SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
_______________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 1, 1999
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Suburban Lodges of America, Inc.
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(Exact Name of Registrant as Specified in Charter)
Georgia 000-28108 58-1781184
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code:
(770) 799-5000
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 1, 1999, Suburban Lodges of America, Inc. ("Suburban")
completed the acquisition of GuestHouse International LLC (the
"Company") through the purchase of substantially all the assets of the
Company by GuestHouse International Franchise Systems, Inc.
("Purchaser"), a wholly-owned subsidiary of Suburban. The purchase
was made pursuant to an Agreement for Purchase and Sale of Assets
dated April 16, 1999, between Suburban, the Purchaser, and the Company.
The consideration consisted of 300,000 newly issued shares of
Suburban's Common Stock, par value $.01 per share, and $1.25 million in
cash from available cash balances. Additional consideration may be
payable over time subject to achievement of certain financial
performance and new facility goals. The Company is a franchisor of
midscale lodging facilities under the names GuestHouse Inns, Hotels
and Suites. Suburban, through the Purchaser, presently intends to
operate the Company substantially as it had been operated prior to its
acquisition. Suburban acquired substantially all of the Company's
assets, including all franchise agreements between the Company and its
franchisees and all of the trademarks owned by the Company and those
in which it has an interest. The acquisition excluded the purchase of
certain assets of the Company, including corporate organizational
documents; the rights to tax refund claims; licenses, permits, orders,
or approvals not transferable under applicable laws; accounts or notes
receivables earned prior to the Closing Date; and cash and cash
equivalents owned on the Closing Date. The consideration was
determined by negotiation among the parties.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Businesses Acquired
The financial statements of the Company required to be reported
as a result of the transaction described in Item 2 have not been
completed as of the date of this report and will be filed as an
amendment to this report as soon as practicable in accordance with
Item 7(a)(4) of Form 8-K.
(b) Pro Forma Financial Information
The pro forma financial statements required to be reported as a
result of the transaction described in Item 2 have not been completed
as of the date of this report, and will be filed as an amendment to
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this report as soon as practicable in accordance with Item 7(a)(4) of
Form 8-K.
(c) Exhibits
The following exhibits are filed with this report:
2.1 (a) Agreement for Purchase and Sale of Assets dated
April 16, 1999 among Suburban, the Purchaser and
the Company.
(b) First Amendment to Agreement for Purchase and Sale
of Assets dated June 1, 1999 among Suburban, the
Purchaser and the Company.
4.1 Amended and Restated Articles of Incorporation of
Suburban (incorporated by reference to Exhibit 3.1 to
Suburban's Registration Statement on Form S-1, File
No. 333-2876, filed with the Commission on March 28,
1996).
4.2 Amended and Restated By-Laws of Suburban (incorporated
by reference to Exhibit 3.2 to Suburban's Annual
Report on Form 10-K for the year ended December 31,
1996, File No. 000-28108, filed with the Commission on
March 28, 1997).
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.
SUBURBAN LODGES OF AMERICA, INC.
By: /s/ David E. Krischer
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David E. Krischer
President and Chief Executive
Officer
Dated: June 15, 1999
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AGREEMENT
FOR
PURCHASE AND SALE OF ASSETS
among
SUBURBAN LODGES OF AMERICA, INC. ("Suburban"),
GUESTHOUSE FRANCHISE SYSTEMS, INC. ("Purchaser"),
and
GUESTHOUSE INTERNATIONAL LLC ("Company")
Dated as of April 16, 1999
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AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS (together with its
Appendices, the "AGREEMENT") is made and entered into as of the 16th day of
April, 1999, by and among SUBURBAN LODGES OF AMERICA, INC., a Georgia
corporation ("SUBURBAN"), GUESTHOUSE FRANCHISE SYSTEMS, INC., a Georgia
corporation and a wholly-owned subsidiary of Suburban ("PURCHASER"), and
GUESTHOUSE INTERNATIONAL LLC, an Arkansas limited liability company (the
"COMPANY").
R E C I T A L S:
WHEREAS, the Company, as a result of the expenditure of time,
skill, effort, and money has developed a distinctive concept, system and
business relating to the establishment, operation and franchising of
limited-service inns, full-service hotels, all-suites lodging and variations
of such operations, which operate under the name "GuestHouse Inn",
"GuestHouse Hotel", "GuestHouse Suites", "GuestHouse International",
"GUESTHOUSE.NET", and some other variations which contain the name
"GuestHouse(R)", respectively, (hereinafter referred to as the "ACQUIRED
BUSINESS", as is more particularly described in EXHIBIT "A" attached
hereto); and
WHEREAS, the Company desires to sell and transfer to Purchaser,
and Purchaser desires to acquire from the Company, substantially all of the
assets of the Company used in connection with the Acquired Business, upon
the terms and conditions contained herein;
NOW, THEREFORE, for and in consideration of the premises,
and the mutual covenants and agreements contained herein, and other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. PURCHASE AND SALE OF ASSETS
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1.1. ACQUIRED ASSETS. Subject to the terms and conditions
contained herein, the Company shall sell, transfer, convey and assign
to Purchaser, and Purchaser shall purchase and acquire from the
Company, on May 17, 1999, subject to adjustment as provided in this
Agreement, or such other date as the parties may agree to (the
"CLOSING DATE"), all of the Company's assets, tangible or intangible,
real or personal, except for those expressly excluded from purchase in
Section 1.2 (collectively, the "ACQUIRED ASSETS").
The Acquired Assets shall include all franchise agreements
between the Company and its franchisees (including those franchise
agreements existing on the date hereof and on the Closing Date and all
pending franchise agreements even if not yet documented), and all of
the Trademarks owned by the Company as well as the Company's interest
in any Trademarks that are pending or have been applied for. All of
the Acquired Assets shall be free and clear of all liens, claims and
encumbrances, other than liens, claims and encumbrances described on
SCHEDULE 1.1, liens for taxes which are not yet due and payable and
minor imperfections of title and encumbrances, if any, the curing or
removal of which would not detract from the value of the Acquired
Assets or impair the operations of the Acquired Business or the use of
the Acquired Assets.
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1.2. EXCLUDED ASSETS. Notwithstanding anything in this Agreement
to the contrary, the Acquired Assets shall not include:
(a) any right, title or interest of the Company under or
related to this Agreement and the agreements contemplated to be
executed in connection herewith, including, without limitation, the
consideration delivered and to be delivered to the Company pursuant to
this Agreement and any other agreements executed in connection
herewith;
(b) the seals, minutes books, transfer books, blank
membership interest certificates, tax returns and other records
relating to the organization or tax reporting of the Company;
(c) the rights to the Company's claims for any federal,
state, local or foreign tax refunds;
(d) any licenses, permits, orders or approvals from any
federal, state or local government or any agency or bureau thereof
that are not transferable under applicable laws;
(e) accounts or notes receivable relating to goods or
services rendered or fees earned prior to the Closing Date, except as
provided in SECTION 2.1.2;
(f) cash and cash equivalents, including all bank accounts,
cash, certificates of deposit and other similar investment
instruments, owned by the Company on the Closing Date; and
(g) any other asset or contract specifically listed on
SCHEDULE 1.2(g).
ARTICLE 2. PURCHASE PRICE
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2.1. PURCHASE PRICE. In consideration of the sale, assignment,
transfer and conveyance of the Acquired Assets, and in reliance upon
the covenants, representations and warranties made herein by the
Company, Suburban and Purchaser shall deliver the Purchase Price.
2.1.1 Payments. The "PURCHASE PRICE" shall be the sum
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of the Closing Payment, the First Anniversary Payment, the Second
Anniversary Payment, and the Third Anniversary Payment.
(a) Closing Payment. Suburban and Purchaser shall deliver
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the Closing Payment at the Closing. The "CLOSING PAYMENT" shall
consist of the Cash Payment and the Shares Payment. The "CASH
PAYMENT" shall be One Million Two Hundred Fifty Thousand Dollars
($1,250,000) payable in cash, subject to proration as provided in
SECTION 2.1.2. The "SHARES PAYMENT" shall be Three Hundred
Thousand (300,000) shares of Suburban's Common Stock, par value
$0.01 per share (the "SUBURBAN STOCK").
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(b) First Anniversary Payment. No later than the ninety-
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fifth (95th) day following the first anniversary of the Closing
Date, Suburban and Purchaser, jointly and severally, shall
deliver the First Anniversary Payment, if due. The "FIRST
ANNIVERSARY PAYMENT" shall be One Million Dollars ($1,000,000).
Subject to SECTION 2.1.1(g), Suburban and Purchaser shall only
deliver, and the Company shall only be entitled to receive, the
First Anniversary Payment if and only if:
(i) the number of Open Franchises equals or exceeds
eighty (80) on the ninetieth (90th) day following the first
anniversary of the Closing Date, and
(ii) the Gross Revenue of the Acquired Business
(including all Open Franchises) for the twelve-month period
ending ninety (90) days following the first anniversary of
the Closing Date equals or exceeds One Million Four Hundred
Twenty-Five Thousand Dollars ($1,425,000).
(c) Second Anniversary Payment. No later than the ninety-
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fifth (95th) day following the second anniversary of the Closing
Date, Suburban and Purchaser, jointly and severally, shall
deliver the Second Anniversary Payment, if due. The "SECOND
ANNIVERSARY PAYMENT" shall be One Million Dollars ($1,000,000).
Subject to Section 2.1.1(g), Suburban and Purchaser shall only
deliver, and the Company shall only be entitled to receive, the
Second Anniversary Payment if and only if either:
(i) (A) the number of Open Franchises equals or
exceeds one hundred thirty (130) on the ninetieth (90th) day
following the second anniversary of the Closing Date, and
(B) the Gross Revenue of the Acquired Business
(including all Open Franchises) for the twelve-month period
ending ninety (90) days following the second anniversary of
the Closing Date equals or exceeds Two Million Six Hundred
Fifty Thousand Dollars ($2,650,000);
or
(ii) (A) the number of Open Franchises equals or
exceeds one hundred seventeen (117) on the ninetieth (90th)
day following the second anniversary of the Closing Date,
and
(B) the Gross Revenue of the Acquired Business
(including all Open Franchises) for the twelve-month period
ending ninety (90) days following the second anniversary of
the Closing Date equals or exceeds Three Million Three
Hundred Fifty Thousand Dollars ($3,350,000).
(d) Third Anniversary Payment. No later than the ninety-
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fifth (95th) day following the third anniversary of the Closing
Date, Suburban and Purchaser, jointly and severally, shall
deliver the Third Anniversary Payment, if due. The "THIRD
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ANNIVERSARY PAYMENT" shall be One Million Dollars ($1,000,000).
Subject to SECTION 2.1.1(g), Suburban and Purchaser shall only
deliver, and the Company shall only be entitled to receive, the
Third Anniversary Payment if and only if either:
(i) (A) the number of Open Franchises equals or
exceeds two hundred (200) on the ninetieth (90th) day
following the third anniversary of the Closing Date, and
(B) the Gross Revenue of the Acquired Business
(including all Open Franchises) for the twelve-month period
ending ninety (90) days following the third anniversary of
the Closing Date equals or exceeds Four Million Seven
Hundred Fifty Thousand Dollars ($4,750,000);
or
(ii) (A) the number of Open Franchises equals or
exceeds one hundred eighty (180) on the ninetieth (90th) day
following the third anniversary of the Closing Date, and
(B) the Gross Revenue of the Acquired Business
(including all Open Franchises) for the twelve-month period
ending ninety (90) days following the third anniversary of
the Closing Date equals or exceeds Five Million Five Hundred
Thousand Dollars ($5,500,000).
(e) Definitions. As used in this Agreement, "OPEN
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FRANCHISES" shall mean open and operating Purchaser owned and/or
franchised GuestHouse inns, hotels or suite hotels (and variations
thereof worldwide) displaying the "GuestHouse" logo that are
substantially complete and open to the public, properly licensed, and
which are in Good Standing under the governing franchise agreements.
As used in this SECTION, "GOOD STANDING" shall mean that (i) no party
to the agreement has given notice of termination or intent to
terminate, and (ii) the franchisee is in substantial compliance with
all maintenance, quality assurance and other operating requirements
under the agreement.
As used in this Agreement, "GROSS REVENUE" shall mean all
revenues and income actually received by Purchaser from franchisees
and licensees of Purchaser, including application fees, initial
license fees, monthly operating fees, license transfer fees,
termination fees, late payment fees or charges, and any other fees
paid by franchisees or licensees to Purchaser under the existing or
any future UFOC in the ordinary course of business and received by
Purchaser.
(f) Stock Election. At the discretion of the Company, all
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of the First Anniversary Payment, Second Anniversary Payment or Third
Anniversary Payment may be paid in either shares of Suburban Stock or
cash at the election of the Company, provided that such shares may be
issued in each such case without registration under the Securities Act
or state blue sky laws. In such event, the number of shares of
Suburban Stock to be delivered shall have a fair market value equal to
the First Anniversary Payment, Second Anniversary Payment, or Third
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Anniversary Payment, as appropriate. Suburban and Purchaser will pay
the fair market value in cash for any fractional shares resulting from
the substitution in lieu of issuing fractional shares. Fair market
value will be determined for each such delivery from the closing price
of the Suburban Stock reported on the Nasdaq National Market, or such
other principal securities market where the Suburban Stock is then
listed, on the last business day prior to the date on which each such
delivery is due.
(g) Acceleration of Payments. If an Acceleration Event
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should occur
(i) prior to the scheduled payment date for the First
Anniversary Payment, then each of the First Anniversary
Payment, the Second Anniversary Payment and the Third
Anniversary Payment shall be due and payable to the Company
not more than sixty (60) days after the date of the
Acceleration Event;
(ii) prior to the scheduled payment date for the Second
Anniversary Payment, then each of the Second Anniversary
Payment and the Third Anniversary Payment shall be due and
payable to the Company not more than sixty (60) days after
the date of the Acceleration Event; or
(iii) prior to the scheduled payment date for the
Third Anniversary Payment, then the Third Anniversary
Payment shall be due and payable to the Company not more
than sixty (60) days after the date of the Acceleration
Event.
An "Acceleration Event" shall be deemed to have occurred if:
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(i) The Purchaser or Suburban shall fail to operate
the Acquired Business substantially in accordance with the
provisions of SECTION 5.14;
(ii) The Purchaser or Suburban sells, transfers or
otherwise assigns more than fifty percent (50%) of the
assets (as of the date of the Acceleration Event) of the
Acquired Business to any entity other than a subsidiary or
Affiliate of Suburban or Purchaser; or
(iii) There shall occur any transaction, transfer
or arrangement in which ownership of, or the right to vote,
more than 50% of the shares or interests entitled to vote
with respect to the election of directors of Suburban or
Purchaser is acquired by or transferred to any Person other
than a subsidiary or Affiliate of Suburban or Purchaser;
provided that this clause (iii) shall not apply to any bona
fide pledge or assignment of such shares or interests to
secure the obligations of Suburban or Purchaser under any
financing transaction.
2.1.2 Prorations. The following prorations to the Cash
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Payment shall be made as of the Closing, with the Company liable or
entitled to the extent such items relate to the time period within the
calendar month in which the Closing occurs up to and including the
Closing, and Purchaser liable or entitled to the extent such items
relate to the time period within the calendar month in which the
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Closing occurs subsequent to the Closing. Except as otherwise
specifically provided herein, the net amount of all such prorations
will be settled and paid at the Closing:
(a) Franchise fees, royalties, or payments from franchisees
due in the calendar month in which the Closing occurs, and,
(b) Rental payments and other deposits, fees and expenses
directly related to any real or personal property leases assumed by
the Purchaser and due in the calendar month in which the Closing
occurs and all other prepaid expenses, the benefit of which will
accrue to the Purchaser as of the Closing Date.
If the actual expenses of any of the above items for the month
within which the Closing occurs is not known on the Closing, the
proration shall be made based on the expense incurred in the previous
month. The Company agrees to furnish Purchaser with such documents
and other records as shall be reasonably requested in order to confirm
all proration calculations.
2.2. ASSUMPTION OF CERTAIN LIABILITIES; OBLIGATIONS NOT ASSUMED.
(a) Except as provided in SECTION 2.2(b), Purchaser agrees
to assume as of the Closing, and to pay or perform, in accordance with
their terms, only the following fixed and determinable obligations and
liabilities of the Company relating to the Acquired Business or the
Acquired Assets (the "ASSUMED LIABILITIES"): all liabilities and
obligations accruing after the Closing under the Assigned Contracts;
provided that the Purchaser will not assume any obligation or
liability resulting from or arising out of any default, breach,
performance or non-performance by the Company under or with respect to
any of the Assigned Contracts.
(b) Except for the Assumed Liabilities, Purchaser shall not
assume any obligation or liability of the Company of any kind, and the
Company shall pay, satisfy and perform all of its obligations, other
than the Assumed Liabilities, whether fixed, contingent, known or
unknown and whether existing as of the Closing or arising thereafter.
No obligation or liability resulting from or arising out of or with
respect to any of the Assigned Contracts or out of the operation of
the Company prior to the Closing shall be considered to have accrued
after the Closing.
(c) Notwithstanding any other provision of this Agreement,
the obligations of the Company pursuant to this SECTION shall survive
the Closing and the transactions contemplated by this Agreement. To
the extent Purchaser pays or satisfies any liabilities not expressly
assumed in this SECTION, then, solely at the Purchaser's option,
either (i) the Company shall promptly reimburse Purchaser or (ii) the
Purchaser shall deduct the amount of such liability from any component
of the Purchase Price.
2.3. Allocation of Purchase Price. The Purchase Price shall be
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allocated among the classes of Acquired Assets in compliance with the
provisions of Section 1060 of the Internal Revenue Code of 1986, as
amended (the "CODE") as set forth in SCHEDULE 2.3. The Company and
Purchaser agree to reflect such allocations in all reports to
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governmental authorities, including, without limitation, for all
foreign, federal, state and local tax purposes. Notwithstanding any
indemnification provided in SECTION 6.1, and in addition thereto, the
Company agrees to indemnify and hold Purchaser harmless, and Purchaser
hereby agrees to indemnify and hold the Company harmless, from and
against any and all losses, liabilities and expenses (including
without limitation, additional income taxes and reasonable fees and
disbursements of counsel) which may be incurred by the indemnified
party as a result of the failure of the indemnifying party so to
report the sale and purchase of the Acquired Assets as required by
applicable laws.
ARTICLE 3. CLOSING; CONDITIONS TO CLOSING
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3.1. CLOSING. The consummation of the transactions contemplated
in this Agreement (the "CLOSING") shall take place at the offices of
Kilpatrick Stockton LLP, 1100 Peachtree Street, Suite 2800, Atlanta,
Georgia, at 10:00 a.m., Atlanta time, on the Closing Date or at such
other place and time as the parties may mutually agree.
All deliveries, payments and other transactions and
documents relating to the Closing shall be interdependent and none
shall be effective unless and until all are effective (except to the
extent that the party entitled to the benefit thereof has waived in
writing satisfaction or performance thereof as a condition precedent
to Closing).
3.2. CONDITIONS OF SUBURBAN AND PURCHASER TO CLOSING. All
obligations of Suburban and Purchaser hereunder to consummate the
transactions contemplated herein at the Closing are subject to the
fulfillment and satisfaction of each of the following conditions on or
prior to the Closing, any or all of which may be waived in whole or in
part by Suburban or Purchaser, provided that no such waiver shall be
effective unless it is set forth in a writing executed by the parties:
(a) Company's Deliveries. The Company and the Members
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shall have executed and delivered to Suburban and Purchaser the
documents described on SCHEDULE 3.2(a).
(b) Compliance with Agreements and Conditions. The Company
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shall have performed and complied with in all material respects all
covenants, agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the date of the
Closing.
(c) Government Consents. Except for Government
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authorizations, consents and approvals related to the UFOC, the
parties shall have received all authorizations, consents and approvals
of any Government necessary for the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby, all such authorizations, consents and approvals shall be in
full force and effect, and all notices required to be given to any
Government shall have been given and all applicable waiting periods
shall have expired.
(d) Other Consents. The Company shall have delivered to
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Suburban all authorizations, consents (including estoppel letters from
lenders, suppliers, lessors, and others), and approvals from the
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Persons identified on SCHEDULE 3.2(d); provided, however, that none of
such authorizations, consents or approvals shall be given on terms
that adversely affect the business, assets, properties, Liabilities,
affairs, results of operations, condition (financial or otherwise),
cash flows or prospects of the Company, in the aggregate.
(e) No Inconsistent Requirements. No Action shall have
----------------------------
been instituted by any Government or other Person (i) against a party
hereto to restrain or prohibit the consummation of the transactions
herein or (ii) which could reasonably be expected to have a material
adverse effect on the Acquired Business.
(f) Proceedings and Documents Satisfactory. All
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proceedings taken in connection with the consummation of the
transactions contemplated herein and all documents and papers
reasonably required in connection therewith shall be reasonably
satisfactory to Suburban and its counsel, and Suburban and its counsel
shall have timely received copies of such documents and papers, all in
form and substance satisfactory to Suburban and its counsel, as
reasonably requested by Suburban or its counsel in connection
therewith.
3.3. CONDITIONS OF THE COMPANY TO CLOSING. All obligations of
the Company hereunder to consummate the transactions contemplated
herein at the Closing are subject to the fulfillment and satisfaction
of each of the following conditions on or prior to the Closing, any or
all of which may be waived in whole or in part by the Company,
provided that no such waiver shall be effective unless it is set forth
in a writing executed by the parties:
(a) Suburban's and Purchaser's Deliveries. At the Closing,
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Suburban and Purchaser shall have delivered the Closing Payment to the
Company pursuant to the provisions of SECTION 2.1.1(a) and shall have
executed and delivered (or caused to be delivered) to the Company the
documents described on SCHEDULE 3.3(a).
(b) Compliance with Agreements and Conditions. Suburban
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and the Purchaser shall have performed and complied with in all
material respects all covenants, agreements and conditions required by
this Agreement to be performed or complied with by them prior to or on
the date of the Closing.
(c) Member Approval. This Agreement and the transactions
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contemplated hereby shall have been approved by the Members in the
manner provided for in the Company's operating agreement, which
approval shall not have been rescinded and shall be in full force and
effect on the Closing Date.
(d) Government Consents. Except for Government
-------------------
authorizations, consents and approvals related to the UFOC, the
parties shall have received all authorizations, consents and approvals
of any Government necessary for the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby, all such authorizations, consents and approvals shall be in
full force and effect, and all notices required to be given to any
Government shall have been given and all applicable waiting periods
shall have expired.
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(e) No Inconsistent Requirements. No Action shall have
----------------------------
been instituted by any Government or other Person (i) against a party
hereto to restrain or prohibit the consummation of the transactions
herein or (ii) which could reasonably be expected to have a material
adverse effect on the Acquired Business.
(f) Proceedings and Documents Satisfactory. All
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proceedings taken in connection with the consummation of the
transactions contemplated herein and all documents and papers
reasonably required in connection therewith shall be reasonably
satisfactory to the Company and its counsel, and the Company and its
counsel shall have timely received copies of such documents and
papers, all in form and substance satisfactory to the Company and its
counsel, as reasonably requested by the Company or its counsel in
connection therewith.
3.4 FURTHER ASSURANCES. Each party shall, at the request of any
other party from time to time and at any time, whether on or after the
Closing, and without further consideration, execute and deliver such
deeds, assignments, transfers, assumptions, conveyances, powers of
attorney, receipts, acknowledgments, acceptances and assurances as may
be reasonably necessary to procure for the party so requesting, and
its successors and assigns, or for aiding and assisting in collecting
and reducing to possession, any and all of the Acquired Assets or the
Acquired Business, or to otherwise satisfy and perform the obligations
of the parties hereunder.
ARTICLE 4. REVIEW AND TERMINATION
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4.1 TERMINATION. It is the intention of the parties that the
Closing shall occur on or before the Closing Date, but this Agreement
shall terminate on June 30, 1999, if the Closing has not occurred on
or before June 30, 1999, unless the parties have otherwise agreed to
extend such period to a later date.
4.2 REVIEW PERIOD. During the period (the "REVIEW PERIOD")
between the date hereof and June 15, 1999, Suburban and Purchaser
shall have the right to conduct a review of the financial and physical
condition and methods of operation of the Company and the Acquired
Business, any of the documents, instruments or agreements heretofore
or hereafter delivered to Suburban and Purchaser pursuant to this
Agreement or otherwise, or any of the matters referred to therein, and
to determine whether the same are satisfactory to Suburban and
Purchaser, in their sole discretion. If the same are not
satisfactory, Suburban and Purchaser may elect to terminate this
Agreement. On or before the end of the Review Period, and not less
than thirteen (13) days prior to the date of the Closing, Suburban and
Purchaser shall notify the Company, in writing, of whether they have
elected to proceed with the Closing or terminate this Agreement. If
Suburban and Purchaser elect to proceed with such Closing, the date of
such notice shall constitute the "APPROVAL DATE". This SECTION shall
not affect the operation or provisions of any Confidentiality
Agreement between any or all of the parties.
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4.3 OTHER TERMINATION; CERTAIN PAYMENTS.
(a) Unless the parties shall otherwise agree to an
extension, this Agreement shall terminate:
(i) at 5:00PM Atlanta time on the seventh (7th) day
following the date hereof if the Board of Directors of Suburban and
Purchaser have not approved the transactions contemplated herein in
writing and delivered to the Company a certified copy of resolutions
evidencing such approval;
(ii) at 5:00PM Atlanta time on the seventh (7th) day
following the date hereof if the Board of Advisors of the Company has
not approved the transactions contemplated herein in writing and
delivered to Suburban a certified copy of resolutions evidencing such
approval; or
(iii) at 5:00PM Atlanta time on the fifteenth
(15th) day following the Approval Date if the Members of the Company
have not approved the transactions contemplated herein in the manner
provided for in its operating agreement.
(b) If not otherwise previously terminated as provided
herein and after the Members of the Company have approved the
transactions contemplated herein, the Company fails or refuses to
close this transaction in a timely manner, the Company shall pay to
Suburban, within two business days following such failure or refusal,
the amount of Six Hundred Thousand Dollars ($600,000) in cash.
(c) If not otherwise previously terminated as provided
herein and after the Members of the Company have approved the
transactions contemplated herein, Suburban or Purchaser fails or
refuses to close this transaction in a timely manner, Suburban shall
pay to the Company, within two business days following such failure or
refusal, the amount of Six Hundred Thousand Dollars ($600,000) in
cash.
(d) The parties acknowledge that the agreements contained
in this SECTION are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, the parties
would not enter into this Agreement.
(e) This SECTION shall survive any termination of this
Agreement, however caused.
ARTICLE 5. ADDITIONAL AGREEMENTS
---------------------
5.1 Representations and Warranties. Each of Suburban, the
Purchaser, and the Company represent and warrant as set forth in
APPENDIX "A" attached hereto and hereby made a part hereof. All of
the representations and warranties of the parties to this Agreement
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shall be true as of the date of this Agreement and on the Closing Date
except for any such representations and warranties made as of a
particular date and for changes permitted hereunder occurring between
the date hereof and the Closing Date.
5.2. EXPENSES. Except as otherwise provided herein, all expenses
incurred by Purchaser and Suburban in connection with the negotiations
among the parties, and the authorization, preparation, execution and
performance of this Agreement and the consummation of the transactions
contemplated hereby shall be paid by Purchaser or Suburban, as the
case may be. Except as otherwise provided herein, all expenses
incurred by the Company in connection with the negotiations among the
parties, and the authorization, preparation, execution and performance
of this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the Company.
5.3. BROKERS. Suburban shall indemnify the Company and hold it
harmless from and against all claims or demands for commissions or
other compensation by any broker, finder, or similar agent claiming to
have been employed by or on behalf of Suburban or Purchaser. The
Company shall indemnify Suburban and Purchaser and hold them harmless
from and against all claims or demands for commissions or other
compensation by any broker, finder or similar agent claiming to have
been employed by or on behalf of the Company.
5.4. PUBLICITY. All press releases and other public
announcements respecting the subject matter hereof shall be made only
by Suburban; provided, however, that the Company may make any
disclosure required to be made under applicable Law if it has
determined in good faith that it is necessary to do so and, prior to
the issuance of the disclosure, it provides to Suburban a copy of the
proposed disclosure and discusses with Suburban and its legal counsel
the proposed disclosure.
5.5. ACCESS AND INSPECTION; COOPERATION. No investigation made
heretofore by Purchaser shall limit or affect the representations,
warranties, covenants and indemnities of the Company hereunder. The
parties shall cooperate fully with each other and with their
respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations
hereunder, and all parties shall use commercially reasonable efforts
to consummate the transactions contemplated herein and to fulfill
their obligations hereunder. From time to time and at any time, at
the Purchaser's or Suburban's request, whether on or after the date
hereof, and without further consideration, the Company shall, at its
expense, execute and deliver such further documents and instruments of
conveyance, assignment, and transfer and shall take such further
reasonable actions as may be necessary or desirable, in the opinion of
the Purchaser, in connection with the consummation of the transactions
described herein.
5.6. Unassignable Contracts or Licenses. Notwithstanding any
provision of this Agreement to the contrary, to the extent that any
Assigned Contract or license to be assigned or transferred to
Purchaser hereunder requires the consent of any other party, the
Company shall not be deemed to have assigned or transferred any such
contract or license, and Purchaser shall not be deemed to have assumed
or received any such contract or license, unless and until such
consent shall have been obtained. Purchaser may waive the obtaining
of any such consent as a condition to Closing, and to the extent
waived by Purchaser, the Company and Purchaser agree to use their
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commercially reasonable efforts to obtain the necessary consents to
the assignment or transfer of any such contract or license. If the
Purchaser elects to proceed with Closing, until any necessary consent
to the assignment or transfer of an Assigned Contract or license is
obtained, the Company and Purchaser shall cooperate with the other
party in any reasonable arrangement which provides Purchaser with the
benefits under such contract or license, including enforcement by the
Company of any and all rights of the Company arising out of any breach
or cancellation by the other party thereto. All liabilities and
expenses arising on and after the Closing under any such contract or
license as to which the necessary consent has not been obtained and
whose benefits are being enjoyed by Purchaser shall be for the account
of Purchaser, and the Company shall be promptly reimbursed by
Purchaser for any such liabilities or expenses which the Company may
be required to pay or incur thereunder.
5.7. SUBURBAN'S PUBLIC DOCUMENTS AND ACCESS TO INFORMATION.
Suburban has delivered to the Company and will deliver to the Members
a true and complete copy of (i) Suburban's Annual Report on Form 10-K
for the year ended December 31, 1998, (ii) Suburban's definitive proxy
statement relating to its 1999 annual shareholders meeting and (iii)
all other filings (other than preliminary registration and proxy
statements) made by Suburban with the Securities and Exchange
Commission ("SEC") between December 31, 1998, and the date hereof
(collectively, the "SEC DOCUMENTS"). In addition to the SEC
Documents, Suburban has provided the Company and will provide each
Member with opportunities to become familiar with the business,
financial condition, management, prospects and operations of Suburban,
including reasonable opportunities to ask questions of, receive
answers from and obtain information regarding Suburban and its
business which is material to their investment decision.
5.8. LEGENDING OF SUBURBAN STOCK. The Company acknowledges and
agrees that all shares of Suburban Stock received by it hereunder have
not been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or the securities Laws of any state. The Company
acknowledges that there shall be placed on all certificates
representing the shares of Suburban Stock issued to the Company
pursuant to this Agreement appropriate restrictive legends referencing
the restrictions imposed by applicable securities Laws. The Company
agrees that it will not offer to sell, sell or otherwise dispose of
any Suburban Stock issued to it pursuant to this Agreement in
violation of the requirements of the Securities Act, including,
without limitation Rule 145(d) promulgated thereunder. With respect
to any such sale or disposition, the Company agrees to furnish to
Purchaser or Suburban upon request such information as its counsel may
deem necessary to assure that such sale or disposition is made in full
compliance with this Agreement, such rule and all applicable federal
and state securities Laws. The Company shall not distribute any of
the Suburban Stock to any of its Members except in compliance with
this paragraph and prior to any such distribution shall obtain from
each such Member an agreement in form acceptable to Suburban whereby
such Member agrees to be bound by the provisions of this paragraph.
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5.9. CONDUCT OF BUSINESS OF THE COMPANY PENDING CLOSING
The Company covenants and agrees that, except as may
otherwise be provided herein, without the prior written consent of
Suburban, between the date hereof and the date of the Closing:
(a) Business in the Ordinary Course. The business of the
-------------------------------
Company shall be conducted only in the ordinary and usual course and
consistent with prior practices. The Company shall use its best
efforts to preserve the Acquired Business, to preserve the goodwill of
the Company's suppliers, customers and others having business
relations with the Acquired Business, and to assist Purchaser in
retaining the services of key employees and agents of the Company, to
the extent desired by Purchaser.
(b) Compensation. Other than bonuses and severance
------------
payments payable solely by the Company, no increase in the
compensation or rate of compensation or commissions payable or to
become payable with respect to any employee of the Company performing
services in the Acquired Business shall be given, and no payment of or
commitment to pay any bonus, profit-share or other extraordinary
compensation payment or other arrangement (whether current or
deferred) shall be made to or with any employee.
(c) Dispositions; Encumbrances. Through the Closing, the
--------------------------
Company will not, without the prior written consent of Purchaser, make
any disposition of, any encumbrance, or any agreement to dispose of or
to encumber, or any pledge or grant of a security interest in or
agreement to pledge an interest in, any of the Acquired Assets of the
Company, or any increase or any agreement to increase any indebtedness
of the Company except in the ordinary course of business.
(d) Events Subsequent to Agreement Date. The Company will
-----------------------------------
promptly advise the Purchaser of the occurrence of any events which
come to the knowledge of the Company after the date of this Agreement
and prior to or on the Closing Date relating to any of those matters
which are the subject of the covenants, representations, and
warranties of the Company contained in this Agreement and any appendix
or exhibit hereto, which will cause any such covenant, representation,
or warranty to be untrue or which may reasonably be expected to cause
any such covenant, representation or warranty to be untrue.
5.10. NAME CHANGE. The Company shall take all necessary action
and shall execute and deliver such documents in such form as is
appropriate for filing with the office of the Secretary of State of
the State of Arkansas amending its articles or certificate of
organization or other charter documents to legally change its name to
a name approved by Suburban in advance.
5.11. SPECIAL MEETING OF THE MEMBERS. Within five (5) days
after the Approval Date, the Company shall take all action necessary
in accordance with all applicable laws and its articles of
organization and operating agreement to duly call, give notice of,
convene and hold a special meeting of its Members to consider and vote
upon the approval and adoption of this Agreement and the transactions
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contemplated hereby and for such other purposes as may be necessary or
desirable.
5.12. NO DISCUSSIONS WITH OTHERS. For and in consideration
of Suburban's undertaking to investigate the business of the Company
and to prepare a definitive purchase agreement and to incur expenses
in connection therewith, and for other value received, until 5:00 p.m.
Eastern Daylight Time on June 30, 1999, neither the Company nor any of
the Company's officers, directors, management employees, affiliates,
or agents will, directly or indirectly, solicit, encourage, negotiate,
discuss, or accept any offer, bid, or proposal from, or negotiate or
discuss with, any other person or entity respecting any transactions
involving a merger of the Company, the sale of shares in or assets of
the Company or any other business combination involving the Company.
In addition, the Company will immediately cease and cause to be
terminated any previously undertaken or ongoing activities,
discussions, or negotiations with any other person or entity with
respect to any transactions of the type described in the preceding
sentence. Furthermore, if the Company or any employee or agent
receives a proposal of the type described in such sentence, then the
Company will immediately notify Suburban of the receipt of such
proposal and will promptly provide to Suburban a copy of such proposal
(or if such proposal is not in writing, a written summary of its
terms).
5.13 CERTAIN EMPLOYMENT MATTERS. The Company will comply with the
WARN Act, COBRA and other notice and filing requirements relating to
any termination of employment or termination of coverage of any
employee of the Company arising out of the transactions contemplated
hereby, and agrees that it will continue to comply with all laws,
statutes, rules, regulations, ordinances, directives, permits and
orders, and insurance coverages relating to employees, with any
notices, filings and other actions to be given, made or taken at the
required time and in the required form. The Company shall deliver to
Suburban prior to the Closing true, complete and correct copies of the
employment files for each employee of the Company that is hired by
Purchaser effective as of the Closing.
5.14 OPERATING OF THE ACQUIRED BUSINESS. Suburban shall cause
Purchaser, and Purchaser shall operate, manage and develop the
Acquired Business after the Closing Date in good faith and pursuant to
the following principles:
(a) Purchaser shall keep separate books and records of the
operations of the Acquired Business using GAAP consistently applied
and shall make all such books and records available to the Company or
its agents for review or audit immediately following the dates for
computation of the First, Second and Third Anniversary Payments, if
requested by the Company.
(b) Purchaser shall not intentionally divert revenues or
business opportunities of Purchaser relating to the Acquired Business
to other entities or persons, whether or not such entities or persons
are related to or affiliated with Purchaser or Suburban: provided, and
except, however, Company and Purchaser acknowledge and agree that (i)
Purchaser and Suburban will offer, fairly and in good faith, to
potential franchisees several competing franchise opportunities in
sometimes overlapping market segments and that choices by potential
franchisees among such franchise opportunities shall not be a
violation of this provision and (ii) nothing herein shall be deemed to
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preclude Suburban or any Affiliate of Suburban, including Purchaser
from acquiring, merging into, or entering into joint ventures with
other businesses.
(c) Purchaser shall have in its employ or under contract,
and shall maintain until the due date of the Third Anniversary Payment
not less than an average of eight (8) sales people actively engaged on
a full time basis in the marketing and development of franchises,
including for the Acquired Business, during any six (6) month period
commencing September 30, 1999.
5.15 SECURITIES COVENANTS. As an inducement for Company to
accept unregistered stock of Suburban pursuant to this Agreement,
Suburban acknowledges and agrees as follows:
(a) It is the intention of Company to distribute to its
Members, on a pro rata basis, the Suburban Stock on or after the first
anniversary of the Closing Date subject to SECTION 5.8 of the
Agreement.
(b) Suburban shall use commercially reasonable efforts
after the Closing Date to make such filings with the Securities and
Exchange Commission until the second anniversary of the Closing Date
as are required to insure that the requirements of Rule 144(c) under
the Securities Act related to "Current Public Information" are
satisfied.
ARTICLE 6. INDEMNITIES
-----------
6.1. INDEMNIFICATION BY THE COMPANY. (a) In accordance with and
subject to the provisions of this Article 6, the Company shall
indemnify and hold harmless Purchaser, Suburban, and the officers,
directors, agents and employees of Purchaser and Suburban
(collectively, the "PURCHASER INDEMNITEES") from and against and in
respect of any and all loss, damage, diminution in value, Liability,
cost and expense, including reasonable attorneys' fees and amounts
paid in settlement (collectively, the "PURCHASER INDEMNIFIED LOSSES"),
suffered or incurred by any one or more of the Purchaser Indemnitees
by reason of, or arising out of:
(i) any misrepresentation or breach of representation
or warranty contained in this Agreement or any exhibit or
appendix hereto, the Other Agreements, or any certificate,
instrument, agreement or other writing executed and
delivered by or on behalf of the Company pursuant to this
Agreement or in connection with the transactions
contemplated herein, or the breach of any covenant or
agreement of the Company contained in this Agreement, any
Other Agreement, or any certificate, instrument, agreement
or other writing executed and delivered to Purchaser or
Suburban by or on behalf of the Company pursuant to this
Agreement or in connection with the transactions
contemplated herein; and
(ii) any and all obligations and liabilities of the
Company (other than Assumed Liabilities), whether direct or
indirect, fixed or contingent, known or unknown, and any
costs incident to any of the foregoing or incurred in
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investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing this
indemnification.
(b) The Company shall reimburse the Purchaser Indemnitees
on demand for any Purchaser Indemnified Losses suffered by the
Purchaser Indemnitees, based on the judgment of any court of competent
jurisdiction or pursuant to a bona fide compromise or settlement of
claims, demands, or actions in respect of any Purchaser Indemnified
Losses. The Company shall have the opportunity to defend at their
expense any claim, action or demand for which the Purchaser
Indemnitees claim indemnity against the Company; provided that (i) the
defense is conducted by reputable counsel approved by the Purchaser
Indemnitees, which approval shall not be unreasonably withheld or
delayed; (ii) the defense is expressly assumed in writing within
fifteen (15) days after written notice of the claim, action or demand
is given to the Company; and (iii) counsel for the Purchaser
Indemnitees may participate at all times and in all proceedings
(formal and informal) relating to the defense, compromise and
settlement of the claim, action or demand at the expense of the
Purchaser Indemnitees.
6.2. INDEMNIFICATION BY SUBURBAN AND PURCHASER. (a) In
accordance with and subject to the provisions of this ARTICLE 6,
Suburban and Purchaser shall indemnify and hold harmless the Company
and the officers, directors, agents and employees of the Company
(collectively, the "COMPANY INDEMNITEES") from and against and in
respect of any and all loss, damage, diminution in value, Liability,
cost and expense, including reasonable attorneys' fees and amounts
paid in settlement (collectively, the "COMPANY INDEMNIFIED LOSSES"),
suffered or incurred by any one or more of the Company Indemnitees
directly by reason of, or arising out of:
(i) any misrepresentation or breach of representation
or warranty contained in this Agreement or any exhibit or
appendix hereto, the Other Agreements, or any certificate,
instrument, agreement or other writing executed and
delivered by or on behalf of Suburban or the Purchaser
pursuant to this Agreement or in connection with the
transactions contemplated herein, or the breach of any
covenant or agreement of Suburban or the Purchaser contained
in this Agreement, any Other Agreement, or any certificate,
instrument, agreement or other writing executed and
delivered to the Company by or on behalf of Suburban or
Purchaser pursuant to this Agreement or in connection with
the transactions contemplated herein; and
(ii) any and all of the Assumed Liabilities, and any
costs incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing this
indemnification.
(b) Suburban or Purchaser shall reimburse the Company
Indemnitees on demand for any Company Indemnified Losses suffered by
the Company Indemnitees, based on the judgment of any court of
competent jurisdiction or pursuant to a bona fide compromise or
settlement of claims, demands, or actions in respect of any Company
Indemnified Losses. Suburban and Purchaser shall have the opportunity
to defend at their expense any claim, action or demand for which the
Company Indemnitees claim indemnity against Suburban or Purchaser;
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provided that (i) the defense is conducted by reputable counsel
approved by the Company Indemnitees, which approval shall not be
unreasonably withheld or delayed; (ii) the defense is expressly
assumed in writing within fifteen (15) days after written notice of
the claim, action or demand is given to Suburban or Purchaser; and
(iii) counsel for the Company Indemnitees may participate at all times
and in all proceedings (formal and informal) relating to the defense,
compromise and settlement of the claim, action or demand at the
expense of the Company Indemnitees.
6.3. LIMITATIONS AND PAYMENT ON CLAIMS BY PURCHASER INDEMNITEES.
(a) No claim shall be brought by any Purchaser Indemnitee under this
Article 6 for breach of any representation or warranty, and none of
them shall be entitled to receive any payment with respect thereto,
unless and until the aggregate amount of such claim(s) equals or
exceeds $20,000, and after such time as the amount of such claim(s)
equals or exceeds $20,000, the Purchaser Indemnitees may assert all
such prior and all future claims against the Company hereunder, and
any such delay in asserting a claim or claims against the Company
pursuant to this SECTION 6.3, shall in no way prejudice the
Indemnitees under any statute or period of limitations or similar Law
or under any principle of equity. Anything to the contrary
notwithstanding, the Company shall not be liable to the Purchaser
Indemnitees under this Article 6 for Purchaser Indemnified Losses, if
any, in excess of the Purchase Price (with the Suburban Stock being
valued as of the date of Closing); provided, however, that such
limitation shall not apply to any loss suffered by the Purchaser
Indemnitees attributable to fraudulent misrepresentations.
(b) Purchaser may set off Purchaser Indemnified Losses
incurred or suffered by any Purchaser Indemnitee against amounts
otherwise payable hereunder or may pursue any other rights and
remedies available to Purchaser. During the pendancy of any dispute
with respect to the reimbursement of Purchaser Indemnified Losses,
Purchaser may withhold payments hereunder in an aggregate amount not
exceeding the amount of such Purchaser Indemnified Losses. The
exercise of such right of set-off by Purchaser in good faith, or the
withholding of payments as specified in this paragraph, whether or not
ultimately determined to be justified, will not constitute a breach of
this Agreement. Neither the exercise of nor the failure to exercise
such right of set-off by Purchaser will constitute an election of
remedies or limit Purchaser in any manner in the enforcement of any
other remedies that may be available to it.
6.4. LIMITATIONS AND PAYMENT ON CLAIMS BY COMPANY INDEMNITEES.
No claim shall be brought by any Company Indemnitee under this Article
6 for breach of any representation or warranty, and none of them shall
be entitled to receive any payment with respect thereto, unless and
until the aggregate amount of such claim(s) equals or exceeds $20,000,
and after such time as the amount of such claim(s) equals or exceeds
$20,000, the Company Indemnitees may assert all such prior and all
future claims against Suburban or the Purchaser hereunder, and any
such delay in asserting a claim or claims against Suburban or the
Purchaser pursuant to this SECTION 6.4, shall in no way prejudice the
Company Indemnitees under any statute or period of limitations or
similar Law or under any principle of equity. Anything to the
contrary notwithstanding, Purchaser or Suburban shall not be liable to
the Company Indemnitees under this ARTICLE 6 for Company Indemnified
Losses, if any, in excess of the Purchase Price (with the Suburban
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Stock being valued as of the date of Closing); provided, however, that
such limitation shall not apply to any loss suffered by the Company
Indemnitees attributable to fraudulent misrepresentations.
6.5. SURVIVAL. The representations and warranties of the
Company, Suburban and Purchaser contained in this Agreement or any
appendix or exhibit hereto, any Other Agreement, or in any
certificate, instrument, agreement or other writing executed and
delivered by or on behalf of any of them pursuant to this Agreement or
in connection with the transactions contemplated herein shall survive
any investigation heretofore or hereafter made by or on behalf of the
other party and the consummation of the transactions contemplated
herein and all such representations and warranties shall be of no
further force and effect after the expiration of two (2) years from
the date of the Closing ("SURVIVAL PERIOD"); provided, however, that
the Survival Period shall not apply to the representations,
warranties, covenants, agreements and indemnifications set forth in
SECTIONs 1.15 and 1.18 of APPENDIX "A" hereof. Anything to the
contrary notwithstanding, a claim for indemnification which is made
specifically and in writing but not resolved prior to the expiration
of the Survival Period may be pursued and resolved after such
expiration. Anything in this SECTION 6.5 to the contrary
notwithstanding, the Company shall remain liable, during the Survival
Period and thereafter, for all liabilities and obligations of the
Company not assumed pursuant to SECTION 2.2.
ARTICLE 7. MISCELLANEOUS
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7.1 DEFINITIONS. Capitalized terms not defined herein are
defined in APPENDIX "B" attached hereto and hereby made a part hereof.
7.2. NOTICES. All notices or other communications required or
permitted to be given or made hereunder shall be in writing and
delivered personally or sent by pre-paid, first class certified or
registered mail, return receipt requested, or by facsimile
transmission, to the intended recipient thereof at its address or
facsimile number set out below. Any such notice or communication
shall be deemed to have been duly given immediately (if given or made
in person or by facsimile confirmed by mailing a copy thereof to the
recipient in accordance with this SECTION on the date of such
facsimile), or five days after mailing (if given or made by mail), and
in proving same it shall be sufficient to show that the envelope
containing the same was delivered to the delivery service and duly
addressed, or that receipt of a facsimile was acknowledged
electronically or otherwise by the recipient. Any party may change
the address to which notices or other communications to such party
shall be delivered or mailed by giving notice thereof to the other
party hereto in the manner provided herein.
If to Suburban or Purchaser: Mr. David E. Krischer
President and Chief Executive
Officer
Suite 1200
300 Galleria Parkway
Atlanta, Georgia 30339
(p) (770) 799-5000
(f) (770) 951-5526
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With a copy to: Corporate Secretary
Suburban Lodges of America, Inc.
Suite 1200
300 Galleria Parkway
Atlanta, Georgia 30339
(p) (770) 799-5000
(f) (770) 951-5526
and
Michael H. Trotter, Esq.
Kilpatrick Stockton LLP
1100 Peachtree Street
Atlanta, Georgia 30309
(p) (404) 815-6500
(f) (404) 815-6555
If to the Company: Mr. James H. Keet, III
Mr. James M. Sculley
1501 North University Avenue,
Ste 968
Little Rock, Arkansas 72207
(p) (501) 663-6606
(f) (501) 664-2552
With a copy to: John Lessel, Esq.
11601 Pleasant Ridge Road, #301
Little Rock, Arkansas 72212
(p) (501) 954-9000
(f) (501) 954-9005
Walter May, Esq.
200 West Capitol Avenue, #2200
Little Rock, Arkansas 72201
(p) (501) 371-0808
(f) (501) 376-9442
7.3. COUNTERPARTS; SIGNATURES BY TELECOPIER. This Agreement may
be executed in any number of counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and
the same instrument. Signatures transmitted by telecopier shall be
binding.
7.4. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. The
validity and effect of this Agreement shall be governed by and
construed and enforced in accordance with the Laws of the State of
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Georgia, without regard to its conflicts of Laws rules. The Company
hereby irrevocably and unconditionally consents and submits to the
personal jurisdiction of any state or federal court sitting in Fulton
County, Georgia, with respect to any Action to enforce this Agreement
and the transactions contemplated hereby, and the Company also
expressly consents and submits to and agree that venue in any such
Action is proper in said courts and county, and the Company hereby
expressly waive any and all personal rights under applicable law or in
equity to object to the jurisdiction and venue of said courts and
county. The jurisdiction and venue of the courts and county consented
and submitted to and agreed upon in this SECTION are not exclusive,
but are cumulative and in addition to the jurisdiction and venue of
any other court under any applicable law or in equity.
7.5. WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO WAIVES ALL
-----------------------------
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING
OUT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
7.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective permitted successors and assigns. The Company may not
assign, delegate or otherwise transfer any of their rights or
obligations under this Agreement without the written consent by
Suburban. This Agreement may be assigned by Purchaser to any
Affiliate of Purchaser or Suburban, provided that no such assignment
shall relieve Purchaser or Suburban of their respective obligations,
representations or warranties hereunder.
7.7. PARTIAL INVALIDITY AND SEVERABILITY. All rights and
restrictions contained herein may be exercised and shall be applicable
and binding only to the extent that they do not violate any applicable
Laws and are intended to be limited to the extent necessary to render
this Agreement legal, valid and enforceable. If any term of this
Agreement, or part thereof, not essential to the commercial purpose of
this Agreement shall be held to be illegal, invalid or unenforceable
by a Forum of competent jurisdiction, it is the intention of the
parties that the remaining terms hereof, or part thereof, shall
constitute their agreement with respect to the subject matter hereof
and all such remaining terms, or parts thereof, shall remain in full
force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision of this Agreement shall be replaced
by a valid provision which will implement the commercial purpose of
the illegal, invalid or unenforceable provision.
7.8. WAIVER. Any term or condition of this Agreement may be
waived at any time by the party which is entitled to the benefit
thereof, but only if such waiver is evidenced by a writing signed by
such party. No failure on the part of any party hereto to exercise,
and no delay in exercising any right, power or remedy created
hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy by either party
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. No waiver by either party hereto of any
breach of or default in any term or condition of this Agreement shall
constitute a waiver of or assent to any succeeding breach of or
default in the same or any other term or condition hereof.
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7.9. HEADINGS. The headings of particular provisions of this
Agreement are inserted for convenience only and shall not be construed
as a part of this Agreement or serve as a limitation or expansion on
the scope of any term or provision of this Agreement.
7.10. NUMBER AND GENDER. Where the context requires, the use
of the singular form herein shall include the plural, the use of the
plural shall include the singular, and the use of any gender shall
include any and all genders.
7.11. ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the
subject matter hereof, and this Agreement contains the sole and entire
agreement between the parties with respect to the matters covered
hereby; provided, however, that any Confidentiality Agreement between
any or all of the parties shall continue in full force and effect in
accordance with its terms. This Agreement shall not be altered or
amended except by an instrument in writing signed by or on behalf of
the party entitled to the benefit of the provision against whom
enforcement is sought.
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IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed by their duly authorized agents as of the day
and year first above written.
SUBURBAN: SUBURBAN LODGES OF AMERICA, INC.
By: /s/ David Krischer
Name: DAVID KRISCHER
Title: CEO
PURCHASER: GUESTHOUSE FRANCHISE SYSTEMS, INC.
By: /s/ David Krischer
Name: DAVID KRISCHER
Title: CEO
COMPANY: GUESTHOUSE INTERNATIONAL LLC
By: /s/ James H. Keel III
Name: JAMES H. KEEL III
Title: Chairman/CEO
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APPENDIX A
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
ARTICLE 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company has delivered to Suburban certain documents and
materials as a part of Suburban's review of the Company and all such
documents and materials are or were true, correct and complete as of
the date furnished, and any and all modifications or amendments
thereto have been or will be delivered to Suburban. At all times
prior to and including the date of the Closing, the Company shall
promptly provide Suburban with written notification of any event,
occurrence or other information which affects or may affect, the
continued truth, correctness or completeness of any representation or
warranty made in this Agreement in any material respect.
Capitalized terms not defined herein are defined in APPENDIX
"B" attached hereto and hereby made a part hereof.
To induce Purchaser and Suburban to enter into and perform
this Agreement, the Company represents and warrants to Purchaser and
Suburban as follows:
1.1. ORGANIZATION, AUTHORITY AND QUALIFICATION. (a) The Company
is a limited liability company duly organized and validly existing
under the Laws of the State of Arkansas. The Company has full power
and authority and is entitled to own or lease its properties and to
carry on its business as and in all places where such business is
conducted and such properties are owned or leased. The Company is not
required to be qualified as a foreign business in any jurisdiction.
The Company has furnished to Suburban true, correct and
complete copies of the articles or certificate of organization and
operating agreement or other charter documents of the Company, as
amended to date. The Company has previously furnished to Suburban
true, correct and complete copies of the minutes and other similar
records of meetings of the Members of the Company and its board of
advisors or managers, which contain all records of meetings and
actions taken in lieu thereof by the Company's Members and show all
actions taken by the Company's Members, the board of advisors or
managers, or any committees thereof.
(b) The Company has the full power and authority to
execute, deliver and perform this Agreement and any other agreements
or instruments contemplated by this Agreement ("OTHER AGREEMENTS") to
which it is a party. This Agreement has been and the Other Agreements
have been duly and validly executed and delivered by the Company and
constitute the valid and legally binding obligations of the Company,
subject to general equity principles, enforceable in accordance with
their respective terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or similar Laws affecting the
rights of creditors generally.
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1.2. CAPACITY; INCONSISTENT OBLIGATIONS. The execution, delivery
and performance of this Agreement and the Other Agreements to which
the Company is a party will not (i) result in a violation of the
Company's articles or certificate of organization and operating
agreement or other charter documents, or any Law, or (ii) result in a
breach of, conflict with or default under any term or provision of any
indenture, note, mortgage, bond, security agreement, loan agreement,
guaranty, pledge, or other instrument, contract, agreement or
commitment or any Order, to which the Company is a party or by which
it or any of its assets and properties is subject or bound; nor will
such actions result in (w) the creation of any Lien on any of the
Acquired Assets, (x) the acceleration or creation of any Liability of
the Company, or (y) the forfeiture of any right or privilege of the
Company.
1.3. CONSENTS. The execution, delivery and performance by the
Company of this Agreement and the Other Agreements and the
consummation of the transactions contemplated herein does not (a)
require the consent, approval or action of, or any filing with or
notice to, any Government or other Person, except as otherwise
provided on SCHEDULE 3.2(d), or (b) impose any other term, condition
or restriction on Purchaser pursuant to any business combination or
takeover Law.
1.4. NO VIOLATION; COMPLIANCE WITH LAWS. The Company is not in
default under or in violation of (a) its articles or certificate of
organization and operating agreement or other charter documents or (b)
any Order. The operations of the Company and its predecessors have
been conducted in all material respects in compliance with all
applicable Laws. (For purposes of this paragraph, any violation of
applicable Law that could result in imposition of a fine or other
monetary penalty upon the Company shall be deemed to be a material
non-compliance). The Company has not received any notification of any
asserted past or present failure by the Company to comply with any
applicable Law.
1.5. POSSESSION OF LICENSES. The Company possesses all
franchises, certificates, licenses, permits and other authorizations
from Governments and all other Persons, free from burdensome
restrictions, that are necessary for the ownership, maintenance and
operation of its properties and assets and the conduct of its
business, and the Company is not in violation thereof.
1.6. FINANCIAL STATEMENTS, FINANCIAL CONDITION. Prior to the
date hereof, the Company has delivered to Suburban true, correct and
complete copies of the audited financial statements of the Company for
and as of the years ended December 31, 1998, 1997 and 1996, including
balance sheets, statements of income, statements of members' equity,
statements of cash flows and related notes (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements are true and
correct, in all material respects, have been prepared in accordance
with GAAP consistently applied, present fairly the financial condition
of the Company as at the respective dates thereof and the results of
the Company's operations and cash flows for the periods then ended,
and are consistent with the books and records of the Company. The
books and records of the Company are true, correct and complete in all
material respects and are maintained in accordance with GAAP.
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1.7. LIABILITIES. The Company has no Liabilities, except (i)
those reflected on the Company's balance sheet as of December 31,
1998, and (ii) Liabilities incurred in the ordinary course of business
since December 31, 1998 reflecting loans from Members or consistent
with the Company's past experience during the periods covered by the
Financial Statements.
1.8. TITLE TO PROPERTIES. The Company has good and complete
title to all of the Acquired Assets reflected in the Company's balance
sheet as of December 31, 1998, except inventories and other immaterial
assets which have been disposed of in the ordinary course of business
since December 31, 1998, and all other properties and assets necessary
to conduct the Acquired Business as currently being conducted and as
conducted during the periods covered by the Financial Statements
(other than any leased property), free and clear of Liens, except as
may be set forth in the notes to the Company's balance sheet as of
December 31, 1998.
1.9. PERSONAL PROPERTY. (a) Except as set forth in SCHEDULE
1.9(a), all machinery, equipment, vehicles, and other items of
tangible personal property which are owned or leased by the Company
are in good condition and repair, subject to normal wear and tear,
suited for the use intended and are and have been operated in
conformity with applicable Laws. To the knowledge of the Company,
there are no defects or conditions which would cause such tangible
personal property to be or become inoperable or unsafe.
(b) Except as set forth in SCHEDULE 1.9(b), to the
knowledge of the Company, all lessors of machinery, equipment or other
tangible personal property leased by the Company have performed and
satisfied their respective duties and obligations under such leases.
The Company has not brought or threatened any Action against any such
lessor for failure to perform and satisfy its duties and obligations
thereunder.
1.10. REAL PROPERTY. (a) The Company does not own any real
property.
(b) The Company leases real property for its office in
Little Rock, Arkansas subject to a written lease or sublease to which
the Company is a party. Such real property lease is valid and in full
force and effect in accordance with its terms. The Company has
previously furnished Suburban with a true, correct and complete copy
of the real property lease. There is not, with respect to the real
property lease, (i) any default by the Company, or any event of
default or event which with notice or lapse of time, or both, would
constitute a default by the Company or (ii) to the knowledge of the
Company, any existing default by any other party to the real property
lease, or event of default or event which with notice or lapse of
time, or both, would constitute a default by any other party to the
real property lease.
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(c) All requisite certificates of occupancy and other
permits and approvals required with respect to the real property or
the improvements and the use, occupancy and operation thereof have
been obtained and paid for and are currently in effect and free of
restrictions.
1.11. SUBSIDIARIES. The Company does not have any subsidiary
business entities and does not own any equity interests in any other
business entities.
1.12. ABILITY TO CONDUCT BUSINESS AND INTELLECTUAL PROPERTY
RIGHTS. (a) The Company has the means, rights, and information
required to offer and sell the products now being offered and sold by
the Company and to perform the services that are presently being
performed by the Company. Except as set forth in SCHEDULE 1.12, the
Company is not a party to, either as a licensor or licensee, nor is it
bound by or subject to, any license agreement for any patent, process,
trademark, service mark, trade name, copyright, trade secret or
confidential information.
The Company owns the Trademarks and has filed applications
for the additional marks set forth on SCHEDULE 1.12. Except for these
Trademarks, the Company neither owns nor uses any patents, copyrights,
trademarks, service marks, trade names and applications therefor or
registrations thereof. There are no rights of third parties with
respect to any trademark, service mark, trade secret, confidential
information, trade name, patent, patent application, copyright,
invention, device or process which has or could have an adverse effect
on the operations of the Company. The Company has complied with all
applicable Laws relating to the filing or registration of "fictitious
names" or trade names.
(b) To the Company's knowledge, it has not interfered with,
infringed, misappropriated or otherwise come into conflict with any
intellectual property rights of any other Person, and neither the
Company nor its respective officers and directors has ever received
any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation. To the
Company's knowledge, no Person has interfered with, infringed,
misappropriated, or otherwise come into conflict with the proprietary
inventions, designs, ideas, processes, methods and other know-how or
other intellectual property of the Company which are owned or used in
the operation of the Acquired Business.
1.13. CONTRACTS. (a) All Assigned Contracts have been
entered into in the ordinary course of the Company's business on
commercially reasonable terms, are valid and enforceable in all
material respects in accordance with their terms, are in full force
and effect, and, assuming compliance by Purchaser after the Closing
Date with the terms thereof, will continue to be valid and enforceable
and in full force and effect on identical terms following the date of
the Closing. True, correct and complete copies of all Assigned
Contracts have been delivered to Suburban and are set forth in
SCHEDULE 1.13(a).
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(b) SCHEDULE 1.13(b) lists all franchise and license
agreements which the Company has executed and indicates for each such
franchise and license agreement (i) the location of such franchise or
license; (ii) whether the Company has a management agreement with the
franchisee or licensee; and (iii) if the franchisee or licensee is a
Related Party, the nature of such relationship to the Company. All
franchise and license agreements and such management agreements (w)
are in full force and effect; (x) have not been amended; (y), except
as to those identified on SCHEDULE 1.13(b), are not in default and
there is no event which with the giving of notice or lapse of time, or
both, would constitute a default; and (z) may be transferred or
assigned without the consent of the franchisee or any other party
other than the Company. There has not been any waiver, amendment, or
other reduction of any royalties, management fees, or other payments
of any kind with respect to the franchise agreements or management
agreements, below the level of such fees as set forth in the
respective agreements for such franchise.
(c) There are no existing material defaults, events of
default or events which, with the giving of notice or lapse of time,
or both, would constitute a material default by the Company under any
Assigned Contract. No event has occurred which may hereafter give
rise to any right of termination, acceleration, damages or any other
remedy under any Assigned Contract.
(d) To the Company's knowledge, neither this Agreement, the
Closing or the relationship between the Company and Suburban and
Purchaser has caused or is likely to cause the termination or
nonrenewal of any Assigned Contract.
1.14. LITIGATION; CONTINGENCIES. No Action is pending or,
to the knowledge of the Company, threatened against, by or affecting
the Company. There are no unsatisfied judgments or Orders against the
Company to which the Acquired Assets are subject.
1.15. TAXES. The Company has duly and timely filed all
federal, state, municipal, local and foreign, if any, Tax returns and
reports (including returns for estimated tax), and all reports and
returns of all other Governments having jurisdiction (collectively,
"RETURNS") with respect to all Taxes; all such Returns show the
correct and proper amount due; and the Taxes shown on all Returns and
all Tax assessments received by the Company have been paid to the
extent that such Taxes or estimates are due. The Company has
previously provided to Suburban true, correct and complete copies of
all Returns filed with respect to the three (3) tax years preceding
the date hereof. All Taxes imposed on the Company and its Affiliated
Entities by any Government (including all deposits in connection
therewith required by applicable Law, and all interest and penalties
thereon) which have become due and payable by the Company for all
periods through the date hereof have been paid in full. To the
knowledge of the Company, there is not now any proposed assessment
against the Company of additional Taxes of any kind. The Company is
not a party to any Tax sharing or Tax allocation agreement,
understanding, arrangement or commitment. There is no dispute or
Action concerning any Tax Liability of the Company raised by a
Government in writing.
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1.16. EMPLOYMENT AND LABOR MATTERS. (a) The Company is not
a party to any agreement of any kind which deals with wages,
conditions of employment, benefits or other matters affecting the
employer/employee relationship with any union, labor organization or
employee group. The Company has substantially complied with all
applicable Laws relating to wages, hours, health and safety, payment
of social security withholding and other taxes, maintenance of
workers' compensation insurance, labor and employment relations and
employment discrimination, and no union organization effort is
underway or threatened.
(b) SCHEDULE 1.16(b) lists all contracts, agreements or
arrangements (written or oral) concerning the employment of any
individual by the Company, including each such individual's title,
compensation and duties.
1.17. EMPLOYEE BENEFIT MATTERS. (a) SCHEDULE 1.17 lists all
"employee benefit plans" (the "ERISA PLANS") within the meaning of
Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended ("ERISA") to which the Company contributes or is required to
contribute and all other practices, commitments, arrangements and
agreements pursuant to which the Company provides, directly or
indirectly, any benefits for employees. The Company is not required
to contribute, and has never been required to contribute, to any
multi-employer plan within the meaning of Section 3(37)(A) of ERISA.
True, correct and complete copies of all ERISA Plans, together with
related trusts, insurance contracts, summary plan descriptions, annual
reports and Form 5500 filings for the past three years, have been
delivered to Suburban.
(b) Each ERISA Plan has been operated and administered in
all material respects in accordance with all applicable Laws,
including, without limitation, ERISA and the Code. Neither the
Company nor the Members nor any of the directors, officers, employees
or agents of the Company, nor to the Company's and the Members'
knowledge any "party in interest" or "disqualified person" (as such
terms are defined in Section 3(14) of ERISA and Section 4975 of the
Code) has been engaged in or been a party to any "prohibited
transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code), nor has any such person been involved in or
caused an ERISA Plan to be involved in a breach of fiduciary duty
under Section 404 of ERISA. Each ERISA Plan that is a group health
plan within the meaning of Section 607(1) of ERISA and Section 4980B
of the Code has complied with and is in compliance with the
continuation coverage requirements of Section 601 of ERISA and
Section 4980B of the Code. There are no pending claims or, to the
Company's and the Members' knowledge threatened claims, by or against
any of the ERISA Plans by any employee or beneficiary covered under
such ERISA Plan, or by any Government or otherwise involving such
ERISA Plan or any of its fiduciaries (other than for routine claims
for benefits).
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(c) SCHEDULE 1.17 separately identifies any ERISA Plan that
is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("COMPANY PENSION PLAN") and also lists any Company
Pension Plan that has been terminated in the last five years. Each
Company Pension Plan constitutes a qualified plan within the meaning
of Section 401(a) of the Code and the trust thereunder is exempt from
federal income tax under Section 501(a) of the Code. All Company and
employee contributions required to be made to each Company Pension
Plan have been made in a timely manner.
(d) Except for a Company Pension Plan, the Company is not
bound to provide, and the Company does not provide, benefits,
including, without limitation, death, health or medical benefits
(whether or not insured), with respect to current or former employees
of the Company beyond their retirement or other termination of service
with the Company other than as required by applicable Law. Neither
this Agreement nor any transaction contemplated hereby will entitle
any current or former employee, officer or director of the Company to
severance pay, unemployment compensation or any similar payment.
1.17. ENVIRONMENTAL MATTERS. The Company is not required to
hold an Environmental Permit to conduct its business and operations
and has conducted, and is presently conducting, its business and
operations in full compliance with all applicable Environmental Laws
and Environmental Permits, including, without limitation, all record
keeping and filing requirements. There are no presently pending, or
to the Company's knowledge, threatened Actions or Orders against or
involving the Company (including any Person for whose acts or
omissions the Company is responsible) relating to any alleged, past or
ongoing violation.
1.18. ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the
Company nor any officer, employee or agent of the Company, nor any
other person acting on behalf of the Company, has, directly or
indirectly, within the past five years, given or agreed to give any
gift or similar benefit to any Person who is or may be in a position
to help or hinder the Company's business (or assist the Company in
connection with any actual or proposed transaction) which (a) might
subject the Company to any material damage or penalty in any Action or
which might have an effect on the Company or its assets and
properties, (b) if not given in the past, might have had an effect on
the Company's business or its assets and properties, or (c) if not
continued in the future, might have an effect on the Company or which
might subject the Company to suit or penalty in any Action.
1.19. AGREEMENTS AND TRANSACTIONS WITH RELATED PARTIES.
Except as set forth in SCHEDULE 1.20, the Company is not directly or
indirectly a party to any contract, agreement or lease with, or any
other commitment to, (a) any Person owning, or formerly owning,
beneficially or of record, directly or indirectly, any of the
membership interests of or other equity interest in the Company, (b)
any Affiliate of such Person, (c) any director or officer of the
Company, (d) any Person in which any of the foregoing Persons has,
directly or indirectly, at least a three percent (3.0%) beneficial
interest in the membership interests or other type of equity interest
of such Person, or (e) any partnership in which any of the foregoing
Persons is a general partner or has at least a three percent (3.0%)
beneficial interest (any or all of the foregoing being referred to
herein as "RELATED PARTIES").
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Without limiting the generality of the foregoing, except as set
forth in SCHEDULE 1.20, (x) no Related Party, directly or indirectly,
owns or controls any assets or properties which are or have been used
in the Company's business, and (y) no Related Party, directly or
indirectly, engages in or has any significant interest in or
connection with any business (i) which is or which within the last
three years has been a competitor, customer or supplier of the Company
or has done business with the Company, or (ii) which as of the date
hereof sells or distributes products or services which are similar or
related to the Company's products or services.
1.20. ABSENCE OF CHANGES. Except as expressly provided for
in this Agreement since December 31, 1998:
(a) There has not been any change in the business, assets,
properties, Liabilities, affairs, results of operations, condition
(financial or otherwise), cash flows or prospects of the Company or in
its respective relationships with suppliers, customers, employees,
lessors or others, other than changes in the ordinary course of
business, none of which have had or will have an adverse effect on the
Company, in the aggregate;
(b) There has been no damage, destruction or loss to the
assets, properties, or business of the Company, whether or not covered
by insurance;
(c) The business of the Company has been operated in the
ordinary course and consistent with its prior practices;
(d) The books, accounts and records of the Company have
been maintained in the usual, regular and ordinary manner on a basis
consistent with prior years and with the basis on which the Financial
Statements were prepared, and there has been no amendment to the
articles of organization and operating agreement of the Company;
(e) Except as set forth in SCHEDULE 1.21(e), there has been
no declaration, setting aside or payment of any dividend or other
distribution on or in respect of the membership interests of the
Company, nor has there been any direct or indirect redemption,
retirement, purchase or other acquisition of any of the membership
interests or other securities of the Company;
(f) The Company has not discontinued or determined to
discontinue selling any products or services previously sold by the
Company, the sales of which have been material to the Company;
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(g) There has been no Lien (other than Liens for current
Taxes which are not yet due and payable) created on or in the assets
of the Company;
(h) There has been no sale, transfer, lease or other
disposition of any asset of the Company to any Related Party or,
except in the ordinary course of the Company's business, to any other
Person, and no debt to, or material claim or right of, the Company has
been canceled, compromised, waived or released;
(i) There has been no amendment, termination or waiver of,
or any notice of any amendment, termination or waiver of, any right of
the Company under any Company Contract or under any franchise,
certificate, license, permit or authorization from any Government;
(j) Except as set forth in SCHEDULE 1.21(j), the Company
has not delayed or postponed the payment of any accounts payable or
other Liabilities outside the ordinary course of business;
(k) Other than bonuses and severance payments payable
solely by the Company, the Company has not paid or committed to pay
any bonus, profit-share or other extraordinary compensation payment or
other arrangement (except in the ordinary course of business and
consistent with past practices), nor has the Company entered into any
agreement, contract or commitment with any Member or any Related Party
or amended the terms of any existing agreement, contract or commitment
with any Member or any Related Party; and
(l) Except as set forth in SCHEDULE 1.21(l), there has been
no change in the authorized, issued or outstanding membership
interests or other securities of the Company.
1.21. UNIFORM FRANCHISE OFFERING CIRCULAR. (a) The Company
has registered any Uniform Franchise Offering Circulars ("UFOC")
related to the Acquired Business in every jurisdiction in which the
UFOC is required to be registered including any federal, state,
county, municipal or other governmental agency, department,
commission, board, bureau or instrumentality, both domestic and
foreign. Set forth in SCHEDULE 1.22(a) is a list of all such agencies
with which the UFOC has been registered, the date of such
registration, and the renewal date, if any, for such registration.
The most recent UFOC registered is dated March 29, 1999, and the UFOC
has not been updated or modified since March 29, 1999. The Company is
not aware of, nor received any notice of any proceedings, revocation,
termination or other action or threat of action against or with
respect to any registration or its UFOC or otherwise which would
affect the Company's ability to transact or conduct its business or
operations in any jurisdiction.
(b) The most recent UFOC dated March 29, 1999, and all
prior UFOC's issued, used and/or relied upon by the Company were
prepared, maintained and distributed in compliance with all applicable
statutes, rules and regulations, including but not limited to the
United States Federal Trade Commission and applicable state regulatory
authorities.
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1.23. MASTER FRANCHISE DEVELOPMENT. Except as set forth in
SCHEDULE 1.23, the Company has not executed nor is it actively
negotiating or considering negotiating a master franchise development,
area development, multiple franchise or similar agreement with any
other entity covering any jurisdiction, city, state, country or other
geographical area.
1.24. FULL DISCLOSURE. No representation or warranty of the
Company contained in this Agreement, the Other Agreements, or any
instrument, certificate, agreement or other writing delivered by or on
behalf the Company pursuant to this Agreement or any Other Agreement
or in connection with the transactions contemplated herein contains
any untrue or incomplete statement of a material fact or omits (or
will omit) to state a material fact necessary to make the statements
contained herein not misleading.
To the Company's knowledge, there is no fact which adversely
affects, or in the future may adversely affect, the business, assets,
properties, Liabilities, affairs, results of operations, condition
(financial or otherwise), cash flows or prospects of the Company which
has not been or is not disclosed in this Agreement, or in the other
instruments, certificates, agreements or writings furnished to
Purchaser or Suburban by or on behalf of the Company pursuant to this
Agreement or the Other Agreements or in connection with the
transactions contemplated herein.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
SUBURBAN
As an inducement to the Company to enter into and perform
this Agreement, Purchaser and Suburban hereby represent and warrant as
follows:
2.1. ORGANIZATION. Suburban and Purchaser are corporations duly
organized and validly existing under the Laws of the State of Georgia.
2.2. AUTHORIZATION; NO INCONSISTENT AGREEMENTS. Upon approval of
this Agreement by the Boards of Directors of Suburban and Purchaser,
each of Purchaser and Suburban will have full corporate power and
authority to execute, deliver and perform this Agreement and the Other
Agreements to which it is a party. Upon such approval, this Agreement
will have been, and such Other Agreements will have been, duly and
validly executed and delivered by Purchaser and Suburban,
respectively, and constitute the valid and legally binding obligations
of Purchaser and Suburban, subject to general equity principles,
enforceable in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or
similar Laws affecting the rights of creditors generally.
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2.3. INCONSISTENT OBLIGATIONS. The execution, delivery and
performance of this Agreement and the Other Agreements to which
Purchaser or Suburban is a party, will not (i) result in a violation
of their respective charter or certificate of incorporation or bylaws
or any Law, or (ii) result in a breach of, conflict with or default
under any term or provision of any indenture, note, mortgage, bond,
security agreement, loan agreement, guaranty, pledge or other
instrument, contract, agreement or commitment or any Order to which
Purchaser or Suburban is a party or by which any of the assets of
Purchaser or Suburban is subject or bound, nor will such actions
result in the creation of any Lien on any of the assets of Purchaser
or Suburban or the acceleration or creation of any Liability.
2.4. AUTHORIZATION OF SUBURBAN STOCK. The shares of Suburban
Stock to be issued to the Company pursuant to this Agreement will be
duly authorized and reserved for issuance at or before the Closing and
upon issuance to the Company will be fully paid and nonassessable.
2.5. CONSENTS. The execution, delivery and performance by
Purchaser and Suburban of this Agreement and the Other Agreements to
which they are a party, and the consummation of the transactions
contemplated herein and therein does not (a) require the consent,
approval or action of, or any filing with or notice to, any Government
or other Person or (b) impose any other term, condition or restriction
on Purchaser pursuant to any business combination or takeover Law.
2.6. FULL DISCLOSURE. No representation or warranty of Purchaser
or Suburban contained in this Agreement or any Other Agreement, or in
any instrument, certificate, agreement or other writing delivered by
Purchaser or Suburban pursuant to this Agreement or the Other
Agreements or in connection with the transactions contemplated herein
or therein contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained
herein or therein not misleading.
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APPENDIX B
DEFINITIONS
Definitions of terms appearing in the Agreement and Appendix
A appear or are cross-referenced below:
"ACCELERATION EVENT" shall have the meaning set forth in
SECTION 2.1.1(g) of the Agreement.
"ACTION" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation contest, or administrative
proceeding, whether at Law, in equity, in arbitration or otherwise,
and whether conducted by or before any Government or other Person.
"AFFILIATE" of any specified Person shall mean any other Person
directly or indirectly Controlling, Controlled by, or under direct or
indirect common Control with such specified Person.
"AFFILIATED ENTITIES" mean any entities at any time eligible or
required to file a consolidated or combined Return with the Company.
"ACQUIRED ASSETS" shall have the meaning set forth in SECTION 1.1
of the Agreement.
"ACQUIRED BUSINESS" shall have the meaning set forth in the
Recitals of the Agreement.
"AGREEMENT" shall mean the Agreement for Purchase and Sale of
Assets among Suburban Lodges of America, Inc., GuestHouse Franchise
Systems, Inc., and GuestHouse International LLC together with any
appendices and exhibits thereto.
"APPROVAL DATE" shall have the meaning set forth in SECTION 4.2
of the Agreement.
"ASSIGNED CONTRACTS" shall have mean all contracts, contractual
rights, purchase orders, sales orders, franchise agreements, franchise
rights and other agreements assigned to Purchaser.
"ASSUMED LIABILITIES" shall have the meaning set forth in SECTION
2.2 of the Agreement.
"CASH PAYMENT" shall have the meaning set forth in SECTION
2.1.1(a) of the Agreement.
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"CLOSING" shall have the meaning set forth in SECTION 3.1 of the
Agreement.
"CLOSING DATE" shall have the meaning set forth in SECTION 1.1 of
the Agreement.
"CLOSING PAYMENT" shall have the meaning set forth in SECTION
2.1.1(a) of the Agreement.
"CODE" shall have the meaning set forth in the SECTION 2.3 of the
Agreement.
"COMPANY" shall have the meaning set forth in the Preamble of the
Agreement and the use of the possessive form of the term shall mean
things belonging or relating to such corporation or any such Person.
"COMPANY INDEMNIFIED LOSSES" shall have the meaning set forth in
SECTION 6.1(a) of the Agreement.
"COMPANY INDEMNITEES" shall have the meaning set forth in SECTION
6.1(a) of the Agreement.
"CONTROL" means a Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies
of another Person, whether through the ownership of voting securities,
by contract or otherwise.
"ENVIRONMENTAL LAWS" shall mean all Laws, general or particular
conditions, requirements, decrees, and covenants relating to health,
safety and the environment, including, without limitation, Laws and
covenants relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous materials or wastes of every kind and nature into the
environment (including without limitation ambient air, surface water,
ground water, soil and subsoil), or otherwise relating to the
manufacture, generation, processing, distribution, application, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances
or wastes, or to occupational or worker safety and health, and any and
all Laws, directives, guidelines, policies, plans, Orders,
stipulations, provisions and conditions of Environmental Permits,
licenses, stipulations, certificates of authorization, and other
operating authorizations, notices or demand letters issued, entered,
promulgated or approved thereunder.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
certificates, approvals, authorizations, regulatory plans or
compliance schedules required by applicable Environmental Laws, or
issued by a Government pursuant to applicable Environmental Laws, or
entered into by agreement of the party to be bound, relating to
activities that affect human health or the environment, including,
without limitation, permits, licenses, certificates, approvals,
authorizations, regulatory plans and compliance schedules for air
emissions, water discharges, pesticide and herbicide or other
agricultural chemical storage, use or application, and hazardous
material or solid waste generation, use, storage, treatment and
disposal.
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"FINANCIAL STATEMENTS" shall have the meaning set forth in
SECTION 1.6 of Appendix "A".
"FIRST ANNIVERSARY PAYMENT" shall have the meaning set forth in
SECTION 2.1.1(b) of the Agreement.
"FORUM" shall mean any federal, national, state, local, municipal
or foreign court, governmental agency, administrative body or agency,
tribunal, private alternative dispute resolution system, or
arbitration panel.
"GAAP" shall mean generally accepted accounting principles in the
United States, consistently applied.
"GOOD STANDING" shall have the meaning set forth in SECTION
2.1.1(e) of the Agreement.
"GOVERNMENT" shall mean any federal, national, state, provincial,
local, municipal, or foreign government or any department, commission,
board, bureau, agency, instrumentality, unit, or taxing authority
thereof.
"GROSS REVENUE" shall have the meaning set forth in SECTION 2.1
of the Agreement.
"PURCHASER INDEMNIFIED LOSSES" shall have the meaning set forth
in SECTION 6.2(a) of the Agreement.
"PURCHASER INDEMNITEES" shall have the meaning set forth in
SECTION 6.2(a) of the Agreement.
"INVENTORY" shall mean all inventories of the Company used
or usable in connection with the Acquired Business, including all raw
materials, work in process, finished products, goods, spare parts, at
any location controlled by the Company or which have been purchased by
and are in transit to the Company.
"KNOWN," "TO THE KNOWLEDGE OF," "AWARE" or words of similar
import employed in this Agreement with reference to any individual or
entity shall be conclusively presumed to mean that the individual or
entity has made reasonable efforts under the circumstances to become
knowledgeable; in the case of the Company, "KNOWLEDGE" shall be deemed
to be the individual and collective knowledge (as defined above) of
its directors and senior officers and managers.
"LAW" shall mean all federal, national, state, provincial, local,
municipal or foreign constitutions, statutes, rules, regulations,
norms, ordinances, acts, codes, legislation, treaties, conventions,
common law principles, judicial decisions and similar laws and legal
requirements, whether of the United States of America or any other
jurisdiction as in effect from time to time.
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"LIABILITY" shall mean any liability or obligation whether known
or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become
due.
"LIEN" shall mean any mortgage, pledge, hypothecation, security
interest, encumbrance, claim, restriction on use, lien or charge of
any kind, or any rights of others, however evidenced or created
(including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing
statement under the lien notice records or other similar legislation
of any jurisdiction).
"MEMBER" and "MEMBERS" shall mean all the holders of the issued
and outstanding membership interests of the Company.
"OPEN FRANCHISES" shall have the meaning set forth in SECTION 2.1
of the Agreement.
"ORDERS" shall mean all applicable orders, writs, judgments,
injunctions, decrees, rulings, consent agreements, and awards of or by
any Forum or entered by consent of the party to be bound.
"OTHER AGREEMENTS" shall have the meaning set forth in
SECTION 1.1(b) of APPENDIX "A".
"PERSON" shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a Government.
"PURCHASE PRICE" shall have the meaning set forth in SECTION
2.1.1 of the Agreement.
"PURCHASER" shall have the meaning set forth in the Preamble to
the Agreement.
"RELATED PARTIES" shall have the meaning set forth in SECTION
1.20 of Appendix "A".
"RETURNS" shall have the meaning set forth in SECTION 1.15 of
Appendix "A".
"REVIEW PERIOD" shall have the meaning set forth in SECTION 4.2
of the Agreement.
"SEC" shall have the meaning set forth in SECTION 5.7 of the
Agreement.
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"SEC DOCUMENTS" shall have the meaning set forth in SECTION 5.7
of the Agreement.
"SECOND ANNIVERSARY PAYMENT" shall have the meaning set forth in
SECTION 2.1.1(c) of the Agreement.
"SECURITIES ACT" shall have the meaning set forth in SECTION 5.8
of the Agreement.
"SHARES PAYMENT" shall have the meaning set forth in SECTION
2.1.1(a) of the Agreement.
"SUBURBAN" shall have the meaning set forth in the Preamble to
the Agreement.
"SUBURBAN STOCK" shall have the meaning set forth in SECTION
2.1.1(a) of the Agreement.
"SURVIVAL PERIOd" shall have the meaning set forth in SECTION 6.5
of the Agreement.
"TAXES" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges
of whatever nature, including without limitation income, gross
receipts, excise, property, sales, use, customs, value added,
consumption, transfer, license, payroll, employee income, withholding,
social security, and franchise taxes, now or hereafter imposed or
levied by the United States of America or any Government or by any
department, agency or other political subdivision or taxing authority
thereof or therein, all deposits required in connection therewith, and
all interests, penalties, additions to tax, and other similar
Liabilities with respect thereto.
"THIRD ANNIVERSARY PAYMENT" shall have the meaning set forth in
SECTION 2.1.1(d) of the Agreement.
"TRADEMARKS" shall mean trademarks, service marks, and trade
names (including, without limitation, the Company's corporate name)
and all variations thereof, all registrations and pending applications
therefor, and all goodwill associated therewith.
"UFOC" shall have the meaning set forth in SECTION 1.22(a) of
Appendix "A".
B-5
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LIST OF SCHEDULES
Agreement:
Schedule 1.1 Liens
Schedule 1.2(g) Excluded Assets
Schedule 2.3 Allocation of Purchase Price
Schedule 3.2(a) Company's Deliveries
Schedule 3.2(d) Other Consents
Appendix A:
Schedule 1.9(a) Personal Property
Schedule 1.9(b) Personal Property
Schedule 1.12 Intellectual Property
Schedule 1.13(a) Assigned Contracts
Schedule 1.13(b) Franchise and License Agreements
Schedule 1.16(b) Employment Agreements
Schedule 1.17 Employee Benefit Plans
Schedule 1.20 Related Party Transactions
Schedule 1.21(e) Dividends and Distributions
Schedule 1.21(j) Delayed Payment of Liabilities
Schedule 1.21(l) Change in Membership Interests
Schedule 1.22(a) UFOC Registration
Schedule 1.23 Master Franchise Agreement
<PAGE>
EXHIBIT 2.1(B)
FIRST AMENDMENT TO AGREEMENT
FOR PURCHASE AND SALE OF ASSETS
THIS FIRST AMENDMENT, dated ___________, 1999 ("Amendment"), to
AGREEMENT FOR PURCHASE AND SALE OF ASSETS among SUBURBAN LODGES OF
AMERICA, INC. ("Suburban"), GUESTHOUSE INTERNATIONAL FRANCHISE
SYSTEMS, INC., formerly known as GUESTHOUSE FRANCHISE SYSTEMS, INC.
("Purchaser") and GUESTHOUSE INTERNATIONAL, L.L.C. ("Company").
RECITALS
WHEREAS, Company, Suburban and Purchaser entered in an Agreement
for Purchase and Sale of Assets, dated April 16, 1999, regarding the
sale and purchase of certain assets by the Company to Purchaser
("Agreement"); and.
WHEREAS, the parties now desire to amend and modify the terms and
provisions of the Agreement, as provided herein.
NOW THEREFORE, for and in consideration of the premises, and the
mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Appendix A, Article 1, of the Agreement, Representations
---------------
and Warranties of the Company, is hereby amended to add the
-----------------------------
following:
1.25 Since the filing of the Articles of Organization, there have
not been any material changes in the business of the
Company, nor any mergers, acquisitions, transfers or sales
of all or substantially all of the assets of the Company,
including, but not limited to, any proposed merger with
Austin Lomas Group, LLC.
1.26 The Company established and holds exclusive title to all
rights associated with the webpage and domain name
GuestHouse.net (collectively, "Webpage"), and has the full
power and authority to sell, transfer and assign the Webpage
to Suburban and Purchaser. The Company shall sell, transfer
and assign the Webpage, and all of the Company's rights
associated with the Webpage, including, but not limited to,
the source code thereto, to Purchaser upon Closing. In the
event that the Company is unable to fully complete the sale,
transfer and assignment of the Webpage by the date of
Closing, the Company shall after Closing assist and
cooperate in good faith with Purchaser in consummating such
sale, transfer and assignment.
2. Section 2.1.2 of the Agreement is hereby amended to add the
following to the last paragraph thereof:
The parties acknowledge that the real and personal property
leases pertaining to the Company's offices in Little Rock,
Arkansas are not, by their terms, assignable, and that these
agreements cannot be assigned absent the specific consent of
the applicable lessors. To the extent the Company does not
obtain such consents to assignment prior to Closing,
Purchaser shall reimburse the Company for all rents and
payments paid by the Company with respect to such leases
applicable to the period of time subsequent to Closing
during which Purchaser enjoys the benefits of such leases
3. A new Section 2.1.3, "Application of Payments From
Franchisees or Licensees", is hereby added to the Agreement as
follows:
Franchise or license fees (other than Initial Franchise
Fees, as defined in Section 5 of the Company's License
Agreements), royalties, operating fees or payments received
from franchisees or licensees by the Company or Purchaser
after the date of Closing shall be applied first towards
current obligations and liabilities of the franchisees and
licensees to Purchaser. All franchisee payments paid after
Closing shall be remitted to Purchaser if received by the
Company. Neither Purchaser nor Suburban shall have any
obligation to collect any delinquencies owed by a franchisee
or licensee to the Company for the period of time prior to
Closing. The Company shall not have any obligation to
collect any delinquencies owed by a franchisee or licensee
to Purchaser for the period of time subsequent to Closing.
If, (a) a franchisee or licensee has been delinquent in its
payment of such franchise or license fees, operating fees,
royalties or payments prior to Closing and such
delinquencies remain outstanding as of Closing; (b) the
Company advises Purchaser prior to Closing, in writing, of
the identity of such franchisees and the amounts of such
delinquencies; and (c) Purchaser receives any funds from
such delinquent franchisees or licensees in excess of their
current obligations to Purchaser, then Purchaser shall remit
such excess funds received from such delinquent franchisees
or licensees to the Company in an amount not to exceed the
lesser of the amount of such delinquency or the amount
specified in the aforesaid written notice of delinquency
from the Company to Purchaser.
<PAGE>
4. A new Section 2.1.4, "Initial Franchise Fees", is hereby added to the
Agreements as follows:
The Company, Suburban and Purchaser agree that all Initial
Franchise Fees paid to and received by the Company prior to
the date of Closing shall be deemed earned and shall be
retained by the Company, and that all Initial Franchise Fees
paid after the date of Closing shall be deemed earned by
Purchaser and shall be remitted to Purchaser if paid to the
Company.
5. Attached hereto as Exhibit A are the following Schedules of the
Company pursuant to the Agreement:
Agreement:
Schedule 1.1 Permitted Liens
Schedule 1.2(g) Miscellaneous Excluded Assets
Schedule 2.3 Allocation of Purchase Price
Schedule 3.2(a) Company Closing Documents
Schedule 3.2(d) Required Consents
Schedule 3.3(a) Suburban and Purchaser Closing
Documents
Appendix A:
Schedule 1.9(a) Personal Property Not in Good Repair
Schedule 1.9(b) Performance of Lessors
Schedule 1.12 GuestHouse Trademark Status
Schedule 1.13(a) Assigned Contracts
Schedule 1.13(b) Franchise and License Agreements
Schedule 1.16(b) Employment and Labor Matters
Schedule 1.17 Employee Benefit Matters
Schedule 1.20 Related Party Agreements
Schedule 1.21(e) Dividends and Distributions
Schedule 1.21(j) Delayed Accounts Payable
Schedule 1.21(l) Change in Membership Interests
Schedule 1.22(a) UFOC Registration
Schedule 1.23 Master Franchise Development
Agreement
Said Schedules are incorporated herein and in the Agreement. The
Company hereby certifies that all such Schedules are true, correct
and complete as of the date hereof and as of the Closing.
6. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Signatures
transmitted by telecopier shall be binding.
7. Except as amended hereby, the Agreement is hereby ratified and
confirmed. No other modification is made or intended other than as
set forth above, and all other terms and conditions of the
Agreement as reinstated shall remain in full force and effect.
Except as specifically provided to the contrary herein, all defined
terms used in this Amendment are defined in the same manner as such
terms are defined in the Agreement.
IN WITNESS WHEREOF, the parties have executed or caused this
Amendment to be executed by their duly authorized representatives as
of the day and year first above written.
SUBURBAN: SUBURBAN LODGES OF AMERICA, INC.
By: /s/ David Krischer
Name: DAVID KRISCHER
Title: CEO
PURCHASER: GUESTHOUSE INTERNATIONAL FRANCHISE SYSTEMS,
INC.
By: /s/ David Krischer
Name: DAVID KRISCHER
Title: CEO
COMPANY: GUESTHOUSE INTERNATIONAL LLC
By: /s/ James H. Keel III
Name: JAMES H. KEEL III
Title: Chairman & Manager
