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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
May 13, 1999
--------------
Date of Report (Date of earliest event reported)
CASA OLE RESTAURANTS, INC.
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(Exact Name of Registrant as Specified in its Charter)
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Texas 000-28234 76-0493269
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(State of Organization) (Commission File Number) (IRS Employer Identification No.)
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1135 Edgebrook
Houston, TX 77034-1899
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(Address of Registrant's Principal Executive Office) (Zip Code)
(713) 943-7574
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(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On April 30, 1999, Casa Ole Restaurants, Inc. (the "Company") completed
its acquisition of La Senorita Restaurants, pursuant to the Stock Purchase
Agreement with Purchase of Designated Assets (the "Stock Purchase Agreement"),
dated as of January 12, 1999, by and among the Company, La Senorita Restaurants
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the
Company, La Senorita Traverse City, Inc., a Michigan corporation; La Senorita
Franchise Company, a Michigan corporation; W. G. Enterprises, Inc., a Michigan
corporation; Kleinrichert Bros., Inc., a Michigan corporation; La Senorita - Mt.
Pleasant, Inc., a Michigan corporation ("Mt. Pleasant"); KMANCO, Inc., a
Michigan corporation; La Senorita Lansing, Inc., a Michigan corporation; and
Kenneth Kleinrichert, Donald Kleinrichert, Joseph Kleinrichert, The Joseph
Kleinrichert Trust and Steven Arnot, of Traverse City, Michigan. A copy of the
Stock Purchase Agreement is attached hereto as Exhibit 2.1.
La Senorita Restaurants are Mexican-themed, casual style operations
consisting of five company-owned restaurants and four franchised restaurants.
All of the nine restaurants are located within the State of Michigan. Sales for
the La Senorita system in 1998 were approximately $11.6 million, of which
approximately $7.6 million were from company-owned restaurants.
A copy of the Company's press release announcing the consummation of
the acquisition is attached hereto as Exhibit 99.1.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
It is impracticable to file with this Form 8-K the financial statements
and pro forma financial information required with respect to the acquisition of
the La Senorita Restaurants. Such required financial statements and pro forma
financial information will be filed by amendment to this Form 8-K as soon as
practicable and, in any event, within 60 days after the required filing date for
this Form 8-K.
(b) Pro forma financial information.
See Item 7(a) above.
(c) Exhibits.
2.1 Stock Purchase Agreement with Purchase of Designated Assets,
dated as of January 12, 1999, by and among the Company, La
Senorita Restaurants Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of the Company , La Senorita
Traverse City, Inc., La Senorita Franchise Company, W. G.
Enterprises, Inc., Kleinrichert Bros., Inc., La Senorita - Mt.
Pleasant, Inc., KMANCO, Inc., La Senorita Lansing, Inc.,
Kenneth Kleinrichert, Donald Kleinrichert, Joseph
Kleinrichert, The Joseph Kleinrichert Trust and Steven Arnot.
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99.1 Press Release of Casa Ole Restaurants, Inc., dated May 3, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CASA OLE RESTAURANTS, INC.
By: /s/ ANDREW DENNARD
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Name: Andrew Dennard
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Title: Vice President & Chief Financial Officer
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Date: May 13, 1999
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EXHIBIT INDEX
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Exhibit No. Exhibit
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2.1 Stock Purchase Agreement with Purchase of Designated Assets,
dated as of January 12, 1999, by and among the Company, La
Senorita Restaurants Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of the Company, La Senorita
Traverse City, Inc., La Senorita Franchise Company, W. G.
Enterprises, Inc., Kleinrichert Bros., Inc., La Senorita - Mt.
Pleasant, Inc., KMANCO, Inc., La Senorita Lansing, Inc.,
Kenneth Kleinrichert, Donald Kleinrichert, Joseph
Kleinrichert, The Joseph Kleinrichert Trust and Steven Arnot.
99.1 Press Release of Casa Ole Restaurants, Inc., dated
May 3, 1999.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
WITH PURCHASE OF DESIGNATED ASSETS
BY AND AMONG
CASA OLE RESTAURANTS, INC.
AND
LA SENORITA RESTAURANTS ACQUISITION CORP.
AND
LA SENORITA TRAVERSE CITY, INC.,
LA SENORITA FRANCHISE COMPANY,
W. G. ENTERPRISES, INC.,
KLEINRICHERT BROS., INC.,
LA SENORITA - MT. PLEASANT, INC.,
KMANCO, INC.,
LA SENORITA LANSING, INC.,
KENNETH KLEINRICHERT,
DONALD KLEINRICHERT,
JOSEPH KLEINRICHERT,
THE JOSEPH KLEINRICHERT TRUST
AND
STEVEN ARNOT
AND FOR CERTAIN PURPOSES,
LA MARGARITA COMPLEX, LLP
Dated: January 12, 1999
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS...........................................................................2
1.1 Definitions...........................................................................2
ARTICLE II PURCHASE AND SALE.....................................................................2
2.1 Purchase and Sale.....................................................................2
2.2 Lansing Assets........................................................................3
(a) Transfer and Conveyance of Lansing Assets....................................3
(b) No Assumption of Obligations.................................................3
2.3 Purchase Price........................................................................3
2.4 Method of Payment of the Purchase Price...............................................3
2.5 Purchase Price Adjustment.............................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE LA SENORITA COMPANIES AND THE
SHAREHOLDERS..........................................................................4
(A) Representations and Warranties of the La Senorita Companies and the Shareholders...................4
3.1 Due Organization......................................................................4
3.2 Authority for Agreement...............................................................5
3.3 No Breach or Default..................................................................5
3.4 Title to Assets.......................................................................6
(a) Title to Lansing Assets......................................................6
(b) Assets of Transferred Entities...............................................6
3.5 Capital Stock of the Transferred Entities; Subsidiaries...............................6
3.6 Litigation, Governmental Action, Etc..................................................7
3.7 Compliance with Laws and Regulations..................................................7
3.8 Financial Statements..................................................................8
3.9 Physical Properties...................................................................8
3.10 Intellectual Property; Year 2000......................................................8
3.11 Permits...............................................................................9
3.12 Contracts.............................................................................9
3.13 Contract Defaults....................................................................10
3.14 Employee Benefits....................................................................10
3.15 Employees; Employee Relations........................................................12
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3.16 Consents.............................................................................13
3.17 Insurance............................................................................13
3.18 Tax Matters..........................................................................14
3.19 Environmental Laws and Regulations...................................................14
3.20 Absence of Certain Changes or Events.................................................15
3.21 True, Correct and Complete Information...............................................15
3.22 Availability of Documents............................................................16
3.23 Broker's and Finder's Fees...........................................................16
3.24 Accounts Receivable; Evidences of Indebtedness.......................................16
3.25 Interests in Customers, Suppliers, Etc...............................................16
3.26 Officers and Directors...............................................................17
3.27 Bank Accounts and Powers of Attorney.................................................17
(B) Representations and Warranties of the Shareholders...................................17
3.28 Authority; Ownership.................................................................17
3.29 Validity of Obligations..............................................................17
3.30 Absence of Claims Against the LaSenorita Companies...................................17
3.31 Taxes................................................................................17
(C) Limitations on Representations and Warranties of the La Senorita
Companies and the Shareholders.......................................................18
3.32 Limitation...........................................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CASA OLE AND BUYER.................................18
4.1 Due Organization.....................................................................18
4.2 No Conflict..........................................................................18
4.3 Authority for Agreement..............................................................18
4.4 Absence of Certain Proceedings.......................................................19
4.5 Broker's and Finder's Fees...........................................................19
4.6 Investment Intent....................................................................19
4.7 Representations and Warranties of Casa Ole and Buyer.................................19
ARTICLE V COVENANTS............................................................................19
5.1 Covenants of the LaSenorita Companies and the Shareholders...........................19
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(a) No Solicitation of Employees................................................19
(b) Maintenance of Business.....................................................20
(c) Operations in Due Course....................................................20
(d) Material Adverse Effect.....................................................20
(e) Access; Confidential Information............................................21
(f) Assets of KMANCO............................................................21
(g) Broker's and Finder's Fees..................................................21
(h) Termination of Obligations..................................................21
5.2 Covenants of the LaSenorita Companies, the Shareholders, Casa Ole
and Buyer............................................................................21
(a) Diligence Towards Closing...................................................21
(b) Notice of Untrue or Inaccurate Representations..............................22
(c) Records Pertaining to the LaSenorita Companies..............................22
(d) Gift Certificates; Accrued Vacation Benefits................................22
(e) Tax Matters.................................................................23
(f) Michigan Restaurant Association Self-Insured Workers
Compensation Fund...........................................................23
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.........................................24
6.1 No Governmental Action...............................................................24
6.2 Representation and Warranties of Transferred Entities and
Shareholders.........................................................................24
6.3 Covenants of Transferred Entities and the Shareholders...............................24
6.4 Transferred Entities' Certificate....................................................24
6.5 No Casualty Losses...................................................................24
6.6 Certificates of Authorities..........................................................25
6.7 Litigation...........................................................................25
6.8 Satisfaction of Buyer's Counsel......................................................25
6.9 Opinion of Transferred Entities' Counsel.............................................25
6.10 No Material Adverse Effect...........................................................26
6.11 Consents.............................................................................26
6.12 No Transfers to Affiliates...........................................................26
6.13 Resignations of Directors and Officers...............................................26
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6.14 Financing............................................................................27
6.15 Further Assurances...................................................................27
6.16 Real Property Leases.................................................................27
6.17 MESA Notice..........................................................................27
6.18 Liquor Licenses......................................................................27
6.19 Employment Agreement.................................................................27
6.20 Noncompetition Agreements............................................................27
6.21 Escrow Agreement.....................................................................27
6.22 Releases of Encumbrances.............................................................28
6.23 Bill of Sale.........................................................................28
6.24 S Corporation Elections..............................................................28
6.25 Allocation of the Purchase Price.....................................................28
6.26 Bank of Boston Payoff Letter.........................................................28
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE LA SENORITA COMPANIES AND
SHAREHOLDERS.........................................................................28
7.1 Representations and Warranties of Buyer..............................................28
7.2 Covenants of Buyer...................................................................28
7.3 Buyer's Certificate..................................................................28
7.4 Certificates of Authorities..........................................................28
7.5 Satisfaction of Transferred Entities' Counsel........................................29
7.6 Real Property Leases.................................................................29
7.7 Opinion of Casa Ole and Buyer's Counsel..............................................29
7.8 Employment Agreement.................................................................29
7.9 Noncompetition Agreements............................................................29
7.10 Escrow Agreement.....................................................................29
7.11 Liquor Licenses......................................................................30
7.12 Bill of Sale.........................................................................30
7.13 Restriction Agreement................................................................30
7.14 Allocation of the Purchase Price.....................................................30
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ARTICLE VIII CLOSING..............................................................................30
8.1 Closing Date and Place...............................................................30
8.2 Conveyance of the Stock..............................................................30
8.3 Transferred Entities' Obligations at Closing.........................................30
8.4 Buyer's Obligations at the Closing...................................................31
8.5 Payment into Escrow..................................................................31
ARTICLE IX PERSONAL GUARANTEES..................................................................31
ARTICLE X SURVIVAL AND INDEMNIFICATION.........................................................31
10.1 Survival of Covenants, Agreements, Representations and Warranties....................31
(a) Covenants and Agreements....................................................31
(b) Representations and Warranties..............................................32
(c) Claims Made Prior to Expiration.............................................32
10.2 Buyer's Losses.......................................................................32
10.3 Employee Compensation and Benefits...................................................33
10.4 Shareholders' Losses.................................................................33
10.5 Notice of Loss.......................................................................33
10.6 Right to Defend......................................................................34
10.7 Cooperation..........................................................................34
10.8 Limitations on Indemnification Obligation............................................34
10.9 Offset...............................................................................35
ARTICLE XI TERMINATION..........................................................................35
11.1 Termination..........................................................................35
11.2 No Further Force or Effect...........................................................36
ARTICLE XII MISCELLANEOUS........................................................................36
12.1 Further Assurances and Additional Conveyances........................................36
12.2 Binding Agreement; Assignment........................................................36
12.3 Counterparts.........................................................................36
12.4 Notices..............................................................................36
12.5 GOVERNING LAW........................................................................37
12.6 Payment of Fees and Expenses.........................................................37
12.7 Captions.............................................................................38
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12.8 Number and Gender of Words...........................................................38
12.9 Recitals, Annexes, Exhibits and Schedules............................................38
12.10 Waiver...............................................................................38
12.11 Attorneys' Fees......................................................................38
12.12 Time of the Essence..................................................................38
12.13 Entire Agreement.....................................................................38
12.14 Publicity............................................................................38
12.15 Bulk Transfers.......................................................................38
ARTICLE XIII GUARANTY OF CASA OLE.................................................................39
13.1 Guaranty.............................................................................39
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LIST OF SCHEDULES
Schedule 2.5 Purchase Price Adjustment
Schedule 3.1 Predecessor Companies and Assumed Names
Schedule 3.3 No Conflicts
Schedule 3.4 Title to the Assets
Schedule 3.5 Capital Stock
Schedule 3.6 Litigation, Governmental Action, Etc.
Schedule 3.7 Compliance with Laws
Schedule 3.9 Physical Properties
Schedule 3.10 Intellectual Property
Schedule 3.11 Permits
Schedule 3.12 Contracts
Schedule 3.13 Contract Defaults
Schedule 3.14 Employee Benefits
Schedule 3.15 Employees; Employee Relations
Schedule 3.16 Consents
Schedule 3.17 Insurance
Schedule 3.18 Tax Matters
Schedule 3.19 Environmental Matters
Schedule 3.24 Accounts Receivable
Schedule 3.26 Officers and Directors
Schedule 3.27 Bank Accounts and Powers of Attorney
Schedule 5.2(e)* Allocation of the Purchase Price
Schedule 5.2(f) Fund Statement
* Denotes schedule to be prepared and attached to this Agreement immediately
prior to the Closing. All other schedules have been prepared and attached
hereto on the date hereof.
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LIST OF EXHIBITS
Exhibit A Definitions
Exhibit B Lansing Assets
Exhibit C Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit D Form of Real Property Lease
Exhibit E Form of Escrow Agreement
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STOCK PURCHASE AGREEMENT
WITH PURCHASE OF DESIGNATED ASSETS
THIS STOCK PURCHASE AGREEMENT WITH PURCHASE OF DESIGNATED ASSETS (this
"Agreement"), dated as of January 12, 1999, is made and entered into by and
among CASA OLE RESTAURANTS, INC., a Texas corporation ("Casa Ole"), and LA
SENORITA RESTAURANTS ACQUISITION CORP., a Delaware corporation ("Buyer") and LA
SENORITA TRAVERSE CITY, INC., a Michigan corporation ("Traverse City"); LA
SENORITA FRANCHISE COMPANY, a Michigan corporation ("Franchise"); W. G.
Enterprises, Inc., a Michigan corporation ("WGE"); Kleinrichert Bros., Inc., a
Michigan corporation ("KBI"); La Senorita - Mt. Pleasant, Inc., a Michigan
corporation ("Mt. Pleasant"); KMANCO, Inc., a Michigan corporation ("KMANCO"
and, together with each of Traverse City, Franchise, WGE, KBI, and Mt. Pleasant,
the "Transferred Entities"); LA SENORITA LANSING, INC., a Michigan corporation
("Lansing" and, together with Transferred Entities, the "La Senorita
Companies"); and KENNETH KLEINRICHERT, DONALD KLEINRICHERT, JOSEPH KLEINRICHERT,
THE JOSEPH KLEINRICHERT TRUST and STEVEN ARNOT, of Traverse City, Michigan
(collectively, the "Shareholders"). In addition, La Margarita Complex, LLP, a
Michigan limited liability partnership ("La Margarita") has executed this
Agreement for purposes of consenting to Sections 6.16, 7.6, 7.13 and 10.9
hereof.
WHEREAS, Traverse City is a corporation duly organized under the laws
of the State of Michigan with the authority to issue sixty thousand (60,000)
shares of common stock, one dollar ($1.00) par value per share, of which six
thousand seven hundred seventy-four (6,774) shares are issued and outstanding
and owned by the Shareholders; and
WHEREAS, Franchise is a corporation duly organized under the laws of
the State of Michigan with the authority to issue fifty thousand (50,000) shares
of common stock, ten cents ($0.10) par value per share, of which sixteen
thousand five hundred (16,500) shares are issued and outstanding and owned by
the Shareholders; and
WHEREAS, WGE is a corporation duly organized under the laws of the
State of Michigan with the authority to issue fifty thousand (50,000) shares of
common stock, one dollar ($1.00) par value per share, of which three thousand
one hundred sixty-one (3,161) shares are issued and outstanding and owned by the
Shareholders; and
WHEREAS, KBI is a corporation duly organized under the laws of the
State of Michigan with the authority to issue fifty thousand (50,000) shares of
common stock, one dollar($1.00) par value per share of which two thousand one
hundred seven (2,107) shares are issued and outstanding and owned by the
Shareholders; and
WHEREAS, Mt. Pleasant is a corporation duly organized under the laws of
the State of Michigan with the authority to issue fifty thousand (50,000) shares
of common stock, one dollar ($1.00) par value per share of which three thousand
one hundred sixty-one (3,161) shares are issued and outstanding and owned by the
Shareholders; and
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WHEREAS, KMANCO is a corporation duly organized under the laws of the
State of Michigan with the authority to issue fifty thousand (50,000) shares of
common stock, one dollar ($1.00) par value per share of which five thousand
three hundred twenty-five (5,325) shares are issued and outstanding and owned by
the Shareholders; and
WHEREAS, the businesses conducted by the La Senorita Companies is
referred to herein as the "Business"; and
WHEREAS, the Shareholders desire to sell and Buyer desires to purchase
from the Shareholders all of the issued and outstanding common stock in each of
the Transferred Entities on the terms of and subject to the conditions of this
Agreement; and
WHEREAS, Lansing owns and/or leases certain assets that are used in
connection with the operation of the Business, and
WHEREAS, pursuant to the terms and conditions hereinafter set forth and
concurrently with the closing of the transactions described herein, Lansing
desires to sell to Traverse City, and Traverse City desires to buy from Lansing,
certain designated assets; and
WHEREAS, La Margarita owns certain real estate and improvements on
which the Transferred Entities conduct business and desires to enter into
several leases with Buyer providing for the use of such property as further
described herein; and
WHEREAS, Casa Ole is the parent corporation of Buyer and desires to
guarantee Buyer's obligations to consummate the transactions set forth below;
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and upon the terms and subject to the conditions
set forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings set forth on Exhibit A, which
is attached hereto and incorporated herein by this reference.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement:
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(a) the Shareholders, jointly and severally, agree to sell,
assign, transfer, set over, convey and deliver to Buyer at the Closing,
all of the issued and outstanding shares of capital stock of the
Transferred Entities (collectively, the "Purchased Shares"), free and
clear of any and all Encumbrances, and Buyer agrees to purchase the
Purchased Shares from the Shareholders on the same terms and conditions
as set forth herein; and
(b) Lansing agrees to sell, assign, transfer, set over, convey and
deliver to Traverse City at the Closing, and Traverse City agrees to
buy from Lansing, all of the assets and properties of Lansing,
including, without limitation, the assets described on Exhibit B hereto
(collectively, the "Lansing Assets"), free and clear of any and all
Encumbrances.
2.2 Lansing Assets.
(a) Transfer and Conveyance of Lansing Assets. Lansing will
execute and deliver to Traverse City, and Traverse City shall execute
and deliver to Lansing, at the Closing a Bill of Sale, Assignment and
Assumption Agreement in the form of Exhibit C (the "Bill of Sale")
attached hereto and any such other assignments and instruments of
transfer as may be necessary or appropriate to carry out the intent of
this Agreement and as shall be sufficient to vest in Traverse City all
of the right, title and interest of Lansing in the Lansing Assets.
(b) No Assumption of Obligations. Traverse City shall assume and
shall be liable for Lansing's obligations to render performance under
the contracts, leases, arrangements and commitments listed on Exhibit B
hereto (the "Lansing Assumed Liabilities") (but not for any obligation
for performance or obligation or liability of Lansing for default or
nonperformance under said contracts, leases arrangements and
commitments arising prior to the Closing). Except as may be expressly
provided herein, Traverse City shall not assume and shall not be liable
for any obligations, liabilities, commitments or undertakings of
Lansing, other than those arising at or after the Closing with respect
to the Lansing Assumed Liabilities.
2.3 Purchase Price. The aggregate purchase price (the "Purchase Price")
Buyer will pay to the Shareholders and to Lansing shall be Five Million One
Hundred Ten Thousand Dollars ($5,110,000), less the following: (a) the
Twenty-Five Thousand Dollar ($25,000) earnest-money payment made by Buyer
pursuant to the Letter of Intent; (b) One Million One Hundred Ten Thousand
Dollars ($1,110,000) to be deposited into escrow in accordance with Section 8.5
(the "Escrowed Amount"); and (c) the Bank of Boston Fee to be paid directly to
Bank of Boston on behalf of the La Senorita Companies and the Shareholders at
Closing. Upon completion of Schedule 5.2(e) in accordance with Section 5.2(e),
the parties will prepare, initial and attach to such schedule a statement
reflecting: (i) the amount of the Purchase Price to be paid to the Shareholders
for the Purchased Shares (the "Share Purchase Price") on a per-entity basis; and
(ii) the amount of the Purchase Price to be paid to Lansing for the Lansing
Assets (the "Asset Purchase Price").
2.4 Method of Payment of the Purchase Price. At the Closing, Buyer
shall deliver: (i) to each Shareholder, the amount set forth on the statement
attached to Schedule 5.2(e) opposite such Shareholder's name; and (ii) to
Lansing the Asset Purchase Price. Buyer shall deliver the Purchase
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Price (less the Escrowed Amount) by certified check or wire transfer of funds to
the bank accounts designated by each Shareholder and Lansing in writing prior to
the Closing. The parties agree that the Escrow Agent shall distribute that
portion of the Purchase Price that constitutes the Escrowed Amount to each of
WGE, KBI, Mt. Pleasant and KMANCO on behalf of La Margarita (in payment of the
accounts payable to each of such entities by La Margarita) in the amounts and in
the manner set forth in the Escrow Agreement.
2.5 Purchase Price Adjustment. Set forth on Schedule 2.5 attached
hereto is an agreement of the parties regarding certain adjustments that will be
made to the Share Purchase Price by the parties (such adjustments referred to
herein collectively as the "Purchase Price Adjustment"). At the Closing, the
parties shall determine the amount of each adjustment set forth on Schedule 2.5
that can be determined at such time (collectively, the "Closing Adjustment"),
and the Purchase Price shall be adjusted to be increased or decreased, as the
case may be, by: (i) the amount of the Closing Adjustment; and (ii) the amount
by which the net value of all merchandise, decor and supplies of KMANCO (value
of assets in excess of trade payables) is greater or less, as the case may be,
than $45,000 on the Closing Date. Within 90 days after the Closing, the parties
shall prepare a statement reflecting the amount of each adjustment listed on
Schedule 2.5 that was not included in the Closing Adjustment (collectively, the
"Post-Closing Adjustment"); except that any adjustment (whether or not listed on
Schedule 2.5) that is addressed elsewhere in this Agreement shall be made in
accordance with the provisions of this Agreement. If the Post-Closing Adjustment
results in a credit to Buyer, the Shareholders shall promptly pay to Buyer the
amount of such Post-Closing Adjustment; if the Post-Closing Adjustment results
in a credit to the Shareholders, the Buyer shall promptly pay to the
Shareholders the amount of such Post-Closing Adjustment. For purposes of the
Purchase Price Adjustment, inventory shall be valued at its historical cost. At
the time of the Post-Closing Adjustment, the parties shall agree in writing to
appropriate modifications, if any, to the allocation set forth on Schedule
5.2(e) that result from the Purchase Price Adjustment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE LA SENORITA COMPANIES
AND THE SHAREHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF THE LA SENORITA COMPANIES AND THE
SHAREHOLDERS.
Each of the La Senorita Companies and each of the Shareholders, jointly
and severally, represents and warrants to Buyer as follows:
3.1 Due Organization. The La Senorita Companies are corporations duly
organized, validly existing and in good standing under the laws of the State of
Michigan, and have full corporate power and authority to own, lease or operate
their respective properties and to carry on the Business as now conducted and in
the place where such properties are owned, leased or operated and the Business
is conducted. None of the La Senorita Companies is, nor is any of them required
under applicable laws to be, qualified or licensed to do business as a foreign
corporation in any jurisdiction. Set forth in Schedule 3.1 is a list of all
names of all predecessor companies for the
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past five (5) years of the La Senorita Companies, including the names of any
entities from which the La Senorita Companies previously acquired material
assets. In addition, set forth on Schedule 3.1 is a complete list of all the
names under which the La Senorita Companies do or have done business. No La
Senorita Company has been a subsidiary or division of another corporation or a
part of an acquisition that was later rescinded. The stock record books and the
minute books of the La Senorita Companies, as heretofore made available to
Buyer, are accurate in all material respects.
3.2 Authority for Agreement. The execution, delivery and performance of
this Agreement by the La Senorita Companies and the Shareholders and all other
agreements by and among the parties, and the consummation by the La Senorita
Companies and the Shareholders of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action, and no
further action by or approval of the La Senorita Entities or the Shareholders is
required in order to permit the La Senorita Companies or the Shareholders to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly and validly executed and delivered by the La Senorita Companies and
the Shareholders and constitutes, and all other agreements by and among the
parties, when executed and delivered in accordance with the terms thereof, will
constitute, the legal, valid and binding obligations of the La Senorita
Companies and the Shareholders, enforceable in accordance with the terms hereof
and thereof, except that: (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally; (ii) the remedy of specific performance and injunctive relief
are subject to certain equitable defenses and to the discretion of the court
before which any proceedings may be brought; and (iii) rights to indemnification
hereunder may be limited under applicable securities laws (the "Equitable
Exceptions"). The La Senorita Companies and the Shareholders have full power,
authority and legal right to enter into this Agreement, and all other agreements
by and among the parties, and to consummate the transactions contemplated hereby
and thereby. This Section 3.2 is hereby qualified in its entirety by the
following: the La Senorita Companies and the Shareholders represent that the
consent of the MLCC is required prior to the transfer of any and all consents,
permits and licenses issued to the La Senorita Companies by the MLCC and that,
in accordance with Section 6.18, Buyer shall be required to obtain such consent
from the MLCC prior to the Closing.
3.3 No Breach or Default. Except as specifically disclosed in Schedule
3.3 attached hereto and except as related to the transfer of any and all liquor
licenses issued by the MLCC, the execution and delivery by the La Senorita
Companies and by each of the Shareholders of this Agreement and all other
agreements by and among the parties, and the consummation by the La Senorita
Companies and by each of the Shareholders of the transactions contemplated
hereby and thereby, will not:
(a) conflict with the Articles of Incorporation, Bylaws or other
organizational documents (collectively, the "Charter Documents") of any
La Senorita Company;
(b) result in the breach or termination of, or constitute a
default under, or constitute an event that with notice or lapse of
time, or both, would become a default under, or result in the creation
of any Encumbrance upon any of the assets of the La Senorita Companies,
or create any rights of termination, cancellation or acceleration in
any person, under any Contract, or violate any order, writ, injunction
or decree, to which any
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La Senorita Company or any of the Shareholders is a party, by which
the Business or operations of any La Senorita Company or any of the
Shareholders may be bound or affected or under which any of the
assets, business or operations of any La Senorita Company receive
benefits;
(c) to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, violate any law or any
order, writ, injunction, or decree of any court, administrative agency
or governmental authority, or require the approval, consent or
permission of any governmental or regulatory authority; or
(d) result in the violation of any provisions of law applicable to
any La Senorita Company, the violation of which could have a material
adverse effect on the Business, operations, properties, assets or
condition (financial or otherwise) or results of operations of such La
Senorita Company (a "Material Adverse Effect").
3.4 Title to Assets.
(a) Title to Lansing Assets. Set forth on Schedule 3.4 is a
complete and accurate list of all Encumbrances on the Lansing Assets.
Upon consummation at the Closing of the transactions contemplated
herein, Lansing will have, and Traverse City will acquire and hold,
good title to all of the Lansing Assets, whether real, personal or
mixed, free and clear of any and all Encumbrances.
(b) Assets of Transferred Entities. Set forth on Schedule 3.4 is a
complete and accurate list of all Encumbrances on the assets of the
Transferred Entities (collectively, the "Transferred Entity Assets").
Upon consummation at the Closing of the transactions contemplated
herein, the Transferred Entities will have good title to all of the
Transferred Entity Assets, whether real, personal or mixed, free and
clear of any and all Encumbrances.
3.5 Capital Stock of the Transferred Entities; Subsidiaries.
(a) The authorized capital stock of each of the La Senorita
Companies is as set forth in the recitals to this Agreement. All of
the issued and outstanding shares of the capital stock of each of the
Transferred Entities (the "Capital Stock") are owned, directly or
indirectly, and not as joint tenants with any other person or entity,
by the Shareholders as set forth on Schedule 3.5 attached hereto, and
all of such shares are owned free and clear of all Encumbrances. Each
share of Capital Stock is duly and validly authorized and issued,
fully paid and nonassessable, no share of Capital Stock was issued in
violation of any preemptive rights of any past or present shareholder
of the Transferred Entities, and no holder thereof is entitled to any
preemptive rights (except any statutory preemptive rights, which the
Shareholder hereby waives). No option, warrant, subscription, plan,
put, call, conversion or exchange right or commitment of any kind
exists that obligates the Transferred Entities to issue any of their
respective authorized but unissued capital stock or other equity
interest or to purchase, redeem or otherwise acquire any shares of
capital stock or other securities, or to pay any dividend or make any
distribution in respect thereof. In addition, there are no rights,
agreements, restrictions or other encumbrances (such as preemptive
rights, rights of
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first refusal, rights of first offer, proxies, voting agreements or
trusts, registration rights agreements or shareholders agreements or
any restrictions on the transferability or sale of such shares
(whether or not any Transferred Entity is party thereto)) pursuant to
any provision of law, contract or otherwise with respect to the
purchase, sale or voting of any shares of Capital Stock. Each
Shareholder has the right to vote the shares of Capital Stock set
forth opposite such Shareholder's name on Schedule 3.5 on any matters
as to which any shares of the shares of Capital Stock are entitled to
be voted under the laws of the State of Michigan and the Charter
Documents of any Transferred Entity free of any right of any other
person.
(b) Except as set forth on Schedule 3.5, the La Senorita Companies
do not presently own, of record or beneficially, or control directly or
indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or
business entity, nor is any Senorita Company, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate
entity.
3.6 Litigation, Governmental Action, Etc. Except as described in
Schedule 3.6 attached hereto there are no suits, actions, claims, nor any legal,
administrative or arbitration proceedings, pending or, to the best of each of
the La Senorita Companies' and the Shareholders' knowledge, information and
belief, threatened (verbal or written) against any La Senorita Company, the
Business or any property rights of any La Senorita Company, at law or in equity
or before or by any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign (collectively, "Agencies") that in any manner relate to or affect the
Business. None of the actions, suits, proceedings or investigations listed on
Schedule 3.6 either: (i) results in or would, if adversely determined, have a
Material Adverse Effect; or (ii) affects or would, if adversely determined,
affect the right or ability of the La Senorita Companies to carry on the
Business substantially as now conducted. None of the La Senorita Companies is
subject to any continuing court or Agency order, writ, injunction or decree
applicable specifically to the Business or the Employees, or in default with
respect to any order, writ, injunction or decree of any court or Agency with
respect to the Business or the Employees. Schedule 3.6 lists; (x) all worker's
compensation claims outstanding against the La Senorita Companies as of the date
hereof; and (y) all actions, suits or proceedings filed by or against the La
Senorita Companies since December 31, 1997.
3.7 Compliance with Laws and Regulations. Except as described in
Schedule 3.7 attached hereto, to the best of each La Senorita Companies' and the
Shareholders' knowledge, information and belief, each of the La Senorita
Companies: (i) has complied with, and is in compliance with, all laws, statutes,
ordinances, rules, licensing requirements, regulations and regulatory
interpretations, orders, judgments, awards and decrees applicable to or
affecting the Business; (ii) has filed with the proper authorities all
statements and reports required by the laws, regulations, licensing requirements
and orders to which it or any of its Employees (because of their activities on
behalf of their employer) is subject; and (iii) possesses all necessary
licenses, franchises, permits and governmental authorizations to conduct its
business in the manner in which and in the jurisdictions and places where such
business is now conducted, except where such noncompliance, nonfiling or failure
to possess would not have a Material Adverse Effect.
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3.8 Financial Statements. The La Senorita Companies have delivered to
Buyer copies of their unaudited balance sheets as of December 31, 1997, and the
related unaudited statements of operations, shareholders' equity and cash flows
for the three (3) years then ended, together with the La Senorita Companies'
unaudited balance sheets, management's statements of operations and
shareholders' equity for the nine-month period ended September 30, 1998
(collectively, the "Financial Statements"). The Financial Statements: (i) are
accurate and in accordance with the books and records and accounting methods of
the La Senorita Companies; (ii) constitute true, full and complete disclosure of
the financial position and results of operations of the La Senorita Companies as
of the dates and for the periods indicated; and (iii) have been prepared in
accordance with GAAP throughout the periods involved. Except as may be set forth
on the Financial Statements or otherwise disclosed herein, there are no
liabilities or obligations, contingent or otherwise, by which any La Senorita
Company or the Business may be bound or affected, other than those incurred in
the ordinary course of business consistent with good business practice and that
would not have a Material Adverse Effect.
3.9 Physical Properties. Set forth on Schedule 3.9 is a description of:
(i) all vehicles owned or leased by the La Senorita Companies (showing motor
vehicle identification numbers and indicating whether such vehicles are owned or
leased); (ii) all restaurant equipment owned or leased by the La Senorita
Companies; and (iii) all physical properties (other than the types of properties
referred to in (i) and (ii) above), real, personal or mixed, owned by or leased
to the La Senorita Companies, having an original cost in excess of $5,000.00.
There are no disputes, oral agreements or forbearance programs in effect as to
any lease; all leased facilities (including alterations constructed by the La
Senorita Companies) have received all approvals of governmental authorities
(including licenses and permits) required in connection with the operation
thereof; and all leased facilities are supplied with utilities and other
services necessary for the operation of such facilities. The La Senorita
Companies enjoy peaceable possession of all properties owned or leased by them.
Except as set forth on Schedule 3.9, none of the La Senorita Companies has ever
owned any real property.
3.10 Intellectual Property; Year 2000.
(a) Schedule 3.10 lists the Intellectual Property owned by the La
Senorita Companies or used thereby in the operation of the Business,
which Schedule defines the Intellectual Property. The La Senorita
Companies have the right to use and license the Intellectual Property
and to transfer and convey the Intellectual Property to the extent set
forth on Schedule 3.10. Each item constituting part of the Intellectual
Property has been, to the extent indicated on Schedule 3.10, registered
with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entity, domestic
or foreign, as is indicated on Schedule 3.10, all such registrations,
filings and issuances remain in full force and effect; and all
applicant/registrant/owner fees and other like charges with respect
thereto are current. Except as stated on Schedule 3.10, there are no
known pending proceedings or adverse claims made or, to the best of the
La Senorita Companies' and the Shareholders' knowledge, information and
belief, threatened against the La Senorita Companies with respect to
the Intellectual Property; there has been no litigation commenced or,
to the best of the La Senorita Companies' and the Shareholders'
knowledge, information and belief, threatened within the past five (5)
years with respect to
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the Intellectual Property or the rights of the La Senorita Companies
therein; and none of the La Senorita Companies nor the Shareholders
have any knowledge that: (i) the Intellectual Property or the use
thereof by the La Senorita Companies, or by Buyer or the Transferred
Entities after the Closing, conflicts or will conflict with any trade
names, trademarks, service marks, trademark or service mark
registrations or applications, patents, patent applications, patent
licenses or copyright registrations or applications of others ("Third
Party Intellectual Property"); or (ii) such Third Party Intellectual
Property or its use by others or any other conduct of a third party
conflicts with or infringes upon the Intellectual Property or its use
by the La Senorita Companies, or by Buyer or the Transferred Entities
after the Closing.
(b) To the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, the operations of the
La Senorita Companies are Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able to
perform date-sensitive functions prior to and after December 31, 1999).
The La Senorita Companies and the Shareholders reasonably believe that
any suppliers and vendors that are material to the operations of the La
Senorita Companies will be Year 2000 compliant for their own computer
applications except to the extent that a failure to do so could not
reasonably be expected to have a Material Adverse Effect.
3.11 Permits. To the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, the La Senorita Companies hold
all licenses, franchises, permits and other governmental authorizations,
including permits, titles (including, without limitation, motor vehicle titles
and current registrations), fuel permits, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the La Senorita Companies, the absence of any of which would have a
Material Adverse Effect (the "Material Permits"). An accurate list and summary
description is set forth on Schedule 3.11 hereto of all such Material Permits.
Except as set forth in Schedule 3.11, and, to the best of the La Senorita
Companies' and the Shareholders' knowledge, information and belief, the Material
Permits are valid and, other than liquor licenses issued by the MLCC, may be
transferred to Buyer at the Closing. None of the La Senorita Companies and none
of the Shareholders have received any notice that any governmental authority
intends to cancel, terminate or not renew any such Material Permit. The La
Senorita Companies and the Shareholders have conducted and are conducting the
Business in compliance with the requirements, standards, criteria and conditions
set forth in applicable permits, licenses, orders, approvals, variances, rules
and regulations and are not in violation of any of the foregoing except where
such noncompliance or violation would not have a Material Adverse Effect. Except
as specifically provided on Schedule 3.11, and, to the best of the La Senorita
Companies' and the Shareholders' knowledge, information and belief, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the La Senorita Companies, or to Buyer or the Transferred Entities
after the Closing, by, any such Material Permits.
3.12 Contracts.
(a) Set forth on Schedule 3.12 is a list of all contracts, leases,
arrangements and commitments (whether oral or written) by which any of
the La Senorita Companies are
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directly affected or are bound, including, without limitation,
contracts, agreements, arrangements or commitments (the following,
"Contracts") that relate to: (i) the employment (including, without
limitation, leased employment) of any person other than personnel
employed at the pleasure of the La Senorita Companies in the ordinary
course of their respective businesses at rates of compensation and on
terms consistent with good business practice; (ii) collective
bargaining with, or any representation of any Employees by, any labor
union or association; (iii) the acquisition of services, supplies,
equipment or other personal property involving more than $5,000.00 or
that is not terminable by the La Senorita Companies upon not more than
thirty (30) days' notice without obligation on the part of the La
Senorita Companies; (iv) the purchase or sale of real property; (v)
lease of real or personal property as lessor or lessee or sublessor or
sublessee; (vi) lending or advancing of funds; (vii) borrowing of funds
or receipt of credit other than by the La Senorita Companies in the
ordinary course of business consistent with good business practice;
(viii) incurring of any obligation or liability except for transactions
engaged in by the La Senorita Companies in the ordinary course of
business consistent with good business practice; and (ix) any matter or
transaction not in the ordinary course of the business of the La
Senorita Companies or that is inconsistent with past business practice
of the La Senorita Companies.
(b) Except as provided in Section 5.1(h) and except as set forth
on Schedule 3.12, each Contract is in full force and effect on the date
hereof, the La Senorita Companies are not in default under any
Contract, the La Senorita Companies have not given or received notice
of any default under any Contract, and, to the best of the La Senorita
Companies' and the Shareholders' knowledge, information and belief, no
other party to any Contract is in default thereunder.
3.13 Contract Defaults. To the best of the La Senorita Companies' and
the Shareholders' knowledge, information and belief, none of the La Senorita
Companies is in default in any respect under any Contract. All of the Contracts
are legal, valid and binding obligations of the respective parties thereto in
accordance with their terms and, except to the extent reflected in Schedule
3.13, have not been amended; and no defenses, offsets or counterclaims thereto
have been asserted or to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, may be made, by any party
thereto other than the La Senorita Companies nor have any of the La Senorita
Companies waived any substantial rights thereunder.
3.14 Employee Benefits.
(a) Set forth on Schedule 3.14 hereto is a complete list of all
"employee pension benefit plans" as defined in Section 3(2) of ERISA
(including Multiemployer Plans), "welfare benefit plans" as defined in
Section 3(1) of ERISA, or stock bonus, stock option, restricted stock,
stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance, or vacation plans, or any other employee
benefit plan, program, policy or arrangement maintained or contributed
to by the La Senorita Companies or any of their Group Members or to
which the La Senorita Companies or any of their Group Members,
contributes or is obligated to make payments thereunder or otherwise
may have any liability (including Multiemployer Plans) (collectively,
the "Plans").
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(b) With respect to each of the Plans, true, correct and complete
copies of the following documents have been delivered to Buyer: (i) the
plan document and any related trust agreement, including amendments
thereto; (ii) any current summary plan descriptions and other material
communications to participants relating to the Plans; (iii) the most
recent Form 5500 Annual Report, if applicable; and (iv) any
correspondence with the IRS, the Pension Benefit Guaranty Corporation,
the Department of Labor or any other Agency.
(c) Each of the Plans (and each related trust, insurance contract
or fund) complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code and other
applicable laws. Each Plan that is intended to be "qualified" within
the meaning of Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service and no event has
occurred and no condition exists that could be expected to result in
the revocation of any such determination.
(d) No event that constitutes a "reportable event" (within the
meaning of Section 4043(b) of ERISA) for which the 30-day notice
requirement has not been waived by the PBGC has occurred with respect
to any Plan. No Plan is subject to Title IV of ERISA, and neither the
La Senorita Companies nor any Group Member has made any contributions
to or participated in any "multiple employer plan" (within the meaning
of the Code or ERISA) or Multiemployer Plan.
(e) Neither the Shareholders, nor the La Senorita Companies nor
any Group Member has incurred any liability or taken any action, or has
any knowledge of any action or event, that could cause it to incur any
liability: (i) under Section 412 of the Code or Title IV of ERISA with
respect to any "single employer plan" (within the meaning of Section
4001(a)(15) of ERISA); (ii) on account of a partial or complete
withdrawal (within the meaning of Section 4205 and 4203 of ERISA,
respectively) with respect to any Multiemployer Plan; or (iii) on
account of unpaid contributions to any such Multiemployer Plan. Neither
the La Senorita Companies nor any of their Group Members has any
liability (including any contingent liability under Section 4204 of
ERISA) with respect to any Multiemployer Plan covering Employees (or
former Employees) employed in the United States.
(f) Full payment has been made of all amounts that the La Senorita
Companies were required under the terms of the Plans to have paid as
contributions to such Plans on or prior to the date hereof (excluding
any amounts not yet due) and all amounts properly accrued to date as
liabilities of the La Senorita Companies that have not been paid have
been properly recorded on the Financial Statements, and no Plan that is
subject to Part 3 of Subtitle B of Title 1 of ERISA has incurred any
"accumulated funding deficiency" (within the meaning of Section 302 of
ERISA or Section 412 of the Code), whether or not waived.
(g) The La Senorita Companies have not, and, to the best of the La
Senorita Companies' and the Shareholders' knowledge, information and
belief, no other "disqualified person" or "party in interest" (within
the meaning of Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has, engaged in any transactions in connection
with any Plan that could be expected to result in the imposition of a
material
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penalty pursuant to Section 502(i) of ERISA, damages pursuant to
Section 409 of ERISA or a tax pursuant to Section 4975(a) of the Code.
No Plan or related trust owns any securities in violation of Section
407 of ERISA.
(h) Except as set forth in Schedule 3.14, neither the execution
and delivery of this Agreement by the La Senorita Companies nor the
consummation of the transactions contemplated hereby will: (i) entitle
any current or former Employee of the La Senorita Companies to
severance pay, unemployment compensation or any similar payment; (ii)
accelerate the time of payment or vesting, or increase the amount of,
any compensation due to any such Employee or former Employee; or (iii)
directly or indirectly result in any payment made or to be made to or
on behalf of any person to constitute a "parachute payment" (within the
meaning of Section 280G of the Code).
(i) Neither the La Senorita Companies nor any of their Group
Members maintains or ever has maintained, or contributes or ever has
contributed to, any welfare plan (as defined above) providing for
continuing benefits or coverage for any participant or any beneficiary
of a participant following termination of employment, except as may be
required under COBRA. Each of the La Senorita Companies' welfare plans
which are "group health plans", as described in Code Section
5000(b)(1), have complied with the notice and continuation requirements
of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of
ERISA and the regulations thereunder.
(j) No material claim, action, proceeding, or litigation has been
made, commenced or, to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, threatened with
respect to any Plan (other than for benefits payable in the ordinary
course and PBGC insurance premiums).
3.15 Employees; Employee Relations.
(a) Schedule 3.15 sets forth: (i) the name and current annual
salary (or rate of pay) and other compensation (including, without
limitation, normal bonus, profit-sharing and other compensation) now
payable by the La Senorita Companies to each Employee whose current
total annual compensation or estimated compensation is Twenty-Five
Thousand Dollars ($25,000) or more; (ii) any increase to become
effective after the date of this Agreement in the total compensation or
rate of total compensation payable by the La Senorita Companies to each
such person; (iii) any increase to become payable after the date of
this Agreement by the La Senorita Companies to Employees other than
those specified in clause (i) of this Section 3.15; (iv) all presently
outstanding loans and advances (other than routine travel advances to
be repaid or formally accounted for within sixty (60) days) made by the
La Senorita Companies to, or made to the La Senorita Companies by, any
director, officer or Employee; (v) all other transactions between the
La Senorita Companies and any director, officer or Employee of the La
Senorita Companies since December 31, 1997 that is not disclosed on the
Financial Statements; and (vi) all accrued but unpaid vacation pay
owing to any officer or Employee that is not disclosed on the Financial
Statements.
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(b) Except as disclosed on Schedule 3.15, none of the La Senorita
Companies is a party to, or bound by, the terms of any collective
bargaining agreement, and none of the La Senorita Companies has
experienced any material labor difficulties during the last five (5)
years. Except as set forth on Schedule 3.15, there are no labor
disputes existing, or to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, threatened involving,
by way of example, strikes, work stoppages, slowdowns, picketing, or
any other interference with work or production, or any other concerted
action by Employees. No charges or proceedings before the National
Labor Relations Board, or similar agency, exist, or to the best of the
La Senorita Companies' and the Shareholders' knowledge, information and
belief, are threatened.
(c) The La Senorita Companies' relationships with their Employees
are good. Except as disclosed on Schedule 3.15, none of the La Senorita
Companies is a party to any employment contract with any individual or
Employee, either express or implied. No legal proceedings, charges,
complaints or similar actions exist under any federal, state or local
laws affecting the employment relationship; and to the best of the La
Senorita Companies' and the Shareholders' knowledge, information and
belief, no proceedings, charges, or complaints are threatened under any
such laws or regulations and no facts or circumstances exist that would
give rise to any such proceedings, charges, complaints, or claims,
whether valid or not. The La Senorita Companies are in full compliance
with the provisions of the ADA. The La Senorita Companies are not
subject to any settlement or consent decree with any present or former
Employee, employee representative or any government or Agency relating
to claims of discrimination or other claims in respect to employment
practices and policies; and no government or Agency has issued a
judgment, order, decree or finding with respect to the labor and
employment practices (including practices relating to discrimination)
of the La Senorita Companies.
(d) Since December 31, 1997, the La Senorita Companies have not
incurred any liability or obligation under the Worker Adjustment and
Retraining Notification Act or similar state laws. The La Senorita
Companies have not laid off more than ten percent (10%) of their
Employees at any single site of employment in any ninety (90) day
period during the twelve (12) month period ending December 31, 1998. It
shall be the obligation of the La Senorita Companies to provide any
notice required by said Act by reason of the provisions, execution or
operation of this Agreement.
3.16 Consents. Except as set forth on Schedule 3.16, no consent,
approval, authorization or order of any court, Agency or any other person or
under any Contract or other agreement or commitment to which the La Senorita
Companies or any Shareholder is a party or by which their respective assets are
bound is required in order to permit the La Senorita Companies and the
Shareholders to consummate the transactions contemplated by this Agreement.
3.17 Insurance. The La Senorita Companies are adequately insured with
responsible insurers in respect of their respective properties against business
risks normally insured against by companies in similar lines of business. Set
forth on Schedule 3.17 attached hereto is a summary description of all policies
of fire, casualty, liability and other forms of insurance and all fidelity bonds
held by the La Senorita Companies (including insurer, named insured, type of
coverage,
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limits of insurance, required deductibles or co-payments, annual premiums and
expiration dates). All such policies are in full force and effect and shall
remain in full force and effect through the Closing Date and are adequate for
the Business.
3.18 Tax Matters.
Each of the La Senorita Companies has duly filed all Tax Returns
that are required to be filed by it and such returns are true, correct
and complete in all respects. Each of the La Senorita Companies has
paid all Taxes shown to be due on such Tax Returns and all other taxes
that have become due or have been assessed against it or the assets of
the Business and all Taxes, penalties and interest that any Taxing
Authority has proposed or asserted to be owing. All Tax liabilities to
which the properties of the La Senorita Companies may have been
subjected have been discharged except for Taxes assessed but not yet
payable. No deficiency, assessment or claim for any Taxes is presently
being asserted or, to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, is threatened to be
asserted, against any La Senorita Company, and neither the La Senorita
Companies nor the Shareholders know of any basis for any such claim. No
action or proceeding for the assessment or collection of any Taxes is
pending against any of the La Senorita Companies, and no notice of any
claim for Taxes, whether pending or threatened, has been received. No
issue has been formerly raised by any Taxing Authority in connection
with an audit or examination of any Tax Return of any of the La
Senorita Companies. All Taxes that the La Senorita Companies have been
required to collect or withhold have been withheld or collected and, to
the extent required, have been paid to the proper Taxing Authority. No
Taxes will be assessed on or after the time of Closing against the La
Senorita Companies for any Tax period ending on or prior to Closing
other than the Taxes disclosed on Schedule 3.18. None of the La
Senorita Companies has granted any extension to any Taxing Authority of
the limitation period during which any Tax liability may be asserted
thereby.
(a) Traverse City and Franchise are corporations that have
effected valid elections under Section 1362 of the Code to be taxed as
S corporations and have qualified as S corporations since July 31, 1996
and July 11, 1990, respectively (which dates are their respective dates
of inception), and Traverse City and Franchise qualify as of the date
of this Agreement and will qualify on the Closing Date as S
corporations. Since July 31, 1996 and July 11, 1990, respectively,
Traverse City and Franchise have properly reported their respective
operations as S corporations within the meaning of Subchapter S of the
Code and corresponding provisions of the laws of the State of Michigan.
(b) Traverse City, Franchise and the Shareholders are eligible to
make an election under Section 338(h)(10) of the Code and any
comparable election under any applicable state law.
3.19 Environmental Laws and Regulations. Except as set forth on
Schedule 3.19: (a) during the occupancy and operation of the Subject Property by
the La Senorita Companies and, to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, prior to their occupancy and
operation, the operations of the Subject Property, and any use, storage,
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treatment, disposal or transportation of Hazardous Substances that has occurred
in, on, to, from or under the Subject Property prior to the date of this
Agreement have been in compliance with Environmental Requirements; (b) the La
Senorita Companies have obtained and hold all necessary permits, licenses,
approvals, consents or authorizations required under Environmental Requirements,
and the La Senorita Companies are in compliance with all terms, conditions and
provisions of the same; (c) during the occupancy and operation of the Subject
Property by the La Senorita Companies and, to the best of the La Senorita
Companies' and the Shareholders' knowledge, information and belief, prior to
their occupancy or operation, no release, leak, discharge, spill, disposal or
emission of Hazardous Substances has occurred in, on, to, from or under the
Subject Property in a quantity or manner that violates or requires further
investigation or remediation under Environmental Requirements or as required by
governmental authorities; (d) to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, there are no Hazardous
Substances on the Subject Property as of the date of this Agreement, except for
the presence of small quantities of Hazardous Substances utilized by the La
Senorita Companies or other tenants of the Subject Property in compliance with
Environmental Requirements, in the ordinary course of their business; (e) there
is no pending or, to the best of the La Senorita Companies' and the
Shareholders' knowledge, information and belief, threatened litigation or
administrative investigation or proceeding concerning the Subject Property or
the La Senorita Companies or the Shareholders relating to or regarding Hazardous
Substances or Environmental Requirements; (f) to the best of the La Senorita
Companies' and the Shareholders' knowledge, information and belief, there are no
above-ground or underground storage tank systems or asbestos-containing
materials located at the Subject Property; or (g) neither the La Senorita
Companies nor any of the Shareholders is aware of any facts, conditions or
circumstances that could reasonably be expected to form the basis for a claim
against any La Senorita Company or Buyer of or relating to the La Senorita
Companies' compliance or failure to comply with any Environmental Requirements.
3.20 Absence of Certain Changes or Events. Since December 31, 1997,
none of the La Senorita Companies has: (i) suffered any extraordinary losses or
waived any rights of substantial value; (ii) amended its Articles of
Incorporation, Bylaws or other organizational documents; (iii) made any change
in its mode of management or any change in its method of operation or method of
accounting; (iv) made or become obligated to make any capital expenditures other
than such expenditures or commitments not exceeding $5,000.00 in the aggregate;
(v) suffered any event or circumstance that could have a Material Adverse
Effect; (vi) entered into any transaction, except in the ordinary course of its
business consistent with good business practice; (vii) received any notice of
any claim asserted against it by any Agency that could have a Material Adverse
Effect; or (viii) incurred or agreed to incur any material obligation outside
the ordinary course of business that has not heretofore been disclosed in
writing to Buyer.
3.21 True, Correct and Complete Information. All written agreements,
lists, schedules, instruments, exhibits, documents, certificates, reports,
statement and other writings furnished to Buyer pursuant hereto or in connection
with this Agreement or the transactions contemplated hereby are and will be
complete and accurate in all material respects. No representation or warranty by
the La Senorita Companies and the Shareholders contained in this Agreement, in
the schedules attached hereto or in any certificate furnished or to be furnished
by any La Senorita
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Company to Buyer in connection herewith or pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary in order to make any statement contained herein or
therein not misleading. There is no fact known to the La Senorita Companies that
has specific application to the La Senorita Companies or the Business (other
than general economic or industry conditions) and that materially adversely
affects or, as far as the La Senorita Companies can reasonably foresee,
materially threatens, the Business, financial condition, or results of
operations of the La Senorita Companies that has not been set forth in this
Agreement or any schedule hereto.
3.22 Availability of Documents. The La Senorita Companies have made
available for inspection by Buyer at the offices of the La Senorita Companies
true, correct and complete copies of their Articles of Incorporation, Bylaws,
other organizational documents and all contracts, leases, arrangements,
commitments and documents referred to herein or in any Schedule referred to
herein, in each case together with all amendments and supplements thereto.
3.23 Broker's and Finder's Fees. Except for their agreement with Bank
of Boston, none of the La Senorita Companies has any agreements with any person
to act as the La Senorita Companies' agent in connection with the transactions
contemplated hereby. The La Senorita Companies and/or the Shareholders will pay
any agent's, broker's or finder's fee or commission payable to Bank of Boston
(the "Bank of Boston Fee") in connection with the transactions contemplated by
this Agreement.
3.24 Accounts Receivable; Evidences of Indebtedness. Set forth on
Schedule 3.24 is a list of all accounts receivable, promissory notes, contract
rights, commercial paper, debt securities and other rights to receive money as
of November 30, 1998, including any such amounts that are not reflected in the
balance sheet as of September 30, 1998, included within the Financial
Statements, and including receivables from and advances to Employees and the
Shareholders (the "Receivables"). Schedule 3.24 shows the name of the account
debtor, maker or obligor, the unpaid balance, the age of the Receivable and, if
applicable, the maturity date, the interest rate and the collateral securing the
obligation. All Receivables reflected in the Financial Statements or acquired
since that date are legal, valid and binding obligations of the obligors and
none of the La Senorita Companies nor any of the Shareholders has any knowledge
of any fact impairing the collectability of such Receivables in accordance with
their terms. The La Senorita Companies' invoices to customers are accurate in
respect to services provided, except for matters that are immaterial as to each
customer and in the aggregate. The reserves for doubtful receivables and
uncollectible accounts reflected in the Financial Statements were established in
accordance with GAAP and are sufficient to provide for any losses which may
arise in connection with the collection of such Receivables. Since September 30,
1998, none of the La Senorita Companies has: (i) written off, cancelled,
committed or become obligated to cancel or write off any Receivables; (ii)
disposed of or transferred any Receivables except through the collection thereof
in accordance with their terms; or (iii) acquired or permitted to be created any
Receivables except in the ordinary course of its business consistent with past
practice.
3.25 Interests in Customers, Suppliers, Etc. No shareholder, officer,
director or Affiliate of any La Senorita Company possesses, directly or
indirectly, any financial interest in, or is a director, officer, Employee or
Affiliate of, any corporation, firm, association or business
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organization that is a client, supplier, customer, lessor, lessee or competitor
of any of the La Senorita Companies. Ownership of securities of a corporation
whose securities are registered under the Securities Exchange Act of 1934 not in
excess of five percent (5%) of any class of such securities shall not be deemed
to be a financial interest for purposes of this Section 3.25.
3.26 Officers and Directors. Set forth on Schedule 3.26 is a list of
the current officers and directors of each of the La Senorita Companies.
3.27 Bank Accounts and Powers of Attorney. Schedule 3.27 sets forth
each bank, savings institution and other financial institution with which any of
the La Senorita Companies have an account or safe deposit box and the names of
all persons authorized to draw thereon or to have access thereto. Each person,
if any, holding a power of attorney or similar grant of authority on behalf of
any of the La Senorita Companies is identified on Schedule 3.27. Except as
disclosed on such Schedule: (i) the La Senorita Companies have not given any
revocable or irrevocable powers of attorney to any person, firm, corporation or
organization relating to their business for any purpose whatsoever; and (ii) the
La Senorita Companies have cancelled any and all credit, debt, gas and other
cards issued to or in the name of or otherwise payable by the La Senorita
Companies effective prior to the Closing and all amounts due thereunder have
been fully paid and discharged.
(B) REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each Shareholder represents and warrants that the representations and
warranties in this Section 3(B) as they apply to such Shareholder are true and
correct as of the date of this Agreement and at the time of the Closing.
3.28 Authority; Ownership. The Shareholder has the full legal right,
power and authority to enter into this Agreement. The Shareholder owns
beneficially and of record the shares of the Capital Stock set forth opposite
such Shareholder's name on Schedule 3.5, free and clear of all Encumbrances
other than standard state and federal laws securing private offering
restrictions and such shares of the Capital Stock, together with the other
shares of the Capital Stock set forth on Schedule 3.5, constitute all of the
outstanding shares of capital stock of the La Senorita Companies. The
Shareholder has owned the Capital Stock since the date set forth on Schedule
3.5.
3.29 Validity of Obligations. This Agreement and all other agreements,
documents and instruments to be executed by the Shareholder have been, or will
be when executed, duly executed and delivered and are the legal, valid and
binding obligations of the Shareholder that is a party thereto enforceable in
accordance with their respective terms, except as such enforcement may be
limited by the Equitable Exceptions.
3.30 Absence of Claims Against the La Senorita Companies. The
Shareholder does not have any claims against the La Senorita Companies other
than as disclosed herein.
3.31 Taxes. The Shareholder is eligible to make an election under
Section 338(h) (10) of the Code and any comparable election under state law.
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(C) LIMITATIONS ON REPRESENTATIONS AND WARRANTIES OF THE LA SENORITA
COMPANIES AND THE SHAREHOLDERS.
3.32 Limitation. Except for matters expressly set forth in this ARTICLE
III, including, without limitation, the representations and warranties set forth
in Section 3.10 above, and except as set forth in any of the schedules
referenced in this Agreement: (i) no other warranties whatsoever are made,
including, without limitation, with regard to matters relative to Intellectual
Property or Year 2000 compliance; and (ii) the La Senorita Companies and the
Shareholders expressly disclaim all implied warranties, including, but not
limited to, implied warranties of merchantability and fitness for a particular
purpose.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CASA OLE AND BUYER
Casa Ole and Buyer represent and warrant to the La Senorita Companies
and the Shareholders as follows:
4.1 Due Organization. Casa Ole is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, and Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Casa Ole and Buyer has full corporate
power and authority to own, lease or operate its properties and to carry on its
business as it is now being conducted and to enter into this Agreement and
perform its obligations hereunder.
4.2 No Conflict. The execution, delivery and performance of this
Agreement by Casa Ole and Buyer and compliance with the provisions of this
Agreement by Casa Ole and Buyer will not violate the provisions of the Charter
Documents of Casa Ole or Buyer or conflict with or result in a breach of the
provisions of, or constitute a default under, any law, regulation or order or
any indenture, mortgage, deed of trust, franchise, permit, license, note,
agreement or other instrument to which Casa Ole or Buyer is a party or by which
Casa Ole or Buyer may be bound.
4.3 Authority for Agreement. The execution, delivery and performance of
this Agreement by Casa Ole and Buyer and all other agreements by and among the
parties, and the consummation by Casa Ole and Buyer of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action and no further action or approval is required in order to
permit Casa Ole and Buyer to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly and validly executed and delivered by Casa
Ole and Buyer and constitutes, and all other agreements by and among the
parties, when executed and delivered in accordance with the terms hereof and
thereof, will constitute, the legal, valid and binding obligations of Casa Ole
and Buyer, enforceable in accordance with the terms thereof, except as such
enforcement may be limited by the Equitable Exceptions. Casa Ole and Buyer have
full power, authority and legal right to enter into this Agreement, and all
other agreements by and among the parties, and to consummate the transactions
contemplated hereby and thereby.
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4.4 Absence of Certain Proceedings. There are no bankruptcy,
reorganization or arrangement proceedings pending, or to the knowledge of Casa
Ole or Buyer, threatened against Casa Ole or Buyer, and neither Casa Ole nor
Buyer is currently contemplating filing any voluntary petition seeking
protection under any bankruptcy laws.
4.5 Broker's and Finder's Fees. Neither Casa Ole nor Buyer has made any
agreement with any person, or taken any action that would cause any person to
become entitled to an agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.
4.6 Investment Intent. Buyer is acquiring the Purchased Shares for its
own account, for investment, and without any present intention to resell the
Purchased Shares. Buyer acknowledges and agrees that the Purchased Shares have
not been and will not be registered under the Securities Act of 1933 or the
Michigan Uniform Securities Act, and Buyer will not resell the Purchased Shares
unless they are so registered or unless an exemption from registration is
available. Buyer consents to the imposition of a legend to this effect on the
certificates for the Purchased Shares and to a notation to this effect in the
appropriate records of each La Senorita Company. To effectuate the terms and
conditions hereof, Buyer represents and warrants to each La Senorita Company
that it has consulted with counsel and that it believes the transaction
contemplated hereby does not violate the Securities Act of 1933 or the Michigan
Uniform Securities Act and that this transaction otherwise qualifies as an
exempt transaction thereunder.
4.7 Representations and Warranties of Casa Ole and Buyer. Casa Ole and
Buyer acknowledge that the MLCC has established certain requirements that must
be satisfied prior to the transfer of the MLCC liquor licenses owned by the La
Senorita Companies to Buyer. With respect to such transfer, Casa Ole and Buyer
represent and warrant to the La Senorita Companies and the Shareholders that:
(i) to the best of Casa Ole's and Buyer's knowledge, information and belief,
Casa Ole, Buyer and their respective Affiliates, shareholders, officers and
directors, if applicable, are qualified to have the MLCC licenses transferred to
Buyer; and (ii) neither Casa Ole nor Buyer knows of any reason why the MLCC
would not approve the transfer of such licenses to Buyer. Casa Ole and Buyer
further acknowledge that they understand that the investigation process
associated with the transfer of the MLCC licenses will require a period of time
and that, in accordance with Section 6.18 of this Agreement, the Closing will
not occur until such time as the investigation process has been completed and
all of the MLCC licenses shall have been validly transferred to Buyer.
ARTICLE V
COVENANTS
5.1 Covenants of the La Senorita Companies and the Shareholders. The La
Senorita Companies and the Shareholders covenant as follows:
(a) No Solicitation of Employees. The Shareholders and Lansing
will not, and the Shareholders will cause Lansing and the Affiliates of
the La Senorita Companies not to, for a period of five (5) years
following the Closing, knowingly solicit or hire, without the
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prior written consent of Buyer, any Employee of Buyer who was employed
or leased by, or otherwise provided services to, the La Senorita
Companies at or immediately prior to the Closing; provided, however,
that commencing on the first anniversary of the Closing Date, the
Shareholders, Lansing and the Affiliates of the La Senorita Companies
shall be permitted to hire any former Employee of Buyer solely to work
in a real estate management, sales or investment position.
(b) Maintenance of Business. During the period from the date
hereof to the Closing:
(i) The La Senorita Companies and the Shareholders shall
maintain the Business in as good a condition as that existing on
the date of this Agreement. All machinery and equipment included
in the Business that are in use and necessary for the day-to-day
operation of the Business will be in normal operating condition
for the purpose for which the same are used in the Business;
(ii) The La Senorita Companies shall not, and the Shareholders
shall cause the La Senorita Companies not to, without the prior
written consent of Buyer, permit any modifications or additions to
the Business, except for any repair and renovation herein
described, or sell or permit to be sold or otherwise transferred
or disposed of any item or group of items constituting personal
property, except food, beverage and other items sold in the
ordinary course of business, nor prepay any contracts or leases
except as is customary in the ordinary course of business;
(iii) The La Senorita Companies and the Shareholders shall
maintain the La Senorita Companies' existing insurance coverage
with respect to the Business;
(iv) The La Senorita Companies and the Shareholders shall
assist and cooperate with Buyer prior to the Closing in obtaining
all necessary permits and licenses (and where possible will assign
such permits and licenses to Buyer) to continue operating the
Business in the present manner; and
(v) The La Senorita Companies and the Shareholders shall use
their reasonable efforts to maintain substantially all of the
current Employees of the Business in a manner consistent with the
La Senorita Companies' normal business practices.
(c) Operations in Due Course. The La Senorita Companies and the
Shareholders shall operate the Business in their usual and customary
manner in the due course of business prior to the Closing.
(d) Material Adverse Effect. The La Senorita Companies and the
Shareholders shall provide to Buyer prompt written notice of any loss,
damage or destruction of or to the Improvements or the Personal
Property (other than reasonable wear, tear and use) that results in a
Material Adverse Effect with respect to any La Senorita restaurant or
the Business.
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(e) Access; Confidential Information. Between the date of this
Agreement and the Closing Date the La Senorita Companies and the
Shareholders shall afford to the officers, Employees and other
authorized representatives of Buyer, including, without limitation, its
engineers, counsel, independent auditors and bankers, access to each
business operation of the La Senorita Companies, the properties and the
books and records of the La Senorita Companies and will furnish Buyer
with such additional financial and operating data and other information
as to the business and properties of the La Senorita Companies as Buyer
may, from time to time, reasonably request. Buyer will cause all
information obtained from the La Senorita Companies and the
Shareholders in connection with the negotiation and performance of this
Agreement to be treated as confidential. Buyer will not disclose such
confidential information to any person or entity other than their
respective Employees, legal counsel, accountants, consultants and
bankers. Buyer will not use, nor knowingly allow others to use, any
such confidential information in a manner detrimental to the La
Senorita Companies. In the event that the transactions contemplated by
this Agreement are not consummated, then all such confidential
information, including copies thereof shall be promptly returned to the
La Senorita Companies and the Shareholders.
(f) Assets of KMANCO. KMANCO shall have a minimum of $45,000 net
value (value of assets in excess of trade payables) of merchandise,
decor and supplies at the Closing Date.
(g) Broker's and Finder's Fees. The La Senorita Companies or the
Shareholders will obtain a payoff letter (the "Bank of Boston Payoff
Letter") from Bank of Boston, which letter shall set forth the total
amount of the Bank of Boston Fee and directions for payment thereof by
wire transfer and which shall provide that, upon receipt of the Bank of
Boston Fee by Bank of Boston from Buyer on behalf of the La Senorita
Companies and the Shareholders, Bank of Boston releases its claims
against Buyer or the La Senorita Companies for any agent's, broker's or
finder's fee or commission. The Shareholders and Lansing hereby
authorize and direct Buyer to pay to Bank of Boston at the Closing the
Bank of Boston Fee out of the Purchase Price in accordance with the
Bank of Boston Payoff Letter.
(h) Termination of Obligations. Each of the promissory notes or
other agreements evidencing the borrowing of funds or receipt of credit
listed on Schedules 3.4 and 3.12 be cancelled, terminated or assigned
to a Shareholder or a company that is not one of the La Senorita
Companies prior to the Closing Date, and the La Senorita Companies will
deliver to Buyer evidence of such cancellation, termination or
assignment.
5.2 Covenants of the La Senorita Companies, the Shareholders, Casa Ole
and Buyer. The La Senorita Companies, the Shareholders, Casa Ole and Buyer
covenant as follows:
(a) Diligence Towards Closing. The La Senorita Companies, the
Shareholders, Casa Ole and Buyer from and after the date hereof will
not hinder in any way or unreasonably delay the Closing of the
transactions contemplated by this Agreement.
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(b) Notice of Untrue or Inaccurate Representations. The La
Senorita Companies, the Shareholders, Casa Ole and Buyer will promptly
give written notice to the other upon becoming aware of the occurrence
or failure to occur, or the impending or threatened occurrence or
failure to occur, of any event that would cause or constitute, or would
be likely to cause or constitute, any of such party's representations
or warranties being or becoming untrue or inaccurate.
(c) Records Pertaining to the La Senorita Companies.
(i) Turnover of Records. At the Closing, the Shareholders
shall deliver or cause to be delivered to Buyer any records in the
possession of the Shareholders and applicable to the La Senorita
Companies.
(ii) Retention of Records. Buyer shall, for a period of four
(4) years (except in the case of any sales invoices, which shall
be for three years) after the Closing Date, neither dispose of nor
destroy any of the business records or files of the La Senorita
Companies without first offering to turn over possession copies
thereof to the Shareholders, at the Shareholders' expense, by
written notice to the Shareholders at least thirty (30) days prior
to the proposed date of such disposition or destruction.
(iii) Access to Records. Buyer shall allow the Shareholders
access to all business records and files of the La Senorita
Companies during normal working hours at the principal place of
business of the La Senorita Companies, or at any location where
such records are stored, and the Shareholders shall have the
right, at their own expense, to make copies of any such records
and files.
(iv) Assistance with Records. From and after the Closing Date,
Buyer shall make available to the Shareholders upon written
request: (i) personnel of the La Senorita Companies to assist the
Shareholders in locating and obtaining records and files
maintained by Buyer or the La Senorita Companies; and (ii) any of
the personnel of the La Senorita Companies whose assistance or
participation is reasonably required by the Shareholders in
anticipation of, or preparation for, any existing or future third
party actions, tax or other matters in which the Shareholders or
any of their past, present or future Affiliates is involved and
that relate to the Business.
(d) Gift Certificates; Accrued Vacation Benefits. The La Senorita
Companies, the Shareholders, Casa Ole and Buyer agree that the
Shareholders shall be required to reimburse Buyer for: (i) any and all
amounts outstanding under gift certificates issued by any La Senorita
Company during calendar year 1998 and not redeemed prior to the
Closing; and (ii) any and all compensation due to Employees for
vacation accrued but not taken prior to the Closing; provided, however,
that the Shareholders shall not be required to reimburse Buyer for such
amounts unless and until: (y) in the case of gift certificates referred
to in clause (i) above, such certificates are presented to Buyer for
redemption; and (z) in the case
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of compensation referred to in clause (ii) above, at such time as the
Employee entitled to such compensation request such compensation.
(e) Tax Matters. Prior to the Closing, the La Senorita Companies,
the Shareholders, Casa Ole and Buyer will agree to, and will set forth
in writing as an attached Schedule 5.2(e) to this Agreement, an
allocation of the Purchase Price among the Shares and the Lansing
Assets (and, with respect to Traverse City and Franchise, an allocation
of the amount allocated to the Shares of such companies (and
corresponding liabilities) among the assets of such companies). Buyer,
Lansing and the Shareholders agree to prepare their respective IRS
forms and any state or local forms with respect to the sale of the
Shares and the Lansing Assets in a manner that is consistent with the
allocation contained in Schedule 5.2(e), which includes an allocation
for asset values appropriate for Section 338(h)(10) of the Code and
corresponding provisions of state and local law. The Shareholders,
Traverse City, Franchise, Casa Ole and Buyer shall prepare and file
promptly an election pursuant to Section 338(h)(10) of the Code and
corresponding provisions of state and local law and in any event within
the time allowed by applicable law with respect to the purchase of the
Shares of Traverse City and Franchise. Consistent with such election
pursuant to Section 338(h)(10) of the Code and corresponding provisions
of state and local law, Traverse City and Franchise shall be treated as
having sold all of their respective assets to Buyer (as opposed to the
Shareholders selling the stock of such companies to Buyer), and Buyer
shall be treated as having purchased the assets of such companies.
Accordingly, the gain or loss attributable to the deemed sale of such
assets shall be reported by Traverse City and Franchise on their final
S corporation tax returns and such gain or loss shall be allocated to
the Shareholders. Any tax liability attributable to such deemed sale of
assets shall be the responsibility of the Shareholders. Within
seventy-five (75) days after the Closing Date, the La Senorita
Companies and the Shareholders shall prepare and file all income and
property Tax Returns, Employee withholding, unemployment Tax Returns
and other federal, state, county, local or city Tax Returns relating to
the Business on or prior to the Closing Date and pay all amounts due
under such returns. No new election with respect to Taxes or any
changes in current elections with respect to Taxes affecting the La
Senorita Companies shall be made after the date of this Agreement
without the prior written consent of Buyer.
(f) Michigan Restaurant Association Self-Insured Workers
Compensation Fund. The La Senorita Companies have delivered to Casa Ole
and Buyer a written statement (the "Fund Statement") from the Michigan
Restaurant Association Self-Insured Workers Compensation Fund (the
"Fund"), a copy of which is attached hereto as Schedule 5.2(f). The
Fund Statement sets forth: (i) the total amount of all credits or
dividends (each a "Fund Adjustment Amount") that would become
creditable or payable to the La Senorita Companies as a result of
periods prior to the Closing, assuming that the La Senorita Companies
were to continue their participation in the Fund for the three-year
period following the Closing and that all pending claims filed with the
Fund (the "Fund Claims") were resolved in the La Senorita Companies'
favor; and (ii) a schedule indicating the dates on which the Fund would
credit or pay, as the case may be, such Fund Adjustment Amounts to the
La Senorita Companies. Buyer agrees that it will pay to the
shareholders an amount equal to: (i) the Fund Adjustment Amount set
forth on the Fund Statement; less (ii) any
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decrease in the Fund Adjustment Amount that results from the resolution
of any Fund Claim against any La Senorita Company. Buyer, the La
Senorita Companies and the Shareholders agree that Buyer shall pay the
foregoing amount to the Shareholders in accordance with the schedule
set forth on the Fund Statement and that in no event shall any payment
made pursuant to this Section 5.2(f) exceed $39,300. Buyer, the La
Senorita Companies and the Shareholders further agree that they shall
use their best efforts to obtain from the Fund accurate information
regarding the resolution of Fund Claims and the impact of such
resolution on the Fund Adjustment Amounts. Nothing in this Section
5.2(f) shall be deemed to require Buyer to continue to participate in
the Fund following the Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to close the purchase of the Purchased Shares
and the Lansing Assets and the other transactions contemplated hereby to occur
at Closing are subject to the satisfaction, on or prior to the Closing Date, of
the following conditions precedent, except such conditions as Buyer may waive in
writing:
6.1 No Governmental Action. The absence at the time of Closing of any
law, ordinance, rule, regulation, standard or guideline ("Governmental
Requirement") of the United States, or any other political subdivision in which
any material portion of the Project is located and any other political
subdivision, agency or instrumentality exercising jurisdiction over Buyer or any
material portion of the Business, which Governmental Requirement would prohibit
any La Senorita Company's sale or Buyer's acquisition of any material portion of
the Business.
6.2 Representation and Warranties of Transferred Entities and
Shareholders. All of the representations and warranties of each La Senorita
Company and the Shareholders set forth in ARTICLE III; and in any Schedule or
other disclosure in writing from the La Senorita Companies or the Shareholders
shall have been true and correct when made, and shall be true and correct on and
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
6.3 Covenants of Transferred Entities and the Shareholders. All of the
covenants and agreements herein on the part of each La Senorita Company and the
Shareholders to be complied with or performed on or before the Closing Date
shall have been fully complied with and performed.
6.4 Transferred Entities' Certificate. There shall be delivered to
Buyer a certificate dated as of the Closing Date and signed by the President or
a Vice President of each of the La Senorita Companies and by the Shareholders to
the effect set forth in Sections 6.2 and 6.3, which certificate shall have the
effect of a representation and warranty made by the La Senorita Companies and
the Shareholders on and as of the Closing Date.
6.5 No Casualty Losses. None of the assets of the La Senorita Companies
shall have suffered any destruction or damage by fire, explosion or other
casualty or any taking by eminent
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domain which has materially impaired the operation of the Business or otherwise
had a Material Adverse Effect.
6.6 Certificates of Authorities. Each of the La Senorita Companies
shall have furnished to Buyer: (i) certificates of the Secretary of State of
Michigan and MESA, each dated as of a date not more than thirty (30) days prior
to the Closing Date, attesting to the organization, existence and good standing
of such La Senorita Companies; (ii) a copy, certified by the Secretary of State
of Michigan as of a date not more than thirty (30) days prior to the Closing
Date, of such La Senorita Companies' Articles of Incorporation or other
organizational document and all amendments thereto; (iii) a copy, certified by
the Secretary of each of the La Senorita Companies, of the Bylaws of such La
Senorita Companies, as amended and in effect at the Closing Date; and (iv) a
copy, certified by an authorized officer of such La Senorita Companies, of
resolutions duly adopted by the Board of Directors of such La Senorita Companies
duly authorizing the transactions contemplated in this Agreement.
6.7 Litigation. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before any Agency: (i)
in which it is sought to restrain, invalidate, set aside or obtain damages in
respect of the consummation of the purchase and sale of the Purchased Shares or
the Lansing Assets or the other transactions contemplated hereby; (ii) that
could, if adversely determined, result in any Material Adverse Effect; or (iii)
as a result of which, in the reasonable judgment of Buyer, Buyer would be
deprived of the material benefits of its ownership of the Business.
6.8 Satisfaction of Buyer's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
thereto and all other related matters shall have been reasonably satisfactory to
Locke Liddell & Sapp LLP, Dallas, Texas, counsel for Buyer.
6.9 Opinion of Transferred Entities' Counsel. Buyer shall have received
an opinion of Bishop & Heintz, P.C., counsel for each La Senorita Company and
the Shareholders, dated the Closing Date, to the effect that: (i) the La
Senorita Companies are corporations duly organized, validly existing and in good
standing under the laws of the State of Michigan; (ii) each of Lansing and La
Margarita and each Shareholder has full power, authority and legal right to
enter into this Agreement and all other agreements to which such entity or
person is a party and to consummate the transactions contemplated hereby and
thereby; (iii) all corporate action required to be taken by Lansing and La
Margarita, and all action required to be taken by each Shareholder, to approve
this Agreement and all other agreements to which such entity or person is a
party and the transactions contemplated hereby and thereby and to authorize
execution and delivery of this Agreement and all other agreements to which such
entity or person is a party and the performance by Lansing, La Margarita and
each Shareholder of their respective obligations hereunder and thereunder, have
been duly and properly taken, and no further action or approval is required in
order to permit Lansing, La Margarita and each Shareholder to consummate the
transactions contemplated by this Agreement and all other agreements to which
such entity or person is a party; (iv) this Agreement and all other agreements
and instruments to which such entity or person is a party have been duly
authorized, executed and delivered by each La Senorita Company and the
Shareholders, to the extent such entities or persons are parties hereto or
thereto, and constitute valid and binding agreements of such La Senorita Company
and of the Shareholders, to the extent such entities or persons are parties
hereto or thereto, enforceable in accordance with their terms, except as such
enforceability may be limited by the Equitable Exceptions; and (v) the
execution, delivery and performance of this Agreement and all other agreements
by and
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among the parties and the consummation of the transactions contemplated hereby
and thereby will not (A) to the best of such counsel's knowledge, result in any
breach or termination of, or constitute a default under, or constitute an event
which with notice or lapse of time, or both, would become a default under, or
result in the creation of any Encumbrance upon any of the assets of the Business
under, or create any rights of termination, cancellation or acceleration in any
person under, any contract, lease, arrangement or commitment which is material
to the business or financial condition of each La Senorita Company or to the
best of such counsel's knowledge, violate any order, writ, injunction or decree
to which such La Senorita Company is a party or by which any of its assets,
business or operations may be bound or affected or under which such La Senorita
Company or the Business or operations of the La Senorita Company receive
benefits, which violation would be material to the business or financial
condition of the La Senorita Company; (B) to the best of such counsel's
knowledge, require the consent, waiver, approval, license or authorization of
any person or Agency that has not been duly obtained, the failure to obtain
which could have a material adverse effect upon the business or financial
condition of any La Senorita Company; or (C) to the best of such counsel's
knowledge, result in the violation of any provision of law applicable to any La
Senorita Company that could have a Material Adverse Effect upon the business or
financial condition of the La Senorita Companies.
6.10 No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect. Each La Senorita Company shall have delivered to Buyer
an unaudited balance sheet dated as of November 30, 1998 that reflects that
there has been no Material Adverse Effect. In addition, Buyer shall receive a
certificate from each La Senorita Company, dated as of the Closing Date and in
form and substance satisfactory to Buyer, as to the fulfillment of the
conditions set forth in this Section 6.10.
6.11 Consents. Each La Senorita Company shall have obtained all orders,
approvals, estoppel certificates or consents of third parties, including,
without limitation, any orders, approvals, certificates or consents deemed
necessary by counsel to Buyer that shall be required to consummate the
transactions contemplated hereby.
6.12 No Transfers to Affiliates. Except as otherwise expressly
contemplated by this Agreement and the Asset Purchase Agreement, no La Senorita
Company shall have distributed or transferred, and no Shareholder shall have
received from any La Senorita Company, any of its assets or properties, or made
any payments, to or for the benefit of any Shareholder or other Affiliate of the
Transferred Entities.
6.13 Resignations of Directors and Officers. Buyer shall have received
the resignations of each of the directors and officers of the Transferred
Entities, effective as of the Closing. In addition, pursuant to the Restriction
Agreement, or if no such Restriction Agreement is entered into, in accordance
with the Charter Documents of Development, either: (i) Kenneth Kleinrichert
shall have resigned from, and Louis P. Neeb shall have been elected to, the
Board of Directors of Development, in which case, the Board of Directors of
Development shall consist of no more than two persons; or (ii) Louis P. Neeb and
Larry Forehand shall have been elected to the Board of Directors of Development,
in which case, the Board of Directors of Development shall consist of no more
than four persons.
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6.14 Financing. Buyer's financing sources shall have provided the
necessary approvals to provide funds with respect to the consummation of the
transactions contemplated hereby and have consummated such financing on terms
satisfactory to Buyer.
6.15 Further Assurances. Each La Senorita Company and each Shareholder
shall take all such further action as may be reasonably requested by Buyer in
order to effectuate the consummation of the transactions contemplated by this
Agreement. If Buyer shall reasonably determine that any further conveyance,
assignment or other document or any further action is necessary to vest in it
full title to the Purchased Shares or Lansing Assets, each La Senorita Company
and the Shareholders shall cause the appropriate officers to execute and deliver
all such instruments and take all such action as Buyer may reasonably determine
to be necessary.
6.16 Real Property Leases. La Margarita shall have executed and
delivered to Buyer (or the appropriate operating entity) and Casa Ole the real
estate lease agreements in substantially the form attached hereto as Exhibit D
pertaining to the property on which the restaurant operations are conducted (the
"Real Property Leases"), together with Landlord's and Mortgage Holder's
Nondisturbance Agreements and Title Commitments, in form and substance
acceptable to Buyer and Casa Ole, for each of the properties subject to the Real
Property Leases.
6.17 MESA Notice. The La Senorita Companies shall have disclosed to the
Buyer, at least two (2) business days prior to the date of this Agreement, on
forms provided by the Michigan Employment Security Agency ("MESA"), the amount
of the La Senorita Companies' outstanding MESC tax liability, unreported MESA
tax liability, MESA tax payments, MESA tax rates, five (5) years of cumulative
unemployment benefit charges, a list of all current Employees of the Seller, and
a listing of Employees of the La Senorita Companies separated from employment in
the most recent twelve (12) months immediately preceding the Closing.
6.18 Liquor Licenses. Buyer shall have received all necessary
approvals, consents, authorizations from, and shall have satisfied all
requirements of, the MLCC necessary to transfer the liquor licenses owned by the
La Senorita Companies to Buyer (or to procure new licenses, if necessary, with
respect to any of the restaurants operated by the La Senorita Companies) prior
to the Closing Date.
6.19 Employment Agreement. Steven Arnot shall have executed and
delivered to Buyer an employment agreement in form and substance satisfactory to
Arnot, Casa Ole and Buyer (the "Employment Agreement").
6.20 Noncompetition Agreements. Each of the Shareholders shall have
executed and delivered to Buyer a noncompetition agreement in form and substance
satisfactory to the Shareholders, Casa Ole and Buyer in which such persons agree
that they will not compete with Casa Ole or Buyer in the operation of a
Mexican-style restaurant business for a period of five (5) years within the
State of Michigan (the "Noncompetition Agreements").
6.21 Escrow Agreement. Each of the Shareholders and Lansing shall have
executed and delivered to Buyer the Escrow Agreement.
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6.22 Releases of Encumbrances. The La Senorita Companies shall have
obtained and delivered to Casa Ole and Buyer releases of any and all
Encumbrances, including expressly all of the Encumbrances listed on Schedule
3.4, together with fully-executed termination statements in form and substance
suitable for filing with the appropriate Agencies to evidence the release of
such Encumbrances.
6.23 Bill of Sale. Lansing shall have executed and delivered to Buyer
the Bill of Sale.
6.24 S Corporation Elections. The S corporation elections of each of
Traverse City and Franchise shall be valid.
6.25 Allocation of the Purchase Price. The parties shall have agreed to
an allocation of the Purchase Price in accordance with Section 5.2(e) and shall
have prepared and delivered to one another Schedule 5.2(e) to this Agreement.
6.26 Bank of Boston Payoff Letter. The La Senorita Companies and the
Shareholders shall have obtained and delivered to Buyer the Bank of Boston
Payoff Letter.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE LA SENORITA
COMPANIES AND SHAREHOLDERS
The obligations of each La Senorita Company and the Shareholders to
cause the sale of the Purchased Shares and the Lansing Assets and the other
transactions contemplated hereby to occur at Closing shall be subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
except such conditions as each La Senorita Company and the Shareholders may
waive in writing:
7.1 Representations and Warranties of Buyer. All of the representations
and warranties of Buyer contained in this Agreement and in any Schedule or other
disclosure in writing from Buyer shall have been true and correct when made, and
shall be true and correct on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date.
7.2 Covenants of Buyer. All of the covenants and agreements herein on
the part of the Buyer to be complied with or performed on or before the Closing
Date shall have been fully complied with and performed.
7.3 Buyer's Certificate. There shall be delivered to the La Senorita
Companies and the Shareholders a certificate dated as of the Closing Date and
signed by the President or a Vice President of Buyer to the effect set forth in
Sections 7.1 and 7.2, which certificate shall have the effect of a
representation and warranty made by Buyer on and as of the Closing Date.
7.4 Certificates of Authorities. Buyer shall have furnished to the La
Senorita Companies: (i) a certificate of the Secretary of State of Delaware,
dated as of a date not more than thirty (30) days
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prior to the Closing Date, attesting to the organization, existence and good
standing of Buyer; (ii) a copy, certified by the Secretary of State of Delaware
as of a date not more than thirty (30) days prior the Closing Date, of Buyer's
Certificate of Incorporation and all amendments thereto; (iii) a copy, certified
by the Secretary of Buyer, of the Bylaws of Buyer, as amended and in effect at
the Closing Date; and (iv) a copy, certified by an authorized officer of Buyer,
of resolutions duly adopted by the Board of Directors of Buyer duly authorizing
the transactions contemplated in this Agreement.
7.5 Satisfaction of Transferred Entities' Counsel. All actions,
proceedings, instruments and documents required to carry out this Agreement or
incidental thereto and all other related legal matters shall have been
reasonably satisfactory to Bishop & Heintz, P.C., counsel for the Transferred
Entities and the Shareholders.
7.6 Real Property Leases. Buyer, or the appropriate operating entity,
together with Casa Ole as guarantor, shall have executed and delivered to La
Margarita the Real Property Leases.
7.7 Opinion of Casa Ole and Buyer's Counsel. The Shareholders shall
have received an opinion of Locke Liddell & Sapp LLP, counsel for Casa Ole and
Buyer dated the Closing Date, to the effect that: (i) Casa Ole is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, and Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware; (ii) each of Casa Ole
and Buyer has full power, authority and legal right to enter into this Agreement
and all other agreements to which such entity is a party and to consummate the
transactions contemplated hereby and thereby; (iii) all corporate action
required to be taken by each of Casa Ole and Buyer to approve this Agreement and
all other agreements to which such entity is a party and the transactions
contemplated hereby and thereby and to authorize execution and delivery of this
Agreement and all other agreements and the performance by Casa Ole and Buyer of
their respective obligations hereunder and thereunder, have been duly and
properly taken, and no further action or approval is required in order to permit
Casa Ole and Buyer to consummate the transactions contemplated by this Agreement
and all other agreements to which such entity or person is a party; and (iv)
this Agreement and all other agreements and instruments by and among the parties
have been duly authorized, executed and delivered by each Casa Ole and Buyer, to
the extent such entities are parties hereto or thereto, and constitute valid and
binding agreements of Casa Ole and Buyer, to the extent such entities are
parties hereto or thereto, enforceable in accordance with their terms, except as
such enforceability may be limited by the Equitable Exceptions. For purposes of
rendering the opinions referred to in section (iv) above, Locke Liddell & Sapp
LLP shall be entitled to limit the opinions to the laws of the State of Texas
and to assume that the laws of the State of Texas are the same as the laws of
the State of Michigan.
7.8 Employment Agreement. Buyer shall have executed and delivered to
Steve Arnot the Employment Agreement.
7.9 Noncompetition Agreements. Buyer shall have executed and delivered
to each of the Shareholders the Noncompetition Agreements.
7.10 Escrow Agreement. Buyer shall have executed and delivered to the
Shareholders and Lansing the Escrow Agreement.
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7.11 Liquor Licenses. Buyer shall have received all necessary
approvals, consents, authorizations from, and shall have satisfied all
requirements of, the MLCC necessary to transfer the liquor licenses owned by the
La Senorita Companies to Buyer (or the appropriate operating entity) prior to
the Closing Date.
7.12 Bill of Sale. Buyer shall have executed and delivered to Lansing
the Bill of Sale.
7.13 Restriction Agreement. Buyer shall have consented in writing to be
bound by the terms of the Restriction Agreement; provided, however, that prior
to their execution of the Restriction Agreement, KMANCO, Kenneth Kleinrichert
and La Margarita shall have provided Buyer with a copy of the proposed
Restriction Agreement in the form that is proposed to be executed by the parties
thereto and shall have afforded Buyer an opportunity to review and comment upon
the Restriction Agreement.
7.14 Allocation of the Purchase Price. The parties shall have agreed to
an allocation of the Purchase Price in accordance with Section 5.2(e) and shall
have prepared and delivered to one another Schedule 5.2(e) to this Agreement.
ARTICLE VIII
CLOSING
8.1 Closing Date and Place. Subject to satisfaction or waiver of the
conditions to the obligations of the parties, the consummation of the purchase
and sale of the Assets and the related transactions contemplated hereby shall
take place at a closing (the "Closing") to be held at the offices of Bishop &
Heintz, P.C., Traverse City, Michigan or at such other place as shall be
mutually agreed upon among the parties at 10:00 a.m., Traverse City, Michigan
time, on February 28, 1999, or, if the condition set forth in Section 6.18
hereof has not been satisfied on such date, three business days after such
condition has been satisfied, or at such other date as the parties may mutually
agree upon (the "Closing Date").
8.2 Conveyance of the Stock. In order to consummate the sale,
assignment, transfer and conveyance of the stock, the Shareholders will deliver
to Buyer at the Closing certificates representing one hundred percent (100%) of
Purchased Shares, free and clear of all Encumbrances.
8.3 Transferred Entities' Obligations at Closing. At the Closing, the
Transferred Entities and the Shareholders shall deliver to Buyer:
(a) the books and records of each La Senorita Company;
(b) certificates representing the Purchased Shares, duly endorsed
in blank or accompanied by appropriate stock or interest powers, in
proper form for transfer, with all transfer taxes paid;
(c) the Real Property Leases;
(d) appropriate receipts;
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(e) the releases and termination statements required to be
delivered pursuant to Section 6.22;
(f) the Bank of Boston Payoff Letter required to be delivered
pursuant to Section 6.26;
(g) to the extent not previously delivered, any and all documents
required to be delivered pursuant to the terms of this Agreement; and
(h) such other documents and instruments as shall be reasonably
required of the Transferred Entities and the Shareholders by Buyer.
8.4 Buyer's Obligations at the Closing. At the Closing, Buyer shall
deliver to the Shareholders:
(a) the Purchase Price (less the Escrowed Amount and the Bank of
Boston Fee);
(b) the Real Estate Leases;
(c) appropriate receipts;
(d) to the extent not previously delivered, any and all documents
required to be delivered pursuant to the terms of this Agreement;
(e) such other documents and instruments as shall be reasonably
required of Buyer by the Shareholders.
8.5 Payment into Escrow. At the Closing, Buyer shall deliver to
Nationsbank or such other entity mutually agreed by the parties (the "Escrow
Agent") by wire transfer of immediately available funds, the Escrowed Amount to
be held in escrow by the Escrow Agent in accordance with the terms of the Escrow
Agreement.
ARTICLE IX
PERSONAL GUARANTEES
[Intentionally omitted.]
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1 Survival of Covenants, Agreements, Representations and Warranties.
(a) Covenants and Agreements. All covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall survive
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the Closing and shall continue in full force and effect thereafter
according to their terms without limit as to duration.
(b) Representations and Warranties. All representations and
warranties contained herein shall survive the Closing and shall
continue in full force and effect thereafter for a period of two (2)
years following the Closing, except that: (a) the representations and
warranties contained in Section 3.18 (Tax Matters) hereof shall survive
until the earlier of (i) the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation
applicable to the payment of the taxes to which such representations
and warranties relate without an assertion of a deficiency in respect
thereof by the applicable taxing authority or (ii) the completion of
the final audit and determinations by the applicable taxing authority
and final disposition of any deficiency resulting therefrom; (b) the
representations and warranties contained in Section 3.19 (Environmental
Laws and Regulations) hereof shall survive for a period of five (5)
years following the Closing; (c) the representations and warranties
contained in Section 3.14 (Employee Benefits) hereof shall survive
until the expiration of the applicable period of the statutes of
limitation applicable to ERISA matters; and (d) the representations and
warranties contained in Sections 3.2 (Authority for Agreement), 3.4
(Title to Assets) and 3.5 (Capital Stock of the Transferred Entities;
Subsidiaries) shall survive indefinitely.
(c) Claims Made Prior to Expiration. Notwithstanding the foregoing
survival periods set forth in this Section 10.1, the termination of a
survival period shall not affect the rights of an Indemnified Party in
respect of any claim made by such party with specificity, in good faith
and in writing to the Indemnifying Party in accordance with Sections
10.5 and 12.4 hereof prior to the expiration of the applicable survival
period.
10.2 Buyer's Losses. Lansing and the Shareholders jointly and severally
agree to indemnify and hold harmless Buyer and the Transferred Entities, and
their respective directors, officers, Employees, representatives, agents and
attorneys from, against, for and in respect of any and all damages (including,
without limitation, amounts paid in settlement with each Shareholder's consent,
which may not be unreasonably withheld), penalties, fines, interest and monetary
sanctions, losses, obligations, liabilities, claims, deficiencies, costs and
expenses, including, without limitation, reasonable attorneys' fees and other
costs and expenses incident to any suit, action, investigation, claim or
proceeding (hereinafter referred to collectively as "Buyer's Losses") suffered,
sustained, incurred or required to be paid by any of them by reason of: (i) the
failure by a La Senorita Company to comply with all applicable laws relating to
bulk transfers including the provisions of the Uniform Commercial Code of the
State of Michigan; (ii) any representation or warranty made by a La Senorita
Company or the Shareholders in or pursuant to this Agreement being untrue or
incorrect in any respect; (iii) any liability arising from or with respect to
the La Senorita Companies or the Lansing Assets through the Closing Date,
including, without limitation, the ownership or operation of the Business
through the Closing Date and any liabilities for warranties or defective
products arising from sales by the La Senorita Companies on or prior to the
Closing Date; (iv) any failure by a La Senorita Company or the Shareholders to
observe or perform their respective covenants and agreements set forth in this
Agreement or any other agreement or document executed by them in connection with
the transactions contemplated hereby; (v) any failure to file annual returns
with the IRS or the U.S. Department of Labor for periods ending on or prior to
the Closing Date with regard to any item listed on Schedule
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3.14 (Employee Benefits) hereof, including any applicable penalties and
interest, including, but not limited to, those amounts described under Section
502(c)(2) of ERISA or Section 6652(e) of the Code; (vi) any matter listed on
Schedule 3.6 (Litigation; Governmental Action, Etc.); or (vii) any liability
arising from or based upon the required consents set forth in Schedule 3.16
(Consents) hereof and not obtained prior to the Closing.
10.3 Employee Compensation and Benefits. Lansing and the Shareholders
jointly and severally agree to indemnify and hold Buyer, and its directors,
officers, Employees, representatives, agents and attorneys harmless from and
against any and all claims made by persons employed or leased by, or who
otherwise provided services to, any La Senorita Company, regardless of when
made, for wages, salaries, bonuses, pension, workmen's compensation, medical
insurance, disability, vacation, severance, pay in lieu of notice, sick benefits
or other compensation or benefit arrangements to the extent the same are based
on employment service rendered to any La Senorita Company prior to the Closing
Date or injury or sickness occurring prior to the Closing Date (collectively,
"Employee Claims").
10.4 Shareholders' Losses. Buyer agrees to indemnify and hold harmless
Lansing and the Shareholders from, against, for and in respect of any and all
damages (including, without limitation, amounts paid in settlement with Buyer's
consent, which may not be unreasonably withheld), penalties, fines, interest and
monetary sanctions, losses, obligations, liabilities, claims, deficiencies,
costs and expenses, including, without limitation, reasonable attorneys' fees
and other costs and expenses incident to any suit, action, investigation, claim
or proceeding (hereinafter referred to collectively as "Shareholders' Losses")
suffered, sustained, incurred or required to be paid by a Shareholder by reason
of: (i) any representation or warranty made by Buyer in or pursuant to this
Agreement being untrue or incorrect in any respect; (ii) any liability arising
from or with respect to the ownership or operation of the Business after the
Closing Date, including, without limitation, any liability for warranties or
defective products arising from sales by Buyer after the Closing Date; (iii) any
failure by Buyer to observe or perform its covenants and agreements set forth in
this Agreement; (iv) any failure by Buyer to observe or perform its covenants
and agreements set forth in this Agreement or any other agreement or document
executed by it in connection with the transactions contemplated hereby; or (vi)
any amounts payable to Shareholders pursuant to Section 5.2(f) hereof.
10.5 Notice of Loss. Except to the extent set forth in the next
sentence, a party to this Agreement shall not have any liability under the
indemnity provisions of this Agreement with respect to a particular matter
unless a notice setting forth in reasonable detail the breach which is asserted
has been given to the Indemnifying Party (as hereafter defined) and, in
addition, if such matter arises out of a suit, action, investigation or
proceeding, such notice is given promptly, but in any event within thirty (30)
days after the Indemnified Party (as hereafter defined) is given notice of the
commencement of the suit, action, investigation or proceeding. Notwithstanding
the preceding sentence, failure of the Indemnified Party to give notice
hereunder shall not release the Indemnifying Party from its obligations under
this ARTICLE X, except to the extent the Indemnifying Party is actually
prejudiced by such failure to give notice. With respect to Buyer's Losses and
Employee Claims, Lansing and the Shareholders, jointly and severally, shall be
the Indemnifying Party and Buyer shall be the Indemnified Party. With respect to
Shareholders' Losses, Buyer shall be the Indemnifying Party and Lansing and the
Shareholders shall be the Indemnified Party.
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10.6 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed by
an Indemnified Party, the Indemnifying Party shall be entitled to defend,
contest or otherwise protect against such suit, action, investigation, claim or
proceeding at its own cost and expense, and the Indemnified Party must cooperate
in any such defense or other action. The Indemnified Party shall have the right,
but not the obligation, to participate at its own expense in a defense thereof
by counsel of its own choosing, but the Indemnifying Party shall be entitled to
control the defense unless the Indemnified Party has relieved the Indemnifying
Party from liability with respect to the particular matter or the Indemnifying
Party fails to assume defense of the matter. In the event the Indemnifying Party
shall fail to defend, contest or otherwise protect in a timely manner against
any such suit, action, investigation, claim or proceeding, the Indemnified Party
shall have the right, but not the obligation, to defend, contest or otherwise
protect against the same and make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnifying Party including reasonable
attorneys' fees, disbursements and all amounts paid as a result of such suit,
action, investigation, claim or proceeding or the compromise or settlement
thereof; provided, however, that the Indemnified Party must send a written
notice to the Indemnifying Party of any such proposed settlement or compromise,
which settlement or compromise the Indemnifying Party may reject, in its
reasonable judgment, within thirty (30) days of receipt of such notice. Failure
to reject such notice within such thirty (30) day period shall be deemed an
acceptance of such settlement or compromise. The Indemnified Party shall have
the right to effect a settlement or compromise over the objection of the
Indemnifying Party; provided, that if (i) the Indemnifying Party is contesting
such claim in good faith or (ii) the Indemnifying Party has assumed the defense
from the Indemnified Party, the Indemnified Party waives any right to indemnity
therefor. If the Indemnifying Party undertakes the defense of such matters, the
Indemnified Party shall not, so long as the Indemnifying Party does not abandon
the defense thereof, be entitled to recover from the Indemnifying Party any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than the reasonable costs of
investigation undertaken by the Indemnified Party with the prior written consent
of the Indemnifying Party.
10.7 Cooperation. Buyer, the Transferred Entities and the Shareholders
and each of their Affiliates, successors and assigns shall cooperate with each
other in the defense of any suit, action, investigation, proceeding or claim by
a third party and, during normal business hours, shall afford each other access
to their books and records and Employees relating to such suit, action,
investigation, proceeding or claim and shall furnish each other all such further
information that they have the right and power to furnish as may reasonably be
necessary to defend such suit, action, investigation, proceeding or claim,
including, without limitation, reports, studies, correspondence and other
documentation relating to Environmental Protection Agency, Occupational Safety
and Health Administration, and Equal Employment Opportunity Commission matters.
10.8 Limitations on Indemnification Obligation. The persons or entities
indemnified pursuant to this ARTICLE X shall not assert any claim for
indemnification hereunder, except with respect to any claim based upon: (i)
intentional misrepresentation or fraud; (ii) failure to own and convey to Buyer
the Lansing Assets, the Purchased Shares or the Transferred Entity Assets free
and clear of Encumbrances; (iii) breach of any provision of Section 3.18 (Tax
Matters); (iv) breach of the covenants of Section 5.2(d) (Gift Certificates;
Accrued Vacation Benefits); (v) breach of the covenants of Section 5.2(e) (Tax
Matters); or (vi) breach of the covenants of Section 5.2(f) (Fund),
34
<PAGE> 44
until such time as the aggregate of all Buyer's Losses (including Employee
Claims) or Shareholders' Losses, as the case may be, that such persons or
entities have against the Indemnifying Parties shall exceed the sum of $50,000,
but upon reaching such amount, from the first dollar of all claims.
Notwithstanding any other provision in this agreement to the contrary: (i) in no
event shall an Indemnifying Party be required to indemnify, defend or hold
harmless an Indemnified Party to the extent that such Indemnifying Party would
be liable hereunder in an amount in excess of the Purchase Price; and (ii) in no
event shall any Shareholder be required to indemnify, defend or hold harmless an
Indemnified Party to the extent that such Shareholder would be liable hereunder
in an amount in excess of the aggregate amount set forth opposite such
Shareholder's name on Schedule 2.3 as the amount payable to such Shareholder in
exchange for such Shareholder's shares of capital stock of the Transferred
Entities; provided, however, that the limitations set forth in sections (i) and
(ii) above shall not apply to any claim based upon: (x) intentional
misrepresentation or fraud; (y) failure to own the Lansing Assets, the
Transferred Entity Assets or the Purchased Shares free and clear of
Encumbrances; or (z) any Tax liability related to the Transferred Entities or
the Lansing Assets that accrued, arose or is otherwise attributable to the
period on or prior to the Closing Date.
10.9 Offset. Upon thirty (30) days prior written notice and opportunity
to cure and in accordance with the terms of the Real Property Leases, Buyer or
Casa Ole shall be entitled to offset any amounts owed by Buyer or Casa Ole to La
Margarita for rent and purchase options relating to the Real Property Leases
against any amounts due Buyer or Casa Ole as a result of Buyer's Losses. This
right of offset shall be nonexclusive and shall be in addition to all other
rights and remedies available to Buyer at law or in equity.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated and abandoned at any
time on or prior to the Closing Date in accordance with the following
provisions:
(a) By mutual consent of the parties hereto;
(b) By Buyer in writing if any of the material conditions to the
obligations of Buyer contained herein shall not have been satisfied or,
if unsatisfied, waived by Buyer as of the Closing Date;
(c) By the Transferred Entities and the Shareholders in writing if
any of the material conditions to the obligations of the Transferred
Entities and the Shareholders contained herein shall not have been
satisfied or, if unsatisfied, waived by the Transferred Entities and
the Shareholders as of the Closing Date; and
(d) By Buyer, the Transferred Entities or the Shareholders in
writing if the Closing shall not have occurred by the later of January
3, 1999 or within fifteen (15) days after the satisfaction of the
condition set forth in Section 6.18 hereof.
35
<PAGE> 45
11.2 No Further Force or Effect. In the event of termination and
abandonment of this Agreement pursuant to the provisions of this ARTICLE XI,
this Agreement shall be of no further force or effect, except for
confidentiality and indemnity provisions and other terms that, by their terms or
nature, are intended to survive such termination.
ARTICLE XII
MISCELLANEOUS
12.1 Further Assurances and Additional Conveyances. In addition to the
acts and deeds recited herein and contemplated to be performed, executed and/or
delivered by Buyer and the Transferred Entities, Buyer and the Transferred
Entities hereby agree to perform, execute and/or deliver or cause to be
delivered at the Closing or after the Closing any and all further acts, deeds
and assurances that the other party may reasonably request to evidence and vest
in Buyer and the Transferred Entities the rights and properties intended to vest
in Buyer and the Transferred Entities and the release of the obligations of the
Transferred Entities pursuant to this Agreement.
12.2 Binding Agreement; Assignment. This Agreement may not be assigned
by Buyer, except to an Affiliate of Buyer (the obligations of which under this
Agreement shall be guaranteed by Casa Ole), or as otherwise consented to in
writing by the Shareholders (which consent shall not be unreasonably withheld)
or by operation of law. This Agreement may not be assigned by the La Senorita
Entities or the Shareholders except as consented to in writing by Casa Ole and
Buyer (which consent shall not be unreasonably withheld) or by operation of law.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
12.3 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
12.4 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if in writing and either
delivered: (i) personally; (ii) by facsimile transmission with electronic
confirmation of receipt; or (iii) by depositing the same in the U.S. mail to the
addresses designated below or such other addresses as may be designated in
writing by notice given hereunder. All such notices shall be effective upon
personal delivery or facsimile transmission thereof or three (3) days following
deposit in the U.S. mail or one (1) business day following deposit with any
express delivery service.
If to Buyer: Casa Ole Restaurants, Inc.
1135 Edgebrook
Houston, Texas 77034
Attention: Drew Dennard
Facsimile No. 713-943-9554
36
<PAGE> 46
With a copy to: Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, TX 75201-6776
Attention: Don M. Glendenning, Esq. and
Rebecca E. Guldi, Esq.
Facsimile No. 214-740-8800
If to the Shareholders: Mr. Kenneth Kleinrichert
1241 Lake Drive
Traverse City, MI 49686
Mr. Donald Kleinrichert
4515 S. Spider Lake Road
Traverse City, MI 49686
Mr. Joseph Kleinrichert or
The Joseph Kleinrichert Trust
4680 Bittersweet Lane
Traverse City, MI 49686
Mr. Steven Arnot
1110 Bass Lake Road
Traverse City, MI 49684
With a copy to: Patrick E. Heintz, Esq.
Bishop & Heintz, P.C.
440 W. Front at Oak
P.O. Box 707
Traverse City, MI 49685
Facsimile No. 616-946-41 00
12.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO THE
CONFLICTS-OF-LAW PRINCIPLES THEREOF.
12.6 Payment of Fees and Expenses. Whether or not the transactions
herein contemplated shall be consummated, Buyer will pay the fees, expenses and
disbursements of Buyer and its respective agents, representatives, accountants
and counsel incurred in connection with the subject matter of this Agreement and
any amendments thereto. The Transferred Entities will pay the expenses and
disbursements of the Transferred Entities and the Shareholders and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto
and all other costs and expenses incurred in the performance and compliance with
all conditions to be performed by the Transferred Entities and the Shareholders
pursuant to the terms of this Agreement.
37
<PAGE> 47
12.7 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
12.8 Number and Gender of Words. Words of any gender used in this
Agreement shall be held and construed to include any other gender and words in
the singular number shall be held to include the plural, and vice versa, unless
the context requires otherwise.
12.9 Recitals, Annexes, Exhibits and Schedules. The recitals, annexes,
exhibits and schedules to this Agreement are incorporated herein and made a part
hereof.
12.10 Waiver. The waiver by any party hereto of any breach, default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall not be deemed to extend to any prior or subsequent
breach, default, misrepresentation or breach of warranty or covenant hereunder
and shall not affect in any way any rights arising by virtue of any such prior
or subsequent occurrence.
12.11 Attorneys' Fees. In any litigation brought by any party hereto to
recover damages or equitable relief for misrepresentation or breach of any
warranty or covenant made in this Agreement the prevailing party, in addition to
such remedy, shall be entitled to recover reasonable attorneys' fees from the
other party.
12.12 Time of the Essence. Time is of the essence with respect to this
Agreement.
12.13 Entire Agreement. This Agreement (including the schedules,
annexes and exhibits hereto) constitutes the entire agreement among the
Transferred Entities, the Shareholders and Buyer and, upon closing of the
transactions contemplated herein, supersedes any prior agreements and
understandings both written and oral, between the parties hereto with respect to
the subject matter hereof, and no party shall be liable or bound to the other in
any manner by any representations or warranties not set forth herein. This
Agreement may be modified or amended only by a written instrument executed by
the Transferred Entities, the Shareholders and Buyer.
12.14 Publicity. Prior to the Closing, all general notices, releases,
statements, and communications to suppliers, distributors, and customers of the
Transferred Entities and to the general public and the press relating to this
Agreement and the transactions contemplated hereby shall be made only at such
times and in such manner as may be mutually agreed upon by Buyer and the
Transferred Entities; provided, however, that the parties hereto shall be
entitled, following reasonable prior written notice to the other parties hereto,
to issue such press releases and to make such public statements as are, in the
opinion of its legal counsel, required by applicable law.
12.15 Bulk Transfers. The parties hereby agree to waive the
requirements of the bulk transfer provision of the Uniform commercial Code as
adopted in Michigan.
38
<PAGE> 48
ARTICLE XIII
GUARANTY OF CASA OLE
13.1 Guaranty. Casa Ole unconditionally and absolutely guarantees
Buyer's obligations under this Agreement in accordance with the terms hereof,
including, without limitation, the payment of all sums due, when due, and all
expenses (including reasonable attorneys fees and expenses, where provided for
herein) that may become due and payable by Buyer hereunder. This guaranty shall
extend to any obligations of Buyer that arise as a result of any extensions of
Buyer's obligations under this Agreement. Should Buyer default, breach any
representation or warranty or otherwise be found liable to the La Senorita
Company or the Shareholders and fail to cure timely such default, breach or
liability, Casa Ole will cure such default, breach or liability in Buyer's stead
as if the cure of such default, breach or liability of Buyer were a direct
obligation of Casa Ole. Following the issuance of an initial demand upon Buyer
by the La Senorita Companies or the Shareholders with regard to any such
default, breach or liability, the La Senorita Companies and the Shareholders
shall not be required to make any further demand upon or pursue or exhaust any
other rights and remedies against Buyer prior to making a demand upon Casa Ole
under this ARTICLE XIII.
[The remainder of this page intentionally left blank.]
39
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto executed this Agreement as of
the day and year first above written.
CASA OLE
CASA OLE RESTAURANTS, INC.
By: /s/ ANDREW DENNARD
---------------------------------------
Name: Andrew Dennard
-------------------------------------
Title: CFO & Vice President
------------------------------------
BUYER:
LA SENORITA RESTAURANTS
ACQUISITION CORP.
By: /s/ ANDREW DENNARD
---------------------------------------
Name: Andrew Dennard
-------------------------------------
Title: Vice President
------------------------------------
SELLING ENTITIES:
LA SENORITA TRAVERSE CITY, INC.
By: /s/ STEVEN L. ARNOT
---------------------------------------
Name: Steven L. Arnot
-------------------------------------
Title: President
------------------------------------
LA SENORITA FRANCHISE COMPANY
By: /s/ KENNETH P KLEINRICHERT
---------------------------------------
Name: Kenneth P Kleinrichert
-------------------------------------
Title: President
------------------------------------
<PAGE> 50
W. G. ENTERPRISES, INC.
By: /s/ STEVEN L. ARNOT
---------------------------------------
Name: Steven L. Arnot
-------------------------------------
Title: President
------------------------------------
KLEINRICHERT BROS., INC.
By: /s/ STEVEN L. ARNOT
---------------------------------------
Name: Steven L. Arnot
-------------------------------------
Title: President
------------------------------------
LA SENORITA - MT. PLEASANT, INC.
By: /s/ STEVEN L. ARNOT
---------------------------------------
Name: Steven L. Arnot
-------------------------------------
Title: President
------------------------------------
KMANCO, INC.
By: /s/ KENNETH P KLEINRICHERT
---------------------------------------
Name: Kenneth P Kleinrichert
-------------------------------------
Title: President
------------------------------------
LA SENORITA LANSING, INC.
By: /s/ STEVEN L. ARNOT
---------------------------------------
Name: Steven L. Arnot
-------------------------------------
Title: President
------------------------------------
<PAGE> 51
SHAREHOLDERS:
/s/ KENNETH KLEINRICHERT
------------------------------------
Kenneth Kleinrichert
/s/ DONALD KLEINRICHERT
------------------------------------
Donald Kleinrichert
/s/ JOSEPH KLEINRICHERT
------------------------------------
Joseph Kleinrichert
THE JOSEPH KLEINRICHERT TRUST
By: /s/ JOSEPH KLEINRICHERT
---------------------------------------
Name: Joseph Kleinrichert
-------------------------------------
Title: Trustee
------------------------------------
/s/ STEVEN ARNOT
------------------------------------
Steven Arnot
FOR PURPOSES OF CONSENTING TO
SECTIONS 6.16, 7.6, 7.13 AND 10.9
OF THIS AGREEMENT
LA MARGARITA COMPLEX, LLP
By: /s/ KENNETH P KLEINRICHERT
---------------------------------------
Name: Kenneth P Kleinrichert
-------------------------------------
Title: President
------------------------------------
<PAGE> 52
EXHIBIT A
DEFINITIONS
"ADA" means the Americans with Disabilities Act.
"Affiliate" of any person means any other person controlling,
controlled by or under common control with, such first person.
"Agency" is defined in Section 3.6 of this Agreement.
"Agreement" means this Stock Purchase Agreement with Purchase of
Designated Assets, as amended from time to time.
"Asset Purchase Price" is defined in Section 2.3 of this Agreement.
"Bank of Boston Fee" is defined in Section 3.23 of this Agreement.
"Bank of Boston Payoff Letter" is defined in Section 5.1(g) of this
Agreement.
"Bill of Sale" is defined in Section 2.2(a) of this Agreement.
"Business" is defined in the recitals of this Agreement.
"Buyer's Losses" is defined in Section 10.2 of this Agreement.
"Buyer" is defined in the preamble to this Agreement.
"Capital Stock" is defined in Section 3.5 of this Agreement.
"Casa Ole" is defined in the preamble to this Agreement.
"Charter Documents" is defined in Section 3.3(a) of this Agreement.
"Closing" and "Closing Date" are defined in Section 8.1 of this
Agreement.
"Closing Adjustment" is defined in Section 2.5 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, together
with the regulations thereunder.
"Contracts" is defined in Section 3.12(a) of this Agreement.
"Development" means La Senorita Development Co., a Michigan corporation
that is 50% owned by KMANCO and that serves as the General Partner of La
Senorita - Sault Ste. Marie Limited Partnership, which is a controlling partner
of La Senorita - Sault Ste. Marie, a Michigan co-partnership.
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<PAGE> 53
"Employee" means any employee of any La Senorita Company, including,
without limitation, any person whose services were leased by, or who otherwise
provided services to, any La Senorita Company.
"Employee Claims" is defined in Section 10.3 of this Agreement.
"Employment Agreement" is defined in Section 6.19 of this Agreement.
"Encumbrance" means any lien, mortgage, security interest, encumbrance,
pledge, charge, adverse claim, option, buy-sell agreement, right of first
refusal agreement, right of preemption, third-party right or interest, right or
restriction of any character whatsoever or any other type of preferential
arrangement, including, without limitation, a title transfer or retention
arrangement having similar effect, other than standard state and federal
securities law private-offering legends and restrictions.
"Environmental Requirements" means all laws, statutes, rules,
regulations, ordinances, permits, guidance documents, judgments, decrees,
orders, agreements and other restrictions and requirements (whether now or
hereafter in effect) of any governmental authority, including, without
limitation, federal, state and local authorities, relating to the regulation or
protection of human health and safety, worker health and safety, natural
resources, conservation, the environment, or the storage, treatment, disposal,
transportation, handling or other management of industrial or solid waste, or
Hazardous Substances.
"Equitable Exceptions" is defined in Section 3.2 of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" is defined in Section 8.5 of this Agreement.
"Escrow Agreement" means an escrow agreement, substantially in the form
attached hereto as Exhibit E to be entered into by and among the Shareholders,
Lansing, Buyer and the Escrow Agent.
"Escrowed Amount" is defined in Section 2.3 of this Agreement.
"Financial Statements" is defined in Section 3.8 of this Agreement.
"Franchise" is defined in the preamble to this Agreement.
"Fund Adjustment" is defined in Section 5.2(f) of this Agreement.
"Fund Claims" is defined in Section 5.2(f) of this Agreement.
"Fund Statement" is defined in Section 5.2(f) of this Agreement.
"GAAP" means generally accepted accounting principles, consistently
applied.
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<PAGE> 54
"Governmental Requirements" is defined in Section 6.1 of this
Agreement.
"Group Member" means any member of any "affiliated service group" as
defined in Section 414(m) of the Code that includes one of the La Senorita
Companies, any member of any "controlled group of corporations" as defined in
Section 1563 of the Code that includes one of the La Senorita Companies, or any
member of any group of "trades or businesses under common control" as defined by
Section 414(c) of the Code that includes one of the La Senorita Companies.
"Hazardous Substance" means: (i) any "hazardous substance" as defined
in ss.101(14) of the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended from time to time (42 U.S.C. ss.ss. 9601 et
seq.) ("CERCLA") or any regulations promulgated thereunder, or the Occupational
Safety and Health Act of 1970, as amended from time to time (29 U.S.C. ss. 651
et seq.), or any regulations promulgated thereunder, or any analogous state or
local regulations; (ii) petroleum and petroleum by-products, asbestos and
asbestos-containing materials, polychlorinated biphenyls and pesticides; or
(iii) any additional substances or materials that have been or are currently
classified or considered to be pollutants, hazardous or toxic under
Environmental Requirements.
"IRS" means the Internal Revenue Service.
"KBI" is defined in the preamble to this Agreement.
"KMANCO" is defined in the preamble to this Agreement.
"La Margarita" is defined in the preamble to this Agreement.
"La Senorita Companies" is defined in the preamble to this Agreement.
"Lansing Assets" is defined in Section 2.1 of this Agreement.
"Lansing Assumed Liabilities" is defined in Section 2.2(b) of this
Agreement
"Lansing" is defined in the preamble to this Agreement.
"Letter of Intent" means that certain letter agreement, dated October
3, 1998 by and between Casa Ole, the La Senorita Companies, La Senorita Sault
Ste. Marie Ltd. Ptr., Kenneth Kleinrichert, Donald Kleinrichert, Joseph
Kleinrichert and Steven Arnot, as amended.
"Material Adverse Effect" is defined in Section 3.3(d) of this
Agreement.
"Material Permits" is defined in Section 3.11 of this Agreement.
"MESA" is defined in Section 6.17 of this Agreement.
"MLCC" means the Michigan Liquor Control Commission.
"Mt. Pleasant" is defined in the preamble to this Agreement.
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<PAGE> 55
"Multiemployer Plan" shall have the meaning defined in Section
4001(a)(3) of ERISA.
"Noncompetition Agreement" is defined in Section 6.20 of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Plan" is defined in Section 3.14(a) of this Agreement.
"Post-Closing Adjustment" is defined in Section 2.5 of this Agreement.
"Purchase Price" is defined in Section 2.3 of this Agreement.
"Purchase Price Adjustment" is defined in Section 2.5 of this
Agreement.
"Purchased Shares" is defined in Section 2.1 of this Agreement.
"Real Property Leases" is defined in Section 6.16 of this Agreement.
"Receivables" is defined in Section 3.24 of this Agreement.
"Restriction Agreement" means that certain Agreement for Restrictions
on the Sale of Shares between Ameriquest, a Michigan Co-Partnership, KMANCO, La
Margarita and Development, or such other agreement relating to restrictions on
transfer of shares of Development and/or voting arrangements and other matters
with regard to Development as may be entered into by KMANCO and La Margarita.
"Share Purchase Price" is defined in Section 2.3 of this Agreement.
"Shareholder Losses" is defined in Section 10.4 of this Agreement.
"Shareholders" is defined in the preamble to this Agreement.
"State Fund" is defined in Section 5.2(f) of this Agreement.
"Subject Property" means all real property comprising a portion of the
assets of the Business and any properties listed on Schedule 3.9.
"Tax Return" or "Tax Returns" means all returns, declarations of
estimated tax payments, reports, forms, estimates, information returns,
statements and other documentation, including any related or supporting
information filed with respect to any of the foregoing, maintained, filed or to
be filed with any Taxing Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Tax" or "Taxes" means all taxes, charges, fees, levies or other
assessments, including, without limitation, any net income tax or franchise tax
based on net income, any alternative or add-on minimum taxes, any gross income,
gross receipts, premium, sales, use, ad valorem, value added, transfer, profits,
license, social security, medicare, payroll, employment, excise, severance,
stamp,
4
<PAGE> 56
occupation, property, environmental or windfall profit tax, custom duty or other
tax, governmental fee or other like assessment, together with any interest,
penalty, addition to tax or additional amount imposed by any "Taxing Authority."
"Taxing Authority" means any domestic, foreign, federal, national,
state, provincial, county or municipal or other local government, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
body exercising any taxing authority or any other authority exercising Tax
regulatory authority.
"Third Party Intellectual Property" is defined in Section 3.10(a) of
this Agreement.
"Transferred Entity Assets" is defined in Section 3.4(b) of this
Agreement.
"Transferred Entities" is defined in the preamble to this Agreement.
"Traverse City" is defined in the preamble to this Agreement.
"WGE" is defined in the preamble to this Agreement.
5
<PAGE> 57
EXHIBIT B
LANSING ASSETS
[Attached hereto.]
<PAGE> 58
La Senorita Lansing, Inc.
Depreciation Schedule by Category (Detail)
For 12 Months Ended 12/31/98
Building
Parking Lot Improvements
Building
Eavestrough
Roofing
Tables
Chairs & Booths
Shelving-GFS
Kitchen Equipment
Kitchen Equipment
(2) Signs
Fire Safe
Security System
Ventilation Hoods
2 Walk-in Coolers
Walk-in Freezer
Cleveland Steamer
Neon Sign
TV's & VCR's
Sign - Entranceway
Food Processor
Mug Freezers/Olander Equipment
Sharp 7370 Copier/Adv. Bus. Mac
Outdoor Sign & Neon/Day Signs
Shell Assembly/Model 340 Taylor
Positouch Computer System
Blinds, Kirsh
Copper Lights/Dining Room
Sound System/Sound Stage
Exterior Neon/Custom Signworks
Light Fixtures/Hi-Lite Mfg. Co.
Rethermalizer, Kirchman
Rewire Neon/Magna/Custom
4 Toshiba TV's, Dales
Upholster Booths/Williams
Phones/Analog Communications
Carpet/Durkan/Valley
Delfield Refrig Counter/Staffor
PC for back office, MCS
<PAGE> 59
EXHIBIT C
FORM OF BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
[Attached hereto.]
<PAGE> 60
BILL OF SALE, ASSIGNMENT AND
ASSUMPTION AGREEMENT
THIS BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement") is made and entered into as of this ___ day of ___, 1999 by
and between La Senorita Lansing, Inc., a Michigan corporation ("Assignor"), and
Traverse City, a Michigan corporation ("Assignee").
WHEREAS, Assignor and Assignee, together with Casa Ole Restaurants,
Inc., a Texas corporation, La Senorita Restaurants Acquisition Corp., a Delaware
corporation, La Senorita Franchise Company, a Michigan corporation, W.G.
Enterprises, Inc., a Michigan corporation, Kleinrichert Bros., Inc., a Michigan
corporation, La Senorita - Mt. Pleasant, Inc., a Michigan corporation, KMANCO,
Inc., a Michigan corporation, Kenneth Kleinrichert, Donald Kleinrichert, Joseph
Kleinrichert, the Joseph Kleinrichert Trust and Steven Arnot and for certain
purposes, La Margarita Complex LLP, a Michigan limited liability partnership,
have entered into that certain Stock Purchase Agreement with Purchase of
Designated Assets dated January ___, 1999 (the "Purchase Agreement"), which
agreement provides, among other things, for the assignment and sale of certain
of the assets and the assumption of certain of the liabilities owned, used or
incurred by Assignor in connection with its business; and
WHEREAS, the parties to this Agreement wish to evidence such
contribution, sale, assignment and assumption as set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINITIONS. Capitalized terms that are used herein and not
otherwise defined shall have the meanings assigned to such terms in the Purchase
Agreement.
2. SALE AND ASSIGNMENT. Subject to the provisions of Section 4 of this
Agreement, Assignor hereby transfers and delivers to Assignee all right, title
and interest of Assignor in, to and under the Lansing Assets. No assets or
properties of any kind or character of Assignor that are not included in the
Lansing Assets are being transferred or delivered hereunder. The Lansing Assets
shall be sold and delivered to Assignee in exchange for cash, as described in
the Purchase Agreement.
3. ASSUMPTION. Subject to the provisions of Section 4 of this
Agreement, Assignee hereby assumes and agrees to pay, perform and discharge all
of the Lansing Assumed Liabilities. Other than as expressly contemplated by the
preceding sentence, Assignee shall not assume or be liable for any liabilities,
obligations or duties of Assignor.
<PAGE> 61
4. LIMITATIONS ON ASSUMPTION AND ASSIGNMENT.
(a) Except to the extent specifically set forth in Section 3 of
this Agreement, Assignee does not assume or agree to pay, perform or
discharge any liabilities or obligations of Assignor.
(b) This Agreement shall not constitute or effect an assignment
of any asset, property or right so long as an assignment or attempted
assignment of such asset, property or right would constitute a breach
or violation of the agreement, instrument or other arrangement or
document pursuant to which such asset, property or right is held, in
any way adversely affect the rights of Assignor or Assignee under such
agreement, instrument or other arrangement or document or violate any
applicable law. Subject to the foregoing sentence, with respect to
obligations described in Section 3 above that by their terms or under
applicable law are not transferable or assignable by Assignor or
require consents to assignment and such consents have not yet been
obtained, Assignor shall enter into such arrangements as are requested
by Assignee to provide Assignee all of the benefits of and under such
assets, properties and rights and Assets, including Assignor
undertaking to use its best efforts and cooperation in obtaining any
required consents.
5. FURTHER ASSURANCES. Assignor, for itself and its successors and
assigns, hereby covenants and agrees that, from time to time, Assignor will
execute and deliver, or will cause to be executed and delivered, such documents
and instruments and will take, or cause to be taken, such further or other
actions as Assignee may deem necessary to sell, assign, convey, transfer and
deliver the Lansing Assets, and to assign, convey, transfer and deliver the
Lansing Assumed Liabilities, unto Assignee and its successors and assigns (or to
evidence any of the foregoing). Assignee, for itself and its successors and
assigns, hereby covenants and agrees that, from time to time, Assignee will
execute and deliver, or will cause to be executed and delivered, such documents
and instruments and will take, or cause to be taken, such further or other
actions as Assignor may deem necessary for Assignee to assume the Lansing
Assumed Liabilities (or to evidence such assumption).
6. GENERAL. This Agreement shall be binding upon, and inure to the
benefit of, the parties to this Agreement and their successors and assigns. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF. Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned by Assignor without the prior written consent of
Assignee. This Agreement may be amended only by a written instrument duly signed
by each of the parties to this Agreement.
<PAGE> 62
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement on the date and year first above written.
ASSIGNOR:
LA SENORITA LANSING, INC.
By:
---------------------------
Name:
-------------------------
Title:
-------------------------
ASSIGNOR:
LA SENORITA TRAVERSE CITY, INC.
By:
---------------------------
Name:
-------------------------
Title:
-------------------------
<PAGE> 63
EXHIBIT D
FORM OF REAL PROPERTY LEASE
[Attached hereto.]
<PAGE> 64
LEASE AGREEMENT
This Lease Agreement effective on the 1st day of January, 1999, by and
between LA MARGARITA COMPLEX, LLP, a Michigan Limited Partnership, hereinafter
referred to as "Landlord" and LA SENORITA RESTAURANTS ACQUISITIONS CORP., a
Delaware Corporation, hereinafter referred to as "Tenant" and CASA OLE'
RESTAURANTS, INC., a Delaware Corporation, hereinafter referred to as
"Guarantor." In consideration of the mutual covenants herein contained, the
parties agree as follows:
1. Description of Premises.
Landlord, in consideration of the rent to be paid and the covenants and
agreements to be performed by Tenant, does hereby lease and demise unto Tenant
the following described premises situated in the ________ of ___________, County
of ____________________ and State of Michigan, consisting of the premises at
[ADDRESS] ________________________________, which includes without limitation a
building containing approximately _________ square feet, (the "Building") and
associated parking areas as shown on the site plan attached hereto as Exhibit A,
and as more particularly described on Exhibit A-1 attached hereto (collectively,
the "Leased Premises").
2. Term.
The term of this Lease is twenty (20) years (240 months) commencing on
January 1, 1999 (the "Commencement Date") and expiring on December 31, 2019 (the
"Expiration Date") (the "Term"), unless earlier terminated as authorized herein.
3. Tenants Acceptance of Property.
At the commencement of the Term, Tenant shall accept the Building,
improvements, and any equipment on or in the Leased Premises, in their existing
condition, latent structural defects excepted. No representation, statement or
warranty, express or implied, has been made by or on behalf of Landlord as to
such condition, or as to the use that may be made of such property except as
otherwise expressly set forth herein. In no event shall Landlord be liable for
any defect in such property or for any limitation on its use, except as
otherwise expressly set forth herein.
4. Rent.
a. All rent payable to Landlord shall be paid to LA MARGARITA COMPLEX,
LLP at 1026 Hannah, Traverse City, Michigan 49684.
b. Net Rent. Annual Net Rent shall be a sum equal to six and
five-tenths percent (6.50%) of the "Annual Sales" (as defined below) of the
Leased Premises (the "Annual Net Rent"). The Minimum Annual Net Rent shall be
five percent (5.00%) of the Annual Sales from the Leased Premises for the
calendar year 1998 (the "Minimum Annual Net Rent").
<PAGE> 65
Tenant agrees to pay Landlord on the first day of each month during
this Lease, monthly installments of the greater of the Minimum Annual Net Rent
and the Annual Net Rent. Tenant shall pay Annual Net Rent based upon quarterly
estimates of such sales:
i. No later than the first day of each quarter, Tenant shall
supply to Landlord an estimate of Tenant's sales for that
quarter, computed in accordance with Section 4(b) iii below.
Tenant's monthly rental payment of Annual Net Rent shall be
made on the first day of the month for that month, using the
following formula:
Tenant's Estimate of the Current Quarter's Sales,
times Six and One Half Percent (6.50%), divided by
three (3).
No later than twenty (20) days after the end of each quarter,
Tenant shall have determined the actual sales for such
quarter. If sales for such subject quarter are greater than
Tenant's prior estimate, then Tenant shall within five (5)
days, forward to Landlord the additional rent owed. If sales
for such subject quarter are less than Tenant's prior
estimate, then Tenant shall deduct the difference from the
next month's rent. In the event the commencement date of this
Lease begins on a day other than the beginning of a quarter,
the calculation of sales and the payment of rent shall be
prorated.
ii. The Minimum Annual Net Rent shall be subject to an adjustment
increase, calculated every two (2) years on the anniversary of
the Commencement Date with the first adjustment to occur on
the first day of the third year of this Lease. The bi-annual
increase shall be equal to four percent (4.00%) of the then
current Minimum Annual Net Rent. Tenant shall be responsible
for making said adjustment and paying rent in accord with
these adjustments. Landlord shall have the right, not more
than two (2) times in a calendar year, to have a certified
public accountant (at Landlord's expense) inspect the books of
Tenant and a calculation of the adjusted rent for the previous
calendar year upon not less than five (5) business days'
notice. Landlord's Inspection shall occur in Tenant's offices
where such records are kept, and any underpayment or
overpayment of Annual Net Rent paid shall be corrected
promptly by payment by Landlord or Tenant, as applicable.
iii. The term "Annual Sales" as used herein, means the gross sales
price of all merchandise, goods, property and services sold at
or from the Leased Premises (whether for cash or otherwise) by
Tenant. Annual Sales shall not include: (i) uncollectible
accounts receivable and uncollectible credit card collection ;
(ii) promotional material given away by Tenant ; (iii) sales,
gross receipts, and excise and similar taxes; (iv) the sales
price of merchandise that is returned by customers and
accounts receivable that are determined by Tenant in
accordance with its
<PAGE> 66
normal business practices to have become uncollectible to the
extent included in the computation of Annual Sales when the
merchandise is sold; (v) any exchange of merchandise between
stores of Tenant when such exchange is made solely for the
convenient operation of Tenant's business and not for the
purpose of consummating away from the Leased Premises a sale
made in, at or from the Leased Premises; (vi) returns to
shippers or manufacturers; (vii) sales of fixtures, machinery
and equipment, which are not part of Tenant's stock in trade,
after use thereof in the conduct of Tenant's business; and
(viii) the amount of any discount on sales to employees.
iv. It is the intention of Landlord and Tenant that rent for each
renewal term of the Lease shall be an amount to be agreed upon
by Landlord and Tenant, and in the absence of such an
agreement, the rent shall be determined based upon the formula
whereby Annual Net Rent, or the Minimum Annual Net Rent for
the initial Term of the Lease was determined. It is the
intention of Landlord and Tenant that the rent herein
specified shall be net to Landlord in each year during the
Term of this Lease. Accordingly, all costs, expenses, and
obligations of every kind relating to the Leased Property
(except as otherwise specifically provided in this Lease)
which are attributable to the Term of this Lease shall be paid
by Tenant, and Landlord shall be indemnified by Tenant against
such costs, expenses and obligations, except to the extent
that the costs, expenses or obligations are created,
triggered, caused by or otherwise aggravated by Landlord's
actions, inactions, responsibilities under this Lease. All
costs, expenses, and obligations of every kind relating to the
Leased Premises which are attributable to a period before or
after the Term of this Lease shall be paid by Landlord, and
Tenant shall be indemnified by Landlord against such costs,
expenses and obligations.
c. Additional Rent. All taxes, charges, costs, and expenses which
Tenant is required to pay hereunder, including but not limited to the items set
forth below, together with all interest and penalties that may accrue thereon in
the event of Tenant's failure to pay such amounts, and all damages, costs, and
expenses which Landlord may incur by reason of any default of Tenant or failure
on Tenant's part to comply with the terms of this Lease, shall be deemed to be
"Additional Rent" and, in the event of nonpayment by Tenant, Landlord shall have
all the rights and remedies with respect thereto as Landlord has for the
nonpayment of the Annual Net Rent. The Annual Net Rent, together with the
Additional Rent, shall hereinafter collectively be referred to as "Rent."
i. Taxes. Tenant shall pay all real estate taxes, assessments,
water and sewer charges, personal property taxes, and other
governmental levies against the Leased Premises, and also any
occupancy tax and "tax on rents" attributable to the Term of
the Lease (all of which are herein called "Impositions"). The
phrase "tax on rents" shall mean any tax levied, assessed, or
imposed in connection with the receipt of Rent under this
Lease for the use and occupancy of the Leased
<PAGE> 67
Premises, in lieu of, in whole or in part, any real estate or
personal property tax upon the Leased Premises. If Impositions
may be made in installments without penalty, then Tenant shall
be obligated to pay only such installments as are attributable
to the Lease Term. All Impositions for the tax years in which
this Lease shall commence and terminate shall be apportioned
between Tenant and Landlord.
Tenant shall have the right, after written notice to Landlord,
to contest by appropriate legal proceedings, diligently
conducted in good faith, the validity or amount of any such
Impositions and to delay payment thereof pending the
prosecution of such proceedings, provided no civil or criminal
penalty would be incurred by Landlord and no lien or charge
would be foreclosed or satisfied out of the Leased Premises or
the Building by reason of such contest and/or delay. Tenant
shall indemnify and hold Landlord harmless from any and all
costs, expense, including reasonable attorney fees, and
obligations of every kind relating to the actions taken by
Tenant in connection with the legal proceedings referenced
herein.
ii. Operating expenses. Tenant shall pay all expenses in the
operation of the Leased Premises applicable to the Term of the
Lease, except (1) any interest and amortization on mortgages
encumbering the fee title at any time, (2) rentals payable by
Landlord as tenant under any superior lease, and (3) any
estate, inheritance, income or other personal taxes of
Landlord.
iii. Receipts. Tenant shall furnish to Landlord official receipts
or other satisfactory proof of payment of the Impositions,
within a reasonable time after demand by Landlord.
iv. Power of attorney. Landlord appoints Tenant the
attorney-in-fact of Landlord for the purpose of making all
payments to be made by Tenant pursuant to any of the
provisions of this Lease to persons other than Landlord. In
case any person to whom any sum is directly payable by Tenant
under any of the provisions of this Lease shall refuse to
accept payment of such sum from Tenant, Tenant shall thereupon
give prompt written notice to Landlord within three (3)
business days, such notice to be accompanied by payment of
such sum to Landlord. In such event, Landlord agrees to
promptly make such payments to the appropriate entity on
Tenant's behalf.
5. Security Deposit.
(a) Deposit. Concurrently with the execution of this Lease, the
Tenant has deposited with the Landlord the sum of Six Thousand ($6,000.00)
Dollars as security for the performance by the Tenant of all the conditions
required to be performed by the Tenant under this Lease.
<PAGE> 68
Such sum shall be returned to the Tenant after the expiration of the term of
this Lease provided the Tenant has performed all such conditions. Prior to the
time when the Tenant shall be entitled to the return of the security deposit,
the Landlord shall be entitled to intermingle such deposit with its own funds
and to use such sum for such purposes as the Landlord may determine. The Tenant
shall not be entitled to any interest on the security deposit.
(b) Default. In the event of default by the Tenant in respect of any of
the conditions of this Lease, including but not limited to the payment of rent
and Additional Rent, the Landlord may use, apply or retain all or any part of
such security deposit for the payment of any unpaid rent and Additional Rent, or
for any other amount which the Landlord may be required to spend by reason of
the default of the Tenant, including any damages or deficiency in the reletting
of the Leased Premises, regardless of whether the accrual of such damages or
deficiency occurs before or after an eviction or a summary reentry or other
reentry by the Landlord.
(c) Assignment. The security deposit shall not be assigned or
encumbered by the Tenant without the written consent of the Landlord, and any
assignment or encumbrance without such consent shall not bind the Landlord.
Regardless of any assignment of this Lease by the Tenant, the Landlord may
return the security deposit to the original Tenant, in the absence of evidence
satisfactory to the Landlord of an assignment of the right to receive such
security deposit or any part of the balance thereof.
6.Interest. Any installment of monthly Rent payable hereunder by Tenant
to Landlord not paid when due shall bear interest at the lesser of (i) prime
rate plus two percent (2%) per annum or (ii) the maximum allowable rate, from
and after five (5) days after the due date until the same shall be paid, at the
sole option of Landlord. By charging interest on payments which shall be
overdue, Landlord shall not be deemed to have waived its right to declare a
default in the Lease and demand possession.
7. Use, Repairs, Replacement, Maintenance and Service. (a) Tenant
covenants that the Leased Premises shall be used and occupied only for the
operation of a restaurant serving primarily Mexican style food, with the sale
and service of alcoholic beverages, with incidental family style entertainment
(not offensive to Landlord) which has been previously available or supplied by
Landlord while it occupied the Premises, and for no other purpose or purposes
without the prior written consent of Landlord, which consent may not be withheld
or delayed; provided that in no event shall the Premises ever be used for any
type of sexually-oriented enterprise. Landlord shall be entitled to injunctive
relief to enforce this clause and the prohibitions herein.
(b) Tenant shall have the right to temporarily cease operating its
business in the Leased Premises for the purposes of remodeling the Leased
Premises or due to condemnation, casualty, an act of God, or other reason beyond
Tenant's reasonable control. Should Tenant cease operating its business for
purposes of remodeling in excess of ninety (90) days, then Landlord shall have
the right, but not the obligation, to terminate this Lease upon thirty (30) days
written
<PAGE> 69
notice to the Tenant. The foregoing notwithstanding, Landlord shall have any and
all rights and remedies available to it as a consequence of the termination of
the Lease caused by Tenant which shall constitute a default under the material
terms and conditions hereof.
In the event there is an cessation of operations by Tenant for more
than five (5) business days in any thirty (30) day period, then the Landlord may
impute sales, based on historical Annual Sales increased for inflation, to
determine the Annual Net Rent under paragraph 4 above.
(c) Tenant shall maintain the entire Leased Premises in good repair and
make all necessary repairs and replacements to all buildings, interior and
exterior, including but not limited to electrical, mechanical, heating and
plumbing equipment, structural and non-structural repairs, any roof and grass
areas, parking areas, grounds, landscaping and sidewalk areas, [TRAVERSE CITY
LEASE: provided, however, that Landlord shall reimburse Tenant for Landlord's
proportionate share (9.6%) of Tenant's cost to repair the roof]. Tenant
expressly acknowledges that the electrical, mechanical, heating, plumbing
equipment, structural and non-structural repairs as well as those fixed assets
not designated with an "*" on Exhibit B hereto shall remain with the Leased
Premises upon the termination of the Lease. Landlord represents and warrants
that as of the Commencement Date, the entire Leased Premises (including but not
limited to the Building and all equipment located therein) is in good repair and
condition, reasonable wear and tear excepted, and covenants to reimburse Tenant
for its reasonable expenses in the event this warranty and representation is not
correct; provided, however that this right of reimbursement shall exist only as
to breaches that have occurred on the date of occupancy by Tenant and that this
warranty and representation is not a guarantee that said Building and equipment
will continue to remain in good repair and condition into the future. Tenant
shall have the continuing obligation to inspect the Leased Premises and
accomplish repairs. Maintenance shall include the removal of snow from parking
and sidewalk areas. [AS TO TRAVERSE CITY LEASE ONLY: Except for Landlord's
obligation to maintain its prorata share (9.6%) of the roof] Landlord shall have
no obligation to maintain or repair any part of the Leased Premises. All costs,
expenses, and other sums incurred pursuant to this section shall be Additional
Rent. The taking of possession of the Leased Premises by the Tenant shall be
conclusive evidence that, at such time, the Leased Premises were in satisfactory
or acceptable condition, except those placed in writing and signed by the
parties at that time.
(d) Tenant shall, throughout the term of this Lease, promptly comply,
or cause compliance, with all laws and ordinances and the orders, rules,
regulations and requirements of all Federal, State, County and Municipal
governments, and appropriate departments, commissions, boards and offices
thereof, which may be applicable to the Leased Premises, including, without
limitation, the fixtures, plate glass and equipment therein and the landscaping,
sidewalks and curbs, if any, adjoining the Leased Premises (collectively,
"Laws"), whether or not the same shall presently be within the contemplation of
the parties hereto or shall involve any change of governmental policy and
whether or not the same require structural or non-structural, ordinary and
extraordinary, interior or exterior, foreseen or unforeseen, repairs,
alterations, or additions, and irrespective of the cost thereof.
<PAGE> 70
(e) Tenant shall have the right to contest by appropriate legal
proceedings, before any tribunal having jurisdiction, whether judicial or
administrative, the validity of any law, ordinance, order, rule, regulation or
requirement of the nature herein described.
8. Utilities. The cost of water, heat, air conditioning, electrical
service, natural gas and other utility services provided to the Leased Premises
during the Term shall be paid by Tenant as Additional Rent.
9. Insurance. Tenant shall pay for, and keep in force, special form
(formerly known as all risk) insurance policies pertaining to the Leased
Premises, and all buildings and other improvements thereon including tenant
improvements. The coverage under such policies shall be public liability
insurance with coverage of not less than One Million ($1,000,000.00) Dollars
combined single limit for general liability, plus Five Million ($5,000,000.00)
Dollars excess liability for each accident or occurrence of bodily injury or
property damage. Such insurance shall cover comprehensive general liability to
include acts commonly referred to as "personal injury," such as false arrest,
detention or imprisonment, malicious prosecution, libel, slander, defamation,
invasion of privacy, and wrongful entry or eviction, and special form property
insurance covering buildings and improvements on the Leased Premises in an
amount equal to one hundred (100%) percent of the replacement cost thereof with
either automatic increase in construction costs or inflation guard provision,
and a clause for contingent liability due to operation of local building
ordinances. Landlord shall be named as an additional insured on all such
policies and such policies shall specifically provide that Landlord shall be
given at least thirty (30) days notice of intent on the part of the insurer to
cancel such insurance. Tenant shall have the right to carry its insurance under
a blanket policy which covers more than one location. Tenant shall furnish
Landlord with a certificate or certificates of insurance as evidence that such
insurance is in full force at all times during the term hereof.
10. Mutual Release. Anything in this Lease to the contrary
notwithstanding, it is agreed that each party (the "Releasing Party") hereby
releases the other party (the "Released Party") from liability which the
Released Party would, but for this paragraph, have had to the Releasing Party
during the term of this Lease, resulting from the occurrence of any accident or
occurrence or casualty (i) which is normally covered by a fire and extended
coverage policy, or an all risk of direct physical loss policy, or (ii) covered
by any other insurance being carried by the Releasing Party at the time of such
occurrence; provided that such release shall not invalidate such insurance
coverage.
11. Environmental Matters. Tenant shall strictly comply with all laws,
ordinances, orders, rules, regulations and requirements of all Federal, State,
County and Municipal governments and appropriate departments, commissions,
boards and offices thereof pertaining to environmental matters (the "Hazardous
Materials Laws"). Tenant shall store all hazardous materials and substances used
in connection with the conduct of its business on the Leased Premises in a
manner which will prevent spills or the release of any hazardous or toxic
substances into the air or onto the ground or into the water. Leased Premises
shall be used for
<PAGE> 71
the storage of hazardous substances as that term is used in the environmental
laws, ordinances and regulations only to the extent necessary to conduct
Tenant's business on the premises, and Tenant may, with Landlord's consent
(which consent is deemed to have been given so long as the same is performed in
accordance with all applicable Hazardous Materials Laws) bring, keep or use in
or about the Leased Premises under the conditions approved by the Landlord,
items customarily used to operate or maintain a restaurant, provided such items
are used and stored in accordance with all applicable Hazardous Materials Laws.
Tenant shall defend, indemnify and hold Landlord harmless from any and all loss,
cost, expense, damage or claim, of whatever name or nature, arising out of a
spill or release of any such hazardous substances on the Leased Premises unless
caused by Landlord occurring after the date this Lease was executed.
Landlord represents and warrants that the Leased Premises (and
Landlord's activities thereon at all times) comply with all laws, ordinances,
orders, rules, regulations and requirements of all Federal, State, County and
Municipal governments and appropriate departments, commissions, boards and
offices thereof pertaining to environmental matters. Notwithstanding any other
provision of this Lease to the contrary, it shall be Landlord's sole
responsibility, without cost or expense to Tenant, to comply with any and all
present and future Hazardous Materials Laws which apply to the Leased Premises
as a consequence of any condition which existed prior to Tenant taking
possession of the Leased Premises, including but not limited to the removal of
asbestos containing materials from the Leased Premises, if required by
applicable law. Landlord shall indemnify, defend and hold Tenant harmless from
and against any and all liabilities, losses and costs, expenses, damages or
claims of whatever name or nature, including, without limitation, Tenant's
reasonable counsel fees, which Tenant may incur in connection with the presence
of hazardous substances at the Leased Premises (including but not limited to
asbestos containing materials), unless such hazardous substances were placed on
the Leased Premises by anyone other than the Landlord.
If any release of hazardous materials, or the clean-up of such release,
materially interferes with Tenant's use or occupancy of the Leased Premises
(other than a release for which Tenant is responsible as set forth above), then
(i) Rent and all other charges payable under the Lease shall abate during the
period of such interference (based on the extent to which Tenant's use of the
Leased Premises is impaired, as determined by Tenant); and (ii) if such
interference continues for a period in excess of thirty (30) days, provided,
however, that if such interference is of a type which cannot be reasonably cured
within thirty (30) days, then Landlord shall have such longer time as may be
reasonably necessary so long as Landlord commences such cure within thirty (30)
days and diligently prosecutes such cure to completion, or poses a health hazard
to Tenant's employees for any period of time, then Tenant, at its option, may
terminate this Lease.
12. Reimbursement of Expenses. If Tenant defaults in the observance or
performance of any of the terms or provisions of this Lease, and does not cure
such default with the applicable cure period, then Landlord may, without further
notice, perform the same for the account of Tenant. Any reasonable expense, cost
or obligation of Landlord arising from Tenant's default, including reasonable
attorney fees, shall be deemed to be Additional Rent and shall be paid by Tenant
to Landlord within fifteen (15) days of the rendition of any bill or statement
to Tenant therefor.
<PAGE> 72
13. Reimbursement of Litigation Expense. In case the Landlord shall,
without fault on its part, be made a party to any litigation, including but not
limited to litigation arising out of Michigan dram shop laws, liquor liability
laws, or other laws associated with the sale, furnishing or making available
alcoholic beverages, commenced by or against Tenant, Tenant shall pay all
reasonable costs, including reasonable attorney's fees incurred by or against
Landlord in connection with such litigation. The Tenant shall also pay all costs
and reasonable attorney's fees incurred by or against the Landlord in enforcing
any of the covenants, terms, and provisions of this Lease, or in terminating
this Lease by reason of the Tenant's default. In any other case, should it be
necessary or proper for Landlord or Tenant to bring any action under this Lease
or to consult or place said Lease, or any amount payable hereunder, with an
attorney concerning or for the enforcement of any of such party's right
hereunder, then Landlord and Tenant each agree that the non-prevailing party
shall pay all attorneys' fees and costs reasonably incurred by the prevailing
party. All such costs and attorney fees payable by Tenant pursuant to this
provision shall be treated as Additional Rent.
14. Assignment. Except as otherwise herein permitted, Tenant shall not
assign this Lease or any right hereunder, or hypothecate or mortgage the same,
or sublet the Leased Premises, or any part thereof, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed.
Any assignment, hypothecation, mortgage or subletting without the said
written consent shall be void. Notwithstanding the foregoing, Tenant may,
without the prior written approval of the Landlord, assign this Lease in its
entirety, to: (a) any entity which has the power to direct Tenant's management
and operations or any entity whose management and operations is controlled by
Tenant; or (b) any entity a majority of whose stock or partnership interest is
directly or indirectly owned by Tenant; or (c) any entity in which or with which
Tenant, its successors or assigns, is merged or consolidated; or (d) any entity
acquiring this Lease and a substantial portion of Tenant's assets; or (e) any
successor to a successor entity becoming such by either of the methods described
in subsections (c) or (d) above; or (f) any franchisee of Tenant, each of the
foregoing exceptions subject to the limitation that nothing herein shall relieve
Tenant or guarantor of their respective obligations hereunder.
15. Subordination. This Lease is subject and subordinate at all times
to the lien of existing and future mortgages on the Leased Premises. Although no
instrument or act on the part of Tenant shall be necessary to effectuate such
subordination, Tenant will, nevertheless, execute and deliver such further
instruments subordinating this Lease to the lien of all such mortgages as may be
desired by the mortgagee. The Tenant hereby appoints the Landlord its
attorney-in-fact, irrevocably, to execute and deliver any such reasonable
instrument for the Tenant. If Tenant fails to do so within five (5) business
days after Landlord's written request, Landlord shall use its best efforts to
obtain a non-disturbance agreement reasonably acceptable to Tenant from any
existing lienholders. Notwithstanding the foregoing, this Lease shall be
subordinate to future
<PAGE> 73
liens only if the lienholder agrees in writing that so long as Tenant is not in
default under this Lease past applicable cure periods, its use and occupancy of
the Leased Premises will not be disturbed notwithstanding any default by
Landlord under the instruments creating such lien.
16. Improvements by Tenant. During the term of this Lease, Tenant may
remodel or alter the interior of the Building without the consent of Landlord so
long as such changes are non-structural in nature and comply with all codes,
ordinances, and laws in effect at the time of remodeling. All structural and
material exterior alterations may be made only with Landlord's prior written
consent, which consent shall not be unreasonably withheld or delayed. Tenant
shall have the right to modify its signs and exterior landscaping without
Landlord's consent so long as such changes are in compliance with the Laws.
Tenant shall be permitted at any time during the Lease, to remove any additions
or improvements made by it, provided, however, that it repairs any damage to the
Leased Premises caused by such removal or pays for any damages caused by such
removal, and further provided, that any such addition or improvement not removed
within ten (10) days of the Expiration Date, shall be deemed abandoned and
shall, thereupon, become the property of Landlord without compensation to
Tenant. Mechanical systems, fixtures and equipment comprising a part of or
attached to the Leased Premises shall become part of the structure and shall not
be removed in any event by Tenant, the foregoing notwithstanding.
17. Default and Reentry.
(a) Tenant Default, reentry. In the event of: (i) any failure of Tenant
to pay any Rent (including additional rent) or other sums when due hereunder
after Landlord has provided Tenant with seven (7) days notice and opportunity to
cure as required under applicable Laws; or (ii) Tenant's default in performing
any of the other terms, conditions or covenants of this Lease to be observed or
performed by Tenant, for more than ten (10) days after written notice of such
other default shall have been given to Tenant, provided, however, if such
default is of the type which cannot reasonably be cured within thirty (30) days,
then Tenant shall have such longer time as may be reasonably necessary so long
as Tenant commences such cure within thirty (30) days and diligently prosecutes
such cure to completion, or if Tenant or an agent of Tenant shall falsify any
report required to be furnished to Landlord pursuant to the terms of this Lease;
or (iv) suffer this Lease to be taken under any writ of execution, then
Landlord, besides other rights or remedies it may have, shall have the immediate
right to terminate this Lease or reenter and attempt to relet without
terminating this Lease and remove all persons and property from the Leased
Premises and such property may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Tenant all without resort to
legal process and without being deemed guilty of trespass, or becoming liable
for any loss or damage which may be occasioned thereby unless caused by the
negligence or willful misconduct of Landlord, its employees, agents or
contractors.
(b) Application of rent, deficiency. If Landlord, without terminating
this Lease, either: (i) elects to reenter and attempts to relet; or (ii) takes
possession pursuant to legal proceedings; or (iii) takes possession pursuant to
any notice provided by law, then it may, from time to time, make such
alterations and repairs as may be necessary in order to relet the Leased
<PAGE> 74
Premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or rentals and upon
such other terms and conditions as Landlord in its reasonable discretion may
deem advisable. Landlord shall use reasonable efforts to relet the Leased
Premises. Upon each such reletting, all rentals received by Landlord from such
reletting shall be applied, first, to the payment of any indebtedness other than
Rent due hereunder from Tenant to Landlord second, to the payment of any costs
and expenses of such reletting, including brokerage fees and reasonable
attorney's fees; third, to the payment of Rent due and unpaid hereunder, and the
residue, if any, shall be held by Landlord and applied to payment of future Rent
as the same may become due and payable hereunder. If such rentals received from
such reletting during any month be less than that to be paid during that month
by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. No such reentry or taking
possession of the Leased Premises by Landlord shall be construed as an election
on its part to terminate this Lease unless a notice of such intention be given
to Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for such previous
breach. Should Landlord at any time terminate this Lease for any breach, in
addition to any other remedies it may have, it may recover from Tenant all
damages it may incur by reason of such breach, (excluding punitive damages),
including the cost of recovering the Leased Premises, reasonable attorney's
fees, and including the worth at the time of such termination of the excess, if
any, of the amount of Rent and charges equivalent to Rent reserved in this Lease
for the remainder of the stated term over the then reasonable rental value of
the Leased Premises for the remainder of the stated term, all of which amounts
shall be reduced to present value (using the current "prime" interest rate of
Chase Bank, or should such financial institution no longer exist, a comparable
financial institution), and shall be immediately due and payable from Tenant to
Landlord. In determining the Rent which would be payable by Tenant hereunder,
subsequent to default, the Annual Net Rent for each year of the unexpired term
shall be equal to the Minimum Annual Net Rent stated in paragraph 4, and
Additional Rent stated in paragraph 4, which future Additional Rent shall be
calculated based upon the average of the Additional Rent due and payable during
the preceding three (3) calendar years or the average of all Additional Rent due
and payable during the full term of the Lease if shorter than three (3) full
calendar years.
(c) Landlord's Default. If Landlord defaults in the observance or
performance of any term or covenant required to be performed by it under this
Lease, Tenant, shall have such rights and remedies that are available hereunder.
If Landlord defaults in the observance or performance of any term or covenant
required to be performed by it under this Lease, Tenant, after not less than
thirty (30) days written notice to Landlord (provided, however, if such default
is of a type which cannot reasonably be cured within thirty (30) days, then
Landlord shall have such longer time as may be reasonably necessary so long as
Landlord commences such cure within thirty (30) days and diligently prosecutes
such cure to completion), may, but shall not be obligated to, remedy such
default and in connection therewith may pay expenses and employ counsel,
provided that Tenant shall have the right to remedy such default without notice
in an emergency. Tenant may offset all sums expended or obligations incurred by
Tenant in
<PAGE> 75
connection therewith against Rent payable under the Lease, or at Tenant's
option, such sums shall be paid by Landlord to Tenant upon demand. If Tenant
elects not to remedy any such default, Tenant shall have the right to terminate
this Lease if such default is not remedied by Landlord within sixty (60) days of
the original written notice from Tenant, unless such default is of a type which
cannot be reasonably cured within said sixty (60) days as set forth above and
Landlord is continuing to demonstrate reasonable efforts to cure.
The parties acknowledge that Lease is executed in connection with that
certain Stock Purchase Agreement dated of even date herewith (the "SPA") between
Tenant, Guarantors, and parties related to the Landlord (the "Seller"), and that
the SPA is of economic benefit to all parties Should Seller default under the
SPA, and said default not be cured within ten (10) business days written notice
to the Landlord, Tenant shall have the right to, upon prior written notice,
deposit the Rent and Additional Rent into an interest bearing escrow account
(with interest earned to be disbursed to the prevailing party upon resolution of
the dispute) with Grand Traverse Title Company, 116 Boardman Avenue, Traverse
City, Michigan, and said funds shall be held in escrow pending resolution of any
alleged default. Should Tenant fail to pay Rent and Additional Rent or otherwise
comply with the terms and conditions of this Lease, then the same shall be
considered a default entitling Landlord to all remedies hereunder, and
acquisition of the escrowed funds. At no time shall Tenant be relieved of its
duties and responsibilities to pay Rent and Additional Rent, either to Landlord
or to the Escrow Agent as contemplated herein. Tenant shall not have any right
of unilateral offset.
(d) No waiver. No waiver of any covenant or condition or the breach of
any covenant or condition of this Lease shall be taken to constitute a waiver of
any subsequent breach of such covenant or condition nor to justify or authorize
the nonobservance on any other occasion of the same or of any other covenant or
condition hereof, nor shall the acceptance of Rent by Landlord at any time when
Tenant is in default under any covenant or condition hereof, be construed as a
waiver of such default or of Landlord's right to terminate this Lease on account
of such default, nor shall any waiver or indulgence granted by Landlord to
Tenant be taken as an estoppel against Landlord, it being expressly understood
that if at any time Tenant shall be in default in any of its covenants or
conditions hereunder an acceptance by Landlord of Rent during the continuance of
such default or the failure on the part of Landlord promptly to avail itself of
such other rights or remedies as Landlord may have, shall not be construed as a
waiver of such default, but Landlord may at any time thereafter, if such default
continues, terminate this Lease on account of such default.
(e) Cumulative remedies. The rights and remedies given to either party
by this Lease shall be deemed to be cumulative and no one of such rights and
remedies shall be exclusive at law or in equity of the rights and remedies which
such party might otherwise have by virtue of a default under this Lease, and the
exercise of one such right or remedy shall not impair such party's standing to
exercise any other right or remedy.
18. Landlords Security Interest.
<PAGE> 76
(a) Security interest, collateral. For valuable consideration and as
security for the payment of rent, additional rent and all other charges becoming
due hereunder, Tenant hereby grants to Landlord a security interest in the
following described collateral: (i) All inventory in the Demised Premises during
the term of this Lease; (ii) All equipment and other personalty placed in the
Demised Premises during the term of this Lease; and (iii) All of the proceeds of
said inventory, equipment and personalty; provided, however, that such security
interest shall be automatically subordinated to the interest of any mortagee or
lienholder of Tenant, now or hereafter, during the term of the Lease. Landlord
agrees to execute any reasonable subordination agreement to such effect within
five (5) business days of Tenant's written request and authorizes Tenant to act
as its attorney-in-fact if Landlord fails to comply with this provision.
(b) Default. Upon the happening of any of the following events or
conditions, namely: (1) Default in the payment of rent, additional rent, or
performance of any of the obligations or of any covenant or liability contained
or referred to herein; and/or (2) Making of any levy, seizure or attachment of
the collateral; and/or (3) Death, dissolution, termination of existence,
insolvency, business failure, appointment of a receiver, assignment for the
benefit of creditors by, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Tenant or any guarantor or surety
for Tenant, thereupon, or any time thereafter (such default not having
previously been cured), Landlord shall then have all the remedies of a secured
party under the laws of the state in which the demised premises are located,
including, without limitation thereto, the right to take possession of the
collateral and for that purpose Landlord may enter upon the demised premises and
remove the same therefrom. Landlord shall give Tenant at least ten days prior
notice of any public notice thereof or of the date after which any private sale
or any other intended disposition is to be made, and at any such sale Landlord
may purchase the collateral.
(c) Termination. The security agreement and the security interest and
collateral created hereby shall be terminated when all of the rent and other
charges becoming due during the term of this Lease or extension thereof have
been paid in full.
19. Payment and Possession After Termination. The failure of Tenant to
surrender the Leased Premises upon termination without Landlord's written
consent shall result in a tenancy for month-to-month, at an Annual Net Rent rate
of 125% of the Annual Net Rent stated in this Lease, plus Additional Rent. This
provision does not grant to Tenant any right to hold over or extend this Lease.
Nor shall payment of any money by Tenant after termination result in an
extension or renewal of this Lease unless the parties execute a new lease or
amendment hereto. Landlord may receive and collect any money due under this
Lease and the payment of the same shall not waive any notice, judgment, or
pending lawsuit.
20. Landlords Right of Access. Tenant shall permit Landlord or
Landlord's agents to inspect or examine the Leased Premises at any reasonable
time following twenty-four (24) hours prior written notice, and shall permit
Landlord to make such repairs, alterations,
<PAGE> 77
improvements, or additions in the Leased Premises or to the building of which
the Leased Premises is a part, that Landlord is required under this Lease to
make or which Tenant has covenanted herein to do and has failed so to do
following written notice and applicable cure periods, without the same being
construed as an eviction of Tenant in whole or in part and the Rent shall in no
manner abate while such repairs, alterations and improvements, or additions are
being made by reason of loss or interruption of the business of Tenant because
of the prosecution of such work. Landlord shall exercise its good faith efforts
in connection with any such inspections, repairs, alterations, improvements, or
additions, but shall not be responsible in any way for any consequential special
or enhanced damages incurred by Tenant in connection therewith.
21. Peaceful Possession. Tenant, on paying the Rent herein provided,
and performing all the covenants and agreements herein contained to be performed
by it, in the manner and at the time set therefor, (subject to applicable cure
periods), shall and may peacefully and quietly have, hold and occupy the Leased
Premises as described herein.
22. Liens. Except as herein permitted, Tenant shall have no power to do
any act or make any contract which may create or be the foundation for any lien,
mortgage or other encumbrance upon the reversion or other estate of Landlord, or
upon any interest of Landlord in the Leased Premises or in the buildings or
improvements thereon; it being agreed that should Tenant cause any alterations,
rebuildings, replacements, changes, additions, improvements or repairs to be
made to the Leased Premises, or cause any labor to be performed or material to
be furnished therein, thereon or thereto, neither Landlord nor the Leased
Premises shall under any circumstances be liable for the payment of any expense
incurred or for the value of any work done or material furnished unless
otherwise expressly set forth in this Lease, but all such alterations,
rebuildings, replacements, changes, additions, improvements and repairs, and
labor and material, shall be made, furnished and performed at Tenant's expense,
and Tenant shall be solely and wholly responsible to contractors, laborers and
suppliers furnishing and performing such labor and material. If, because of any
act or omission (or alleged act or omission) of Tenant, any construction or
other lien, charge or order for the payment of money shall be filed against the
Leased Premises or any building or improvements thereon, or against Landlord, or
any conditional bill of sale or security agreement may exist with respect to any
building equipment or any materials used in the construction or alteration of,
or installed in, any such building or improvement (whether or not such lien,
charge or order, conditional bill of sale or security agreement is valid or
enforceable as such), Tenant shall, at its own cost and expense, cause the same
to be canceled and discharged of record or bonded within ten (10) business days
after written notice hereof. The provisions of this section shall not apply to
any work which is the responsibility of Landlord under this Lease.
23. Bankruptcy or Insolvency.
(a). Conditions to the Assumption and Assignment of the Lease Under
Chapter 7 of the Bankruptcy Code. In the event that Tenant shall become a debtor
under Chapter 7 of the
<PAGE> 78
Bankruptcy Code, and the Trustee or Tenant shall elect to assume this Lease for
the purpose of assigning the same or otherwise, such election and assignment may
only be made if all of the terms and conditions of Section B and Section C
hereof are satisfied. If such Trustee shall fail to elect or assume this Lease
within sixty (60) days after the filing of the Petition, this Lease shall be
deemed to have been rejected. Landlord shall be thereupon immediately entitled
to possession of the Leased Premises without further obligation to Tenant or
Trustee, and this Lease shall be canceled, but Landlord's right to be
compensated for damages in such liquidation proceeding shall survive.
(b) Conditions to the Assumption of the Lease in Bankruptcy
Proceedings. In the event that a Petition for reorganization or adjustment of
debts is filed concerning Tenant under Chapter 11 of the Bankruptcy Code, or a
proceeding is filed under Chapter 7 of the Bankruptcy Code and is transferred to
Chapter 11, the Trustee or Tenant, as Debtor-in-Possession, must elect to assume
this Lease within seventy-five (75) days from the date of the filing of the
Petition under Chapter 11, or the Trustee or Debtor-in-Possession shall be
deemed to have rejected this Lease. No election by the Trustee or
Debtor-in-Possession to assume this Lease, whether under Chapter 7 or 11, shall
be effective unless each of the following conditions, which Landlord and Tenant
acknowledge are commercially reasonable in the context of a bankruptcy
proceeding of Tenant, have been satisfied, and Landlord has so acknowledged in
writing:
1) The Trustee or the Debtor-in-Possession has cured, or
has provided Landlord adequate assurance (as defined
below) that:
(i) Within ten (10) days of such assumption the
Trustee will cure all monetary defaults
under this Lease; and
(ii) Within thirty (30) days from the date of
such assumption the Trustee will cure all
non-monetary defaults under this Lease.
2) The Trustee or the Debtor-in-Possession has
compensated, or has provided to Landlord adequate
assurance (as defined below) that within ten (10)
days from the date of assumption Landlord will be
compensated for any pecuniary loss incurred by
Landlord arising from the default of Tenant, the
Trustee or the Debtor-in-Possession as recited in
Landlord's written statement of pecuniary loss sent
to the Trustee or Debtor-in-Possession.
3) The Trustee or the Debtor-in-Possession has provided
Landlord with adequate assurance of the future
performance of each of Tenant's, Trustee's, or
Debtor-in-Possession's obligations under this Lease;
provided, however, that:
(i) The Trustee or Debtor-in-Possession shall
also deposit with Landlord as security for
the timely payment of rent an amount
<PAGE> 79
equal to three (3) months' Rent (as adjusted
pursuant to this section) and other monetary
charges accruing under this Lease; and
(ii) If not otherwise required by the terms of
this Lease, the Trustee or
Debtor-in-Possession shall also pay in
advance on the date monthly Rent is payable
1/12th of Tenant's annual obligations under
this Lease for Additional Rent.
(iii) The obligations imposed upon the Trustee or
Debtor-in-Possession shall continue with
respect to Tenant or any assignee of the
Lease after the completion of bankruptcy
proceedings.
4) The assumption of the Lease will not breach any
provision in any other lease, mortgage, financing
agreement or other agreement by which Landlord is
bound relating to the Leased Premises.
5) For purposes of this section, Landlord and Tenant
acknowledge that, in the context of a bankruptcy
proceeding of Tenant, at a minimum "adequate
assurance" shall mean:
(i) The Trustee or the Debtor-in-Possession has
and will continue to have sufficient
unencumbered assets after the payment of all
secured obligations and administrative
expenses to assure Landlord that the Trustee
or Debtor-in-Possession will have sufficient
funds to fulfill the obligations of Tenant
under this Lease; and
(ii) The Bankruptcy Court shall have entered an
Order segregating sufficient cash payable to
Landlord, and/or the Trustee or
Debtor-in-Possession shall have granted a
valid and perfected first lien and security
interest and/or mortgage in property of
Tenant, Trustee or Debtor-in-Possession,
acceptable as to value and kind to Landlord
to secure to Landlord the obligation of the
Trustee or Debtor-in-Possession to cure the
monetary and/or non-monetary defaults under
this Lease within the time periods set forth
above.
(c) Conditions to the Assignment of the Lease in Bankruptcy
Proceedings. If the Trustee or Debtor-in-Possession has assumed the Lease
pursuant to the terms and provisions of paragraphs A and B herein, for the
purpose of assigning (or elects to assign) Tenant's interest under this Lease or
the estate created thereby, to any other person, such interest or estate may be
so assigned only if Landlord shall acknowledge in writing that the intended
assignee has provided adequate assurance as defined in this section of future
performance of all of the terms, covenants and conditions of this Lease to be
performed by Tenant.
<PAGE> 80
For purposes of this section, Landlord and Tenant acknowledge that, in
the context of a bankruptcy proceeding of Tenant, at a minimum "adequate
assurance of future performance" shall mean that each of the following
conditions have been satisfied, and assignee has so acknowledged in writing.
1) The assignee has submitted a current financial
statement audited by an officer of assignee which
shows a net worth and working capital in amounts
determined to be sufficient by Landlord to assure the
future performance by such assignee of Tenant's
obligation under this Lease;
2) The assignee, if required by Landlord, shall have
obtained guarantees in form and substance
satisfactory to Landlord from one or more persons who
satisfy Landlord's reasonable standards of
creditworthiness; and
3) Landlord has obtained all consents or waivers from
any third party required under any lease, mortgage,
financing arrangement or other agreement by which
Landlord is bound to perform Landlord to consent to
such assignment.
(d) Use and Occupancy Charges. When pursuant to the Bankruptcy Code,
the Trustee or Debtor-in-Possession shall be obligated to pay reasonable use and
occupancy charges for the use of the Leased Premises or any portion thereof,
such charges shall not be less than the Monthly Rent and Additional Rent as
defined in this Lease.
24. Damage or Destruction. If, during the lease Term, the buildings or
improvements located on the Leased Premises at the commencement of the Term or
thereafter erected thereon shall be destroyed or damaged in whole or in part by
fire or other cause, Tenant shall give Landlord prompt notice thereof, and
Tenant, at its own cost and expense, shall promptly repair, replace and rebuild
the same (or at the parties' mutual agreement, Landlord will accept the
insurance proceeds in lieu of Tenant's repairs), at least to the extent of the
value and as nearly as possible to the character of the buildings and
improvements existing immediately prior to such occurrence; and Landlord shall
in no event be called upon to repair, replace or rebuild any such buildings,
improvements or equipment, nor to pay any of the costs or expenses thereof
beyond or in excess of the insurance proceeds as herein provided. All insurance
proceeds received by Landlord or Tenant on account of such damage or destruction
shall be paid to an escrow agent to be agreed upon by Landlord and Tenant in the
event of such damage or destruction and shall be disbursed by the escrow agent
to pay or reimburse Tenant pursuant to an escrow agreement to be negotiated
among Landlord, Tenant and escrow agent to Tenant for such restoration, repairs,
replacement, rebuilding or alterations. There shall be no abatement of rent
during the period of restoration.
Restoration shall commence as soon as any insurance payments shall have
been received and necessary permits shall have been obtained. Tenant shall be
responsible to undertake all
1
<PAGE> 81
necessary action to render the Leased Premises safe and secure promptly after
any damage shall occur and to demolish damaged and dangerous structures and
remove debris.
(As to the Mount Pleasant Lease Only): If the Land Contract Vendor of
the Leased Premises shall, by the terms of its Land Contract, require that such
insurance proceeds be used to apply on the indebtedness, instead of to repair or
restoration, the Tenant shall be entitled to elect to repair or restore with its
own funds or to terminate this Lease by written notice to the Landlord given
within thirty (30) days of the damage. The termination shall be effective as of
the date of the notice.
25. Condemnation. If the whole or any part of the Leased Premises shall
be taken by any lawful authority under the power of eminent domain, then this
Lease and the term demised, at Tenant's option, shall thereupon terminate and
Tenant shall be liable for Rent only to the date of such termination. If a
portion of the Building is taken, then the Minimum Annual Net Rent shall be
adjusted proportionately. If the Lease is terminated, all compensation awarded
for any taking (or sale proceeds in lieu thereof) shall be the property of
Landlord; provided, however, that Tenant shall have the right to make a claim
separate and apart from Landlord's claim for moving expenses, tenant
improvements, trade fixtures and personalty, good will, and all other interests
and property for which Tenant is entitled to compensation under the Laws.
26. Notices. Whenever in this Lease it shall be required or permitted
that notice or demand be given or served by either party upon the other, such
notice or demand shall be in writing and shall be deemed to have been duly given
or served when addressed as set forth below: (i) when hand delivered; or (ii) on
the earlier of the date actually received or the third day after deposit in the
United States mail, postage prepaid, certified or registered mail, with return
receipt requested; or (iii) on the day following deposit with a nationally
recognized overnight courier; or (iv) on the day sent by facsimile transmission,
provided a copy of such notice is also sent by one of the methods set forth
above.
Landlord: LA MARGARITA COMPLEX, LLP
1026 Hannah
Traverse City, MI 49684
Tenant: c/o Casa Ole' Restaurants, Inc.
1135 Edgebrook
Houston, TX 77034-1899
Fax Number: 713-943-9554
27. Representations. No agreement shall be binding upon either party
unless made in writing and signed by it. No representation, guarantee or
warranty, except such as is herein contained, nor any collateral agreement
hereto shall be binding unless the same be in writing and shall refer to this
Lease.
<PAGE> 82
28. Severability. If any term, covenant, or condition of this Lease or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Lease shall be valid and enforced to
the fullest extent permitted by law.
29. No Option. The submission of this Lease for examination does not
constitute a reservation of or option for the Leased Premises.
30. Sale of Leased Premises. Landlord reserves the right to sell,
assign, transfer, mortgage or otherwise encumber the Leased Premises without
prior consent of the Tenant. Upon any sale or transfer, including any transfer
by operation of law, of the Leased Premises, Landlord shall be relieved from all
subsequent obligations under this Lease, provided that the buyer or transferee
shall assume such obligations in writing.
31. Headings. The captions in this Lease are inserted only for
convenience and are not to be construed as part of this Lease or as in any way
affecting it. All negotiations, considerations, representations and
understandings between the parties are incorporated herein, and may be modified
or altered only by agreement in writing between the parties. Whenever herein the
singular number is used, the same shall include the plural, and the masculine
gender shall include the feminine and neuter genders.
32. Applicable Law. This Lease and the performance hereunder shall be
governed by the laws of the State of Michigan.
33. Force Majeure. If either party fails to perform any of its
obligations under this Lease as a result of Force Majeure, such party shall not
be liable for loss or damage for the failure and the other party shall not be
released from any of its obligations as a result of Force Majeure, and the
period of delay or prevention shall be added to the time herein provided for the
performance of any such obligation.
"Force Majeure" shall mean any period of delay which arises from or
through Acts of God; strikes, lockouts, or labor difficulty; explosion,
sabotage, accident, riot, or civil commotion; act of war; fire or other
casualty; legal requirements; delays caused by the other party; and causes
beyond the reasonable control of a party.
34. Interpretation. This Lease has been executed and reviewed by both
parties and after opportunity for both parties to have it reviewed by legal
counsel of their choice. None of the provisions of this Lease shall be
interpreted against either party solely by reason of the fact that legal counsel
for such party shall have drafted any such provision.
35. Binding on Successors, Etc. The covenants, conditions and
agreements made and
<PAGE> 83
entered into by the parties hereto shall inure to the benefit of and shall be
binding upon their respective heirs, legal representatives, successors and
assigns, as the case may be.
36. Plural, Singular and Gender Words. Any word contained in the text
of this Lease shall be read as the singular or the plural and as the masculine,
feminine or neuter gender as may be applicable in the particular context.
37. Joint and Several Obligation of Tenant. If there is more than one
party tenant, the covenants of the Tenant shall be the joint and several
obligations of each such party, and, if the Tenant is a partnership, the
covenants of the Tenant shall be the joint and several obligations of each of
the partners and the obligations of the firm.
38. Entire Agreement. There are no oral agreements affecting this
Lease; this Lease and exhibits, if any, attached hereto and forming a part
thereof, supersede and cancel any and all previous negotiations, arrangements,
letters of intent, lease proposals, brochures, agreements, representations,
promises, warranties and understandings between the parties as stated by,
including, but not limited to, Tenant's agent(s), employees. No alteration,
amendment, change or addition to this Lease shall be binding upon either party
unless reduced to writing and signed by each party.
39. Authority. Landlord represents and warrants that it is the sole
owner of the Building and the Leased Premises, that it has the full right, power
and authority to make this Lease and that no other person needs to join in the
execution of this instrument in order for this Lease to be binding on all
parties having an interest in the Leased Premises and that it will execute or
procure any further necessary assurances of title that may be reasonably
required for the protection of Tenant.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals this _____ day of ________ , 199__.
WITNESSES: LANDLORD:
LA MARGARITA COMPLEX, LLP
- ---------------------------------- By:
----------------------------------
- ---------------------------------- Its:
---------------------------------
<PAGE> 84
WITNESSES: TENANT:
LA SENORITA RESTAURANTS ACQUISITION
CORP.
- ---------------------------------- By:
----------------------------------
- ---------------------------------- Its:
---------------------------------
STATE OF MICHIGAN )
) ss
COUNTY OF )
On this day of , 199__, before me, a Notary Public, in and for the
jurisdiction aforesaid, personally appeared ____________________, the
_____________ of La Margarita Complex, LLP, a Michigan Limited Partnership, to
me personally known, who by me duly sworn did say that said instrument was
signed on its behalf and that they acknowledged execution of said instrument to
be voluntary act and deed by it voluntarily executed.
------------------------------------
Notary Public
__________________ County, MI
My commission expires: ____________
<PAGE> 85
STATE OF )
) ss
COUNTY OF )
On this day of , 199__, before me, a Notary Public, in and for the
jurisdiction aforesaid, personally appeared ____________________, the
_____________ of LA SENORITA RESTAURANTS ACQUISITION CORP., a Delaware
corporation, to me personally known, who by me duly sworn did say that said
instrument was signed on its behalf and that they acknowledged execution of said
instrument to be voluntary act and deed by it voluntarily executed.
------------------------------------
Notary Public
__________________ County, MI
My commission expires: ____________
Prepared by:
Patrick E. Heintz, Esq.
BISHOP & HEINTZ, P.C.
440 W. Front at Oak
P.O. Box 707
Traverse City, MI 49685-0707
(616) 946-4100
<PAGE> 86
GUARANTY
WHEREAS, LA SENORITA RESTAURANTS ACQUISITION CORP., (hereafter
"Tenant") is indebted to LA MARGARITA COMPLEX, LLP, (hereafter "Landlord") under
the terms and conditions of the above Lease Agreement; and
WHEREAS, Landlord has demanded security for such indebtedness; and
WHEREAS, CASA OLE' RESTAURANTS, INC. is interested in a continuation of
the Lease Agreement and desires that Landlord accept performance of the Lease
Agreement as set forth above; and
WHEREAS, CASA OLE' RESTAURANTS, INC., recognizes that the
accommodations given to it are beneficial, necessary, and property and in the
best interests of the Tenant; and
WHEREAS, CASA OLE' RESTAURANTS, INC. has agreed to guarantee payment
and performance of said Lease by Tenant; and
WHEREAS, CASA OLE' RESTAURANTS, INC. acknowledge receipt of personal
benefits from the accommodations given to Tenant by Landlord;
NOW, THEREFORE, in consideration of the foregoing and to induce
Landlord to accept and enter into the Lease Agreement, the undersigned, on
behalf of CASA OLE' RESTAURANTS, INC., of 1135 Edgebrook, Houston, Texas
77034-1899 guarantees the payment and performance unconditionally and absolutely
of the foregoing Lease in accordance with its terms, including all sums when due
and all extensions or renewals thereof, and all expenses (including reasonable
attorney fees and legal expenses) incurred in the collection thereof and the
enforcement hereof.
The undersigned, CASA OLE' RESTAURANTS, INC. represents that it is a
Delaware Corporation and that it intends to bind its property hereby. In
addition, the undersigned represents that at the time of the execution and
delivery of this Guaranty, nothing exists to impair the effectiveness of
liability of the undersigned to Landlord hereunder, to the immediate taking
effect of this Guaranty as the sole agreement between the undersigned and the
Landlord to guarantee the Tenant's obligation to the Landlord.
If Tenant fails to pay all or any part of the rent when due under said
Lease, whether by default, demand, or maturity, the undersigned immediately upon
demand of the Landlord will pay to the Landlord the amount due and unpaid by
Tenant as if such amount constituted the direct and primary obligation of the
undersigned. Landlord shall not be required prior to any such demand on, or
payment by the undersigned, to make any demand upon or pursue or exhaust any of
its rights or remedies against Tenant or others with respect to the payment of
any portion of the rent or sums due under the Lease, or pursue or exhaust any of
its rights or remedies with
<PAGE> 87
respect to any collateral given by Tenant or for this Guaranty. The undersigned
shall have no rights of subrogation with respect to payment under the Lease or
any collateral securing the Lease until Landlord has received full payment.
The undersigned waives notice of acceptance of this Guaranty and
further waives protest, presentment, demand for payment, notice of default, or
nonpayment and notice of dishonor, and all other notices whatsoever, and agrees
that the Landlord may from time to time extend or renew the Lease for any
period, whether or not longer than the original period of said Lease, and grant
any releases, compromises, or indulgences with respect to said Lease or any
extension or renewal thereof, all without notice to or consent of the
undersigned and without affecting the liability of the undersigned hereunder.
This Guaranty shall inure to the benefit of the Landlord, its
successors and assigns, and shall be binding upon the Guarantor, its heirs,
successors and assigns.
CASA OLE' RESTAURANTS, INC.
By:
----------------------------
Its:
---------------------------------------
STATE OF )
)ss:
County of )
On this _______ day of ________________, 199__, before me, a Notary
Public in and for said County, personally appeared ____________________, the
__________________ of Casa Ole' Restaurants, Inc., to me known to be the person
described in and who executed the within instrument who have acknowledged said
instrument to be the free act and deed of Casa Ole' Restaurants, Inc.
------------------------------------
Notary Public
__________________ County, MI
My commission expires: ____________
<PAGE> 88
EXHIBIT "A"
Site Plan.
<PAGE> 89
EXHIBIT "A-1"
Description of Leased Premises
<PAGE> 90
EXHIBIT "B"
Fixed Assets
<PAGE> 91
EXHIBIT E
FORM OF ESCROW AGREEMENT
[Attached hereto.]
<PAGE> 92
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "AGREEMENT") is entered into as of , 1999
among Kenneth Kleinrichert, Donald Kleinrichert, Joseph Kleinrichert, The Joseph
Kleinrichert Trust and Steven Arnot (each individually, a "Shareholder" and
collectively, the "Shareholders"), La Senorita Restaurants Acquisition Corp., a
Delaware corporation ("Acquisition"), La Margarita Complex, LLP, a Michigan
limited partnership ("La Margarita") and ("Agent").
RECITALS:
WHEREAS, the Shareholders; Acquisition; La Margarita; Casa Ole
Restaurants, Inc., a Texas corporation; La Senorita Traverse City, Inc., a
Michigan corporation; La Senorita Franchise Company, a Michigan corporation;
W.G. Enterprises, Inc., a Michigan corporation; Kleinrichert Bros., Inc., a
Michigan corporation; La Senorita - Mt. Pleasant, Inc., a Michigan corporation;
and KMANCO, Inc., a Michigan corporation (collectively the "Transferred
Entities"); and La Senorita Lansing, Inc., a Michigan corporation ("Lansing"
and, together with the Transferred Entities, the "La Senorita Companies"), have
entered into that certain Stock Purchase Agreement with Purchase of Designated
Assets, of even date herewith, providing for the sale by the Shareholders to
Acquisition of all of the outstanding shares of capital stock of the Transferred
Entities and the sale by Lansing of certain designated assets of Lansing (the
"Stock Purchase Agreement"); and
WHEREAS, pursuant to Section 2.3 of the Stock Purchase Agreement,
Acquisition has agreed to deposit $1,110,000.00 (the "Escrow Amount") with
Agent, to be applied in accordance with the terms of this Agreement; and
WHEREAS, the Shareholders, La Margarita and Acquisition desire for
Agent to hold the Funds (as defined below), and Agent has agreed to hold the
Funds, pursuant to the terms of this Agreement;
NOW, THEREFORE, for in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Shareholders, Acquisition and Agent hereby agree as
follows:
1. Appointment. The Shareholders and Acquisition hereby appoint Agent
as escrow agent, to serve in such capacity in accordance with the terms and
conditions set forth in this Agreement and, except as specifically provided to
the contrary in this Agreement, in accordance with Agent's General Provisions
attached to this Agreement as Exhibit A and incorporated in this Agreement for
all purposes. Agent hereby accepts such appointment.
<PAGE> 93
2. Deposit. Simultaneous with the Closing (as defined in the Stock
Purchase Agreement), Acquisition shall deposit the Escrow Amount with Agent.
Agent hereby acknowledges receipt of the Escrow Amount and accepts the same as
escrow agent hereunder and shall hold the Escrow Amount, together with interest
earned thereon (collectively, the "Funds") in accordance with the terms of this
Agreement.
3. Purpose of Escrow Account. The purpose of the this Agreement is to
assure the performance of Acquisition under the Stock Purchase Agreement.
4. Investment of Funds. Agent shall invest the Funds as Acquisition
shall from time to time direct in writing. All such investments shall be made in
obligations that are guaranteed by the federal government and immediately
available for withdrawal.
5. Disbursement of Funds. Immediately following the Closing, Agent
shall disburse the Funds on behalf of La Margarita to the La Senorita Companies
in the amounts described in Section 6 of this Escrow Agreement, to be applied to
the purchase price described in Section 2.3 of the Stock Purchase Agreement.
Also at the Closing, Agent shall disburse to La Senorita Companies all accrued
interest on the Funds. The Funds shall be disbursed at such time as Agent shall
be instructed in writing by Acquisition, by a final decision of the arbitrators
chosen as provided below or by a final order of a court of competent
jurisdiction.
6. Apportionment of La Senorita Companies Payment. The La Senorita
Companies Payment shall be apportioned in the following amounts: $260,000.00 to
W.G. Enterprises, Inc.; $400,000 to Kleinrichert Bros., Inc.; $20,000 to La
Senorita-Mt. Pleasant, Inc.; and $430,000 to KMANCO, Inc.
7. Disputes. In the event that a timely objection to the disbursement
of Funds under Section 5 is given by the Shareholders or Acquisition to Agent or
where any other condition for the disbursement remains unsatisfied, Agent shall
not make the disbursement until such objection is withdrawn or until such
conditions are satisfied.
(a) Any dispute under this Agreement shall be settled by
arbitration in Houston, Texas, and, except as herein specifically
stated, in accordance with the commercial arbitration rules of the
American Arbitration Association ("AAA Rules") then in effect. However,
in all events, these arbitration provisions shall govern over any
conflicting rules that may now or hereafter be contained in the AAA
Rules. Any judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction over the subject matter
thereof.
(b) Any such arbitration will be conducted before a single
arbitrator who will be compensated for his or her services at a rate to
be determined by the parties or by the American Arbitration
Association, but based upon a reasonable hourly or daily consulting
ESCROW AGREEMENT - Page 2
<PAGE> 94
rate for the arbitrator if the parties are not able to agree upon his
or her rate of compensation.
(c) The American Arbitration Association will have the
authority to select an arbitrator from a list of lawyers who are
familiar with Texas contract law and experienced in mergers and
acquisitions; provided, however, that such lawyers cannot work for a
firm then performing services for either party, that each party will
have the opportunity to make such reasonable objection to any of the
arbitrators listed as such party may wish and that the American
Arbitration Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such objection. If the
foregoing procedure is not followed, then Acquisition and the
Shareholders shall each choose one person from the list of arbitrators
provided by the American Arbitration Association (provided that such
person does not have a conflict of interest), and the two persons so
selected will select from the list provided by the American Arbitration
Association the person who will act as the arbitrator.
(d) Acquisition and the Shareholders will each pay 50% of the
initial compensation to be paid to the arbitrator in any such
arbitration and 50% of the costs of transcripts and other normal and
regular expenses of the arbitration proceedings; provided, however,
that the prevailing party in any arbitration will be entitled to an
award of attorneys' fees and costs, and all costs of arbitration,
including those provided for above, will be paid by the non-prevailing
party, and the arbitrator will be authorized to make such
determinations.
(e) For any dispute submitted to arbitration, the burden of
proof will be as it would be if the claim were litigated in a Texas
judicial proceeding.
(f) Upon the conclusion of any arbitration proceedings
hereunder, the arbitrator will render findings of fact and conclusions
of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to
this Agreement along with a signed copy of the award.
(g) The arbitrator chosen in accordance with these provisions
will not have the power to alter, amend or otherwise affect the terms
of these arbitration provisions or the provisions of this Agreement or
the Stock Purchase Agreement.
(h) Except as specifically otherwise provided in this
Agreement or the Stock Purchase Agreement, arbitration will be the sole
and exclusive remedy of the parties for any dispute arising out of this
Agreement.
8. Compensation of Agent. The Shareholders agree to pay and will be
solely liable for all compensation, fees, costs, damages, judgments and
expenses, including reasonable attorneys'
ESCROW AGREEMENT - Page 3
<PAGE> 95
fees, suffered or incurred by Agent in connection with or arising out of this
Agreement, except that with respect to any suit in interpleader brought by
Agent, the losing party shall be responsible for all of Agent's cost incurred in
connection with such suit.
9. Resignation of Agent and Appointment of Successor. Agent, or any
successor, may resign at any time upon giving written notice to Acquisition, the
Shareholders and La Margarita thirty (30) days before such resignation shall
take effect. If Agent shall resign or be unable to serve, then it shall be
succeeded by such bank or trust company as the Shareholders shall appoint, with
the written approval of Acquisition and La Margarita, or, if no appointment is
made, then by a bank or trust company appointed by a court of competent
jurisdiction. Acquisition or the Shareholders may petition such a court to
appoint a successor to Agent. Agent shall transfer the Funds to its successor
and shall thereupon be discharged, and the successor shall thereupon succeed to
all of the rights, powers and duties and shall assume all of the obligations of
Agent under this Agreement.
10. No Third-Party Beneficiary. No person not a party to this Agreement
shall have any rights in the Funds or be deemed a third-party beneficiary of
this Agreement.
11. Termination. This Agreement shall terminate upon any of the
following occurrences:
(a) Upon mutual agreement of Acquisition,
the Shareholders and La Margarita, written notice of
which is delivered to Agent;
(b) Upon disbursement of the Funds pursuant
to Section 5 above; or
(c) On May 1, 1999, in which event Agent
shall disburse the Funds to Acquisition and this
Agreement shall terminate; provided, however, that if
a dispute is pending pursuant to Section 7 above and
said dispute has not been resolved, then Agent shall
not disburse the Funds, and this Agreement shall
remain in effect during the pendency of said dispute
solely for the purpose of the payment of actual costs
and expenses associated with said dispute.
12. Affiliations. Agent represents and warrants to Acquisition that it
has disclosed to Acquisition in writing all direct and indirect affiliations
that it has or within the last year has had with any of the Shareholders, the La
Senorita Companies or La Margarita.
13. Notices. Any notice, request, instruction, objection or other
document or communication to be given hereunder shall be in writing and shall be
delivered personally or sent by registered or certified mail to the following
address or such other address as may be specified by such notice.
ESCROW AGREEMENT - Page 4
<PAGE> 96
The Shareholders: Mr. Kenneth Kleinrichert
1241 Lake Drive
Traverse City, MI 49686
Mr. Donald Kleinrichert
4515 S. Spider Lake Road
Traverse City, MI 49686
Mr. Joseph Kleinrichert
and/or The Joseph Kleinrichert Trust
4680 Bittersweet Lane
Traverse City, MI 49686
Mr. Steven Arnot
1110 Bass Lake Road
Traverse City, MI 49684
With copy to: Patrick E. Heintz, Esq.
Bishop & Heintz, P.C.
440 W. Front at Oak
P. O. Box 707
Traverse City, MI 49685
Facsimile No. 616-946-4100
La Margarita: La Margarita Complex, LLP
P.O. Box 388
Traverse City, MI 49685
Attention: Kenneth Kleinrichert
Facsimile No.: 616-947-8137
With copy to: Patrick E. Heintz, Esq.
Bishop & Heintz, P.C.
440 W. Front at Oak
P. O. Box 707
Traverse City, MI 49685
Facsimile No. 616-946-4100
Acquisition: Casa Ole Restaurants, Inc.
1135 Edgebrook
Houston, Texas 77034
Attention: Drew Dennard
Facsimile No.: (713)943-9554
ESCROW AGREEMENT - Page 5
<PAGE> 97
With copy to: Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attention: Don M. Glendenning, Esq. and
Rebecca E. Guldi
Facsimile No.: 214-740-8800
Agent: ___________________________________________________
___________________________________________________
___________________________________________________
Attention:_________________________________________
14. Amendment. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
16. Assignability. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors, assigns and transferees.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE
CONFLICTS-OF-LAW PRINCIPLES THEREOF.
18. Headings. The headings of the several Sections in this Agreement
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning of this Agreement.
[The remainder of this page intentionally left blank.]
ESCROW AGREEMENT - Page 6
<PAGE> 98
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SHAREHOLDERS:
______________________________________________
Kenneth Kleinrichert
______________________________________________
Donald Kleinrichert
______________________________________________
Joseph Kleinrichert
THE JOSEPH KLEINRICHERT TRUST
By:___________________________________________
Name:_________________________________________
Title:________________________________________
______________________________________________
Steven Arnot
ACQUISITION:
LA SENORITA RESTAURANTS ACQUISITION CORP.
By:_____________________________________
Name:_________________________________________
Title:________________________________________
ESCROW AGREEMENT - Page 7
<PAGE> 99
ESCROW AGENT:
By:___________________________________________
Name:_________________________________________
Title:________________________________________
LA MARGARITA:
LA MARGARITA COMPLEX, LLP
By:___________________________________________
Name:_________________________________________
Title:________________________________________
ESCROW AGREEMENT - Page 8
<PAGE> 100
SCHEDULE 2.5
PURCHASE PRICE ADJUSTMENT
[Attached.]
<PAGE> 101
La Senorita/Casa Ole
Accounting Issues
The following is a list of current assets and current liabilities of La Senorita
companies, with an explanation on how each will be settled at close.
<TABLE>
<CAPTION>
RESTAURANT COMPANIES: ACTION AT CLOSE
- --------------------- ---------------
<S> <C>
Cash (all accounts) to Kleinrichert's, Casa will collect cash from
sales after close
Accounts Receivable - House Charges to Casa Ole & prorated (when collected, receipts
for sales prior to close will be sent to
Kleinrichert's)
Adopt a Family Funds Kleinrichert pays balances (at close) to Casa
401-k withholdings Kleinrichert pays balances (at close) to Casa
Intercompany Accounts will be eliminated
Inventories to Casa, with credit for the Inventory balance
to be offset against accounts payables.
Utility Deposits Casa will pay to Kleinrichert's (only deposit
is $100 on W.G. Enterprises records.)
Prepaid Service Contracts Prorated, with Casa to pay Kleinrichert's their portion
Prepaid Expenses Prorated, with Casa to pay Kleinrichert's their portion
Prepaid Insurance Prorated, in the event that Casa keep current
La Senorita insurance, if Casa switches
Insurance carriers, prepaid insurance balances
will be due Kleinrichert's when collected.
Accounts Payable Assumed by Casa, to be offset by inventory
balances. To the extent that accounts payable
exceed the Inventory balance, Kleinrichert's
will pay Casa the difference, and vice-versa.
FICA & Federal W/H Payable Prorated, Kleinrichert's to pay their share to
Casa when paid
Accrued Unemployment Taxes Prorated, Kleinrichert's to pay their share to
Casa when paid
State W/H Taxes Payable Prorated, Kleinrichert's to pay their share to
Casa when paid
Worker's Comp. Insurance Payab Prorated, Kleinrichert's to pay their share to
Casa when paid
Accrued Tuition Payable All payments after close to be paid by Casa
Accrued Vacation Pay Prorated, Kleinrichert's to pay their share to
Casa when paid by Casa
</TABLE>
<PAGE> 102
<TABLE>
<S> <C>
Accrued Payroll Prorated, Kleinrichert's to pay their share to
Casa when paid by Casa Accrued Bonus Prorated,
Kleinrichert's to pay their share to Casa when
paid by Casa
Health Insurance payable Prorated, Kleinrichert's to pay their share to
Casa when paid by Casa
Accrued Utilities Prorated, Kleinrichert's to pay their share to
Casa when paid by Casa
Accrued Insurances Prorated, Kleinrichert's to pay their share to
Casa when paid by Casa
Personal Property Taxes Payable Prorated, Casa to pay tax bills after close
with reimbursement from Kleinrichert's for
their portion.
Real Property Taxes Payable Prorated, paid according to lease terms
</TABLE>
KMANCO INC.:
The settling will be the same as for the Restaurant Companies, with the addition
of the following accounts that are only recorded on Kmanco:
<TABLE>
<S> <C>
Investment in Sauit Ste. Marie & A/R assumed by Casa
La Senorita Sauit Partnership
A/R House Charges To Casa Ole & prorated (when collected,
receipts for sales prior to close will be sent
to Kleinrichert's)
Maintenance Fund will be eliminated
Note Receivable - Reddy Ent. balance assumed by Casa & paid to
Kleinrichert's when collected (balance will
extend beyond one year)
Note Receivable - S.W. Smith Co. balance assumed by Casa & paid to
Kleinrichert's when collected (balance will
extend beyond one year)
A/R Franchisees Prorated, balances assumed by Casa & amounts
due to Kleinrichert's will be paid when
collected.
A/R Fern Street & A/R Help U Sell Accounts to be eliminated
A/R Shareholder Accounts to be eliminated
Intercompany Accounts Accounts to be eliminated
Inventory - Restaurant Supplies To be acquired by Casa, balance to be at least
$45,000 per Purchase Agreement
Prepaid Insurance To be prorated, unless Casa changes insurance
carriers
</TABLE>
<PAGE> 103
<TABLE>
<S> <C>
Cash Surrender Value, Deferred Comp. The policies on the 3 Kleinrichert's will be
Policies (Asset) & Deferred transferred to La Margarita, the policies on
Compensation (Liability) the other employees will transfer to Casa.
</TABLE>
For any other issues that may not have been covered here, the general intent is
for the Kleinrichert's to be paid for any amounts earned and due La Senorita
prior to the close. It is also the responsibility of the Kleinrichert's to pay
for any obligation (not covered below) that was incurred prior to the close.
<PAGE> 104
SCHEDULE 3.1
PREDECESSOR NAMES OF THE LA SENORITA COMPANIES
1. La Senorita - Mount Pleasant, Inc. was originally incorporated under the
name La Senorita - Kalkaska, Inc.
2. La Senorita - Lansing, Inc. filed an assumed name certificate for the name
La Senorita - Lansing on December 20, 1988.
3. La Senorita - Traverse City, Inc. filed an assumed name certificate for
the name La Senorita - Traverse City on October 7, 1996.
4. Prior to September 17, 1979, W.G. Enterprises, Inc. conducted business as
Watson & Guyot, PC.
5. The La Senorita Companies and/or the Shareholders operated the Traverse
City and Petoskey restaurants as "La Margarita Mexican Restaurant" prior to
1983.
<PAGE> 105
SCHEDULE 3.3
NO CONFLICTS
KMANCO has agreed to certain limitations on its ability to transfer
its shares of stock in La Senorita Development Co. and has committed to enter
into an Agreement for Restrictions on the Sale of Shares, by and among
Ameriquest, a Michigan Co-Partnership, KMANCO, La Margarita and La Senorita
Development Co., a Michigan corporation (the "Restriction Agreement). Buyer
will become subject to the Restriction Agreement as a result of its purchase of
the outstanding stock of KMANCO. A draft of the Restriction Agreement has been
previously provided to Buyer and Casa Ole, and KMANCO and La Margarita will
provide a final draft of the Restriction Agreement to Buyer and Casa Ole, and
will provide each of them with time to review the draft of the Restriction
Agreement and an opportunity to comment thereon, prior to the execution
thereof.
<PAGE> 106
SCHEDULE 3.4
TITLE TO THE ASSETS
The following liens have been filed of record against the La Senorita
Companies:
1. LANSING
FILINGS WITH THE STATE OF MICHIGAN:
<TABLE>
<CAPTION>
LIEN NUMBERS SECURED PARTY TYPE
------------ ------------- ----
<S> <C> <C>
C179100 COMERICA Bank, Original
Midland, MI
C755836 COMERICA Bank, Continuation
Midland, MI
D418387 COMERICA Bank, Continuation
Livonia, MI
C179101 COMERICA Bank, Original
Midland, MI
C755837 COMERICA Bank, Continuation
Midland, MI
D418388 COMERICA Bank, Continuation
Livonia, MI
C179102 COMERICA Bank, Original
Midland, MI
C755834 COMERICA Bank, Continuation
Midland, MI
D418390 COMERICA Bank, Continuation
Livonia, MI
C179103 COMERICA Bank, Original
Midland, MI
C755835 COMERICA Bank, Continuation
Midland, MI
</TABLE>
<PAGE> 107
<TABLE>
<S> <C> <C>
418389 COMERICA Bank, Continuation
Livonia, MI
</TABLE>
<TABLE>
<CAPTION>
FILINGS WITH INGHAM COUNTY:
<S> <C> <C>
538788 COMERICA Bank Original
1740-312/313 Midland, MI
538788 COMERICA Bank Continuation
2649-270 Livonia, MI
538789 COMERICA Bank Original
1740-314/315 Midland, MI
538789 COMERICA Bank Continuation
2649-271 Livonia, MI
</TABLE>
The above-referenced filings relate to Small Business Association loans made by
COMERICA Bank to Lansing in the aggregate amount of $167,451.22.
<TABLE>
<CAPTION>
FILINGS WITH GRAND TRAVERSE COUNTY:
<S> <C> <C>
162123 State of Michigan Original
Tax Lien - Employment
Security Commission
</TABLE>
The obligations evidenced by this filing have been paid. Buyer is working to
obtain a release of lien from the Employment Security Commission and will
either: (i) provide such release in form satisfactory for filing to Buyer at
the Closing; or (ii) file the release prior to Closing and provide evidence of
such filing to Buyer at the Closing.
2. TRAVERSE CITY
<TABLE>
<CAPTION>
FILINGS WITH STATE OF MICHIGAN:
<S> <C> <C>
D235505 Old Kent Bank Original
Traverse City, MI
FILINGS WITH GRAND TRAVERSE COUNTY:
206370 Old Kent Bank Original
Traverse City, MI
</TABLE>
<PAGE> 108
3. WGE
<TABLE>
<CAPTION>
FILINGS WITH THE STATE OF MICHIGAN:
<S> <C> <C>
B245690 Traverse City Bank, Original
Traverse City, MI
B773891 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
C461876 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
D073126 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
B262775 Pacesetter Bank & Trust Original
GD Traverse
Traverse City, MI
74864A Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
C492674 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
D107189 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
B337884 Pacesetter Bank & Trust Original
GD Traverse
Traverse City, MI
B921040 Pacesetter Bank & Trust Continuation
GD Traverse
Traverse City, MI
</TABLE>
<PAGE> 109
<TABLE>
<S> <C> <C>
C590169 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
D221937 Old Kent Bank Continuation
Traverse City, MI
</TABLE>
<TABLE>
<CAPTION>
FILINGS WITH GRAND TRAVERSE COUNTY:
<S> <C> <C>
749/617 Old Kent, Bank Original
Number not Traverse City, MI
readable on copy.
157166 Old Kent Bank, Continuation
1032/167 Grand Traverse
Traverse City, MI
</TABLE>
4. KMANCO
<TABLE>
<CAPTION>
FILINGS WITH THE STATE OF MICHIGAN:
<S> <C> <C>
B754529 Old Kent Bank, Original
Grand Traverse
Traverse City, MI
C431279 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
D045867 Old Kent Bank, Continuation
Grand Traverse
Traverse City, MI
C735021 Old Kent Bank, Original
Grand Traverse
Traverse City, MI
D357967 Old Kent Bank Continuation
Traverse City, MI
</TABLE>
5. See Schedule 5.12, Item 3.
<PAGE> 110
SCHEDULE 3.5
CAPITAL STOCK
<TABLE>
<CAPTION>
Company Shareholder Number of Shares
------- ----------- ----------------
<S> <C> <C>
La Senorita - Traverse City, Inc. Kenneth Kleinrichert 2,164
Donald Kleinrichert 2,164
Joseph Kleinrichert Trust 2,164
Steven Arnot 282
------
Total: 6,774
======
La Senorita Franchise Co. Kenneth Kleinrichert 5,500
Donald Kleinrichert 5,500
Joseph Kleinrichert 5,500
------
Total: 16,500
======
W G Enterprises, Inc. Kenneth Kleinrichert 2,000
Joseph Kleinrichert 1,000
Steven Arnot 161
------
Total: 3,161
======
Kleinrichert Bros., Inc. Kenneth Kleinrichert 2,000
Steven Arnot 107
------
Total: 2,107
======
La Senorita - Mount Pleasant, Inc. Donald Kleinrichert 1,000
Joseph Kleinrichert 1,000
Kenneth Kleinrichert 1,000
Steven Arnot 161
------
Total: 3,161
======
KMANCO, Inc. Kenneth Kleinrichert 2,164
Donald Kleinrichert 1,198
Joseph Kleinrichert 1,681
Steven Arnot 282
------
Total: 5,323
======
</TABLE>
SUBSIDIARIES:
1. KMANCO owns 50% of the issued and outstanding capital stock of
Development, which is the general partner of and operates La
Senorita-Sault Ste. Marie Limited Partnership, a Michigan limited
partnership, which is a controlling partner of La Senorita - Sault
Ste. Marie, a Michigan partnership.
2. Franchise has a wholly-owned subsidiary, La Buena Agency, a Michigan
corporation, which is a marketing company.
<PAGE> 111
SCHEDULE 3.6
LITIGATION, GOVERNMENTAL ACTION, ETC.
1. KMANCO MATTERS:
KMANCO received notice on December 14, 1998 that it is delinquent in
filing with the IRS Form 5500 C/R for the La Senorita Mexican Restaurants
Profit Sharing & 401(k) Plan. The notice provides that the IRS must have a
response to such notice by January 14, 1999. KMANCO will file a Form 5500 C/R,
together with any other required filings, and will pay any fees associated
therewith prior to the Closing.
KMANCO has approximately 93 claims that have been filed with the
Michigan Restaurant Association Self Insured Workers' Compensation Fund (the
"Fund"), which are listed on that certain claims cost detail created by the
Fund, dated as of 9/30/98. A copy of the claims cost detail, together with
copies of the Employer's Basic Report of Injury related to each claim listed
thereon, were previously provided to Buyer.
2. UNEMPLOYMENT CLAIMS:
From time to time, Employees of the La Senorita Companies file
unemployment claims with the State of Michigan following the termination of
their employment with the La Senorita Companies. Copies of each Request to
Employers for Wage and Separation Information issued to the La Senorita
Companies by the Michigan Unemployment Security Agency since December 31, 1997
for each such claimant, together with copies of determinations (if made) and
descriptions of the context surrounding each such claim, have been previously
provided to Buyer.
3. The La Senorita Restaurant in Traverse City received a Citation and
Notification of Penalty from the Michigan Department of Consumer and Industry
Services, General Industry Safety Division following an inspection on October
15, 1997. The citation related to required use of personal protective equipment
for employees changing hot oil in the kitchens at the restaurant and required
provision of certain communications regarding hazards in the workplace. The
matter was resolved in an Informal Settlement Agreement, signed by the
Department on January 5, 1998 (the "Settlement Agreement"), which provided for
the restaurant correcting its violations and paying certain penalties. The
restaurant has complied with the Settlement Agreement at all times since
January 5, 1998.
<PAGE> 112
SCHEDULE 3.7
COMPLIANCE WITH LAWS
1. See Schedule 3.6, Item 3 for information regarding the La Senorita
(Traverse City) Restaurant.
2. A number of the La Senorita Companies have filed a request for approval
of construction related to the Petoskey restaurant. Before the construction can
begin, the restaurant will need to obtain a waiver of the building setback
zoning rules in Bear Creek Township. Documents related to this request for
waiver have been previously provided to Buyer.
<PAGE> 113
SCHEDULE 3.9
PHYSICAL PROPERTIES
1. VEHICLES OWNED BY KMANCO:
1951 1HC Pickup Truck, VIN # L11232685.
1998 GM Yukon Station Wagon, VIN # 1GKEK13R2WJ735070.
1995 Chevrolet Station Wagon, VIN # 1GNFK16K5SJ459192.
1996 Dodge Ram Pickup Truck, VIN # 1B7KF23Z4TJ176982.
The 1998 GM Yukon Station Wagon, the 1995 Chevrolet Station Wagon and the 1996
Dodge Ram Truck will be transferred to Kenneth, Donald and/or Joseph
Kleinrichert at or prior to the Closing.
2. VEHICLES LEASED BY KMANCO: (copies of leases and related documents
previously provided to Buyer)
1998 Chevrolet Pickup Truck, VIN # 2GCEK19M1W1139725. Leased by Williams
Chevrolet, Inc., Traverse City, Michigan.
1995 Toyota Tacoma, VIN # 4TAUN73C6SZ062692. Leased by Traverse Motors, Inc.,
Traverse City, Michigan.
3. FIXED ASSETS:
Attached hereto is a fixed asset list for each of the La Senorita
Companies.
4. REAL PROPERTY:
The Traverse City (Garfield Avenue), Petosky and Saginaw restaurants
may have originally been owned in the name of the respective operating
companies for a short time, but were transferred to La Margarita.
<PAGE> 114
SCHEDULE 3.10
INTELLECTUAL PROPERTY
1. MARKS OWNED BY WGE:
Servicemark for Sombrero Sam, Reg. No. 1,521,314, Registered January 17, 1989.
Trademark for La Senorita, Reg. No. 1.637,229, Registered September 23, 1991.
Trademark for Margarita Lounge, Reg. No. 1,731,794, Registered October 10, 1992.
2. SHRINKWRAP SOFTWARE LICENSES HELD BY LA SENORITA COMPANIES:
Positouch
Cyma
Novell
Documentation regarding each of the software licenses has been previously
provided to Buyer.
<PAGE> 115
SCHEDULE 3.11
PERMITS
1. PERMITS HELD BY WGE:
State of Michigan License No. 28-000133.
Grand Traverse County 1998 Food Service License #133.
1998-1999 Liquor License No. 06136-97.
2. PERMITS HELD BY KBI:
State of Michigan License No. 24-000041.
Emnet County 1998 Food Service License (number not available).
Copy of application dated April 9, 1998 and receipt from District
Health Department No. 3 (Receipt No. 30581) provided to Buyer.
1998-1999 Liquor License No. 06818-97.
3. PERMITS HELD BY MT. PLEASANT:
State of Michigan License No. 37-000018.
Permit granted to Ken Kleinrichert
Isabella County 1998 Food Service License (number not available).
Copy of receipt for application for Food License from Central Michigan
Heath Department (Receipt No. 4757) provided to Buyer.
1998-1999 Liquor License No. 07785-97.
4. PERMITS HELD BY LANSING:
1998-1999 Liquor License No. 03471-98.
Ingham County 1998 Food Service License (number not available).
Copy of application dated April 7, 1998 and receipt from Ingham County
Health Department (No. 30591) provided to Buyer.
5. PERMITS HELD BY TRAVERSE CITY:
State of Michigan License No. 28-000606.
Grand Traverse County 1998 Food Service License # 606.
1998-1999 Liquor License No. 08802-98.
6. PERMITS HELD BY KMANCO:
Grand Traverse County Water Permit # 1483.
Sewer Permit # 3558.
<PAGE> 116
SCHEDULE 3.12
CONTRACTS
1. FRANCHISE AGREEMENTS:
Franchise Agreement, dated June 25, 1995, by and between Franchise and Reddy
Enterprises, Inc. related to Cadillac restaurant.
Franchise Agreement, dated June 5, 1993, by and between Franchise and La
Senorita Sault Ste. Marie, Ltd. Partnership. related to Sault Ste. Marie
restaurant.
Franchise Agreement, dated May 15, 1992, by and between Franchise and S.W.
Smith Corporation related to Saginaw restaurant.
Franchise Agreement, dated April 24, 1992, by and between Franchise and
Timoteo, Inc. related to Gaylord restaurant.
Copies of the above agreements have been previously provided to Buyer.
2. BONUS ARRANGEMENTS:
The La Senorita Entities have bonus arrangements with the following
employees. Each bonus ranges from between $0 to $200 per month, and sample
bonus work sheets have been provided to Buyer.
Jeff Birgy
Bryan Young
Steve Sura
Matt Sura
Lura Ruede
Leslie Eberhardt
Anthony Harvey
Dennis Kenville
Ray Dilts
Kris Kobylarz
Robert Anderson
George Wills
Gary Shetteck
Steve Arnot
David Scott
David Starkey
<PAGE> 117
3. LOANS:
Promissory Notes made by WGE in favor of Old Kent Bank: (i) dated 6/23/86, in
the original amount of $30,000; (ii) dated 9/2/86, in the original amount of
$58,751.16; (iii) dated 6/26/81 in the original amount of $200,000; and (iv)
dated 2/29/88, in the original amount of $100,000. Each note is secured by a
Security Agreement, dated 1/13/87, pursuant to which Old Kent Bank has taken a
security interest in all of the assets of WGE. Old Kent Bank has filed a UCC-1
related to this security interest.
Promissory Note made by La Senorita - Gaylord, Inc. in favor of Old Kent Bank,
dated 5/12/87, in the original amount of $245,000. This is secured by a
Security Agreement, dated 2/29/88, executed by WGE.
Promissory Note made by WGE, La Margarita, KMANCO, Car Wash, Inc. and KBI in
favor of Old Kent Bank, dated 2/29/88, in the original amount of $975,079.39.
This is secured by a Security Agreement dated 2/29/88, executed by WGE.
Promissory Note made by WGE in favor of Old Kent Bank, dated 4/5/89, in the
original amount of $21,150. This is secured by a Security Agreement dated
4/5/89, executed by WGE.
Promissory Note made by Traverse City in favor of Old Kent Bank, dated 5/15/97,
in the original amount of $300,000. This is secured by a Security Agreement of
even date, executed by Traverse City.
Promissory Note made by Mt. Pleasant in favor of Old Kent Bank, dated 5/1/92,
in the original amount of $55,106.87. This is secured by a Security Agreement
of even date, executed by Mt. Pleasant.
Promissory Note made by KMANCO in favor of Old Kent Bank, dated 6/30/93, in the
original amount of $300,000. This is secured by a Security Agreement of even
date, executed by KMANCO.
Promissory Note made by KMANCO in favor of Old Kent Bank, dated 1/7/86, in the
original amount of $22,000. This is secured by a Security Agreement of even
date, executed by KMANCO.
COMERICA Bank has made loans to Lansing. The loans are evidenced by an
Authorization Debenture Guaranty and Loan Agreement, dated November 14, 1988,
SBA Debenture No. CDC S 333428 30 06 MI together with related documents. The
notes are secured by a Continuing Collateral Mortgage, dated February 1, 1989,
executed by Lansing. The loans were made through the Small Business
Administration.
5. MANAGEMENT AGREEMENTS:
Administrative Services Contract, dated June 1, 1985 between KMANCO and WGE.
<PAGE> 118
Administrative Services Contract, dated June 1, 1985 between KMANCO and KBI.
Administrative Services Contract, dated June 1, 1985 between KMANCO and D.J.K.,
Inc.
Administrative Services Contract, dated December 1, 1986 between KMANCO and La
Senorita - Gaylord, Inc.
Administrative Services Contract, dated June 1, 1985 between KMANCO and La
Senorita - Flint, Inc.
Copies of the above-referenced Administrative Services Contracts have been
previously provided to Buyer.
6. OTHER CONTRACTS:
Contract with Pepsico for beverage and soft-drink products, a copy of which has
been previously provided to Buyer.
<PAGE> 119
SCHEDULE 3.13
CONTRACT DEFAULTS
[NONE]
<PAGE> 120
SCHEDULE 3.14
EMPLOYEE BENEFITS
1. Long Term Disability Insurance
Insurer- Northwestern Mutual Life Insurance Company
Group Policy Number- L653057
Effective Date- January 1, 1993
The La Senorita Companies have purchased long-term disability policies
for several Employees. The La Senorita Companies have requested that
Buyer reimburse the Shareholders for any refund of the cash value of
such policies that is attributable to premiums paid before the Closing
Date received by Buyer or the La Senorita Companies after the Closing
following the termination of the employment of any of such Employee.
The La Senorita Companies have agreed to: (i) obtain a statement from
Northwestern Mutual Life Insurance Company setting forth the names of
the Employees with a cash value accumulated in such policies and the
amount of that cash value; and (ii) deliver the same to Buyer at or
prior to the Closing. Buyer has agreed to the requested reimbursement;
provided, however that for any Employee listed on such statement,
Buyer's liability to the Shareholders for any such refund shall not
exceed the amount set forth on such statement.
2. La Senorita Scholarship Plan; several of the La Senorita Companies
provide up to $3,000 for college tuition for Employees after three
years of service (amount based on years of service).
3. Employee Life Insurance Policies
a) Employee- Steven L. Arnot
Insurer- Transamerica Occidental Life
Policy Number- 92171816
Policy Date- July 2, 1987
b) Employee- Rose M. Wieber
Insurer- Transamerica Occidental Life
Policy Number- 92171523
Policy Date- July 2, 1987
c) Employee- David M. Starkey
Insurer- Transamerica Occidental Life
Policy Number- 92219574
Policy Date- June 6, 1988
<PAGE> 121
d) Employee- Bryan R. Young
Insurer- Northwestern Mutual Life Insurance Company
Policy Number- 12685258
Policy Date- September 8, 1993
e) Employee- Gregory L. Church
Insurer- Northwestern Mutual Life Insurance Company
Policy Number- 11729398
Policy Date- April 4, 1991
f) Employee- Steven S. Sura
Insurer- Northwestern Mutual Life Insurance Company
Policy Number- 11771466
Policy Date- May 9, 1991
g) Employee- David E. Scott
Insurer- Lincoln National Life Insurance Co.
Policy Number- 20-07229303
4. 401(k) Plan- a copy of which has previously been provided to Buyer
Plan Name- La Senorita Mexican Restaurants Profit Sharing & 401(k)
Plan
Employer- KMANCO, Inc.
Trustee- Northwestern Savings Bank & Trust, FSB
Administrator- KMANCO, Inc.
5. Health Plan
Group Name- KMANCO, Inc. dba La Senorita Restaurants
Insurer- Blue Cross Blue Shield of Michigan
Group Number- 44789
Effective Date- December 15, 1997
6. Dental and Prescription Drug Plan
Employer- KMANCO, Inc.
Plan Supervisor/Third Party Administrator- Group Benefit Services,
Inc.
Effective Date- July 1, 1998
7. Section 125 Plan (Employee Paid Insurance Plan)
Plan Name- La Senorita- Petoskey Sec. 125 Plan
Employer- Kleinrichert Bros. Inc.
Insurer- Atlanta Life Insurance Company
Effective Date- December 12, 1995
<PAGE> 122
The La Senorita Companies also maintain the following 125 Plans through Midland
Insurance Group:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Group # Group Name
- ------------------------------------------------------------------------
<S> <C>
200067 La Senorita/Saginaw
- ------------------------------------------------------------------------
00571 La Senorita/Kleinrichert Petoskey
- ------------------------------------------------------------------------
200050 La Senorita/Reddy Enter.
- ------------------------------------------------------------------------
200072 La Senorita/Sault Ste. Marie
- ------------------------------------------------------------------------
200070 La Senorita/Timoteo
- ------------------------------------------------------------------------
200071 La Senorita/W.G. Enterprises
- ------------------------------------------------------------------------
200044 La Senorita/Lansing, Inc.
- ------------------------------------------------------------------------
200046 La Senorita/Mt. Pleasant
- ------------------------------------------------------------------------
100825 La Senorita/Traverse City
- ------------------------------------------------------------------------
</TABLE>
<PAGE> 123
SCHEDULE 3.15
EMPLOYEES; EMPLOYEE RELATIONS
<TABLE>
<CAPTION>
Name Annual Salary
- ---- -------------
<S> <C>
Steve Arnot $ 74,367
David Scott 61,881
David Starkey 57,089
Steve Sura 55,805
Bryan Young 51,471
Lura Ruede 47,801
Matthew Sura 46,495
Jeff Birgy 35,832
Raymond Dilts 31,346
Tracey Towner 31,299
Gary Schettek 29,926
Dennis Kenville 29,564
Gregory Church 28,553
Leslie Eberhart 27,773
Anthony Harvey 25,593
Steve Smith 24,587
</TABLE>
The Company pays bonuses to its employees. As of January 7, 1999, the Company
has accrued $30,227 of bonus compensation that may become payable to employees.
As of January 7, 1999, the Company has accrued $30,963 of vacation pay that may
become payable to employees.
<PAGE> 124
SCHEDULE 3.16
CONSENTS
None
<PAGE> 125
SCHEDULE 3.17
INSURANCE
1. Commercial Property, General Liability, Crime
Named Insured- La Senorita Restaurant
Insurer- Citizens Insurance Company of America
Policy Number- 01 MPG 0520832 00
Effective Dates- January 1, 1999 to January 1, 2000
2. Liquor
Named Insured- KMANCO Inc, et al.
Insurer- Citizens Insurance Company of America
Policy Number- 01 BXX 0164232 01
Effective Dates- January 1, 1999 to January 1, 2000
3. Automobile
Named Insured- La Margarita Complex, et al.
Insurer- Citizens Insurance Company of America
Policy Number- 01 MPC 052327900
Effective Dates- January 1, 1999 to January 1, 2000
4. Boiler and Machinery
Named Insured- KMANCO, Inc.
Insurer- Cincinnati Insurance Co.
Policy Number- 2656285
Effective Dates- January 1, 1999 to January 1, 2002
5. Umbrella
Named Insured- KMANCO, Inc.
Insurer- Cincinnati Insurance Co.
Policy Number- CCC 439 3188
Effective Dates- January 1, 1999 to January 1, 2002
6. Michigan Restaurant Association Self-Insured Workers Compensation Fund
All La Senorita Companies participate in this fund.
7. See Schedule 3.14.
<PAGE> 126
SCHEDULE 3.18
TAX MATTERS
None.
<PAGE> 127
SCHEDULE 3.19
ENVIRONMENTAL MATTERS
An underground storage tank was removed in 1992 from the Traverse City
location then in existence (address: 1245 South Garfield). Documentation
relative to the tank and site analysis has previously been provided to Buyer.
<PAGE> 128
SCHEDULE 3.24
ACCOUNTS RECEIVABLE
Attached.
<PAGE> 129
W. G. Enterprises
Lectern
Sneeze guard
Stainless steel top
Lighted sign board
Elecrtrolux
Safe
Alarm
Glass Tender
Pot Racks
Shelves
Work Table
Food processor
Glasswasher
Disposal
Chairo-Upholstered
Pitco Fryer
Phones
Hot food tables
Freezer condensor unit
Telephone system -- Macrotel
Steamer
Margarita Machine -- Taylor
Perlick Glass Froster
Freezer
Dishwasher -- Hobart
Perlick Glass Froster
Stainless 1 with sink
Amana microwaves
Panel for microwaves
Chairs
Walk-in freezer
DataSym POS System
Dynamic mixer
Upgrade phone system
Water heater
Cooler walk-in
Hanging lights
Hobart hoodvents for dish
Freezer walk-in
Margarita machine
Shelving
Range
Duo Aire make-up air unit
<PAGE> 130
Roof canopies -- fans
Vending machine
Margarita machine
Positouch computer system
2 Bar mixers
Epson 300B Thermal printers
Outside patio furniture
Mita copier
Amana Microwave
Toshiba projection TV
Neon Exterior sign
Range -- griddle
Draft beer unit
Sound system
Lincoln Impinger II Oven
Rethormalizer
Rubber maid utility cart
Lincoln impinging oven
Glass racks, Janisse
Tables, lounges, Janisse
Positouch monitor
Kitchen serving line
Proofer, Kirchman
Chip warmer, Kirchman
Front sign rebuilt, day signs
Antenna/premester
Reupholseter lounge booths
Chairs, pacifico, the barn furn
Chairs, pacifico 18 yellow side
Chairs, pacifico 53 red and purple
Epson kitchen printers Syacon
Leasehold improvements
Bldg permit
Tile
Banquet room architect
Banquet room Wilson Const
Landscaping
Tile -- Scott
Door -- Eliason
Construction Tank
Banquet room carpet
Parking lot pave & strip
Architect
<PAGE> 131
Air ducts
Install recessed fixtures
Install dimmers
Install ground circuit
Brown lumbar
Exterior paint
Wilson construction
Tile
New roof
Seal & stripe parking lot
Install tile shelf
Repair tile & repaint
Arte de mexico
Air conditioner
Arte de mexico
Excavating -- dirt
Shelving
New walls
Paneling
New lighting
Quarry tile
Glass window
Outdoor light
Interior decor
Flu damper
Remodeling
Interior decor
Improvements
Painting
Remodeling
A/c heat
Remodeling
Fiberglass wall panels
Floor-bath
Neon signs
Remodel -- B&G Improvements
Oak doors -- lounge
A/c reehm rf 200-92
Electric panel
New tile kitchen floor
Gas piping
New roof
Furnace
Wall dividers
New roof lounge
<PAGE> 132
Remodel exterior
Exterior lights
Install awnings and lights
Remodel bldg
Lawn sprinkler system
Electrical work
Paint outside building
Carpet, Durkan/Valley
Rebuild fire sprinklers
[List of distributions of assets by WG Enterprises prior to date of agreement
follows. As such distributions occurred prior to the purchase by Casa Ole, it
is immaterial and not reproduced here.]
Kleinrichert Bros., Inc.
Bissel sweeper
Warmer
Chairs
Lighted sign board
Reach in cooler
Chairs
Cooler
Floor grill
Chairs
Alarm sirens
Kitchen equip
Slush machine
Hanging sign
Food processor
Hobart dishwasher
Freezer -- Rapid, Inc.
Amana microwaves
Bar draft lines draft
Marquee sign
Refrigerator
Dish tables
Steam cleaner
Margarita machine
100 glasser chairs
super mixer
gas fireplace
steamer
Perlick glass froster
neon signs
<PAGE> 133
TV & VCR
A/C compressor
ATT phones
Gas generator chairs
Margarita machines
Water heater
Hobart hood vents
Signs
Signage changeable copy
Positouch pos computer
Light fixtures
Reupstolster chairs
Positouch monitor -- touch screen
Pitco S. Steel fry pot replacements
Microwave, RC-22
Sound system
Mita copiers
Penney press
Holexio conveyer toaster
Rethermalizer
Grill lang
Water heater
2-citizen printers
Lockwood proofer
chairs Kitchen serving line
Kolpak freezer refrig Stafford
compressor beer cooler
Leasehold improvements
[A list of remodeling improvements substantially similar to those listed above
for WG Enterprises follows and is omitted herefrom as immaterial.]
[List of distributions of assets by Kleinrichert Bros., Inc. prior to date of
agreement follows. As such distributions occurred prior to the purchase by Casa
Ole, it is immaterial and not reproduced here.]
La Senorita -- Mt. Pleasant
Pay phones
Lighted sign board
Chairs grill games
Computer software
Computer equip
Telephone system
<PAGE> 134
Steamer
Copy machine
Tables, chairs
Woodstove
Margarita machine
Waitress pagers
NCR Upgrade release 7
Preeter
Pay phone dishwasher -- purch option
Vending machine
TVs & VCRs
5 Amana microwaves
Dining room chairs
Food processor
Gasser chairs
Tables
Plants, acces
Glass tender
Sound system
Stainless tables & sink
3 Neon sings
Steel duct -- dishwasher
Sharp 7370 copier
Dishwasher hood
Mug freezer
Kinetico 2000 softener
ATT partner phone system
Taylor freeze model340 marg
Water heater
Sound system
Rethermalizer, Kirchman
Lockwood proofer ship warmer
TVs
Chairs
[A list of remodeling improvements substantially similar to those listed above
for WG Enterprises follows and is omitted herefrom as immaterial.]
[List of distributions of assets by La Senorita Mt Pleasant prior to date of
agreement follows. As such distributions occurred prior to the purchase by Casa
Ole, it is immaterial and not reproduced here.]
La Senorita -- Lansing
Tables
<PAGE> 135
Chairs & booths
Shelving
Kitchen equip
Signs
Fire safe
Security system
Ventilation hoods
2 walk in coolers
Walk in freezer
Cleveland steamer
Neon sign
TVs &VCRs
Sign -- entry
Food processor
Mug freezers
Sharp 7370 copier
Outdoor sign & neon day signs
Shell assemble
Positouch computer system
Blinds
Copper lights
Sound system
Exterior lights
Light fixtures
Rethermalizer, Kirchman
Rewire neon
4 Toshiba TV's
Upholster booths
Phones
Carpet
Delfield refrig counter
PC for back offices
[A list of remodeling improvements substantially similar to those listed above
for WG Enterprises follows and is omitted herefrom as immaterial.]
[List of distributions of assets by La Senorita Mt Pleasant prior to date of
agreement follows. As such distributions occurred prior to the purchase by Casa
Ole, it is immaterial and not reproduced here.]
La Senorita Traverse City
Work top table sink fauce
Wall shelf
Work table drawer tabco
<PAGE> 136
Dishtables -- stainless stee
Disposer model ss-100-29
Dishwasher Hobart CR 66A
Dishwasher hood sturdi
Fan penn
Roof curb sq weldeo
Refrigerated table delfie
4-shelf racks
Freezer Delfield
Taco table Delfield
Shelving metro shelf
Refrigerator
Hot food unit
Impinger oven Lincoln
Oven ve3nt
Roof fan
Roof curb
Double over shelves mirto
6 Amana microwaves
Single shelf tray
Gas hose for wolf grill
Refrigerator Delfield
Shelves for refrigerator
Fryer fileter combo
Rethermalizer
Table
Range
Tilt skillet
Pot & Kettle filler
Fryer
Hand sinks SS
Work table SS w faucet
Work table SS drawe
Sink w faucet
Work table draw cas
Wall shelf
Work table
Canopy
Canopy
Roof fans
Roof fans
Roof curbs
Make up air duo aire
Walk in coolers freezer
Shelving
<PAGE> 137
Hand sink
Refrig units
Glastender draft beer box
Cooler
Mug frosters
Dual wait ST glass washer
Pre rinser
Bar stools
Table
Shelf
Marg machines
Booths
Tables
Chairs
Positouch computer system
Music system
Telephone system
TVs security system
Fire suppression
Kitchen equipment
Hobart mixer
Kitchen small equip utens
Outside patio furniture
Refrigeration
Bar lines
Speakers
Prep table
[A list of remodeling improvements substantially similar to those listed above
for WG Enterprises follows and is omitted herefrom as immaterial.]
[List of distributions of assets by La Senorita Lansing prior to date of
agreement follows. As such distributions occurred prior to the purchase by Casa
Ole, it is immaterial and not reproduced here.]
KMANCO, INC.
Desk
Desk
Drawing table
Storage cabinets
File cabinets
Two drawer files
Easel & chalk boards
Bookcases
<PAGE> 138
Storage cabinets
Overhead projector
Office furniture
NEC Computer
Computer, s-ware, Epson prn
NEC Computer
Steelcase desk drawers
Acma 486 computer
Acma computers
HP Laser jet 4pl printer
Acma computer w cd
Acma 486 dx workstation
Compaq prosignia
AST 486 computer
Two novan mixers
Digital laser printer
Digital Pentium computer
Furnishings
VCR
Sarplus digital phone system
Novell upgrade
AST computers
Alarm system
Conference table and chairs
Pentium computer
Positouch monitor hospitality
Mita copier
Pentium computer
Software
Computer monitor touch-screen
2 Epson printers
Computer
Canon printer
Epson kitchen printers
[A list of remodeling improvements substantially similar to those listed above
or WG Enterprises follows and is omitted herefrom as immaterial.]
[List of distributions of assets by KMANCO prior to date of agreement follows.
As such distributions occurred prior to the purchase by Casa Ole, it is
immaterial and not reproduced here.]
<PAGE> 139
SCHEDULE 3.26
OFFICERS AND DIRECTORS OF THE LA SENORITA COMPANIES
FRANCHISE
President - Kenneth Kleinrichert
Secretary - Donald Kleinrichert
Treasurer - Joseph Kleinrichert
Directors:
Kenneth Kleinrichert
Donald Kleinrichert
Joseph Kleinrichert
KBI
President - Steven Arnot
Vice President - Kenneth Kleinrichert
Secretary - Donald Kleinrichert
Treasurer - Joseph Kleinrichert
Directors:
Kenneth Kleinrichert
Joseph Kleinrichert
Steven Arnot
KMANCO
President - Kenneth Kleinrichert
Vice President - Joseph Kleinrichert
Secretary - Donald Kleinrichert
Treasurer - Donald Kleinrichert
Directors:
Kenneth Kleinrichert
Joseph Kleinrichert
Donald Kleinrichert
MT. PLEASANT
President - Steven Arnot
Vice President - Kenneth Kleinrichert
<PAGE> 140
Vice President - Joseph Kleinrichert
Secretary - Donald Kleinrichert
Treasurer - Donald Kleinrichert
Directors:
Kenneth Kleinrichert
Joseph Kleinrichert
Donald Kleinrichert
Steven Arnot
LANSING
President - Steven Arnot
Vice President - Kenneth Kleinrichert
Secretary - Donald Kleinrichert
Treasurer - Joseph Kleinrichert
Directors:
Kenneth Kleinrichert
Joseph Kleinrichert
Donald Kleinrichert
Steven Arnot
TRAVERSE CITY
President - Steven Arnot
Vice President - Kenneth Kleinrichert
Secretary - Donald Kleinrichert
Treasurer - Joseph Kleinrichert
Directors:
Kenneth Kleinrichert
Joseph Kleinrichert
Donald Kleinrichert
WGE
President - Steven Arnot
Vice President - Kenneth Kleinrichert
Secretary - Donald Kleinrichert
Treasurer - Joseph Kleinrichert
<PAGE> 141
Directors:
Kenneth Kleinrichert
Joseph A. Kleinrichert
Steven Arnot
<PAGE> 142
SCHEDULE 3.27
BANK ACCOUNTS; POWERS OF ATTORNEY
<TABLE>
<CAPTION>
TYPE NAME ACCOUNT NUMBER/BANK
- ---- ---- -------------------
<S> <C> <C>
General WG ENTERPRISES INC. Acct# 8400525
D/B/A LA SENORITA OLD KENT BANK-
Signers: Ken Kleinrichert, David Starkey, Steven Arnot GRAND TRAVERSE
Petty Cash WG ENTERPRISES INC. Acct# 8437170
D/B/A LA SENORITA OLD KENT BANK-
Signers: Steven Arnot, Jeff Birgy, Gina Hoy GRAND TRAVERSE
Tax Account WG ENTERPRISES Acct# 9036294
D/B/A LA SENORITA OLD KENT BANK-
Signers: Ken Kleinrichert, David Starkey GRAND TRAVERSE
General LA SENORITA-PETOSKEY Acct# 8653347
Signers: Ken Kleinrichert, Steve Arnot, Dave Starkey OLD KENT BANK-
GRAND TRAVERSE
Petty Cash LA SENORITA Acct# 338397
PETTY CASH ACCOUNT OLD KENT BANK-
Signers: Bryan R. Young, Steven Arnot, Glenda Naganashe PETOSKEY
General LA SENORITA-MT. PLEASANT Acct# 8653370
Signers: Ken Kleinrichert, Dave Starkey OLD KENT BANK-
GRAND TRAVERSE
General LA SENORITA-MT. PLEASANT INC. Acct# 101903418
Signers: Ken Kleinrichert, David Starkey, Steven Arnot NATIONAL CITY BANK
Petty Cash LA SENORITA-MT. PLEASANT, INC. Acct# 101903434
PETTY CASH NATIONAL CITY BANK
Signers: Steven Arnot, Steve Sura, Anna Higgins
General LA SENORITA-LANSING Acct# 8653388
Signers: Ken Kleinrichert, David Starkey, Steven Arnot OLD KENT BANK-
GRAND TRAVERSE
Petty Cash LA SENORITA LANSING INC. Acct# 7510383537
PETTY CASH ACCOUNT OLD KENT BANK-
Signers: Matt Sura, Steven Arnot, Angela DePauge GRAND TRAVERSE
General LA SENORITA TRAVERSE CITY Acct# 750712338
Signers: Ken Kleinrichert, Dave Starkey OLD KENT BANK-
GRAND TRAVERSE
</TABLE>
<PAGE> 143
<TABLE>
<CAPTION>
TYPE NAME ACCOUNT NUMBER/BANK
---- ---- -------------------
<S> <C> <C>
Petty Cash LA SENORITA TRAVERSE CITY Acct# 7507679582
#9 PETTY CASH OLD KENT BANK
Signers: Lura Ruede, Steven Arnot, Bev Jody GRAND TRAVERSE
General KMANCO INC. Acct# 8525164
Signers: Ken Kleinrichert, David Starkey, Steven Arnot OLD KENT BANK-
GRAND TRAVERSE
KMANCO INC. Acct# 8648552
INSURANCE ACCOUNT OLD KENT BANK-
Signers: Ken Kleinrichert, David Starkey GRAND TRAVERSE
KMANCO INC. Acct# 7506947204
REMODEL ACCOUNT OLD KENT BANK-
Signers: David Starkey GRAND TRAVERSE
PAYROLL ANALYSIS CO Acct# 8758617
Signers: David Starkey, Steven Arnot OLD KENT BANK-
GRAND TRAVERSE
LA SENORITA FRANCHISE CO. Acct# 8680746
Signers: David Starkey OLD KENT BANK-
GRAND TRAVERSE
</TABLE>
<PAGE> 144
SCHEDULE 5.2(e)
ALLOCATION OF THE PURCHASE PRICE
[To be prepared following execution of document and prior to the Closing,
initialed by the parties, and attached hereto.]
<PAGE> 145
LA SENORITA - ANALYSIS OF PRICE ALLOCATION FOR SALE TO CASA OLE
SCHEDULE 5.2
<TABLE>
<CAPTION>
C Corporations
--------------------------------------------------------------
W.G. KLEINRICHERT LA SENORITA
ENTERPRISES, BROS., MT. PLEASANT, KMANCO,
INC. INC. INC. INC.
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PURCHASE PRICE ALLOCATION
Purchase price - stock $ 645,000 $ 770,000 $ 670,000 $ 35,000
Purchase price - furniture, fixtures & equipment -- -- -- --
Purchase price - liquor license -- -- -- --
Purchase price - goodwill -- -- -- --
Purchase price - receivable La Margarita Complex 260,000 400,000 20,000 430,000
----------- ----------- ----------- -----------
SUBTOTAL $ 905,000 $ 1,170,000 $ 690,000 $ 465,000
Purchase price - cash on hand -- -- -- --
Purchase price - accounts receivable -- -- -- --
Purchase price - food and supplies inventory 17,600 26,000 18,100 --
Purchase price - beverage inventory 6,400 6,000 4,900 --
Purchase price - prepaid expenses -- -- -- --
Purchase price - investments and other assets -- -- -- --
Purchase price - liabilities for accounts payable (21,100) (23,100) (14,500) (27,200)
----------- ----------- ----------- -----------
NET PURCHASE PRICE $ 907,900 $ 1,178,900 $ 698,500 $ 437,800
Less: receivable La Margarita Complex paid from closing (260,000)g (400,000) (20,000) (430,000)
----------- ----------- ----------- -----------
Net cash flow $ 647,900 $ 778,900 $ 678,500 $ 7,800
=========== =========== =========== ===========
Stock Sale Stock Sale Stock Sale Stock Sale
<CAPTION>
S Corporations
-------------------------------------------------------------
LA SENORITA LA SENORITA LA SENORITA TOTAL
TRAVERSE LANSING, FRANCHISE CURRENT
CITY, INC. INC. COMPANY SALE
<S> <C> <C> <C> <C>
Purchase price - stock $ 920,000 -- $ 500,000 $ 3,540,000
Purchase price - furniture, fixtures & equipment -- $ 75,000 000 75,000
Purchase price - liquor license -- 35,000 -- 35,000
Purchase price - goodwill -- 350,000 -- 350,000
Purchase price - receivable La Margarita Complex -- N/A -- 1,110,000
----------- ----------- ----------- -----------
SUBTOTAL $ 920,000 $ 460,000 $ 500,000 $ 5,110,000
Purchase price - cash on hand -- N/A -- --
Purchase price - accounts receivable -- N/A -- --
Purchase price - food and supplies inventory 22,200 16,000 -- 99,900
Purchase price - beverage inventory 8,800 4,000 -- 30,100
Purchase price - prepaid expenses -- N/A -- --
Purchase price - investments and other assets -- N/A -- --
Purchase price - liabilities for accounts payable (16,800) N/A -- (102,700)
----------- ----------- ----------- -----------
NET PURCHASE PRICE $ 934,200 $ 480,000 $ 500,000 $ 5,137,300
Less: receivable La Margarita Complex paid from closing -- N/A -- (1,110,000)
----------- ----------- ----------- -----------
Net cash flow $ 934,200 $ 480,000 $ 500,000 $ 4,027,300
=========== =========== =========== ===========
Stock Sale Asset Sale Stock Sale Stock Sale
</TABLE>
<TABLE>
Includes
Ownership
of
La Buena
Agency,
Inc.
<S> <C> <C>
Allocate price for purposes of Section 338 (h)(10) election
for step up in basis
Purchase price - food and supplies inventory 22,200 -
Purchase price - beverage inventory 8,800 -
Purchase price - furniture, fixtures & equipment 220,000 -
Purchase price - liquor license 35,000 -
Purchase price - goodwill 665,000 -
Purchase price - liabilities for accounts payable (16,800) -
Purchase price - franchise - 500,000
--------- ---------
$ 934,200 $ 500,000
========= =========
</TABLE>
Note: inventory and accounts payable are listed at estimates based
on actual at 12/31/98. Inventory and accounts payable to be
adjusted to actual as of date of sale.
<PAGE> 146
SCHEDULE 5.2(f)
FUND STATEMENT
[Attached.]
<PAGE> 147
Attached is a letter from the Michigan Self Insured Workers Compensation Fund,
dated 7/29/98 that reads as follows:
RE: MRA premium return explanation & report card
Dear MRA fund member:
A copy of your mid-year premium return explanation & report card is enclosed.
Your report outlines the profits that have been returned to you and the
estimated amount remaining to eventually be returned. The amount returned by
your fund is regulated by the Department of Consumer & Industry Services (DCIS).
Profits are returned over time. This conservative approach by the DCIS ensures
that enough premium is in your fund to cover any unexpected increase in losses.
The DCIS has allowed the return of $2,443,070 dollars in profits that were paid
out in four separate installments. These "profits" represented excess premiums
not used to pay claims and investment income generated from your fund's
investment portfolio. Your fund will be making its fifth return request this
fall.
Report explanation
Top half: Displays the total profits returned to you, the amount remaining for
return, and when the returns were made.
Bottom half: Displays the total profits returned and remaining by individual
fund year. The total of all fund years will be equal to the summary "total
returned" and "total remaining" at the top of your report. The bottom of the
report displays how your grade for this current fund year compares to other fund
members.
The success of your fund is based on your organization's ability to proactively
address unsafe work conditions and crate a safety "culture." Your fund wants to
assist you in your safety efforts. Feel free to call to set up an
on0-siteconsultation with a fund safety representative.
Sincerely,
/s/ Joe Clifford
Director of Risk Management
Enclosure:1
<PAGE> 148
MRA Self Insured Workers Compensation Fund
Premium Return Explanation & Report Card - Fall 1998
Member Policy Number LASEN-R
Total Profits Returned to Date: $82,033.06 (see below)
Total Remaining: $39,258.40 (estimated) [Handwritten note: forfeited if we leave
the fund - amount subject to claims paid]
Fall 1998 Return $13,185.43 (profits from fund years 3,4,5)
Fall 1997 Return $19,480.53 (profits from fund years 3,4)
Fall 1996 Return $21,139.30 (profits from fund years 1,2,3)
Fall 1995 Return $20,139.52 (profits from fund years 1,2)
Fall 1994 Return $ 7,483.27 (profits from fund year 1)
DETAILED EXPLANATION BY FUND YEAR
Your grade is based on your loss ratio (losses/premium), returns are weighted by
the loss ratio.
A+ = 0%
A = 1-20%
B = 21-40%
C = 41-55%
D = 56-75%
E = 76-100%
F = 101%+
<TABLE>
<CAPTION>
*Premium
Fund Year Premium Paid Premium returned remaining Loss ratio Grade
- --------- ------------ ---------------- --------- ---------- -----
<S> <C> <C> <C> <C> <C>
12/92-11/93 $80,656.35 $25,093.32 $10,157.55 20% A
12/93-11/94 $94,710.37 $ 8,326.41 $ 5,141.97 15% A
12/94-11/95 $69,271.53 $38,959.18 $ 6,024.50 15% A
12/95-11/96 $49,424.84 $ 9,654.15 $ 7,354.76 36% B
12/96-11/97 $45,411.90 94% E
12/97-10/98 $41,724.86 Year not completed $10,579.63 45%(est) C
</TABLE>
TOTAL PREMIUM REMAINING: $39,258.40
The Premium Remaining numbers are estimates based on your current loss ratio as
well as the fund's. Fund year 6 is the most likely to change because of it
having not been completed.
<PAGE> 149
HOW DO YOU MEASURE UP?
The summary below represents fund totals for 12/1/97 to 10/1/98 Eg, Your fund
has 238 members with "0" losses.
Grade summary - A+ - 238
A - 98
B - 24
C - 12
D - 2
E - 10
F - 26
<PAGE> 1
EXHIBIT 99.1
MONDAY MAY 3, 11:36 AM EASTERN TIME
COMPANY PRESS RELEASE
CASA OLE RESTAURANTS INC. CLOSED ON ITS ACQUISITION OF LA SENORITA RESTAURANTS
HOUSTON--(BUSINESS WIRE)--May 3, 1999--Casa Ole Restaurants Inc. (the "Company")
(Nasdaq:CASA - news) announced today that it closed on its acquisition of La
Senorita Restaurants on Friday, April 30, 1999. The purchase price was
approximately $4,000,000 in cash.
La Senorita Restaurants are Mexican themed, casual style operations consisting
of five company-owned restaurants and four franchised restaurants. All of the
nine restaurants are located within the State of Michigan. Sales for the La
Senorita system in 1998 were approximately $11.6 million, of which approximately
$7.6 million were from company-owned restaurants. "We are excited by this latest
acquisition, which is another step in our strategy of adding shareholder value
by careful new restaurant development in existing markets, coupled with
opportunistic acquisitions of proven Mexican restaurant companies," stated Lou
Neeb, chairman and CEO of Casa Ole Restaurants Inc. "To date, the Company has
acquired two Mexican themed companies, Monterey's Acquisition Corp. in July
1997, and now La Senorita Restaurants. With the many similarities in operations
and management philosophies in the two companies, we see this acquisition as
being an immediate contributor to our company's financial growth."
The Company plans to release its first quarter earnings on Friday, May 14, 1999.
The Company has scheduled a conference call on Monday, May 17, 1999 to discuss
first quarter results. The call will last approximately 30 minutes, including
time allotted for taking questions from callers. It will begin at 3:00 p.m.
Central Standard Time. Inquiries regarding the call should be directed to Teresa
Atkinson at 713/943-7574.
Casa Ole Restaurants Inc. operates and franchises 80 Mexican restaurants. The
current system includes 48 Company-operated restaurants and 32
franchisee-operated restaurants.
Special Note Regarding Forward-Looking Statements
Certain statements in this release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other facts which may cause the actual results, performance or
achievements of Casa Ole Restaurants Inc., its area developers, market partners,
franchisees and Casa Ole restaurants to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; competition; success of operating
initiatives; development and operating costs; area developers' adherence to
development schedules; advertising and promotional efforts; brand awareness;
adverse publicity; acceptance of new product offerings; consumer trial and
frequency; availability, locations and terms of sites for store development;
changes in business strategy or development plans; quality of management;
availability, terms and development of capital; business abilities and judgment
of personnel; availability of qualified personnel; food, labor and employee
benefit costs; changes in, or the failure to comply with government regulations;
regional weather conditions; construction schedules; and other factors
referenced in the Company's 1998 Annual Report and Form 10-K. The use in this
release of such words as
<PAGE> 2
"believes", "anticipates", "expects", "intends" and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such statements. The success of the Company is dependent on the
efforts of the Company, its employees and its area developers, market partners,
and franchisees and the manner in which they operate and develop stores.
Contact:
Casa Ole Restaurants Inc., Houston
Curt Glowacki, 713/943-7574
or
Andrew J. Dennard, 713/943-7574
