Exhibit 10.19
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July 31,
1998, is made by and between KING ▇▇▇▇▇▇, INC. (the "Purchaser"), a Delaware
corporation with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ and UNIQUE CASUAL RESTAURANTS, INC. (the "Seller"), a
Delaware corporation with its principal place of business at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and joined in to the extent set forth in the Joinder below by
CHAMPPS ENTERTAINMENT, INC. ("Champps"), a Minnesota corporation with its
principal place of business at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, the Seller is the owner of all of the issued and outstanding
shares (the "Shares") of the capital stock of Fuddruckers, Inc. (the "Company"),
a Texas corporation;
WHEREAS, the Company (a) owns all of the issued and outstanding shares
of the capital stock of each of R. ▇▇▇, Inc. ("RWes"), a Texas corporation,
Fuddruckers Europe, Inc. ("Fudds Europe"), a Texas corporation, and 8725 ▇▇▇▇▇▇▇
II, Inc. ("▇▇▇▇▇▇▇"), a Kansas corporation, (b) controls all operations and
assets of Fuddrucker Club, Inc. ("Fudds Club"), a Texas not for profit
membership organization, (c) owns 244,000 common shares of the issued and
outstanding capital stock of Fuddruckers - EMA, E.C. ("EMA"), a Bahrainian
corporation which is not controlled by or otherwise affiliated with the Seller
or the Company, and (d) owns of record 4,999,998 common shares, and owns
beneficially in the aggregate 5,000,000 common shares, of the issued and
outstanding capital stock of Atlantic Restaurant Ventures, Inc. ("ARVI"), a
Virginia corporation, which owns all of the issued and outstanding shares of the
capital stock of A.R.I.V. -Rockville, Inc. ("Rockville"), a Maryland
corporation, and owns of records 80 common shares, and owns beneficially in the
aggregate all, of the issued and outstanding shares of the capital stock of ARVI
of Pikesville, Inc. ("Pikesville"), a Maryland corporation (RWes, Fudds Europe,
▇▇▇▇▇▇▇, Fudds Club, ARVI, Rockville and Pikesville are hereinafter referred to
collectively as the "Subsidiaries" and individually as a "Subsidiary", and
together with the Company, collectively as the "Acquired Companies" and
individually as an "Acquired Company");
WHEREAS, the Company and the Subsidiaries are engaged in the operation
and franchise of a chain of restaurants operating under the trade name
"Fuddruckers" in the United States and Canada and EMA, pursuant to exclusive
rights granted to EMA by the Company under the EMA Agreements (as hereinafter
defined), is engaged in the operation and franchise of a chain of restaurants
operating under the name "Fuddruckers" in Europe, the Middle East and Africa
(the foregoing operations and activities are referred to collectively as the
"Business"), it being agreed and acknowledged by the Purchaser that with respect
to all geographies where EMA has exclusive rights to currently operate and
franchise "Fuddruckers" restaurants, the Company has no rights to currently
operate or franchise any such restaurants but holds such residual, contingent or
other reversionary rights as set forth in the EMA Agreements and under
applicable Law;
WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Seller, all of the Shares for the consideration and
on the terms set forth in this Agreement;
WHEREAS, the proceeds of the transactions contemplated by this
Agreement will directly benefit the business, operations and prospects of
Champps; and
WHEREAS, Champps desires to induce the Purchaser to enter into this
Agreement, and Champps has agreed to become jointly and severally liable, as a
primary obligor and along with the Seller, for certain covenants and obligations
under this Agreement, as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale; Defined Terms
Section 1.1 Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing, the Seller will sell, transfer, convey, assign and
set over ("Transfer") to the Purchaser, and the Purchaser will purchase and
acquire from the Seller, all of the Seller's right, title and interest in and to
the Shares.
Section 1.2 Transferred Seller Assets. Prior to the Closing, the Seller
will Transfer, to one or more of the Acquired Companies, all of the Seller
Assets except that (a) in the case of Seller Assets which are furniture,
fixtures and equipment used in the overhead operations of the Business, only
those of such Seller Assets listed on Schedule 1.2(A) will be so Transferred,
and (b) with respect to rights under Seller Assets which are Commitments with
third parties, only those of such Commitments listed on Schedule 1.2(B) will be
so Transferred.
Section 1.3 Certain Definitions and Interpretive Matters.
A. Certain Definitions. As used in this Agreement, (i) unless the
context otherwise requires, each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with United States
generally accepted accounting principles as consistently applied by the Seller
in accordance with its procedures and practices used in the preparation of the
June 1997 Audited Financials (as hereinafter defined) ("GAAP"), (ii) "or" is
disjunctive but not necessarily exclusive, (iii) "including" means "including
without limitation", (iv) the term "Affiliate" has the meaning given to that
term in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of 1934,
as amended, (v) the term "Person" means any individual, corporation, trust,
partnership, limited liability company, unincorporated association, joint
venture, Governmental Entity or other entity of any kind, (vi) all references to
"$" or dollar amounts mean lawful currency of the United States of America, and
(vii) the term "Laws" shall mean any foreign or domestic, federal, state, county
or local statute, law, ordinance, rule, regulation, order, judgment or ruling.
B. Interpretive Matters. No provision of this Agreement will be
interpreted in favor of, or against, any of the parties hereto by reason of the
extent to which any such party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is inconsistent
with any prior draft hereof or thereof.
C. Specific Defined Terms. The following defined terms are defined in
the respective Sections of this Agreement as set forth below:
Defined Term Section Defined In
------------ ------------------
"AAA" 2.3(A)
"Acquired Company(ies)" Preamble
"Affiliate" 1.3(A)
"Agreement" Intro. Paragraph
"Andover Restaurant" 4.1(D)(iii)
"Applicable Affiliate" 4.1(P)
"Arbitrator" 13.15
"Arrangements" 4.1(M)(ii)
"ARVI" Preamble
"Assets" 4.2
"Audited Balance Sheet" 4.1(D)(i)
"Benefit Arrangements" 4.1(M)(ii)
"Benefit Plans" 4.1(M)(ii)
"Boston Restaurant" 4.1(D)(iii)
"Business" Preamble
"Business Commitments" 4.1(G)(i)
"Business Licenses" 4.1(G)(iii)
"Cash Payment Adjustment" 6.17
"Champps" Intro. Paragraph
"Closed Required Restaurant" 6.18(A)
"Closed Store Adjustment" 6.18(A)
"Closing" 3.1
"Closing Date" 3.1
"Closing Date Receivable Adjustment" 2.2(C)
"Closing Statement" 2.2(A)(i)
"Code" 3.2(A)(14)
"Commitments" 4.2
"Company" Preamble
"Company Employees" 4.1(M)(i)
"Compass PLC" Schedule 6.6(A)(iii)
"Competing Transaction" 6.7(A)
"Current Assets" 2.2(D)
"Current Liabilities" 2.2(D)
"Current Locations" 4.1(H)(i)
"Current Receivables" 4.2
"DAKA" Schedule 6.6(A)(iii)
"Declining Seller Employee" 13.16(B)
"disclosure documents" 4.1(V)(iv)
"Disclosure Schedule" 4.2
"EBITDA" 4.2
"EBITDA Adjustment" 2.2(D)
"EMA Agreements" 4.1(X)
"Environment" 4.1(L)(iv)
"Environmental Condition" 4.1(L)(iv)
"Environmental Cost Estimate" 8.6(C)
"Environmental Laws" 4.1(L)(iv)
"Environmental Matters" 13.14(A)
"Equity Securities" 4.1(C)(i)
"ERISA" 4.1(M)(i)
"ESA" 8.6(A)
"Escrow Agent" 2.2(B)
"Escrow Agreement" 3.2(A)(8)
"Escrow Amount" 2.2(B)
"Estimated Purchase Price" 2.2(B)
"Estimated Working Capital" 2.2(A)(i)
"Excluded Items" 4.2
"Existing PSI Reports" 8.6(A)
"FAS 121" 4.2
"Final Purchase Price" 2.3(C)
"Final Working Capital" 2.3(A)
"Financial Statements" 4.1(D)(ii)
"Former Employees" 4.1(M)(ii)
"Franchise Agreements" 4.1(G)(i)
"Franchise Laws" 4.1(V)(i)
"Fuddruckers System" 11.5(A)
"Fudds Club" Preamble
"Fudds Europe" Preamble
"GAAP" 1.3(A)(i)
"General Escrow Amount" 2.2(B)
"Governmental Entity" 4.1(L)(iv)
"Hazardous Materials" 4.1(L)(iv)
"Hazardous Materials Activities" 13.14
"Head Office" 4.1(I)
"Holdings" Schedule 6.6(A)(iii)
"HSR Act" 4.1(B)
"Indemnification Agreement" Schedule 6.6(A)(iii)
"Indemnitee" 13.14(E)
"Indemnitor" 13.14(E)
"Independent Accountants" 2.3(A)
"Insurance" 4.1(O)
"Intellectual Property" 4.1(J)
"International" Schedule 6.6(A)(iii)
"Inventory" 4.2
"IRS" 4.1(M)(i)
"June Financials" 6.12(A)
"June 1997 Audited Financials" 4.1(D)(i)
"June 1997 Balance Sheet" 6.12(A)
"KCOB Parties" Schedule 6.6(A)(iii)
"Knowledge" 13.11
"La Salsa Agreement" 4.1(Q)
"Laws" 1.3(A)
"Lease Consent Escrow" 6.18(E)
"Lease Termination Amount" 6.18(A)
"Leased Real Properties" 4.1(H)(i)
"Leases" 4.1(H)(i)
"Legal Proceeding" 4.1(G)(iii)
"Long-Term Receivables" 4.2
"Liabilities" 4.1(D)(vi)
"Liability Escrow" 6.6(A)
"Licenses" 4.1(G)(iii)
"Lien(s)" 4.1(B)
"Litigation Escrow" 6.6(D)
"Maintenance Expenditure Adjustment" 6.13
"March Balance Sheet" 4.1(D)(ii)
"Material Adverse Change" 4.2
"Material Adverse Effect" 4.2
"▇▇▇▇▇▇▇" Preamble
"NARLP" 4.1(Y)
"Non-Current Liabilities" 6.6(A)
"Notice of Qualified Competing 6.7(B)
Transaction"
"Objection Notice" 2.3(A)
"Order" 4.1(B)
"Other Locations" 4.1(L)(iii)
"Outside Date" 10.1(e)
"Owned Real Properties" 4.1(H)(i)
"P/C Escrow" Schedule 6.6(A)(iii)
"P/C Parties" Schedule 6.6(A)(iii)
"P/C Termination Date" Schedule 6.6(A)(iii)
"Person" 1.3(A)
"Pikesville" Preamble
"Post-Closing Asset Transfer 2.3(B)
Adjustment"
"PSI" 8.6(A)
"Purchaser" Intro. Paragraph
"Purchaser's Losses" 13.14(A)
"Put/Call Agreement" 4.1(Y)
"Put/Call L/C" Schedule 6.6(A)(iii)
"Qualified Competing Transaction" 6.7(A)
"Receivables" 4.2
"Rehired Seller Employee" 13.16(B)
"Release" 4.1(L)(iv)
"Rent Adjustment Amount" 6.18(D)
"Required Consent" 6.18(A)
"Required Estoppel" 6.18(A)
"Required Lease" 6.18(A)
"Required Restaurant" 6.18(A)
"Retained Liabilities" 4.2
"Rockville" Preamble
"RWes" Preamble
"S/A Agreements" 6.12(D)
"S/A Escrow Agreement" 6.12(D)
"S/A Escrow Funds" 6.12(D)
"Saugus Restaurant" 4.1(D)(iii)
"SEC Reports" 4.1(L)(ii)
"Section 338(h)(10) Elections" 12.2(A)
"Section 6.7(B) Notice" 6.7(B)
"Secured Parties" Schedule 6.6(A)(iii)
"Seller" Intro. Paragraph
"Seller Assets" 4.2
"Seller Employees" 13.16(B)
"Seller's Accountants" 4.1(D)(i)
"Seller's Losses" 13.14(B)
"Shared Employees" 13.16(C)
"Shared Employee Services" 13.16(C)
"Shares" Preamble
"Special Meeting" 6.8
"Specialty" Intro. Paragraph
"Store No. 114" 8.6(B)
"Subsidiary(ies)" Preamble
"Tax(es)" 12.4
"Tax Allocation Agreement" Schedule 6.6(A)(iii)
"Tax Return(s)" 12.4
"Threat of Release" 4.1(L)(iv)
"Threshold Commitments" 4.1(G)(i)
"Threshold Licenses" 4.2
"Transfer" 1.1
"Transferred Liabilities" 4.2
"Transferred Seller Assets" 4.2
"Transitional Services Agreement" 6.11
"Unadjusted Purchase Price" 2.1
"Updates" 8.6(A)
"Working Capital" 2.2(D)
"1998 EBITDA" 6.12(B)
"1998 Store EBITDA" 6.18(A)
ARTICLE II
Purchase Price
Section 2.1 Unadjusted Purchase Price. In consideration of the purchase
and sale of the Shares and the covenants herein contained, the purchase price
shall be $43,000,000 (the "Unadjusted Purchase Price"), subject to adjustment at
Closing as provided in Section 2.2 and further adjustment post-Closing as
provided in Section 2.3.
Section 2.2 Estimated Purchase Price.
A. Closing Statement. (i) At the Closing, the Seller will deliver to
the Purchaser its good faith statement (the "Closing Statement") of estimated
Working Capital (as hereinafter defined) as of the Closing Date (the "Estimated
Working Capital"). The Closing Statement shall be prepared by the Seller on a
basis consistent with the March Balance Sheet (as hereinafter defined) including
where applicable the definitions set forth in Section 2.2(C), and in any case
utilizing a physical Inventory count and actual cash reconciliations. Subject to
Section 2.2(C), the Closing Statement shall separately reflect all items
comprising Current Assets (as hereinafter defined) and Current Liabilities (as
hereinafter defined) of the Acquired Companies on a consolidated, stand-alone
basis as of the Closing Date, and in any case the Closing Statement shall not
reflect any intercompany payable or receivable. For the purposes of the Seller's
preparation of the Closing Statement (subject to the Purchaser's right to review
the same as provided in Section 2.3) Current Assets and Current Liabilities will
be shown by the Seller thereon at book value. The Purchaser and its independent
accountants and other representatives shall have the opportunity to review, from
time to time prior to the Closing, the work papers, trial balances and similar
materials used in the preparation of the Closing Statement and to observe all
procedures utilized in the preparation of the Closing Statement and the
calculation of the Estimated Working Capital, including any physical Inventory
count or similar procedure.
B. Estimated Purchase Price. The Unadjusted Purchase Price shall be (a)
decreased by the amount of the EBITDA Adjustment (as hereinafter defined), (b)
increased by the amount that the Estimated Working Capital is more than $0 and
decreased by the amount that the Estimated Working Capital is less than $0, as
the case may be, (c) decreased by the amount of the Maintenance Expenditure
Adjustment (as hereinafter defined), (d) decreased by the amount of the Cash
Payment Adjustment (as hereinafter defined), and (e) decreased by the amount of
the Closed Store Adjustment (as hereinafter defined) (as so adjusted, the
"Estimated Purchase Price"). On the Closing Date, the Purchaser will pay, by
wire transfer of immediately available funds, to such account as the Seller
shall have designated, an amount equal to the Estimated Purchase Price less the
aggregate of (i) $1,000,000 representing the "General Escrow Amount", (ii)
$1,000,000 representing the "Lease Consent Escrow", if any, (iii) the amount of
the Litigation Escrow (as hereinafter defined), if any, and (iv) the amount of
the Liability Escrow (as hereinafter defined), if any (the General Escrow
Amount, the Lease Consent Escrow, the Litigation Escrow and the Liability Escrow
collectively the "Escrow Amount"). The Escrow Amount shall be paid by the
Purchaser to the escrow agent (the "Escrow Agent") under the Escrow Agreement
(as hereinafter defined) to be held by the Escrow Agent in accordance therewith.
C. Excluded Items. The Purchaser may in its sole discretion, require
the Seller to have Transferred to itself, at Closing, any Current Asset (other
than Inventory, cash and assumable prepaid expenses as of the Closing which are
reflected as Current Assets on the Closing Statement), and any Current or
Long-Term Receivable (as hereinafter defined) and any such Current Asset or
Current Receivable so Transferred shall not be reflected on the Closing
Statement and the calculation of Estimated Working Capital or Final Working
Capital. The Seller shall be deemed to have Transferred to itself as of the
Closing those certain Receivables and associated claims and rights arising from
any former or current agreement, arrangement or business relationship between
the Company or ARVI, on the one hand, and KCOB I, Inc., KCOB II, Inc., or ▇▇▇▇▇▇
▇'▇▇▇▇▇, on the other hand, including the judgment rendered in the Legal
Proceeding (Fuddruckers, Inc. v. KCOB I, Inc. and ▇▇▇▇▇▇ ▇'▇▇▇▇▇) pending before
the Federal District Court for Kansas set forth on Schedule 4.1(K); provided,
however, that (i) the Purchaser shall retain all rights as a secured party under
security agreements, pledges and other collateral arrangements with respect to
the "Fuddruckers" restaurants formerly owned by KCOB I, Inc. and KCOB II, Inc.,
including all rights to act as receiver under court order during the pendency of
litigation and all remedies as a secured creditor with respect to ownership and
operation of such restaurants.
D. Defined Terms. The term "Working Capital" shall mean the amount of
the difference between the "Current Assets" and "Current Liabilities" of the
Acquired Companies on a consolidated, stand-alone basis as of the Closing Date.
As used herein the terms: (1) "Current Assets" shall mean those types of items
classified as such and marked with an asterisk (*) on the March Balance Sheet
(to be attached hereto as Schedule 4.1(D)(ii)); and (2) "Current Liabilities"
shall mean those types of items classified as such and marked with a double
asterisk (**) on the March Balance Sheet (to be attached hereto as Schedule
4.1(D)(ii)). The term "EBITDA Adjustment" shall mean, provided that the
conditions described in Section 8.7 and in Section 9.5 are met or have been
waived by both the Purchaser and the Seller, if the 1998 EBITDA (as hereinafter
defined) is less than $8,500,000, an amount equal to the product of 5 times the
amount by which $8,500,000 exceeds the 1998 EBITDA. There shall not be any
EBITDA Adjustment in the event that the 1998 EBITDA is more than $8,500,000.
Section 2.3 Final Purchase Price.
A. Final Working Capital. During the one hundred and twenty (120) day
period following the Closing Date, the Purchaser shall have the right to review
the Closing Statement. During such 120-day period, the Purchaser and its
authorized representatives will be entitled to review, during normal business
hours, the Seller's books, records and workpapers (to the extent related to the
Business (excluding the books, records and workpapers of EMA, unless otherwise
consented to by EMA) and not otherwise Transferred to the Purchaser at Closing),
and the Seller shall otherwise cooperate with the Purchaser and with the
Purchaser's independent accountants and other authorized representatives in
connection with such review. By no later than the last day of the Purchaser's
120-day review period, the Purchaser shall notify the Seller whether the
Purchaser accepts or rejects the accuracy of the Seller's Closing Statement and
Estimated Working Capital, and if it rejects, the Purchaser shall furnish to the
Seller as part of such notice an adjusted Closing Statement reflecting such
changes as its believes appropriate to make the Closing Statement accurate as of
the Closing Date. The failure by the Seller to deliver to the Purchaser a notice
of its objection (the "Objection Notice") to the Purchaser's adjusted Closing
Statement prior to the expiration of the ten business day period following the
delivery of the same to the Seller shall constitute the Seller's acceptance of
the Purchaser's adjusted Closing Statement and the Working Capital calculated
therefrom. If the Purchaser and the Seller are unable to resolve any
disagreement between them regarding the Closing Statement and the Working
Capital Adjustment within ten business days after the Seller's delivery, to the
Purchaser, of an Objection Notice, any items still in dispute will be referred
for determination to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (or, if ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP refuses to
act on behalf of the parties pursuant to this Section 2.3(A), such other
nationally recognized accounting firm as shall be appointed by the President of
the Boston office of the American Arbitration Association (the "AAA")) (the
"Independent Accountants") within ten business days following the expiration of
the foregoing ten business day period. The Independent Accountants'
determination will be (a) in writing, (b) furnished to each of the parties
hereto as promptly as practicable, and (c) conclusive and binding upon the
parties hereto. The fees and expenses of the Independent Accountants will be
borne by the non-prevailing party. The Working Capital, as agreed to by the
Purchaser and the Seller, deemed accepted by the Seller, or finally determined
by the Independent Accountants, as the case may be, shall hereinafter be called
the "Final Working Capital".
B. Post-Closing Asset Transfer Adjustment. By no later than 120 days
after the Closing Date, the Purchaser may in its sole discretion require that
the Seller purchase from the Purchaser any Current Asset (other than Inventory,
cash and assumable prepaid expenses as of the Closing which are reflected as
Current Assets on the Closing Statement) which had been reflected on the
Seller's Closing Statement, at an amount equal to (i) in the case of any Current
Receivable, the amount thereof set forth in the Seller's Closing Statement minus
100% of all amounts collected on account of such Current Receivable since the
Closing by the Purchaser or any Acquired Company, and (ii) in the case of any
other Current Asset, the book value thereof as of the date on which the purchase
thereof by the Seller takes place; provided, however, that the Seller shall only
be obligated to purchase any Current Asset or Current Receivable from the
Purchaser if the Purchaser has not compromised or settled in any manner the
applicable Acquired Company's claims associated therewith and has not released,
waived, compromised or otherwise impaired any rights of the applicable Acquired
Company against the debtor or any guarantor or collateral relating thereto under
any promissory notes, guarantees, pledges, security agreements or other
instruments executed for the benefit of the applicable Acquired Company, all of
which claims, rights, notes, guarantees, pledges, security agreements and other
instruments shall be assigned and transferred to the Seller together with the
applicable Current Asset at no additional cost to the Seller (above the amount
to be paid by the Seller on account of the Current Asset or Current Receivable
itself as specified above). The aggregate amount owing by the Seller to the
Purchaser on account of the foregoing Transfers shall hereinafter be called the
"Post-Closing Asset Transfer Adjustment". By no later than 120 days after the
Closing Date, the Purchaser may in its sole discretion assign and Transfer to
the Seller (at no cost to the Seller) any Long-Term Receivable together with all
related claims, rights, notes, guarantees, pledges, security agreements and
other instruments, it being understood that no portion of any such Long-Term
Receivable will be included in the Post-Closing Asset Transfer Adjustment. The
Seller shall have unrestricted authority and right in its sole discretion to
pursue any action and exercise any remedy with respect to the collection of any
Current or Long-Term Receivables assigned or transferred to the Seller pursuant
to this Section 2.2(B), including without limitation instituting any action or
other litigation before any court, agency, arbitrator or tribunal and
foreclosing upon any collateral, including franchised "Fuddruckers" restaurants
and the related Franchise Agreement, furniture, fixtures and equipment without
incurring any Liability to the Purchaser hereunder.
C. Final Purchase Price. The Estimated Purchase Price shall be (a) if
necessary, increased or decreased, as the case may be, by the amount by which
the Estimated Working Capital exceeds or is exceeded by the Final Working
Capital, and (b) decreased by the amount of the Post-Closing Asset Transfer
Adjustment (as so adjusted by (a) and (b) above, the "Final Purchase Price").
D. Payment of Adjustment Amount. Any adjustment to the Estimated
Purchase Price to be made pursuant to this Section 2.3 shall be paid by the
Seller to the Purchaser or by Purchaser to the Seller, as the case may be,
within ten (10) days after the final determination or acceptance, as the case
may be, of the Final Working Capital, together with interest on the amount by
which the Estimated Working Capital exceeds or is exceeded by the Final Working
Capital, from the Closing Date to the date of payment (at a rate equal to Fleet
Bank's prime rate, as publicly announced and in effect from time to time during
such period, plus 2.0%, calculated on the basis of the actual number of days
elapsed over 365), by wire transfer of immediately available funds to such
account as the Purchaser or the Seller, as the case may be, shall have
designated. Any Transfer of Current Assets, or Current or Long-Term Receivables,
shall take place on the date on which the aforementioned adjustment is paid.
ARTICLE III
Closing
Section 3.1 Closing Date. The purchase and sale (the "Closing")
provided for in this Agreement will take place at the offices of Goulston &
Storrs, P.C., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 a.m. (local time)
on November 2, 1998 or, subject to Section 10.1(e), at such other time and place
as the parties may agree (such date being hereinafter called the "Closing
Date"). Subject to the provisions of Article X, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 3.1 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement. All matters at the Closing shall be considered to take place
simultaneously, and no delivery of any document or instrument shall be deemed
complete until all transactions contemplated by this Agreement, and deliveries
of all documents and instruments contemplated by this Agreement to be delivered
at the Closing, are completed.
Section 3.2 Closing Documents.
A. Deliveries of the Seller. At the Closing, the Seller shall deliver
the following to the Purchaser:
1. original certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers) for Transfer to the
Purchaser;
2. original certificates representing all Equity Securities in
each Subsidiary other than ARVI, or other evidence satisfactory to the Purchaser
that such original certificates are under the power and control of the Seller
and that such power and control has been assigned to the Purchaser, and as to
the Equity Securities in Pikesville that are owned by ARVI beneficially and not
of record, an executed stock power from each record owner assigning record
ownership in such Equity Securities to ARVI;
3. original certificates representing all Equity Securities in
EMA and in ARVI that are owned by the Company as listed on Schedule 4.1(C), or
other evidence satisfactory to the Purchaser that such original certificates are
under the power and control of the Seller and that such power and control has
been assigned to the Purchaser, and as to the Equity Securities in ARVI that are
owned beneficially by the Company and not of record, an executed stock power
from each record owner assigning record ownership in such Equity Securities to
the Company;
4. possession of the minute books and stock record books of
each of the Acquired Companies, all other books and records referenced in
Section 4.1(F), and to the extent that the following are in the possession of
the Seller, originals of all Leases, title policies and deeds relating to the
Owned Real Properties, Business Licenses, and other Business Commitments, and
all other files of the Acquired Companies and the Business (excluding EMA's
books and records);
5. Required Consents and Required Estoppels (each Required
Estoppel to be in the form of Exhibit A with such changes requested by the
relevant lessor as may be consented to by the Purchaser which consent shall not
be unreasonably withheld, or in such other form as may be prescribed by the
Required Lease) for such Required Restaurants as represent an aggregate of at
least 85% of the cumulative 1998 Store EBITDA for all Required Restaurants which
are open and operating at the time of the Closing, duly executed, and such
further duly executed Required Consents, Required Estoppels, consents,
authorizations, permits, approvals and the like as the Seller has actually
obtained from any Governmental Entity or other Person in connection with the
consummation of the transactions contemplated hereby;
6. Intentionally Deleted;
7. resignations and releases executed by each of the directors
and executive officers listed on Schedule 4.1(A) (other than ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
in his capacity as a director of ARVI and a director of Rockville, and those
other directors and officers as shall be specified by the Purchaser to the
Seller prior to the Closing Date) of each Acquired Company, in the form of
Exhibit B;
8. the escrow agreement in the form of Exhibit C (the "Escrow
Agreement") executed by the Seller, Champps and the Escrow Agent and dated the
Closing Date;
9. certificates executed by the President or the Chief
Financial Officer of the Seller, of each Acquired Company and of Champps in the
form of Exhibit D;
10. certificates executed by the Secretary of the Seller, of
each Acquired Company and of Champps in the form of Exhibit E;
11. corporate good standing certificates concerning the
Seller, each Acquired Company and Champps from the Secretary of State or other
Governmental Entity of each of their respective jurisdictions of incorporation,
dated as of a date not more than ten business days prior to the Closing Date;
12. articles or certificate of incorporation of the Seller,
each Acquired Company and Champps certified by the Secretary of State or other
Governmental Entity of each of their respective jurisdictions of incorporation,
dated as of a date not more than ten business days prior to the Closing Date;
13. an opinion of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, in the form of
Exhibit F;
14. a certification of non-foreign status signed by the
President or the Chief Financial Officer of the Seller affirming that the Seller
is not a foreign person within the meaning of Section 1445(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code"), which certification shall be in
the form of Exhibit G;
15. Intentionally Deleted;
16. Intentionally Deleted;
17. the evidence, releases and other documents described in
Section 6.6 (including without limitation executed original mortgage discharges,
in recordable form, sufficient to discharge of record all mortgages, deeds to
secure debt or deeds of trust on the Owned Real Properties), Section 6.11,
Section 6.12, Section 6.13, Section 6.14 and Section 6.15, and the June
Financials;
18. foreign qualification certificates concerning each
Acquired Company from the Secretary of State or other Governmental Entity of
each jurisdiction in which they are, respectively, authorized to do business,
dated as of a date not more than ten business days prior to the Closing Date;
19. an opinion of Wiley, Rein & Fielding, to the effect set
forth on Exhibit H;
20. an opinion of Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.,
to the effect set forth on Exhibit I;
21. commitments for the issuance of an owner's title insurance
policy in the name of the Company, substantially conforming to those existing
commitments for the relevant Owned Real Property which were previously delivered
to the Purchaser, issued by Lawyer's Title Insurance Company or another
acceptable title insurance company, for each of the Owned Real Properties listed
on Exhibit 3.2(A)(21);
22. the Transitional Services Agreement (as hereinafter
defined) executed by the Seller and dated the Closing Date.
23. evidence of the payment of all Taxes referred to in
Section 12.1.
B. Deliveries of the Purchaser. At the Closing, the Purchaser shall
deliver the following to the Seller:
1. the Estimated Purchase Price as set forth in Section
2.2(A)(iv);
2. a certificate executed by an officer of the Purchaser in
the form of Exhibit J;
3. a certificate executed by the Secretary of the Purchaser in
the form of Exhibit K;
4. a corporate good standing certificate concerning the
Purchaser from the Secretary of State of Delaware, dated as of a date not more
than five business days prior to the Closing Date;
5. the certificate of incorporation of the Purchaser certified
by the Secretary of State of Delaware, dated as of a date not more than five
business days prior to the Closing Date;
6. the Escrow Agreement executed by the Purchaser;
7. an opinion of Goulston & Storrs, P.C., in the form of
Exhibit L; and
8. the Transitional Services Agreement executed by the
Purchaser or the Company (at the Purchaser's election).
ARTICLE IV
Representations and Warranties by the Seller
Section 4.1 Representations and Warranties. The Seller (and Champps
jointly and severally for the purposes of Section 4.1(R) and Section 4.1(W))
hereby represents and warrants to the Purchaser that, as of the date hereof and
on the Closing Date:
A. Corporate Existence and Qualification; Due Execution, Etc. Schedule
4.1(A) contains a complete and accurate list, for each Acquired Company and for
EMA, of its name, and its jurisdiction of incorporation, and for each Acquired
Company of all of its current executive officers and directors, and each other
jurisdiction in which it is authorized to do business and every other
jurisdiction in which it is doing business, and for EMA all of its current
officers and directors who are employees of the Seller or any Acquired Company.
Except as set forth on Schedule 4.1(A), the Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, with full corporate power and authority to own, lease or otherwise
hold its assets (including without limitation the Transferred Seller Assets and
the Shares) and to carry on its business (including without limitation the
Business (except for jurisdictions where EMA operates or franchises
restaurants)) as conducted by it now and immediately prior to the Closing.
Except as set forth on Schedule 4.1(A), each Acquired Company is a corporation
duly organized, validly existing, and in good standing under the Laws of its
jurisdiction of incorporation shown on Schedule 4.1(A), and has full corporate
power and authority to own, lease or otherwise hold its assets (including
without limitation the Assets owned, leased or otherwise held by it) and to
carry on its business (including without limitation the Business (except for
jurisdictions where EMA operates or franchises restaurants)) as conducted by it
now and immediately prior to the Closing. Each of the Seller and the Acquired
Companies is duly qualified to conduct business, and is in good standing, under
the Laws of each state or other jurisdiction in which its ownership, lease, or
use of property or the conduct of its business (including without limitation the
Business (except for jurisdictions where EMA operates or franchises
restaurants)) require such qualification, except where the failure to be so
qualified and to be in good standing could not reasonably be anticipated to
result in, following the Closing, a Material Adverse Effect on the Business.
Subject to the approval of this Agreement and the transactions contemplated
hereby at a Special Meeting (as hereinafter defined), the Seller has all
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation by the Seller of
the transactions contemplated by the terms and provisions of this Agreement to
be consummated by it have been duly authorized by all requisite corporate action
(subject to the approval of this Agreement and the transactions contemplated
hereby at a Special Meeting), and, assuming the due execution of this Agreement
by the Purchaser, this Agreement and its terms constitutes the valid and binding
obligation of the Seller enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws relating to creditors' rights generally and to general
principles of equity.
B. No Violation. Except as set forth on Schedule 4.1(B), and assuming
that the Seller has taken all actions required to be taken by it pursuant to
Articles II, III and VI of this Agreement, neither the execution and delivery by
the Seller of this Agreement nor the consummation of the transactions
contemplated hereby: (i) violates or will violate any Law applicable to the
Seller or any Acquired Company, including without limitation the Securities Act
of 1933 and the Securities Exchange Act of 1934; (ii) violates or will violate
any order, ruling, writ, judgment, injunction or decree of any Governmental
Entity (an "Order") applicable to the Seller or any Acquired Company; (iii)
results or will result in a breach of or default under the certificate or
articles of incorporation or bylaws of the Seller or any Acquired Company; (iv)
conflicts or will conflict with or results or will result in any breach of any
Commitment applicable to the Seller or any Acquired Company except for any such
conflict or breach as could not reasonably be anticipated to result in a
Material Adverse Effect on the Business or as could not reasonably be
anticipated to impair the ability of the Seller to consummate the transactions
contemplated hereby; (v) requires the approval of the stockholders of any
Acquired Company (except insofar as such Acquired Company is wholly owned by the
Seller or another Acquired Company); (vi) results or will result in the
imposition of any title defect, mortgage, lien, charge, pledge, security
interest or other encumbrance (collectively, "Liens", and individually a "Lien")
on any of the Shares, the Assets or the Transferred Seller Assets or (vii)
results or will result in or give rise to any claim or judgment against any
Acquired Company, the Purchaser, the Shares, the Assets, or the Transferred
Seller Assets except for any such claim or judgment against the foregoing other
than the Shares as could not reasonably be anticipated to result in a Material
Adverse Effect on the Business. Except for the notification required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), and
assuming that the Seller has taken all actions required to be taken by it
pursuant to Articles II, III and VI of this Agreement, and except as set forth
on Schedule 4.1(B), no consent, authorization, license, permit, or approval
from, or registration or filing with, any Governmental Entity or other Person is
required to be obtained or made by or with respect to the Seller, any Acquired
Company or, to the Seller's knowledge, EMA, in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or for the Purchaser and the Acquired Companies taken as a whole to
succeed to the rights of the Seller and the Acquired Companies as a whole in the
Assets and the Transferred Seller Assets except for any such consent,
authorization, approval, registration or filing (a) which the failure to obtain
or make could not reasonably be anticipated to result in a Material Adverse
Effect on the Business or (b) which the Purchaser is required to obtain or make
after the Closing as a result of the consummation of the transactions
contemplated by this Agreement and becoming the owner of the Shares and the
controlling person with respect to the Acquired Companies and the Business.
C. Capitalization and Equity Securities. (i) Schedule 4.1(C) sets forth
the capitalization of each Acquired Company and of EMA, including as to each
Acquired Company and EMA the number of shares of common and other classes of
stock, the par value thereof, all outstanding instruments convertible into
shares, the number of issued and outstanding convertible securities and shares
of each class of stock, and also including as to each Acquired Company the
identity of each shareholder and holder of convertible securities (all issued
and outstanding (a) shares in any class of capital stock, (b) instruments
convertible into shares, and (c) similar interests in any unincorporated entity,
are hereinafter collectively called "Equity Securities"), and also including as
to EMA the number and type of issued and outstanding Equity Securities as are
held by any Acquired Company or the Seller. The Seller is the record and
beneficial owner and holder of the Shares, which constitute all of the Equity
Securities in the Company, free and clear of all Liens except as set forth on
Schedule 4.1(C). All of the Equity Securities in each Subsidiary other than EMA,
Rockville, Pikesville and ARVI are owned of record and beneficially by the
Company, free and clear of all Liens except as set forth on Schedule 4.1(C). All
of the Equity Securities in each of Rockville and Pikesville are owned of record
and/or beneficially by ARVI, free and clear of all Liens except as set forth on
Schedule 4.1(C). The Equity Securities in each of EMA and of ARVI that are
listed on Schedule 4.1(C) as being owned by the Company of record are owned of
record by the Company, free and clear of all Liens except as set forth on
Schedule 4.1(C). The Equity Securities in ARVI that are listed on Schedule
4.1(C) as being owned by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and by ▇▇▇▇▇ ▇▇▇▇▇▇ are owned
beneficially by the Company, free and clear of all Liens, except as set forth on
Schedule 4.1(C). Schedule 4.1(C) accurately sets forth all of the record and
beneficial owners of Equity Securities in ARVI. Except as set forth on Schedule
4.1(C), no legend or other reference to any purported Lien appears or is
required to appear upon any certificate representing Equity Securities in any
Acquired Company or in EMA (including without limitation the Shares) which are
owned by the Seller or any Acquired Company. Except as set forth on Schedule
4.1(C), all of the Equity Securities (including without limitation the Shares)
of each Acquired Company have been duly authorized and validly issued and are
fully paid and nonassessable, and there are no preemptive rights in respect
thereof. Except as set forth on Schedule 4.1(C), there are no Commitments
relating to the issuance, sale, or transfer of, voting or preemptive rights, or
other similar rights or obligations relating to, any Equity Securities
(including without limitation the Shares) in any Acquired Company or any Equity
Securities in EMA which are owned by any Acquired Company or the Seller. The
Equity Securities in each Acquired Company were issued in compliance with the
Securities Act of 1933 and all other Laws.
(ii) Except as set forth on Schedule 4.1(C), no Acquired
Company owns, or has any Commitment to acquire, any Equity Securities in any
other Person.
(iii) Each of RWes, ▇▇▇▇▇▇▇ and Fudds Club holds no assets and
has no Liabilities, except as set forth on Schedule 4.1(C). Fudds Europe holds
no assets, has no Liabilities, does not operate any business, and is inactive.
D. Financial Information. (i) Attached hereto as Schedule 4.1(D)(i) is
the consolidated balance sheet of the Seller together with its subsidiaries
(which include the Acquired Companies) as of June 29, 1997 (the "Audited Balance
Sheet") and the related statements of operations, stockholders' equity and cash
flows for the fiscal year then ended (including any footnotes thereto)
(collectively the "June 1997 Audited Financials"), all of which (a) have been
audited by Deloitte & Touche LLP (the "Seller's Accountants"), whose unqualified
reports thereon are included within Schedule 4.1(D)(i), (b) have been prepared
in accordance with GAAP, consistently applied throughout the period involved and
for prior periods, and (c) present fairly, in all material respects, the
financial position of the Seller, on a consolidated basis with its subsidiaries
(which include the Acquired Companies), at the dates indicated in such financial
statements and the results of the Seller's operations, on a consolidated basis
with its subsidiaries (which include the Acquired Companies), for the periods
stated therein. Also attached hereto as Schedule 4.1(D)(i) is the consolidated
and consolidating balance sheet and statement of operations of each of ARVI, the
Company and the former Canadian "Fuddruckers" operations as of June 29, 1997 and
for the fiscal year then ended, which (a) have been prepared in accordance with
GAAP, consistently applied throughout the period involved and for prior periods,
and (b) are true and complete in all material respects, present all of the
financial information (including without limitation Liabilities) required to be
listed on a balance sheet and statement of operations for each of ARVI, the
Company and the former Canadian "Fuddruckers" operations in accordance with
GAAP, and fairly reflect profits and losses, except that no allocation for
general corporate overhead provided by the Seller to the Acquired Companies is
reflected thereon.
(ii) Attached hereto as Schedule 4.1(D)(ii) is the unaudited
consolidated balance sheet of the Seller together with its subsidiaries (which
include the Acquired Companies) as of March 29, 1998 (the "March Balance Sheet",
and together with the Audited Balance Sheet, collectively the "Financial
Statements"), and the related statements of operations, stockholders' equity and
cash flows for the nine months then ended, all of which (a) have been prepared
in accordance with GAAP, consistently applied throughout the periods involved
and for prior periods, and include all adjustments, consisting of normal
recurring adjustments necessary for the fair presentation of financial position
and results of operations (none of which are material) in accordance with the
requirements of the Securities and Exchange Commission's rules applicable to
quarterly reporting, and (b) present fairly, in all material respects, the
financial position of the Seller, on a consolidated basis with its subsidiaries
(which include the Acquired Companies), at March 29, 1998, and the results of
the Seller's operations, on a consolidated basis with its subsidiaries (which
include the Acquired Companies) for the nine-month period then ended. Also
attached hereto as Schedule 4.1(D)(ii) is the consolidated and consolidating
schedule of balance sheet and statement of operations of each of ARVI, the
Company and the former Canadian "Fuddruckers" operations as of March 29, 1998
and for the nine months then ended, which (a) have been prepared in accordance
with GAAP, consistently applied throughout the periods involved and for prior
periods, and include all adjustments, consisting of normal recurring adjustments
necessary for the fair presentation of financial position and results of
operations (none of which are material) in accordance with the requirements of
the Securities and Exchange Commission's rules applicable to quarterly
reporting, and (b) are true and complete in all material respects, present all
of the financial information (including without limitation Liabilities) required
to be listed on a balance sheet and statement of operations for each of ARVI,
the Company and the former Canadian "Fuddruckers" operations in accordance with
GAAP, and fairly reflect profits and losses, except that no allocation for
general corporate overhead provided by the Seller to the Acquired Companies is
reflected thereon.
(iii) When delivered in accordance with Section 6.12, the June
Financials shall be attached hereto as Schedule 4.1(D)(iii) and will be
comprised of (as provided in Section 6.12) a complete set of financial
statements for the Acquired Companies as of June 28, 1998 on a stand-alone
basis, which financial statements shall include the June 1997 Balance Sheet and
a balance sheet as of June 28, 1998 (prepared on a consistent basis using the
same accounting principles, assumptions and methodologies applied in the
preparation of the June 1997 Audited Financials), a statement of operations for
the fiscal year ended June 28, 1998, and the related statements of stockholders'
equity and cash flows for the fiscal year then ended (including any footnotes
thereto), all of which will (a) have been audited by the Seller's Accountants,
whose unqualified reports thereon will be included within Schedule 4.1(D)(iii),
(b) have been prepared in accordance with GAAP, consistently applied throughout
the period involved and for prior periods, (c) present fairly, in all material
respects, the financial position of the Acquired Companies, on a consolidated
basis, at the dates indicated in such financial statements, and the results of
the Acquired Companies' operations, on a consolidated basis, for the periods
stated therein. The statement of operations included in the June Financials will
have separately identified: (i) an allocation of the corporate overhead for the
Acquired Companies on a stand-alone basis, (ii) an allocation of district
overhead for the Acquired Companies, (iii) the 1998 Store EBITDA, if less than
zero, and any write-offs or write-downs attributable (without double counting)
to (A) any "Fuddruckers" locations which were closed during the fiscal year
ended June 28, 1998; (B) the Saugus, MA "Fuddruckers" location (the "Saugus
Restaurant"); (C) the North Andover, MA "Fuddruckers" location (the "Andover
Restaurant"); and (D) the Boston, MA (City Place) "Fuddruckers" location (the
"Boston Restaurant"), (iv) adjustments for FAS 121 for the fiscal year then
ended, (v) any write-downs, write-offs or accruals related to the termination of
the La Salsa Agreement (as hereinafter defined), (vi) amounts paid in settlement
or satisfaction of pending Legal Proceedings pursuant to the terms of this
Agreement and (vii) costs or expenses related to environmental testing or
remediation pursuant to the terms of this Agreement.
(iv) The Inventory shown on the Financial Statements and that
will be shown on the June Financials and on the Closing Statement consists and
will consist only of, items usable or salable in the ordinary course of business
of the Acquired Companies and is or will be shown at the lower of historical
cost or net realizable value in accordance with GAAP consistently applied. The
Seller has no knowledge of any condition, event or occurrence which may
adversely affect, after the Closing, the continuity of the supply of Inventory
to the Acquired Companies by the suppliers used by the Seller or the Acquired
Companies in the Business (assuming that the Purchaser chooses to continue to
use such suppliers) except in each case for any such condition, event or
occurrence which applies to the economy in general or to the restaurant industry
as a whole.
(v) The Current Receivables that are shown or reflected on the
Financial Statements and that will be shown or reflected either on the June
Financials or on the Closing Statement arise and will have arisen, in each case,
from transactions in the ordinary course of business of the Acquired Companies
and each such Receivable constitutes an identifiable indebtedness of the
applicable account debtor, not subject to any offset, defense, counterclaim or
Lien, collectible in the ordinary course of the conduct of the Business.
(vi) Except as set forth on Schedule 4.1(D)(vi), each Acquired
Company (1) currently has no liabilities, obligations, expenses or claims
against it or liability for damages whether known or unknown and whether
absolute, accrued, contingent, named, unnamed, disputed, undisputed, legal,
equitable, determined, undetermined, or otherwise of any kind (any and all of
the foregoing, "Liabilities"), except for Liabilities reflected or reserved
against in the March Balance Sheet and (2) will have at the Closing no
Liabilities assuming all payments required to be made by the Seller under
Article VI have been made except for (y) Current Liabilities reflected or
reserved against in the March Balance Sheet or (z) Current Liabilities incurred
in the ordinary course of the Business consistent with this Agreement since the
date of the March Balance Sheet.
E. Absence of Certain Transactions. Except as set forth on Schedule
4.1(E), since the date of the March Balance Sheet, the Business (except for the
operations of EMA, which the Seller does not control) has been and as of the
Closing Date will have been conducted only in the ordinary course of business,
consistent with past practice and there has not and will not have been any:
(i) Material Adverse Change;
(ii) change in any Acquired Company's authorized or issued
Equity Securities; grant of any option, right to purchase or similar right
regarding Equity Securities of any Acquired Company; voluntary change in any
Acquired Company's or the Seller's percentage interest in EMA (on a fully
diluted basis); grant of any registration rights by any Acquired Company;
purchase, redemption, retirement, or other acquisition by any Acquired Company
of any such Equity Securities; or declaration or payment of any dividend or
other distribution or payment in respect of Equity Securities of any Acquired
Company, except that all cash balances of every subsidiary of the Seller are
concentrated daily in the Seller's accounts, no material cash balances are held
by any of the Acquired Companies and no intercompany payable or receivable will
be shown on the Closing Statement;
(iii) amendment to the certificate or articles of
incorporation or bylaws of any Acquired Company, or any action with respect to
the certificate of incorporation or bylaws of the Seller which would impair the
Seller's ability to consummate the transactions contemplated hereby or to
perform its obligations hereunder;
(iv) payment of any bonuses, or increase in salaries or other
compensation, by any Acquired Company to any of its stockholders, directors,
officers (other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇), or Company Employees, or by the Seller to
any Seller Employee, except for annual bonus awards and increases in salaries
consistent with past practice; or entry into any employment, severance, or
similar Commitment with any stockholder, director, officer (other than ▇▇▇▇▇▇ ▇.
▇▇▇▇▇), Company Employee or Seller Employee except for any severance Commitment
under and in accordance with the Seller's Severance Plan listed on Schedule
4.1(M);
(v) adoption of, or increase in the schedule of payments or
benefits under, any Employee Benefit Plan, Arrangement or Benefit Plan for or
with any Company Employee or Seller Employee except for discretionary payments
to Seller Employees under the Unique Casual Restaurants Savings and Retirement
Plan listed on Schedule 4.1(M) consistent with past practice;
(vi) damage to or destruction or loss of any Asset or
Transferred Seller Asset, whether or not covered by Insurance, which has had a
Material Adverse Effect on the Business;
(vii) entry into, termination of, or receipt of notice of
termination of any License, distributorship, dealership, joint venture, credit,
franchise or other Threshold Commitment, in each case by any Acquired Company or
by the Seller relating to the Business, other than financing arrangements
entered into by the Seller, provided, however, that notwithstanding the
foregoing, the Company may enter into franchise agreements with franchisees
pursuant to those Business Commitments listed on Schedule 4.1(E) and on Schedule
4.1(G);
(viii) sale, purchase, lease, license or other Transfer of any
Asset (except (a) for sales of assets located at or held in connection with the
operation of "Fuddruckers" restaurants at the Midlothian, Virginia location, the
Colonial Heights, Virginia location, and the Boston Restaurant and (b) the sale
of excess or obsolete furniture, fixtures and equipment in the ordinary course
of business, and in any case for not more than $100,000 individually and
$200,000 in the aggregate), any Transferred Seller Asset, or the Shares or
mortgage, pledge, or imposition of any Lien on any Asset, any Transferred Seller
Asset, or the Shares, including any sale, purchase, lease, license or other
Transfer of any Intellectual Property;
(ix) incurrence of indebtedness or guarantee of debt or other
Liability of any other Person by any Acquired Company;
(x) except as disclosed on Schedule 4.1(E), cancellation or
waiver of any claims or rights of an Acquired Company against third Persons with
an individual value in excess of $25,000;
(xi) material change in the accounting methods or principles
used by the Seller or any Acquired Company except for (A) write-downs or
write-offs in the value of assets as required by GAAP or (B) such adjustments as
required by GAAP as a result of the transactions contemplated by this Agreement;
or
(xii) agreement, whether oral or written, by the applicable
party bound by clauses (i) through (xi), as the case may be, to do any of the
foregoing.
F. Books and Records. The minute books and stock record books of each
of the Acquired Companies, all of which have been made available to the
Purchaser, are complete and correct in all material respects and have been
maintained in accordance with customary business practices for consolidated
subsidiaries of a holding company. Except as set forth on Schedule 4.1(F), the
minute books of the Acquired Companies contain accurate and complete records of
all meetings held of, and corporate action taken by, the stockholders, the
Boards of Directors, and committees of the Boards of Directors of the Acquired
Companies, except for any failure to contain such records as would not have a
Material Adverse Effect on any Acquired Company. At the Closing, all of the
books of account, minute books, stock record books, and other records (including
without limitation books, records and data relating to the purchase of
materials, supplies and services, financial results, sale of products, records
of the Company Employees and the Seller Employees, commercial data, research
done by or for the Business, catalogues, brochures, training and other manuals,
sales literature, advertising and other sales and promotional materials,
maintenance records and drawings, all Business Commitments, files related to
Legal Proceedings and filings with any Governmental Entity) of the Acquired
Companies and the Business will be in the possession of the Seller, the Acquired
Companies or their respective agents or representatives, and possession of the
foregoing will be given to the Purchaser as provided in Section 3.2(A)(4).
G. Commitments. (i) Schedule 4.1(G) accurately lists, as of the date
hereof, all Business Commitments (as hereinafter defined), in each case, which
cannot be terminated without penalty by the Seller or the Acquired Company party
thereto on 90 days' or less prior notice or which requires (or could be
reasonably anticipated to require, if dependent on future events) aggregate
payments or expenditures, by or to any party thereto in any twelve (12) month
period, in excess of: (a) in the case of any Business Commitments relating to
more than one restaurant, $100,000 per Commitment; and (b) in the case of
Business Commitments relating to a single restaurant, $10,000 per Commitment
(collectively, the "Threshold Commitments"); in each case whether written or
oral, and including all amendments thereto, and in each case (other than in the
case of Leases and Franchise Agreements copies of which have been previously
delivered or made available to the Purchaser) specifying the parties to such
Commitments. The Seller has made available to the Purchaser true and correct
copies of all Threshold Commitments which are in written form and any amendments
thereto. Each Commitment which relates to the Business or the Assets or is
otherwise in effect with respect to any Acquired Company (collectively, the
"Business Commitments"), including each Lease, and each franchise agreement to
which any Acquired Company is party and which shall be listed on Schedule 4.1(G)
under the sub-heading "Franchise Agreements" (collectively, the "Franchise
Agreements"), is in full force and effect and represents the valid and binding
obligation, in accordance with its terms, of the Seller and any Acquired Company
that is a party thereto, and to the knowledge of the Seller, the other party or
parties thereto, except where the failure to be in such full force and effect
and to be the valid and binding obligation could not reasonably be anticipated
to result in a Material Adverse Effect on the Business.
(ii) With respect to each Business Commitment (including
without limitation each Lease and each Franchise Agreement), each of the Seller
and any Acquired Company and, to the knowledge of the Seller, the other party or
parties thereto, has performed all obligations required to be performed by it
thereunder through the date hereof and is not (with or without the lapse of time
or the giving of notice, or both) in default under any such Commitment, except
in each case for any failure to perform or default as could not reasonably be
anticipated to result in a Material Adverse Effect on the Business and none of
the Seller or any Acquired Company has received any written notice or other
notice given in accordance with the notice provisions of the relevant Commitment
of any such existing default (whether monetary or nonmonetary) or termination of
any such Commitment from any other party thereto which has not been withdrawn,
cured or received within the past twelve (12) months.
(iii) Except as set forth on Schedule 4.1(G)(iii), each of the
Acquired Companies have duly obtained and legally and validly holds all
certificates of need, permits, titles, fuel permits, licenses (including without
limitation liquor licenses, restaurant licenses, franchises and certificates),
approvals, consents and authorizations issued by any Governmental Entity
(collectively, "Licenses") necessary under applicable Laws for the operation of
the Business (except any operations of EMA) as presently conducted (the
"Business Licenses") except where the failure to have obtained or to hold any
such Business License could not reasonably be anticipated to have a Material
Adverse Effect on the Business. Listed or to be listed under the sub-heading
"Licenses" on Schedule 4.1(G) (which sub-heading will be delivered to the
Purchaser as provided in Section 6.14) are and will be all of the Threshold
Licenses (as hereinafter defined). All of the Business Licenses are valid, in
good standing and in full force and effect except where the failure to be valid,
in good standing and in full force and effect could not reasonably be
anticipated to have a Material Adverse Effect on the Business. No claim, action,
suit, proceeding or investigation in or before (or which would be brought
before) or being conducted by (or which would be conducted by) any Governmental
Entity (a "Legal Proceeding") against the Seller or any Acquired Company has
been commenced, or to the knowledge of the Seller, threatened, which would, if
successful on the merits, lead to a revocation, suspension, or material
limitation of the rights of any Acquired Company under any of the Business
Licenses, and the Seller and each Acquired Company is in compliance with each of
such Licenses except for any failure to comply as could not reasonably be
anticipated to result in a Material Adverse Effect on the Business.
(iv) Without limiting the generality of the foregoing,
Schedule 4.1(G) lists each Business Commitment of the type described below:
(a) Any employment, severance or consulting
Commitment with any Company Employee or Seller Employee;
(b) Any Commitment or series of related Commitments
for capital expenditures or the acquisition or construction of fixed assets
which requires or require per Commitment future payments or expenditures in
excess of $25,000 (other than any such Commitment which will be fully performed
prior to the Closing Date);
(c) Any Commitment granting to any Person a
first-refusal, first-offer or other right to purchase or acquire any of the
Assets, the Transferred Seller Assets, the Shares, or Equity Securities in any
Acquired Company or in EMA;
(d) Any Commitment relating to or evidencing any
license or royalty agreement with respect to any Intellectual Property;
(e) Any Threshold Commitment with any manufacturer's
representative or other sales agent or relating to distribution or commission
arrangements;
(f) Any Commitment under which any Acquired Company
or the Seller for the Business is: (1) a lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned by any
other Person, (2) a lessor of real property, or (3) a lessor of, or makes
available for use by any other Person, any tangible personal property, and in
the case of items (1) and (3) above requires aggregate annual payments in excess
of $25,000;
(g) Any Commitment with respect to a joint venture or
partnership arrangement, under which any Acquired Company is to become a joint
venturer or partner;
(h) Any Commitment granting a power of attorney;
(i) Any Commitment of any Acquired Company with
respect to letters of credit, surety arrangements or other performance bonds or
pursuant to which any Assets are, or are to be, subjected to a Lien, other than
Liens, if any, on Inventory securing ordinary course trade payables owing to the
respective vendors of such Inventory other than surety bonds issued in the
ordinary course of business with respect to insurance programs;
(j) Any confidentiality Commitment or Commitment
limiting or restricting the ability of any Acquired Company (or the Purchaser
following the Closing) to enter into or engage in any market or line of
business;
(k) Any Commitment relating to (i) any borrowing by
any Acquired Company or (ii) any full or partial guarantee or similar Liability
by any Acquired Company in respect of any Liability of any Person other than any
other Acquired Company; or
(l) Any Commitment relating to services with respect
to the Owned Real Properties which requires aggregate annual payments in excess
of $5,000.
H. Real Properties. (i) Schedule 4.1(H) lists all of the locations and
parcels of real estate which are owned by any Acquired Company (such real
estate, the "Owned Real Properties"). Listed (under the heading "Leases") on
Schedule 4.1(G) and on Schedule 4.1(H) are all of the leasehold interests of any
Acquired Company (or the Seller to the extent related to the Business) under
leases of real property (such leases, the "Leases", and the real estate subject
to such leases, the "Leased Real Properties"). The locations and parcels of real
estate which together comprise the Leased Real Properties and the Owned Real
Properties (collectively, the "Current Locations") comprise all of the real
estate owned or leased by the Seller for use in the Business as presently
conducted or by any Acquired Company. Each Acquired Company listed on Schedule
4.1(H) or Schedule 4.1(G) as the owner of any Owned Real Property or as the
holder of any leasehold interest in any Leased Real Property has good and
marketable title to such Owned Real Property and to such leasehold interest,
free and clear of all Liens except as set forth on Schedule 4.1(H). Except as
set forth on Schedule 4.1(H), there are no subtenants under any of the Leases,
and the Seller has delivered to the Purchaser true and complete copies of each
Lease and of all extensions, renewals, guaranties, waivers and amendments
thereto.
(ii) Except as set forth on Schedule 4.1(H), on each of the
Current Locations (other than the Head Office), a "Fuddruckers" restaurant is
presently open and operating in the ordinary course.
(iii) Except as set forth on Schedule 4.1(H), no condemnation,
zoning, environmental or other land use regulation proceedings are pending, or
to the knowledge of the Seller, threatened, with respect to any of the Current
Locations, nor has any such property been condemned except for any such
condemnation which does not and will not impair the ability of any Current
Location to be operated in accordance with applicable zoning or other land use
Laws as a restaurant substantially in the manner operated immediately prior to
such condemnation. All past and ongoing improvements at the Current Locations
were performed, and are being performed, in accordance with applicable Laws.
(iv) Except as set forth on Schedule 4.1(H) and except for any
such failure to have access as could not reasonably be anticipated to result in
a Material Adverse Effect on the Business, the Acquired Companies have access to
public roads or valid easements over private streets or private property for
such ingress to and egress from each of the Current Locations as is necessary
for the conduct of the Business as conducted as of the date hereof, and to the
knowledge of the Seller, no change therein has been proposed by any Person or
Governmental Entity. The consummation of the transactions contemplated by this
Agreement will not adversely affect any such access or easements.
(v) Except as set forth on Schedule 4.1(H), there are no
special assessments filed, pending or, to the Seller's knowledge, proposed,
against the Owned Real Properties or any portion thereof, including, without
limitation, any street improvement or special district assessments.
(vi) Except as set forth on Schedule 4.1(H), there are no
so-called "linkage" payments, "impact fees," "voluntary contributions," or
"voluntary payments" due and/or payable with respect to the Owned Real
Properties.
(vii) Except as set forth on Schedule 4.1(H), the Owned Real
Properties are each legal and separate lot(s) under applicable subdivision
statutes and ordinances and for tax assessment purposes, and are each an
independent unit which does not rely on any facility or property (other than
facilities of public utility and water companies) located on any property not
included in such Owned Real Property (a) to fulfill any zoning or building code
or any other municipal or governmental requirement or structural support, or (b)
except for common areas or shared services reflected in any Business Commitment
listed on Schedule 4.1(G), for furnishing essential building systems of
utilities, including, without limitation, electrical, plumbing, drainage,
mechanical, heating, ventilating and air conditioning systems; and no building
or other improvements not included in any such Owned Real Property relies on any
part of the Owned Real Property to fulfill any zoning, building code or any
other governmental or municipal requirement, or structural support, or the
furnishing to such building or improvement of any essential building system or
utilities. The Seller has not received, nor, to the Seller's knowledge, is there
any violation or any notice or record of any violation, of any restriction,
condition, covenant or agreement concerning the Owned Real Property or the use
thereof contained in any instrument of record or in any federal, state,
municipal or governmental permit, rule or regulation applicable to the Owned
Real Property except for any such violation which could not reasonably be
anticipated to have a Material Adverse Effect on the Business.
(viii) To the Seller's knowledge, there are no restrictive
covenants or agreements affecting any of the Owned Real Properties except as
reflected on Schedule 4.1(H).
(ix) Except as expressly set forth in the Leases and except as
set forth on Schedule 4.1(H), none of the Seller with respect to the Business or
any Acquired Company is subject to any obligation to pay any broker's or other
fee or commission upon the renewal of any Lease or the purchase or lease of any
Current Locations or additional "Fuddruckers" locations.
I. Other Assets. Except as set forth on Schedule 4.1(I), (a) the
Company owns all of the Assets located at each of the Current Locations
occupied, owned or leased by it as specified on Schedule 4.1(H) and on Schedule
4.1(G) and at its principal place of business located at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Head Office"), and (b) ARVI owns all of the Assets
located at each of the Current Locations occupied or leased by it as specified
on Schedule 4.1(G). Except as set forth on Schedule 4.1(I), the Company, ARVI
and the Seller have (and as to the Transferred Seller Assets, at the Closing the
Company will have) good and marketable title to all Assets and Transferred
Seller Assets free and clear of all Liens other than Liens for Taxes which are
not due and payable or which may thereafter be paid without penalty and which
are reflected in the March Balance Sheet and which will be reflected in the June
Financials and in the Closing Statement (to the extent that they constitute
Current Liabilities). All of the Assets and the Transferred Seller Assets
necessary to operate the Business as currently conducted are maintained in
current operating condition, normal wear and tear excepted. Except as set forth
on Schedule 4.1(I), the Assets, together with the Owned Real Property, the
Leases and the Transferred Seller Assets, taken as a whole, comprise all assets
necessary to operate the Business as presently conducted, provided, however,
that the Seller makes no representation as to the sufficiency or adequacy of the
Transferred Seller Assets to perform corporate overhead functions currently
being performed for the Business and the Acquired Companies by the Seller,
including without limitation functions relating to payroll, preparation of
financial statements and management reports, purchasing, insurance and risk
management, non-store level technology and management information systems,
employee benefits, and mail room and related functions.
J. Intellectual Property. Set forth on Schedule 4.1(J) is a list of all
licenses, patents, copyrights, designs and drawings, trademarks, service marks,
trade names, computer software, and other intellectual property rights, and all
applications therefor and registrations thereof (collectively, together with all
engineering and manufacturing documents, technical manuals, patterns, processes,
formulae, know how, trade secrets, and Proprietary Information, the
"Intellectual Property") to the extent such are currently used or were designed
for use (whether or not currently used) in the operation of the Business as
presently conducted, indicating in each case whether such Intellectual Property
is owned or licensed and if any Person other than the Company owns or licenses
the same, the name of such other Person. Except as set forth on Schedule 4.1(J),
the use of the Intellectual Property listed on Schedule 4.1(J) as currently used
does not infringe upon any intellectual property rights of others and none of
the Seller or any Acquired Company has received any written notice of a conflict
with the asserted rights of others in connection with the use of any such
Intellectual Property that has not been satisfied or withdrawn. Except as set
forth on Schedule 4.1(J), the Seller has no knowledge of any infringing use of
any Intellectual Property listed on Schedule 4.1(J) by others, and to the
Seller's knowledge, no franchisees of the Seller or of any Acquired Company
claims or has ever claimed any rights in any such Intellectual Property other
than in accordance with their rights as franchisees under the Franchise
Agreements.
K. Litigation. Except as set forth on Schedule 4.1(K), there are no
Legal Proceedings pending or, to the knowledge of the Seller, threatened: (i)
against or involving any Acquired Company, the Seller to the extent related to
the Business, the Shares, any of the Assets or any of the Transferred Seller
Assets, or that may, with the passage of time or otherwise, result in the
imposition of a mechanic's, serviceman's, materialman's or any other Lien with
respect to any of the Current Locations, or (ii) against or involving any
Acquired Company or the Seller, by any Company Employee (as hereinafter
defined), Seller Employee (as hereinafter defined), or Former Employee (as
hereinafter defined) arising out of employment by any Acquired Company, or the
Seller relating to the Business, including without limitation any Legal
Proceeding for unlawful employment practices or discrimination in employment or
(iii) against or involving any predecessors or Affiliates of any Acquired
Company or the Seller to the extent related to the Business, the Shares, any of
the Assets or any of the Transferred Seller Assets or (iv) that seek to enjoin
or obtain damages in respect of the consummation of the transactions
contemplated by this Agreement. None of the Seller or any Acquired Company is in
default with respect to any Order.
L. Compliance With Laws. (i) The Business is operated and has been
operated in compliance (and the Current Locations and the Seller's and any
Acquired Company's use of the same comply) with all applicable Laws, including
without limitation the Americans with Disabilities Act and all Laws relating to
wage and hour restrictions, payment of minimum wages, minimum age of employees,
liquor, food and beverage quality standards or disclosures (including without
limitation any so-called "Consumer Protection" Laws), entertainment and
restaurant licensing, zoning and property use, or noise and nuisance, except for
any failure to so comply as could not reasonably be anticipated to result in a
Material Adverse Effect on the Business.
(ii) Without limiting the generality of clause (i) above, the
Seller has made all filings required to be filed by it under the Securities
Exchange Act of 1934, including each Current Report on Form 8-K, Proxy or
Information Statement, Annual Report on Form 10-K and Quarterly Report on Form
10-Q (collectively, the "SEC Reports"). The SEC Reports, as of their respective
filing dates, complied as to form in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, and did not, as of their
respective filing dates, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(iii) (a) Without limiting the generality of clause (i) above,
none of the Seller or any Acquired Company has Liability under any, and each
Acquired Company is presently in compliance with, all Environmental Laws (as
hereinafter defined), except for any failure to so comply as could not
reasonably be anticipated to result in a Material Adverse Effect on the
Business, applicable to (1) the Current Locations, and any facilities and
operations thereon, (2) any other location which the Seller or any of its
Affiliates has at any time leased or owned for use in, or at which the Seller or
any of its Affiliates has at any time conducted, the Business, or (3) any other
location which any Acquired Company, or any Affiliate of any one of them has at
any time leased or owned, or at which any Acquired Company or any Affiliate of
any one of them has at any time conducted any activities or operations,
including without limitation the Business (all such other locations referred to
in paragraph (2) and (3) above, the "Other Locations"); (b) the Acquired
Companies have all Licenses necessary under all applicable Environmental Laws
for the conduct of the Business and their activities and operations at the
Current Locations, which Licenses are or will be listed on Schedule 4.1(G); (c)
except as set forth on Schedule 4.1(L), to the knowledge of the Seller, there
exists no Environmental Condition (as hereinafter defined) with respect to any
of the Current Locations or any facilities or operations thereon or any of the
Other Locations or any facilities or operations thereon; (d) none of the Seller
or any Acquired Company has generated, manufactured, refined, transported,
treated, stored, handled, disposed of, transferred, produced or processed any
Hazardous Materials (as hereinafter defined) in violation of any applicable
Environmental Laws, except for any violation of such Environmental Laws as could
not reasonably be anticipated to result in a Material Adverse Effect on the
Business; (e) except as set forth on Schedule 4.1(L), to the knowledge of the
Seller, there has been no Release or Threat of Release (as such terms are
hereinafter defined) of any Hazardous Materials at the Current Locations or any
of the Other Locations; (f) none of the Seller with respect to any Current
Location or Other Location or any Acquired Company has entered into any
Commitments relating to cleanup, abatement or other actions in connection with
any Environmental Condition; (g) none of the Seller or any Acquired Company has
received a request for information, notice, demand letter, or notice of a Legal
Proceeding with respect to any Environmental Condition relating to any of the
Current Locations or any facilities or operations thereon, any of the Other
Locations or any facilities or operations thereon or the generation, storage,
handling, treatment, transportation or disposal of Hazardous Materials at or
from any such Location; (h) none of the Seller or any Acquired Company is in
violation of any Environmental Laws relating to asbestos or asbestos containing
materials; (i) except as set forth on Schedule 4.1(L), to the knowledge of the
Seller, no polychlorinated biphenyls are used or stored at any of the Current
Locations; (j) except as set forth on Schedule 4.1(L), to the knowledge of the
Seller, none of the Seller or any Acquired Company currently uses any private
water or sewer system at any of the Current Locations, but rather uses public
water and sewer systems at all of the Current Locations; and (k) except as set
forth on Schedule 4.1(L), to the knowledge of the Seller, no underground storage
tanks exist at or on any of the Current Locations.
(iv) For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Environment" shall mean soil, surface waters,
groundwater, land, stream and other sediments, surface or subsurface strata,
ambient air and any other environmental medium.
(b) "Environmental Condition" shall mean any
condition with respect to the Environment, whether or not yet discovered, which
results, could reasonably be expected to result, or has resulted in any material
damage, loss, cost, expense, claim, demand, Order or Liability to or against the
Seller or any Acquired Company by any Person (including without limitation any
Governmental Entity) under any Environmental Law.
(c) "Environmental Laws" shall mean any and all
applicable federal, state, county or local laws, ordinances or regulations
relating to (1) the generation, discharge, release, containment, storage,
transportation or cleanup of Hazardous Materials or other contaminants or
similar materials and (2) the protection of human health, safety or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation Liability Act of 1980, 42 U.S.C. ss.9601 et seq., the
Solid Waste Disposal Act, 42 U.S.C. ss.6901 et seq., and any other federal,
state, county, or local statutes or implementing regulations (or any other
statutes or implementing regulations of any other Governmental Entity) relating
to, regulating, or having jurisdiction over any Hazardous Materials,
Environmental Condition, Release, or Threat of Release (all as amended).
(d) "Hazardous Materials" shall mean any pollutants,
toxic substances, hazardous wastes, hazardous materials, hazardous substances or
oil or other petroleum products, including, without limitation, polychlorinated
biphenyls, asbestos and asbestos containing materials, as any of the foregoing
may be defined in any Environmental Law.
(e) "Release" shall mean any releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping into the Environment.
(f) "Threat of Release" shall mean a substantial
likelihood of a Release which requires action to prevent or mitigate damage to
the Environment which may result from such Release.
(g) "Governmental Entity" shall mean any federal,
state or local, domestic or foreign, court, government, governmental agency,
authority, entity or instrumentality.
M. Employee Matters. (i) Schedule 4.1(M) accurately lists all of the
current employees of the Acquired Companies (the "Company Employees"), all of
the Seller Employees (as hereinafter defined), and all Employee Benefit Plans
and Benefit Arrangements currently applicable to Company Employees, Seller
Employees or Former Employees (as hereinafter defined). Except as set forth on
Schedule 4.1(M), each Employee Benefit Plan complies in all respects and has
been operated and administered in all respects in accordance with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), to the extent that
ERISA is applicable, and all other applicable Laws, except for any failure to so
comply or to be so operated and administered as could not reasonably be
anticipated to result in a Material Adverse Effect on the Business; no
"reportable event" (for which the notice requirement is not waived by the
applicable regulations under ERISA), "prohibited transaction" (as such terms are
defined in ERISA and the Code, as applicable) or termination has occurred with
respect to any Employee Benefit Plan; and each Employee Benefit Plan that is an
"employee pension benefit plan" as defined in Section 3(2) of ERISA has been
determined by the Internal Revenue Service (the "IRS") to be qualified under
Section 401(a) of the Code, and to the Seller's knowledge, no event or omission
has occurred which would cause any such Employee Benefit Plan to lose such
qualification. Except as set forth on Schedule 4.1(M), no Company Employee,
Seller Employee or Former Employee nor any beneficiary or dependent of any of
them is or may become entitled to post employment health care or any other
non-pension benefits (other than as required by Law) by reason of their
employment by the Seller or any Acquired Company or termination of such
employment and no Company Employee, Seller Employee or Former Employee will have
rights to any severance payment or any other benefits by reason of the execution
or delivery of this Agreement or the consummation of the transactions
contemplated hereby or, subject to Section 13.16 in the event of their
termination prior to or following the Closing by the Seller or any Acquired
Company. The Seller has made available to the Purchaser all material plan
documents and other material documents relating to the Employee Benefit Plans
and Benefit Arrangements.
(ii) For purposes of this Agreement:
(a) the term "Arrangements" means all employment
policies, practices or other arrangements to provide employee or executive
compensation or benefits with respect to employees and/or their spouses or
beneficiaries, including without limitation any such policies or practices
relating to life and health insurance, hospitalization, savings, bonus, deferred
compensation, incentive compensation, holiday, vacation, severance pay, sick
pay, sick leave, disability, tuition refunds, service awards, company cars,
scholarships, relocation, patent awards, fringe benefits, contracts, collective
bargaining agreements, individual employment, consultancy or severance
contracts; but excluding in all events Benefit Plans;
(b) the term "Benefit Arrangements" means all
Arrangements that the Seller or any Acquired Company is providing or is
obligated to provide, or under which the Seller or any Acquired Company has any
obligation to make any contributions or other payments, with respect to Company
Employees, Seller Employees, Former Employees and/or any of their spouses or
beneficiaries;
(c) the term "Benefit Plans" shall mean each and all
"employee benefit plans" as defined in Section 3(3) of ERISA;
(d) the term "Employee Benefit Plans" means each and
all Benefit Plans required to be maintained or contributed to by the Seller or
any Acquired Company or in which the Seller or any Acquired Company participates
or under which the Seller or any Acquired Company has any obligation to make any
contributions or other payments or provides any benefits with respect to Company
Employees, Seller Employees, Former Employees and/or any of their spouses or
beneficiaries, including (1) any such plan that is an "employee welfare benefit
plan" as defined in Section 3(l) of ERISA, including retiree medical and life
insurance plans and (2) any such plan that is an "employee pension benefit plan"
as defined in Section 3(2) of ERISA; and
(e) the term "Former Employees" means all employees
employed by any Acquired Company, or the Seller for the Business, at any time
prior to the Closing but not employed by any Acquired Company or the Seller on
the date hereof, including any person on long-term leave of absence or long-term
disability on the date hereof.
N. Labor Relations. No Company Employee or Seller Employee is a party
to or subject to any collective bargaining agreements. Except as set forth on
Schedule 4.1(M): (i) none of the Seller or any Acquired Company has any
personnel policy applicable to, any Company Employee, Seller Employee or Former
Employee; and (ii) there are, and have been within the last four years, no
strikes or work slowdowns pending or, to the knowledge of the Seller,
threatened, against or affecting any Acquired Company or the Business. To the
knowledge of Seller, no union organizational campaign is currently, or has been
within the last four years, pending with respect to employees involved in the
Business.
O. Insurance Policies. Schedule 4.1(O) accurately lists all workers,
compensation, general liability, casualty, property damage, products liability,
auto liability, excess general liability or any other insurance policy or
program (collectively, "Insurance"), which the Seller currently maintains in
force and covering the Business, the Assets, the Transferred Seller Assets or
the Current Locations or any facilities or operations thereon, including (i) the
broker for each such policy of Insurance and (ii) the periods covered by each
such policy of Insurance. Except as set forth on Schedule 4.1(O), (i) all such
Insurance is in full force and effect, (ii) all premiums, including any current
or future retrospective premiums or other like arrangement with respect to such
policies of Insurance which are currently maintained have been paid when due or
have been accrued on the March Balance Sheet (or will be accrued on the June
Financials and on the Closing Statement), (iii) no recommendation has been made
by any insurer to the Seller or any Acquired Company under any such currently
maintained policy of Insurance which is required for or relates to the
maintenance or renewal of any such policy, (iv) no notice of cancellation or
termination has been received with respect to any such policy of Insurance, (v)
except as set forth in Schedule 4.1(O), no claim is currently reserved or, to
the knowledge of the Seller, should be reserved under any policy of Insurance
involving an amount in excess of $5,000, and (vi) all such Insurance is
so-called "occurrence-based" Insurance. Except as set forth on Schedule 4.1(O),
none of the Seller or any Acquired Company has and in the past has had any
Insurance which is or was maintained as self-insurance.
P. Taxes. (i) Except as set forth on Schedule 4.1(P) or as could not
reasonably be anticipated to result in a Material Adverse Effect on the Seller
or the Business, (A) all Tax Returns (as hereinafter defined) required to be
filed by the Seller, any Acquired Company or any Applicable Affiliate have been
filed on a timely basis under the Laws of each jurisdiction in which any Tax
Return is so required to be or to have been filed, (B) all such Tax Returns were
complete and accurate as filed, and (C) all Taxes shown as owing on such Tax
Returns and all other Taxes owed by the Seller, any Acquired Company or any
Applicable Affiliate have been paid, whether or not such Taxes are disputed or
shown on any Tax Return. For purposes of this Agreement, the term "Applicable
Affiliate" means any Person that, on or before the Closing Date, is or was a
member of any "affiliated group" within the meaning of Code section 1504(a) (or
similar group defined under a similar provision of state, local or foreign Law)
that filed a consolidated federal income Tax Return that includes or included
any of the Acquired Companies or for any Taxes of which any Acquired Company is
or could be liable (jointly and severally or otherwise). All Taxes relating to
the Acquired Companies, the Business (excluding EMA), the Assets or the Seller
Assets not yet due but accruable in accordance with GAAP on or before the date
hereof or allocable to a period ending on or before the date hereof or to a
portion of a period beginning before and ending after the date hereof have been
adequately reserved for on the Financial Statements and will be adequately
reserved for on the June Financials and on the Closing Statement. Except as set
forth on Schedule 4.1(P) or as could not reasonably be anticipated to result in
a Material Adverse Effect on the Seller or the Business, none of the Seller, any
Acquired Company or any Applicable Affiliate has executed or filed with the IRS
or any other taxing authority any agreement extending the period for filing any
Tax Return relating to or otherwise affecting the Seller, the Acquired
Companies, the Business (excluding EMA), the Assets or the Seller Assets.
(ii) Except as set forth on Schedule 4.1(P) or as could not
reasonably be anticipated to result in a Material Adverse Effect on the Seller
or the Business, no claim for assessment or collection of Taxes relating to or
otherwise affecting the Seller, the Acquired Companies, the Business (excluding
EMA), the Assets or the Seller Assets has been asserted and is currently pending
against the Seller, any Acquired Company, any Applicable Affiliate, any of the
Assets or any of the Seller Assets. None of the Seller, any Acquired Company or
any Applicable Affiliate is a party to any pending Legal Proceeding by any
Governmental Entity for the assessment or collection of Taxes relating to or
otherwise affecting the Seller, any Acquired Company, the Business (excluding
EMA), the Assets or the Seller Assets.
(iii) Except as set forth on Schedule 4.1(P) or as could not
reasonably be anticipated to result in a Material Adverse Effect on the Seller
or the Business, no waivers of statutes of limitation in respect of any Taxes or
Tax Returns relating to or otherwise affecting the Seller, any Acquired Company,
the Business (excluding EMA), the Assets or the Seller Assets have been given or
requested by the Seller, any Acquired Company, or any Applicable Affiliate nor
has the Seller, any Acquired Company, or any Applicable Affiliate agreed to any
extension of time with respect to a Tax assessment or deficiency relating to or
otherwise affecting the Seller, any Acquired Company, the Business (excluding
EMA), the Assets or the Seller Assets. The federal income Tax Returns of, or
which include, the Seller, any Acquired Company, and any Applicable Affiliate
for all periods to and including any period ended prior to July 1, 1996, have
either been examined by the IRS or the period of limitations for the assessment
or collection of any deficiency with respect to such period has expired. Except
as noted on Schedule 4.1(P), to the Seller's knowledge no claim has been made at
any time by a Governmental Entity in a jurisdiction where the Seller, any
Acquired Company, or any Applicable Affiliate does not currently file Tax
Returns that any of such Persons is or may be subject to taxation by such
jurisdiction nor is the Seller aware that any such assertion of jurisdiction is
threatened. No security interests have been imposed upon or asserted against any
of the Assets or Seller Assets or the Shares as a result of or in connection
with any failure, or alleged failure, to pay any Tax. No ruling with respect to
Taxes (other than a request for determination of the status of a qualified
pension plan) has been requested by or on behalf of the Seller, any Acquired
Company, or any Applicable Affiliate with respect to the Seller, any Acquired
Company, the Business (excluding EMA), any Assets or any Seller Assets.
(iv) Except as disclosed on Schedule 4.1(P) or as could not
reasonably be anticipated to result in a Material Adverse Effect on the Seller
or the Business: (A) none of the Seller or any Acquired Company has filed a
consent under Section 341(f) of the Code, (B) none of the Seller or any Acquired
Company is obligated to make any payments that may constitute "excess parachute
payments," as defined in Section 280G of the Code, (C) none of the Seller or any
Acquired Company has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code, (D) none of the Seller or any
Acquired Company is a party to any agreement that is or may be characterized as
a lease under the safe-harbor leasing provisions of Section 168(f)(8) (now
repealed) of the Internal Revenue Code of 1954 that would result in any Asset or
Seller Asset being treated as owned by another Person, and (E) none of the
Assets or Seller Assets is tax-exempt use property within the meaning of Section
168(h) of the Code or tax-exempt bond financed property within the meaning of
Section 168(g)(5) of the Code.
(v) The Seller has delivered to the Purchaser true and correct
copies of the federal income Tax Returns filed with respect to the Seller or any
Acquired Company for tax years ending in 1993, 1994, 1995, 1996, and 1997.
Except as disclosed on Schedule 4.1(P), no such Tax Returns have been audited or
are currently the subject of audit. The Seller has delivered to the Purchaser
correct and complete copies of all examination reports and statements of
deficiencies accrued against or agreed to by the Seller, any Acquired Company or
any Applicable Affiliate since June 25, 1992.
(vi) None of the Seller or any Acquired Company has entered
into any tax-sharing agreement or other agreement, whether or not written,
providing for the payment of Taxes or entitlement to refunds and related matters
with any other party, other than the Tax Allocation Agreement (as hereinafter
defined).
(vii) Except as set forth on Schedule 4.1(P) or as could not
reasonably be anticipated to result in a Material Adverse Effect on the Seller
or the Business, each of the Seller, the Acquired Companies and each Applicable
Affiliate has withheld and paid all Taxes required to be withheld or paid in
connection with any amounts paid or owing to any employee, creditor, independent
contractor, stockholder or other third party.
(viii) Except as set forth on Schedule 4.1(P) or as could not
reasonably be anticipated to result in a Material Adverse Effect on the Seller
or the Business, none of the Assets or Seller Assets is held in an arrangement
for which Tax Returns as a partnership have been, are required to, or may be
filed.
Q. La Salsa. As of the Closing, no Acquired Company has or will have
any Liability or further obligations in respect of the La Salsa License
Agreement (the "La Salsa Agreement") made and executed as of February 14, 1996
by and among La Salsa Franchise, Inc., La Salsa Holdings, Inc., the Company and
International, except for any Liabilities under Sections 3.7, 3.8(c), 3.8(d), 6,
7.3 with respect to fees incurred prior to the termination which shall in any
case be Retained Liabilities hereunder, 8.1, 9, 10, 15.2 and 16 of the La Salsa
Agreement.
R. Solvency; No Successor Liability. Both as of the date of this
Agreement and taking into account the transactions contemplated hereby and the
intended or otherwise anticipated disposition of the proceeds thereof, (i) the
aggregate fair market value of each of the Seller's and Champps' respective
assets is now and will then be greater than their respective Liabilities; (ii)
each of the Seller and Champps is now and will then be able to pay its
then-existing debts as they become due in the ordinary course, and (iii) the
fair salable value of each of the Seller's and Champps' respective assets is now
and will then be greater than the amount that will be required to pay their
respective probable liability on each of their then-existing debts as they
become due.
S. Brokers' Fees. None of the Seller or any Acquired Company, or any
Affiliate of any one of them has made any agreement or taken any other action
which will cause the Purchaser to become obligated for any broker's or other fee
or commission as a result of any of the transactions contemplated by this
Agreement.
T. Certain Payments. None of the Seller, any Acquired Company, or any
Affiliate, director, officer, or agent of any one of them, or any Company
Employee, Seller Employee, or Former Employee, or to the Seller's knowledge, any
other Person associated with or acting for or on behalf of any Acquired Company
or the Business (except for EMA), has directly or indirectly given or agreed to
give any gift or similar benefit to any customer, supplier, employee of any
Governmental Entity, or other Person who is or may be in a position to help or
hinder the Business (except for EMA) (i) which subjected or could reasonably be
anticipated to subject the Seller or any Acquired Company to any suit, damage or
penalty in any civil or criminal Legal Proceeding, or (ii) which, in the case of
a payment made directly or indirectly to an official or employee of any
Governmental Entity, constitutes an illegal bribe or kickback (or, if made to an
official or employee of a foreign Governmental Entity, is unlawful under the
Foreign Corrupt Practices Act of 1977) or, in the case of a payment made
directly or indirectly to a Person other than an official or employee of a
Governmental Entity, constitutes an illegal kickback or other illegal payment
under any Law which subjects the payor to a criminal penalty or, except where
such loss could not reasonably be anticipated to result in a Material Adverse
Effect on the Business, the loss of a License or privilege to engage in a trade
or business or the termination of a Commitment.
U. Relationships with Related Persons. Except as set forth on Schedule
4.1(U), none of the Seller or any current Affiliate thereof (other than those
Affiliates that are institutional stockholders of the Seller) owns, of record or
beneficially, any Equity Securities or any other financial or profit interest
in, a Person other than an Acquired Company or EMA that has (i) had material
business dealings or a material financial interest in any transaction with any
other Acquired Company, or (ii) engaged in competition with any such other
Acquired Company in any market presently served by such other Acquired Company,
except in each case for the ownership of up to 2% of the outstanding Equity
Securities of any publicly traded corporation.
V. Franchise. (i) From the time the Seller and each Acquired Company
commenced franchising, the Seller and each Acquired Company have complied with
all domestic and, where applicable, international laws pertaining to the offer
and/or sale of a franchise or regulating the franchise relationship
(collectively, "Franchise Laws"), except for any failure to comply as could not
reasonably be anticipated to result in a Material Adverse Effect on the
Business. As used in this Section 4.1(V), "Seller" and "Acquired Company" shall
include each of their respective predecessors and agents, if any, involved in
"Fuddruckers" franchising activity; and "laws" and "Franchise Laws" shall
include but not be limited to statutes, regulations, rules, policies,
interpretations, judicial and administrative opinions, and guidelines and,
further, shall include business opportunity laws to the extent any such law may
be deemed applicable by any regulatory authority or court to the "Fuddruckers"
franchising activities of the Seller and each Acquired Company.
(ii) None of the Seller or any Acquired Company has made any
statement or omission in any registration application, notice, offering
circular, franchise agreement or related document that either has been filed
with any Governmental Entity or provided to any franchisee or prospective
franchisee, which it knew or should have known was materially incomplete,
inaccurate, deceptive, false or misleading. None of the Seller or any Acquired
Company has made any representations, written or oral, or omissions to any
Governmental Entity, franchisee or prospective franchisee, which it knew or
should have known was materially inconsistent or contradictory to the
disclosures contained in any registration application, or offering circular, or
that were otherwise materially deceptive, false or misleading. The Seller and
each Acquired Company have not made any "earnings claims", as that term is
defined by or understood in connection with the Uniform Franchise Offering
Circular Guidelines promulgated by the North American Securities Administrators'
Association, to franchisees or prospective franchisees except in compliance with
all Franchise Laws.
(iii) Schedule 4.1(V) lists each state or other jurisdiction
in which the Seller or any Acquired Company has undertaken franchising
activities. The Franchise Agreements constitute all of the franchise agreements
(and all oral or written amendments thereto) to which the Seller (in relation to
the Business) or any Acquired Company is a party. Each Franchise Agreement is in
full force and effect and represents the valid, binding and enforceable
obligation of the Seller or any Acquired Company, and to the Seller's knowledge,
each of the other parties thereto. The Seller and each Acquired Company have not
attempted to enforce any terms or provisions in any "Fuddruckers" franchise
agreement (including, without limitation, any Franchise Agreement) in a way that
would result in its violation of or noncompliance with any applicable Franchise
Laws except for any such violation or noncompliance as could not reasonably be
anticipated to result in a Material Adverse Effect on the Business.
(iv) Prior to each offer and/or sale of a franchise, each
prospective franchisee received all offering circulars and other disclosure
documents (collectively, "disclosure documents") required to be provided by all
then applicable Franchise Laws and, further, all such disclosure documents were
provided within timelines prescribed by all such applicable Franchise Laws.
(v) Each offer and/or sale of a "Fuddruckers" franchise by the
Seller or any Acquired Company occurred at a time when all material information
contained in the offering circular and other required documents disclosed in
each such transaction was current as of that time except for any such failure to
be current as could not reasonably be anticipated to result in a Material Averse
Effect on the Business.
(vi) Whenever the Seller or any Acquired Company has offered,
attempted to sell or sold a "Fuddruckers" franchise in any state that had at the
relevant time a franchise registration statute, rule or regulation, the
"Fuddrucker's" franchise offering has been effectively and lawfully registered
with each such state except for any failure to be so registered as could not
reasonably be anticipated to result in a Material Adverse Effect on the
Business.
(vii) All offering circulars (with attachments and exhibits
thereto including the standard "Fuddruckers" franchise agreements then in use)
registered with each state or Governmental Entity, or provided by the Seller or
any Acquired Company to any prospective franchisee in connection with any offer
and/or sale of a "Fuddruckers" franchise, have substantially complied with the
format and content requirements of that state's or Governmental Entity's
applicable Franchise Laws. With respect to offers and/or sales involving any
registration state, prospective franchisees received disclosure documents that
were identical in form and content as the then effectively registered disclosure
documents.
(viii) There are no existing or impending defaults by the
Seller or any Acquired Company under any of the Franchise Agreements and no
event has occurred which (with notice, or lapse of time, or both) would
constitute a default by Seller or any Acquired Company thereunder.
(ix) The Seller has made available to the Purchaser complete
and accurate copies of the following past, present and pending documents or
information:
(a) Any documents received by the Seller or any
Acquired Company and the outside franchise counsel of the same, during the last
five years, from the Federal Trade Commission or any other Governmental Entity
relating to any "Fuddruckers" franchising activity, including activity in
connection with any registration or attempted registration of a "Fuddruckers"
franchise offering.
(b) All current offering circulars (with attachments,
accompanying submissions and exhibits) in the form filed or registered in any
state or other jurisdiction.
(c) All franchise agreements (with related contracts,
amendments, attachments and exhibits thereto, whether oral or written) for
currently open franchises and franchises closed since 1993, including without
limitation the Franchise Agreements and any documents (including notices and
correspondence) related to the performance (or alleged failure of performance or
default) of the Seller or any Acquired Company and each franchisee under the
applicable franchise agreements.
(d) All documents relating to the transfer or sale of
a franchise by a franchisee and the Seller's and each Acquired Company's
assistance, if any, with the same and all franchises (y) terminated by any
Acquired Company or the Seller before the expiration of their term or (z) not
renewed at the end of the franchise agreement's terms.
(e) All versions of any current operating manual for
franchisees.
W. Champps. Champps is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Minnesota. Champps has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation by Champps of the transactions contemplated by
the terms and provisions of this Agreement to be performed by it has been duly
authorized by all requisite corporate action. This Agreement has been duly
executed by Champps and, assuming the due execution of this Agreement by the
Purchaser, this Agreement constitutes a valid and binding obligation of Champps
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
relating to creditors' rights generally and to general principles of equity.
Neither the execution and delivery by Champps of this Agreement nor the
consummation by Champps of the transactions contemplated hereby: (i) violates or
will violate any Law applicable to Champps; (ii) violates or will violate any
Order applicable to Champps; (iii) results or will result in a breach of or
default under the certificate or articles of incorporation or bylaws of Champps,
or conflicts or will conflict or results or will result in any breach of any
Commitment applicable to Champps; (iv) results or will result in the imposition
of any Lien on any of Champps' assets; or (v) results or will result and/or give
rise to any claim or judgment against Champps, except for any of the foregoing
as could not reasonably be anticipated to result in a Material Adverse Effect on
Champps.
X. EMA. Schedule 4.1(X) lists: (a) all of the Commitments (the "EMA
Agreements") to which the Company is a party relating to EMA, and (b) all
Liabilities of the Company towards EMA or its stockholders (other than the
Company) which are not contained in the EMA Agreements. The Company is in
compliance with all of its obligations under the EMA Agreements and the other
Liabilities the existence of which are listed on Schedule 4.1(X), except where
the failure to so comply could not reasonably be anticipated to result in a
Material Adverse Effect on the Business. The Seller has delivered true and
complete copies of all of the EMA Agreements to the Purchaser.
Y. ARVI. The Company has no contractual obligations or other
Liabilities towards ARVI or the other stockholders thereof except for those
obligations as are found in the Commitments listed on Schedule 4.1(Y) and
obligations imposed under the corporate Laws of the State of Virginia. The
Company has the right to purchase all of NARLP's Equity Securities in ARVI on
January 31, 2000 for $5,400,000 under the terms of the Put/Call Agreement dated
as of October 22, 1993 as amended November 24, 1993 (the "Put/Call Agreement")
between the Company and New American Restaurants Limited Partnership ("NARLP").
The "Investor Value Added", as defined in the Put/Call Agreement, is zero.
Section 4.2 Certain Defined Terms. As used in the foregoing Section 4.1
and elsewhere in this Agreement, the terms set forth below shall have the
following meanings:
"Assets". As used herein, the term "Assets" shall mean all of
the properties (including without limitation the Owned Real Properties), rights,
claims, judgments, cash (to the extent included in the Working Capital and the
Final Working Capital), Commitments, Licenses, Intellectual Property, Equity
Securities, machinery, equipment, leasehold improvements, vehicles, parts,
furniture, furnishings, plant and office equipment and other assets, whether
fixed or personal, tangible or intangible, real or personal, ▇▇▇▇▇▇ or inchoate,
wherever located, owned, leased or otherwise held, by any Acquired Company.
"Commitments". As used herein, the term "Commitments" shall
mean all contracts, agreements, guaranties, loans, other rights or obligations
of a contractual nature, Licenses, Leases, franchises, rights or arrangements,
and all warranties or other transferable benefits.
"Current Receivables". As used herein, the term "Current
Receivables" shall mean each of the Receivables that are Current Assets.
"Disclosure Schedule". As used herein, the term "Disclosure
Schedule" shall mean the Schedules attached hereto, which Schedules are
incorporated herein and made a part hereof, fully as if the same were set forth
in the body of this Agreement in their entirety. The information disclosed on
any Schedule shall be deemed to have been disclosed on each other Schedule
regardless of the presence or absence of internal cross-references, except that
(a) the financial statements (but not the footnotes) attached as Schedule
4.1(D)(i), Schedule 4.1(D)(ii) and Schedule 4.1(D)(iii) and the information
disclosed and reflected in such financial statements shall not be deemed to have
been disclosed on any other Schedule, and (b) none of the information disclosed
on any Schedule other than Schedule 4.1(B) (except for Section 4.1(B)(iv) and
the last sentence of Section 4.1(B)), Schedule 4.1(C), Schedule 4.1(D)(i),
Schedule 4.1(D)(ii) and Schedule 4.1(D)(iii) shall be deemed to have been
disclosed on Schedule 4.1(B), Schedule 4.1(C), Schedule 4.1(D)(i), Schedule
4.1(D)(ii), or Schedule 4.1(D)(iii) unless a specific cross-reference to another
Schedule is noted on such Schedules.
"EBITDA". As used herein, the term "EBITDA" shall mean for any
period, an amount equal to the consolidated net income of a Person determined in
accordance with GAAP consistently applied, plus the following to the extent
deducted in computing such net income for such period: (i) all interest and all
amortization of debt discount and expense on any indebtedness for such period,
(ii) Taxes on income for such period, (iii) depreciation for such period, (iv)
amortization for such period, and (v) other non-cash charges resulting from the
application of Statement of Financial Accounting Standards No. 121 ("FAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of".
"Excluded Items". As used herein, the term "Excluded Items"
shall mean any and all of the Current Assets (including Current Receivables) and
Long-Term Receivables that the Purchaser has required the Seller, in accordance
with Section 2.2(A)(ii) and Section 2.3(C), to have Transferred to itself at or
prior to the Closing or to purchase from the Purchaser post-Closing.
"Inventory". As used herein, the term "Inventory" shall mean
all inventories, including raw materials, food and beverage inventories, liquor,
wine, beer, soft drinks, linens, tableware, glasses, smallwares, dishes,
ingredients and work in process, finished product and administrative, cleaning
and other supplies and materials including, without limitation, any of the
foregoing which are in the possession of any subcontractor or other bailee.
"Long-Term Receivables". As used herein, the term "Long-Term
Receivables" shall mean each of the Receivables other than the Current
Receivables, including those franchise and lease receivables listed on Schedule
4.2 attached hereto.
"Material Adverse Change". As used herein, the term "Material
Adverse Change" shall mean any change or changes in the business, financial
condition or results of operations of any Acquired Company or the Business which
changes taken as a whole result, or could reasonably be anticipated to result,
in an aggregate decrease in the annualized EBITDA of the Acquired Companies by
more than $600,000 following such change or changes.
"Material Adverse Effect". As used herein, the term "Material
Adverse Effect on the Business" shall mean a material adverse effect on the
assets, business, condition (financial or otherwise), or results of operations
of the Business taken as a whole or of the Acquired Companies taken as a whole
whether prior to or following the Closing and shall be deemed to include in any
case any event or series of events resulting in either (a) the incurrence by,
imposition upon, or attachment against, any Acquired Company or its assets, of
aggregate Liabilities with respect to the representations or warranties to which
the concept of Material Adverse Effect is being applied in excess of $100,000,
or (b) the material impairment of the ability to operate the Business (including
without limitation, the ability to operate any one or more "Fuddruckers"
restaurant). As used herein, the term "Material Adverse Effect" when used with
specific reference to any Person shall mean a material adverse effect on the
assets, business, condition (financial or otherwise), or results of operations
of such Person.
"Receivable(s)". As used herein, the term "Receivable(s)"
shall mean each of the trade, miscellaneous, accounts and notes receivable
arising out of the sale or lease of goods or the rendering of services and any
amount payable and all security for any of the foregoing.
"Retained Liabilities". As used herein, the term "Retained
Liabilities" shall mean all Liabilities of the Seller and the Acquired Companies
other than the Transferred Liabilities, including without limitation, regardless
of any disclosure made in the Disclosure Schedule, (i) any Liabilities under any
current or pending Legal Proceedings, (ii) any Liability for Taxes for which the
Seller is responsible under this Agreement, (iii) any Liability of the Company
in connection with the sublease of the Saugus Restaurant or the Andover
Restaurant and any other Liability in connection with the Saugus Restaurant or
the Andover Restaurant, (iv) any Liability under any Business Commitments which
are required to be disclosed on any Schedule to this Agreement and have not been
so disclosed (unless the Acquired Companies elect to continue to receive the
performance of the other party(ies) to such Commitments), (v) any Liability
which would constitute a breach of any of the Seller's representations and
warranties under this Agreement, (vi) any Commitment listed on Schedule 4.2(A),
and (vii) any other Liability (other than the Transferred Liabilities) arising
out of or relating to the operation of the Business prior to the Closing
regardless of whether the Purchaser would be deemed to have otherwise assumed
any such Liabilities as a matter of law incident to the purchase of the Shares.
"Seller Assets". As used herein, the term "Seller Assets"
shall mean all of the properties, rights, claims, judgments, cash, Commitments,
Licenses, Intellectual Property, machinery, equipment, leasehold improvements,
vehicles, parts, furniture, furnishings, plant and office equipment and other
assets, whether fixed or personal, tangible or intangible, real or personal,
▇▇▇▇▇▇ or inchoate, wherever located, owned, leased or otherwise held as of the
date hereof and as of the Closing Date by the Seller for use in the Business as
currently or then conducted.
"Threshold Licenses". As used herein, the term "Threshold
Licenses" shall mean any Licenses, the absence of which would: (a) cause an
interruption in the ordinary course operation of the Business (except for EMA),
or (b) cost more than $1,000 per License, or $25,000 in the aggregate, to renew,
file, or otherwise reinstate, obtain or replace.
"Transferred Liabilities". As used herein, the term
"Transferred Liabilities" shall mean all Current Liabilities reflected in the
Final Working Capital, all obligations under Business Commitments and Business
Licenses to which any of the Acquired Companies is a party arising following the
Closing (except that Transferred Liabilities shall not include in any case any
Liability under any Business Commitments which are required to be disclosed on
any Schedule to this Agreement and have not been so disclosed unless the
Acquired Companies elect to continue to receive the performance of the other
party(ies) to such Commitments) and any Liability arising out of or relating to
the operation of the Business after the Closing including all severance and
similar payments due upon termination of Company Employees and, except as set
forth in Section 13.16, Seller Employees, after the Closing.
"Transferred Seller Assets". As used herein, the term
"Transferred Seller Assets" shall mean all of the Seller Assets to be
Transferred to the Company pursuant to Section 1.2.
ARTICLE V
Representations and Warranties by the Purchaser
Section 5.1 Representations and Warranties. The Purchaser represents and
warrants to the Seller that:
A. Corporate Existence and Qualification; Due Execution, Etc. The
Purchaser is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware and has all requisite corporate power
and authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated by this Agreement. The execution and performance
by the Purchaser of the terms and provisions of this Agreement have been duly
authorized by all requisite corporate action and, assuming the due execution of
this Agreement by the Seller, Champps, and Specialty, this Agreement constitutes
a valid and binding obligation of the Purchaser enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws relating to creditors' rights
generally and to general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity).
B. No Violation. Neither the execution and delivery by the Purchaser of
this Agreement nor the consummation of the transactions contemplated hereby: (i)
violates or will violate any provision of Law applicable to the Purchaser; (ii)
violates or will violate any Order applicable to the Purchaser; or (iii) results
or will result in a breach of or default under the certificate of incorporation
or bylaws of the Purchaser.
C. Capitalization. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ owns not less than 85% of the Equity
Securities in the Purchaser.
D. Litigation. There are no Legal Proceedings pending before any
Governmental Entity or, to the Purchaser's knowledge, threatened against the
Purchaser.
E. Brokers' Fees. The Purchaser has not made any agreement or taken any
other action which will cause the Seller to become obligated for any broker's or
other fee or commission as a result of any of the transactions contemplated by
this Agreement.
F. Net Worth. The Purchaser has, and shall have as of the Closing, net
worth in cash or freely tradeable securities not issued by Affiliates of the
Purchaser equal to at least $20,000,000 and will maintain such net worth through
to the Closing.
G. Compliance With Law. (i) The Purchaser's business is operated and
has been operated in material compliance with all applicable Laws.
H. No Prior Activities. Since its incorporation on July 28, 1998, the
Purchaser has owned no assets (other than the cash and securities referred to in
Section 5.1(F)), and has not conducted any business or operations except the
negotiations of the terms of this Agreement. Except as set forth on Schedule
5.1(H), the Purchaser has no Liabilities, Commitments or obligations with
respect to indebtedness or guarantees.
ARTICLE VI
Covenants of the Seller Prior to and Post-Closing
Section 6.1 Access and Investigation. Prior to the Closing, upon
reasonable notice from the Purchaser to the Seller given in accordance with this
Agreement, the Seller will afford to the officers, attorneys, accountants or
other authorized representatives of the Purchaser reasonable access during
normal business hours to the facilities, assets, books and records of the Seller
and the Acquired Companies so as to afford the Purchaser a reasonable
opportunity to make, at its sole cost and expense, such additional review,
examination and investigation of the Business, the Assets and the Transferred
Seller Assets as the Purchaser may reasonably desire to make, including without
limitation examination of the title of the Owned Real Properties, asset
appraisals and so-called "Phase I" (i.e., documentary review and walk-through
site inspection) preliminary environmental evaluations; provided, however, that
no borings or other so-called "Phase II" environmental examinations will be
performed without the Seller's prior written consent, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the Seller hereby consents
to such borings or other so-called "Phase II" environmental examinations as may
be recommended in any Update (as hereinafter defined) prepared for Store No. 114
(as hereinafter defined) in accordance with Section 8.6, provided that the
Seller is given at least two days' prior notice of any such borings or other
examinations. The Purchaser will be permitted to make extracts from or to make
copies of such books and records as it may reasonably request. Prior to the
Closing, the Seller will furnish or cause to be furnished to the Purchaser such
existing financial and operating data and other information pertaining to the
Acquired Companies and the Business as the Purchaser may reasonably request so
long as such information is available to the Seller or any Acquired Company and
does not require additional services of outside auditors or advisors to prepare.
Section 6.2 Operation of the Business. Between the date of this
Agreement and the Closing, the Seller will, and will cause each Acquired Company
to:
(i) conduct the Business (excluding EMA) only in the ordinary
course consistent with past practice, and use its commercially reasonable
efforts to maintain the Assets and the Transferred Seller Assets in their
current condition subject to additions, deletions and normal wear and tear in
the ordinary course;
(ii) use its commercially reasonable efforts to preserve
intact the current business organization of each Acquired Company and of the
Seller to the extent related to the Business, to keep available the services of
the current officers and agents of each Acquired Company, the Company Employees
and the Seller Employees, and to maintain the relations and good will with
suppliers, customers, landlords, creditors, franchisees, Company Employees,
Seller Employees, agents, and others having material business relationships with
any Acquired Company or with the Seller to the extent related to the Business;
(iii) confer with the Purchaser concerning operational matters
of the Business which are of a material nature, it being understood that
notwithstanding anything to the contrary herein until the Closing the Seller and
the Acquired Companies shall have sole authority to operate the Business; and
(iv) keep, or cause to be kept, proper books of record and
account such that such books and accounts shall be true and complete as of the
date on which the quarterly reports of the Seller and the Acquired Companies are
prepared or can be prepared in the ordinary course, and supply to the Purchaser
monthly and quarterly unaudited balance sheets and statements of income of the
Acquired Companies as a consolidated group, and monthly updates to the March
Balance Sheet and the June Financials, as soon as practicable after the end of
each month, prepared in accordance with past practice (it being understood that
the monthly balance sheets and updates are internally prepared management
reports which are not necessarily prepared in accordance with GAAP and are not
subject to the same procedures and review as quarterly balance sheets, updates
and financial statements).
Section 6.3 Negative Covenant. Except as otherwise expressly permitted
by this Agreement, between the date of this Agreement and the Closing, none of
the changes or events listed in Section 4.1(E) shall have occurred without the
prior written consent of the Purchaser.
Section 6.4 Approvals. As promptly as practicable after the date of
this Agreement, the Seller will, and will cause each Acquired Company to, make
all filings required by Law to be made by them in order to consummate the
transactions contemplated by this Agreement (including all filings under the HSR
Act). Between the date of this Agreement and the Closing, the Seller will, and
will cause each Acquired Company to cooperate with the Purchaser with respect to
all filings that the Purchaser reasonably elects or is required by Law to make
in connection with the transactions contemplated by this Agreement (including
taking all actions requested by the Purchaser to cause early termination of any
applicable waiting period under the HSR Act).
Section 6.5 Notification. Between the date of this Agreement and the
Closing, the Seller will promptly notify the Purchaser in writing if the Seller
or any Acquired Company becomes aware of any fact or condition that causes or
constitutes a breach of any of the Seller's representations and warranties as of
the date of this Agreement, or if the Seller or any Acquired Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly required by this Agreement) cause or
constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Schedule hereto if such Disclosure Schedule were dated the
date of the occurrence or discovery of any such fact or condition, the Seller
will promptly deliver to the Purchaser a supplement to the Disclosure Schedule
hereto specifying such change. No supplement to the Disclosure Schedule
delivered pursuant to this Section 6.5 shall be deemed to cure any breach of any
representation or warranty made in this Agreement for the purposes of a
determination by the Purchaser that the conditions of Article VIII shall have
been met or otherwise, but if the Closing occurs the Disclosure Schedule as so
supplemented shall be the Disclosure Schedule for all purposes under this
Agreement, including Section 13.14. During the same period, the Seller will
promptly notify the Purchaser of the occurrence of any breach of any covenant of
the Seller in this Article VI or of the occurrence of any event that may make
the satisfaction of the conditions in Article VIII impossible or unlikely.
Section 6.6 Liabilities, etc.
A. Non-Current Liabilities. The Seller hereby agrees and covenants that
it shall, prior to or simultaneously with the Closing, perform, pay or
discharge, or cause the Acquired Companies to perform, pay or discharge, all to
the extent not theretofore performed, paid or discharged, and in each case in
accordance with its terms, (1) those Liabilities of the Seller listed in
Schedule 6.6(A)(i), and (2) any and all known Liabilities as of the Closing Date
of any Acquired Company ((1) and (2) collectively, the "Non-Current
Liabilities") other than in the case of (2), (i) those Liabilities set forth on
Schedule 6.6(A)(ii), (ii) contingent Liabilities or Liabilities for workers'
compensation or similar payments not due and payable as of the Closing Date
unless otherwise expressly required by this Section 6.6, (iii) Current
Liabilities, (iv) all deferred income items (in each case measured as of the
Closing Date) of the type indicated on the March Balance Sheet with a triple
asterisk (***) including straight line rent adjustment and buy-down royalty
accrued income, and (v) Liabilities arising under any Business Commitment
applicable to the Acquired Companies following the Closing. Without limiting the
generality of the foregoing, the Seller hereby agrees and covenants that it
shall, prior to or simultaneously with the Closing, (a) obtain the releases
described on Schedule 6.6(A)(iii); and (b) cause all indebtedness owed by the
Seller and or any of its Affiliates to an Acquired Company and by an Acquired
Company to the Seller, any other Acquired Company or any of their respective
Affiliates (whether or not such indebtedness constitutes a Non-Current
Liability) to be canceled or forgiven. The Seller shall provide evidence
reasonably satisfactory to the Purchaser of the foregoing at the Closing,
failing which, the Seller shall disclose to the Purchaser the continued
existence of any such Liabilities. The aggregate amount of any Liabilities
required to be paid, canceled or forgiven under this Section 6.6(A) at or prior
to the Closing and not so paid, canceled or forgiven shall be delivered by the
Purchaser to the Escrow Agent as an additional escrow amount (the "Liability
Escrow") to be used at the direction of the Seller by the Escrow Agent to pay
all such Liabilities and any portion of the Liability Escrow remaining after
such payment shall be returned to the Seller as soon as all such Liabilities
have been so paid or canceled (and if not so paid or canceled by the termination
of the Escrow Agreement the Purchaser may pay such amounts on behalf of the
Seller from the Liability Escrow), all as more fully set forth in the Escrow
Agreement.
B. Intentionally Deleted.
C. Closed Locations. The Seller shall Transfer to itself at or prior to
the Closing, or otherwise assume responsibility for in a manner and on terms
reasonably satisfactory to the Purchaser, all Assets and Liabilities (whether
Non-Current Liabilities or otherwise, and without the Purchaser being required
to make a separate election in respect of the same under Section 2.2(A)(ii) or
Section 2.3(C)) relating to any "Fuddruckers" location that is no longer
operating as a "Fuddruckers" restaurant at Closing (including without limitation
the locations listed on Schedule 6.6(C)), and shall deliver to the Purchaser, at
the Closing, evidence reasonably satisfactory to the Purchaser of the same.
D. Concluded Litigation. The Seller hereby covenants and agrees that,
by no later than the Closing, it shall have paid and discharged all Liabilities
in regard to any concluded Legal Proceeding that has been reduced to Judgment
against the Seller to the extent relating to the Business or against any
Acquired Company, is the subject of an executed settlement agreement or
otherwise concluded as of the Closing Date (except for any such Legal Proceeding
as to which the Seller is pursuing an appeal), including without limitation
those Legal Proceedings listed on Schedule 6.6(D). In addition, to the extent
that the Legal Proceeding indicated with an asterisk (*) on Schedule 6.6(D) has
not been paid and discharged by the Closing, the Seller hereby agrees that the
full amount of the damages and costs awarded in the Judgment Entered After
Finding dated March 23, 1998 totaling $41,752.83 shall be delivered by the
Purchaser to the Escrow Agent from the Estimated Purchase Price, at the Closing,
as an additional escrow amount (the "Litigation Escrow") to be so held by the
Escrow Agent for use at the Seller's request to pay and discharge the final
judgment in such case and any balance after the judgment has been so paid and
discharged shall be delivered to the Seller, all as more fully set forth in the
Escrow Agreement.
E. Liens. The Seller hereby agrees and covenants that it shall, prior
to or simultaneously with the Closing, file, or cause to be filed, UCC-3
termination statements and obtain, or cause to be obtained, any other releases,
consents or similar documents necessary to release any Liens on the Assets, the
Transferred Seller Assets or the Shares including without limitation those
relating to the Liabilities to be performed, paid or discharged as provided in
this Section 6.6, those in favor of those Persons listed on Schedule 6.6(E), and
the mortgages on the Owned Real Properties in favor of those Persons listed on
Schedule 6.6(E), all as set forth on Schedule 6.6(E), except for those Liens
curing, to the extent and only to the extent they may secure, furniture,
fixtures and equipment which are leased pursuant to Business Commitments listed
on a Schedule to this Agreement and applicable to the Acquired Companies after
the Closing, or which are loaned or consigned pursuant to ordinary course vendor
arrangements, or purchase money security interests pursuant to any Business
Commitment listed on Schedule 4.1(I) and applicable to the Acquired Companies
after the Closing.
F. Liabilities Not Assumed. The Seller agrees and acknowledges that
notwithstanding the Transfer of the Shares, the Purchaser does not and will not
at Closing or otherwise assume any Liabilities of the Seller or the Acquired
Companies other than the Transferred Liabilities. The Seller shall be deemed to
have assumed and Transferred to itself at Closing, or shall otherwise retain,
and shall from and after the Closing pay, discharge and perform in accordance
with their respective terms, all of the Retained Liabilities.
Section 6.7 No Solicitation or Negotiation.
A. No Solicitation. Until such time, if any, as this Agreement is
terminated pursuant to Article X, the Seller will not, nor will it authorize or
permit any Acquired Company or any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Seller or
any Acquired Company to, directly or indirectly, solicit, initiate, or encourage
any inquiries or proposals from any Person (other than the Purchaser) relating
to any transaction involving the sale of all or any part of the Shares, the
Business, the Assets or the Transferred Seller Assets (other than in the
ordinary course of business), or any Equity Securities of any Subsidiary or of
EMA, or any merger, consolidation, business combination, or similar transaction
involving any Acquired Company (any such transaction, a "Competing Transaction")
or participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, any Competing Transaction (it being
expressly acknowledged by the Purchaser that any transaction involving the sale,
merger, consolidation of, share exchange, tender or exchange offer for, business
combination with, or similar transaction involving, the Seller or any of its
subsidiaries other than the Acquired Companies and which is not inconsistent
with this Agreement and the consummation of the transactions contemplated hereby
in accordance with its terms shall not fall within the definition of "Competing
Transaction", so long as the Seller's obligations under this Agreement shall
survive as the obligations of the resulting or surviving Person); provided,
however, that prior to the approval of this Agreement and the transactions
contemplated hereby at a Special Meeting, the Seller may, to the extent required
by the fiduciary obligations of the Board of Directors of the Seller as
determined in good faith by such Board of Directors with the advice of outside
legal counsel (i) in response to an unsolicited request therefor, furnish
information with respect to the Acquired Companies to any Person who has
indicated to the Seller that it is interested in pursuing a Competing
Transaction and discuss such information with such Person and (ii) following the
delivery to the Purchaser of the notice required pursuant to Section 6.7(C),
participate in discussions or negotiations with any Person that makes, or
expresses a bona fide intention to make, a proposal with respect to a Competing
Transaction. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by any officer, director
or employee of, or any investment banker, attorney, broker, agent or other
advisor or representative with implied or express authority, of the Seller or
any Acquired Company, shall be deemed to be a breach of this Section 6.7 by the
Seller. For purposes of this Agreement, "Qualified Competing Transaction" means
a Competing Transaction having terms which the Board of Directors of the Seller
believes (based on, among other things, the advice of a financial advisor of
nationally recognized reputation) in its good faith reasonable judgment to be
more favorable to the Seller than the terms contemplated hereby.
B. Seller's Board of Directors. Except as provided otherwise in this
paragraph, neither the Board of Directors of the Seller nor any committee
thereof shall (x) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to the Purchaser, the approval or recommendation by such Board of
Directors or any such committee of this Agreement and the consummation of the
transactions contemplated hereby, (y) approve or recommend, or propose to
approve or recommend, any Competing Transaction or (z) enter into any agreement
with respect to any Competing Transaction. Notwithstanding the foregoing, in the
event that the Seller receives a bona fide offer of a Qualified Competing
Transaction, the Board of Directors of the Seller or any committee thereof may
(subject to the limitations contained in this Section 6.7) withdraw or modify
its approval or recommendation of this Agreement and the consummation of the
transactions contemplated hereby following the Purchaser's receipt of written
notice (a "Notice of Qualified Competing Transaction") advising the Purchaser
that the Seller has received a bona fide offer of a Qualified Competing
Transaction, specifying the material terms and conditions of such Qualified
Competing Transaction and identifying the Person making such Qualified Competing
Transaction. The Seller may take any of the foregoing actions pursuant to the
preceding provisions of this Section 6.7(B) only until this Agreement and the
consummation of the transactions contemplated hereby have been approved at the
Special Meeting. Once the Board of Directors of the Seller or any committee
thereof has withdrawn or modified its approval or recommendation of this
Agreement and the consummation of the transactions contemplated hereby in
accordance with this Section 6.7(B), or the stockholders of the Seller shall
otherwise fail to approve this Agreement and the transactions contemplated
hereby at a Special Meeting, if required as specified in Section 6.8, the Seller
shall give notice of the occurrence of the same to the Purchaser (the "Section
6.7(B) Notice") within 48 hours following such occurrence.
C. Notice to Purchaser. In addition to the obligations of the Seller
set forth in Section 6.7(B), the Seller shall promptly advise the Purchaser
orally and in writing of any request for information or of any proposal for a
Competing Transaction, the material terms and conditions of such request,
Competing Transaction, or proposal, and the identity of the Person making any
such request or Competing Transaction proposal. The Seller shall keep the
Purchaser fully informed of the status and details of any such request,
Competing Transaction, or proposal.
Section 6.8 Special Meeting. Subject to Section 6.7, if required by Law
or the rules of any applicable self-regulatory organization the Seller shall
call (or shall cause the calling of) a special meeting of its stockholders (the
"Special Meeting") to be held as soon as shall be practicable after the date
hereof in order for such stockholders to consider and vote upon all matters
necessary for the consummation of the transactions contemplated by this
Agreement and shall recommend to its stockholders a vote "FOR" the approval of
this Agreement and the consummation of such transactions.
Section 6.9 Press Releases. Prior to the filing of proxy or related
disclosure materials with respect to the Special Meeting, the Seller will, and
will cause each Acquired Company to, maintain this Agreement confidential and
will not, and will cause each Acquired Company not to, issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the Purchaser which consent shall not be unreasonably withheld;
provided, however, that nothing herein will prohibit the Seller from issuing or
causing publication of any such press release or public announcement to the
extent that the Seller reasonably determines, after consultation with outside
legal counsel, such action to be required by Law or the rules of any applicable
self-regulatory organization, in which event the Seller will use its
commercially reasonable efforts to allow the Purchaser reasonable time to
comment on such release or announcement in advance of its issuance. The parties
acknowledge that a press release in the form of Schedule 6.9 shall be made
immediately following the execution of this Agreement.
Section 6.10 Intentionally Deleted.
Section 6.11 Transferred Seller Assets. Prior to the Closing, the
Seller shall take any and all reasonable actions (including the obtaining of any
required consents) to effect the Transfer of the Transferred Seller Assets to
the Company so that all such Transferred Seller Assets are owned, free and clear
of any Liens, by the Company immediately prior to and immediately following the
Closing, and shall deliver to the Purchaser evidence reasonably satisfactory to
the Purchaser of the same. A transitional services agreement (the "Transitional
Services Agreement") in form and substance reasonably acceptable to the
Purchaser and the Seller shall be entered into at Closing and shall provide for
those matters listed on Schedule 6.11.
Section 6.12
A. June Financials. As soon as practicable following the date hereof
and in any event no later than 30 days prior to the Closing Date, the Seller
shall deliver to the Purchaser a complete set of financial statements for the
Acquired Companies as of June 28, 1998 (the "June Financials") on a stand-alone
basis, which financial statements shall include a balance sheet as of June 29,
1997 (the "June 1997 Balance Sheet") and a balance sheet as of June 28, 1998
(prepared on a consistent basis using the same accounting principles,
assumptions and methodologies applied in the preparation of the June 1997
Audited Financials), a statement of operations for the fiscal year ended June
28, 1998, and the related statements of stockholders' equity and cash flows for
the fiscal year then ended (including any footnotes thereto), all of which shall
(a) have been audited by the Seller's Accountants, whose unqualified reports
thereon will be simultaneously delivered to the Purchaser, (b) have been
prepared in accordance with GAAP, consistently applied throughout the period
involved and for prior periods, (c) present fairly, in all material respects,
the financial position of the Acquired Companies, on a consolidated basis, at
the dates indicated in such financial statements, and the results of the
Acquired Companies' operations, on a consolidated basis, for the periods stated
therein. The statement of operations included in the June Financials shall
separately identify: (i) an allocation of the corporate overhead for the
Acquired Companies on a stand-alone basis, (ii) an allocation of district
overhead for the Acquired Companies, (iii) the 1998 Store EBITDA, if less than
zero, and any write-offs or write-downs attributable (without double counting)
to (A) any "Fuddruckers" locations which were closed during the fiscal year
ended June 28, 1998; (B) the Saugus Restaurant; (C) the Andover Restaurant; and
(D) the Boston Restaurant, (iv) adjustments for FAS 121 for the fiscal year then
ended, (v) any write-downs, write-offs or accruals related to the termination of
the La Salsa Agreement, (vi) amounts paid in settlement or satisfaction of
pending Legal Proceedings pursuant to the terms of this Agreement, and (vii)
costs or expenses related to environmental testing or remediation pursuant to
the terms of this Agreement.
B. 1998 EBITDA. As used in this Agreement, the "1998 EBITDA" shall
equal the EBITDA of the Acquired Companies computed consistently with the
illustration attached as Schedule 4.2(B) and based on the June Financials with
(a) add-backs for the items described in Section 6.12(A)(i), Section
6.12(A)(iv), Section 6.12(A)(v), Section 6.12(A)(vi) and Section 6.12(A)(vii)
and subject to Section 6.12(D), Section 6.12(A)(iii), and (b) for clarification,
any expense relating to the AT&T Credit Corp. Master Equipment Lease Agreement
(as amended) and Assumption Agreement will be included as an expense in the
computation of such 1998 EBITDA. Attached hereto as Schedule 4.2(B) is a
calculation of EBITDA for the nine month period ended March 29, 1998 which shall
be used as an illustration of the application of the 1998 EBITDA.
C. Boston Restaurant. If the Boston Restaurant has not been closed by
the Closing, the Seller hereby agrees to operate the Boston Restaurant as a
franchisee of the Company and to assume full liability in connection with such
operation until the expiration of the term of the Lease applicable to the Boston
Restaurant (without any extension of such term) all as set forth on Schedule
6.11 and to be more fully set forth in the Transitional Services Agreement.
D. Saugus/Andover. In the event that prior to the Closing the escrow
funds (the "S/A Escrow Funds") deposited with the escrow agent under that
certain Escrow Agreement (the "S/A Escrow Agreement") dated as of June 28, 1998
among The ▇▇▇▇▇▇ Group I, LLC, The ▇▇▇▇▇▇ Group II, LLC, the Company and
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. have been delivered to the Company and the
conditions for the release of such escrow have been met or waived in accordance
with the terms of such Agreement, the Seller shall deliver to the Purchaser
evidence reasonably satisfactory to the Purchaser that the Asset Purchase
Agreements (the "S/A Agreements") made and entered into as of June 28, 1998
between the Company and, respectively, The ▇▇▇▇▇▇ Group I, LLC and The ▇▇▇▇▇▇
Group II, LLC (and the other transaction documents under each such Agreements)
are no longer terminable. In the event that such evidence is not delivered to
the Purchaser at the Closing, the items described in Section 6.12(A)(iii)(B) and
Section 6.12(A)(iii)(C) shall not be add-backs for the purposes of calculating
1998 EBITDA. In the event that at any time prior to or at the Closing either (a)
The ▇▇▇▇▇▇ Group I, LLC or The ▇▇▇▇▇▇ Group II, LLC has exercised its rights
pursuant to the S/A Agreements to terminate such Agreement, or (b) the S/A
Escrow Funds have been delivered to The ▇▇▇▇▇▇ Group I, LLC or The ▇▇▇▇▇▇ Group
II, LLC under the S/A Escrow Agreement, the Seller shall promptly notify the
Purchaser of the same, and any and all Liabilities relating to the operation of
the Saugus Restaurant and the Andover Restaurant shall be Retained Liabilities
(including without limitation any Liabilities under the Leases applicable to
such locations).
Section 6.13 Maintenance. The Seller hereby covenants and agrees that
it has, and shall, from July 1, 1998 until the Closing Date, spend not less than
$250,000 per month (or pro rated for any partial month) on capital expenditures
of the type reflected on the schedule relating to the same and previously
delivered to the Purchaser. The Seller shall provide evidence reasonably
satisfactory to the Purchaser, at the Closing, that the foregoing covenant has
been met, failing which any amount required to have been spent and which was not
so spent by the Seller in accordance with this Section 6.13 (to the extent not
included in Current Liabilities for purposes of Working Capital or Final Working
Capital) shall be deducted from the Estimated Purchase Price at Closing as a
reduction thereto (the "Maintenance Expenditure Adjustment"). The Maintenance
Expenditure Adjustment shall be the Purchaser's sole remedy for a breach of the
covenant contained in this Section 6.13 and, provided that the Maintenance
Expenditure Adjustment is made, any such breach shall not constitute a breach of
a closing condition in Article VIII.
Section 6.14 Licenses. By no later than thirty (30) days prior to the
Closing, the Seller shall deliver to the Purchaser that portion of Schedule
4.1(G) containing the sub-heading "Licenses" and listing all Threshold Licenses
thereon (it being understood that Schedule 4.1(G)(iii) shall have been delivered
to the Purchaser on the date hereof).
Section 6.15 Taxes. The Seller hereby covenants and agrees that by no
later than the Closing, it shall have filed or caused to be filed all Tax
Returns which it is required to file and all amended Tax Returns which it is
required to file (including without limitation the stub year Tax Return and the
amended 1997 Tax Return and all those Tax Returns listed on Schedule 4.1(P)) in
all jurisdictions in which such Tax Returns are required to be filed, and shall
pay or cause to be paid all Taxes relating to the same. The Seller shall provide
evidence reasonably satisfactory to the Purchaser of the foregoing at the
Closing.
Section 6.16 Pending Litigation. The Seller hereby covenants and agrees
that, by no later than the Closing, it shall use its commercially reasonable
efforts to settle, and cause the dismissal with prejudice of the Legal
Proceeding listed on Schedule 6.16.
Section 6.17 Cash Payment Adjustment. Cash payments received after the
date hereof and prior to the Closing on account of non-refundable rebates of
vendors, buy-downs of franchise fees, one-time license fees for territorial
rights, and other similar rights shall be apportioned between the Purchaser and
the Seller such that to the extent that such cash payments are attributable to
periods prior to the Closing they shall be for the Seller's benefit and to the
extent such cash payments are attributable to periods post-Closing they shall be
for the Purchaser's benefit and the Unadjusted Purchase Price shall be reduced
(without double-counting in the Working Capital or Final Working Capital) by
such amount which is for the Purchaser's benefit (the "Cash Payment
Adjustment").
Section 6.18 Leases.
A. Definitions. The following terms, when used in this Section 6.18,
shall be defined as hereinafter set forth:
(i) Required Lease -- Those Leases listed on Schedule 6.18, which
require the consent of the lessor in connection with the
consummation of the transactions contemplated by this
Agreement.
(ii) Required Estoppel -- Those Estoppel Certificates listed on
Schedule 6.18, which are required by Purchaser for Closing.
(iii) Required Consent -- Each consent necessary pursuant to the
terms of each Required Lease in connection with the
consummation of the transactions contemplated by this
Agreement, as provided in Schedule 6.18.
(iv) Required Restaurant -- Each restaurant as to which a Required
Consent or Required Estoppel, or both, is required.
(v) 1998 Store EBITDA -- With respect to each Required Restaurant,
the EBITDA for the fiscal year ended June 28, 1998.
(vi) Closed Required Restaurant -- Any Required Restaurant that
shall have ceased to operate or is in the process of ceasing
to operate between the date hereof and the Closing.
(vii) Closed Store Adjustment -- For and with respect to each Closed
Required Restaurant, the sum of (x) five times the 1998 Store
EBITDA for such Closed Required Restaurant, plus (y) $50,000.
(viii) Rent Adjustment Amount -- The net present value on the Closing
Date of the aggregate increase in the lessee's monetary
obligations to the lessor under any amendment to a Required
Lease, as contemplated by Section 6.18(D) (including, without
limitation, any so-called "up front payment" and any rent
increase during the balance of the term of the Required Lease)
calculated using a discount rate of ten percent (10%) from the
time when such amount is payable.
(ix) Lease Termination Amount -- For and with respect to each
Required Lease which is terminated, the sum of: (i) the
product of (x) the 1998 Store EBITDA for such Required
Restaurant (but in no event less than $0), times (x) in the
event the termination occurs during the (A) first two years
following the Closing, five, (B) the third year following the
Closing, three, (C) the fourth year after the Closing, two,
and (D) the fifth year following the Closing, one; plus (ii)
$50,000, plus (iii) the actual cost incurred by the Purchaser
after the Closing with respect to the leasehold improvements
to the premises demised under the applicable Required Lease.
B. Requirements for Consents and Estoppels. Schedule 6.18 lists all
Required Leases. As soon as practicable after delivery of the June Financials,
the Purchaser and the Seller shall supplement Schedule 6.18 to include the 1998
Store EBITDA for each Required Restaurant. Following the execution and delivery
of this Agreement, the Seller shall, at its sole expense, use all commercially
reasonable efforts to obtain all Required Consents and Required Estoppels. The
Purchaser shall cooperate with the Seller in such efforts as reasonably
requested by the Seller, but at no cost or expense to the Purchaser. Incident to
such cooperation, the Purchaser agrees that, as necessary, the Purchaser will:
(i) furnish evidence to the lessor of the Purchaser's net worth
and other financial information related to the Purchaser's
ability to perform the lessee's obligations under the relevant
Required Lease from and after the Closing as reasonably
requested by such lessor;
(ii) execute instruments reasonably satisfactory to the Purchaser
evidencing the Purchaser's obligations (from and after the
Closing), as successor to the Seller (if and only to the
extent Seller had been so obligated), to pay and perform the
lessee's obligations under the relevant Required Lease
incurred or arising from and after the Closing Date, as the
lessor may reasonably request; and
(iii) participate in meetings with lessors at mutually acceptable
times and locations.
C. Payment of Closed Store Adjustment. For and with respect to each
Closed Required Restaurant, the Estimated Purchase Price shall be reduced by the
Closed Store Adjustment.
D. Post-Closing Efforts. If any Required Consent or Required Estoppel
shall not have been obtained by the Seller on or prior to the Closing Date and
the Closing shall have occurred, the Seller shall cooperate, at the Purchaser's
request after the Closing, to seek any such Required Consent and any such
Required Estoppel on behalf of the Purchaser, but at the sole cost and expense
of the Seller. Purchaser may at its election participate in any such efforts or
initiate such efforts on its own and shall be authorized to commit the Seller to
pay to lessors of Required Restaurants up to $250,000 as Rent Adjustment Amounts
to obtain one or more Required Consents or Required Estoppels.
Any time and at the election of either Purchaser or Seller, in the
event that within three (3) months following the Closing Date any Required
Consent or Required Estoppel shall not have been obtained, the Seller and the
Purchaser shall cooperate to institute and prosecute Legal Proceedings, to
compel the lessor under the terms of a Required Lease or applicable Law to
execute a Required Consent or Required Estoppel. The costs and expenses of
prosecuting any such proceedings shall be paid entirely by the Seller.
If, at any time after the Closing Date, a lessor shall exercise or
attempt to exercise its remedies under the terms of a Required Lease or shall
refuse to perform any of such lessor's obligations thereunder on account of any
breach arising as a result of the transactions contemplated by this Agreement
having been consummated without a Required Consent or on account of or allegedly
on account of any default or alleged default under a Required Lease which
occurred or is alleged to have occurred prior to the Closing Date, the Purchaser
shall so notify the Seller.
Thereafter, subject to the provisions of this Section 6.18, the Seller
shall have the right to act on behalf of the lessee in response to any such
exercise of remedies or refusal to perform by lessor, and regardless of whether
the Seller elects to act on lessee's behalf as aforesaid, the Purchaser retains
the right to act on its own or any such lessee's behalf in the event Seller
fails to take timely actions in response to any such exercise of remedies by any
such lessor. All costs and expenses of prosecuting any such Legal Proceeding
against a lessor by Seller or Purchaser shall be paid by the Seller and shall
not be undertaken by Seller unless and until Purchaser shall have been notified
of any intended action by the Seller and shall have had an opportunity for input
to the Seller. Furthermore, provided that there shall have been, and shall be,
no interference with the Purchaser's or any lessee's use and enjoyment of a
Required Restaurant, the Seller (or Purchaser if Seller has not undertaken to
act on behalf of the lessee) may negotiate the terms of a settlement or
amendment to the Required Lease in order to induce the lessor to grant a
Required Consent or Required Estoppel. No such amendment or settlement shall
impose any additional non-monetary obligation under such Required Lease, or
affect the term or the availability of any right or option to extend the term of
any such Required Lease, or, except as hereinafter explicitly set forth,
increase any monetary obligation under such Required Lease. If a monetary
obligation under such Required Lease is to be increased by actions of either
Seller or Purchaser hereunder, the Purchaser shall receive from Seller, at the
time of execution of any such amendment, payment in cash of the Rent Adjustment
Amount with respect to such Required Lease.
If, notwithstanding such efforts by the Seller or Purchaser, a Required
Lease is terminated or the lessee under a Required Lease is otherwise unable to
continue to operate the applicable Required Restaurant, the Seller shall pay to
the Purchaser, in cash, an amount equal to the Lease Termination Amount for and
with respect to each such Required Restaurant.
E. Lease Consent Escrow. The Seller shall cause an amount equal to
$1,000,000 in cash to be deposited with the Escrow Agent (the "Lease Consent
Escrow"), to be held by the Escrow Agent as security for the benefit of the
Purchaser with respect to any amounts due to the Purchaser from the Seller as a
Lease Termination Amount or Rent Adjustment Amount as provided in this Section
6.18(D) and for no other purposes under the terms of the Escrow Agreement. The
Purchaser's rights to obtain amounts pursuant to the Lease Consent Escrow shall
be non-exclusive and the Purchaser's recourse against the Seller shall not be
limited to amounts in the Lease Consent Escrow.
F. Termination. Anything to the contrary in this Agreement
notwithstanding, the Seller's obligations under this Section 6.18 (including any
liability under Section 6.18(D)) shall be terminated with respect to the
applicable Required Lease if the reason for the exercise by a lessor of its
remedies under a Required Lease is not the consummation of the transactions
contemplated by this Agreement, but, rather, is because the Purchaser after the
Closing (i) fails to satisfy any of the requirements under the terms of such
Required Lease, including any minimum net worth requirements, continued
financial covenants, or continued operation of a minimum number of restaurants,
(ii) the Purchaser and/or the Company and/or the lessee under the applicable
Required Lease breaches in any material respect such Required Lease or fails to
discharge when due any financial obligation of the lessee under such Required
Lease resulting in the termination of the Required Lease by the lessor or (iii)
fails to make any filing with a Governmental Entity required with respect to the
change in control of the Acquired Companies to the Purchaser as a result of the
consummation of the transactions contemplated by this Agreement.
G. Purchaser's Covenants. The Purchaser agrees that from and after the
Closing, it shall pay and perform, and cause the applicable lessee to pay and
perform, any and all obligations with respect to all Leases (other than Leases
for Current Locations referred to in Section 6.6(C)) as they become due. As to
Required Leases for which the Required Consents and/or Required Estoppels have
been delivered to the Purchaser, the Purchaser shall reimburse the Seller for
any payments made by the Seller to the appropriate lessor after the Closing Date
under or pursuant to guaranty agreements, if any, whereby the Seller secures any
Required Lease, and the Purchaser shall indemnify the Seller from any liability
or obligation under such Required Leases arising from any failure of the
Purchaser or the lessee to pay or perform any of its obligations under such
Required Leases arising after the Closing Date.
H. Alternative Arrangements. To the extent permitted by any Required
Lease, the Seller and the Purchaser (or the Company, at the Purchaser's
election) may enter into arrangements reasonably acceptable to the Purchaser and
the Seller in order to provide the Purchaser the benefits of any such Required
Lease for which the Required Consent or Required Estoppel has not been delivered
at the Closing, including, without limitation, management agreements, subleases,
franchise agreements, or the like.
ARTICLE VII
Covenants of the Purchaser Prior to the Closing
Section 7.1 Approvals. As promptly as practicable after the date of
this Agreement, the Purchaser will make all filings required by Law to be made
by it to consummate the transactions contemplated by this Agreement (including
all filings under the HSR Act). Between the date of this Agreement and the
Closing, the Purchaser will cooperate with the Seller with respect to all
filings that the Seller is required by Law to make in connection with the
transactions contemplated by this Agreement; provided, however, that this
Agreement will not require the Purchaser to dispose of or make any change in any
portion of its business or to incur any other burden or expense in order to
comply with the foregoing covenant.
Section 7.2 Press Releases. Prior to the filing of proxy or related
disclosure materials with respect to the Special Meeting, the Purchaser will
maintain this Agreement confidential and will not issue or cause the publication
of any press release or other public announcement with respect to this Agreement
or the transactions contemplated hereby without the prior written consent of the
Seller which consent shall not be unreasonably withheld. The parties acknowledge
that a press release in the form of Schedule 6.9 shall be made immediately
following the execution of this Agreement.
ARTICLE VIII
Conditions Precedent to the Purchaser's Obligation to Close
The Purchaser's obligation to purchase the Shares and to take the other
actions required to be taken by the Purchaser at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Purchaser, in whole or in part):
Section 8.1 Accuracy of Representations. Each of the Seller's
representations and warranties in this Agreement must have been accurate in all
respects as of the date of this Agreement, and must be accurate in all respects
as of the Closing Date as if made on the Closing Date, without giving effect to
any supplement to the Disclosure Schedule (it being understood that the portion
of Schedule 4.1(G) to be delivered by the Seller pursuant to Section 6.14 shall
not be considered to be a supplement to the Disclosure Schedule), except for
such breaches as could not reasonably be anticipated to result in, in the
aggregate, a Material Adverse Effect on the Business and which the Seller
undertakes to cure within 30 days following the Closing with such cure
obligation to survive the Closing as a covenant of the Seller.
Section 8.2 Seller's Performance. Each of the covenants and obligations
that the Seller is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been duly performed and complied
with and the Seller must have delivered each of the documents required to be
delivered by it pursuant to Section 3.2(A).
Section 8.3 No Proceedings. At the time of Closing, there shall be no
effective injunction, writ or preliminary restraining order or any Order of any
nature issued by a court or Governmental Entity of competent jurisdiction
directing that any of the transactions contemplated in this Agreement not be
consummated as herein provided, and no Legal Proceeding shall have been
commenced or threatened in writing by any Person against the Purchaser or any
Acquired Company seeking to enjoin or obtain damages in respect of the
consummation of any transaction contemplated by this Agreement.
Section 8.4 No Claim. There must not have been made or threatened in
writing by any Person any claim asserting that such Person is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any of the Shares, or any Equity Securities in ARVI (other than
the Equity Securities owned by NARLP as listed on Schedule 4.1(C)).
Section 8.5 Owned Real Property Appraisals. The Purchaser shall have
obtained current appraisals, from an "MAI" appraiser selected by the Seller and
acceptable to the financial institution providing financing to the Purchaser in
connection with the transactions contemplated by this Agreement, of the value of
each of the Owned Real Properties which value shall not be, in the aggregate for
all of the Owned Real Properties, less than $12,500,000.00.
Section 8.6 Updated Environmental Site Assessment Reports.
A. The Purchaser shall have obtained, at the Purchaser's sole cost and
expense, updated Environmental Site Assessment ("ESA") reports for each of the
Owned Real Properties (the "Updates") from Professional Service Industries, Inc.
("PSI"), the environmental consulting firm which performed ESAs on all of the
Owned Real Properties in 1997 (the "Existing PSI Reports"), or another qualified
environmental consulting firm selected by the Purchaser. Except as set forth
below in this Section 8.6, such Updates shall either (i) confirm that the
conclusions and/or recommendations set forth in the Existing PSI Reports,
including, without limitation, PSI's "Supplemental File Review" letter report
regarding ▇▇▇▇▇ ▇▇. ▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (dated September 10,
1997), remain unchanged or (ii) set out modified conclusions and/or
recommendations which are determined to be acceptable to the Purchaser, in the
Purchaser's sole discretion.
B. The Purchaser and the Seller acknowledge that the Existing PSI
Report for Store No. 114, 4625 Virginia Beach Blvd., Virginia Beach, VA ("Store
No. 114"), contains a recommendation regarding the performance of certain Phase
II ESA activities, including the installation of soil borings and monitoring
▇▇▇▇▇. In the event that the Update for Store No. 114 concludes that Phase II
ESA activities are not warranted or recommended at this time, the Seller shall
be deemed to have satisfied the condition precedent regarding an Update for
Store No. 114 and Store No. 114 shall be included in the transactions
contemplated by this Agreement.
C. Any Phase II ESA activities recommended in the Update for Store No.
114 shall be conducted as soon as is practicable and the Seller shall be kept
informed, in a timely manner, as to the nature and timing of all such Phase II
ESA activities. In the event that Hazardous Materials are discovered in
connection with such Phase II ESA activities, the selected consultant shall
prepare cost estimates (the "Environmental Cost Estimate") for all investigatory
activities, remedial activities, monitoring and regulatory compliance work
required in accordance with applicable Environmental Laws.
D. In the event that the Environmental Cost Estimate is less than
$300,000, Store No. 114 shall be included within the transactions contemplated
by this Agreement and the Seller shall be responsible for addressing, or causing
to be addressed, all Hazardous Materials on, at or under Store No. 114 after the
Closing (except for Releases of Hazardous Materials which occur after the
Closing and are not related to the acts, practices or omissions of the Seller).
All such post-Closing environmental work shall be conducted (i) in a manner and
at times that will not unreasonably interfere with the operation of Store No.
114, (ii) in accordance with all applicable Environmental Laws, and (iii) at the
Seller's sole cost and expense.
E. In the event that the Environmental Cost Estimate is or exceeds
$300,000, at the Seller's option the Seller may nevertheless address all
Hazardous Materials as specified in Section 8.6(D) or Store No. 114 shall be
Transferred to the Seller prior to or at the Closing and agreements shall be
entered into between the Seller and the Purchaser (or the Company at the
Purchaser's election) whereby the Seller shall have rights as a franchisee to
operate Store No. 114 and the Seller shall be responsible for all costs and
expenses associated with the operation of Store No. 114; provided that the
Company will manage Store No. 114 in consideration of a management fee equal to
100% of the economics (EBITDA) of Store No. 114.
Section 8.7 Estimated Purchase Price. The Estimated Purchase Price
shall not be less than $40,000,000.
ARTICLE IX
Conditions Precedent to the Seller's Obligation to Close
The Seller's obligation to sell the Shares and to take the other
actions required to be taken by the Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Seller, in whole or in part):
Section 9.1 Accuracy of Representations. Each of the Purchaser's
representations and warranties in this Agreement must have been accurate in all
respects as of the date of this Agreement and must be accurate in all respects
as of the Closing Date as if made on the Closing Date, except for such breaches
as would not, in the aggregate, have a Material Adverse Effect on the Purchaser
and which the Purchaser undertakes to cure within 30 days following the Closing
with such obligation to survive the Closing as a covenant of the Purchaser.
Section 9.2 Purchaser's Performance. Each of the covenants and
obligations that the Purchaser is required to perform or to comply with pursuant
to this Agreement at or prior to the Closing must have been duly performed and
complied with and the Purchaser must have delivered each of the documents
required to be delivered by it, and must have made the payments required to be
made by it, pursuant to Section 3.2(B).
Section 9.3 No Proceedings. At the time of Closing, there shall be no
effective injunction, writ or preliminary restraining order or any Order of any
nature issued by a court or Governmental Entity of competent jurisdiction
directing that the transactions contemplated in this Agreement or any of them
not be consummated as herein provided, and no Legal Proceeding shall have been
commenced or threatened in writing by any Person against the Seller seeking to
enjoin or obtain damages in respect of the consummation of any transaction
contemplated by this Agreement.
Section 9.4 Seller Stockholder Approval. To the extent required as
provided in Section 6.8, the sale of the Shares by the Seller to the Purchaser
shall have been approved and adopted by the requisite vote of the stockholders
of the Seller.
Section 9.5 Estimated Purchase Price. The Estimated Purchase Price
shall not be less than $40,000,000.
ARTICLE X
Termination Events
Section 10.1 Termination Events. This Agreement may, by notice given
prior to or at the Closing, be terminated:
(a) by mutual consent of the Purchaser and the Seller;
(b) by either the Purchaser or the Seller if a material breach
of any provision of this Agreement has been committed by the other party and
such breach has not been waived by the terminating party;
(c) (i) by the Purchaser, if any of the conditions in Article
VIII has not been satisfied as of the Closing or if satisfaction of any such
condition is or becomes impossible (other than through the failure of the
Purchaser to comply with its obligations under this Agreement) and the Purchaser
has not waived such condition at or before the Closing; or (ii) by the Seller,
if any of the conditions in Article IX has not been satisfied as of the Closing
or if satisfaction of any such condition is or becomes impossible (other than
through the failure of the Seller to comply with its obligations under this
Agreement) and the Seller has not waived such condition at or before the
Closing;
(d) by the Seller, if (i) the Board of Directors of the Seller
pursuant to Section 6.7(B) withdraws or modifies its approval or recommendation
of, or otherwise fails to approve or recommend, this Agreement and the
consummation of the transactions contemplated hereby to the stockholders of the
Seller, and (ii) the Seller pays to the Purchaser an alternative transaction fee
equal to $1,720,000, promptly upon such withdrawal, modification or failure, by
wire transfer of immediately available funds to such account as shall have been
designated by the Purchaser; or
(e) by either the Purchaser or the Seller if the Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on or
before November 2, 1998, (the "Outside Date") or such later date as the parties
may agree upon; provided, however, that notwithstanding anything to the contrary
in this Agreement (i) if on November 2, 1998 the applicable waiting periods
under the HSR Act have not expired or terminated then each of the Purchaser and
the Seller shall have the independent right, exercisable in its sole discretion
by delivery of written notice thereof to the other on or before November 2,
1998, to extend the Outside Date to the earlier of five (5) business days after
such regulatory approvals have been obtained or December 15, 1998 and (ii) if on
November 2, 1998 the Seller has not obtained the consents required to be
delivered pursuant to Section 3.2(A)(5) then the Seller shall have the right
exercisable in its sole discretion by delivery of written notice thereof to the
Purchaser on or before November 2, 1998, to extend the Outside Date to December
15, 1998.
Section 10.2 Effect of Termination. Each party's right of termination
under Section 10.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
10.1, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 6.9, 7.2, 10.1(d), 11.6, 13.7
and 13.14 will survive.
Section 10.3 Failure to Close. In the event that the Closing does not
occur on or prior to the Outside Date (as the same may be extended pursuant to
Section 10.1(e)) due to: (i) the Purchaser's breach of its obligations under
this Agreement and the resulting termination of this Agreement (other than a
termination pursuant to Section 10.1(a), Section 10.1(b) due to the Seller's
breach, Section 10.1(c)(i), Section 10.1(d), or Section 10.1(e)),
notwithstanding any other provision of this Agreement (including Section 10.2
and Section 13.14) the Seller's sole and exclusive remedy against the Purchaser
under this Agreement and with respect to the transactions contemplated hereby
shall be to exercise its rights to terminate this Agreement and to receive the
payment from the Purchaser of cash in an amount equal to $5,000,000 as
liquidated damages (and not as a penalty) for which within 30 days after the
date hereof the Purchaser shall furnish a letter of credit for the benefit of
the Seller; or (ii) the non-satisfaction of the condition contained in Section
8.7 or Section 9.5 or the failure of the stockholders of the Seller to approve
this Agreement and the consummation of the transactions contemplated hereby at
the Special Meeting (if required) where the Board of Directors of the Seller has
approved or recommended the same to the stockholders (without modification or
withdrawal of such approval or recommendation), the Seller shall pay to the
Purchaser an amount equal to $1,000,000 as liquidated damages (and not as a
penalty) in consideration of the time, the fees and expenses spent or incurred
by the Purchaser, or on its behalf, in connection with this Agreement and the
transactions contemplated hereby.
ARTICLE XI
Other Covenants
Section 11.1 Personnel; Taxes. From and after the Closing, the Seller
and the Purchaser will each make available to the other, upon written request
and with the requesting party bearing responsibility for all of its
out-of-pocket expenses therefor, its and its Affiliates personnel and books and
records to the extent that the assistance or participation of such personnel or
access to such books and records is reasonably requested in anticipation of, or
preparation for, existing or future Legal Proceedings, Tax Return preparation,
audits or other matters in which the requesting party or any of its Affiliates
(including any Acquired Company) is involved and that is related to the
Business. Each of the Seller and the Purchaser will cooperate with one another
in the conduct of any Tax audit, claim for refund of Taxes or similar
proceedings involving or otherwise relating to the Shares, any of the Assets,
any of the Transferred Seller Assets, the Business or any Acquired Company (or
the income therefrom or assets thereof).
Section 11.2 Corporate Name. Without in any way limiting the right,
title or interest of the Acquired Companies in and to Intellectual Property,
following the Closing the Seller shall change all signage and stationery and
otherwise discontinue the use of the name "Fuddruckers" and shall have no
further right to use any of the Intellectual Property; provided, however, that
the Seller may, for a period of 90 days following the Closing Date, consume
stationary and similar supplies on hand as of the Closing which contains the
name "Fuddruckers" and related logos.
Section 11.3 Certain Insurance Matters. After the Closing, the Seller
will not take any action to cancel before its normal expiration any Insurance
policy of the Seller if such Insurance policy relates to the Business, the
Assets or the Transferred Seller Assets and by the Closing and continuing
thereafter the Acquired Companies shall be named as additional insureds thereon.
With respect to any loss, Liability or damage suffered after the Closing
relating to, resulting from or arising out of the conduct of the Business at or
prior to the Closing for which the Seller or any of its Affiliates would be
entitled to assert, or cause any other Person to assert, a claim for recovery
under any policy of Insurance maintained by or for the benefit of the Seller, in
respect of the Business, at the request of the Purchaser or any Acquired Company
the Seller will assert one or more claims under such Insurance policy if the
Purchaser or any Acquired Company is not itself entitled to assert any such
claim but the Seller or any of its Affiliates is so entitled. To the extent
required under the terms of such Insurance policy to give effect to the
foregoing, the Seller will be deemed, solely for the purpose of asserting claims
for Insurance pursuant to the immediately preceding sentence, to have assumed or
retained Liability for such loss, Liability or damage to the extent of the
policy limits for the applicable policy of Insurance.
Section 11.4 Cooperation by the Seller. Without limiting the provisions
of Section 13.14, after the Closing, the Seller shall, reasonably promptly after
acquiring knowledge thereof, notify the Purchaser of any threatened or pending
Legal Proceeding in which the Seller may be involved, whether as an actual or
potential party or witness or otherwise, or with respect to which it may receive
requests for information, arising out of or relating to the Business with
respect to a matter for which indemnification is to be provided by the Seller
under Section 13.14. The Seller shall cooperate fully with the Purchaser and any
insurer or other indemnitor of the Purchaser in connection with any such Legal
Proceeding, at no expense to the Purchaser. After the Closing, the Seller shall
(a) cooperate fully with and shall assist the Purchaser in the enforcement of
the Acquired Companies' rights under the Business Commitments, and (b) perform
any other action reasonably requested by the Purchaser in order to fully vest
the Purchaser in the ownership of the Shares, the Company in the ownership of
the Transferred Seller Assets, and the Acquired Companies in the ownership of
any of the Equity Securities in any other Acquired Company free and clear of all
Liens, and to effect the Transfer of any Business License required due to the
transactions contemplated by this Agreement.
Section 11.5 Non-Competition.
As part of the consideration to be paid by the Purchaser to the Seller
pursuant to this Agreement, each of the Seller and Champps agrees to be bound
by, and agrees to cause each of its subsidiaries (other than EMA) to operate in
a manner consistent with, the following covenants on and after the Closing:
A. The Fuddruckers System. Each of the Seller and Champps acknowledges
that (i) the Company owns all right, title and interest in and to any and all
information, knowledge, recipes, trade secrets, plans, drawings, information
concerning sources of supply, confidential and proprietary information, know-how
and techniques that give the Company a competitive advantage (collectively, the
"Fuddruckers System"), and the Company has taken measures to protect the
Fuddruckers System and (ii) each of the Seller and Champps shall not communicate
or disclose any information regarding the Fuddruckers System to any Person,
unless such Person receives the Purchaser's prior written consent or such
information regarding the Fuddruckers System is then generally known to the
public or is disclosed in accordance with an order of a court of competent
jurisdiction or in a manner otherwise required by applicable Law.
B. Covenant Not to Compete. Absent the prior written consent of the
Purchaser, for a period of ten years following the Closing, none of the Seller
or Champps, shall: (1) directly or indirectly, own, manage, operate, finance,
join, or control, or participate in the ownership, management, operation,
financing or control of, or be associated as a partner or representative in
connection with, any restaurant business that is in the gourmet hamburger
business or whose method of operation or trade dress is similar to that employed
in the operation of the "Fuddruckers" restaurants; or (2) directly or indirectly
solicit, induce or attempt to induce any Person then employed by any Acquired
Company or the Purchaser (including without limitation any Company Employee or
Seller Employee who has entered the employ of the Purchaser or the Company at or
after the Closing) to enter the employ of the Seller or Champps, or any of their
respective Affiliates or any other Person. To the extent that any subsidiary of
the Seller or Champps has not, or does not, join in this Agreement, each of the
Seller or Champps shall cause each such subsidiary (other than the Acquired
Companies) to comply with the provisions of this Section 11.5. None of the
Seller or Champps, or any of their respective subsidiaries (other than the
Acquired Companies), shall dispose of any of its assets or of any Equity
Securities it may own in any other such subsidiary unless the purchaser or
transferee thereof agrees, in a document reasonably acceptable to the Purchaser,
to uphold the provisions of this Section 11.5.
The Fuddruckers trade dress is comprised of the "total image" of the
"Fuddruckers" restaurant including products, colors, sizes, shapes, color
combination, graphics, layout and floor plan and specifically such features (or
any of them in different combinations) as follows: An exposed glassed in butcher
shop for meal preparation and for cutting and processing beef; a beef showcase;
an exposed on-premises bakery for the preparation of bread and dessert products;
a bakery showcase for the bakery products; a fresh vegetable condiment island
with stacked vegetables; and interior green bands of neon lights and neon beer
signs. While it is understood that the use of some of these elements are used in
"casual dining" restaurants in general, the way in which several of these
elements are used in combination by the Company constitutes its distinctive
trade dress. This covenant is not intended to cover all "casual dining"
concepts.
The Purchaser acknowledges and agrees that, notwithstanding anything to
the contrary herein, the Seller is presently engaged in the operation of
"Champps Americana" restaurants and is hereby permitted to engage in the
operation thereof as currently conducted.
C. Limitations. (i) The Purchaser shall have the right, in its sole
discretion, to reduce the scope of any covenant in this Section 11.5 effective
immediately upon the Seller's receipt of written notice to such effect from the
Purchaser, and each of the Seller and Champps agrees that it shall comply
forthwith with any covenant as so modified, which shall be fully enforceable so
long as any such reduction does not add additional burden, limitation or
restriction on the Seller or Champps.
(ii) The restrictions contained in this Section 11.5 shall not
apply to the ownership, by the Seller or Champps, of less than a 5% legal or
beneficial ownership in outstanding Equity Securities of any publicly traded
corporation. The existence of any claim that the Seller or Champps may have
against the Purchaser or any Acquired Company, whether or not arising from this
Agreement, shall not constitute a defense by the Seller or Champps to the
enforcement by the Purchaser and any Acquired Company of the covenants in this
Section 11.5
D. Equitable Relief. The Seller and Champps, and the Purchaser, each
acknowledge that any breach of the covenants contained in Section 11.5(A) would
cause an irreparable injury to the Purchaser and that damages and remedies at
law for any breach of any such covenant would be inadequate, and the Seller and
Champps hereby accordingly consent to the entry of an order by any court of
competent jurisdiction for specific performance or for injunctive relief and
other equitable relief to prevent an actual, intended or probable breach of any
such covenant. Each of the Acquired Companies and the Purchaser may further
avail itself of any other legal or equitable rights and remedies that it may
have under this Agreement or otherwise.
E. Judicial Determinations. It is the desire and intent of the parties
to this Agreement that the provisions of this Section 11.5 be enforced to the
fullest extent permissible under the Laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provision or
portion of this Section 11.5 shall be adjudicated to be invalid, ineffective or
unenforceable, this Section 11.5 shall be deemed automatically amended to delete
therefrom such provision or portion adjudicated to be invalid, ineffective or
unenforceable, such amendment to apply only with respect to the operation of
such provision in the particular jurisdiction with respect to which adjudication
is made.
Section 11.6 Confidentiality. Whether or not the Closing occurs, the
Purchaser and the Seller will each, and will each cause its Affiliates and
authorized representatives to, treat in confidence all documents, materials and
other information disclosed by or on behalf of the other party or any of their
respective Affiliates, whether before, during or after the course of the
negotiations leading to the execution of this Agreement or thereafter, and in
the preparation of agreements, schedules and other documents relating to the
consummation of the transactions contemplated hereby.
Section 11.7 Champps Successors. Champps and the Seller hereby jointly
and severally agree that not less than fifteen (15) days prior written notice of
(i) any proposed sale of the stock of Champps, (ii) any proposed sale of any
significant portion of the assets of Champps outside of the ordinary course, or
(iii) any merger, consolidation or similar transaction involving Champps, shall
be given by Champps or the Seller to the Purchaser. The Seller and Champps
jointly and severally covenant and agree that, as a condition to (A) any such
sale of assets or (B) any such sale of stock or merger, consolidation or similar
transaction after giving effect to which the purchaser of the stock or the
surviving or resulting Person would not become as a matter of law legally and
validly bound by this Agreement, including Section 13.14 and this Section 11.7,
the Seller or Champps, as applicable, shall cause the purchaser of such assets
or stock or the surviving or resulting Person in any such merger or other
transaction to (a) expressly assume, jointly and severally, for the benefit of
the Purchaser in a writing delivered to the Purchaser, all obligations of
Champps under this Agreement, and (b) undertake for the direct benefit of the
Purchaser to require any subsequent purchaser of such stock or assets or
subsequent surviving or resulting Person in any merger or other transaction
described in clause (A) or clause (B) above to in turn agree to the matters
contained in this Section 11.7 including with respect to any subsequent
transferee. It is further acknowledged that any breach of the covenants and
agreements contained in this Section 11.7 would cause an irreparable injury to
the Purchaser and that damages and remedies at law for any breach of any such
covenant would be inadequate, and the parties each hereby accordingly consent to
the entry of an order by any court of competent jurisdiction for specific
performance or for injunctive relief and other equitable relief to prevent an
actual, intended or probable breach of any such covenant or agreement. The
Purchaser may further avail itself of any other legal or equitable rights and
remedies that it may have under this Agreement or otherwise.
ARTICLE XII
Certain Tax Matters
Section 12.1 Obligation for Certain Taxes. All sales, use, transfer,
documentary, stamp, registration, conveyance, value added or other similar
Taxes, duties, fees, excises or governmental charges (including any penalties
and interest) imposed by any taxing jurisdiction, domestic or foreign, and all
recording or filing fees (other than the HSR Act filing fee which is governed by
Section 13.7), notarial fees and other similar costs of Closing with respect to
the Transfer of the Shares, the Assets and the Transferred Seller Assets (and
any Excluded Items, or Assets and Liabilities to be Transferred as provided in
Section 6.6(C)) will be borne by the Seller, and the Seller will, at its own
expense, file all necessary Tax Returns and other documentation with respect to
all of the foregoing.
Section 12.2 Section 338(h)(10) Elections; Allocation of Purchase
Price.
A. Section 338(h)(10) Elections. The Seller will join with the
Purchaser in making elections under section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign Law) (collectively, the
"Section 338(h)(10) Elections") with respect to the purchase and sale (including
any deemed purchase and sale) of the stock of each of the Acquired Companies.
The Seller will pay any Tax attributable to the making of the Section 338(h)(10)
Elections and will indemnify the Purchaser and the Acquired Companies from and
against any costs, expenses or other Liabilities (including any Taxes resulting
from this indemnification) arising out of any failure to pay such Tax. The
Seller will also pay any state, local or foreign Tax (and indemnify the
Purchaser and the Acquired Companies from and against any costs, expenses or
other Liabilities, including any Taxes resulting from this indemnification,
arising out of any failure to pay such Tax) attributable to any election under
state, local or foreign Law similar to the election available under section
338(g) of the Code (or which results from the making of an election under
section 338(g) of the Code) with respect to the purchase and sale (including any
deemed purchase and sale) of the stock of the Acquired Companies.
Indemnification under this Section 12.2(A) shall include only such Taxes
(together with related costs, expenses or other Liabilities) as result directly
from such elections as of the date on which the deemed asset purchase occurs,
and shall not include Taxes, if any, resulting from the secondary effects of
such elections, such as differences in depreciation deductions, loss of net
operating loss carry forwards and like matters.
B. Allocation of Purchase Price. The Seller and the Purchaser agree to
use their best good faith efforts to allocate, as soon as practicable following
the Closing, the Final Purchase Price and the Transferred Liabilities (plus
other relevant items) to the assets of the Acquired Companies for all Tax
purposes. The Seller, the Purchaser and the Acquired Companies will file all Tax
Returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation.
Section 12.3 Tax Returns; Cooperation.
A. Tax Periods Ending on or Before the Closing Date. The Seller shall
prepare and file or cause to be prepared and filed all Tax Returns for the
Acquired Companies for all periods ending on or prior to the Closing Date which
are filed after the Closing Date including income Tax Returns with respect to
periods for which a consolidated, unitary or combined income Tax Return of the
Seller will include the operations of the Acquired Companies. The Seller shall
permit the Purchaser to review and comment on each such Tax Return described in
the preceding sentence prior to filing. The Seller shall pay all Taxes of the
Acquired Companies with respect to such periods.
B. Tax Periods Beginning Before and Ending After the Closing Date. The
Purchaser shall prepare and file or cause to be prepared and filed any Tax
Returns of the Acquired Companies for Tax periods which begin before the Closing
Date and end after the Closing Date. The Purchaser shall permit the Seller to
review and comment on each such Tax Return described in the preceding sentence
prior to filing. The Seller shall reimburse the Purchaser, within fifteen (15)
days after the date on which such costs are paid with respect to such periods,
for one half of the costs associated with the preparation and filing of such Tax
Returns. The Seller shall deliver to the Purchaser, at least three (3) business
days prior to the date on which such Taxes are required to be paid, that portion
of the Taxes which relate to the portion of such taxable period ending on the
Closing Date. For purposes of this Section 12.3(B), in the case of any Taxes
that are imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such taxable period ending on the Closing Date shall
(i) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (ii) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing Date. Any
credits relating to a taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Acquired Companies.
C. Legal Proceedings. With respect to any Tax Returns for any Tax
periods, the party hereto responsible for the preparation and filing of such Tax
Return shall control the defense of any audits thereof or other Legal
Proceedings relating thereto, provided that the costs of any such defense shall
be shared by the parties hereto, pro rata based on their responsibility for
Taxes due under any such Tax Return, and provided further that no such audits or
other Legal Proceedings shall be settled in a manner which would adversely
affect the other party hereto without the prior written consent of such other
party, which consent shall not be unreasonably withheld.
D. Cooperation on Tax Matters. (i) The Purchaser, the Acquired
Companies and the Seller shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Section 12.3 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder as provided in
Section 11.1.
(ii) The Purchaser and the Seller further agree, upon request,
to use their best efforts to obtain any certificate or other document from any
Governmental Entity or any other Person as may be necessary to mitigate, reduce
or eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(iii) The Purchaser and the Seller further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder.
(iv) The Purchaser and the Seller further agree that Tax
Returns prepared pursuant to paragraphs A and B above shall not unreasonably, or
in a manner inconsistent with past practice of the Acquired Companies,
accelerate or defer any Tax items.
E. Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving any Acquired Company shall be terminated
as to the Acquired Companies as of the Closing Date. After the Closing Date, no
Acquired Company shall be bound by or have any Liability under any such tax
sharing agreement or similar agreement, including without limitation the Tax
Allocation Agreement.
F. Indemnification Against Taxes of Other Persons. The Seller agrees to
indemnify the Purchaser and the Acquired Companies from and against any costs,
expenses or other Liabilities (including any Taxes resulting from this
indemnification) that the Purchaser or the Acquired Companies may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
Liability of any of the Acquired Companies for Taxes of any Person other than
the Acquired Companies (i) under Treasury Regulations section 1.1502-6 (or any
similar provision of state, local or foreign Law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise. Such indemnification shall not
include Liability for Taxes of any Person who is an "affiliate" (within the
meaning of Section 1504(a) of the Code) of the Purchaser or who becomes an
"affiliate" (within the meaning of Section 1504(a) of the Code) of any of the
Acquired Companies on or after the Closing. Furthermore, such indemnification
shall not include any Liability for Taxes arising from or relating to any
transaction occurring after the Closing Date.
Section 12.4 Certain Definitions. For purposes of this Agreement, (i)
"Tax" or "Taxes" includes all federal, state, local, foreign and other taxes,
assessments, or governmental charges of any kind whatsoever including, without
limitation, income, franchise, capital stock, excise, property, sales, use,
service, service use, leasing, leasing use, gross receipts, value added, single
business, alternative or add-on minimum, occupation, real and personal property,
stamp, workers' compensation, severance, windfall, profits, customs, duties,
disability, registration, estimated, environmental (including Taxes under Code
Section 59A), transfer, payroll, withholding, employment, unemployment and
social security taxes, or other taxes of the same or similar nature, together
with any interest, penalties or additions thereon and estimated payments
thereof, whether disputed or not, (ii) "Tax Return" or "Tax Returns" includes
all returns, reports, information returns, forms, declarations, claims for
refund, statements and other documents (including any amendments thereto and
including any schedule or attachment thereto) in connection with Taxes that are
required to be filed with a Governmental Entity or other tax authority, or sent
or provided to another party under applicable Law, and (iii) all citations of
the Code or to the Treasury Regulations promulgated thereunder will include any
amendments or successor provisions thereto.
ARTICLE XIII
Miscellaneous
Section 13.1 Entire Agreement; Amendment. Each of the representations,
warranties, covenants and agreements of any party hereto contained in this
Agreement or the Disclosure Schedule or any certificate delivered by any party
hereto pursuant to this Agreement will be deemed incorporated and contained in
this Agreement and will constitute representations and warranties of such party.
This Agreement (including the Disclosure Schedule) supersedes any other
agreement, whether written or oral, that may have been made or entered into by
any party or any of their respective Affiliates (or by any director, officer or
representative thereof) with respect to the subject matter hereof, including
without limitation that certain letter from the Purchaser to the Seller dated
May 15, 1998 and agreed to by the Seller on June 3, 1998 and, as of the Closing
only, that certain confidentiality letter dated March 2, 1998. This Agreement
(including the Disclosure Schedule) constitutes the entire agreement of the
parties hereto with respect to the matters provided for herein and there are no
agreements or commitments by or among such parties or their Affiliates with
respect to the subject matter hereof except as expressly set forth in this
Agreement. No investigation or receipt of information (other than the
information contained in the Disclosure Schedule) by or on behalf of the
Purchaser will diminish any of the representations, warranties, covenants or
agreements of the Seller under this Agreement or the conditions to obligations
of the Purchaser under this Agreement. No investigation or receipt of
information by or on behalf of the Seller will diminish or obviate any of the
representations, warranties, covenants or agreements of the Purchaser under this
Agreement or the conditions to obligations of the Seller under this Agreement.
Section 13.2 Amendments. No amendment, modification or alteration of
the terms or provisions of this Agreement shall be binding unless the same shall
be in writing and duly executed by the Purchaser and the Seller.
Section 13.3 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and their respective
successors and permitted assigns. This Agreement may not be assigned by the
Seller, or by Champps without the Purchaser's prior written consent (subject to
Section 11.7). This Agreement is freely assignable by the Purchaser, and without
limiting the foregoing, the Purchaser may designate a nominee(s) or designee(s)
to acquire the Shares at the Closing, provided that the assignee, nominee or
designee of the Purchaser executes a document acknowledging that it accepts the
terms and provisions of this Agreement with the same force and effect as if it
had originally been the "Purchaser" hereunder provided that the Seller is
reasonably satisfied that such assignee, nominee or designee meets the net worth
and other requirements applicable to the Purchaser hereunder.
Section 13.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original for all
purposes and all of which together shall constitute one and the same instrument.
Section 13.5 Headings and Section References. The headings of the
sections and paragraphs of this Agreement are included for convenience only and
are not intended to be a part of, or to affect the meaning or interpretation of,
this Agreement. All section references herein, unless otherwise clearly
indicated, are to sections within this Agreement.
Section 13.6 Waiver. No failure or delay by either the Purchaser or the
Seller in exercising any right, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by Law.
Section 13.7 Expenses. Except as otherwise specifically provided for in
this Agreement, the Seller and the Purchaser shall each pay all costs and
expenses incurred by it, or on its behalf, in connection with this Agreement and
the transactions contemplated hereby, including, without limitation, fees and
expenses of its own financial consultants, accountants and counsel. The
Purchaser and the Seller shall each pay one half of the HSR Act filing fee. The
Purchaser shall pay all fees and expenses related to filings with Governmental
Entities relating to Business Licenses which filings are required to be made
following the Closing due to a change in control of any Acquired Company due to
the Purchaser's acquisition of the Shares.
Section 13.8 Notices. Any notice, request, instruction or other
document to be given under this Agreement by any party hereto to any other party
shall be in writing and delivered personally, dispatched by facsimile
transmission, or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid:
If to the Seller, to:
Unique Casual Restaurants, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇
Exchange Place
Boston, MA 02109
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser, to:
King ▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Goulston & Storrs, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as shall be specified by like notice. Any notice that
is delivered personally in the manner provided herein shall be deemed to have
been duly given to the Person to which it is directed upon actual receipt by
such Person (or its agent for notices hereunder). Any notice that is dispatched
by facsimile transmission shall be deemed to have been duly given to the Person
to which it is addressed upon transmission and confirmation of receipt. Any
notice that is addressed as provided herein and mailed by registered or
certified mail shall be conclusively presumed to have been duly given to the
Person to which it is addressed at the close of business, local time of such
party, on the fifth calendar day after the day it is so placed in the mail. Any
notice that is addressed as provided herein and sent by a nationally recognized
overnight courier service shall be conclusively presumed to have been duly given
to the Person to which it is addressed at the close of business, local time of
such Person, on the next business day following its deposit with such courier
service for next day delivery.
Section 13.9 Governing Law. This Agreement and the legal relations
among the parties hereto shall be governed and construed in accordance with the
substantive Laws of the Commonwealth of Massachusetts, without giving effect to
the principles of conflict of laws thereof.
Section 13.10 Severability. If any provisions hereof shall be held by
any court of competent jurisdiction to be illegal, void, or unenforceable, such
provisions shall be of no force and effect, but the illegality or
unenforceability shall have no effect upon, and shall not impair the
enforceability of, any other provision of this Agreement.
Section 13.11 "Knowledge". Whenever "to its knowledge," "known",
"aware" or a similar phrase is used to qualify a representation of the Seller,
the "knowledge" so referred to shall be deemed to be the actual knowledge of the
individual named on Schedule 13.11.
Section 13.12 Rights of Third Parties. Nothing expressed or implied in
this Agreement is intended or will be construed to confer upon or give any
Person other than the parties hereto and their respective successors and
permitted assigns any rights or remedies under or by reason of this Agreement or
any transaction contemplated hereby.
Section 13.13 Consent to Jurisdiction. Each of the Purchaser and the
Seller hereby irrevocably consents that any legal action or proceeding against
it under, arising out of, or in any manner relating to this Agreement or any
other agreement, document or instrument arising out of or executed in connection
with this Agreement may be brought in any state or federal court in the
Commonwealth of Massachusetts of competent jurisdiction. Each party, by the
execution and delivery of this Agreement, expressly and irrevocably consents and
submits to the personal jurisdiction of any of such courts in any such action or
proceeding. Each party hereby further irrevocably consents to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to it by hand, by mail or by overnight express
delivery service in the manner provided for in Section 13.8 or by serving a copy
thereof on any registered agent for such party in such jurisdiction. Each party
hereby expressly and irrevocably waives any claim or defense in any action or
proceeding based on any alleged lack of personal jurisdiction, improper venue,
forum non conveniens, or any similar basis. Nothing in this Section 13.13 shall
affect or impair in any manner or to any extent the right of any party to
commence legal proceedings or otherwise proceed against any other party in any
jurisdiction or to serve process in any manner permitted by Law. The parties
further agree that the consents and waivers provided for in this Section 13.13
are personal and solely for the benefit of the parties to this Agreement and
their respective heirs and successors and are not intended for the benefit of,
and may not be invoked by, any other Person.
Section 13.14 Indemnification: Survival of Representations and
Warranties.
A. Indemnification by the Seller and Champps. The Seller and Champps
each hereby jointly and severally agrees to indemnify, defend and hold harmless
the Purchaser, each of the Acquired Companies, each of the Affiliates of the
Purchaser or any Acquired Company, and each of the employees, officers,
directors, stockholders, members, managers, partners and representatives of any
one of them, from and against any losses, assessments, Liabilities, claims,
obligations, damages, costs or expenses (including without limitation reasonable
attorneys' fees and disbursements) which arise out of or relate to:
(1) any misrepresentation in, breach of or failure to comply
with, any of the representations, warranties, undertakings, covenants or
agreements of the Seller or any Acquired Company or any Affiliate of any of them
contained in this Agreement, including without limitation in the Disclosure
Schedule, or in any certificate or other instrument or document executed and
delivered by the Seller or any Acquired Company or any Affiliate of any of them
pursuant to this Agreement; or
(2) any Environmental Matters (as hereinafter defined); or
(3) any Retained Liabilities; or
(4) obligations of the Seller under Section 2.4 with
respect to Lease Termination Amounts and Rent
Adjustment Amounts;
and all such losses, assessments, Liabilities, claims, obligations, damages,
costs or expenses so arising out of or relating to any of the foregoing clauses
(1) through (4), inclusive, of this Section 13.14(A), or the matters described
therein, are referred to hereinafter as the "Purchaser's Losses"; provided,
however, that the Seller shall not have any obligation so to indemnify the
Purchaser on account of any breach of any representation or warranty as
described in clause (1) above of this Section 13.14(A) unless and until the
Purchaser's Losses paid or incurred by the Purchaser on account of all such
breaches of representations and warranties exceed $100,000 in the aggregate, in
which event the Purchaser will be entitled to such indemnification in respect of
all such Purchaser's Losses, including without limitation such initial $100,000
of Purchaser's Losses.
As used above, the term "Environmental Matters" shall mean and include
each and all of the following:
(i) any Environmental Condition on, at, under, migrating from
or to, or relating to the Current Locations or the Other Locations or any
facilities or operations thereon, or otherwise relating in any way to the
Business, to the proportionate extent any such Environmental Condition was
caused or is alleged to have been caused by the acts, omissions, operations or
activities of the Seller and/or any of the Acquired Companies;
(ii) the generation, manufacture, refinement, transportation,
treatment, storage, handling, disposal, transfer, production, Release, Threat of
Release, or processing of any Hazardous Materials (collectively, "Hazardous
Materials Activities") on, at, under or relating to the Current Locations or the
Other Locations or any facilities or operations thereon, or otherwise relating
in any way to the Business, to the proportionate extent any such Hazardous
Materials Activities occurred or are alleged to have occurred during the period
of the Seller's ownership or operation of the Business and/or any of the
Acquired Companies, including, without limitation, off-site waste transportation
and disposal practices prior to the Closing; and
(iii) any Environmental Condition on, at, under, migrating
from or to, or relating to any Current Location or Other Location or any
facilities or operations thereon, or otherwise relating in any way to the
Business, and identified or referenced in the ESA for said Location listed on
Schedule 13.14 attached hereto or otherwise disclosed to the Purchaser by the
Seller.
The Seller acknowledges and agrees that the definition of
"Environmental Matters" above shall include each and all of the foregoing
clauses (i) through (iii), inclusive, regardless of whether any of the matters
described in such clauses (i) through (iii), inclusive, or any facts or
circumstances relating thereto, have been disclosed to the Purchaser in this
Agreement or in the Disclosure Schedule or otherwise, and that the
indemnification obligations with respect to Environmental Matters pursuant to
this Section 13.14 shall exist in full force and effect notwithstanding any such
disclosure. The Purchaser acknowledges that (i) the Seller's indemnification
obligations with respect to Environmental Matters shall not abrogate or
otherwise affect the Seller's ability to pursue third parties for damages and/or
contribution, and (ii) the Seller shall be entitled to bring third party claims
regarding Environmental Matters by or through the Purchaser (at the Seller's
sole cost and expense) provided that the Seller first obtains the Purchaser's
written consent (which consent shall be granted or denied at the sole but
reasonable discretion of the Purchaser).
B. Indemnification by the Purchaser. The Purchaser shall indemnify,
defend and hold harmless the Seller and its employees, officers, directors,
partners and representatives (other than any of the foregoing as may become
employees of any Acquired Company or the Purchaser at or after the Closing) from
and against any losses, assessments, Liabilities, claims, obligations, damages,
costs or expenses (including without limitation reasonable attorneys' fees and
disbursements) which arise out of or relate to: (i) any misrepresentation in,
breach of or failure to comply with, any of the representations, warranties,
covenants or agreements of the Purchaser contained in this Agreement, or in any
certificate or other instrument executed and delivered by the Purchaser pursuant
to this Agreement; or (ii) any Transferred Liabilities (and all such losses,
assessments, Liabilities, claims, obligations, damages, costs or expenses are
referred to hereinafter as the "Seller's Losses"); provided, however, that the
Purchaser shall not have any obligation so to indemnify the Seller on account of
any breach of any representation or warranty as described herein unless and
until the Seller's Losses paid, incurred, suffered or accrued by the Seller on
account of all breaches of representations and warranties exceed $100,000 in the
aggregate, in which event the Seller will be entitled to such indemnification in
respect of all such Seller's Losses, including without limitation such initial
$100,000 of Seller's Losses. The Purchaser's representations and warranties
under this Agreement, and its indemnification obligations arising from such
representations and warranties, shall survive the Closing and shall expire and
terminate on December 31, 2000. Any covenants or agreements of the Purchaser
hereunder, and any and all indemnification obligations relating thereto shall
survive the Closing indefinitely, unless earlier expiring in accordance with
their respective terms. Notwithstanding anything herein to the contrary, the
maximum aggregate liability of the Purchaser on account of any breach of any
representation or warranty described in this Section 13.14(B)(i) shall be
limited to $5,000,000; provided, however, that such limitation on the liability
of the Purchaser shall not apply to, and there shall be no cap or limit on the
liability of the Purchaser to the Seller under or in connection with any such
liability on account of any breach by the Purchaser of any of its covenants or
agreements hereunder or on account of its indemnification obligations pursuant
to this Section 13.14 (except for those indemnification obligations specifically
referenced in the first clause of this sentence).
C. Survival. The Seller's representations and warranties under this
Agreement, and its indemnification obligations arising from such representations
and warranties, shall survive the Closing and shall expire and terminate on
December 31, 2000, except for those representations and warranties contained in
(a) Section 4.1(L)(iii) which shall survive the Closing and shall expire and
terminate on December 31, 2003, (b) Section 4.1(M) and Section 4.1(P) which
shall survive the Closing and shall expire and terminate on the expiration of
the applicable statute of limitations with respect to any applicable Purchaser's
Losses, and (c) Section 4.1(A) with respect to the due organization, valid
existence and good standing of the Seller and any Acquired Company as well as
with respect to the matters referred to in the last two sentences thereof,
Section 4.1(B) (except for clause (iv) and the last sentence thereof), and
Section 4.1(C) which shall survive the Closing indefinitely. Any covenants or
agreements of the Seller hereunder, and any and all indemnification obligations
relating thereto shall survive the Closing indefinitely, unless earlier expiring
in accordance with their respective terms. The Seller's indemnification
obligations with respect to covenants and the items described in Section
13.14(A)(2), Section 13.14(A)(3), and Section 13.14(A)(4) shall survive
indefinitely.
D. Indemnification Liability. Notwithstanding anything herein to the
contrary, the maximum aggregate liability of the Seller on account of any breach
of any representation or warranty described in Section 13.14(A)(1) shall be
limited to the amount of the Final Purchase Price. Such limitation on the
liability of the Seller shall not apply to, and there shall be no cap or limit
on the liability of the Seller to the Purchaser under or in connection with any
liability on account of any breach by the Seller of any of its covenants or
agreements hereunder or on account of indemnification obligations pursuant to
this Section 13.14 (except for those indemnification obligations specifically
referenced in the first clause of this Section 13.14(D)), provided that it shall
be a condition to the Purchaser recovering any amount of Purchaser's Losses in
excess of the Final Purchase Price that the Purchaser transfers to the Seller
full ownership and control of the Shares, the Assets and the Transferred Seller
Assets (to the extent then owned by the Purchaser and the Acquired Companies),
the Acquired Companies and the Business in such a manner as to rescind the
transactions contemplated hereby and the Seller pays to the Purchaser in
connection with such transfer an amount equal to (i) the Final Purchase Price
plus (ii) all additional investments made in the Acquired Companies following
the Closing plus (iii) an amount equal to an internal rate of return equal to
25% on the sum of items (i) and (ii), unless the Seller in its discretion
declines to have such transfer-back and rescission effected and elects to pay to
the Purchaser all such Purchaser's Losses regardless of this proviso.
E. Procedures. (i) Any of the Purchaser's Losses may first be
satisfied, at the Purchaser's election, from the General Escrow Amount, and any
interest earned thereon, to the extent sufficient. In the event that any Legal
Proceeding shall be threatened or instituted in respect to which indemnification
may be sought by one party hereto from another party under the provisions of
this Section 13.14, the party seeking indemnification ("Indemnitee") shall,
reasonably promptly after acquiring actual knowledge of such threatened or
instituted Legal Proceeding, cause written notice in reasonable detail of such
threatened or instituted Legal Proceeding and which is covered by this
indemnification, to be forwarded to the other party from which indemnification
is being sought ("Indemnitor"), provided, however, that the failure to provide
such notice as of any particular date as aforesaid will not affect any rights to
indemnification hereunder.
(ii) In the event of the initiation of any Legal Proceeding
against an Indemnitee by a third party, the Indemnitor shall have the absolute
right after the receipt of the notice described in Section 13.14(E)(i), at its
option and at its own expense, to be represented by counsel of its choice, and
(subject to Section 13.14(E)(iii)) to defend against, negotiate, settle or
otherwise deal with any Legal Proceeding or demand that relates to any
Purchaser's Losses or Seller's Losses, as the case may be, indemnified against
hereunder, and, in such event, the Indemnitee will reasonably cooperate with the
Indemnitor and its representatives in connection with such defense, negotiation,
settlement or dealings (and the Indemnitee's costs and expenses arising
therefrom or relating thereto shall constitute Purchaser's Losses, if the
Indemnitee is the Purchaser, or Seller's Losses, if the Indemnitee is the
Seller); provided, however, that the Indemnitee may directly participate in any
such Legal Proceeding so defended with counsel of its choice at its own expense,
except that, if the Indemnitor fails to take reasonable steps necessary to
defend diligently such third party claim within 15 business days after receiving
written notice from the Indemnitee that the Indemnitee reasonably believes the
Indemnitor has failed to take such steps, the Indemnitee may assume its own
defense, and, in such event (a) the Indemnitor will be liable for all
Purchaser's or Seller's Losses, as the case may be, reasonably paid or incurred
in connection therewith, and (b) the Indemnitor shall, in any case, reasonably
cooperate, at its own expense, with the Indemnitee and its representatives in
connection with such defense.
(iii) Without the prior written consent of the Indemnitee,
which shall not be unreasonably withheld, the Indemnitor will not enter into any
settlement of any third party claim which would lead to Liability or create any
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not provided indemnification hereunder or which would otherwise
adversely affect the Assets, the Transferred Seller Assets, the Business, any
Acquired Company or the Purchaser. If a firm offer is made to settle a third
party claim without leading to Liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
provided indemnification hereunder and the Indemnitor desires to accept and
agree to such offer, the Indemnitor will give written notice to the Indemnitee
to that effect. If the Indemnitee notifies the Indemnitor that it does not
consent to such firm offer within 10 calendar days after its receipt of such
notice from the Indemnitor, the Indemnitee may continue to contest or defend
such third party claim and, in such event, the maximum Liability of the
Indemnitor as to such third party claim will not exceed the amount of such
settlement offer, plus the Purchaser's Losses or Seller's Losses, as the case
may be, reasonably paid or incurred by the Indemnitee through the end of such
10-calendar day period.
(iv) After any final judgment or award shall have been
rendered by a Governmental Entity of competent jurisdiction and the time in
which to appeal therefrom has expired, or a settlement shall have been
consummated, or the Indemnitee and the Indemnitor shall have arrived at a
mutually binding agreement with respect to each separate matter alleged to be
indemnified by the Indemnitor hereunder, the Indemnitee shall forward to the
Indemnitor notice of any sums due and owing by it with respect to such matter,
and the Indemnitor shall pay all of the sums so owing to the Indemnitee by wire
transfer or certified or bank cashier's check within 30 days after the date of
such notice. Any and all Purchaser's Losses or Seller's Losses that are costs
and expenses incurred in connection with a third party claim other than those
described in the preceding sentence (including Purchaser's Losses or Seller's
Losses incurred in the absence of any threatened or pending Legal Proceeding, or
Purchaser's Losses or Seller's Losses incurred after any such Legal Proceeding
has been threatened or instituted but prior to the rendering of any final
judgment or award in connection therewith), shall be paid by the Indemnitor on a
current basis, and, without limiting the generality of the foregoing, the
Indemnitee shall have the right to invoice the Indemnitor for such Purchaser's
Losses or Seller's Losses, as the case may be, as frequently as it deems
appropriate, and the amount of any such Purchaser's Losses or Seller's Losses,
as the case may be, which are described or listed in any such invoice shall be
paid to the Indemnitee, by wire transfer or certified or bank cashier's check,
within 30 days after the date of such invoice.
F. Certain Limitations. (i) The amount of any Purchaser's Losses or
Seller's Losses shall be net of any amounts actually recovered by the Indemnitee
from third parties (including, without limitation, amounts actually recovered
under insurance policies) with respect to such Purchaser's Losses or Seller's
Losses as the case may be. Any Indemnitor hereunder shall be subrogated to the
rights of the Indemnitee upon payment in full of the amount of the relevant
Purchaser's Losses or Seller's Losses as the case may be. An insurer who would
otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, have any subrogation rights with respect thereto. If any
Indemnitee recovers an amount from a third party in respect of any Purchaser's
Losses or Seller's Losses as the case may be after the full amount of such
Purchaser's Losses or Seller's Losses has been paid by an Indemnitor or after an
Indemnitor has made a partial payment of such Purchaser's Losses or Seller's
Losses and the amount received from the third party exceeds the remaining unpaid
balance of such Purchaser's Losses or Seller's Losses, then the Indemnitee shall
promptly remit to the Indemnitor the excess (if any) of (a) the sum of the
amount theretofore paid by the Indemnitor in respect of such Purchaser's Losses
or Seller's Losses plus the amount received from the third party in respect
thereof, less (b) the full amount of such Purchaser's Losses or Seller's Losses.
(ii) The amount of any Purchaser's Losses or Seller's Losses or any
other amounts payable or reimbursable by one party to the other under this
Agreement shall be increased or decreased to take account of any net Tax cost
incurred or any net Tax benefit realized by the Indemnitee.
(iii) Notwithstanding any other provisions of this Agreement (a) the
Purchaser shall not have any right to make claims for indemnification pursuant
to this Section 13.14 with respect to any matter which is the basis of any
economic adjustment pursuant to Section 2.2(B) or Section 2.3(C), it being
understood that such adjustments constitute the Purchaser's sole recourse and
remedy with respect to such matters to the exclusion of this Section 13.14, and
(b) neither the Purchaser nor the Seller shall have any right to make claims for
indemnification pursuant to this Section 13.14 on account of breaches of
representations and warranties in this Agreement after the period for which such
representations or warranties survive pursuant to Section 13.14(B) and Section
13.14(C). If the Closing occurs, the indemnification rights of the parties
provided in this Section 13.14 and in the Escrow Agreement constitute the
exclusive remedy of the parties with respect to all matters described in this
Agreement (except for the matters described in Article II, Section 6.7, Section
6.9, Section 6.18, Article XI and Article XII for which the parties shall be
entitled to specific performance and all other remedies available at law or
equity for the breach of the matters described in such Sections and Articles).
Section 13.15 Arbitration. Any and all disputes between the parties
that arise out of or relate to Article II or Section 13.14 (other than a claim
based on a breach of a representation or warranty except for a claim for such
breach under the Escrow Agreement to which arbitration shall apply) of this
Agreement, or that arise out of or relate to the Escrow Agreement, and which
cannot be amicably settled, shall be determined solely and exclusively by
arbitration by a single arbitrator (the "Arbitrator") who has either been
appointed jointly by (a) the Purchaser and the Seller, or (b) an arbitrator
appointed by the Purchaser and an arbitrator appointed by the Seller. If the
Arbitrator has not been appointed within ten business days of the date of notice
of any such dispute having been given by a party hereto the other party, the
Arbitrator shall be appointed by the President of the AAA. The Arbitrator shall
be an individual with experience in the field which is the subject matter which
he or she is being asked to determine. Any arbitration pursuant to this Section
13.15 shall be administered by the AAA under its commercial arbitration rules
for such disputes at its office in Boston, Massachusetts. The parties expressly,
unconditionally and irrevocably waive any right to recision, repudiation or any
similar remedy in any Legal Proceeding hereunder for which arbitration is
applicable under this Section 13.15. Judgment on the award rendered by the
Arbitrator may be entered in any court having jurisdiction thereof. All fees and
expenses of the Arbitrator shall be paid by the non-prevailing party.
Section 13.16 Certain Employment Matters.
A. Company Employees. As of and immediately following the Closing all
Company Employees shall remain employees of the applicable Acquired Company on
the same terms and conditions on which they are employed by such Acquired
Company immediately prior to the Closing. The Acquired Companies shall not
assume the Employee Benefit Plans of Seller, but Purchaser shall use reasonable
commercial efforts, to the extent consistent with the operating plans for the
Business after the Closing, to establish comparable benefit arrangements for the
Acquired Companies (other than any stock purchase or other incentive or
retirement plan except for a so-called "401K" plan) to be in force immediately
following the Closing; provided, however, that after the Closing, the Acquired
Companies shall be liable for all severance and all accrued vacation of the
Company Employees as of the Closing Date, and the Seller shall have no
reimbursement or other liability to the Purchaser, the Acquired Companies or the
Company Employees after the Closing on account thereof. The obligations of the
Acquired Companies under the second sentence of this Section 13.16(A) to
establish comparable benefit arrangements shall only survive for six months
following the Closing. The employee benefit plans, programs and policies
established by Purchaser and/or the Acquired Companies after the Closing shall
credit the Company Employees covered thereby with all service with Seller or the
Acquired Companies (or any predecessor or affiliated employers) to the extent
such service would be recognized by Seller prior to the Closing for all purposes
under its Employee Benefit Plans, to the same extent as if such service were
service with Purchaser and/or the Acquired Companies, and in the case of any
group medical or dental insurance or other health care plan, the Company
Employees shall be covered under such plan without regard to any pre-existing
condition restrictions, but only to the extent such condition did not also apply
under Seller's health care plan, and to the extent feasible, with credit for
payments made during the current plan year as to annual maximum out-of-pocket
co-payments and deductibles. Nothing contained in this Agreement shall confer
upon any Company Employee any right with respect to continuance of employment by
the applicable Acquired Company, nor shall anything herein interfere with the
right of the Seller, the Purchaser and the Acquired Companies to terminate the
employment of any of the Company Employees at any time, with or without cause,
or restrict the Purchaser or the Acquired Companies in the exercise of their
independent business judgment in modifying any of the terms and conditions of
the employment of the Company Employees. No provision of this Agreement shall
create any third party beneficiary rights in any Company Employee, or any
beneficiary or dependents thereof, with respect to compensation, terms and
conditions of employment and benefits. Seller will provide Purchaser, in a
timely manner, any information with respect to any Company Employee's employment
with and compensation from Seller or the Acquired Companies or rights or
benefits under any employee benefit plan of Seller which Purchaser may
reasonably request.
B. Seller Employees. Schedule 13.16 sets forth the names of all current
employees of Seller (including employees on sick leave and vacation, but
excluding the Chief Executive Officer of Seller) who spend any of their working
time performing services relating to the Business (the "Seller Employees").
Unless Purchaser otherwise elects with Seller's consent (not to be unreasonably
withheld) prior to the Closing, all Seller Employees shall be offered employment
by the Company as of the Closing, which offers shall be for wages or salaries
which are reasonably similar to such employees' wages or salaries immediately
prior to the Closing. Seller agrees to fully cooperate with Purchaser in
connection with such offer of employment by Purchaser and will not take any
action, directly or indirectly, to prevent any Seller Employee to whom the
Purchaser offers employment from becoming employed by the Company from and after
the Closing. After the Closing, all Seller Employees who shall have accepted the
Company's offer of employment pursuant to the foregoing sentence shall be
treated for all purposes as if they were "Company Employees", including without
limitation all provisions of Section 13.16(A) hereof, except as otherwise
expressly set forth in Section 13.16(C). Effective as of the Closing, Seller
shall (i) terminate the employment of each Seller Employee who has been offered
employment by the Company as of the Closing in accordance with this Section
13.16(B) and has accepted such employment (a "Rehired Seller Employee"); and
(ii) in its sole discretion, either retain any Seller Employee who has been
offered employment by the Company as of the Closing in accordance with this
Section 13.16(B) and has not accepted such employment (a "Declining Seller
Employee") or terminate such Declining Seller Employee's employment, whereby
Seller shall be liable for all severance and accrued vacation of such Declining
Seller Employee as of the Closing Date, and the Purchaser and the Acquired
Companies shall have no reimbursement or other liability to the Seller or such
Declining Seller Employee as of and after the Closing on account thereof.
C. Shared Employees. An asterisk in Schedule 13.16 next to their names
indicates those Seller Employees who, if they become Rehired Seller Employees,
Purchaser will cause to be made available to Seller by the Company to provide
services after the Closing for the benefit of Seller and its remaining
subsidiaries and business in accordance with this Section 13.16(C) and the
Transitional Services Agreement (the "Shared Employees"). Notwithstanding their
status as "Shared Employees", except as otherwise, expressly set forth in this
Section 13.16(C) such employees shall be for all purposes "Rehired Seller
Employees". Seller shall have the right to receive from the Shared Employees,
and Purchaser and the Company shall take all commercially reasonable actions to
cause the Shared Employees so long as they are employed by any Acquired Company
to provide to Seller, services in the categories and for the maximum terms
specifically set forth in the Transitional Services Agreement, (the "Shared
Employee Services"). Approximately 50% of each Shared Employee's normal business
hours will be devoted to duties on behalf of Seller. Each such Shared Employee's
duties hereunder will consist of substantially the same duties as were performed
by such Shared Employee during the six-month period prior to the Closing subject
to (i) such minor modifications as shall be necessary to reflect the
consummation of the transactions contemplated by this Agreement or as to which
Seller shall reasonably request, and (ii) the reasonable needs of the Company as
determined in its reasonable discretion. It is understood and agreed that
Seller, and not Purchaser, shall be responsible for directing and supervising
the Shared Employees with respect to the performance of Shared Employee
Services. Purchaser and the Company may not terminate any of the Shared Employee
Services prior to the earlier of (i) the maximum terms set forth in the
Transitional Services Agreement or (ii) the date on which Seller elects to
terminate the applicable Shared Employee Services as provided in the
Transitional Services Agreement, unless such termination is "for cause" or
unless in each case Purchaser gives Seller five business day's prior written
notice of any such termination by an Acquired Company without cause and an
opportunity to offer employment to the terminated Shared Employee
notwithstanding the restrictions set forth in Section 11.5 hereof. Seller agrees
to compensate the Company for Shared Employees Services at the rate of 50% of
the sum of (i) annual salary (initially as of the Closing and as may be revised
during the Company's standard employee merit review process) and (ii)
attributable benefits and direct costs related to such Shared Employee. Seller
shall have no employer-employee relationship with any Rehired Seller Employees.
If a Shared Employee is terminated by Purchaser or the Company within the 12
months immediately following the Closing, Seller and Purchaser agree to share
equally in any severance obligation which becomes payable to such terminated
Shared Employee.
[Signatures on Next Page]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
KING ▇▇▇▇▇▇, INC.
By:
Title:
UNIQUE CASUAL RESTAURANTS, INC.
By:
Title:
Champps Entertainment, Inc. hereby joins in this Agreement for the
purposes of the representations, warranties, covenants and obligations contained
in Section 4.1(R), Section 4.1(W), Section 11.5, Section 11.7, and Section
13.14, and hereby agrees to be bound by each and all of the provisions thereof
as a direct obligor thereunder:
CHAMPPS ENTERTAINMENT, INC.
By:
Title:
Exhibit 3.2(A)(21)
TITLE COMMITMENTS
▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇
▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
8 Clearlake, Texas
9 Normandy, Texas
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
Schedule 6.11
Matters to be Addressed in Transitional Services Agreement
1. Data Processing: The Seller shall cause Restaurant Consulting Services,
Inc. ("RCS") to provide to the --------------- Purchaser, until June 30,
1999, such data processing and consulting services as RCS is currently
obligated to provide to the Seller in connection with the Seller's conduct
of the Business under and pursuant to that certain Professional Services
Contract (the "RCS Contract") dated July 1, 1997 between the Seller and
RCS. In consideration of the foregoing, the Purchaser, or at the election
of the Purchaser the Company, shall pay to the Seller an amount equal to
$40,000 per month during this term (prorated for a portion of any month).
The Seller has no liability or responsibility for RCS' performance of the
foregoing services and all services not covered by the RCS Contract may be
contracted for directly between the Purchaser or the Company and RCS at the
Purchaser's sole cost and expense.
2. Head Office: The Seller shall provide to the Purchaser 10,000 square feet
of space in the Head Office until the termination of the term of the Lease
applicable to the Head Office. In consideration of the foregoing, the
Purchaser, or at the Purchaser's election the Company, shall pay to the
Seller rent equal to $20 per square foot (which amount shall constitute the
Purchaser's sole monetary responsibility thereunder for rent, additional
rent or otherwise) on the 10,000 square feet provided (whether or not
actually used by the Purchaser). The Purchaser may terminate the foregoing
arrangement at any time on 120 days' prior notice to the Seller.
3. Personnel: Details to implement Section 13.16.
4. Office Furniture and Equipment: The Transferred Seller Assets shall include
office furniture and equipment for 29 employees. The Seller shall Transfer
to the Purchaser, or at the election of the Purchaser the Company, any
office furniture and equipment used by any shared personnel (in excess of
29) who are eventually hired by the Purchaser or the Company.
5. Boston Restaurant: The Seller shall manage and operate the Boston
Restaurant, shall be fully responsible for all Liability relating to
Company Employees at the Boston Restaurant, and shall assume the Employment
Agreement dated as of June 28, 1998 between the Company and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, all on terms and conditions to be mutually acceptable to the
Purchaser and the Seller.