Proof dated as of May 22, 1996
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1996
333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERIKING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 5812 36-3970707
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>
AMERIKING, INC.
2215 ENTERPRISE DRIVE, SUITE 1502
WESTCHESTER, ILLINOIS 60154
(708) 947-2150
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LAWRENCE E. JARO
AMERIKING, INC.
2215 ENTERPRISE DRIVE, SUITE 1502
WESTCHESTER, ILLINOIS 60154
(708) 947-2150
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
James B. Carlson, Esq. John T. Gaffney, Esq.
Mayer, Brown & Platt Cravath, Swaine & Moore
1675 Broadway Worldwide Plaza
New York, New York 10019 825 Eighth Avenue
(212) 506-2500 New York, New York 10019
(212) 474-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE(1)(2) AMOUNT OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK ($.01 PAR VALUE PER SHARE)...... $115,000,000 $39,655.17
===========================================================================================================
</TABLE>
(1) Includes $15,000,000 of shares of Common Stock issuable upon exercise
of an over-allotment option granted to the Underwriters by the Company
and certain stockholders of the Company.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
AMERIKING, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM AND HEADING OF FORM S-1 HEADING OR LOCATION IN PROSPECTUS
----------------------------------- --------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus ................ Facing page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Page of
Pages of Prospectus ............... Prospectus
3. Summary Information and Risk
Factors ........................... Prospectus Summary; Risk Factors
4. Use of Proceeds .................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price ... Outside Front Cover Page of Prospectus; Risk
Factors; Underwriting
6. Dilution ........................... Dilution
7. Selling Security Holders ........... Principal and Selling Stockholders
8. Plan of Distribution ............... Outside and Inside Front Cover Pages of
Prospectus; Underwriting
9. Description of Securities to be
Registered ......................... Outside Front Cover Page of Prospectus; Dividend
Policy; Description of Capital Stock; Shares
Eligible for Future Sale
10. Interest of Named Experts and
Counsel ........................... Legal Matters; Experts
11. Information with Respect to the
Registrant ........................ Outside Front and Outside Back Cover Page of
Prospectus; Prospectus Summary; Risk Factors;
Dividend Policy; Dilution; Capitalization; Pro
Forma Consolidated Financial Statements; Selected
Consolidated Financial Information; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management
Principal and Selling Stockholders; Description of
Indebtedness; Certain Transactions; Shares
Eligible for Future Sale; Underwriting; Experts;
Index to Consolidated Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities ................... Not Applicable
</TABLE>
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten public offering in the United States
and Canada (the "U.S. Prospectus") and one to be used in a concurrent
underwritten public offering outside the United States and Canada (the
"International Prospectus"). The U.S. Prospectus and the International
Prospectus are identical except for the front and back cover pages. The form
of U.S. Prospectus is included herein and is followed by the alternate pages
to be used in the International Prospectus. The alternate pages for the
International Prospectus included herein are labeled "International
Prospectus--Alternate Pages." Final forms of each prospectus will be filed
with the Securities and Exchange Commission under Rule 424(b) under the
Securities Act of 1933.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy, nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED MAY 22, 1996
PROSPECTUS
SHARES
AMERIKING, INC.
COMMON STOCK
All of the shares of common stock (the "Common Stock") of AmeriKing, Inc.
(the "Company") offered hereby are being sold by the Company. Of the
shares of Common Stock offered hereby, a total of shares are being
offered hereby for sale in the United States and Canada (the "U.S. Offering")
by the U.S. Underwriters (as defined) and a total of shares are being
offered by the Managers (as defined) in a concurrent international offering
outside the United States and Canada (the "International Offering" and,
together with the U.S. Offering, the "Offerings").
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will
be between $ and $ per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price.
Application has been made to have the Common Stock quoted on the Nasdaq
National Market under the symbol "AKNG."
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==============================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
- ------------------------------------------------------------------------------
Per Share $ $ $
Total (3) $100,000,000 $ $
==============================================================================
(1) For information regarding indemnification of the U.S. Underwriters and
the Managers, see "Underwriting."
(2) Before deducting expenses estimated at $ payable by the Company.
(3) The Company and certain stockholders of the Company have granted the
U.S. Underwriters a 30-day option to purchase up to additional
shares of Common Stock solely to cover over-allotments, if any. See
"Underwriting." If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $ , $ and $ , respectively. The Company will not receive
any of the proceeds from the sale of Common Stock by such selling
stockholders. See "Underwriting" and "Principal and Selling
Stockholders."
--------------
The shares of Common Stock are being offered by the several U.S.
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
the shares of Common Stock offered hereby will be available for delivery on
or about , 1996, at the offices of Smith Barney Inc., 333 West 34th
Street, New York, New York 10001.
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
EVEREN SECURITIES, INC.
[ ], 1996
<PAGE>
[MAP]
Burger King(Registered Trademark) is a registered trademark and service
mark and Whopper(Registered Trademark) is a registered trademark of Burger
King Brands, Inc., a wholly-owned subsidiary of Burger King Corporation.
Burger King Corporation is wholly-owned by Grand Metropolitan PLC.
Neither Burger King Corporation nor any of its subsidiaries or affiliates
is in any way participating in or approving the Offerings. All financial and
other information contained herein has been prepared by and is the sole
responsibility of the Company. For a full discussion of the Burger King
Corporation disclaimer, please see "Available Information."
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND MANAGERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED
THROUGH THE NASDAQ NATIONAL MARKET, IN THE OVER-THE- COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to and
should be read in conjunction with the more detailed information and
financial statements, including the notes thereto, appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information in this
Prospectus (i) gives effect to the recapitalization of the Company's capital
stock which will occur in connection with the Offerings (the
"Recapitalization") and (ii) assumes that the over-allotment option granted
by the Company and certain selling stockholders to the U.S. Underwriters is
not exercised. References to a fiscal year refer in each case to the year
ended December 31, except that references to fiscal 1995 refer to the fiscal
year ended January 1, 1996. Unless the context indicates or requires
otherwise, references in this Prospectus to the "Company" or "AmeriKing" are
to AmeriKing, Inc. and its subsidiaries.
THE COMPANY
The Company is the leading independent Burger King franchisee in the
midwestern United States and management believes the Company is the second
largest Burger King franchisee in the United States. The Company was formed
in 1994 by a group consisting of former Burger King franchisees, former
Burger King Corporation ("BKC") executives and The Jordan Company to take
advantage of significant acquisition and related new restaurant development
opportunities within the growing Burger King system. Since its inception, the
Company has grown primarily through a series of nine acquisitions involving
the purchase of 175 Burger King restaurants. Currently, the Company operates
180 Burger King restaurants in the states of Illinois, Virginia, Indiana,
Colorado, Texas, Tennessee, Kentucky, Wisconsin, Ohio, North Carolina and
Georgia. Restaurant sales for fiscal 1995 were $139.6 million ($237.4 million
on a pro forma basis--see "Pro Forma Consolidated Financial Statements").
The Company's growth strategy consists of two principal components: (i)
strategic acquisitions of multi-restaurant Burger King operations in new and
existing markets and (ii) development of new Burger King restaurants in
markets in which the Company has established a presence. The Company
currently intends to acquire 40 Burger King restaurants in the Michigan
Acquisition (as described below) and plans to develop 16 new Burger King
restaurants in fiscal 1996 (four developed to date) and 34 new Burger King
restaurants in fiscal 1997.
Management believes that there are many attractive acquisition candidates
in the $8.4 billion Burger King system because of its significant size and
highly fragmented nature. According to information publicly filed by Grand
Metropolitan PLC ("GrandMet"), BKC's parent corporation, as of September 30,
1995 the Burger King system included approximately 8,000 restaurants
worldwide, of which approximately 91% were operated by approximately 1,500
independent franchisees. In addition, since September 30, 1991, the number of
restaurants in the Burger King system has grown by approximately 25%, with a
record number of 657 new restaurants added during the year ended September
30, 1995 (of which 32 were developed by BKC and 625 were developed by
independent franchisees). Management believes that the five largest
franchisees in the Burger King system operate less than 10% of all Burger
King restaurants.
The Company has and will continue to target acquisitions in geographic
markets which have potential for substantial new restaurant development.
Management believes that the underpenetration of the Burger King system
provides the Company with significant new development opportunities.
Moreover, management believes that the proven success of the Burger King
concept and the relative predictability of development costs and restaurant
profitability versus that of newer restaurant concepts substantially reduces
the Company's new restaurant development risk. For fiscal 1996, the Company
has budgeted approximately $350,000 for the development of each new Burger
King restaurant (exclusive of land acquisition and building costs, as the
Company leases each of its properties). For the 121 restaurants operated by
the Company for all of fiscal 1995, average restaurant sales and average
restaurant operating cash flow were approximately $1.1 million and $173,000,
respectively.
3
<PAGE>
The Company's operating strategy is to maximize restaurant level and
overall profitability. The Company implements this strategy from a revenue
perspective principally by engaging in activities and undertaking investments
designed to expand the Company's customer base and to increase sales volume.
The Company regularly reviews its restaurant properties for revenue-enhancing
opportunities (such as improvements in drive-thru efficiencies and the
addition or expansion of children's playground facilities) and when
appropriate implements such opportunities.
In addition, the Company tightly controls its operating costs at both the
unit and corporate levels and captures economies of scale throughout its
operations. The Company believes that the large number of restaurants that it
operates, combined with its sophisticated management information systems,
provide the Company with significant advantages over many other quick-service
restaurant operators particularly with respect to market consistency and cost
control. In addition, the Company believes that its size and management
information systems will continue to enhance profitability in the future,
providing the Company with significant cost saving opportunities as it
acquires and develops restaurants.
The Company's senior management has extensive experience in the Burger
King system as either former executives of BKC or as independent Burger King
franchisees. The top five members of the Company's senior management each
have over 10 years of experience, and in some cases more than 20 years of
experience, within the Burger King system in connection with the operation,
acquisition and development of Burger King restaurants. In addition, most of
the Company's regional managing directors, district managers and restaurant
managers have substantial experience within the Burger King system and/or the
quick-service restaurant industry.
BURGER KING CORPORATION
The Company believes that it benefits from its affiliation with BKC as a
result of, among other things, the widespread recognition of the Burger King
name and products, the size and market penetration of BKC's media budget
(which was approximately $200 million for its fiscal year ended September 30,
1995, according to LNA/Arbitron Multi-Media Service), BKC's overall
management of the Burger King concept, including new product development,
quality assurance and strategic planning, and the continuing growth of the
Burger King system.
BKC, an operating subsidiary of GrandMet, was founded in 1954 and is
currently the second largest restaurant franchisor in the world with
system-wide restaurant sales of $8.4 billion for its fiscal year ended
September 30, 1995. According to GrandMet, the Burger King system accounts
for approximately 19% of the domestic hamburger market, as compared to 41%
for McDonald's, 12% for Wendy's and 9% for Hardees. According to Technomic
Information Services, domestic revenues from hamburger and related sales
totaled approximately $37.6 billion in 1995.
THE MICHIGAN ACQUISITION
On May 11, 1996, the Company executed purchase agreements to acquire 40
Burger King restaurants in the Grand Rapids, Michigan area (the "Michigan
Acquisition") from a franchisee for an aggregate cash purchase price of $35.6
million. The Company plans to use a portion of the net proceeds from the
Offerings to fund the Michigan Acquisition. The Michigan Acquisition is
conditioned on, among other things, the consummation of the Offerings, BKC's
consent (described below) and standard closing conditions. As part of the
Michigan Acquisition, it is expected that the seller will enter into a
non-competition agreement and an agreement to assist the Company in
developing additional Burger King restaurant sites in the Michigan market. It
is anticipated that the key operating personnel of the restaurants acquired
in the Michigan Acquisition will be retained. Pursuant to the BKC franchise
agreement, acquisitions of Burger King restaurants, including those to be
acquired in the Michigan Acquisition, are subject to BKC's consent and right
of first refusal. See "Risk Factors--BKC Franchise Agreement Restrictions."
On May 20, 1996, the Company submitted to BKC the relevant documentation in
order to obtain BKC's consent for the Michigan Acquisition.
--------------
The Company was incorporated in the State of Delaware on August 17, 1994
as NRE Holdings, Inc. Its principal executive offices are located at 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154, and its telephone
number is (708) 947-2150.
4
<PAGE>
THE OFFERINGS
COMMON STOCK OFFERED:
U.S. Offering .................... shares
International Offering ........... shares
------
Total .......................... shares
Common Stock to be outstanding
after the Offerings ............... shares(1)
Use of proceeds .................... To fund the Michigan Acquisition and
reduce outstanding indebtedness. See
"Use of Proceeds."
Proposed Nasdaq National Market
Symbol ............................ AKNG
- ------------
(1) Excludes: an aggregate of shares of Common Stock reserved for
issuance under the Company's 1996 Stock Option Plan (the "Stock Option
Plan") and 195.32 shares of Common Stock issuable upon exercise of
options and warrants outstanding as of April 1, 1996. See
"Management--Stock Option Plan" and "Description of Capital Stock."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain historical financial and operating
data for the Company and restaurants formerly owned and operated by BKC (the
"BKC Restaurants") and entities controlled by certain members of the
Company's current management (the "Management Restaurants") (collectively the
"Initial Acquisitions") and certain pro forma financial and operating data
for the Company as of the dates and for the periods indicated. Prior to their
acquisition by the Company on September 2, 1994, the BKC Restaurants and the
Management Restaurants were not under common control or management. In
addition, restaurant contribution for the BKC Restaurants and the Management
Restaurants, which reflects restaurant sales net of restaurant operating
expenses, does not reflect all costs of operating the BKC Restaurants and
Management Restaurants. Accordingly, restaurant sales, restaurant operating
expenses and restaurant contribution may not be comparable to or indicative
of post-acquisition results. The following information should be read in
conjunction with the "Selected Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Pro Forma Consolidated Financial Statements," the Consolidated
Financial Statements of the Company and the notes thereto and the Historical
Schedules of Restaurant Contribution for the Initial Acquisitions and the
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
-------------------------- ---------------
JAN. 1, 1994 SEPT. 2, 1994
FISCAL THROUGH SEPT. THROUGH DEC.
1993 1, 1994 31, 1994(3)
--------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales .................... $82,895 $56,720 $33,931
Restaurant operating expenses ....... 76,297 53,351 29,876
---------
Restaurant contribution ............. $ 6,598 $ 3,369 $ 4,055
========= ===============
General and administrative expenses . 1,374
Other (income) expense .............. 2,249
---------------
Provision for income taxes .......... 191
---------------
Net income .......................... $ 241
===============
SELECTED OPERATING DATA:
Restaurants open at end of period ... 82 82 121
Average sales per restaurant(6) ..... $ 1,011
Average restaurant operating cash
flow(6)(7) ......................... $ 106
Average restaurant operating cash
flow margin(6) ..................... 10.5%
SUPPLEMENTAL DATA: (8)(9)
Restaurant sales:
BKC Restaurants ..................... $70,667 $47,762
Management Restaurants:
Jaro restaurants ................... 10,115 7,400
Osborn restaurants ................. 2,113 1,558
--------- ---------------
Total for Initial Acquisitions ... $82,895 $56,720
========= ===============
Restaurant Operating Expenses:
BKC Restaurants ..................... $65,263 $45,257
Management Restaurants:
Jaro restaurants ................... 9,166 6,718
Osborn restaurants ................. 1,868 1,376
--------- ---------------
Total for Initial Acquisitions ... $76,297 $53,351
========= ===============
Restaurant Contribution:
BKC Restaurants ..................... $ 5,404 $ 2,505
Management Restaurants:
Jaro restaurants ................... 949 682
Osborn restaurants ................. 245 182
--------- ---------------
Total for Initial Acquisitions ... $ 6,598 $ 3,369
========= ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-----------------------------------
FISCAL 1995 APRIL 1, 1996
------------------------ ----------- ----------------------
PRO FORMA, PRO FORMA,
AS MARCH 31, AS
ACTUAL ADJUSTED(4) 1995 ACTUAL ADJUSTED(4)
---------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales .................... $139,572 $237,389 -- -- --
Restaurant operating expenses ....... 123,181 210,289 -- -- --
---------- ------------ ----------- -------- ------------
Restaurant contribution ............. 16,391 27,100 -- -- --
General and administrative expenses . 5,904 7,404 -- -- --
Other (income) expense .............. 8,760 7,972
Provision for income taxes .......... 825 4,924 -- -- --
---------- ------------ ----------- -------- ------------
Net income .......................... $ 902 $ 6,800(5)
========== ============ =========== ======== ============
SELECTED OPERATING DATA:
Restaurants open at end of period ... 140 213
Average sales per restaurant(6) ..... $ 1,125 $ 1,147
Average restaurant operating cash
flow(6)(7) ......................... $ 173 $ 175
Average restaurant operating cash
flow margin(6) ..................... 15.4% 15.3%
SUPPLEMENTAL DATA: (8)(9)
Restaurant sales:
BKC Restaurants .....................
Management Restaurants:
Jaro restaurants ...................
Osborn restaurants .................
Total for Initial Acquisitions ...
Restaurant Operating Expenses:
BKC Restaurants .....................
Management Restaurants:
Jaro restaurants ...................
Osborn restaurants .................
Total for Initial Acquisitions ...
Restaurant Contribution:
BKC Restaurants .....................
Management Restaurants:
Jaro restaurants ...................
Osborn restaurants .................
Total for Initial Acquisitions ...
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AS OF FISCAL 1995 YEAR END AS OF APRIL 1, 1996
------------------------------ -----------------------
PRO FORMA, PRO FORMA,
AS AS
ACTUAL ADJUSTED(10) ACTUAL ADJUSTED(10)
----------- ------------- -------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficiency) .............. $(13,202) $ (5,288)
Total assets .............. 107,236 183,410
Long term debt and
capitalized leases ....... 79,270 85,004
Total stockholders' equity 8,743 88,909
</TABLE>
- ------------
(1) Reflects the combined historical financial results of the 68 BKC
Restaurants and the 14 Management Restaurants acquired by the Company
on September 2, 1994 for the indicated period during which the
restaurants were owned and operated by BKC and management-controlled
entities. The results of the Initial Acquisitions for fiscal 1993 and
the period from January 1, 1994 through September 1, 1994 may not be
reflective of the ongoing operations of the Company under its current
ownership structure.
(2) Due to the inability of the Company to determine certain expenses for
the Initial Acquisitions on a meaningful and consistent basis, net
income is not comparable and is not presented for the Initial
Acquisitions.
(3) Reflects the historical results of the Company, including the Initial
Acquisitions subsequent to their acquisition by the Company on
September 2, 1994. Also includes limited expenses of the Company during
the period August 17, 1994 (date of incorporation) to September 2,
1994, during which period the Company had no operations.
(4) Pro forma, as adjusted, to reflect (i) the 1995 Acquisitions (in the
case of fiscal 1995), (ii) the 1996 Acquisitions, (iii) the Michigan
Acquisition and (iv) the Offerings, including the application of the
estimated net proceeds therefrom as set forth in "Use of Proceeds." See
"Pro Forma Consolidated Financial Statements."
(5) The pro forma income statement does not give effect to an extraordinary
pre-tax charge of approximately $5,497 (approximately $3,243 on an
after-tax basis), which the Company expects to record immediately
following the closing of the Offerings, consisting of (i) an
approximate $2,047 (approximately $1,208 on an after-tax basis)
write-off of deferred financing costs relating to the prepayment of the
Subordinated Debt (as hereinafter defined) and (ii) an approximate
$3,450 (approximately $2,035 on an after-tax basis) prepayment premium
incurred in connection with the prepayment of the Subordinated Debt.
(6) Reflects the results of only those restaurants operating for the entire
period.
(7) Restaurant operating cash flow includes restaurant sales less
restaurant operating expenses other than depreciation and amortization.
Restaurant operating cash flow should not be considered by a
prospective investor as an alternative to net income as a better
measure of the Company's operating performance or as an alternative to
cash flows as a better measure of liquidity.
(8) Sets forth for the Initial Acquisitions the components constituting
aggregate restaurant sales, restaurant operating expenses and
restaurant contribution for the indicated periods. See the Historical
Schedules of Restaurant Contribution with respect to the Initial
Acquisitions and the notes thereto.
(9) Jaro restaurants consist of the 11 Management Restaurants acquired from
entities owned or controlled by Lawrence Jaro, the Company's current
Chief Executive Officer and Chairman of the Company's Board of
Directors. Osborn restaurants consist of the three Management
Restaurants acquired from entities owned or controlled by William
Osborn, the current Vice-Chairman of the Company's Board of Directors.
(10)Pro forma, as adjusted, to give effect to (i) the 1996 Acquisitions (in
the case of fiscal 1995), (ii) the Michigan Acquisition and (iii) the
Offerings and the application of the estimated net proceeds therefrom,
as if all such transactions had occurred at the end of the period. See
"Use of Proceeds," "Capitalization" and "Pro Forma Consolidated
Financial Statements."
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully the following risk factors, in addition to the other information
set forth in this Prospectus, before purchasing any shares of Common Stock.
BKC FRANCHISE AGREEMENT RESTRICTIONS
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is party to a BKC franchise agreement. In
addition to the contractual restrictions imposed on the Company's
subsidiaries in the BKC franchise agreements, the Company and its
subsidiaries are also subject to certain restrictions imposed by current BKC
policies and procedures. These restrictions may have the effect of limiting
the Company's ability to pursue its business plan.
For example, part of the Company's business strategy is to expand its
operations through both the acquisition and development of Burger King
restaurants. Pursuant to current BKC policies and procedures applicable to
the Company, BKC's approval is required for the acquisition of Burger King
restaurants by the Company from other Burger King franchisees and the
development of new Burger King restaurants by the Company. Pursuant to the
BKC franchise agreements, BKC's approval is required for the renewal of
existing franchise agreements. BKC's consent to such renewals, acquisitions
or development may be withheld in BKC's sole discretion. Within five years of
April 1, 1996, 26 of the Company's current 180 franchise agreements with BKC,
which generated $26.9 million in total restaurant sales in fiscal 1995, are
scheduled to expire. BKC may also condition its consent to any such renewal,
acquisition or development on the Company's agreement to take certain
actions, such as making capital expenditures on acquired restaurants,
providing information to BKC's management information systems, disposing of
certain acquired restaurants and maintaining specified financial ratios. For
example, in connection with one of the Company's acquisitions in 1995, the
Company renewed its commitment to sell up to 10 specified Burger King
restaurants in the Chicago market to a BKC designee on or prior to July 19,
1996. In the event the transaction is not consummated by that date, BKC has
the right to designate an alternative purchaser until such transaction is
completed. The Company believes that the sale of the 10 specified Burger King
restaurants will not have a material adverse effect on the Company's
financial condition or results of operations. In addition, BKC franchise
agreements provide BKC with a right of first refusal to purchase all Burger
King restaurants which franchisees wish to sell, including those restaurants
which are expected to be sold to the Company in the Michigan Acquisition.
Accordingly, no assurances can be made that BKC will (i) grant franchise
extensions to the Company with respect to the Company's existing Burger King
restaurants, (ii) consent to the Company's development of additional Burger
King restaurants, in each case without requiring the Company to incur
substantial costs or undertake certain other actions, if at all, or (iii) not
exercise its right of first refusal with respect to the sale of Burger King
restaurants that the Company seeks to acquire.
Current BKC policies and procedures also require the Company and each of
its subsidiaries which is a franchisee to seek BKC consent prior to making
certain changes to their capital structure and modifications to their
corporate governance documents, including changing the (i) description of the
Company or the relevant subsidiary franchisee's purpose or authorized
activities; (ii) designation of, or the procedures for designating, the
managing owner (the individual primarily in charge of implementing BKC
policies and procedures) or (iii) authority granted to the managing owner.
Current BKC policies and procedures also place certain restrictions on the
management structure of Burger King franchisees. For example, in the event
Messrs. Jaro or Osborn, who have been designated as managing owners under the
franchise agreements, were to terminate their relationships with the Company,
the Company would be required to seek BKC's approval to appoint a new
managing owner, who would, absent the consent of BKC, be approved by BKC and
be required to have a currently exercisable 5% voting interest in the Company
and to personally guaranty the Company's obligations to BKC. Absent BKC's
waiver of the 5% equity ownership and guarantee requirements, there can be no
assurance that the Company will be able to obtain successor managing owners,
which would cause the Company's subsidiaries to be in default of their
franchise agreements with BKC. Furthermore, pursuant to the terms of the BKC
Franchise Agreements, Messrs. Jaro, Osborn and Hubert, who are named as
owners under the franchisee
8
<PAGE>
agreements, may not sell, encumber or otherwise transfer any portion of their
equity interests in the Company without first obtaining the consent of BKC.
Should the Company, the managing owner, or owners fail to comply, as
applicable, with current BKC policies and procedures or any provision of
BKC's franchise agreements, BKC could, among other remedies, terminate its
franchise agreements with the Company's subsidiaries. In addition, BKC has
the right to terminate its franchise agreements with a franchisee if (i) the
franchisee or the managing owner is convicted of a crime punishable by a term
of imprisonment in excess of one year or (ii) the franchisee or the managing
owner or managing director engages in conduct that reflects unfavorably on
the franchisee or a Burger King system generally. Although not required under
its franchise agreements with BKC, the Company may also, as a practical
matter, be required to adopt price discount programs instituted by BKC which
could have a material adverse effect on the Company's financial condition and
results of operations.
Pursuant to the BKC franchise agreements, transfers or issuances by the
Company of its equity securities or transfers that result in a change of
control of the Company in connection with a public tender offer, require the
consent of BKC. If BKC were to object to any issuance or transfer by the
Company of its equity securities or transfers that result in a change of
control of the Company in connection with a public tender offer, BKC could
declare an event of default under its franchise agreements which would have a
material adverse effect on the Company's financial condition and results of
operations. In addition, the Company's financial flexibility and ability to
issue equity securities in connection with acquiring future Burger King
restaurants could be limited by BKC. Any such limitation would affect the
Company's growth strategy and could have a material adverse effect on the
Company's financial condition and results of operations.
In connection with the Offerings, the Company will be required to enter
into an agreement with BKC pursuant to which the Company will (i) indemnify
BKC for any claims against BKC arising out of the Offerings and (ii) agree
not to enter into any line of business which represents a competing
quick-service hamburger concept. See "Business--Franchise Agreements,"
"Description of Capital Stock--Anti-Takeover Effects of Delaware Law and the
BKC Franchise Agreements" and "Certain Transactions."
DEPENDENCE UPON BURGER KING CORPORATION
The Company's financial performance is directly related to the success of
the Burger King restaurant system, including the management and financial
condition of BKC as well as restaurants operated by other Burger King
franchisees. The inability of Burger King restaurants to compete effectively
with other quick-service restaurants would have a material adverse effect on
the Company's operations. The success of Burger King restaurants depends in
part on the effectiveness of BKC's marketing efforts, new product development
programs, quality assurance and other operational systems over which the
Company has no control. For example, adverse publicity involving BKC or one
or more Burger King franchisees could have an adverse effect on all Burger
King franchisees, including the Company. See "Business--Burger King
Corporation" and "--Competition."
RISKS OF EXPANSION AND DEVELOPMENT
The Company intends to expand rapidly in the future through the
acquisition and development of Burger King restaurants. This expansion could
significantly increase the number of restaurants operated by the Company. The
Company currently intends to acquire an additional 40 Burger King restaurants
in the Michigan Acquisition and to develop 16 new Burger King restaurants in
fiscal 1996 (four developed to date) and 34 new Burger King restaurants in
fiscal 1997. To date, the Company has had limited experience in the
development of Burger King restaurants and BKC exercises sole and absolute
discretion with respect to any development by its franchisees. The Company's
ability to achieve its expansion goals will depend on a number of factors,
including (i) the availability of existing franchises for sale and suitable
sites for new restaurant development, (ii) the availability of funds for
expansion, (iii) the consent of BKC, (iv) BKC not exercising its right of
first refusal on the sale of any franchise, (v) the hiring, training and
retention of skilled management and other restaurant personnel and (vi) the
ability to obtain the necessary governmental permits and approvals. No
assurances can be made that the Company's expansion plans will be achieved,
that a new restaurant will be operated profitably, that new restaurants
(particularly
9
<PAGE>
acquired restaurants) will be smoothly integrated into the Company's
operations, or that such expansion will not cannibalize sales at existing
Company restaurants located near newly opened restaurants. A substantial
portion of the Company's capital resources will be used for acquisitions and
development of Burger King restaurants. Consequently, the Company may require
additional debt or equity financing for future acquisitions, which additional
financing may not be available or, if available, may not be on terms that are
acceptable to the Company. In addition, the Credit Agreement contains, and
the New Credit Facility (described below) is likely to contain, restrictions
on, among other things, new acquisitions, capital expenditures and the
incurrence of additional indebtedness. Moreover, BKC may require that, as a
condition to approving a proposed restaurant acquisition or development
opportunity, the Company limit the amount of its proposed or future debt
financing. The failure to continue its expansion by acquisition or
development of restaurant sites could have a material adverse effect on the
Company's performance.
LIMITED OPERATING HISTORY
The Company was formed on August 17, 1994 and has a limited operating
history. The board of directors of the Company (the "Board of Directors") and
executive officers have overall responsibility for the management of the
Company. Although certain of the Company's executive officers and directors
have extensive experience in the acquisition, development and financing of
Burger King restaurants, and certain of the Company's directors have
extensive experience in the operation of Burger King restaurants, prior to
the commencement of the Company's operations, no executive officer of the
Company had significant experience in operating a business of the size and
geographic diversity of the Company.
HIGH LEVERAGE AND RELATED FINANCIAL AND OPERATING RESTRICTIONS
In connection with its acquisition of Burger King restaurants, the Company
incurred substantial indebtedness resulting in a highly leveraged capital
structure. The Company and National Restaurant Enterprises, Inc.
("Enterprises"), the Company's principal operating subsidiary and parent
corporation to the Company's other subsidiaries are parties to a Second
Amended and Restated Revolving Credit and Term Loan Agreement (the "Credit
Agreement"). At April 1, 1996, the Company had $127.9 million of long-term
debt outstanding, of which $89.0 million was outstanding under the Credit
Agreement. The Company is currently negotiating with a number of financial
institutions to obtain a new credit agreement (the "New Credit Facility")
which would replace the Credit Agreement and increase the Company's borrowing
capability by $50 million. A portion of the net proceeds of the Offerings,
together with borrowings under the New Credit Facility, will be used to repay
in full amounts outstanding under the Credit Agreement and other outstanding
Company indebtedness. See "Use of Proceeds." On a pro forma basis giving
effect to (i) the Michigan Acquisition, (ii) the borrowing of $79.9 million
under the New Credit Facility and (iii) the Offerings and the application of
the net proceeds thereof, the Company would have had $86.4 million of
long-term debt outstanding at April 1, 1996. See "Capitalization." The
Company anticipates that it may require additional debt financing for future
acquisition and development activities resulting in a more leveraged capital
structure.
To date, a substantial portion of the Company's cash flow has been devoted
to debt service. The ability of the Company to make payments of principal and
interest on outstanding indebtedness will be largely dependent upon its
future performance. Failure to generate sufficient cash flow from operations
will limit the Company's ability to expand through additional restaurant
acquisitions and development and could limit the Company's ability to obtain
additional financing. In addition, under the terms of the Credit Agreement
and the likely terms of the New Credit Facility, the Company is required or
will be required to meet certain financial covenants on a regular basis,
including minimum cash flow, debt service and interest coverage ratios, and
is restricted in its ability to incur additional indebtedness, create
additional liens, invest further in certain of its subsidiaries, engage in
business activities other than the ownership and operation of Burger King
restaurants, dispose of certain of its assets or make capital expenditures
beyond a specified amount without obtaining the prior approval of the lenders
(the "Lenders"). If the Company is unable to generate sufficient cash flow or
otherwise obtain funds necessary to make required payments under the Credit
Agreement or the New Credit Facility, or if the Company
10
<PAGE>
fails to comply with the various other covenants or restrictions contained in
the Credit Agreement or the New Credit Facility, the Lenders would be able to
accelerate the maturity of all amounts borrowed under the Credit Agreement or
the New Credit Facility to be due and payable, together with accrued and
unpaid interest, if any. If the Company is unable to repay its indebtedness
to the Lenders, the Lenders could foreclose on substantially all of the
tangible operating assets of the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Certain Indebtedness--Credit
Agreement."
REGIONAL CONCENTRATION OF OPERATIONS
A substantial majority of the Company's Burger King restaurants are
located in the midwestern United States. Of the Company's 220 Burger King
restaurants (including the 40 restaurants to be acquired in the Michigan
Acquisition), 113 or 51.4% are located in the Chicago, Illinois area, thereby
exposing the Company to adverse developments in the Chicago region's economy,
weather conditions, and demographic and population changes. While the Company
intends to expand into other regions of the United States, no assurances can
be made that the current geographic concentration of the Company's business
will not have a material adverse effect on the Company's financial condition
and results of operations. See "Business--Restaurant Locations."
COMPETITION
The quick-service restaurant industry is intensely competitive with
respect to price, product quality, variety and taste, speed of service,
convenience of location and restaurant cleanliness and upkeep. In each of its
markets, the Company's Burger King restaurants compete with large national
quick-service chains, some of which have greater financial and other
resources than the Company. In particular, McDonald's, Wendy's and Hardees
are the Company's principal competitors. The Company's Burger King
restaurants also compete against locally-owned restaurants offering
low-priced menus and quick-service. To a lesser degree, the Company also
competes against quick-service chains offering alternative menus such as Taco
Bell, Pizza Hut and Kentucky Fried Chicken as well as convenience stores and
grocery stores that offer menu items comparable to that of Burger King
restaurants. To the extent that a competitor of the Company offers items
which are better priced, more appealing to consumer tastes or if such
competitor increases the number of restaurants it operates in one of the
Company's targeted markets, this could have a material adverse effect on the
Company's financial condition and results of operations. See "Business--
Competition."
In addition, the Company faces competition in its expansion plans. The
Company's potential competitors in acquiring and developing Burger King
restaurants include BKC, which (i) has exercised its right of first refusal
with respect to previously proposed restaurant sales, (ii) controls the areas
in which new Burger King restaurant sites can be developed and (iii) may
impose, as a condition to its consent to any proposed acquisition or
development opportunity, conditions, limitations or other restrictions on the
Company and its activities. BKC has substantially greater financial resources
than the Company to fund acquisitions and restaurant development. There can
be no assurance that BKC will not (i) exercise its right of first refusal
with respect to future restaurant acquisitions by the Company, (ii) limit the
areas in which the Company may develop restaurants or (iii) impose
significant or unacceptable conditions, limitations or other restrictions on
the Company and its activities. Other potential competitors in acquiring and
developing Burger King restaurants include other investors and existing
Burger King franchisees. The Company also competes with other quick-service
restaurant operators and developers for the most desirable site locations.
Many of the Company's competitors may have greater financial resources than
the Company to finance acquisition and development opportunities or may be
willing to pay higher prices for the same opportunities. See
"Business--Competition."
11
<PAGE>
DEPENDENCE UPON SENIOR MANAGEMENT
The Company is dependent on the personal efforts, relationships and
abilities of its senior management team. The loss of services of any of these
individuals would have a material adverse effect on the future performance of
the Company. In addition, pursuant to the terms of BKC's franchise
agreements, the Company must receive BKC's consent prior to replacing its
managing owners (Messrs. Jaro and Osborn). In addition, Messrs. Jaro, Osborn
and Hubert are personally liable to BKC for the Company's obligations under
each of its franchise agreements and leases with BKC as the lessor. To the
extent BKC requires the Company's senior management to continue to guarantee
such obligations, it may be more difficult for the Company to retain such
executives or replace these executives in the future with other qualified
individuals. The Company believes that its success is dependent on its
ability to attract and retain additional qualified employees, and the failure
to recruit such other skilled personnel could have a material adverse effect
on the Company's financial condition and results of operations. See
"Business-- Employees," "--Franchise Agreements" and "Management--Employment
Agreements."
CONTROL BY PRINCIPAL AND SELLING STOCKHOLDERS
The Company's executive officers and directors (and their respective
affiliates, including The Jordan Company) will beneficially own an aggregate
of % of the Company's outstanding shares of Common Stock after the
Offerings ( % if the Underwriter's over-allotment option is exercised in
full). Such stockholders, if voting together, will have sufficient voting
power to elect the entire Board of Directors, exercise control over the
business, policies and affairs of the Company and, in general, determine the
outcome of any corporate transaction or other matters submitted to the
stockholders for approval such as (i) any amendment to the amended and
restated certificate of incorporation of the Company (the "Certificate of
Incorporation"), (ii) any merger, consolidation, sale of all or substantially
all of the assets of the Company, and (iii) any "going private" transaction,
and prevent or cause a change of control of the Company, all of which may
adversely affect the Company and its stockholders. See "Principal and Selling
Stockholders."
GOVERNMENT REGULATION
The restaurant business is subject to extensive laws and regulations
relating to the development and operation of restaurants, including zoning,
the preparation and sale of food and employer/employee relationships. Any
substantial increases in the minimum wage (including those currently under
consideration in Congress) or mandatory health care coverage could adversely
affect the Company's financial condition and results of operations.
Violations of zoning or building codes or regulations could delay new
restaurant openings or the acquisition of existing restaurants. See
"Business--Government Regulation."
FACTORS AFFECTING OPERATIONS
A number of factors beyond the control of the Company may affect sales and
profitability of the Company, including, among other things, the strength of
regional economies where the Company operates, weather, gas prices and public
health concerns regarding certain foods served at quick-service restaurants.
Severe weather conditions in some of the Company's principal markets, such as
Chicago, Illinois, may have a negative impact on customer traffic, sales and
restaurant contribution. An economic downturn in any of the Company's
regional markets may also have a similar effect.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Certificate of Incorporation, the Company's
amended and restated bylaws (the "Bylaws"), the General Corporation Law of
the State of Delaware ("Delaware Corporation Law") the BKC franchise
agreements and BKC policies and procedures may delay, discourage or prevent a
change in control of the Company. Such provisions may also discourage bids
for the Common Stock at a premium over the market price of the Common Stock
and may adversely affect the market price and the voting and other rights of
the holders of Common Stock. In addition, the Board of Directors has the
authority without action by the Company's stockholders to fix the rights,
privileges and preferences of and
12
<PAGE>
to issue shares of the Company's preferred stock, $.01 par value per share
(the "Preferred Stock"), which may have the effect of delaying, deterring or
preventing a change in control of the Company. The Company's Bylaws also
impose various procedural and other requirements that could make it more
difficult for stockholders to effect certain corporate actions. See
"Business--Franchise Agreements," "Description of Capital Stock--Certificate
of Incorporation and Bylaws" and "--Anti-Takeover Effects of Delaware
Corporation Law and the BKC Franchise Agreements."
LACK OF PRIOR PUBLIC MARKET FOR COMMON STOCK
Prior to the Offerings, there has been no public market for the Common
Stock. The Company has applied for listing on the Nasdaq National Market
under the trading symbol "AKNG." There can be no assurance, however, that an
active public market will develop for the Common Stock. The initial public
offering price will be determined through negotiations between the Company
and the Representatives (as hereinafter defined) of the U.S. Underwriters and
the Managers, and may not be indicative of the market price of the Common
Stock after the completion of the Offerings.
The market price of the Common Stock after the completion of the Offerings
could be subject to significant fluctuations in response to variations in the
Company's quarterly operating results and other factors. In addition, the
stock market in recent years has experienced broad price and volume
fluctuations which often have been unrelated to the operating performance of
companies. These broad fluctuations may also adversely affect the market
price of the Common Stock. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
After the completion of the Offerings, shares of Common Stock will be
outstanding. Of such shares, only the shares sold pursuant to the Offerings
will be tradeable without restriction by persons other than "affiliates" of
the Company. The remaining shares of Common Stock outstanding after the
Offerings will be "restricted securities" within the meaning of Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"), and may
not be publicly resold, except in compliance with the registration
requirements of the Securities Act or pursuant to an exemption from
registration, including that provided by Rule 144 promulgated under the
Securities Act. No prediction can be made as to the effect, if any, that
future sales of shares, or the availability of shares for future sale, will
have on the market price of the Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect the prevailing market price of the
Common Stock.
The Company, the directors and executive officers of the Company, and each
holder of capital stock of the Company immediately prior to the Offerings
(including holders of options and warrants exercisable into shares of Common
Stock) have agreed that, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of any Common Stock
or securities convertible, exercisable or exchangeable for Common Stock or
grant any options or warrants to purchase Common Stock, subject to certain
exceptions. Upon expiration of the 180-day period, shares of Common Stock
will be eligible for immediate resale without restriction under the
Securities Act, subject to certain volume, timing and other requirements of
Rule 144 promulgated under the Securities Act. The Company intends to file a
Registration Statement on Form S-8 immediately following the Offerings to
register under the Securities Act an aggregate of shares of Common Stock
covered by the Stock Option Plan. See "Management--Stock Option Plan." In
addition, all stockholders of the Company prior to the Offerings are entitled
to incidental registration rights with respect to 1,123.62 shares of Common
Stock and certain stockholders of the Company are entitled to demand
registration rights with respect to 461.07 shares of Common Stock. After the
expiration of the 180-day period, such holders may choose to exercise such
rights, which could result in a large number of shares being sold in the
public market and could have an adverse effect on the market price for the
Common Stock. See "Description of Capital Stock--Registration Rights" and
"Shares Eligible for Future Sale."
13
<PAGE>
SUBSTANTIAL DILUTION
Based on an initial public offering price of $ (the midpoint of the
price range set forth on the cover of this Prospectus), purchasers of the
Common Stock offered hereby will experience substantial dilution in the net
tangible book value per share of Common Stock of $ . In addition, as of the
date of this Prospectus, the Company had granted warrants and options to
purchase an aggregate of 195.32 shares of Common Stock, of which warrants and
options to purchase 189.70 shares of Common Stock are immediately
exercisable. If such warrants and options are exercised in full, purchasers
of the Common Stock offered hereby would experience dilution in the net
tangible book value per share of Common Stock of $ . See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never declared or paid any dividends on the Common Stock
and does not anticipate paying any cash dividends on the Common Stock in the
foreseeable future. In addition, the Company's existing and future loan and
financing documents will likely restrict the Company's ability to pay
dividends. See "Dividend Policy" and "Description of Certain Indebtedness."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
approximately $91.5 million (approximately $ million if the U.S.
Underwriters' over-allotment option is exercised in full) after deducting
estimated underwriting discounts and expenses of the Offerings payable by the
Company of $8.5 million. The net proceeds from the Offerings, combined with
borrowings under the New Credit Facility, will be used (i) to finance the
Michigan Acquisition, (ii) to repay borrowings under the Credit Agreement,
(iii) to repay the Senior Subordinated Notes (including a prepayment
penalty), the Subordinated Notes, the BBI Note and the Seller Notes (each as
hereinafter defined and collectively referred to herein as the "Subordinated
Debt") and (iv) to redeem all of the shares of the various classes of the
Company's preferred stock issued and outstanding prior to the
Recapitalization (collectively, the "Original Preferred Stock"). Affiliates
of the Company will receive a portion of the proceeds from the Offerings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources," "Business," "Certain
Transactions," "Description of Certain Indebtedness," "Description of Capital
Stock--The Recapitalization" and "Summary--The Michigan Acquisition."
The following table sets forth an estimated breakdown of the sources and
uses of funds, assuming a closing had taken place on April 1, 1996.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Offerings (net proceeds) ....................... $ 91,500
Borrowings under New Credit Facility ........... 79,913
--------------
Total Sources ................................ $171,413
==============
USES OF FUNDS:
Finance Michigan Acquisition ................... $ 36,240(1)
Repay Credit Agreement Borrowings .............. 89,000(2)
Prepay Subordinated Debt (including a
prepayment penalty of $3,450) .................. 34,450(3)
Redeem Original Preferred Stock ................ 8,184
Fees and Expenses .............................. 2,034
Accrued Interest (at April 1, 1996) ............ 1,505
--------------
Total Uses ................................... $171,413
==============
</TABLE>
(1) Reflects a $35,600 purchase price plus a $640 working capital
adjustment. See "Business--Business Strategy--Growth by Acquisition"
and the Pro Forma Consolidated Financial Statements and the notes
thereto included in this Prospectus.
(2) Credit Agreement borrowings consist of (i) two term loans, $45,000
principal amount of term loans ("Term Loan A") which mature on January
31, 2002, and $40,000 principal amount of term loans ("Term Loan B")
which mature on January 31, 2004, and (ii) $4,000 principal amount of
revolving credit loans which mature on January 31, 2002. As of April 1,
1996, the weighted average interest rate with respect to all Credit
Agreement borrowings was 8.36%. See "Description of Certain
Indebtedness."
(3) Subordinated Debt consists of: (i) $15,000 principal amount of Senior
Subordinated Notes bearing interest at a rate of 12.5% per annum with a
scheduled maturity of January 31, 2005; (ii) $11,000 principal amount
of Subordinated Notes bearing interest at a rate of 12.75% per annum
with a scheduled maturity of August 31, 2005; (iii) a $3,450 prepayment
premium to be paid in connection with the repayment of the Senior
Subordinated Notes; (iv) a $600 principal amount BBI Note bearing
interest at a rate of 6% per annum with a scheduled maturity of March
31, 2005; and (v) $4,400 principal amount of Seller Notes bearing
interest at a rate of 12.75% per annum with a scheduled maturity of
August 31, 2005. See "Description of Certain Indebtedness".
15
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid any dividends on its capital stock.
Enterprises has paid dividends to the Company from time to time in order to
permit the Company to pay interest on the Subordinated Notes, which the
Company intends to repay in full with the net proceeds of the Offerings. The
Company does not anticipate paying any dividends on the Common Stock in the
foreseeable future and intends to retain all available funds for use in the
operation and development of its business. The Board of Directors intends to
review the Company's dividend policy from time to time. Any payment of
dividends in the future will be at the discretion of the Board of Directors
and will be dependent on the earnings and financial requirements of the
Company and other factors, including the restrictions imposed by the Delaware
Corporation Law on the payment of dividends, covenants restricting the
payment of dividends in existing and future loan and financing documents, and
such other factors as the Board of Directors deems relevant.
DILUTION
As of April 1, 1996, the net tangible book value of the Company was $
million or $ per share. Net tangible book value per share is defined as the
total book value of tangible assets of the Company, less total liabilities,
divided by the number of shares of Common Stock outstanding. After giving
effect to: (i) the sale of shares of Common Stock offered hereby at an
assumed initial public offering price of $ per share (the midpoint of the
price range set forth on the cover of this Prospectus and after deducting
estimated underwriting discounts and expenses of the Offerings); and (ii) the
Recapitalization, the pro forma net tangible book value of the Company as of
April 1, 1996 would have been $ million or $ per share, representing
an immediate increase in net tangible book value of $ per share to the
existing stockholders and an immediate dilution to new stockholders of $
per share. The following table illustrates the dilution per share to new
stockholders:
<TABLE>
<CAPTION>
PER SHARE
-------------
<S> <C> <C>
Initial public offering price .................................. $
Deficit in net tangible book value ............................ $
Net increase in net tangible book value attributable to the
Offerings ....................................................
----------
Pro forma net tangible book value after the Offerings .........
-------------
Dilution to new investors ...................................... =============
</TABLE>
The following table summarizes, on a pro forma basis as of April 1, 1996,
the difference between (i) the number of shares of Common Stock which the
existing stockholders acquired since the Company's inception or which they
have a right to acquire within 60 days after the date of this Prospectus;
(ii) the number of shares of Common Stock purchased from the Company by new
investors in the Offerings; (iii) the total cash consideration paid by
existing stockholders and the new investors; and (iv) the average purchase
price per share paid by existing stockholders and the new investors (before
deducting the underwriting discounts and commissions and expenses of the
Offerings):
<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
----------------------- ----------------------- -------------
NUMBER PERCENT AMOUNT PERCENT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1) ... % % $
New stockholders .............
---------- ----------- ---------- -----------
Total .................... % % %
========== =========== ========== ===========
</TABLE>
- ------------
(1) Does not include shares of Common Stock reserved for issuance under
the Company's Stock Option Plan and 195.32 shares of Common Stock
issuable upon the exercise of options and warrants outstanding as of
April 1, 1996. See "Management--Stock Option Plan."
16
<PAGE>
CAPITALIZATION
The following table sets forth as of January 1, 1996, (i) the historical
consolidated capitalization of the Company and (ii) the pro forma
consolidated capitalization after giving effect to the 1996 Acquisitions, the
Michigan Acquisition and the Offerings and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds." This table should
be read in conjunction with the Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 1, 1996
--------------------------
PRO FORMA, AS
ACTUAL(1) ADJUSTED(2)
--------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and capital leases $10,840 $ 1,647
========= ===============
Long-term debt--less current portion:
Borrowings under the Credit Agreement .............. $61,350 --
Borrowings under New Credit Facility ............... -- $ 76,981
Subordinated Debt .................................. 16,000 --
Other long-term debt ............................... 1,744 7,847
--------- ---------------
Total long-term debt--less current portion ...... 79,094 84,828
--------- ---------------
Other long-term liabilities .......................... 176 176
Total long-term debt ................................. 79,270 85,004
--------- ---------------
Stockholders' equity:
Preferred Stock(3) ................................. -- --
Common Stock(4) .................................... -- 91,500
Non-Voting Common Stock ............................ -- --
Additional paid-in capital ......................... 7,600 100
Retained Earnings .................................. 1,143 (2,691)
--------- ---------------
Total stockholders' equity ....................... 8,743 88,909
--------- ---------------
Total capitalization ........................... $88,013 $173,913
========= ===============
</TABLE>
- ------------
(1) Historical capitalization of the Company as of January 1, 1996.
(2) Gives effect to the 1996 Acquisitions, the Michigan Acquisition and the
Offerings and the application of the estimated net proceeds therefrom,
as if each had occurred as of January 1, 1996. For information relating
to the pro forma assumptions and adjustments, see "Pro Forma
Consolidated Financial Statements" and the notes thereto included in
this Prospectus.
(3) Due to rounding, the "Actual" column does not reflect the Company's
outstanding preferred stock with a total par value of seventy five
dollars, which will be redeemed in full with a portion of the net
proceeds of the Offerings. See "Use of Proceeds" and "Descriptions of
Capital Stock--The Recapitalization."
(4) Due to rounding, the "Actual" column does not reflect the Company's
outstanding common stock with a total par value of ten dollars. The
"Pro Forma, as Adjusted" column currently reflects the anticipated net
proceeds of the Offerings.
17
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma,consolidated income statement and consolidated balance sheet
of the Company for fiscal 1995 give effect to each of the following
transactions as if each had occurred on January 1, 1995 (in the case of the
income statement) or January 1, 1996 (in the case of the balance sheet): (i)
the Company's acquisition of a total of 18 restaurants from BKC and two
existing Burger King franchisees in three transactions (in the case of the
income statement), one in September 1995, one in October 1995 and one in
November 1995, including five restaurants in Colorado, nine in Tennessee, two
in Illinois and two in Georgia (collectively, the "1995 Acquisitions"); (ii)
the Company's acquisition of a total of 36 restaurants from two existing
Burger King franchisees in two transactions in February 1996, including 21
restaurants in Virginia, three in North Carolina, seven in Kentucky, three in
Ohio and two in Indiana (collectively, the "1996 Acquisitions"); (iii) the
Michigan Acquisition; and (iv) the completion of the Offerings and the
application of the estimated net proceeds therefrom as described in "Use of
Proceeds." The pro forma consolidated income statement for the first quarter
ended April 1, 1996 gives effect to each of the following transactions as if
each had occurred on January 2, 1996: (i) the 1996 Acquisitions; (ii) the
Michigan Acquisition; and (iii) the completion of the Offerings and the
application of the estimated net proceeds therefrom as further described in
"Use of Proceeds."
Subject to certain conditions, the Company has executed purchase
agreements to acquire 40 restaurants in the Grand Rapids, Michigan area in
the Michigan Acquisition for an aggregate cash purchase price of
approximately $35.6 million. The Company anticipates that it will consummate
the Michigan Acquisition concurrently with the completion of the Offerings
and that a portion of the net proceeds of the Offerings will be used to fund
the Michigan Acquisition. See "Summary--The Michigan Acquisition." The
Michigan Acquisition is accounted for in the pro forma financial statements
under the purchase method of accounting. The total purchase price is
allocated to tangible and identifiable intangible assets and liabilities
based on management's estimate of their fair values with the excess of cost
over the fair value of the net assets acquired allocated to goodwill. The
actual assigned values for the acquired assets are estimated and may be
adjusted in the future in the event the Michigan Acquisition is consummated.
The Company believes that the assumptions used in the pro forma financial
statements provide a reasonable basis on which to present the statements. The
pro forma financial statements are provided for information purposes only and
should not be construed to be indicative of the Company's results of
operations or financial position had the Offerings and the other events
described below been consummated on or as of the dates assumed, and are not
intended to project the Company's results of operations or its financial
position for any future period or as of any future date. The Pro Forma
Consolidated Financial Statements of the Company and accompanying notes
should be read in conjunction with the Historical Schedules of Restaurant
Contribution and the notes thereto and the audited Consolidated Financial
Statements of the Company and the notes thereto, each included elsewhere in
this Prospectus.
18
<PAGE>
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR FISCAL 1995
<TABLE>
<CAPTION>
ADJUSTMENTS
---------------------------------------------
1995 1996 1995 AND 1996
ACQUISITIONS ACQUISITIONS ACQUISITIONS PRO FORMA
ACTUAL (1) (2) ADJUSTMENTS SUBTOTAL
-------- -------------- -------------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
RESTAURANT SALES ........ $139,572 $14,399 $41,721 $ -- $195,692
RESTAURANT OPERATING
EXPENSES:
COST OF SALES .......... 44,798 4,846 13,116 -- 62,760
RESTAURANT LABOR AND
RELATED COSTS ......... 34,526 4,037 10,254 -- 48,817
DEPRECIATION AND
AMORTIZATION .......... 4,927 321 436 1,381 (4) 7,065
OCCUPANCY AND OTHER
OPERATING EXPENSES ... 38,930 3,834 12,393 (1,500)(5) 53,421
(236)(6)
-------- -------------- -------------- ------------- ---------
TOTAL RESTAURANT
OPERATING EXPENSES .. 123,181 13,038 36,199 (355) 172,063
-------- -------------- -------------- ------------- ---------
RESTAURANT CONTRIBUTION 16,391 1,361 5,522 355 23,629
GENERAL AND
ADMINISTRATIVE EXPENSES 5,904 926 (7) 7,191
231 (8)
130 (9)
-------- -------------- -------------- ------------- ---------
OPERATING INCOME ...... 10,487 1,361(11) 5,522(11) (932) 16,438
OTHER INCOME (EXPENSE):
INTEREST EXPENSE ....... (8,323) (4,238)(12) (12,561)
AMORTIZATION OF
DEFERRED COSTS ........ (511) (367)(15) (878)
OTHER INCOME (EXPENSE),
NET ................... 74 -- 74
-------- -------------- -------------- ------------- ---------
TOTAL OTHER INCOME
(EXPENSE), NET ....... (8,760) (4,605) (13,365)
-------- -------------- -------------- ------------- ---------
INCOME BEFORE INCOME
TAXES .................. 1,727 1,361(11) 5,522(11) (5,537) 3,073
PROVISION FOR INCOME
TAXES .................. 825 552 (17) 1,377
-------- -------------- -------------- ------------- ---------
NET INCOME .............. $ 902 $ 1,361(11) $ 5,522(11) $(6,089) $ 1,696
======== ============== ============== ============= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------------------
MICHIGAN MICHIGAN
ACQUISITION ACQUISITION OFFERINGS PRO FORMA,
(3) ADJUSTMENTS ADJUSTMENTS AS ADJUSTED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
RESTAURANT SALES ........ $41,697 $ -- $ -- $237,389
RESTAURANT OPERATING
EXPENSES:
COST OF SALES .......... 13,450 -- -- 76,210
RESTAURANT LABOR AND
RELATED COSTS ......... 12,239 -- -- 61,056
DEPRECIATION AND
AMORTIZATION .......... 926 637 (4) -- 8,628
OCCUPANCY AND OTHER
OPERATING EXPENSES ... 11,332 (358)(6) -- 64,395
------------- ----------- ----------- -----------
TOTAL RESTAURANT
OPERATING EXPENSES .. 37,947 279 -- 210,289
------------- ----------- ----------- -----------
--
RESTAURANT CONTRIBUTION 3,750 (279) -- 27,100
GENERAL AND
ADMINISTRATIVE EXPENSES -- 658 (7) (609) (10) 7,404
164 (8)
------------- ----------- ----------- -----------
OPERATING INCOME ...... 3,750(11) (1,101) 609 19,696
OTHER INCOME (EXPENSE):
INTEREST EXPENSE ....... 124 (13) 4,973 (14) (7,464)
AMORTIZATION OF
DEFERRED COSTS ........ 296 (16) (582)
OTHER INCOME (EXPENSE),
NET ................... -- -- -- 74
------------- ----------- ----------- -----------
TOTAL OTHER INCOME
(EXPENSE), NET ....... 124 5,269 (7,972)
------------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES .................. 3,750(11) (977) 5,878 11,724
PROVISION FOR INCOME
TAXES .................. -- 1,137 (18) 2,410 (19) 4,924
------------- ----------- ----------- -----------
NET INCOME .............. $ 3,750(11) $(2,114) $3,468 $ 6,800(20)
============= =========== =========== ===========
</TABLE>
19
<PAGE>
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR QUARTER ENDED APRIL 1, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------
1996
1996 ACQUISITIONS ACQUISITIONS PRO FORMA
ACTUAL (2) ADJUSTMENTS SUBTOTAL
------------ ----------------- ---------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
RESTAURANT SALES ............ $ $ $ $
RESTAURANT OPERATING
EXPENSES:
COST OF SALES ..............
RESTAURANT LABOR AND
RELATED COSTS .............
DEPRECIATION AND
AMORTIZATION ..............
OCCUPANCY AND OTHER
OPERATING EXPENSES ........
------------ ----------------- ---------------- -------------
TOTAL RESTAURANT
OPERATING EXPENSES .......
------------ ----------------- ---------------- -------------
RESTAURANT CONTRIBUTION ....
GENERAL AND
ADMINISTRATIVE EXPENSES ...
------------ ----------------- ---------------- -------------
OPERATING INCOME ..........
OTHER INCOME (EXPENSE):
INTEREST EXPENSE ...........
AMORTIZATION OF DEFERRED
COSTS .....................
OTHER INCOME (EXPENSE),
NET .......................
------------ ----------------- ---------------- -------------
TOTAL OTHER INCOME
(EXPENSE), NET ...........
------------ ----------------- ---------------- -------------
INCOME BEFORE INCOME TAXES ..
PROVISION FOR INCOME TAXES ..
------------ ----------------- ---------------- -------------
NET INCOME .................. $ $ $ $
============ ================== ================ =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ADJUSTMENTS
---------------------------------------------------
MICHIGAN
MICHIGAN ACQUISITION OFFERINGS PRO FORMA, AS
ACQUISITION (3) ADJUSTMENTS ADJUSTMENTS ADJUSTED
----------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
RESTAURANT SALES ............ $ $ $ $
RESTAURANT OPERATING
EXPENSES:
COST OF SALES ..............
RESTAURANT LABOR AND
RELATED COSTS .............
DEPRECIATION AND
AMORTIZATION ..............
OCCUPANCY AND OTHER
OPERATING EXPENSES ........
----------------- --------------- --------------- -------------
TOTAL RESTAURANT
OPERATING EXPENSES .......
----------------- --------------- --------------- -------------
RESTAURANT CONTRIBUTION ....
GENERAL AND
ADMINISTRATIVE EXPENSES ...
----------------- --------------- --------------- -------------
OPERATING INCOME ..........
OTHER INCOME (EXPENSE):
INTEREST EXPENSE ...........
AMORTIZATION OF DEFERRED
COSTS .....................
OTHER INCOME (EXPENSE),
NET .......................
----------------- --------------- --------------- -------------
TOTAL OTHER INCOME
(EXPENSE), NET ...........
----------------- --------------- --------------- -------------
INCOME BEFORE INCOME TAXES ..
PROVISION FOR INCOME TAXES ..
----------------- --------------- --------------- -------------
NET INCOME .................. $ $ $ $
================= =============== =============== ===============
</TABLE>
20
<PAGE>
NOTES TO FISCAL PRO FORMA CONSOLIDATED INCOME STATEMENTS
The Pro Forma Consolidated Income Statement of the Company for fiscal 1995
gives effect to the 1995 Acquisitions, the 1996 Acquisitions, the Michigan
Acquisition and the Offerings and the application of the estimated net
proceeds therefrom, as if each such transaction had occurred on January 1,
1995. The Pro Forma Consolidated Income Statement of the Company for the
quarter ended April 1, 1996 gives effect to the 1996 Acquisitions, the
Michigan Acquisition and the Offerings and the application of the estimated
net proceeds therefrom, as if each such transaction had occurred on January
2, 1996.
(1) Reflects restaurant contribution for the restaurants acquired in the
1995 Acquisitions for the period prior to their respective acquisition
by the Company, during which period such acquired restaurants were
operated by their prior owners. See the Historical Schedules of
Restaurant Contribution included elsewhere in this Prospectus. The
"1995 Acquisitions" consist of the September 12, 1995 asset purchase of
five restaurants in Colorado; the October 24, 1995 asset purchase of
two restaurants in Illinois; and the November 21, 1995 stock purchase
of nine restaurants in Tennessee and two in Georgia. Restaurant
contribution for such acquired restaurants subsequent to their
acquisition is included under "Actual" for fiscal 1995.
(2) Reflects restaurant contribution for the restaurants acquired in the
1996 Acquisitions for the period prior to their respective acquisition,
during which period such acquired restaurants were operated by their
prior owners. See the Historical Schedules of Restaurant Contribution
included elsewhere in this Prospectus. The "1996 Acquisitions" consist
of two asset purchases as of February 7, 1996: (i) seven restaurants in
Kentucky, three in Ohio and two in Indiana, and (ii) the acquisition of
21 restaurants in Virginia and three in North Carolina. Restaurant
contribution for such acquired restaurants subsequent to their
respective acquisition is included under "Actual" for fiscal 1995 and
for the quarter ended April 1, 1996.
(3) Reflects restaurant contribution for the restaurants to be acquired in
the Michigan Acquisition. See the Historical Schedules of Restaurant
Contribution included elsewhere in this Prospectus. The "Michigan
Acquisition" consists of the proposed acquisition of 40 restaurants in
the Grand Rapids, Michigan area of which 37 were in operation during
fiscal 1995 and 38 were in operation during the quarter ended April 1,
1996. The other two restaurants are expected to open in the third
quarter of fiscal 1996.
(4) Reflects an increase in depreciation and amortization expense arising
from the Company's increased basis in acquired tangible restaurant
assets (restaurant equipment, signs and decor) and intangible assets
(franchise agreements and goodwill). For fiscal 1995, the $1,381
adjustment for the 1995 and 1996 Acquisitions consists of $141 and
$1,240 pertaining to the 1995 Acquisitions and the 1996 Acquisitions,
respectively.
(5) Reflects a decrease in occupancy and other operating expenses resulting
from a decrease in equipment rental expense relating to the purchase of
certain restaurant equipment previously leased in the 1996
Acquisitions. For fiscal 1995, the full amount of the $1,500 decrease
for the 1995 and 1996 Acquisitions pertains to the 1996 Acquisitions.
(6) Reflects an overall decrease in occupancy and other operating expenses
resulting from a decrease in rental expense reflecting more favorable
leasing terms negotiated by the Company in connection with the
acquisition of certain restaurants. For fiscal 1995, the $236
adjustment for the 1995 and 1996 Acquisitions consists of a $49
increase and $285 decrease in rental expense pertaining to the 1995
Acquisitions and the 1996 Acquisitions, respectively.
(7) Reflects an increase in supervisory management expense. For fiscal
1995, the $926 adjustment to the 1995 and 1996 Acquisitions consists of
$209 and $717 pertaining to the 1995 Acquisitions and the 1996
Acquisitions, respectively.
(8) Reflects an increase in overhead. For fiscal 1995, the $231 adjustment
for the 1995 and 1996 Acquisitions consists of $52 and $179 pertaining
to the 1995 Acquisitions and the 1996 Acquisitions, respectively.
(9) Reflects an increase in management fees payable under the management
consulting agreement (the "TJC Consulting Agreement") with The Jordan
Management Company. For fiscal 1995, the $130
21
<PAGE>
adjustment for the 1995 and 1996 Acquisitions consists of $22 and $108
pertaining to the 1995 Acquisitions and the 1996 Acquisitions,
respectively. See "Certain Transactions."
(10) Reflects a change in management fees due to the amendment of certain
provisions of the TJC Consulting Agreement. See "Certain
Transactions."
(11) Presented for informational and referencing purposes only. Pro forma
adjustments to general and administrative expenses, other income
(expense) and provision for income taxes are reflected for the 1995
Acquisitions and 1996 Acquisitions in the column entitled "1995 and
1996 Acquisitions Adjustments" (for fiscal 1995) or "1996 Acquisition
Adjustments" and for the Michigan Acquisition in the column entitled
"Michigan Acquisition Adjustments."
(12) Reflects an increase in interest expense associated with an aggregate
increase in average net borrowings of $41,262 for the 1995 and 1996
Acquisitions. Interest expense adjustments assume that the increased
tax-effected cash flow resulting from the 1995 Acquisitions and 1996
Acquisitions was applied to reduce outstanding indebtedness under the
Credit Agreement. For fiscal 1995, the $4,238 adjustment for the 1995
and 1996 Acquisitions consists of $562 and $3,676 pertaining to the
1995 Acquisitions and the 1996 Acquisitions, respectively.
(13) Reflects the application of tax-effected cash flow attributable to
the Michigan restaurants applied to reduce outstanding indebtedness
under the Credit Agreement.
(14) Reflects the application of a portion of the estimated net proceeds
of the Offerings to pay or prepay aggregate borrowings of $42,232.
(15) Reflects the amortization of deferred financing and organizational
costs on a straight line basis over seven and five years,
respectively. For fiscal 1995, the $367 adjustment for the 1995 and
1996 Acquisitions consists of $18 and $349 pertaining to the 1995
Acquisitions and the 1996 Acquisitions, respectively.
(16) Reflects a reduction in amortization expense relating to the
write-off of $2,047 of financing costs in connection with the
prepayment of the Subordinated Debt.
(17) Represents the incremental tax effect of the pro forma adjustments
assuming an effective corporate tax rate of 41.0%. For fiscal 1995,
the $552 increase relates to $1,346 of incremental income before
income taxes comprised of $1,361 for the 1995 Acquisitions, $5,522
for the 1996 Acquisitions and $(5,537) for increases in corporate
overhead and capital structure arising from the 1995 and 1996
Acquisitions.
(18) Represents the incremental tax effect of the Michigan pro forma
adjustments assuming an effective corporate tax rate of 41.0%. For
fiscal 1995, the $1,137 increase relates to the $2,773 of incremental
income before income taxes comprised of $3,750 for the Michigan
Acquisition and $(977) for the adjustments to the Company's corporate
overhead and capital structure arising from the Michigan Acquisition.
(19) Represents the incremental tax effect of the Offerings pro forma
adjustments assuming an effective corporate tax rate of 41.0%.
(20) The pro forma, as adjusted, statement of income does not give effect
to an extraordinary pre-tax charge of approximately $5,497
(approximately $3,243 on an after-tax basis), which the Company
expects to record immediately following the closing of the Offerings
consisting of (i) an approximately $2,047 (approximately $1,208 on an
after-tax basis) write-off of deferred financing costs related to the
prepayment of the Subordinated Debt and (ii) an approximately $3,450
(approximately $2,035 on an after-tax basis) prepayment premium
incurred in connection with the repayment of the Subordinated Debt.
22
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JANUARY 1, 1996
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
-------------- -----------------------------
1996 PRO FORMA MICHIGAN OFFERINGS PRO FORMA, AS
ACTUAL ACQUISITIONS SUBTOTAL ACQUISITION ADJUSTMENTS ADJUSTED
----------- -------------- ----------- ------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .......... $ 1,887 $(1,925)(1) $ (38) $40(1) $-- $ 2
Accounts receivable ................ 1,118 -- 1,118 -- -- 1,118
Inventory .......................... 1,009 72 (2) 1,081 240(2) -- 1,321
Prepaid expenses ................... 1,218 190 (3) 1,408 360(3) -- 1,768
----------- -------------- ----------- ------------- -------------- -------------
Total current assets ............. 5,232 (1,663) 3,569 640 -- 4,209
PROPERTY AND EQUIPMENT ............... 28,457 6,358 (4) 34,815 8,811(4) -- 43,626
GOODWILL ............................. 66,847 30,362 (5) 97,209 26,063(5) -- 123,272
OTHER ASSETS:
Deferred financing costs ........... 3,096 2,444 (6) 5,540 -- (389)(7) 5,151
Deferred organization costs ........ 220 -- 220 -- -- 220
Franchise agreements ............... 3,384 888 (8) 4,272 1,260(8) -- 5,532
Deferred income taxes .............. -- -- -- -- 1,400 (9) 1,400
----------- -------------- ----------- ------------- -------------- -------------
Total other assets ............... 6,700 3,332 10,032 1,260 1,011 12,303
----------- -------------- ----------- ------------- -------------- -------------
TOTAL ASSETS ......................... $107,236 $38,389 $145,625 $36,774 $ 1,011 $183,410
=========== ============== =========== ============= ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued
expenses .......................... $ 5,399 $ 256 (10) $ 5,655 $-- $-- $ 5,655
Accrued payroll .................... 802 -- 802 -- -- 802
Accrued sales tax payable .......... 1,047 -- 1,047 -- -- 1,047
Accrued interest payable ........... 346 -- 346 -- -- 346
Current portion of long-term debt .. 10,741 (9,193)(11) 1,548 -- -- 1,548
Current portion of capital leases .. 99 -- 99 -- -- 99
----------- -------------- ----------- ------------- -------------- -------------
Total current liabilities ........ 18,434 (8,937) 9,497 -- -- 9,497
----------- -------------- ----------- ------------- -------------- -------------
LONG-TERM DEBT--Less current portion 79,094 47,326 (12) 126,420 36,774(13) (78,366)(14) 84,828
OBLIGATIONS UNDER CAPITAL LEASE ..... 176 -- 176 -- -- 176
DEFERRED INCOME TAXES ................ 789 -- 789 -- (789)(2) --
----------- -------------- ----------- ------------- -------------- -------------
TOTAL LIABILITIES .................... 98,493 38,389 136,882 36,774 (79,155) 94,501
=========== ============== =========== ============= ============== =============
STOCKHOLDERS' EQUITY
Preferred Stock .................... -- -- -- -- -- --
Common stock ....................... -- -- -- -- 91,500 (15) 91,500
Additional paid-in capital ......... 7,600 -- 7,600 -- (7,500)(16) 100
Retained earnings .................. 1,143 -- 1,143 -- (3,834)(17) (2,691)
----------- -------------- ----------- ------------- -------------- -------------
Total stockholders' equity ....... 8,743 -- 8,743 -- 80,166 88,909
----------- -------------- ----------- ------------- -------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY .............................. $107,236 $38,389 $145,625 $36,774 $ 1,011 $183,410
=========== ============== =========== ============= ============== =============
BALANCE SHEET DATA:
Working Capital (deficiency) ......... $(13,202) $ (5,288)
Total assets ......................... 107,236 183,410
Long-term debt and capitalized leases 79,270 85,004
Total stockholders' equity ........... 8,743 88,909
</TABLE>
23
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
The Pro Forma Consolidated Balance Sheet of the Company as of January 1,
1996 gives effect to the 1996 Acquisitions, the Michigan Acquisition and the
Offerings and the application of the estimated net proceeds thereof, as if
each such transaction had occurred on January 1, 1996.
(1) For the 1996 Acquisitions, the $1,925 decrease in cash relates to the
use of $1,000 of cash on hand to pay down the revolving credit
facility, the use of $985 cash on hand to fund the 1996 Acquisitions,
and the related acquisition of $60 of restaurant cash on hand. For
the Michigan Acquisition, the $40 increase relates to the acquisition
of restaurant cash on hand.
(2) Reflects the acquisition of inventory.
(3) Reflects the acquisition of prepaid expenses.
(4) Reflects the acquisition of restaurant property and equipment.
(5) Goodwill represents the excess of the total cost of the assets to be
acquired plus transaction costs over their fair value. Amounts for
the Michigan Acquisition are estimated.
(6) Reflects the increase in deferred financing costs incurred in
connection with financing the 1996 Acquisitions.
(7) Reflects a decrease in deferred financing costs relating to the
prepayment of the Subordinated Debt and additional costs related to
the New Credit Facility. See Note 17.
(8) Reflects the value of the Burger King franchise agreements acquired
or to be acquired.
(9) Reflects the net income tax benefit to be received upon the write-off
of deferred financing costs and prepayment penalties paid in
connection with the prepayment of Subordinated Debt. See Note 17.
(10) Reflects accrued transaction costs.
(11) Represents the refinancing of the BKC Note in the original principal
amount of $6,920 on a long- term basis and the reclassification of
$2,273 of indebtedness under the Credit Agreement from current to
long-term debt due to an amendment of the amortization schedules
under the Credit Agreement.
(12) Represents additional borrowings of $38,133 to fund the 1996
Acquisitions, the $6,920 refinancing of the BKC Note and the $2,273
reclassification of indebtedness under the Credit Agreement described
in Note 11.
(13) Represents additional borrowings to fund the Michigan Acquisition.
(14) Reflects the repayment of indebtedness.
(15) Reflects the issuance of shares of Common Stock in the
Offerings and the related increase in paid in capital.
(16) Reflects the redemption of the Original Preferred Stock and the
related reduction to paid in capital.
(17) Reflects the extraordinary pre-tax charge of approximately $5,339
(approximately $3,150 on an after-tax basis) that the Company expects
to accrue immediately following the closing of the Offerings relating
to (i) an approximately $1,889 (approximately $1,115 on an after-tax
basis) write-off of deferred financing charges related to the
prepayment of the Subordinated Debt and (ii) the $3,450
(approximately $2,035 on an after-tax basis) prepayment premium
incurred in connection with the prepayment of the Subordinated Debt.
In addition, reflects cumulative payment-in-kind dividends of $684 to
be paid in connection with the redemption of the Original Preferred
Stock.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The financial data set forth below are derived from the consolidated
financial statements of the Company and the Historical Schedules of
Restaurant Contribution for the Initial Acquisitions. The data presented for
the Initial Acquisitions as of and for the year ended December 31, 1993 and
for the period from January 1, 1994 through September 1, 1994 are derived
from the audited Historical Schedules of Restaurant Contribution for the 68
BKC Restaurants and the 14 Management Restaurants formerly owned and operated
by BKC and entities controlled by certain members of the Company's current
management. Prior to their acquisition by the Company on September 2, 1994,
the BKC Restaurants and the Management Restaurants were not under common
control or management. In addition, restaurant contribution for the BKC
Restaurants and the Management Restaurants, which reflects restaurant sales
net of restaurant operating expenses, does not reflect all costs of operating
the BKC Restaurants and Management Restaurants. Accordingly, restaurant
sales, restaurant operating expenses and restaurant contribution may not be
comparable to or indicative of post-acquisition results. The data presented
for the Company as of December 31, 1994 and for the period from August 17,
1994 (date of incorporation) through December 31, 1994, and for the fiscal
year ended January 1, 1996 are derived from the Company's audited financial
statements appearing elsewhere herein. The audited Historical Schedules of
Restaurant Contribution for the Initial Acquisitions and financial statements
of the Company were each audited by Deloitte & Touche LLP. The data presented
for the Company for the quarters ended March 31, 1995 and April 1, 1996 and
as of April 1, 1996 are derived from the unaudited financial statements of
the Company, appearing elsewhere herein, and in the opinion of management
include all adjustments (consisting only of normal recurring adjustments)
which the Company considers necessary for a fair presentation of the
Company's results of operations and financial condition for those periods.
The data for the quarter ended April 1, 1996 are not necessarily indicative
of results that may be expected for any other interim period or for the
fiscal year ending December 30, 1996. The Selected Consolidated Financial
Information should be read in conjunction with (i) "Management's Discussion
and Analysis of Financial Condition and Results of Operations", (ii) the
audited Historical Schedules of Restaurant Contribution for the Initial
Acquisitions and the notes thereto, (iii) the audited financial statements
for the Company and the notes thereto and (iv) the Pro Forma Consolidated
Financial Statements, each included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
-------------------------- ----------------------------------------
SEPT. 2, 1994 FISCAL 1995
JAN. 1, 1994 THROUGH ------------------------
FISCAL THROUGH DEC. 31, PRO FORMA,
1993 SEPT. 1, 1994 1994(3) ACTUAL AS ADJUSTED(4)
--------- --------------- -------------- ---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
RESTAURANT SALES ................. $82,895 $56,720 $33,931 $139,572 $237,389
RESTAURANT OPERATING EXPENSES:
COST OF SALES .................... 25,832 18,602 10,807 44,798 76,210
RESTAURANT LABOR AND RELATED
COSTS ........................... 21,998 15,529 8,647 34,526 61,056
DEPRECIATION AND AMORTIZATION .... 2,062 1,366 1,193 4,927 8,628
OCCUPANCY AND OTHER OPERATING
EXPENSES ........................ 26,405 17,854 9,229 38,930 64,395
--------- --------------- -------------- ---------- --------------
TOTAL RESTAURANT OPERATING
EXPENSES ...................... 76,297 53,351 29,876 123,181 210,289
--------- --------------- -------------- ---------- --------------
RESTAURANT CONTRIBUTION .......... $ 6,598 $ 3,369 4,055 16,391 27,100
========= ===============
GENERAL AND ADMINISTRATIVE
EXPENSES ........................ 1,374 5,904 7,404
-------------- ---------- --------------
OPERATING INCOME ................. 2,681 10,487 19,696
OTHER INCOME (EXPENSE):
INTEREST EXPENSE ................ (1,925) (8,323) (7,464)
AMORTIZATION OF DEFERRED COSTS .. (104) (511) (582)
OTHER INCOME (EXPENSE), NET ..... (220) 74 74
-------------- ---------- --------------
TOTAL OTHER INCOME (EXPENSE) ... (2,249) (8,760) (7,972)
-------------- ---------- --------------
INCOME BEFORE INCOME TAXES ....... 432 1,727 11,724
PROVISION FOR INCOME TAXES ....... 191 825 4,924
-------------- ---------- --------------
NET INCOME ....................... $ 241 $ 902 $6,800(5)
============== ========== ==============
SELECTED OPERATING DATA:
RESTAURANTS OPEN AT END OF PERIOD 82 82 121 140 213
AVERAGE SALES PER RESTAURANT(6) .. $ 1,011 $ 1,125 $ 1,147
AVERAGE RESTAURANT OPERATING
CASH FLOW(6)(7) ................. $ 106 $ 173 $ 175
AVERAGE RESTAURANT OPERATING
CASH FLOW MARGIN(6) ............. 10.5% 15.4% 15.3%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------
FIRST QUARTER ENDED
APRIL 1, 1996
----------------------------
MAR. 31, PRO FORMA, AS
1995 ACTUAL ADJUSTED(4)
--------- ---------- ---------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
RESTAURANT SALES ................. -- --
RESTAURANT OPERATING EXPENSES:
COST OF SALES ................... -- --
RESTAURANT LABOR AND RELATED
COSTS ........................... -- --
DEPRECIATION AND AMORTIZATION .... -- --
OCCUPANCY AND OTHER OPERATING
EXPENSES ........................ -- --
---------- --------
TOTAL RESTAURANT OPERATING
EXPENSES ...................... -- --
---------- --------
RESTAURANT CONTRIBUTION .......... -- --
GENERAL AND ADMINISTRATIVE
EXPENSES ........................ -- --
OPERATING INCOME ................. -- --
OTHER INCOME (EXPENSE): -- --
INTEREST EXPENSE ................ -- --
AMORTIZATION OF DEFERRED COSTS .. -- --
OTHER INCOME (EXPENSE), NET ..... -- --
TOTAL OTHER INCOME (EXPENSE) ... -- --
---------- --------
INCOME BEFORE INCOME TAXES ....... -- --
PROVISION FOR INCOME TAXES ....... -- --
---------- --------
NET INCOME ....................... -- --
========== ========
SELECTED OPERATING DATA:
RESTAURANTS OPEN AT END OF PERIOD
AVERAGE SALES PER RESTAURANT(6) ..
AVERAGE RESTAURANT OPERATING
CASH FLOW(6)(7) .................
AVERAGE RESTAURANT OPERATING
CASH FLOW MARGIN(6) .............
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
THE INITIAL
ACQUISITIONS(1)(2) THE COMPANY
------------------------ -------------------------------------------
SEPT. 2, 1994 FISCAL 1995
JAN. 1, 1994 THROUGH ------------------------
FISCAL THROUGH DEC. 31, PRO FORMA
1993 SEPT. 1, 1994 1994(3) ACTUAL AS ADJUSTED(4)
------- -------------- ------------- -------- --------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
SUPPLEMENTAL DATA (8)(9):
RESTAURANT SALES:
BKC RESTAURANTS .................. $70,667 $47,762
MANAGEMENT RESTAURANTS:
JARO RESTAURANTS ................ 10,115 7,400
OSBORN RESTAURANTS .............. 2,113 1,558
--------- ---------------
TOTAL FOR INITIAL ACQUISITIONS $82,895 $56,720
========= ===============
RESTAURANT OPERATING EXPENSES:
BKC RESTAURANTS .................. $65,263 $45,257
MANAGEMENT RESTAURANTS:
JARO RESTAURANTS ................ 9,166 6,718
OSBORN RESTAURANTS .............. 1,868 1,376
--------- ---------------
TOTAL FOR INITIAL ACQUISITIONS $76,297 $53,351
========= ===============
RESTAURANT CONTRIBUTION:
BKC RESTAURANTS .................. $ 5,404 $ 2,505
MANAGEMENT RESTAURANTS:
JARO RESTAURANTS ................ 949 682
OSBORN RESTAURANTS .............. 245 182
--------- ---------------
TOTAL FOR INITIAL ACQUISITIONS $ 6,598 $ 3,369
========= ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------
FIRST QUARTER ENDED
APRIL 1, 1996
----------------------------
MAR. 31, PRO FORMA, AS
1995 ACTUAL ADJUSTED(4)
--------- ---------- ---------------
<S> <C> <C> <C>
SUPPLEMENTAL DATA (8)(9):
RESTAURANT SALES:
BKC RESTAURANTS ..................
MANAGEMENT RESTAURANTS:
JARO RESTAURANTS ................
OSBORN RESTAURANTS ..............
TOTAL FOR INITIAL ACQUISITIONS
RESTAURANT OPERATING EXPENSES:
BKC RESTAURANTS ..................
MANAGEMENT RESTAURANTS:
JARO RESTAURANTS ................
OSBORN RESTAURANTS ..............
TOTAL FOR INITIAL ACQUISITIONS
RESTAURANT CONTRIBUTION:
BKC RESTAURANTS ..................
MANAGEMENT RESTAURANTS:
JARO RESTAURANTS ................
OSBORN RESTAURANTS ..............
TOTAL FOR INITIAL ACQUISITIONS
</TABLE>
<TABLE>
<CAPTION>
AS OF FISCAL AS OF FISCAL AS OF APRIL 1,
1994 YEAR END 1995 YEAR END 1996
------------- ------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency) ...... $ (3,085) $(13,202)
Total assets ...................... 101,790 107,236
Long term debt and capitalized
leases ............................ 81,050 79,270
Total stockholders' equity ........ 7,841 8,743
</TABLE>
- ------------
(1) The Initial Acquisitions consist of the 68 BKC Restaurants and the 14
Management Restaurants acquired by the Company on September 2, 1994
from BKC and from entities formerly controlled by certain members of
the Company's current management. The information set forth under
"Initial Acquisitions" reflects the combined historical financial
results of the BKC Restaurants and Management Restaurants for the
indicated period during which time the restaurants were owned and
operated by BKC and management-controlled entities. The results of the
Initial Acquisitions for fiscal 1993 and the period from January 1,
1994 through September 1, 1994 may not be reflective of the ongoing
operations of the Company under its current ownership structure.
(2) Due to the inability of the Company to determine certain expenses for
the Initial Acquisitions on a meaningful and consistent basis, net
income is not comparable and is not presented for the Initial
Acquisitions.
(3) Reflects the historical results of the Company, including the Initial
Acquisitions subsequent to their acquisition by the Company on
September 2, 1994. Also includes limited expenses of the Company during
the period August 17, 1994 (date of incorporation) to September 2,
1994, during which period the Company had no operations.
(4) Pro forma, as adjusted, to reflect (i) the 1995 Acquisitions (in the
case of fiscal 1995), (ii) the 1996 Acquisitions, (iii) the Michigan
Acquisition and (iv) the Offerings, including the application of the
estimated net proceeds therefrom as set forth in "Use of Proceeds." See
"Pro Forma Consolidated Financial Statements."
(5) The pro forma income statement does not give effect to an extraordinary
pre-tax charge of approximately $5,497 (approximately $3,243 on an
after-tax basis), which the Company expects to record immediately
following the closing of the Offerings, consisting of (i) an
approximate $2,047 (approximately $1,208 on an after-tax basis)
write-off of deferred financing costs relating to the prepayment of the
Subordinated Debt (as hereinafter defined) and (ii) an approximate
$3,450 (approximately $2,035 on an after-tax basis) prepayment premium
incurred in connection with the prepayment of the Subordinated Debt.
(6) Reflects the results of only those restaurants operating for the entire
period.
(7) Restaurant operating cash flow includes restaurant sales net of
restaurant operating expenses other than depreciation and amortization.
Restaurant cash flow should not be considered by a prospective investor
as an alternative to net income as a better indicator of the Company's
operating performance or as an alternative to cash flows as a better
measure of liquidity.
(8) Sets forth for the Initial Acquisitions, the components constituting
aggregate restaurant sales, restaurant operating expenses and
restaurant contributions for the indicated periods. See the Historical
Schedules of Restaurant Contribution with respect to the Initial
Acquisitions and the notes thereto.
(9) Jaro restaurants consist of the 11 Management Restaurants acquired from
entities owned or controlled by Lawrence Jaro, the Company's current
Chief Executive Officer and Chairman of the Company's Board of
Directors. Osborn restaurants consist of the three Management
Restaurants acquired from entities owned or controlled by William
Osborn, the current Vice-Chairman of the Company's Board of Directors.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is the leading independent Burger King franchisee in the
midwestern United States and management believes the Company is the second
largest franchisee in the United States, with 180 restaurants in eleven
states. The Company was incorporated in August 1994 to effect the acquisition
of the 68 BKC Restaurants and the 14 Management Restaurants. Subsequently,
the Company has grown primarily through the acquisition of Burger King
restaurants, including the acquisition of 39 restaurants in 1994, 18
restaurants in 1995 and 36 restaurants in 1996. In addition, the Company has
developed five Burger King restaurants.
Each of the Company's Burger King restaurants operates under a separate
BKC franchise agreement which generally has a term of 20 years and requires
payment of a monthly royalty fee to BKC equal to 3.5% of each restaurant's
sales and a monthly advertising contribution of 4.0% of sales. The franchise
agreements are generally renewable, subject to certain conditions being met
by the Company and payment by the Company of a successor franchise fee. The
franchise agreements require the Company to pay an initial franchise fee
(currently $40,000) for each new restaurant opened and to pay a successor
franchise fee (equal to the then-current franchise fee) upon renewal. The
Company amortizes these franchise fees over the terms of the related
franchise agreements. See "Business--Franchise Agreements."
To date the Company has grown principally through the acquisition of
existing Burger King restaurants. As the Company acquires additional Burger
King restaurants, it capitalizes the value of the acquired franchise
agreements based on the number of years remaining on their terms and the
franchise fee in effect at the time of acquisition (currently, $2,000 per
year) and it capitalizes excess cost over fair value of the other net assets
acquired and amortizes for financial statement purposes the goodwill expense
over a 35-year period. The Company generally purchases assets and is able to
deduct goodwill amortization expense for tax purposes over a 15-year period.
Restaurant sales include food sales and merchandise sales. Merchandise
sales include convenience store sales at the Company's dual-use facilities
(of which the Company currently has five), as well as sales of promotional
products at the Company's restaurants. Historically, merchandise sales have
contributed less than 2.5% to restaurant sales. Promotional products, which
account for the majority of merchandise sales, are generally sold at or near
the Company's costs.
Restaurant contribution includes restaurant sales less restaurant
operating expenses other than general and administrative expenses such as
office overhead and non-restaurant supervisory management. As a result,
restaurant contribution does not include all of the Company's costs of doing
business.
On August 1, 1995, the Company converted its fiscal year to a 52/53 week
fiscal year. Due to the conversion, the 1995 fiscal year ended January 1,
1996 and included 366 days of operating activity. All fiscal years discussed
herein had a length of approximately 52 weeks.
RESULTS OF OPERATIONS
Prior to their acquisition by the Company on September 2, 1994, the 68 BKC
Restaurants and the 14 Management Restaurants (which constitute the Initial
Acquisitions) were not under common control or management. The table set
forth below combines the results of operations for the BKC Restaurants and
the Management Restaurants for the period from January 1, 1994 through
September 1, 1994 with the results of operations of the Company from
September 2, 1994 through December 31, 1994. The results of operations for
the Company also include limited expenses of the Company during the period
August 17, 1994 (date of incorporation) to September 2, 1994, during which
period the Company had no operations. Prior to September 1, 1994, the BKC
Restaurants and the Management Restaurants were operated under a different
management and capitalization structure than that of the Company.
Accordingly, the information set forth below with respect to the Initial
Acquisitions and the "Combined" results for the
27
<PAGE>
Initial Acquisitions and the Company for fiscal 1994 is provided for the
purposes of analysis only and may not be comparable to or indicative of
post-acquisition results. In addition, the results with respect to the
Initial Acquisitions and the "Combined" results may not be representative of
what the Company's results of operations would have been if the Company had
owned the BKC Restaurants and Management Restaurants for all of fiscal 1993
and fiscal 1994.
<TABLE>
<CAPTION>
INITIAL INITIAL
ACQUISITIONS ACQUISITIONS THE COMPANY COMBINED
-------------- -------------- --------------- ----------
JAN. 1, 1994 SEPT. 2, 1994
THROUGH SEP. THROUGH DEC. FISCAL
FISCAL 1993 1, 1994 31, 1994 1994
-------------- -------------- --------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales ....................... $82,895 $56,720 $33,931 $90,651
Restaurant operating expenses:
Cost of sales ......................... 25,832 18,602 10,807 29,409
Restaurant labor and related costs ... 21,998 15,529 8,647 24,176
Depreciation and amortization ......... 2,062 1,366 1,193 2,559
Occupancy and other operating expenses 26,405 17,854 9,229 27,083
-------------- -------------- --------------- ----------
Total restaurant operating expenses . 76,297 53,351 29,876 83,227
-------------- -------------- --------------- ----------
Restaurant contribution ................ $ 6,598 $ 3,369 $ 4,055 $ 7,424
============== ============== =============== ==========
</TABLE>
The following table sets forth, for the periods indicated, operating
results as a percentage of restaurant sales.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF SALES
--------------------------------------------
INITIAL
ACQUISITIONS COMBINED THE COMPANY
FISCAL 1993 FISCAL 1994 FISCAL 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Restaurant sales ....................... 100.0% 100.0% 100.0%
Cost of sales .......................... 31.2 32.4 32.1
Restaurant labor and related costs .... 26.5 26.7 24.7
Depreciation and amortization .......... 2.5 2.8 3.6
Occupancy and other operating expenses 31.8 29.9 27.9
-------------- ------------- -------------
Restaurant operating expenses ......... 92.0 91.8 88.3
-------------- ------------- -------------
Restaurant contribution ................ 8.0% 8.2% 11.7%
============== ============= =============
General and administrative expenses ... 4.2
-------------
Operating income ....................... 7.5
Other income (expense) ................. 6.3
-------------
Income before income taxes ............. 1.2
Provision for income taxes ............. 0.6
-------------
Net income ............................. 0.6%
=============
</TABLE>
FISCAL 1995 COMPARED TO FISCAL 1994
Restaurant Sales. Restaurant sales increased $48.9 million or 54.0% during
fiscal 1995, to $139.6 million from $90.7 million in fiscal 1994, due
primarily to the inclusion of a full year of operations for the 39
restaurants purchased in December 1994, and a partial year of operations for
the five restaurants purchased in September 1995, the two restaurants
purchased in October 1995 and the 11 restaurants purchased in November 1995.
The inclusion of these newly acquired restaurants accounted for $46.4 million
of the total increase in restaurant sales. In addition, the Company developed
a single new restaurant in August 1995. Sales at comparable restaurants for
all 139 restaurants owned by the Company at the end of fiscal 1995 declined
0.1%, primarily as a result of the discontinuation of extensive promotional
couponing at the 39 restaurants acquired in December 1994. Comparable
restaurant sales for the 82 restaurants owned by the Company since its
inception increased 1.7%. Restaurant menu prices remained stable during the
year.
28
<PAGE>
Restaurant Operating Expenses. Total restaurant operating expenses
increased $40.0 million or 48.0% during fiscal 1995, to $123.2 million from
$83.2 million in fiscal 1994. As a percentage of restaurant sales, restaurant
operating expenses declined 3.5% to 88.3% in fiscal 1995 from 91.8% in fiscal
1994.
Cost of sales increased $15.4 million during fiscal 1995, but decreased
0.3% as a percentage of restaurant sales to 32.1% in fiscal 1995 from 32.4%
in fiscal 1994 due primarily to a 1.0% decline in food and paper costs as a
percentage of restaurant sales created by improved distribution efficiencies
from restaurant acquisitions. This decline was partially offset by a 0.7%
increase in the cost of promotional merchandise.
Restaurant labor and related expenses increased $10.4 million during
fiscal 1995, but decreased 2.0% as a percentage of restaurant sales to 24.7%
in fiscal 1995 from 26.7% in fiscal 1994, due primarily to improvements in
group insurance costs being applied over the larger restaurant base. In
addition, the successful application of the Company's information systems
technology within the restaurant base increased scheduling efficiency and
further reduced labor costs as a percentage of restaurant sales.
Depreciation and amortization increased $2.4 million during fiscal 1995,
to $4.9 million in fiscal 1995 from $2.5 million in fiscal 1994. As a
percentage of restaurant sales, depreciation and amortization expense
increased 0.8% to 3.6% in fiscal 1995 from 2.8% in fiscal 1994, due primarily
to the increase in goodwill amortization resulting from the purchase method
of accounting for the newly acquired restaurants.
Occupancy and other expenses increased $11.8 million during fiscal 1995,
but decreased 2.0% as a percentage of restaurant sales to 27.9% in fiscal
1995 from 29.9% in fiscal 1994. Occupancy expense increased $4.5 million, but
decreased 1.0% as a percentage of sales to 11.1% in fiscal 1995 from 12.1% in
fiscal 1994, due primarily to the negotiation of more favorable lease terms
under the Company's existing lease agreements. Other operating expenses
increased $7.3 million during fiscal 1995, but decreased 1.0% as a percentage
of restaurant sales to 16.8% in fiscal 1995 from 17.8% in fiscal 1994, due
primarily to the result of more favorable terms negotiated for general
liability insurance policies covering the Company's larger restaurant base.
Restaurant Contribution. Restaurant contribution increased $9.0 million or
120.8% to $16.4 million in fiscal 1995 from $7.4 million in fiscal 1994. As a
percentage of restaurant sales, restaurant contribution increased 3.5%, to
11.7% in fiscal 1995 from 8.2% in fiscal 1994, due primarily to the
improvements as described above.
FISCAL 1994 COMPARED TO FISCAL 1993
Restaurant Sales. Restaurant sales increased $7.8 million or 9.4% during
fiscal 1994 to $90.7 million from $82.9 million in fiscal 1993. This increase
was due in part to the acquisition of the 39 restaurants purchased in
December 1994 which accounted for 50% of the increase in total sales. In
addition, sales at comparable restaurants for all 121 restaurants owned by
the Company at the end of fiscal 1994 increased 4.4% as a result of the
impact of the introduction of Value Meals(Registered Trademark) in the
Company's restaurants.
Restaurant Operating Expenses. Total restaurant operating expenses
increased $6.9 million, or 9.1%, during fiscal 1994, to $83.2 million from
$76.3 million in fiscal 1993. As a percentage of restaurant sales, restaurant
operating expenses declined 0.2% to 91.8% in fiscal 1994 from 92.0% in fiscal
1993.
Cost of sales increased $3.6 million during fiscal 1994 and increased 1.2%
as a percentage of restaurant sales to 32.4% from 31.2% in fiscal 1993, due
primarily to a 0.9% increase in food and paper costs as a percentage of
restaurant sales, created by the introduction of Value Meals(Registered
Trademark) in the Company's restaurants. In addition, merchandise costs
increased 0.3% as a percentage of restaurant sales due to the increase in
promotional activities by the Company.
Restaurant labor and related expenses increased $2.2 million during fiscal
1994 and increased 0.2% as a percentage of restaurant sales to 26.7% from
26.5% in fiscal 1993, due primarily to an increase in direct labor costs.
This increase was partially offset by improvements in group insurance costs
being applied over the newly acquired restaurant base.
29
<PAGE>
Depreciation and amortization increased $0.5 million during fiscal 1994 to
$2.6 million from $2.1 million in fiscal 1993. As a percentage of restaurant
sales, depreciation and amortization expense increased 0.3% to 2.8% in fiscal
1994 from 2.5% in fiscal 1993, due primarily to the increase in goodwill
amortization resulting from the purchase method of accounting for the newly
acquired restaurants.
Occupancy and other expenses increased $0.7 million during fiscal 1994,
but decreased 1.9% as a percentage of restaurant sales to 29.9% from 31.8% in
fiscal 1993. Occupancy expense decreased 0.6% as a percentage of sales and
other expenses decreased 1.3% as a percentage of restaurant sales, due
primarily to increased sales at comparable restaurants and increased sales
leverage over a larger restaurant base.
Restaurant Contribution. Restaurant contribution increased $0.8 million or
12.5% to $7.4 million in fiscal 1994 from $6.6 million in fiscal 1993. As a
percentage of restaurant sales, restaurant contribution increased 0.2%, to
8.2% from 8.0% in fiscal 1993, due primarily to the improvements described
above.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows for
August 17, 1994 (date of incorporation) through December 31, 1994 and fiscal
1995.
<TABLE>
<CAPTION>
1994 1995
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net cash provided by operating activities .......... $ 7,658 $ 4,173
Net cash used in investing activities ............... (82,558) (15,092)
---------- ----------
Net cash provided by financing activities .......... 82,550 5,156
---------- ----------
Net increase (decrease) in cash and cash equivalents $ 7,650 $ (5,763)
========== ==========
</TABLE>
The Company does not have significant receivables or inventory and
receives trade credit based upon negotiated terms in purchasing food products
and other supplies. Therefore, the Company's business has not required
significant working capital to meet its operating requirements. The Company
requires capital primarily for the acquisition and development of Burger King
restaurants and has historically financed these activities from capital
contributions by its shareholders, loans made under its Credit Agreement and
cash generated from operations. During fiscal 1995, the Company's operations
generated approximately $4.2 million in cash, compared with approximately
$7.7 million in the September 2, 1994 through December 31, 1994 period. The
Company had capital expenditures, associated primarily with new restaurant
development and acquisitions, during fiscal 1995 and the September 2, 1994
through December 31, 1994 period of approximately $15.1 million and
approximately $82.6 million, respectively.
At January 1, 1996, the Company had $1.9 million in cash and cash
equivalent balances, compared to $7.6 million at December 31, 1994. The
Credit Agreement requires that a specified percentage of the Company's excess
cash flow be applied to repay amounts outstanding under its outstanding term
loans.
The Company's Credit Agreement currently provides for up to $100 million
of senior secured debt, consisting of (i) a $45 million term loan, (ii) a $40
million term loan, and (iii) a $15 million revolving credit facility. On
April 1, 1996, the outstanding principal balance under the revolving credit
facility was $4 million, leaving $11 million of revolving credit
availability. The interest rate on each of the three facilities under the
Credit Agreement is variable, and as of April 1, 1996 the weighted average
interest rate of all three facilities was approximately 8.37%. The Company
has entered into an interest rate protection agreement in connection with the
Credit Agreement which currently covers up to $25.6 million in borrowings.
Amounts outstanding under the revolving credit facility are payable in full
by January 31, 2002. The Company intends to enter into the New Credit
Facility that will replace the Credit Agreement at or prior to the
consummation of the Offerings, and will provide for an additional $50 million
of senior indebtedness.
The Company's primary cash requirements following the Offerings will be to
finance additional acquisitions, capital expenditures in connection with the
development of new restaurants, upgrades of acquired and existing restaurants
and general working capital needs. The Company intends to develop 16 new
restaurants in fiscal 1996 (four developed to date) and 34 new restaurants in
fiscal 1997. The
30
<PAGE>
Company has budgeted approximately $350,000 for the development of each of
these restaurants. The Company anticipates it will spend approximately an
additional $3.0 to $5.0 million annually for other capital expenditures. The
actual amount of the Company's cash requirements for capital expenditures
depends on, among other things, the number of new restaurants opened or
acquired and the costs associated with such restaurants and the number of
franchises subject to renewal and the costs associated with bringing the
related restaurants up to BKC's then-current design specifications in
connection with these franchise renewals. See "Business--Expansion."
The cost of developing a restaurant (not including the cost of the
building and related real estate) is approximately $350,000 (including the
$40,000 franchise fee). In order to increase the number of restaurants to be
developed or to fund additional acquisitions, the Company may require
additional debt or equity financing, which may not be available to the
Company or, if available, may not be on terms acceptable to the Company. Any
such equity financing will also be subject to BKC's consent. See "Risk
Factors--BKC Franchise Agreement Restrictions."
The Company believes that the proceeds from the Offerings, together with
borrowings under the New Credit Facility and the Company's cash on hand, will
be sufficient to cover its working capital, capital expenditures, planned
development and acquisition activities and debt service requirements for the
next 18 months.
INCOME TAXES
The Company completed fiscal 1995 with a net operating loss carry-forward
for tax purposes of approximately $8.7 million.
INFLATION
While inflation can have a significant impact on food, paper, labor and
other operating costs, the Company has historically been able to minimize the
effect of inflation through periodic price increases, and believes it will be
able to offset future inflation with price increases, if necessary.
RECENT ACCOUNTING PRONOUNCEMENTS
New accounting standards have been issued by the Financial Accounting
Standards Board that will apply to the Company in fiscal 1996. Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets," requires a review of long term tangible and intangible
assets (such as property, plant and equipment and goodwill) for impairment of
recorded value and resulting write downs if value is impaired.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), establishes accounting and disclosure
requirements using a fair value based method of accounting for stock-based
employee compensation plans. Under SFAS 123, the Company may either adopt the
new fair value based method or provide pro forma disclosure of net income
(loss) as if the accounting provisions of SFAS 123 had been adopted. The
Company intends to elect the intrinsic method of accounting for stock-based
employee compensation plans and provide the required pro forma disclosure.
These statements are not expected to have a material effect on the
Company's financial position or results of operations.
EXTRAORDINARY LOSS
Upon the prepayment of the Subordinated Debt, concurrent with the
Offerings, the Company will record an extraordinary loss of approximately
$3.1 million, net of taxes, reflecting a prepayment penalty, as well as the
write-off of related debt issuance costs. In connection with the consummation
of the Offerings and repayment of borrowings under the Credit Agreement, the
Company anticipates that it will incur a nonrecurring extraordinary loss of
approximately $2.3 million, net of taxes, in the second quarter of fiscal
1996.
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SEASONAL AND QUARTERLY COMPARISONS
The Company's operating results may fluctuate from period to period, as a
result of, among other things, sales associated with each new restaurant, the
costs associated with opening new restaurants, the timing of new restaurant
openings and acquisitions and the timing of new product introduction by BKC
and promotional programs sponsored by the Company. In addition, the Company's
business typically varies with general seasonal trends that are
characteristic of the quick-service restaurant industry. The Company has
historically experienced its strongest operating results during the summer
months (the second and third quarter of its fiscal year), while operating
results are somewhat lower during the winter months (the first and fourth
quarters of its fiscal year). As the Company continues to make acquisitions
and develop new restaurants, quarterly results may fluctuate more
significantly. The following tables set forth by fiscal quarter in fiscal
1995 the Company's income statement data.
<TABLE>
<CAPTION>
1995 1996
---------------------------------------------------------------- ---------------
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER FIRST QUARTER
--------------- -------------- --------------- -------------- ---------------
(90 DAYS) (91 DAYS) (94 DAYS) (91 DAYS) (91 DAYS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Restaurant sales .............. $30,967 $35,375 $37,104 $36,126
Restaurant operating expenses 28,338 30,989 32,012 31,842
Restaurant Contribution ...... 2,629 4,386 5,092 4,284
General and administrative
expenses ..................... 1,203 1,359 1,641 1,701
--------------- -------------- --------------- -------------- ---------------
Income from operations ........ 1,426 3,027 3,451 2,583
Other (expense) ............... (2,123) (2,146) (2,253) (2,238)
Provision (benefit) for income
taxes ........................ (333) 421 573 164
--------------- -------------- --------------- --------------
Net income .................... $ (364) $ 460 $ 625 $ 181
=============== ============== =============== ==============
</TABLE>
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BUSINESS
GENERAL
The Company is the leading independent Burger King franchisee in the
midwestern United States and management believes the Company is the second
largest Burger King franchisee in the United States. The Company was formed
in 1994 by a group consisting of former Burger King franchisees, former BKC
executives and The Jordan Company to take advantage of significant
acquisition and related new restaurant development opportunities within the
growing Burger King system. Since its inception, the Company has grown
primarily through a series of nine acquisitions involving the purchase of 175
Burger King restaurants. Currently, the Company operates 180 Burger King
restaurants in the states of Illinois, Virginia, Indiana, Colorado, Texas,
Tennessee, Kentucky, Wisconsin, Ohio, North Carolina and Georgia. Restaurant
sales for fiscal 1995 were $139.6 million ($237.4 million on a pro forma
basis--see "Pro Forma Consolidated Financial Statements").
The Company's senior management has extensive experience in the Burger
King system as either former executives of BKC or as independent Burger King
franchisees. The top five members of the Company's senior management each
have over 10 years of experience, and in some cases more than 20 years of
experience, within the Burger King system in connection with the operation,
acquisition and development of Burger King restaurants. In addition, most of
the Company's regional managing directors, district managers and restaurant
managers have substantial experience within the Burger King system and/or the
quick-service restaurant industry. See "Management--Directors and Executive
Officers."
BUSINESS STRATEGY
The Company's growth strategy consists of two principal components: (i)
strategic acquisitions of multi-restaurant Burger King operations in new and
existing markets and (ii) development of new Burger King restaurants in
markets in which the Company has established a presence. The Company
currently intends to acquire 40 Burger King restaurants in the Michigan
Acquisition and plans to develop an additional 16 new Burger King restaurants
in fiscal 1996 (four developed to date) and 34 new Burger King restaurants in
fiscal 1997.
Growth by Acquisition. Management believes that there are many attractive
acquisition candidates in the $8.4 billion Burger King system because of its
significant size and highly fragmented nature. According to information
publicly filed by GrandMet, BKC's parent corporation, as of September 30,
1995 the Burger King system included approximately 8,000 restaurants
worldwide, of which approximately 91% were operated by approximately 1,500
independent franchisees. In addition, since September 30, 1991, the number of
restaurants in the Burger King system has grown by approximately 25%, with a
record number of 657 new restaurants added during the year ended September
30, 1995 (of which 32 were developed by BKC and 625 were developed by
independent franchisees). Management believes that the five largest
franchisees in the Burger King system operate less than 10% of all Burger
King restaurants.
The Company's growth strategy includes new market acquisitions and fill-in
acquisitions within existing markets. New market acquisitions represent new
geographic markets for the Company and typically involve operations with the
critical mass necessary to achieve operating efficiencies and support a
regional operating structure. The Company's key criteria when evaluating new
market acquisitions are the future opportunities for fill-in acquisitions,
potential for new restaurant development in the area, the overall
attractiveness of the market from a demographic perspective and the
acquisition price relative to historical and expected financial performance
of these restaurants. Typically, key operating personnel of acquired
restaurants are retained to oversee the operation with the added benefit of
the Company's sophisticated management information systems and other
corporate resources. Five of the Company's nine acquisitions to date have
been of large, regional operations, each consisting of more than 10
restaurants. Furthermore, the Company intends to use a portion of the net
proceeds from the Offerings for a significant new market acquisition, the
Michigan Acquisition.
The Company's fill-in acquisitions typically involve smaller, local
operations in areas in, or contiguous to, the Company's existing operations.
Fill-in acquisitions allow the Company (i) to achieve greater
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restaurant penetration within existing markets; (ii) to increase regional
operating efficiencies (since fill-in restaurants can be added to a market
with few, if any, additions to the regional operating structure); and (iii)
to take advantage of certain economies of scale. An example of a typical
fill-in acquisition is the Company's acquisition in September 1995 of five
additional restaurants in Denver, Colorado. An example of a larger fill-in
acquisition is the Company's acquisition in November 1994 of 39 additional
restaurants in the Chicago market.
The table below summarizes each of the Company's acquisitions,
representing 175 restaurants, since its inception and the proposed
acquisition of 40 Burger King restaurants in the Michigan Acquisition.
<TABLE>
<CAPTION>
NUMBER OF RESTAURANTS
ACQUISITION DATE STATE ACQUIRED TYPE OF SELLER
- -------------------- --------------------------- ------------------------- --------------
<S> <C> <C> <C>
September 1994 Illinois/Indiana 68 BKC
September 1994 Texas/Colorado 11 Management
September 1994 Colorado 3 Management
November 1994 Illinois/Wisconsin 39 Franchisee
September 1995 Colorado 5 Franchisee
October 1995 Illinois 2 BKC
November 1995 Tennessee/Georgia 11 Franchisee
February 1996 Virginia/North Carolina 24 Franchisee
February 1996 Kentucky/Ohio/Indiana 12 Franchisee
Pending Michigan 40 Franchisee
</TABLE>
On May 11, 1996, the Company executed purchase agreements to acquire 40
Burger King restaurants in the Grand Rapids, Michigan area from a franchisee
for an aggregate cash purchase price of $35.6 million. The Company plans to
use a portion of the net proceeds from the Offerings to fund the Michigan
Acquisition. The Michigan Acquisition is conditioned on, among other things,
the consummation of the Offerings, BKC's consent (described below) and
standard closing conditions. As part of the Michigan Acquisition, it is
expected that the seller will enter into (i) a non-competition agreement and
(ii) an agreement to assist the Company in developing additional Burger King
restaurant sites in the Michigan market. It is anticipated that the key
operating personnel of the restaurants acquired in the Michigan Acquisition
will be retained. Pursuant to the BKC franchise agreement, acquisitions of
Burger King restaurants, including those to be acquired in the Michigan
Acquisition, are subject to BKC's consent and right of first refusal. See
"Risk Factors--BKC Franchise Agreement Restrictions." On May 20, 1996, the
Company submitted to BKC the relevant documentation in order to obtain BKC's
consent for the Michigan Acquisition.
The Michigan Acquisition represents a new market for the Company. The 40
restaurants to be acquired constitute approximately 47% of all Burger King
restaurants in the greater Grand Rapids, Michigan market, and the Company
believes that these restaurants provide the critical mass necessary to
achieve operating efficiencies and to support a regional operating structure
within this market. Of the 40 restaurants to be acquired in the Michigan
Acquisition, 37 were open as of December 31, 1995, generating restaurant
sales and cash flow during 1995 of $41.7 million and $5.0 million,
respectively. Thirty-one of those restaurants were open for all of 1995,
generating for 1995 average annual sales and restaurant cash flow of $1.2
million and $158,000, respectively. As of April 1, 1996, 38 restaurants were
open with the remaining two projected to open in the third quarter of 1996.
In addition to the Michigan Acquisition, the Company is engaged in various
levels of discussions with numerous independent Burger King franchisees
concerning the acquisition of all or a portion of their operations. In all
cases, these discussions and negotiations are preliminary in nature (no
agreements have been reached) and such discussions may be terminated by
either party at any time. The success of any particular acquisition is
subject to a significant number of factors, including the Company's
completion of its due diligence, successful negotiation of the purchase price
and related definitive documentation, BKC's consent to the proposed franchise
acquisition, BKC not exercising its right of first refusal with respect to
the acquisition, obtaining the necessary governmental permits and approvals
and the ability of the Company to obtain financing as required. No assurances
can be made that the Company will be able to
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acquire the Burger King restaurants that are currently the subject of these
preliminary discussions and negotiations or any future Burger King
restaurants that the Company may seek to acquire. See "Risk Factors--Risks of
Expansion and Development," "--Franchise Agreements" and "Certain
Transactions."
Development of New Burger King Restaurants. The Company has and will
continue to target acquisitions in geographic markets which have potential
for substantial new restaurant development as determined by the number and
location of existing Burger Kings and competing quick service restaurants, as
well as local market traffic patterns, demographics and other relevant
factors. Management believes that the underpenetration of the Burger King
system provides the Company with significant new development opportunities.
Moreover, management believes that the proven success of the Burger King
concept and the relative predictability of development costs and restaurant
profitability versus that of newer restaurant concepts and management's
extensive experience within the Burger King system substantially reduces the
Company's new restaurant development risk. For fiscal 1996, the Company has
budgeted approximately $350,000 for the development of each new Burger King
restaurant (exclusive of land acquisition and building costs, as the Company
leases each of its properties). For the 121 restaurants operated by the
Company for all of fiscal 1995, average restaurant sales and average
restaurant operating cash flow were approximately $1.1 million and $173,000,
respectively.
Prior to developing a new restaurant, the Company's senior management
conducts an extensive site selection process with significant input from
BKC's development field personnel, including an analysis of projected
development costs and anticipated profitability on a per location basis. The
Company also uses regional and local developers, as well as former Burger
King restaurant owners with significant knowledge of local markets, to assist
in site selection and in reviewing zoning requirements and other regulatory
matters related to the construction of new Burger King restaurants. The
Company must obtain BKC's approval prior to beginning construction of a new
restaurant. Typically, it takes the Company between 4 and 18 months to obtain
BKC approval and to develop and open a new restaurant.
To date, the Company has opened four new restaurants in 1996 and has
received preliminary BKC site approval necessary to develop an additional 12
restaurants in the remainder of 1996. Developing and opening a new Burger
King restaurant typically requires an initial investment of approximately
$350,000 (not including the cost of the building and related real estate), of
which $40,000 is paid to BKC as a one-time franchise fee and the balance is
used to purchase equipment, furniture and fixtures, point-of-sale systems and
signage. The Company currently leases all of its buildings and related real
estate at each of its restaurant locations.
Improved Operations and Efficiencies. The Company's operating strategy is
to maximize restaurant level and overall profitability. The Company
implements this strategy from a revenue perspective principally by engaging
in activities and undertaking investments designed to expand the Company's
customer base and increase sales volumes. These activities and investments
include (i) seeking to ensure consistent high quality customer experiences,
(ii) regularly reviewing the Company's restaurant properties for revenue
enhancing opportunities (such as improvements in drive-thru efficiencies and
the addition or expansion of children's playground facilities) and when
appropriate implementing such opportunities, (iii) upgrading the appearance
of the Company's restaurants, (iv) supplementing BKC's national advertising
and promotions with local advertising and promotions and (v) using the
Company's sophisticated management information system to identify sales
growth opportunities. In 1996, the Company, in conjunction with a BKC
system-wide program, plans to implement a program to upgrade the appearance
of selected restaurants. In addition, the Company plans to actively sponsor
local advertising and engage in local promotions. The Company believes that
the large number of restaurants it operates provides it with certain
competitive advantages. Generally, as the number of restaurants that the
Company owns in a particular market increases, the Company has greater
ability to (i) ensure overall customer satisfaction in that market through
consistency in food quality, service and restaurant appearance and (ii)
coordinate and influence local Burger King advertising and promotional
programs and pricing policies. In addition, the large number of restaurants
that the Company owns and the corresponding professional development
opportunities permit the Company to attract and retain strong regional,
district and restaurant management.
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<PAGE>
The Company implements its operating strategy from a cost perspective
principally by (i) tightly controlling restaurant and corporate level costs,
(ii) capturing certain economies of scale and (iii) leveraging its corporate
overhead structure. With respect to controlling restaurant level costs, the
Company's principal competitive advantage is its sophisticated management
information systems. The Company's management information systems, typically
not affordable by smaller Burger King franchisees or quick-service
restaurants, allow the Company to: monitor point-of-sale order taking,
control shrinkage, manage inventory and product mix, efficiently schedule
labor and integrate accounting systems. The Company's management information
system also permits the Company to increase sales revenues by assisting
restaurant managers in optimally scheduling the restaurant work-force during
any particular shift at the restaurant work stations for which they are best
qualified.
The Company believes that the large number of restaurants that it
operates, combined with its sophisticated management information systems,
provide it with significant advantages over many other quick-service
restaurant operators, particularly with respect to market consistency and
cost control. Areas where the Company has experienced both restaurant-level
and corporate-level savings as a result of its size and related bargaining
power include food and paper purchasing and distribution, restaurant
maintenance services and general liability insurance. In addition, as the
Company acquires and develops additional Burger King restaurants, management
believes that it will be able to leverage its corporate overhead structure by
spreading its relatively fixed general and administrative costs over a
growing number of restaurants.
BURGER KING CORPORATION
Overview. The Company believes that it realizes significant benefits from
its affiliation with BKC as a result of, among other things, the widespread
recognition of the Burger King name and products, the size and market
penetration of BKC's media budget (which was approximately $200 million for
its fiscal year ended September 30, 1995, according to LNA/Arbitron
Multi-Media Service), BKC's overall management of the Burger King concept,
including new product development, quality assurance and strategic planning,
and the continuing growth of the Burger King system. BKC, an operating
subsidiary of GrandMet, was founded in 1954 and is currently the second
largest restaurant franchisor in the world with system-wide restaurant sales
of $8.4 billion for its fiscal year ended September 30, 1995. According to
GrandMet, the Burger King system accounts for approximately 19% of the
domestic hamburger market, as compared to 41% for McDonald's, 12% for Wendy's
and 9% for Hardees. According to Technomic Information Services, domestic
revenues from hamburger and related sales totaled approximately $37.6 billion
in 1995.
Menu and Operations. The Burger King system philosophy is characterized by
its "Have It Your Way" service, flame-broiling, generous portions and
competitive prices. Each Burger King restaurant offers a standard menu
containing a variety of traditional and innovative food items. Burger King
restaurants feature flame-broiled hamburgers, the most popular of which is
The Whopper(Registered Trademark) sandwich. The Whopper is a large,
flame-broiled hamburger on a toasted bun garnished with combinations of
lettuce, onions, pickles, tomatoes and mayonnaise. At present, the standard
menu of all Burger King restaurants consists primarily of hamburgers,
cheeseburgers, chicken sandwiches, fish sandwiches, breakfast items, french
fried potatoes, salads, milkshakes, desserts, soft drinks, milk and coffee.
In addition, promotional menu items are introduced periodically for limited
times.
Burger King restaurants are typically open seven days per week with
minimum operating hours from 7:00 AM to 11:00 PM. Burger King restaurants are
of distinctive design and are generally located in high-traffic areas
throughout the United States. The Company believes that convenience of
location, speed of service, quality of food and price/value of food served
are the primary competitive advantages of Burger King restaurants. The
Company believes that it will continue to realize significant benefits from
its affiliation with BKC as a result of the widespread recognition of the
Burger King brand, the effectiveness of BKC's national marketing programs and
the overall management of the Burger King system, including product
development, quality assurance and strategic planning.
In October 1993, BKC implemented the first stages of a nationwide Value
Menu Program. The program consisted of discounted combination meals and menu
items designed to give the consumer
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<PAGE>
greater value while increasing customer traffic and profitability. BKC has
also focused its efforts on a back-to-basics marketing strategy by
eliminating over 30 items from its menu and emphasizing its core hamburgers,
french fries and soft drinks. In addition, as part of its "Bigger, Better
Burgers" campaign, BKC increased its standard hamburger patty size to 2.8
ounces, which is 75% larger than McDonald's current standard size of 1.6
ounces.
Restaurant Configurations. Burger King restaurants consist of one of
several building types with various layouts, seating capacities and
engineering specifications. BKC's traditional restaurant contains
approximately 2,500 square feet, seats 86 customers and offers interior
design flexibility. BKC also features alternative restaurant formats ranging
in size from 500 to 4,000 square feet and seating capacities ranging up to
over 100 customers. BKC has developed a number of standard and
non-traditional restaurant formats which enable maximum seating capacities
from available square footage in such facilities as airports, hospitals,
college campuses, gas stations and retail shopping centers. Substantially all
of the Company's restaurants are traditional free-standing restaurants with
seating capacities of at least 50 and which contain drive-thru windows.
According to BKC, over 50% of all restaurant sales in the Burger King system
are generated from drive-thru windows.
National Marketing and Promotion. The Burger King brand has been in
existence for over 40 years. As an established franchisor, BKC has
historically made considerable advertising and promotional expenditures to
heighten brand awareness. BKC's advertising campaigns are generally carried
on television, radio and in mass circulation print media (national and
regional newspapers and magazines). BKC franchisees are required to
contribute 4.0% of monthly gross sales from restaurant operations to a BKC
advertising fund, which contributions are generally utilized by BKC for its
advertising and promotional programs and public relations activities. BKC has
also entered into selective partnership arrangements to help promote its
products. Recently, BKC's national promotional partners have included The
Walt Disney Company, the NCAA and the Coca-Cola Company.
QUICK-SERVICE RESTAURANT INDUSTRY
Since the introduction of quick-service restaurants in the mid-1950s, the
percentage of the average family's food budget spent on meals consumed "away
from home" has grown significantly from approximately 25% of the food budget
in 1955 to approximately 46% in 1995, according to the National Restaurant
Association. Concurrently, the quick-service restaurant industry has expanded
to include hamburger, pizza, chicken, Mexican food, ice cream/yogurt, donuts
and various sandwich types. The National Restaurant Association estimates
that sales at these quick-service restaurants will reach approximately $100
billion in 1996, representing an inflation-adjusted growth rate of 4.2% over
1995. The National Restaurant Association's growth estimate for the
quick-service restaurant industry is slightly more than double the rate of
growth of full-service restaurant sales, which are expected to rise by an
inflation-adjusted rate of 2.0% in 1996. According to Technomic Information
Services, revenues from hamburger and related sales, which represented the
biggest share of the quick-service restaurant industry, totaled approximately
$37.6 billion in 1995.
The recent growth in the quick-service restaurant segment is attributable
to consumers' desire for value and convenience, such as bundled value meals,
drive-thru windows, carry-out and delivery. In 1995, off-premise services
generated by drive-thru windows, pickup and home delivery comprised 64% of
the quick-service traffic, according to the National Restaurant Association.
COMPANY OPERATIONS
Management Structure. All executive management, finance, marketing and
operations support functions are conducted centrally at the Company's
Westchester, Illinois headquarters. In each of its six regions (Chicago,
Virginia, Colorado, Texas, Tennessee and Cincinnati), the Company has a
regional managing director who is responsible for the operations of all
Company Burger King restaurants within the assigned region. Each of these
managing directors must be approved by BKC. Supporting the managing director
in Chicago are four directors of operations (who each oversee an average of
27 restaurants), who supervise 16 district managers (who directly supervise
four to eight restaurants each).
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The five other managing directors are also supported by district managers.
The district managers are responsible for direct oversight of the day-to-day
operations of the Company's Burger King restaurants. Typically, district
managers have previously served as restaurant managers within the Burger King
system. A typical Company restaurant is staffed with a full-time manager, one
to three assistant managers and full- and part-time hourly employees.
Management Incentives and Retention. Managing directors, directors of
operations, district managers and most restaurant managers are compensated
with a fixed salary plus a bonus based upon the performance of the
restaurants under their supervision. Evaluation criteria include compliance
with Burger King's restaurant operating guidelines and restaurant
profitability. After the consummation of the Offerings, the Company will also
provide its executive officers and employees with long-term incentive
compensation opportunities through the use of stock options. See
"Management--Stock Option Plan." In addition, senior management believes that
the Company's larger size and regional focus provide significant professional
development opportunities for the Company's management and operating
personnel not available to smaller franchisees. The Company believes that its
compensation structure and professional development opportunities are
significant advantages in attracting and retaining qualified management
personnel.
Training. The Company maintains a comprehensive training and development
program for all of its personnel. This program emphasizes the Burger King
system-wide operating procedures, food preparation methods and customer
service standards. The management training program features an intensive five
week hands-on restaurant training period, followed by two weeks of classroom
instruction (one week of simulated restaurant management activities and one
week of food sanitation). Special emphasis is placed on quality food
preparation, service standards and total customer satisfaction. Upon
certification, new managers work closely with experienced managers to
solidify their skills and expertise. The Company's existing restaurant
managers regularly participate in the Company's ongoing training efforts,
including classroom programs and in-restaurant programs. In addition, BKC's
training and development programs are also available to the Company.
Improved Technology. The Company utilizes a sophisticated management
information system which provides daily tracking and reporting of customer
traffic counts, sales, average check values, menu item sales, inventory
variances, key labor measures and other detailed information in comparative
form, by individual restaurant and for the Company as a whole. The Company's
management information system, typically installed in its restaurants within
60 to 90 days of acquisition, transmits data on a daily basis to Company
headquarters. This information is available by 6:00 AM the following day and
can be accessed by district managers on a remote basis using a laptop
computer. The Company's integrated management information system provides
management with the ability to (i) identify and quickly capitalize on
restaurant sales enhancement and profit opportunities, such as minimizing
shrinkage and controlling labor costs, (ii) monitor point-of-sale order
taking, (iii) effectively manage inventory and (iv) integrate accounting
systems. Customized exception reporting is used to focus operations on high
priority issues and opportunities. The Company also utilizes the system to
analyze various promotional programs using product mix information.
FRANCHISE AGREEMENTS
The Company operates Burger King restaurants through its wholly owned
subsidiaries, each of which is a party to a BKC franchise agreement. These
franchise agreements do not grant any franchisee exclusive rights to a
defined territory; however, the Company believes that BKC generally seeks to
ensure that newly granted franchises do not materially affect the operations
of existing Burger King restaurants. Acceptance as a franchisee is based upon
several factors including management experience, qualifications, financial
status and net worth. The franchise agreements require, among other things,
that all restaurants be of standardized design and operated in a prescribed
manner, including utilization of the standard Burger King menu. Most
franchise agreements provide for a term of 20 years, and, at the option of
the franchisee and BKC, a successor franchise agreement may be granted by BKC
provided that the
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restaurant meets BKC's operating standards applicable at that time and the
franchisee is not in default under the relevant franchise agreement. The BKC
franchise agreements are noncancelable except for failure to abide by the
terms thereof and in certain other limited circumstances.
BKC franchise agreements provide for a one-time franchise fee (currently
$40,000), a monthly royalty fee of 3.5% of each restaurant's gross sales and
a monthly advertising contribution of 4.0% of gross sales. During fiscal
1995, the Company paid BKC an aggregate of $4.8 million in royalty fees and
$5.7 million in advertising contributions.
BKC franchise agreements generally are renewable for an additional term
based upon the form of franchise agreement applicable at that time, provided
that the franchisee (i) pays a successor franchise fee equal to the
then-current franchise fee, (ii) has demonstrated an ability to operate the
business consistent with the standards set forth in the franchise agreement,
(iii) agrees to make capital improvements to the subject restaurant to bring
the restaurant up to BKC's image standards applicable at that time and (iv)
is not then currently in default with respect to any other obligations to
BKC, including pursuant to other franchise agreements. The Company, through
its district managers, closely supervises the operation of all of its
restaurants to ensure that operating policies are followed and that the
requirements of the franchise agreements are met. The amount of capital
expenditures that may be required to bring a restaurant up to BKC's current
standards at any given time varies widely depending upon the magnitude of the
required changes and the degree to which the franchisee has made interim
changes to the restaurant. Within five years of April 1, 1996, 26 of the
Company's current 180 franchise agreements with BKC, which contributed $26.9
million in restaurant sales in fiscal 1995, are scheduled to expire. The
Company believes that it will satisfy BKC's requirements for renewal of
franchise agreements and, accordingly, that successor franchise agreements
will be granted in due course by BKC upon the expiration of the franchise
agreements.
The Company intends to expand its operations of Burger King restaurants
through both acquisitions and new restaurant development. Pursuant to the BKC
franchise agreements, BKC approval is required for the renewal of the
Company's existing franchise agreements. Pursuant to current BKC policies and
procedures applicable to the Company, BKC's approval is required for the
acquisition of Burger King restaurants by the Company from other Burger King
franchisees and the development of new Burger King restaurants by the
Company. BKC's consent to such renewals, acquisitions or development may be
withheld in BKC's sole discretion. BKC may also condition its consent to any
such renewal, acquisition or development on the Company's agreement to take
certain actions, such as making capital expenditures on acquired restaurants,
providing information to BKC's management information systems, disposing of
certain acquired restaurants and maintaining specified financial ratios. In
addition, BKC franchise agreements provide BKC with a right of first refusal
to purchase all Burger King restaurants which franchisees wish to sell,
including those restaurants which may be sold to the Company in the Michigan
Acquisition. See "Risk Factors--BKC Franchise Agreement Restrictions" and
"Certain Transactions."
Pursuant to current BKC policies and procedures, the Company and each of
its subsidiaries which is a franchisee is required to obtain BKC's consent
prior to making certain changes to their capital structure and modifications
to their corporate governance documents. In particular, no amendment may be
made to the Company's or the relevant subsidiary franchisee's certificate of
incorporation or bylaws, nor may any resolution be adopted, without first
obtaining BKC's consent, if such amendment or resolution would have any of
the following effects: (i) change the description of the Company or the
relevant subsidiary franchisee's purpose or authorized activities; (ii)
change the designation of, or the procedures for designating, the managing
owner; (iii) change the authority granted to the managing owner; or (iv)
materially alter promises or representations made in a distribution plan
approved by BKC. A distribution plan is a plan approved by BKC prior to
granting a franchise which describes the distribution of the securities of
the Company or the relevant subsidiary franchisee. The franchise agreements
also prohibit the Company's subsidiaries, its managing owners and owners,
including Messrs. Jaro, Osborn and Hubert, from transferring their interests
in the Company's franchise agreements in any way without first obtaining
BKC's consent.
Current BKC policies and procedures also place certain restrictions on the
management structure of BKC franchisees, including the Company. For example,
a managing owner and an owner must be named
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in each franchise agreement. Under the franchise agreements, Messrs. Jaro and
Osborn are named as managing owners and Messrs. Jaro, Osborn and Hubert are
named as owners. The managing owners have the authority to bind the
franchisee in its dealings with BKC and to direct any action necessary to
ensure compliance with the franchise agreements and related documents,
including leases with BKC. In addition, each managing owner is personally
liable to BKC for the franchisee's obligations under such agreements. Also,
each franchise agreement requires that a managing director be designated to
ensure that the day-to-day operation of the relevant franchised restaurant
complies with BKC's standards. BKC has the right to terminate its franchise
agreement with a franchisee if (i) the franchisee or the managing owner is
convicted of a crime punishable by a term of imprisonment in excess of one
year or (ii) the franchisee, the managing owner or a managing director
engages in conduct which reflects unfavorably on the franchisee or Burger
King system generally. Managing owners cannot be replaced without receiving
the consent of BKC. In addition, absent BKC's prior written consent, managing
owners are required to hold a 5% voting interest in corporate franchise and
to personally guarantee the franchisee's obligations to BKC. Furthermore, no
managing owner or owner may sell, encumber or otherwise transfer any portion
of his equity interest in the Company without first obtaining the consent of
BKC. After the transfer of its equity interest, managing owners remain
personally obligated to BKC under the franchise agreements and any other
agreements between the franchisee and BKC, unless such obligation has been
fully satisfied or waived by BKC.
Pursuant to the BKC franchise agreements, transfers or issuances by the
Company of its equity securities or transfers that result in a change of
control of the Company in connection with a public tender offer, require the
consent of BKC. If BKC were to object to any issuance or transfer by the
Company of its equity securities or transfers that result in a change of
control of the Company in connection with a public tender offer, BKC could
declare an event of default under its franchise agreements. See "Description
of Capital Stock--Anti-Takeover Effects of Delaware Law and the BKC Franchise
Agreements," "Certain Transactions" and "Risk Factors--BKC Franchise
Agreements."
ADVERTISING AND PROMOTION
The Company believes that one of the major advantages of being a BKC
franchisee is the marketing support and brand promotion it realizes from the
marketing activities of BKC. In addition to the benefits derived by the
Company from BKC's $200 million advertising budget, the Company supplements
BKC's advertising and promotional activities with local advertising and
promotions, including purchasing additional television, radio and print
advertising and running promotional programs that support national programs
with local tie-ins to other consumer brands. These local tie-ins included
cross promotions with the Colorado Rockies, Fannie May Candies and
Northwestern University, among others. Other promotional programs include
coupons and price discounts, which are tailored by the Company to appeal to
its customer base depending on demographics and other factors, thereby
creating flexible and directed marketing programs. For fiscal 1995, the
Company spent approximately $600,000 on supplemental local advertising and
promotions, and plans to continue its local advertising and promotional
programs at comparable levels in the future.
SUPPLIES AND DISTRIBUTION
The Company is a member of a national purchasing cooperative created by
and for the Burger King system known as Restaurant Services, Inc. ("RSI").
RSI is an independent, member-owned, non-profit cooperative which provides
services on behalf of, and for the benefit of, Burger King restaurant
operators. RSI negotiates the lowest cost for the Burger King system while
improving quality, enhancing competitiveness and ensuring the best possible
value. RSI has the sole and exclusive responsibility for negotiating
purchasing arrangements for the Burger King system with respect to certain
paper goods, restaurant supplies, food and drink products, certain equipment
and many other items mutually agreed to by Burger King franchisees for use in
the Burger King system. The Company uses its purchasing power to negotiate
directly with certain other vendors as well as each of its distributors, to
obtain favorable pricing and terms for the distribution of its products.
Currently, the Company's primary distributor of foodstuffs and supplies is
ProSource Distribution Services, Inc.
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All BKC-approved suppliers are required by BKC to purchase all foodstuffs
and supplies from BKC, approved manufacturers and purveyors. BKC is
responsible for quality control and supervision of these manufacturers and
purveyors. BKC monitors all BKC-approved manufacturers and purveyors of its
foodstuffs. BKC regularly visits these manufacturers and purveyors to observe
the preparation of the foodstuffs and conducts various tests to ensure that
only high quality foodstuffs are sold to BKC-approved suppliers, distributors
and franchisees. In addition, BKC coordinates and supervises audits of
approved suppliers and distributors to determine continuing product
specification compliance and ensure that manufacturing plant and distribution
center standards are met.
The Company believes that reliable alternative sources for virtually all
restaurant supplies are readily available at competitive prices should the
arrangements with ProSource or any other existing supplier or distributor
change.
QUALITY ASSURANCE
The Company's operations are focused on achieving a high level of customer
satisfaction, with speed, accuracy and quality of service closely monitored.
The Company's senior management and restaurant management staff are
principally responsible for ensuring compliance with the Company's and BKC's
operating procedures. The Company and BKC have uniform operating standards
and specifications relating to the quality, preparation and selection of menu
items, maintenance and cleanliness of the premises and employee conduct.
Detailed reports from the Company's own management information systems and
surveys conducted by the Company or BKC are tabulated and distributed to
management on a regular basis to help maintain compliance. In addition to
customer satisfaction, these reports track comparable sales and customer
counts, labor and food costs, inventory levels, waste losses and cash
balances.
All Burger King franchisees operate subject to a comprehensive regimen of
quality assurance standards set by BKC, as well as standards set by Federal,
state and local governmental laws and regulations. These standards include
food preparation rules regarding, among other things, minimum cooking times
and temperatures, sanitation and cleanliness. In addition, BKC has set
maximum time standards for holding unsold prepared food. For example,
sandwiches and french fries are required to be discarded after ten minutes
and seven minutes following preparation, respectively. The "conveyor belt"
cooking system utilized in all Burger King restaurants, which is calibrated
to carry hamburgers through the flame broiler at regulated speeds, is one of
the safest cooking systems among major fast-food restaurants and helps to
ensure that the standardized minimum times and temperatures for cooking are
met.
The Company closely supervises the operation of all of its restaurants to
help insure that standards and policies are followed and that product
quality, customer service and cleanliness of the restaurants are maintained.
In addition, BKC may conduct unscheduled inspections of Burger King
restaurants throughout the nationwide system.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, location and food quality. The industry is mature and competition
can be expected to increase. The Company's Burger King restaurants compete
with a large number of national and regional restaurant chains, as well as
locally-owned restaurants offering low-priced and medium-priced food.
Convenience stores, grocery stores, delicatessens and food counters,
cafeterias and other purveyors of moderately priced and quickly prepared
foods also compete with the Company. In the Company's markets, McDonald's,
Wendy's and Hardees provide the most significant competition.
McDonald's operates more restaurants than the Company in all but one of
the Company's current markets and is the Company's largest competitor.
According to publicly available information, as of December 31, 1995, the
McDonald's system comprised 18,380 restaurants and total system-wide revenues
for McDonald's for the year ended December 31, 1995 were $29.9 billion. The
Company believes that product quality and taste, name recognition,
convenience of location, speed of service, menu variety,
41
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price, and ambiance are the most important competitive factors in the
quick-service restaurant industry and that its Burger King restaurants
effectively compete in each category.
The Company faces competition in its expansion plans. Potential Burger
King acquisition and development competitors include BKC, which has exercised
its right of first refusal with respect to previously proposed restaurant
sales, controls the areas in which new Burger King restaurant sites can be
developed and may impose, as a condition to its consent to any proposed
acquisition or development opportunity, conditions, limitations or other
restrictions on the Company and its activities. Other potential competitors
in acquiring and developing Burger King restaurants include other investors
and existing Burger King franchisees. The Company also competes with other
quick-service restaurant operators and developers for the most desirable site
locations. See "Business--Strategy."
GOVERNMENT REGULATION
The Company is subject to various Federal, state and local laws affecting
its business, including various health, sanitation, fire and safety
standards. Newly constructed or remodeled restaurants are subject to state
and local building code and zoning requirements. In connection with the
remodeling and alteration of the Company's Burger King restaurants, the
Company may be required to expend funds to meet certain Federal, state and
local regulations, including regulations requiring that remodeled or altered
restaurants be handicapped-accessible. The Company is also subject to Federal
and state environmental regulations, although such regulations have not had a
material effect on the Company's operations taken as a whole. Difficulties or
failures in obtaining the required licenses or approvals could delay or
prevent the opening of a new restaurant in a particular area.
The Company is also subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. A significant number
of the Company's food service personnel are paid at rates related to the
Federal minimum wage and increases in the minimum wage, including proposals
currently before Congress, would increase the Company's labor costs.
The Company is also subject to various local, state and Federal laws
regulating the discharge of pollutants into the environment. The Company
believes that it conducts its operations in substantial compliance with
applicable environmental laws and regulations. In an effort to prevent and,
if necessary, to correct environment problems, the Company conducts
environmental audits of a proposed restaurant site in order to determine
whether there is any evidence of contamination prior to purchasing or
entering into a lease with respect to such restaurant.
The Company believes that it conducts its operations in substantial
compliance with applicable laws and regulations governing its operations.
PROPERTIES
As of the date of this Prospectus, the Company operated all of its
restaurants on locations where it leases the land and the building. BKC is
the lessor on approximately 60% of such properties, primarily as a result of
the Company's initial acquisition of Burger King restaurants from BKC. Most
of the Company's leases are coterminous with the related franchise agreements
and require the Company to pay property taxes, insurance, maintenance and
other operating costs of the properties. Generally, the terms of the leases
require lease payments equal to the greater of a fixed minimum annual rent or
8.5% of annual gross sales. The Company believes that it generally will be
able to renew all of its restaurant leases as they expire at commercially
reasonable rates.
Within five years of April 1, 1996, 23 of the Company's 180 current
restaurant leases are due to expire. The Company believes that it will be
able to renew expiring leases at reasonable rates in the future. During
fiscal 1995, the Company renewed each of its three leases expiring during
such fiscal year on terms generally consistent with those of the expiring
leases.
The Company's headquarters are located in an approximately 16,000 square
foot leased office space in Westchester, Illinois. The term of the present
lease expires on September 30, 1998. The Company believes that its existing
central office provides sufficient space to support its expected expansion
over the next several years.
42
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EMPLOYEES
As of April 1, 1996, the Company employed 631 full-time salaried employees
and approximately 5,400 full and part-time hourly employees. Of the Company's
full-time employees, 37 are involved in overseeing restaurant operations, 528
are involved in the management of individual restaurants, and the remainder
are responsible for corporate administration. None of the Company's employees
are covered by a collective bargaining agreement. The Company believes that
the dedication of its employees is critical to its success, and its relations
with its employees are good.
LITIGATION
The Company is not a party to any pending legal proceeding the resolution
of which, the management of the Company believes, would have a material
adverse effect on the Company's results of operations or financial condition,
nor to any other pending legal proceedings other than ordinary, routine
litigation incidental to its business.
43
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names and ages of the Company's directors and
executive officers and the positions they hold as of the date of this
Prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ----------------------- ----- ---------------------------------------------------
<S> <C> <C>
Lawrence E. Jaro ....... 52 Managing Owner, Chairman and Chief Executive
Officer
William C. Osborn ...... 47 Managing Owner, Vice Chairman and Director
Gary W. Hubert ......... 44 Chief Operating Officer and Director
Joel D. Aaseby ......... 37 Chief Financial Officer and Corporate Secretary
Scott E. Vasatka ....... 43 Vice President-Human Resources
A. Richard Caputo, Jr. 30 Vice President and Director
Thomas H. Quinn ........ 48 Director
John W. Jordan, II .... 47 Director
David W. Zalaznick .... 42 Director
</TABLE>
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
MR. JARO has served as the Company's Managing Owner, Chief Executive
Officer and as a Director since the Company's inception, and currently serves
as Chairman. Mr. Jaro has over 15 years of experience as a Burger King
restaurant franchisee. Prior to joining the Company, Mr. Jaro was the
President and Chief Executive Officer of Jaro Enterprises, Inc., an operator
of 12 Burger King restaurants in Colorado and Texas.
MR. OSBORN has served as the Company's Managing Owner and as a Director
since the Company's inception. Mr. Osborn also served as the Company's
President until May 10, 1996 at which time he was appointed the Company's
Vice Chairman. Mr. Osborn has over 10 years of experience as a Burger King
restaurant franchisee as well as a franchisee of other restaurant concepts.
Prior to joining the Company, Mr. Osborn owned and operated three Burger King
restaurants in Colorado.
MR. HUBERT has served as the Company's Senior Vice President and as a
Director since the Company's inception, and currently serves as Chief
Operating Officer. Mr. Hubert has over 20 years of experience with BKC in
restaurant operations and franchise management. Prior to joining the Company,
Mr. Hubert was a Vice President with BKC in both the Franchise and Corporate
Operations divisions and served as the Area Operations Manager for BKC's
Chicago region from 1985 to 1989.
MR. AASEBY has served as the Company's Vice President--Finance and
Corporate Secretary since the Company's inception, and currently serves as
Chief Financial Officer. Mr. Aaseby has over 21 years of experience with BKC
in various finance, accounting and operations positions, including Midwest
Sector Controller from 1989 to 1994.
MR. VASATKA has served as the Company's Vice President-Human Resources
since the Company's inception. Mr. Vasatka has over 26 years of experience in
the restaurant industry. Prior to joining the Company, Mr. Vasatka was
employed by Davgar Restaurants from 1969 until 1994, and held various senior
management positions including District Manager, Director of Training and
Division President.
MR. CAPUTO has served as a Vice President and Director of the Company
since its inception. Mr. Caputo is a partner of The Jordan Company, which he
has been associated with since 1990. Mr. Caputo is also a director of Jackson
Products, Inc. as well as other privately held companies.
MR. QUINN has served as a Director of the Company since its inception.
Since 1988, Mr. Quinn has been President, Chief Operating Officer and a
director of Jordan Industries, Inc., a diversified industrial holding
company. Mr. Quinn is also the Chairman of the Board and Chief Executive
Officer of American Safety Razor Company and Welcome Home, Inc. as well as
other privately held companies.
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<PAGE>
MR. JORDAN has served as a Director of the Company since its inception.
Mr. Jordan is a managing partner of The Jordan Company, a private merchant
banking firm which he founded in 1982. Mr. Jordan is also a director of
Jordan Industries, Inc., American Safety Razor Company, Jackson Products,
Inc., Leucadia National Corporation, Carmike Cinemas, Inc., NEWFLO
Corporation, Welcome Home, Inc. and Apparel Ventures, Inc. as well as other
privately held companies.
MR. ZALAZNICK has served as a Director of the Company since its inception.
Since 1982, Mr. Zalaznick has been a managing partner of The Jordan Company.
Mr. Zalaznick is also a director of Jordan Industries, Inc., Carmike Cinemas,
Inc., American Safety Razor Company, Jackson Products, Inc., Marisa
Christina, Inc., NEWFLO Corporation and Apparel Ventures, Inc. as well as
other privately held companies.
Each of the Company's directors was nominated to the Board of Directors
pursuant to the Stockholders Agreement (as hereinafter defined), which
required the stockholders named therein to vote for such nominees.
Simultaneously with the closing of the Offerings, and pursuant to the
Recapitalization Agreement, certain provisions of the Stockholders Agreement,
including the agreement to nominate certain members to the Board of
Directors, will be terminated. See "Description of Capital Stock--The
Recapitalization."
Prior to the consummation of the Offerings, the Company intends to
increase the number of members of the Board of Directors from seven to nine.
The Company has initiated a search to identify two independent directors (the
"Independent Directors") to fill the new positions on the Board of Directors.
Effective simultaneously with the closing of the Offerings, the Board of
Directors intends to establish (i) an executive committee with Messrs.
Caputo, Jaro, Jordan, and Quinn serving as the members thereof, (ii) an audit
committee with Mr. Caputo and the Independent Directors serving as the
members thereof, and (iii) a compensation committee with Mr. Quinn and the
Independent Directors serving as the members thereof.
BOARD OF DIRECTORS
Liability Limitation. The Certificate of Incorporation provides that a
director of the Company shall not be personally liable to it or its
stockholders for monetary damages to the fullest extent permitted by Delaware
Corporation Law. In accordance with Delaware Corporation Law, the Certificate
of Incorporation does not eliminate or limit the liability of a director for
acts or omissions that involve intentional misconduct by a director or a
knowing violation of law by a director for voting or assenting to an unlawful
distribution, or for any transaction from which the director will personally
receive a benefit in money, property, or services to which the director is
not legally entitled. Delaware Corporation Law does not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his duty of care. Any amendment to these
provisions of the Delaware Corporation Law will automatically be incorporated
by reference into the Certificate of Incorporation and the Bylaws, without
any vote on the part of its stockholders, unless otherwise required.
Indemnification Agreements. Simultaneously with the consummation of the
Offerings, the Company and each of its directors will enter into
indemnification agreements. The indemnification agreements will provide that
the Company will indemnify the directors against certain liabilities
(including settlements) and expenses actually and reasonably incurred by them
in connection with any threatened or pending legal action, proceeding or
investigation (other than actions brought by or in the right of the Company)
to which any of them is, or is threatened to be, made a party by reason of
their status as a director, officer or agent of the Company, or serving at
the request of the Company in any other capacity for or on behalf of the
Company; provided that (i) such director acted in good faith and in a manner
not opposed to the best interest of the Company, (ii) with respect to any
criminal proceedings had no reasonable cause to believe his or her conduct
was unlawful, (iii) such director is not finally adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
Company, unless the court views in light of the circumstances the director is
nevertheless entitled to indemnification, and (iv) the indemnification does
not relate to any liability arising under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules or
regulations promulgated thereunder. With respect to any action brought by or
in the right of the Company, directors may also be indemnified, to the
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<PAGE>
extent not prohibited by applicable laws or as determined by a court of
competent jurisdiction, against expenses actually and reasonably incurred by
them in connection with such action if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests
of the Company.
Director Compensation. After the consummation of the Offerings, directors
who are not employees of the Company will receive $10,000 per year for
serving as a director of the Company. In addition, the Company reimburses
directors for their travel and other expenses incurred in connection with
attending meetings of the Board of Directors. The Independent Directors will
receive options under the Stock Option Plan. See "--Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
Prior to the consummation of the Offerings, the Board of Directors did not
maintain a Compensation Committee. During fiscal 1995, however, Messrs.
Caputo, Jaro, Jordan and Quinn participated in deliberations of the Board of
Directors concerning executive officer compensation. See "Certain
Transactions."
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of certain information regarding
compensation paid or accrued by the Company during fiscal 1995 to each of the
Company's chief executive officer and other executive officers of the Company
whose total annual salary and bonus exceeded $100,000 during such period
(collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION
- --------------------------- -------- ---------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Lawrence E. Jaro
Managing Owner and Chief
Executive Officer ......... 1995 $215,000 $64,500 $0 $0
William C. Osborn
Managing Owner and Vice
Chairman .................. 1995 215,000 64,500 0 10,000(3)
Gary W. Hubert
Chief Operating Officer
and Senior Vice President.. 1995 215,000 64,500 0 0
Joel D. Aaseby
Chief Financial Officer
and Corporate Secretary ... 1995 110,000 32,000 0 0
Scott E. Vasatka
Vice President--
Human Resources ........... 1995 105,000 31,000 0 0
</TABLE>
(1) The Company provides bonus compensation based on an individual's
achievement of certain specified objectives, including achieving the
Company's stated earnings before interest, taxes, depreciation and
amortization. Employees are eligible to receive from 10% to 60% of their
annual compensation as a bonus. After the consummation of the Offerings,
bonuses paid to executive officers will be determined by the Compensation
Committee of the Board of Directors.
(2) No executive named in the table above received any Other Annual
Compensation in an amount in excess of either $50,000 or 10% of Salary and
Bonus reported for him in the two preceding columns.
(3) Represents the amount of life insurance premiums paid by the Company on
the life of Mr. Osborn with death benefits designated by the executive.
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<PAGE>
Option Exercises in Fiscal 1995 and Fiscal Year-end Values
The following table shows stock options exercised by each of the Named
Executives during fiscal 1995, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options as of fiscal
year-end, and the values for unexercised options. Except as listed in the
table, no other Named Executive exercised any Company stock options or
beneficially owned unexercised Company stock options.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
STOCK
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
JANUARY 1, 1996 AT JANUARY 1, 1996(1)
----------------------------- ------------------------------
EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
SCOTT E. VASATKA 2.81 2.81 $ $
</TABLE>
(1) Based on the difference between an initial public offering price of $ per
share (the midpoint of the range set forth on the cover of this
Prospectus) and the option exercise price. The above valuation may not
reflect the actual value of unexercised options as the value of
unexercised options will fluctuate with market activity.
(2) The Company granted options to purchase up to 5.62 shares of Common Stock,
50% of which vested as of September 1, 1995 and 50% of which will vest as
of September 1, 1996.
RETIREMENT AND 401(K) PLANS
Starting August 1, 1996, the Company will offer to all its employees the
option to participate in its newly created 401(k) plan, upon fulfillment of
certain requirements. The Company will have the option, but not the
obligation, to match contributions made by its employees under the 401(k)
plan. In addition, the Company will provide disability insurance to certain
key executives. The insurance will cover all salary payments to the
executives during the entire period of disability.
EMPLOYMENT AGREEMENTS
Effective September 1, 1994, Enterprises entered into an employment
agreement with Lawrence E. Jaro (the "Jaro Employment Agreement"). Pursuant
to the terms of the Jaro Employment Agreement, Mr. Jaro agreed to serve as
Chief Executive Officer and Co-Managing Owner of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Jaro nor Enterprises has
provided the other with a notice of termination 120 days prior to the
expiration date of the Jaro Employment Agreement. Mr. Jaro also agreed not to
compete against Enterprises throughout the term of his employment and for one
year thereafter, and not to disclose any confidential information during and
after the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Jaro with a base salary of $215,000 per
annum (subject to an annual cost of living adjustment), an automobile
allowance of $800 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. After the consummation of the Offerings, the
Compensation Committee may, in its sole discretion, approve a higher annual
base salary for Mr. Jaro and an annual bonus of up to 60% of Mr. Jaro's base
salary. In the event Mr. Jaro no longer provides services to Enterprises due
to (i) his death or physical or mental disability or (ii) his dismissal
without Cause (as defined in the Jaro Employment Agreement) or as a result of
a material reduction in his authority, then Mr. Jaro is entitled to receive
his base compensation from the date of his termination through the first
anniversary of such termination or through the remaining term of his
employment agreement, respectively.
Effective September 1, 1994, Enterprises entered into an employment
agreement with William C. Osborn (the "Osborn Employment Agreement").
Pursuant to the terms of the Osborn Employment
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<PAGE>
Agreement, Mr. Osborn agreed to serve as President and Co-Managing Owner of
the Company and Enterprises for a five-year period ending on August 31, 1999
with automatic one-year renewals thereafter, provided that neither Mr. Osborn
nor Enterprises has provided the other with a notice of termination 120 days
prior to the expiration date of the Osborn Employment Agreement. Mr. Osborn
also agreed not to compete against Enterprises throughout the term of his
employment and for one year thereafter, and not to disclose any confidential
information during and after the term of his employment. In exchange for his
services and covenants, Enterprises agreed to compensate Mr. Osborn with a
base salary of $215,000 per annum (subject to an annual cost of living
adjustment), an automobile allowance of $800 per month and reimbursement of
up to $6,000 per annum for automobile-related costs. After the consummation
of the Offerings, the Compensation Committee may, in its sole discretion,
approve a higher annual base salary for Mr. Osborn and an annual bonus of up
to 60% of Mr. Osborn's base salary. In the event Mr. Osborn no longer
provides services to Enterprises due to (i) his death or physical or mental
disability or (ii) his dismissal without Cause (as defined in the Osborn
Employment Agreement) or as a result of a material reduction in his
authority, then Mr. Osborn is entitled to receive his base compensation from
the date of his termination through the first anniversary of such termination
or through the remaining term of his employment agreement, respectively.
Effective May 10, 1996, the Company and Mr. Osborn agreed that Mr. Osborn
would resign as President to become Vice Chairman of the Company.
Effective September 1, 1994, Enterprises entered into an employment
agreement with Gary W. Hubert (the "Hubert Employment Agreement"). Pursuant
to the terms of the Hubert Employment Agreement, Mr. Hubert agreed to serve
as Senior Vice President and Managing Director of the Company and Enterprises
for a five-year period ending on August 31, 1999 with automatic one-year
renewals thereafter, provided that neither Mr. Hubert nor Enterprises has
provided the other with notice of termination 120 days prior to the
expiration of the Hubert Employment Agreement. Mr. Hubert also agreed not to
compete against Enterprises throughout the term of his employment and for one
year thereafter, and not to disclose any confidential information during and
after the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Hubert with a base salary of $215,000
per annum (subject to an annual cost of living adjustment), an automobile
allowance of $800 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. After the consummation of the Offerings, the
Compensation Committee may, in its sole discretion, approve a higher annual
base salary for Mr. Hubert and an annual bonus of up to 60% of Mr. Hubert's
base salary. In the event Mr. Hubert no longer provides services to
Enterprises due to (i) his death or physical or mental disability or (ii) his
dismissal without Cause (as defined in the Hubert Employment Agreement) or as
a result of a material reduction in his authority, then Mr. Hubert is
entitled to receive his base compensation from the date of his termination
through the first anniversary of such termination or through the remaining
term of his employment agreement, respectively.
Effective September 1, 1994, Enterprises entered into an employment
agreement with Joel D. Aaseby (the "Aaseby Employment Agreement"). Pursuant
to the terms of the Aaseby Employment Agreement, Mr. Aaseby agreed to serve
as Vice President--Finance of Enterprises for a five-year period ending on
August 31, 1999 with automatic one-year renewals thereafter, provided that
neither Mr. Aaseby nor Enterprises has provided the other with notice of
termination 120 days prior to the expiration of the Aaseby Employment
Agreement. Mr. Aaseby also agreed not to compete with Enterprises throughout
the term of his employment and for one year thereafter, and not to disclose
any confidential information during and after the term of his employment. In
exchange for his services and covenants, Enterprises agreed to compensate Mr.
Aaseby with a base salary of $110,000 per annum (subject to an annual cost of
living adjustment), an automobile allowance of $500 per month and
reimbursement of up to $6,000 per annum for automobile-related costs. After
the consummation of the Offerings, the Compensation Committee may, in its
sole discretion, approve a higher annual base salary for Mr. Aaseby and an
annual bonus of up to 40% of Mr. Aaseby's base salary. In the event Mr.
Aaseby no longer provides services to Enterprises due to (i) his death or
physical or mental disability or (ii) his dismissal without Cause (as defined
in the Aaseby Employment Agreement) or as a result of a material reduction in
his authority, then Mr. Aaseby is entitled to receive his base compensation
from the date of his termination through the first anniversary of such
termination or through the remaining term of his employment agreement,
respectively. In the event Mr. Aaseby no longer provides services to
Enterprises after his initial five-year
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<PAGE>
term of employment or during his initial five-year term for any reason other
than his voluntary termination, then Mr. Aaseby has the option for 540 days
following his termination to purchase from Enterprises one of its Burger King
restaurants for a specified price.
Effective September 1, 1994, Enterprises entered into an employment
agreement with Scott E. Vasatka (the "Vasatka Employment Agreement").
Pursuant to the terms of the Vasatka Employment Agreement, Mr. Vasatka agreed
to serve as Vice President--Human Resources of Enterprises for a five-year
period ending on August 31, 1999 with automatic one-year renewals thereafter,
provided that neither Mr. Vasatka nor Enterprises has provided the other with
notice of termination 120 days prior to the expiration of the Vasatka
Employment Agreement. Mr. Vasatka also agreed not to compete against
Enterprises throughout the term of his employment and for one year
thereafter, and not to disclose any confidential information during and after
the term of his employment. In exchange for his services and covenants,
Enterprises agreed to compensate Mr. Vasatka with a base salary of $105,000
per annum (subject to an annual cost of living adjustment), an automobile
allowance of $500 per month and reimbursement of up to $6,000 per annum for
automobile-related costs. After the consummation of the Offerings, the
Compensation Committee may, in its sole discretion, approve a higher annual
base salary for Mr. Vasatka and an annual bonus. In the event Mr. Vasatka no
longer provides services to Enterprises due to (i) his death or physical or
mental disability or (ii) his dismissal without Cause (as defined in the
Vasatka Employment Agreement) or as a result of a material reduction in his
authority, then Mr. Vasatka is entitled to receive his base compensation from
the date of his termination through the first anniversary of such termination
or through the remaining term of his employment agreement, respectively.
STOCK OPTION PLAN
Subject to the approval of the Company's existing stockholders and the
consummation of the Offerings, the Company has adopted the Stock Option Plan
pursuant to which options and stock appreciation rights are granted for the
purpose of attracting and motivating key employees and non-employee directors
of the Company. The Stock Option Plan will be administered by the
Compensation Committee. The Stock Option Plan will provide for the grant of
options to purchase shares of Common Stock that are either "qualified," that
is, those that satisfy the requirements of Section 422 of the Code for
incentive stock options, or "non-qualified," that is, those that are not
intended to satisfy the requirements of Section 422 of the Code, as well as
stock appreciation rights ("SARs") on such options. The Compensation
Committee will recommend, subject to the approval of the disinterested
members of the Board of Directors, which individuals will be granted options
and SARs, the number of shares to be optioned and other terms and conditions
applicable to the grants. Under the terms of the Stock Option Plan, options
will be at the market price of the Common Stock at the time of grant. If an
option holder ceases to be an employee of the Company, the holder has three
months to exercise the holder's vested options, unless the holder's
termination was by reason of death or disability, in which case the holder
(or his estate) has twelve months to exercise his vested options, or
retirement, in which case the holder has three years to exercise his vested
options.
The maximum number of shares of Common Stock reserved for issuance under
the Stock Option Plan is shares (subject to adjustment for certain
events such as stock splits and stock dividends). The Company intends to file
immediately after the Offerings a registration statement on Form S-8 under
the Securities Act to register the shares of Common Stock reserved for
issuance under the Stock Option Plan and the shares reserved for issuance to
Messrs. Stahurski and Vasatka described below. Independent directors of the
Company will each be awarded options to purchase shares of the Company's
Common Stock, at an exercise price equal to the initial public offering price
of the Common Stock, of which will vest on each of the first through
the anniversaries of the date of grant.
In connection with their employment by the Company, on September 1, 1994,
the Company granted each of Messrs. Stahurski and Vasatka options to purchase
5.62 shares of Common Stock, pursuant to separate option agreements which are
not part of the Stock Option Plan. These options vest at a rate of 50% per
annum. Each of Messrs. Stahurski and Vasatka intend to exercise their options
simultaneously with the consummation of the Offerings.
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PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth as of April 1, 1996, certain information prior
to and after the Offerings regarding beneficial ownership of Common Stock
held by (i) each director and each of the Named Executives who own shares of
Common Stock, (ii) all directors and executive officers of the Company as a
group, (iii) each person known by the Company to own beneficially more than
5% of the Common Stock and (iv) to the extent not set forth pursuant to the
foregoing, each potential selling stockholder (the "Selling Stockholders") if
the Underwriters' over-allotment is exercised in full. Each individual or
entity named has sole investment and voting power with respect to shares of
Common Stock indicated as beneficially owned by them, except where otherwise
noted.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AFTER OFFERINGS IF
SHARES BENEFICIALLY NUMBER OF OVER-
OWNED PRIOR TO THE SHARES BEING ALLOTMENT OPTION
OFFERINGS(1) OFFERED IF OVER- EXERCISED IN FULL (1)
-------------------------- ALLOTMENT OPTION ----------------------
NUMBER PERCENTAGE EXERCISED IN FULL NUMBER PERCENTAGE
------------ ------------ ----------------- -------- ----------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Lawrence E. Jaro .................... 227.10(2) 22.7% 0
William C. Osborn ................... 93.95(3) 9.4 0
Gary W. Hubert ...................... 33.71 3.4 0
Joel D. Aaseby ...................... 11.24 1.1 0
Thomas H. Quinn(4) .................. 33.71 3.4 0
John W. Jordan ...................... 44.35(5) 4.4 0
A. Richard Caputo, Jr.(6) ........... 14.61 1.5 0
David W. Zalaznick .................. 44.35 4.4 0
Scott E. Vasatka .................... 5.62(7) 0.6 0
All directors and executive officers
as a group (9 persons) ............. 508.64(8) 50.6 0
OTHER PRINCIPAL AND
SELLING STOCKHOLDERS:
MCIT PLC(9) ......................... 285.31 28.5%
Leucadia Investors, Inc.(10) ....... 71.33 7.1
BancBoston Capital Inc. ............. 112.36(11) 10.1
PMI Mezzanine Fund, L.P. ............ 71.72(12) 6.7
</TABLE>
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned
by such person, but not deemed outstanding for the purpose of calculating
the percentage owned by each other person listed. As of April 1, 1996, the
Company had 1,000.02 shares of Common Stock issued and outstanding. The
table gives effect to the Recapitalization. See "Description of Capital
Stock--The Recapitalization."
(2) Includes 193.39 shares of Common Stock beneficially owned by various
affiliates of Mr. Jaro. Mr. Jaro's address is c/o the Company, 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154.
(3) Includes 60.24 shares of Common Stock beneficially owned by various
affiliates of Mr. Osborn. Mr. Osborn's address is c/o the Company, 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154.
(4) Mr. Quinn is President and Chief Operating Officer of Jordan Industries,
Inc., a company affiliated with The Jordan Company, an entity with which
Messrs. Caputo, Jordan and Zalaznick are also affiliated.
(5) Represents 44.35 shares of Common Stock held by John W. Jordan II
Revocable Trust, of which Mr. Jordan is trustee.
(6) Mr. Caputo is a partner of The Jordan Company, an entity with which
Messrs. Jordan and Zalaznick are also affiliated.
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(7) Represents an immediately exercisable option to purchase shares of Common
Stock.
(8) Includes all shares owned directly or beneficially by directors and
executive officers, including shares beneficially owned by affiliates of
Messrs. Jaro and Osborn.
(9) The principal address of MCIT is c/o Jordan/Zalaznick Advisors, Inc., 9
West 57th Street, New York, New York 10019.
(10) The principal address of Leucadia is 315 Park Avenue South, New York, New
York 10010.
(11) Represents immediately exercisable warrants to purchase 112.36 shares of
Non-Voting Common Stock (as hereinafter defined) held by BancBoston
Capital Inc. ("BancBoston") an affiliate of The First National Bank of
Boston ("FNBB"). The principal address of BancBoston is 100 Federal
Street, Boston, Massachusetts 02110. See "Description of Capital
Stock--Non-Voting Common Stock."
(12) Represents immediately exercisable warrants to purchase 71.72 shares of
Common Stock. The address of PMI Mezzanine Fund, L.P. ("PMI") is 610
Newport Center Drive, Suite 1100, Newport Beach, California 92660. Upon
the consummation of the Offerings, all of the warrants held by PMI to
purchase shares of Common Stock will terminate.
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DESCRIPTION OF CAPITAL STOCK
The following summarizes certain provisions of the Certificate of
Incorporation, the Bylaws and the Stockholders Agreement (as hereinafter
defined), in each case after giving effect to the Recapitalization (described
below). Such summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Certificate of Incorporation, the Bylaws and the Stockholders Agreement,
including the definitions therein of certain terms, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
GENERAL
The Board of Directors and the Company's stockholders have approved,
subject to the closing of the Offerings, the adoption of the Certificate of
Incorporation and Bylaws. The Certificate of Incorporation will provide for,
among other things, the authorization of shares of Common Stock,
shares of non-voting common stock (the "Non-Voting Common Stock"), and
1,000,000 shares of serial Preferred Stock.
THE RECAPITALIZATION
The Company's capital structure as reflected in its historical
consolidated financial statements consists of four classes of common stock
(Classes A, B, C and D) (the "Original Common Stock") and four classes of
Original Preferred Stock (Special Voting Preferred Stock and Classes A(1, A(2
and B Preferred Stock). The Company eliminated the Special Voting Preferred
Stock in February 1996. The various classes of common stock and preferred
stock differ principally in respect of voting, dividend and liquidation
rights.
The Company and its stockholders have entered into a recapitalization
agreement (the "Recapitalization Agreement"). Pursuant to the
Recapitalization Agreement, upon the consummation of the Offerings, the
Certificate of Incorporation, Bylaws and the stockholders agreement, dated
September 1, 1994, between the Company and all of its stockholders prior to
the Offerings (the "Stockholders Agreement") will be amended and restated so
that, among other things, (i) each share of Original Common Stock will be
converted into a share of Common Stock and the Company will effect a stock
split resulting in the stockholders prior to the Offerings receiving
shares of Common Stock for each share of Original Common Stock originally
owned; (ii) the outstanding classes of Original Preferred Stock will be
redeemed with a portion of the net proceeds from the Offerings; and (iii) the
stockholders of the Company prior to the Offerings and the Company will enter
into an amended Stockholders Agreement pursuant to which such stockholders
will continue to be entitled to incidental registration rights and certain
stockholders will be entitled to demand registration rights with respect of
the Common Stock described under "--Registration Rights."
After giving effect to the Recapitalization and the redemption of the
outstanding Original Preferred Stock, but not giving effect to the Offerings,
the Company will have outstanding shares of Common Stock, shares of
Non-Voting Common Stock, and no shares of Preferred Stock. See "Use of
Proceeds" and "Principal and Selling Stockholders."
COMMON STOCK
Following the Offerings, shares of Common Stock will be outstanding.
All of the issued and outstanding shares of Common Stock are, and upon the
consummation of the Offerings the shares of Common Stock offered hereby will
be, fully paid and non-assessable. Each holder of shares of Common Stock
(other than the Non-Voting Common Stock) is entitled to one vote per share on
all matters to be voted on by stockholders. The holders of Common Stock are
entitled to dividends and other distributions if, as and when declared by the
Board of Directors out of assets legally available therefor, subject to the
rights of the Lenders and the restrictions, if any, imposed by other
indebtedness outstanding from time to time. See "Dividend Policy."
Upon the liquidation, dissolution or winding up of the Company, the
holders of shares of Common Stock would be entitled to share ratably in the
distribution of all of the Company's assets remaining
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available for distribution after satisfaction of all its liabilities and the
payment of the liquidation preference of any outstanding share of Preferred
Stock. The holders of Common Stock have no preemptive or other subscription
rights to purchase shares of stock of the Company, nor are such holders
entitled to the benefits of any sinking fund provisions. As of April 1, 1996,
there were 29 beneficial owners of Common Stock.
NON-VOTING COMMON STOCK
Immediately prior to the consummation of the Offerings, the Company
authorized shares of Non-Voting Common Stock for issuance. The Non-Voting
Common Stock is identical to the Common Stock in all respects except voting
and conversion rights. The holders of Non-Voting Common Stock have no right
to vote. Upon transfer to an entity not restricted from holding voting common
stock, each share of Non-Voting Common Stock will automatically convert into
an equal number of shares of Common Stock, entitling the holders thereof to
voting rights. The Non-Voting Common Stock will not be listed on the Nasdaq
National Market or any other exchange.
PREFERRED STOCK
The Certificate of Incorporation will authorize the Board of Directors to
create and issue one or more series of Preferred Stock and determine the
rights and preferences of each series, to the extent permitted by the
Certificate of Incorporation and applicable law. Among other rights, the
Board of Directors may determine, without the further vote or action by the
Company's stockholders, (i) the number of shares constituting the series and
the distinctive designation of the series; (ii) the dividend rate on the
shares of the series, whether dividends will be cumulative and, if so, from
which date or dates, and the relative rights of priority, if any, of payment
of dividends on shares of the series; (iii) whether the series shall have
voting rights, in addition to the voting rights provided by law and, if so,
the terms of such voting rights; (iv) whether the series shall have
conversion privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine; (v) whether or not the
shares of that series shall be redeemable or exchangeable and, if so, the
terms and conditions of such redemption or exchange, as the case may be,
including the date or dates upon or after which they shall be redeemable or
exchangeable, as the case may be, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates; (vi) whether the series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms and
amount of such sinking fund and (vii) the rights of the shares of the series
in the event of voluntary or involuntary liquidation, dissolution or winding
up of the Company and the relative rights or priority, if any, of payment of
shares of the series. Except for any difference so provided by the Board of
Directors, the shares of all series of Preferred Stock will rank on a parity
with respect to the payment of dividends and the distribution of assets upon
liquidation.
REGISTRATION RIGHTS
In connection with their prior acquisitions of securities of the Company,
the Jordan Investors (as defined) (other than MCIT), BancBoston and PMI have
been granted by the Company demand and incidental registration rights. All
stockholders of the Company prior to the Offerings have been granted
incidental registration rights.
In general, each of (i) the holders of a majority of shares of Common
Stock held by the Jordan Investors (other than MCIT) and (ii) BancBoston have
the right to cause the Company to register their holdings of Common Stock
under the Securities Act (such right being referred to as a "demand
registration right"), subject to certain exceptions. At any time after
September 1, 1999, the holders of a majority of shares of Common Stock held
by PMI will also be entitled to substantially comparable demand registration
rights as the Jordan Investors and BancBoston, subject to certain exceptions.
All stockholders of the Company prior to the Offerings are each entitled, if
the Company determines to file a registration statement covering any of its
securities under the Securities Act, other than a registration statement on
Form S-4 or Form S-8, to require the Company to use its best efforts to
include a requested
53
<PAGE>
amount of their shares of Common Stock in the Company's registered offering
(such right being referred to as an "incidental registration right"), subject
to certain limitations. The number of shares of Common Stock registered
pursuant to a demand or incidental registration may be reduced pursuant to a
specified formula if the managing underwriter determines that market
conditions require a limitation on the number of such shares registered.
The Company is required to bear all registration expenses in connection
with each demand and incidental registration and has agreed to indemnify the
holders of demand and incidental registration rights against, and provide
contribution with respect to, certain liabilities under the Securities Act in
connection with incidental and demand registrations. All holders of demand
and incidental registration rights have agreed not to exercise their
registration rights with respect to the Offerings and for a period of 180
days after the date of this Prospectus. All stockholders of the Company prior
to the Offerings are entitled to incidental registration rights with respect
to 1,123.62 shares of Common Stock and certain stockholders of the Company
are entitled to demand registration rights with respect to 461.07 shares of
Common Stock. See "Principal and Selling Stockholders" and "Shares Eligible
for Future Sale."
CERTIFICATE OF INCORPORATION AND BYLAWS
The rights of the Company's stockholders are governed by the Delaware
Corporation Law, the Certificate of Incorporation, and the Bylaws. Certain
provisions of the Certificate of Incorporation and the Bylaws, which are
summarized below, may discourage or make more difficult a takeover attempt
that a stockholder might consider in its best interest. Such provisions may
also adversely affect the prevailing market price for the Common Stock.
Preferred Stock. The Board of Directors will have the authority, without
action by the Company's stockholders, to fix the rights, privileges and
preferences of, and to issue up to 1,000,000 shares of, Preferred Stock. The
issuance of such Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of the Company without further action by
the stockholders and may adversely affect the voting and other rights of the
holders of the Common Stock, including the loss of voting control to others.
Following the closing of the Offerings, there will be no shares of Preferred
Stock issued and outstanding and the Company currently has no plans to issue
any shares of Preferred Stock.
No Stockholder Action by Written Consent; Special Meetings. The
Certificate of Incorporation and Bylaws will prohibit stockholders from
taking action by written consent in lieu of an annual or special meeting. In
addition, special meetings of stockholders may be called only by the Chairman
of the Board, the President, or a majority of the Board of Directors. Special
meetings may not be called by stockholders.
Advance Notice Requirements for Stockholder Proposals. The Bylaws will
establish advance notice procedures with regard to stockholder proposals.
These procedures provide that the notice of stockholder proposals must be
received by the Company no later than (i) with respect to an annual meeting
of stockholders, 60 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders and (ii) with respect to a special
meeting of stockholders, no later than the close of business on the tenth day
following the date on which notice of such meeting is first sent or given to
stockholders. Each stockholder proposal must set forth certain information as
specified in the Bylaws.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND THE BKC FRANCHISE AGREEMENTS
Delaware Law. Section 203 of the Delaware Corporation Law ("Section 203")
and the BKC franchise agreements contain certain provisions that may make
more difficult the acquisition of control of the Company by means of a tender
offer, open market purchase, proxy fight or otherwise. Section 203 is
designed to encourage persons seeking to acquire control of the Company to
negotiate with the Board of Directors and the restrictions contained in the
BKC franchise agreements are designed to prevent individuals who are
unacceptable to BKC from controlling Burger King franchises. Therefore, these
provisions could have the effect of discouraging a prospective acquiror from
making a tender offer or otherwise attempting to obtain control of the
Company. To the extent that these provisions discourage takeover attempts,
they could deprive stockholders of opportunities to realize takeover premiums
for their shares or could depress the market price of the shares of the
Company. Set forth below is a
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<PAGE>
description of the relevant provisions of Section 203 and the BKC franchise
agreements. The description is only intended as a summary and is qualified in
its entirety by reference to Section 203 and the BKC franchise agreements.
Section 203 prohibits certain business combinations between a publicly
held Delaware corporation, such as the Company after the Offerings, and any
interested stockholder for a period of three years after the date in which a
party became an interested stockholder, unless (i) prior to that date the
board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested shareholder, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the
interested stockholder held at least 85% of the stock of the corporation
which is not held by directors, officers or certain employee stock option
plans, or (iii) at or subsequent to such time, the business combination is
approved by the board of directors and authorized at a meeting of
stockholders by at least 66 2/3 % of the voting stock of the corporation not
held by the interested stockholder.
The restrictions set forth in Section 203 shall not apply if (i) the
corporation's original certificate of incorporation contains a provision
whereby the corporation expressly elects not to be governed by Section 203,
(ii) the corporation, by action of its stockholders, adopts an amendment to
its certificate of incorporation or bylaws whereby the corporation expressly
elects not to be governed by Section 203 (such amendment would not be
effective until 12 months after adoption under certain circumstances and
would not apply to any business combination between such corporation and any
person who became an interested stockholder of such corporation at or prior
to such adoption) or (iii) the business combination is with an interested
stockholder at a time when the restrictions contained in Section 203 did not
apply by reason of any of the foregoing. The Certificate of Incorporation
expressly provides that the Company elects to be governed by Section 203.
BKC Franchise Agreements. Current BKC policies and procedures require the
Company and each of its subsidiaries which is a franchisee to seek BKC
consent prior to making certain changes to their capital structure and
modifications to their corporate governance documents. Pursuant to the BKC
franchise agreements, transfers or issuances by the Company of its equity
securities or transfers that result in a change of control of the Company in
connection with a public tender offer, require the consent of BKC. If BKC
were to object to any issuance or transfer by the Company of its equity
securities or transfers that result in a change of control of the Company in
connection with a public tender offer, BKC could declare an event of default
under its franchise agreements which would have a material adverse effect on
the Company's financial condition and results of operations. In addition, the
Company's financial flexibility and ability to issue equity securities in
connection with acquiring future Burger King restaurants could be limited by
BKC. Any such limitations would affect the Company's growth strategy and
could have a material adverse effect on the Company's financial condition and
results of operations.
NASDAQ NATIONAL MARKET LISTING
Application has been made for inclusion of the Common Stock on the Nasdaq
National Market under the trading symbol "AKNG."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of important terms of certain indebtedness of
the Company. For more complete information regarding such indebtedness,
reference is made to the definitive agreements and instruments setting forth
the terms of such indebtedness, copies of which have been filed as exhibits
to the Registration Statement of which this Prospectus is a part and which
are incorporated by reference herein.
CREDIT AGREEMENT
The Credit Agreement provides for up to $100.0 million of senior secured
indebtedness, consisting of two term loans of $45.0 million ("Term Loan A")
and $40.0 million ("Term Loan B" and, together with the Term Loan A, the
"Term Loans"), and $15.0 million of Revolving Loans (the Revolving Loans,
together with the Term Loans, the "Loans"). Subject to certain restrictions,
Enterprises may use the full commitment amount of the Revolving Loans for the
issuance of documentary or standby letters of credit.
Term Loan A and the Revolving Loans bear interest at a rate of the lower
of either FNBB's annual rate of interest (the "Base Rate") plus 1.5% or the
Eurodollar Rate (as defined in the Credit Agreement) plus 2.75%, and mature
on January 31, 2002. The interest rates for Term Loan A and the Revolving
Loans are subject to downward adjustment based on a debt service ratio of
Enterprises on specified dates. As of April 1, 1996, the outstanding
principal balance under the Revolving Loans was $4.0 million. Term Loan B
bears interest at a rate of the lower of either the Base Rate plus 2% or the
Eurodollar Rate plus 3.25%, and matures on January 31, 2004. Interest on
Loans utilizing the Base Rate is payable quarterly in arrears and interest on
Loans utilizing the Eurodollar Rate is payable at the end of each respective
interest period. Enterprises is required to repay the principal amount on the
Term Loans in consecutive quarterly installments pursuant to payment
schedules specified in the Credit Agreement. In addition, Enterprises is
required to make annual prepayments on the principal amount of the Term Loans
based on Consolidated Excess Cash Flow (as defined in the Credit Agreement).
Due to various amendments to the Credit Agreement and as a result of
Enterprises' various acquisitions, Enterprises has not been required to
prepay any amounts under the Term Loans based on Consolidated Excess Cash
Flow since entering into the Credit Agreement.
Borrowings under the Credit Agreement are secured by a first priority
security interest in all present and future acquired tangible assets of
Enterprises and certain of its subsidiaries (other than real estate and the
franchise agreements) and Enterprises' repayment obligations are guaranteed
by certain of its subsidiaries and the Company.
The Credit Agreement contains certain customary covenants with respect to,
among other things: (i) maintenance by Enterprises and its subsidiaries of
prescribed ratios of cash flow to total debt service and cash flow to total
interest expense (each as determined in the Credit Agreement); (ii)
maintenance by Enterprises and its subsidiaries of minimum levels of cash
flow (as determined); and (iii) restrictions on indebtedness, distributions,
investments, liens, sales and leasebacks, mergers, consolidations,
acquisitions, sales and dispositions of assets, capital expenditures, and
restaurant development. As of April 1, 1996, the Company was in compliance
with all such covenants and restrictions.
The Term Loans may be prepaid without penalty, in full or in part, at any
time at the option of Enterprises.
SENIOR SUBORDINATED NOTES
On February 7, 1996, the Company, Enterprises, and PMI entered into a note
purchase agreement (the "Senior Note Purchase Agreement") for the purchase by
PMI of $15.0 million aggregate principal amount of Senior Subordinated Notes
(collectively, the "Senior Subordinated Notes"). The Senior Subordinated
Notes are general, unsecured obligations of Enterprises and are guaranteed by
certain subsidiaries of Enterprises. The Senior Subordinated Notes mature on
January 31, 2005, without a prepayment schedule, and bear interest at a rate
of 12.5% per annum, payable quarterly in arrears.
The Senior Subordinated Notes are subordinated in right of payment to the
loans under the Credit Agreement. The Senior Subordinated Notes may, at the
election of the Company, be prepaid in whole or
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<PAGE>
in part, at any time, subject to a specified prepayment premium. Upon (i) a
Change of Control (as defined in the Senior Note Purchase Agreement), (ii) a
merger, reorganization, or consolidation involving the Company or
Enterprises, (iii) the sale or disposition of all or substantially all of the
assets of the Company, Enterprises, and their subsidiaries, taken as a whole,
(iv) the occurrence of one or more events that give rise to a mandatory
prepayment obligation with respect to other indebtedness of the Company, or
(v) the occurrence of a public offering in which shares of Common Stock are
being registered for sale by holders other than the Company or PMI (or its
designated transferee), Enterprises, at the option of the holders of a
majority of the Senior Subordinated Notes, may be required to prepay the
Senior Subordinated Notes subject to a specified prepayment premium.
The Senior Note Purchase Agreement contains certain financial and negative
covenants which, among other things, require the maintenance of certain
financial ratios and restrict the ability of the Company and Enterprises to
incur indebtedness, make investments, incur liens, enter into sales and
leasebacks, enter into transactions with affiliates, enter into mergers,
guarantee other indebtedness, consolidate or dispose of assets and make
capital expenditures. The Senior Note Purchase Agreement also restricts the
ability of Enterprises to distribute money to the Company. As of April 1,
1996, the Company was in compliance with all such covenants and restrictions.
Assuming net proceeds of the Offerings of $91.5 million and proceeds from
borrowings under the New Credit Facility of $79.9 million, the Company
intends to use $18.5 million of such total proceeds to prepay the Senior
Subordinated Notes in full (including a prepayment penalty of approximately
$3.5 million). See "Use of Proceeds."
SUBORDINATED NOTES
On February 7, 1996, the Company and MCIT entered into an amended and
restated purchase agreement (the "Subordinated Note Purchase Agreement")
which related to the prior purchase by MCIT of $11.0 million aggregate
principal amount of Subordinated Notes (collectively, the "Subordinated
Notes") and certain shares of capital stock of the Company. The Subordinated
Notes are general, unsecured obligations of the Company. The Subordinated
Notes mature on August 31, 2005, without a prepayment schedule, and bear
interest at a rate of 12.75% per annum, payable semi-annually in arrears.
The Subordinated Notes are subordinated to the Company's guarantee
obligations in respect of borrowings under the Credit Agreement. Subject to
their subordination terms, the Company may at its option prepay the
Subordinated Notes, in whole or in part; however, the Company is required to
prepay all Subordinated Notes upon a Change of Control (as defined in the
Subordinated Note Purchase Agreement). The Company is not subject to a
prepayment premium upon a voluntary or mandatory prepayment of the
Subordinated Notes.
The Subordinated Note Purchase Agreement contains negative covenants,
similar to those contained in the Senior Note Purchase Agreement, and
financial maintenance covenants.
Assuming net proceeds of the Offerings of $91.5 million and proceeds from
borrowings under the New Credit Facility of $79.9 million, the Company
intends to use $11.0 million of such total proceeds to prepay the
Subordinated Notes in full. See "Use of Proceeds."
SELLER NOTES
In connection with the acquisition of certain Burger King restaurants from
Messrs. Jaro and Osborn in September 1994, the Company issued promissory
notes to entities controlled by Messrs. Jaro and Osborn in the aggregate
principal amount of $4.4 million (collectively and as amended and restated,
the "Seller Notes"). The Seller Notes are junior in right of payment to the
Senior Subordinated Notes and the Company's guarantee obligations in respect
of borrowings under the Credit Agreement and bear interest at a rate of
12.75% per annum, payable semi-annually in arrears. The Seller Notes have a
scheduled maturity of August 31, 2004.
The Company may prepay the Seller Notes only under certain specified
limited conditions and is required to prepay the Seller Notes in full without
a prepayment premium upon the occurrence of
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specified events, including upon (i) an acceleration of the Subordinated
Notes, (ii) a default by the Company in the payment of any principal on a
Seller Note, (iii) the commencement of a bankruptcy proceeding by the Company
or certain of its subsidiaries or (iv) a Change of Control (which is defined
to have the same meaning as set forth in the Subordinated Note Purchase
Agreement).
Assuming net proceeds of the Offerings of $91.5 million and proceeds from
borrowings under the New Credit Facility of $79.5 million, the Company
intends to use $4.4 million of such total proceeds to prepay the Seller Notes
in full. See "Use of Proceeds."
BBI NOTES
In connection with the acquisition of certain Burger King restaurants from
Sheldon Friedman and affiliates in November 1994, the Company issued
promissory notes to BancBoston Investments, Inc., an affiliate of FNBB, in
the aggregate principal amount of $600,000 (collectively, the "BBI Notes").
The BBI Notes are junior in right of payment to the Senior Subordinated
Notes, the Company's guarantee obligations in respect of borrowings under the
Credit Agreement, the Subordinated Notes and the Seller Notes and bear
interest at a rate of 6% per annum, payable quarterly in arrears. The BBI
Notes have a scheduled maturity date of March 31, 2005.
The Company may at its option prepay the BBI Notes, in whole or in part.
The Company is required to prepay all BBI Notes upon a Change of Control
(which is defined to have the same meaning as set forth in the Subordinated
Note Purchase Agreement). The Company is not subject to a prepayment premium
upon a voluntary or mandatory prepayment of the BBI Notes.
Assuming net proceeds of the Offerings of $91.5 million and proceeds from
borrowings under the New Credit Facility of $79.5 million, the Company
intends to use $600,000 of such total net proceeds to prepay the BBI Notes in
full. See "Use of Proceeds."
BKC NOTE
In connection with the acquisition of certain Burger King restaurants from
the stockholders of QSC, Inc. and Ro-Lank, Inc., AmeriKing Tennessee
Corporation I ("ATCI"), a wholly owned subsidiary of Enterprises, issued a
Secured Promissory Note (the "BKC Note") to BKC in the principal amount of
$6.9 million. The BKC Note bears interest at a rate of 9.75% per annum,
payable monthly in arrears, and is secured by a pledge of all of the
outstanding capital stock of ATCI.
Pursuant to the terms of the BKC Note, on February 7, 1996 ATCI paid down
$827,633 of the principal from the proceeds of the sale of the building and
underlying real estate of one of its Burger King restaurants. ATCI may at its
option prepay the BKC Note, in whole or in part, and may be required to
prepay the BKC Note upon an Event of Default (as defined therein). Events of
Default under the BKC Note include, among other things, failure to make
required payments or failure by ATCI to meet BKC franchise agreement
requirements.
Borrowings under the BKC Note are secured by a pledge by Enterprises of
all of the issued and outstanding capital stock of ATCI.
The BKC Note matures on July 19, 1996 and is expected to be refinanced on
a long term basis.
FAC NOTE
In connection with the acquisition of certain Burger King restaurants from
Daniel White and affiliate, AmeriKing Colorado Corporation I ("ACCI") a
wholly owned subsidiary of Enterprises, issued a Promissory Note to Franchise
Acceptance Corporation Limited (the "FAC Note") in the principal amount of
$1.87 million. Franchise Acceptance Corporation Limited is an affiliate of
BKC. The FAC Note bears an interest rate of the Program Rate (as defined
therein) plus 2.75% per annum, payable monthly in arrears. The FAC Note
matures on January 25, 2006 and requires ACCI to make monthly principal
payments of $15,541.67 (1/120 of the original principal amount) starting
January 25, 1996 for each month up to maturity.
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ACCI may at its option, subject to certain restrictions, prepay the FAC
Note, in whole or in part. However, ACCI is required to continue its monthly
principal payments following any partial voluntary prepayment. In addition,
ACCI is required to pay the FAC Note in full following any Event of Default
(as defined therein). Events of Default under the FAC Note include, among
other things, failure to make required payments or failure by ACCI to meet
BKC franchise agreement requirements.
Borrowings under the FAC Note are secured by a security interest in all
present and future restaurant-related assets of ACCI.
The FAC Note is expected to remain outstanding after consummation of the
Offerings.
CERTAIN TRANSACTIONS
Subordinated Debt Holders. PMI, MCIT, affiliates of Messrs. Jaro and
Osborn and BancBoston are the holders of Senior Subordinated Notes,
Subordinated Notes, Seller Notes and the BBI Notes, respectively. The Senior
Subordinated Notes bear interest at a rate of 12.5% per annum, payable
quarterly in arrears, the Subordinated Notes and Seller Notes bear interest
at a rate of 12.75% per annum, payable semi-annually in arrears, and the BBI
Notes bear interest at a rate of 6% per annum, payable quarterly in arrears.
For the three-month period ended April 1, 1996, the Company accrued $286,000
as interest expense to PMI under the Senior Subordinated Notes and during
fiscal 1995, the Company paid to MCIT, the holders of Seller Notes and
BancBoston Investments, Inc. approximately $1.4 million, $560,000 and $36,000
as interest expense under the Subordinated Notes, the Seller Notes and the
BBI Notes, respectively. Simultaneously with the consummation of the
Offerings, the Company will use approximately $35.6 million from the net
proceeds of the Offerings to prepay the principal amount and accrued interest
under each of the Senior Subordinated Notes, the Subordinated Notes, the
Seller Notes and the BBI Notes. PMI, MCIT, and BancBoston are principal
stockholders of the Company. Mr. Jaro is the Company's Chairman, Chief
Executive Officer, Managing Owner and a principal stockholder and Mr. Osborn
is the Company's Vice Chairman, Managing Owner, director and a principal
stockholder. See "Use of Proceeds" and "Description of Certain Indebtedness."
TJC Management Corporation. On September 1, 1994, the Company and
Enterprises entered into the TJC Consulting Agreement with TJC. Under the TJC
Consulting Agreement, the Company retained TJC to render consulting services
to it regarding the Company and its subsidiaries, their financial and
business affairs and their relationships with their lenders and stockholders,
and the operation and expansion of their business. The TJC Consulting
Agreement expires on September 1, 2004, but is automatically renewed for
successive one-year terms, unless either party provides written notice of
termination 60 days prior to the scheduled renewal date. Prior to the
consummation of the Offerings, the TJC Consulting Agreement provided for an
annual consulting fee payable on a quarterly basis equal to the higher of (i)
$500,000 or (ii) 2.5% of the Company's cash flow (as determined in the TJC
Consulting Agreement). In addition, the TJC Consulting Agreement provided for
payment to TJC of (i) an investment banking and sponsorship fee of up to 2%
of the purchase price of certain acquisitions or sales involving the Company,
Enterprises or any of their subsidiaries and (ii) a financial consulting fee
of up to 1% of any debt, equity or other financing arranged by the Company
with the assistance of TJC. During fiscal 1995 and the three months ended
April 1, 1996, the Company paid consulting fees to TJC of $477,609 and
$125,000, respectively, pursuant to the terms of the TJC Consulting
Agreement. In connection with the acquisition on February 7, 1996 by certain
subsidiaries of Enterprises of an aggregate of 36 Burger King restaurant
franchises located in the States of Indiana, Kentucky, Ohio, Virginia and
North Carolina, the Company paid to TJC an investment banking fee of $1.0
million and paid fees totalling $300,000 to certain members of the Company's
senior management. In connection with the consummation of the Offerings, the
Company intends to amend the TJC Consulting Agreement to provide for a
reduced investment banking fee. If the Michigan Acquisition and related
financings are consummated by the Company, it is expected that the Company
will pay to TJC an investment banking fee of $1.0 million based upon this
amended formula. Messrs. Jordan and Zalaznick are directors of TJC. The
Company believes that the terms of the TJC Consulting Agreement are
comparable to the terms that it would obtain from non-affiliated parties for
comparable services.
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Original Preferred Stockholders. Affiliates of Messrs. Jaro and Osborn,
affiliates of The Jordan Company and BancBoston Investments, Inc. are the
holders of Original Preferred Stock. Simultaneously with the consummation of
the Offerings, the Company will use approximately $8.2 million to redeem the
Original Preferred Stock (including approximately $684,000 representing
payment-in-kind dividends). Approximately $1.75 million and $547,000 of such
proceeds will be paid to (i) affiliates of Messrs. Jaro and Osborn and (ii)
affiliates of The Jordan Company, respectively. See "Use of Proceeds" and
"Description of Capital Stock--The Recapitalization."
Burger King Corporation. In connection with certain of its previous
acquisitions of Burger King restaurants, the Company and its subsidiaries
have entered into certain agreements with BKC as a precondition to receiving
BKC approval of the acquisition. As part of its purchase agreement with BKC,
dated September 1, 1994, Enterprises committed to expend up to $2.25 million
by September 1, 1997 to upgrade the 68 Burger King restaurants it acquired.
As part of its November 21, 1995 acquisition of 11 Burger King restaurants,
the Company and ATCI agreed to (i) renew the Company's commitment, initially
made in connection with its November 30, 1994 acquisition, to sell up to 10
Burger King restaurants to a franchisee to be designated by BKC and (ii)
expend up to $1.65 million by November 21, 1997 to upgrade certain of the 11
Burger King restaurants so acquired. The commitment by ATCI to upgrade the
restaurants is subject to certain capital expenditures to be made by BKC. As
part of its acquisitions of 36 Burger King restaurants on February 7, 1996,
the Company and ATCI (i) renewed the Company's commitment to sell up to 10
Burger King restaurants to a franchisee to be designated and (ii) agreed to
make the capital expenditures necessary to bring each of the Burger King
restaurants operated by the Company and its subsidiaries into compliance with
BKC current repair and maintenance standards by September 7, 1997.
In connection with the Offerings, the Company will be required to enter
into an agreement with BKC pursuant to which the Company will, among other
things, indemnify BKC for any claims against BKC arising out of the
Offerings.
Members of the Board of Directors. Enterprises leases the land and
buildings for two Burger King restaurants under noncancelable operating
leases from an entity which is owned by Mr. Jaro. The leases expire in March
2006 and January 2007, respectively, and require total monthly rental
payments of $20,600. For the year ended January 1, 1996 and for the three
month period ended April 1, 1996, the Company recorded rent expense of
$248,000 and $62,000, respectively, under these leases.
Pursuant to the provisions of BKC's franchise agreements, Messrs. Jaro,
Osborn and Hubert, as managing owners and owners, have guaranteed the
obligations of the Company and its subsidiaries under each franchise
agreement and each lease agreement in which BKC is the lessor. In addition,
Messrs. Jaro, Osborn and Hubert have personally guaranteed all obligations of
ATCI under the BKC Note. The Company intends to seek BKC's consent to
terminate the personal guarantees of Messrs. Jaro, Osborn and Hubert under
each of the franchise agreements, lease agreements and the BKC Note.
In connection with the September 1994 purchase of the Management
Restaurants, the Company (i) entered into a $700,000 revolving loan agreement
with Mr. Jaro whereby the Company loaned funds to Mr. Jaro and (ii) deferred
payment in full of the purchase price for one of the Management Restaurants
sold to the Company by a corporation controlled by Mr. Jaro. Effective upon
the consummation of the Offerings, the Company intends to cancel the
outstanding balance of the revolving loan to Mr. Jaro in exchange for Mr.
Jaro's cancellation of the outstanding balance of the deferred purchase price
for the restaurant.
Upon the consummation of the Offerings, the Company will enter into
indemnification agreements with each member of the Board of Directors whereby
the Company will agree, subject to certain exceptions, to indemnify and hold
harmless each director from liabilities incurred as a result of such person's
status as a director of the Company. See "Management--Board of Directors."
The Company has adopted a policy, which will be effective simultaneously
with the consummation of the Offerings, to provide that future transactions
between the Company and its officers, directors and other affiliates must (i)
be approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors and (ii) be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the Offerings, there will be shares of Common
Stock issued and outstanding. Of such shares, only the shares of Common
Stock to be sold in the Offerings will be immediately eligible for sale in
the public market, except for any of such shares owned at any time by an
"affiliate" of the Company within the meaning of Rule 144 under the
Securities Act. The remaining outstanding shares are "restricted
securities" within the meaning of Rule 144 and may not be publicly resold,
except in compliance with the registration requirements of the Securities Act
or pursuant to an exemption from registration, including that provided by
Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted" shares
for at least two years, including a person who may be deemed an affiliate of
the Company, is entitled to sell within any three-month period a number of
shares of Common Stock that does not exceed the greater of 1% of the
then-outstanding shares of Common Stock of the Company, or the average weekly
trading volume of Common Stock on the Nasdaq National Market during the four
calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are subject to certain restrictions
relating to manner of sale, notice and the availability of current public
information about the Company. A person who is not an "affiliate" of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned shares for at least three years, would be entitled to sell
such shares immediately following the Offerings under Rule 144(k) without
regard to the volume limitations, manner of sale provisions or notice or
other requirements of Rule 144. In addition, any employee, director or
officer of, or consultant to, the Company who purchased his shares pursuant
to a written compensatory plan or contract may be entitled to rely on the
resale provisions of Rule 701 under the Securities Act, which permit
non-affiliates to sell their Rule 701 shares without having to comply with
the public information, holding period, volume limitation or notice
provisions of Rule 144, and permit affiliates to sell their Rule 701 shares
without having to comply with Rule 144's holding period restrictions, in each
case commencing 90 days after the date of this Prospectus.
Each of (i) the Company and each of its executive officers and directors
and (ii) each holder of capital stock of the Company immediately prior to the
Offerings (including holders of options and warrants exercisable into shares
of Common Stock) have agreed that, for a period of 180 days after the date of
this Prospectus, they will not, without the prior written consent of Smith
Barney Inc., offer, sell, contract to sell or otherwise dispose of any Common
Stock or securities convertible, exercisable or exchangeable for Common Stock
or grant any options or warrants to purchase Common Stock, subject to certain
exceptions. Upon expiration of the 180-day period, shares of Common Stock
will be eligible for immediate resale without restriction under the
Securities Act, subject to certain volume, timing and other requirements of
Rule 144 promulgated under the Securities Act.
All stockholders of the Company prior to the Offerings are entitled to
incidental registration rights with respect to 1,123.62 shares of Common
Stock and certain stockholders of the Company are entitled to demand
registration rights with respect to 461.07 shares of Common Stock. All
stockholders with registration rights have agreed not to exercise such rights
with respect to the Offerings and for a period of 180 days after the date of
this Prospectus. However, after the expiration of the 180 day period, such
holders may choose to exercise their demand registration rights, which could
result in a large number of shares being sold in the public market. See
"Description of Capital Stock--Registration Rights."
The Company intends to file immediately following the Offerings a
registration statement on Form S-8 under the Securities Act to register
shares of Common Stock reserved for issuance pursuant to the exercise of
stock options granted under the Stock Option Plan. The stock registered under
such registration statement will thereafter be available for sale in the
public market upon vesting of such options, subject to the resale limitations
of Rule 144 applicable to "affiliates" of the Company.
Prior to the date of this Prospectus, there has been no public market for
the Common Stock. Trading of the Common Stock on the Nasdaq National Market
is expected to commence following the completion of the Offerings. No
prediction can be made as to the effect, if any, that future sales of shares,
or the availability of shares for future sale, will have on the market price
of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock.
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CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS
The following is a general discussion of certain Federal tax consequences
of the ownership and disposition of a share of Common Stock by beneficial
owner of such shares that is not a U.S. person for U.S. Federal income tax
purposes (a "non-U.S. holder"). For purposes of this discussion, a "U.S.
person" means a citizen or resident of the United States, a corporation or
partnership created or organized in the United States or under the law of the
United States or of any State or political subdivision of the foregoing, or
any estate or trust whose income is includible in gross income for U.S.
Federal income tax purposes regardless of its source. This discussion does
not deal with all aspects of U.S. Federal income and estate taxation that may
be relevant to non-U.S. holders in light of their particular circumstances,
and does not address state, local or non-U.S. tax considerations.
Furthermore, the following discussion is based on current provisions of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder and administrative and judicial interpretations as of
the date hereof, all of which are subject to change, possibly with
retroactive effect. Each prospective investor is urged to consult its own tax
adviser with respect to the U.S. Federal, state and local consequences of
owning and disposing of a share of Common Stock, as well as any tax
consequences arising under the laws of any other taxing jurisdiction.
U.S. INCOME AND ESTATE TAX CONSEQUENCES
It is not currently contemplated that the Company will pay dividends on
the Common Stock in the foreseeable future. If the Company were to pay a
dividend in the future, such a dividend paid to a non-U.S. holder would be
subject to U.S. withholding tax at a 30% rate, or if applicable, a lower
treaty rate, unless the dividend is effectively connected with the conduct of
a trade or business in the United States by a non-U.S. holder (and, if
certain tax treaties apply, is attributable to a United States permanent
establishment maintained by such non-U.S. holder). A dividend that is
effectively connected with the conduct of a trade or business in the United
States by the non-U.S. holder (and, if certain tax treaties apply, is
attributable to a United States permanent establishment maintained by such
non-U.S. holder) will be exempt from the withholding tax described above and
subject instead (i) to the U.S. Federal income tax on net income that applies
to U.S. persons and (ii) with respect to corporate holders under certain
circumstances, a 30% (or, if applicable, lower treaty rate) branch profits
tax that in general is imposed on its "effectively connected earnings and
profits" (within the meaning of the Code) for the taxable year, as adjusted
for certain items.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding
discussed above and, under the current interpretation of the Treasury
Regulations, for purposes of determining the applicability of a tax treaty
rate. Under Proposed Treasury Regulations, not currently in effect, however,
a non-U.S. holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
and other requirements. A non-U.S. holder that is eligible for a reduced rate
of U.S. withholding tax pursuant to an income tax treaty may obtain a refund
of any excess amounts withheld by filing an appropriate claim for refund with
the Internal Revenue Service (the "IRS").
Under current law, a non-U.S. holder generally will not be subject to U.S.
Federal income tax on any gain recognized on a sale or other disposition of a
share of Common Stock unless (i) the Company is or has been during the
five-year period ending on the date of disposition a "United States real
property holding corporation" for U.S. Federal income tax purposes (which the
Company does not believe that it has been or is currently and does not
anticipate becoming), (ii) the gain is effectively connected with the conduct
of a trade or business within the United States of the non-U.S. holder and,
if certain tax treaties apply, is attributable to a United States permanent
establishment maintained by the non-U.S. holder, (iii) the gain is not
described in clause (ii) above, the non-U.S. holder is an individual who
holds the share as a capital asset, is present in the United States for 183
days or more in the taxable year of the disposition and either (a) such
individual has a "tax home" (as defined for U.S. Federal income tax purposes)
in the United States or (b) the gain is attributable to an office or other
fixed place of business maintained in the United States by such individual,
or (iv) the non-U.S. holder is subject to tax pursuant to the Code
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provisions applicable to certain U.S. expatriates. In the case of a non-U.S.
holder that is described under clause (ii) above, its gain will be subject to
the U.S. Federal income tax on net income that applies to U.S. persons and,
in addition, if such non-U.S. holder is a foreign corporation, it may be
subject to the branch profits tax as described in the preceding paragraph. An
individual non-U.S. holder that is described under clause (iii) above will be
subject to a flat 30% tax on the gain derived from the sale, which may be
offset by U.S. capital losses (notwithstanding the fact that he or she is not
considered a resident of the United States). Thus, individual non-U.S.
holders who have spent 183 days or more in the United States in the taxable
year in which they contemplate a sale of the Common Stock are urged to
consult their tax advisers as to the tax consequences of such sale.
Shares of Common Stock owned at the time of his or her death by an
individual non-U.S. holder who is treated as a U.S. resident at such time for
U.S. Federal estate tax purposes will be includible in his or her gross
estate for U.S. Federal estate tax purposes unless an applicable estate tax
treaty provides otherwise.
BACK-UP WITHHOLDING AND INFORMATION REPORTING
Dividends
Except as provided below, the Company must report annually to the IRS and
to each non-U.S. holder the amount of dividends paid to and the tax withheld
with respect to such holder. These information reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable
tax treaty. Copies of these information returns may also be available under
the provisions of a specific treaty or agreement with the tax authorities in
the country in which the non-U.S. holder resides. In general, backup
withholding at a rate of 31% and additional information reporting will apply
to dividends paid on shares of Common Stock to holders that are not "exempt
recipients" and that fail to provide in the manner required certain
identifying information (such as the holder's name, address and taxpayer
identification number). Generally, individuals are not exempt recipients,
whereas corporations and certain other entities generally are exempt
recipients. However, dividends that are subject to U.S. withholding tax at
the 30% statutory rate or at a reduced tax treaty rate are exempt from backup
withholding of U.S. Federal income tax and such additional information
reporting.
Broker Sales
If a non-U.S. holder sells shares of Common Stock through a U.S. office of
a U.S. or foreign broker, the broker is required to file an information
return and is required to withhold 31% of the sale proceeds unless the
non-U.S. holder is an exempt recipient or has provided the broker with the
information and statements, under penalties of perjury, necessary to
establish an exemption from backup withholding. If payment of the proceeds of
the sale of a share by a non-U.S. holder is made to or through the foreign
office of a broker, that broker will not be required to backup withhold or,
except as provided in the next sentence, to file information returns. In the
case of proceeds from a sale of a share by a non-U.S. holder paid to or
through the foreign office of a U.S. broker or a foreign office of a foreign
broker that is (i) a controlled foreign corporation for U.S. tax purposes or
(ii) a person 50% or more of whose gross income for the three-year period
ending with the close of the taxable year preceding the year of payment (or
for the part of that period that the broker has been in existence) is
effectively connected with the conduct of a trade or business within the
United States (a "Foreign U.S. Connected Broker"), information reporting is
required unless the broker has documentary evidence in its files that the
payee is not a U.S. person and certain other conditions are met, or the payee
otherwise establishes an exemption. In addition, the Treasury Department has
indicated that it is studying the possible application of backup withholding
in the case of such foreign offices of U.S. and Foreign U.S. Connected
Brokers.
Refunds
Any amounts withheld under the backup withholding rules from a payment to
a non-U.S. holder may be refunded or credited against the non-U.S. holder's
U.S. Federal income tax liability, provided that the required information is
furnished to the IRS.
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UNDERWRITING
Under the terms and subject to the conditions stated in the Underwriting
Agreement, each of the underwriters of the U.S. Offering named below (the
"U.S. Underwriters"), for whom Smith Barney Inc., PaineWebber Incorporated
and EVEREN Securities, Inc. are acting as the representatives (the
"Representatives"), has severally agreed to purchase, and the Company has
agreed to sell to each U.S. Underwriter, the number of shares of Common Stock
set forth opposite the name of such U.S. Underwriter below:
U.S. UNDERWRITERS NUMBER OF SHARES
- ---------------------------- --------------------
Smith Barney Inc. ...........
PaineWebber Incorporated ...
EVEREN Securities, Inc. ....
--------------------
Total .....................
Under the terms and subject to the conditions contained in the
International Underwriting Agreement, each of the managers of the concurrent
International Offering named below (the "Managers"), for whom Smith Barney
Inc. and PaineWebber International (U.K.) Ltd., are acting as lead managers
(the "Lead Managers"), has severally agreed to purchase, and the Company has
agreed to sell to each Manager, the number of shares of Common Stock set
forth opposite the name of such Manager below:
MANAGERS NUMBER OF SHARES
- ----------------------------------------- --------------------
Smith Barney Inc. ........................
PaineWebber International (U.K.) Ltd. ...
--------------------
Total ..................................
Each of the U.S. Underwriting Agreement and the International Underwriting
Agreement provides that the obligations of the several U.S. Underwriters and
several Managers to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by
counsel and to certain other conditions. The U.S. Underwriters and the
Managers are obligated to take and pay for all shares of Common Stock offered
hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The U.S. Underwriters and the Managers (collectively, the "Underwriters")
initially propose to offer part of the shares offered hereby directly to the
public at the public offering price set forth on the cover page of this
Prospectus and part of the shares offered hereby to certain dealers at a
price which represents a concession not in excess of $ per share under the
public offering price. The U.S. Underwriters and Managers may allow, and such
dealers may reallow, a concession not in excess of $ per share to other
U.S. Underwriters or Managers, respectively, or to certain other dealers.
After the initial public offering, the public offering price and such
concessions may be changed by the Underwriters.
The Company and certain stockholders of the Company have granted the
Underwriters an option, exercisable at any time and from time to time during
a 30-day period from the date of this Prospectus, to purchase up to an
aggregate of additional shares of Common Stock at the public offering
price set forth on the cover page hereof less underwriting commissions. The
Underwriters may exercise such option to purchase additional shares solely
for the purpose of covering over-allotments, if any, incurred in connection
with the sales of the shares of Common Stock offered hereby. To the extent
such option is exercised, each underwriter will be obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number of shares set forth opposite each
Underwriter's name in the preceding Underwriters table bears to the total
number of shares of Common Stock offered by the U.S. Underwriters hereby. The
Company will not receive any of the proceeds from the sale of Common Stock by
the Selling Stockholders. See "Principal and Selling Stockholders."
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<PAGE>
The Company, the Selling Stockholders, the U.S. Underwriters and the
Managers have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
Each of (i) the Company and each of its executive officers and directors
and (ii) each holder of capital stock of the Company immediately prior to the
Offerings (including holders of warrants exercisable into shares of Common
Stock) have agreed that, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of any Common Stock
or securities convertible or exercisable or exchangeable for Common Stock or
grant any options or warrants to purchase Common Stock, subject to certain
exceptions.
At the Company's request, the U.S. Underwriters and the Managers have
reserved up to shares of Common Stock (the "Directed Shares") for sale at
the public offering price to persons who are directors, officers or employees
of, or are otherwise associated with, the Company and who have advised the
Company of their desire to participate in its future growth. Purchasers of
Directed Shares will be required to agree to restrictions on resale similar
to those described in the preceding paragraph. The number of shares of Common
Stock available for sale to the general public will be reduced to the extent
of sales of Directed Shares to any of the persons for whom they have been
reserved. Any shares not so purchased will be offered by the U.S.
Underwriters and the Managers on the same basis as all other shares offered
hereby.
The U.S. Underwriters and the Managers have entered into an Agreement
Between U.S. Underwriters and Managers pursuant to which each U.S.
Underwriter has agreed that, as part of the distribution of the shares
offered in the U.S. Offering (i) it is not purchasing any such shares for the
account of anyone other than a U.S. or Canadian Person and (ii) it has not
offered or sold, and will not, offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to U.S.
Offering outside the U.S. or Canada or to anyone other than a U.S. or
Canadian Person. In addition, each Manager has agreed that as part of the
distribution of the shares offered in the International Offering: (i) it is
not purchasing any such shares for the account of any U.S. or Canadian Person
and (ii) it has not offered or sold, and will not offer, sell, resell or
deliver, directly or indirectly, any of such shares or distribute any
prospectus relating to the International Offering in the U.S. or Canada or to
any U.S. or Canadian Person. Each Manager has also agreed that it will offer
to sell shares only in compliance with all relevant requirements of any
applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Agreement Between U.S.
Underwriters and Managers, including: (i) certain purchases and sales between
the U.S. Underwriters and the Managers, (ii) certain offers, sales, resales,
deliveries or distributions to or through investment advisors or other
persons exercising investment discretion, (iii) purchases, offers or sales by
a U.S. Underwriter who is also acting as Manager or by a Manager who is also
acting as a U.S. Underwriter and (iv) other transactions specifically
approved by the Representatives and the Lead Managers. As used herein, "U.S.
or Canadian Person" means any resident or national of the U.S. or Canada, any
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or Canada or any estate or trust the income of which is
subject to U.S. or Canadian income taxation regardless of the source of its
income (other than the foreign branch of any U.S. or Canadian Person), and
includes any U.S. or Canadian branch of a person other than a U.S. or
Canadian Person.
Any offer of shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the relevant province of Canada
in which such offer is made.
Each Manager has represented and agreed that (i) it has not offered or
sold and will not offer or sell in the United Kingdom, by means of any
document, any shares other than to persons whose ordinary business it is to
buy or sell shares or debentures, whether as principal or agent or in
circumstances which do not constitute an offer to the public within the
meaning of the Public Offering of Securities Regulation 1995, (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
shares in, from, or otherwise involving, the United Kingdom and (iii) it has
only issued or passed on and will only issue or pass on to any person in the
United
65
<PAGE>
Kingdom any document received by it in connection with the issue of the
shares if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom the document may otherwise lawfully be issued or
passed on.
No action has been or will be taken in any jurisdiction by the Company,
the U.S. Underwriters or the Managers that would permit any offering to the
general public of the Common Stock offered hereby in any jurisdiction other
than the United States.
Purchasers of the Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the offering price set forth on the cover
page hereof.
Pursuant to the Agreement Between U.S. Underwriters and Managers, sales
may be made between the U.S. Underwriters and the Managers of such number of
shares of Common Stock as may be mutually agreed. The price of any shares so
sold shall be the public offering price as then in effect for Common Stock
being sold by the U.S. Underwriters and the Managers, less all or any part of
the selling concession, unless otherwise determined by mutual agreement. To
the extent that there are sales between the U.S. Underwriters and the
Managers pursuant to the Agreement Between U.S. Underwriters and Managers,
the number of shares initially available for sale by the U.S. Underwriters
and by the Managers may be more or less than the number of shares appearing
on the front cover of this Prospectus.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price of the shares was negotiated between
the Company and the Representatives. Among the factors considered in
determining such price were the history of and prospects for the Company's
business and the industry in which it competes, an assessment of the
Company's management and the present state of the Company's development, the
past and present revenues and earnings of the Company, the prospects for
growth of the Company's revenues and earnings, the current state of the
economy in the United States and the current level of economic activity in
the industry in which the Company competes and in related or comparable
industries, and currently prevailing conditions in the securities markets,
including current market valuations of publicly traded companies which are
comparable to the Company.
66
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the legality of the Common Stock
offered hereby will be passed upon for the Company and the Selling
Stockholders by Mayer, Brown & Platt, New York, New York. Certain legal
matters relating to the Offerings will be passed upon for the U.S.
Underwriters and the Managers by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of January 1, 1996
and December 31, 1994 and for the years then ended and the historical
schedules of restaurant contribution for each of the periods from January 1,
1993 to the earlier of the date of purchase by the Company or December 31,
1995, appearing in this Prospectus and Registration Statement have been
audited by Deloitte & Touche LLP, independent certified public accountants,
as set forth in their reports thereon appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act, with respect to
the shares of Common Stock offered hereby. For the purposes hereof, the term
"Registration Statement" means the original Registration Statement and any
and all amendments thereto. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and
such Common Stock, reference is hereby made to such Registration Statement,
which can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission
at Seven World Trade Center, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates.
Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
67
<PAGE>
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants and with
quarterly reports containing updated summary financial information for each
of the first three quarters of each fiscal year.
NEITHER BKC NOR ANY OF ITS SUBSIDIARIES, AFFILIATES, OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES, ACCOUNTANTS OR ATTORNEYS ARE IN ANY WAY PARTICIPATING IN,
APPROVING OR ENDORSING THESE OFFERINGS OF SECURITIES, ANY OF THE UNDERWRITING
OR ACCOUNTING PROCEDURES USED IN THE OFFERINGS, OR ANY REPRESENTATIONS MADE
IN CONNECTION WITH THE COMPANY. THE GRANT BY BKC OF ANY FRANCHISE OR OTHER
RIGHTS TO THE COMPANY IS NOT INTENDED AS, AND SHOULD NOT BE INTERPRETED AS,
AN EXPRESS OR IMPLIED APPROVAL, ENDORSEMENT OR ADOPTION OF ANY STATEMENT
REGARDING ACTUAL OR PROJECTED FINANCIAL OR OTHER PERFORMANCE WHICH MAY BE
CONTAINED IN THE COMPANY'S OFFERING MATERIALS. ALL FINANCIAL AND OTHER
PROJECTIONS HAVE BEEN PREPARED BY, AND ARE THE SOLE RESPONSIBILITY OF, THE
COMPANY.
ANY REVIEW BY BKC OF THE OFFERING MATERIALS OR THE INFORMATION INCLUDED
THEREIN HAS BEEN CONDUCTED SOLELY FOR THE BENEFIT OF BKC TO DETERMINE
CONFORMANCE WITH BKC'S INTERNAL POLICIES, AND NOT TO BENEFIT OR PROTECT ANY
OTHER PERSON. NO INVESTOR SHOULD INTERPRET SUCH REVIEW BY BKC AS AN APPROVAL,
ENDORSEMENT, ACCEPTANCE OR ADOPTION OF ANY REPRESENTATION, WARRANTY, COVENANT
OR PROJECTION CONTAINED IN THE MATERIALS REVIEWED.
THE ENFORCEMENT OR WAIVER OF ANY OBLIGATION OF THE COMPANY UNDER ANY
AGREEMENT BETWEEN THE COMPANY AND BKC OR BKC'S AFFILIATES IS A MATTER OF
BKC'S OR BKC'S AFFILIATES SOLE DISCRETION. NO INVESTOR SHOULD RELY ON ANY
REPRESENTATION, ASSUMPTION OR BELIEF THAT BKC OR BKC'S AFFILIATES WILL
ENFORCE OR WAIVE PARTICULAR OBLIGATIONS OF THE COMPANY UNDER SUCH AGREEMENTS.
68
<PAGE>
AMERIKING, INC.
(formerly named NRE Holdings, Inc.)
Index to the Consolidated Financial Statements
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report ................................................................ F-2
Consolidated Balance Sheets as of January 1, 1996 and December 31, 1994 ..................... F-3
Consolidated Statements of Operations for the period January 1, 1995 to January 1, 1996 and
the period August 17, 1994 (date of incorporation) to December 31, 1994 .................... F-4
Consolidated Statements of Stockholders' Equity for the period January 1, 1995 to January 1,
1996 and the period August 17, 1994 (date of incorporation) to December 31, 1994 .......... F-5
Consolidated Statements of Cash Flows for the period January 1, 1995 to January 1, 1996 and
the period August 17, 1994 (date of incorporation) to December 31, 1994 .................... F-6
Notes to Consolidated Financial Statements .................................................. F-7
</TABLE>
INDEX TO THE HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
<S> <C>
INITIAL ACQUISITIONS
Independent Auditors' Report ................................................................ F-15
Historical Schedules of Restaurant Contribution for the BKC Restaurants, Jaro restaurants
and Osborn restaurants for the period January 1, 1994 through September 1, 1994 ........... F-16
Historical Schedules of Restaurant Contribution for the BKC Restaurants, Jaro restaurants
and Osborn restaurants for the year ended December 31, 1993 ................................ F-17
Notes to the Historical Schedules of Restaurant Contribution ................................ F-18
ACQUISITIONS
Independent Auditors' Report ................................................................ F-19
Historical Schedules of Restaurant Contribution for DMW, Inc., BKC, QSC, Inc. and Ro-Lank,
Inc., Curtis James Investments, Inc., C&N Dining, Inc. and Stuart Ray Investments, Inc. for
the year ended December 31, 1995 or the period January 1, 1995 through date of acquisition F-20
Historical Schedules of Restaurant Contribution for Friedman, QSC, Inc. and Ro-Lank, Inc.,
Curtis James Investments, Inc., C&N Dining, Inc. and Stuart Ray Investments, Inc. for the
year ended December 31, 1994 or the period January 1, 1994 through date of acquisition .... F-21
Historical Schedules of Restaurant Contribution for Friedman, QSC, Inc. and Ro-Lank, Inc.,
Curtis James Investments, Inc., C&N Dining, Inc. and Stuart Ray Investments, Inc. for the
year ended December 31, 1993 ............................................................... F-22
Notes to the Historical Schedules of Restaurant Contribution ................................ F-23
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
NRE Holdings, Inc.
Westchester, Illinois
We have audited the accompanying consolidated balance sheets of NRE
Holdings, Inc. and subsidiary as of January 1, 1996 and December 31, 1994,
and the related consolidated statements of operations, stockholders' equity
and cash flows for the period January 1, 1995 to January 1, 1996 and the
period August 17, 1994 (date of incorporation) to December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of NRE Holdings, Inc. and
subsidiary as of January 1, 1996 and December 31, 1994, and the results of
their operations and their cash flows for the period January 1, 1995 to
January 1, 1996 and the period August 17, 1994 (date of incorporation) to
December 31, 1994 in conformity with generally accepted accounting
principles.
Deloitte & Touche, LLP
March 12, 1996
Chicago, Illinois
F-2
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 1996 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
1996 1994
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................... $ 1,887,000 $ 7,650,000
Accounts receivable .......................... 1,118,000 134,000
Inventory .................................... 1,009,000 1,001,000
Prepaid expenses ............................. 1,218,000 775,000
-------------- --------------
Total current assets ........................ 5,232,000 9,560,000
PROPERTY AND EQUIPMENT ........................ 28,457,000 23,471,000
GOODWILL ...................................... 66,847,000 61,739,000
OTHER ASSETS:
Deferred financing costs ..................... 3,096,000 3,509,000
Deferred organization costs .................. 220,000 272,000
Franchise agreements ......................... 3,384,000 3,239,000
-------------- --------------
Total other assets .......................... 6,700,000 7,020,000
-------------- --------------
TOTAL ......................................... $107,236,000 $101,790,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued expenses . $ 5,399,000 $ 6,037,000
Accrued payroll .............................. 802,000 1,193,000
Accrued sales tax payable .................... 1,047,000 924,000
Accrued interest payable ..................... 346,000 1,041,000
Current portion of long-term debt (Note 5) .. 10,741,000 3,450,000
Current portion of capital leases (Note 6) .. 99,000
-------------- --------------
Total current liabilities ................... 18,434,000 12,645,000
LONG-TERM DEBT -- Less current portion
(Note 5) ...................................... 63,094,000 65,050,000
LONG-TERM DEBT -- Related Parties (Note 6) ... 16,000,000 16,000,000
OTHER LONG-TERM LIABILITIES (Note 6) ......... 176,000
DEFERRED INCOME TAXES ......................... 789,000 254,000
STOCKHOLDERS' EQUITY:
Preferred stock .............................. 75 75
Common stock ................................. 10 10
Additional paid-in capital ................... 7,599,915 7,599,915
Retained earnings ............................ 1,143,000 241,000
-------------- --------------
Total stockholders' equity .................. 8,743,000 7,841,000
-------------- --------------
TOTAL ......................................... $107,236,000 $101,790,000
============== ==============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
JANUARY 1, AUGUST 17,
1995 TO 1994 TO
JANUARY 1, PERCENTAGE DECEMBER 31, PERCENTAGE
1996 OF SALES 1994 OF SALES
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
RESTAURANT SALES .............................. $139,572,000 100.0% $33,931,000 100.0%
RESTAURANT OPERATING EXPENSES:
Cost of sales ................................ 44,798,000 32.1 10,807,000 31.8
Restaurant labor and related costs ........... 34,526,000 24.7 8,647,000 25.5
Occupancy .................................... 15,454,000 11.1 3,768,00 11.1
Depreciation and amortization of goodwill and
franchise agreements ........................ 4,927,000 3.6 1,193,000 3.5
Advertising .................................. 6,330,000 4.5 1,449,000 4.3
Royalties .................................... 4,788,000 3.4 1,162,000 3.4
Other operating expenses ..................... 12,358,000 8.9 2,850,000 8.4
-------------- ------------ -------------- ------------
Total restaurant operating expenses ....... 123,181,000 88.3 29,876,000 88.8
-------------- ------------ -------------- ------------
RESTAURANT CONTRIBUTION ....................... 16,391,000 11.7 4,055,000 12.0
GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 5,176,000 3.7 1,227,000 3.6
OTHER OPERATING EXPENSES:
Depreciation expense -- office ............... 199,000 0.1 15,000 0.1
Management and directors' fees ............... 529,000 0.4 132,000 0.4
-------------- ------------ -------------- ------------
Income from operations ..................... 10,487,000 7.5 2,681,000 7.9
OTHER INCOME (EXPENSE):
Interest expense ............................. (6,296,000) (4.4) (1,256,000) (3.7)
Interest expense -- related party ............ (2,027,000) (1.5) (669,000) (2.0)
Amortization of deferred costs ............... (511,000) (0.4) (104,000) (0.3)
Other income ................................. 209,000 0.1 16,000 0.1
Other expense ................................ (135,000) (0.1) (236,000) (0.7)
-------------- ------------ -------------- ------------
Total other expense ........................ (8,760,000) (6.3) (2,249,000) (6.6)
-------------- ------------ -------------- ------------
INCOME BEFORE PROVISION FOR INCOME TAXES ..... 1,727,000 1.2 432,000 1.3
PROVISION FOR INCOME TAXES .................... 825,000 0.6 191,000 0.6
-------------- ------------ -------------- ------------
NET INCOME .................................... $ 902,000 0.6% $ 241,000 0.7%
============== ============ ============== ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
----------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INITIAL ISSUANCE OF STOCK .. $56 $10 $5,699,934 $5,700,000
Issuance of preferred stock 19 1,899,981 1,900,000
Net income ................. $ 241,000 241,000
----------- -------- ------------ ------------ ------------
BALANCE -- December 31, 1994 75 10 7,599,915 241,000 7,841,000
Net income ................. 902,000 902,000
----------- -------- ------------ ------------ ------------
BALANCE -- January 1, 1996 . $75 $10 $7,599,915 $1,143,000 $8,743,000
=========== ======== ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
JANUARY 1, 1995 AUGUST 17, 1994
TO TO
JANUARY 1, 1996 DECEMBER 31, 1994
--------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 902,000 $ 241,000
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and amortization ............................ 5,637,000 1,311,000
Deferred income taxes .................................... 535,000
Unrealized loss on property and equipment ................ 135,000
Changes in:
Accounts receivable ..................................... (984,000) (134,000)
Inventory ............................................... (8,000) (1,001,000)
Prepaid expenses ........................................ (443,000) (775,000)
Accounts payable and accrued expenses ................... (1,601,000) 7,845,000
--------------- -----------------
Net cash flows from operating activities ............... 4,173,000 7,658,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of restaurant franchise agreements, equipment and
goodwill ................................................. (11,305,000) (81,671,000)
Cash paid for organization costs .......................... (6,000) (290,000)
Cash paid for franchise agreements ........................ (60,000)
Cash paid for property and equipment ...................... (3,721,000) (597,000)
--------------- -----------------
Net cash flows from investing activities ............... (15,092,000) (82,558,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of preferred stock ............................... 5,900,000
Issuance of common stock .................................. 71,000
Proceeds from short-term debt ............................. 6,920,000
Proceeds from long-term debt .............................. 1,865,000 68,500,000
Proceeds from subordinated debt -- related party ......... 11,600,000
Cash paid for financing costs ............................. (135,000) (3,521,000)
Advances under line of credit ............................. 2,000,000 3,500,000
Payments on line of credit ................................ (2,000,000) (3,500,000)
Payments on long-term debt ................................ (3,450,000)
Payments on capital leases ................................ (44,000)
--------------- -----------------
Net cash flows from financing activities ............... 5,156,000 82,550,000
--------------- -----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS .................... (5,763,000) 7,650,000
CASH AND CASH EQUIVALENTS -- Beginning of period .......... 7,650,000
--------------- -----------------
CASH AND CASH EQUIVALENTS -- End of period ................. $ 1,887,000 $ 7,650,000
=============== =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest .................. $ 9,018,000 $ 884,000
=============== =================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
On September 1, 1994, in connection with the purchase of
restaurant franchises from certain members of the
Company's management, the Company issued the following
noncash consideration:
Preferred stock (including additional paid-in capital) .. $ 1,600,000
Common stock (including additional paid-in capital) ..... 29,000
Subordinated debt -- related party ....................... 4,400,000
New capital leases ........................................ $ 319,000
--------------- -----------------
TOTAL ...................................................... $ 319,000 $ 6,029,000
=============== =================
On September 1, 1994, in connection with the purchase of
restaurant franchises from Burger King Corporation, the
Company received a purchase price allowance for deferred
maintenance which was recorded as other accrued expenses . $ 1,350,000
=================
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
1. DESCRIPTION OF BUSINESS
NRE Holdings, Inc. ("Holdings") and its wholly owned subsidiary, National
Restaurant Enterprises, Inc. d/b/a/ AmeriKing Corporation ("AmeriKing")
(consolidated, the "Company"), were formed on August 17, 1994 to acquire and
operate Burger King restaurants in five states (Illinois, Indiana, Colorado,
Texas and Wisconsin) and to grow through the development or acquisition of
additional Burger King restaurants in these and other states.
Effective September 2, 1994, the Company acquired 68 Burger King
restaurants located in the Chicago metropolitan area from Burger King
Corporation ("BKC") for $41,500,000 in cash, and 14 restaurants in Colorado
and Texas from certain members of the Company's current management for
$6,029,000 of subordinated debt and preferred and common stock in the Company
and $1,975,000 in cash, (collectively the "Initial Acquisitions"). Effective
December 1, 1994, AmeriKing acquired 39 Burger King restaurants from a
third-party franchisee in Chicago for $37,000,000 in cash.
During 1995, the Company purchased 18 restaurants in Colorado, Illinois,
Tennessee and Georgia for $10,769,000 in cash and opened one restaurant
located in Texas (the "1995 Acquisitions"). As a result of these acquisitions
and developments, the Company is one of the largest independent Burger King
franchisees in the United States, operating 140 restaurants at January 1,
1996.
ORGANIZATIONAL STRUCTURE -- National Restaurant Enterprises, Inc. (d/b/a
AmeriKing Corporation) is a wholly owned subsidiary of NRE Holdings, Inc.
National Restaurant Enterprises, Inc. is comprised of the following
subsidiaries: AmeriKing Colorado Corporation I, AmeriKing Illinois
Corporation I, AmeriKing Tennessee Corporation I, and, subsequent to January
1, 1996 (see Note 10), AmeriKing Cincinnati Corporation I and AmeriKing
Virginia Corporation I.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR -- In 1995, the Company converted its fiscal year to a
52/53-week fiscal year. Due to this conversion, the 1995 fiscal year ended
January 1, 1996 included 366 days of operating activity. The comparative
fiscal period ended December 31, 1994 included 136 days with 121 days of
operating activity.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiary, AmeriKing. All significant intercompany accounts and transactions
have been eliminated in consolidation.
CASH EQUIVALENTS -- The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORIES -- Inventories consist primarily of restaurant food and
supplies and are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
F-7
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost.
Normal repairs and maintenance cost are expensed as incurred. Depreciation is
being recorded using the straight-line method over the following estimated
useful lives:
Restaurant equipment and furnishings ... 5-15 years
Office furniture and equipment .......... 5-9 years
Buildings ............................... 40 years
Leasehold improvement ................... Life of lease
FRANCHISE AGREEMENTS -- The franchise agreements with BKC require the
Company to pay a franchise fee for each restaurant opened. Amortization is
recorded on the straight-line method over the terms of the related franchise
agreements. The franchise agreements generally provide for a term of 20 years
with renewal options upon expiration. Accumulated amortization as of January
1, 1996 and December 31, 1994 was approximately $309,000 and $60,000,
respectively.
GOODWILL -- Goodwill represents the excess of cost over fair value of the
net assets acquired in conjunction with the acquisitions described in Note 1.
Goodwill is being amortized over 35 years using the straight-line method.
Accumulated amortization as of January 1, 1996 and December 31, 1994 was
approximately $2,203,000 and $394,000, respectively.
DEFERRED COSTS -- Costs associated with the organization of the Company
and its subsidiaries have been deferred and are being amortized on a
straight-line basis over five years. Costs incurred by the Company in
obtaining the financing for the acquisitions have been deferred and are being
amortized on a straight-line basis over seven years. Accumulated amortization
as of January 1, 1996 and December 31, 1994 was approximately $76,000 and
$18,000, respectively, for deferred organization costs and approximately
$569,000 and $86,000, respectively, for deferred financing costs.
RECLASSIFICATIONS -- Certain information in the consolidated financial
statements for fiscal 1994 has been reclassified to conform with the current
reporting format.
PRO FORMA OPERATING RESULTS (UNAUDITED) -- The following are the pro forma
operating results for the periods ended January 1, 1996 and December 31, 1994
as if the acquisitions by the Company described above had occurred on August
17, 1994. The pro forma results give effect to changes in depreciation and
amortization resulting from valuing property and franchise agreements at
their estimated fair value and recording the excess of purchase price over
the net assets acquired (000's omitted):
<TABLE>
<CAPTION>
PERIOD ENDED
----------------------------
JANUARY 1, DECEMBER 31,
1996 1994
------------ --------------
<S> <C> <C>
Net sales .............. $153,971 $37,891
Restaurant Contribution 17,752 4,681
</TABLE>
The pro forma results of operations are not necessarily indicative of the
actual operating results that would have occurred had the acquisitions been
consummated at the beginning of the respective periods.
3. FRANCHISE AGREEMENTS
In connection with the purchase of the Burger King restaurants, the
Company enters into franchise agreements with BKC for the operation of Burger
King restaurants. The franchise agreements provide
F-8
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
3. FRANCHISE AGREEMENTS (CONTINUED)
BKC with significant rights regarding the business and operations of the
Company. The franchise agreements with BKC require the Company to pay monthly
royalty and advertising fees equal to 3.5% and 4.0%, respectively, of
restaurant sales.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
1996 1994
------------- --------------
<S> <C> <C>
Restaurant equipment and furnishings $28,020,000 $23,663,000
Office furniture and equipment ..... 1,941,000 302,000
Leasehold improvements .............. 756,000 67,000
Land ................................ 423,000
Buildings ........................... 850,000
New restaurant development .......... 313,000 98,000
------------- --------------
Total ............................... 32,303,000 24,130,000
Less accumulated depreciation ...... 3,846,000 659,000
------------- --------------
Property and equipment -- net ...... $28,457,000 $23,471,000
============= ==============
</TABLE>
The Company included in accumulated depreciation an unrealized loss on
property and equipment of $135,000 due to the forced disposition of a
Company-owned restaurant that will occur in May 1997. Such loss represents
the difference between the salvage value and the book value of the equipment,
decor, landscaping and signs of the restaurant at the date of disposition.
The loss on disposition is included in other expenses on the consolidated
statements of operations.
5. LONG TERM DEBT
Debt at January 1, 1996 and December 31, 1994 consists of the following:
<TABLE>
<CAPTION>
JANUARY 1, 1996 DECEMBER 31, 1994
---------------------------- ---------------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Term Loan A, at a variable interest rate,
8.687% at January 1, 1996, due 2001 ..... $ 3,500,000 $41,750,000 $3,250,000 $45,250,000
Term Loan B, at a variable interest rate,
9.187% at January 1, 1996, due 2002 ..... 200,000 19,600,000 200,000 19,800,000
Franchise Acceptance Corporation
Limited note, at a variable interest
rate, 8.56% at January 1, 1996, due 2005.. 121,000 1,744,000
Burger King Corporation note,
9.75%, due 1996 .......................... 6,920,000
------------- ------------- ------------ -------------
Total ..................................... $10,741,000 $63,094,000 $3,450,000 $65,050,000
============= ============= ============ =============
Debt at January 1, 1996 and December 31, 1994 to related parties consists of
the following:
SENIOR SUBORDINATED DEBENTURES,
12.75%, DUE 2004 .............. 15,400,000 15,400,000
Junior subordinated debentures,
6.00%, due 2005 ............... 600,000 600,000
------------- ------------- ------------ -------------
Total .......................... $16,000,000 $16,000,000
============= ============= ============ =============
</TABLE>
F-9
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
(CONTINUED)
5. LONG TERM DEBT (CONTINUED)
On September 1, 1994, the Company entered into a revolving credit and
term loan agreement with a lender (the "Agent Bank"). On November 30, 1994,
the loan agreement was amended and restated (the "Loan Agreement"). Under the
terms of the Loan Agreement, a consortium of banks led by the Agent Bank (the
"Consortium") provided two term loans, one for $48,500,000 ("Term Loan A")
and one for $20,000,000 ("Term Loan B"), and a $6,000,000 revolving credit
facility to the Company (collectively, the "Loans"). The original proceeds
from the Loans were used to acquire the BKC Restaurants and the Management
Restaurants, and the additional proceeds from the Loans were used to acquire
the Franchise Restaurants (see Note 1). The Loans are secured by all of the
assets of AmeriKing and a guaranty from Holdings.
Term Loan A and Term Loan B (collectively, the "Term Loans") provide for
quarterly principal payments as provided by the Loan Agreement until final
maturity. Term Loan A matures November 30, 2001. Term Loan B matures November
30, 2002. The Company may prepay the Term Loans, in whole or in part, at any
time, provided such prepayments are at least $500,000 or a larger multiple of
$100,000.
The Term Loans bear interest at the lower of two variable rates which are
determined by reference to either (i) the Agent Bank's prime rate, or (ii)
the adjusted Eurodollar rate as determined by the Agent Bank, plus certain
interest rate spreads as specified in the Loan Agreement.
In connection with the Loan Agreement, the Company entered into a
three-year interest rate cap agreement with the Agent Bank expiring December
29, 1997. Under the terms of this agreement, the maximum Eurodollar rate to
be used in the determination of the interest rates on 40% of the outstanding
principal of the Term Loans is limited to 9% per annum. The Company paid the
Agent Bank $242,000 in connection with the Loan Agreement, which is being
amortized over the term of the Loan Agreement. Accumulated amortization as of
January 1, 1996 was approximately $81,000. No amortization was recorded prior
to December 31, 1994.
Under the Loan Agreement, the revolving line of credit facility provides
for revolving borrowings bearing interest at the lower of two variable rates
which are determined by reference to either (i) the Agent Bank's prime rate,
or (ii) the adjusted Eurodollar rate as determined by the Agent Bank, plus
certain interest rate spreads as specified in the Loan Agreement. All
outstanding principal under the line of credit is due November 30, 2001. No
amounts were outstanding under the revolving credit facility at January 1,
1996 or December 31, 1994.
The Loan Agreement contains, among other provisions, certain covenants for
maintaining defined levels of tangible net worth and various financial
ratios, including debt service coverage and interest coverage. As of January
1, 1996, the Company was in compliance with all such covenants.
On September 1, 1994, the Company issued senior subordinated notes (the
"Senior Subordinated Notes") to certain stockholders. Such Senior
Subordinated Notes bear interest at a rate of 12.75% per annum and are
subordinated to amounts due to the consortium and to BKC. All principal of
the Senior Subordinated Notes is due August 2004.
On November 30, 1994, the Company issued junior subordinated notes (the
"Junior Subordinated Notes") to the Agent Bank. Such Junior Subordinated
Notes bear interest at a rate of 6% per annum and are subordinated to the
amounts due to the Consortium and the Senior Subordinated Notes. All
principal of the Junior Subordinated Notes is due March 2005.
On November 29, 1995, the Company issued a note to Franchise Acceptance
Corporation Limited in connection with the acquisition of five restaurants
located in Colorado. Such note bears interest at the 30-day commercial paper
rate plus 2.75% and is secured by certain assets of the Company's wholly
owned
F-10
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
(CONTINUED)
5. LONG TERM DEBT (CONTINUED)
subsidiary, AmeriKing Colorado Corporation I, which owns the five
restaurants. Principal installments of the note are due quarterly through
December 2005.
On November 21, 1995, the Company issued a note to BKC in connection with
the acquisition of 11 restaurants located in Tennessee and Georgia. Such note
bears interest at a rate of 9.75% per annum and is secured by a pledge of all
capital stock of the Company's wholly-owned subsidiary, AmeriKing Tennessee
Corporation I, which owns the 11 restaurants. All principal of the note is
due May 1996.
On February 7, 1996, the Company amended and restated the Loan Agreement
("the Amended and Restated Loan Agreement"). The Amended and Restated Loan
Agreement provides for an increase of principal of $20 million and $9 million
for the Term Loans and the revolving credit facility, respectively, resulting
in additional borrowing capacity of $29 million. The Amended and Restated
Loan Agreement provides for a principal balance of $45 million for Term Loan
A, $40 million for Term Loan B and $15 million for the revolving credit
facility. Interest on the new agreements remains unchanged from the prior
agreements; however, the new agreements provide for changes to existing and
additional covenants. In addition, beginning in 1996, the Company is required
to make additional principal payments on the Term Loans of 75% of the
Company's consolidated excess cash flow as defined by the Amended and
Restated Loan Agreement.
Aggregate maturities of the Company's long-term debt as of January 1, 1996
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 ........ $10,741,000
1997 ........ 5,832,000
1998 ........ 6,944,000
1999 ........ 11,673,000
Thereafter . 46,237,000
-------------
Total ....... $89,835,000
=============
</TABLE>
6. LEASES
The Company leases restaurant space under noncancelable operating leases
with remaining lease terms of one to twenty years. In many cases, the leases
provide for rent escalations and for one or more five-year renewal options.
The leases generally require the Company to pay property taxes, insurance,
maintenance and other operating costs of the properties, as well as
contingent rentals based upon a percentage (generally 8.5%) of net sales. In
addition, the Company leases office space, office equipment, restaurant
equipment and vehicles under noncancelable operating leases.
During the periods ended January 1, 1996 and December 31, 1994, rent
expense amounted to:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
1996 1994
------------- --------------
<S> <C> <C>
Minimum rentals under operating leases $11,072,000 $2,691,000
Contingent rentals .................... 958,000 253,000
------------- --------------
Total ................................. $12,030,000 2,944,000
============= ==============
</TABLE>
F-11
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
(CONTINUED)
6. LEASES (Continued)(CONTINUED)
At January 1, 1996, future minimum lease payments under noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 ........ $ 12,229,000
1997 ........ 12,164,000
1998 ........ 11,997,000
1999 ........ 11,748,000
2000 ........ 11,157,000
Thereafter . 93,921,000
-------------
Total ....... $153,216,000
=============
</TABLE>
At January 1, 1996, future minimum lease payments under noncancelable
capital leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 ......................................... $129,000
1997 ......................................... 129,000
1998 ......................................... 66,000
----------
Total minimum lease payments ................. 324,000
Less amount representing interest ............ 49,000
----------
Present value of the minimum lease obligatiom $275,000
==========
</TABLE>
Payments on capital leases for the period ended January 1, 1996 was
$63,000; no payments were made in the period ended December 31, 1994.
7. CAPITAL STOCK
At January 1, 1996 and December 31, 1994, the Company's authorized capital
stock was as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF ISSUED VOTING
VALUE SHARES AND RIGHTS
PER SHARE AUTHORIZED OUTSTANDING PER SHARE
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Class A Common Stock .......... $0.01 2,000.0 348.7 1
Class B Common Stock .......... 0.01 100.0 0.0 0
Class C Common Stock .......... 0.01 3,500.0 1,000.0 1
------------ -------------
Total common stock ............ 3,500.0 1,000.0
============ =============
Special Voting Preferred Stock $0.00 1.0 1.0 716
Class A1 Preferred Stock ..... 0.00 5,000.0 4,425.0 0
Class A2 Preferred Stock ..... 0.01 2,500.0 1,200.0 0
Class B Preferred Stock ...... 0.01 3,000.0 1,875.0 0
------------ ------------
Total preferred stock ......... 10,501.0 7,501.0
============ ============
</TABLE>
The preferred stock pays dividends at 6% per annum on the total issuance
price of each share, payable quarterly when allowed under the Loan Agreement.
Any preferred dividends not paid when due are cumulative. Any preferred
dividends not paid in cash will be paid in preferred stock.
F-12
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
(CONTINUED)
7. CAPITAL STOCK (CONTINUED)
The voting rights of the Special Voting Preferred Stock adjust so that,
at any time, the total votes per share of Special Voting Preferred Stock is
equal to the total shares of Class A and Class D Common Stock issued and
outstanding plus one vote. The Special Voting Preferred Stock was eliminated
from the Company's Certificate of Incorporation on February 7, 1996.
In connection with entering into the original Loan Agreement, the Company
issued warrants to purchase 112.36 shares of Class B Common Stock for an
exercise price of $0.01 per share to an affiliate of the Agent Bank. The
warrants are exercisable at any time and expire the earlier of (i) the date
such warrants are exercised in full, or (ii) November 30, 2002.
During 1994, the Company granted stock options to purchase 11.24 shares of
Class D Common Stock at $100 per share in connection with employment
agreements with two members of the Company's management. All of these options
vest ratably over a two-year period ending September 1, 1996 at which time
all become exercisable. The options expire at the earlier of (i) 90 to 180
days after separation of the employee from the Company, or (ii) December 31,
2004. At January 1, 1996, all of these options remained outstanding; fifty
percent (50%) of such options were currently excercisable as of September,
1995.
The Company has never declared or paid dividends on its capital stock, as
stipulated by the Loan Agreement.
8. INCOME TAXES
The components of the income tax provision for the periods ended January
1, 1996 and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
1996 1994
------------ --------------
<S> <C> <C>
Current -- state... $290,000 $ 20,000
Deferred -- federal 535,000 171,000
------------ -------------
Total ............. $825,000 $191,000
============ =============
</TABLE>
The Company's assumed effective tax rate on pretax income for the periods
ended January 1, 1996 and December 31, 1994 differs from the U.S. federal
statutory rate of 35% primarily due to state taxes and nondeductible
expenses.
The deferred tax liability at January 1, 1996 and December 31, 1994
results primarily from the use of accelerated depreciation methods for income
tax purposes and differences between the financial reporting basis and the
tax basis of the Company's assets, reduced by the tax benefit of the net
operating loss carry-forward.
On September 1, 1994, the Company acquired the assets of the restaurants
from the Predecessors in a transaction which involved a partial carry-over of
basis for income tax purposes. The Company recorded goodwill and a long-term
deferred income tax liability since the income tax basis of the restaurants
acquired from the Predecessors is lower than the financial reporting basis of
such assets.
The Company has a net operating loss carry-forward for tax purposes at
January 1, 1996 and December 31, 1994 of approximately $8,735,000 and
$2,050,000, respectively, which carry-forward will expire in 2009.
F-13
<PAGE>
NRE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 1, 1995 TO JANUARY 1, 1996 AND
THE PERIOD AUGUST 17, 1994 (DATE OF INCORPORATION) TO DECEMBER 31, 1994
(CONTINUED)
9. RELATED PARTIES
At January 1, 1996, the Company has Senior Subordinated Notes payable to
certain stockholders totaling $15,400,000 (see Note 5). During the periods
ended January 1, 1996 and December 31, 1994 the Company recorded interest
expense on the Senior Subordinated Notes totaling $1,982,000 and $660,000,
respectively.
The Company leases two restaurants under noncancelable operating leases
from an entity which is owned by a member of the Company's management. The
leases expire in March 2006 and January 2007, respectively, and require total
monthly rental payments of $20,600. During the periods ended January 1, 1996
and December 31, 1994, the Company recorded rent expense of $248,000 and
$82,000, respectively, under these leases.
The Company has entered into a management consulting agreement with an
affiliate of a stockholder. Under the terms of the agreement, the Company is
required to pay the consultant an annual management fee equal to the higher
of (i) $300,000, or (ii) 0.35% of food sales. During the periods ended
January 1, 1996 and December 31, 1994, the Company recorded expense of
$479,000 and $116,000, respectively, under this agreement. On February 7,
1996, the Company amended the management consulting agreement changing the
annual management fee calculation to the higher of (i) $500,000 and (ii) 2.5%
of cash flow (as determined in the management consulting agreement).
10. SUBSEQUENT EVENTS
ISSUANCE OF SUBORDINATED NOTES -- On February 7, 1996, the Company's
subsidiary issued Subordinated Notes of $15.0 million to PMI Mezzanine Fund,
L.P. ("PMI"). Such Subordinated Notes bear interest at a rate of 12.5% per
annum and are subordinated to amounts due to the Agent Bank and its
consortium and certain amounts due BKC. All principal of the subordinated
notes is due January 31, 2005. The Subordinated Note Agreement contains,
among other provisions, certain covenants for maintaining defined levels of
tangible net worth and various financial ratios, including debt service
coverage and interest coverage. Concurrent with the issuance of the
Subordinated Notes, the Company issued common stock purchase warrants for the
purchase of shares of Class C Common Stock to PMI.
ACQUISITION OF RESTAURANTS -- Concurrent with the refinancing on February
7, 1996 (see Note 5) and issuance of Senior Subordinated Notes, the Company
acquired 36 Burger King restaurants located in Virginia, North Carolina and
Ohio. The purchase price aggregated $36.9 million for the 36 restaurants and
$4.1 million for transaction fees and expenses. The acquisitions were
financed through net borrowings of $20.0 million under Term Loans A and B,
$5.0 million under the revolving credit facility and $15.0 million from the
Senior Subordinated Notes and warrants issued to PMI. The acquisitions will
be accounted for using the purchase method. The excess of the purchase price
over the acquired tangible and intangible net assets, when determined, will
be allocated to goodwill and amortized on a straight-line basis over 35
years. In addition, concurrent with the acquisitions, the Company entered
into operating leases on all 36 properties.
* * * * * *
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
NRE Holdings, Inc.
Westchester, Illinois
We have audited the Historical Schedules of Restaurant Contribution (the
"Schedules") of the restaurants purchased by National Restaurant Enterprises,
Inc., a wholly-owned subsidiary of NRE Holdings, Inc., from Burger King
Corporation ("BKC") and from entities owned or controlled by Lawrence E. Jaro
("Jaro") and William C. Osborn ("Osborn") for the period January 1, 1994
through September 1, 1994 and the year ended December 31, 1993. These
schedules are the responsibility of the management of the entities from whom
the restaurants were acquired. Our responsibility is to express an opinion on
these schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Schedules are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Schedules. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
Schedules. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying Schedules were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in the registration statement on Form S-1 of NRE Holdings, Inc.) as
described in Note 2 and are not intended to be a complete presentation of the
earnings of the restaurants purchased from BKC, Jaro and Osborn.
In our opinion, the Schedules referred to above present fairly, in all
material respects, the restaurant contribution for the restaurants purchased
by National Restaurant Enterprises, Inc. from BKC, Jaro and Osborn for the
period January 1, 1994 through September 1, 1994 and the year ended December
31, 1993, in conformity with generally accepted accounting principles.
Deloitte & Touche, LLP
October 10, 1995
Chicago, Illinois
F-15
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
FOR THE PERIOD JANUARY 1, 1994 THROUGH SEPTEMBER 1, 1994
<TABLE>
<CAPTION>
BKC JARO OSBORN
RESTAURANTS RESTAURANTS RESTAURANTS TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
RESTAURANT SALES ..................... $47,762,000 $7,400,000 $1,558,000 $56,720,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ....................... 15,589,000 2,534,000 479,000 18,602,000
Restaurant labor and related costs . 13,253,000 1,849,000 427,000 15,529,000
Occupancy ........................... 6,211,000 843,000 152,000 7,206,000
Depreciation and amortization of
franchise agreements ............... 1,161,000 179,000 26,000 1,366,000
Advertising ......................... 2,091,000 386,000 94,000 2,571,000
Royalties ........................... 1,642,000 254,000 54,000 1,950,000
Other operating expenses ............ 5,310,000 673,000 144,000 6,127,000
------------- ------------- ------------- -------------
Total restaurant operating expenses 45,257,000 6,718,000 1,376,000 53,351,000
------------- ------------- ------------- -------------
RESTAURANT CONTRIBUTION .............. $ 2,505,000 $ 682,000 $ 182,000 $ 3,369,000
============= ============= ============= =============
</TABLE>
See notes to historical schedules of restaurant contribution.
F-16
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
BKC JARO OSBORN
RESTAURANTS RESTAURANTS RESTAURANTS TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
RESTAURANT SALES ..................... $70,667,000 $10,115,000 $2,113,000 $82,895,000
RESTAURANT OPERATING EXPENSES:
Cost of sales ....................... 21,844,000 3,344,000 644,000 25,832,000
Restaurant labor and related costs . 18,921,000 2,510,000 567,000 21,998,000
Occupancy ........................... 9,063,000 1,221,000 216,000 10,500,000
Depreciation and amortization of ...
franchise agreements ............... 1,722,000 292,000 48,000 2,062,000
Advertising ......................... 3,711,000 567,000 117,000 4,395,000
Royalties ........................... 2,434,000 348,000 73,000 2,855,000
Other operating expenses ............ 7,568,000 884,000 203,000 8,655,000
------------- ------------- ------------- -------------
Total restaurant operating expenses 65,263,000 9,166,000 1,868,000 76,297,000
------------- ------------- ------------- -------------
RESTAURANT CONTRIBUTION .............. $ 5,404,000 $ 949,000 $ 245,000 $ 6,598,000
============= ============= ============= =============
</TABLE>
See notes to historical schedules of restaurant contribution.
F-17
<PAGE>
NOTES TO THE HISTORICAL SCHEDULES OF
RESTAURANT CONTRIBUTION
FOR THE PERIOD JANUARY 1, 1994 THROUGH SEPTEMBER 1, 1994
AND THE YEAR ENDED DECEMBER 31, 1993
1. DESCRIPTION OF BUSINESS
NRE Holdings, Inc. and its wholly-owned subsidiary, National Restaurant
Enterprises, Inc. d/b/a AmeriKing Corporation (consolidated, the "Company"),
were formed on August 17, 1994 to acquire and operate Burger King restaurants
in five states (Illinois, Indiana, Colorado, Texas and Wisconsin) and grow
through the development and acquisition of additional Burger King restaurants
in these and other states.
Effective September 2, 1994, the Company acquired 68 Burger King
restaurants located in the Chicago metropolitan area from Burger King
Corporation ("BKC") for $41,500,000 in cash, and 14 Burger King restaurants
in Colorado and Texas from entities owned or controlled by Lawrence E. Jaro
("Jaro") and William C. Osborn ("Osborn"), who are members of the Company's
current management, for $6,029,000 of subordinated debt and preferred and
common stock of NRE Holdings, Inc. and $1,975,000 in cash.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Historical Schedules of Restaurant Contribution (the "Schedules"),
include operations of the acquired restaurants for the periods prior to their
purchase by the Company, and have been prepared pursuant to Article 3 of
Regulation S-X, Section 210.3-02(a).
SALES -- Sales consist primarily of food and premium sales.
COST OF SALES -- Costs of sales consist primarily of restaurant and food
supplies, determined using the first-in, first-out (FIFO) method of inventory
valuation.
RESTAURANT LABOR AND RELATED COSTS -- Restaurant labor and related costs
include managers' salaries, hourly wages and related payroll taxes and
benefits.
OCCUPANCY -- Occupancy costs consist of rents, licenses and permits, real
estate taxes and common area maintenance.
DEPRECIATION AND AMORTIZATION OF FRANCHISE AGREEMENTS -- Depreciation is
recorded using accelerated methods permissible under generally accepted
accounting principles over the following useful lives:
<TABLE>
<CAPTION>
<S> <C>
Building improvements ............................ 10-20 years
Furniture, fixtures and restaurant equipment .... 5-10 years
</TABLE>
The franchise agreements with BKC require the Predecessors to pay a
franchise fee for each restaurant opened. Amortization is recorded on the
straight-line method over the terms of the related franchise agreements. The
franchise agreements generally provide for a term of 20 years with renewal
options upon expiration.
ADVERTISING -- Under the franchise agreements with BKC, monthly
advertising fees are to be paid at 4% of restaurant food sales.
ROYALTIES -- Under the franchise agreements with BKC, monthly royalties
are to be paid at 3.5% of restaurant food sales.
OTHER OPERATING EXPENSES -- Other operating expenses include utilities,
repairs and maintenance, cleaning, security, uniforms, workmen's compensation
and training expenses.
The Schedules of Restaurant Contribution do not include amounts relative
to interest income. In addition, the Schedules do not include general and
administrative expenses, interest expense, amortization of deferred
organization costs, income tax or other expenses.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
NRE Holdings, Inc.
Westchester, Illinois
We have audited the Historical Schedules of Restaurant Contribution (the
"Schedules") of the restaurants purchased by National Restaurant Enterprises,
Inc., a wholly-owned subsidiary of NRE Holdings, Inc., from Sheldon T.
Friedman ("Friedman"), QSC, Inc. and Ro-Lank, Inc., Curtis James Investments,
Inc., C&N Dining, Inc. and Stuart Ray Investments, Inc. (collectively, the
"Entities") for the periods indicated in the accompanying Schedules. These
Schedules are the responsibility of the Entities' management. Our
responsibility is to express an opinion on these Schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Schedules are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Schedules. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
Schedules. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying Schedules were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in the registration statement on Form S-1 of NRE Holdings, Inc.) as
described in Note 2 and are not intended to be a complete presentation of the
Entities' restaurant earnings.
In our opinion, the Schedules referred to above present fairly, in all
material respects, the restaurant contribution for the restaurants purchased
by National Restaurant Enterprises, Inc. for the periods indicated in the
accompanying Schedules, in conformity with generally accepted accounting
principles.
Deloitte & Touche, LLP
May 8, 1996
Chicago, Illinois
F-19
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
QSC, INC. AND
RO-LANK, INC.
DMW, INC. FOR THE BKC FOR THE FOR THE PERIOD CURTIS JAMES
PERIOD JANUARY 1, PERIOD JANUARY JANUARY 1, 1995 INVESTMENTS, INC.
1995 THROUGH 1, 1995 THROUGH THROUGH NOVEMBER FOR THE YEAR ENDED
SEPTEMBER 12, 1995 OCTOBER 24, 1995 20, 1995 DECEMBER 31, 1995
------------------ ---------------- ----------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
RESTAURANT SALES ........... $2,814,000 $1,324,000 $10,261,000 $14,766,000
RESTAURANT OPERATING
EXPENSES:
COST OF SALES ............. 942,000 543,000 3,361,000 4,753,000
RESTAURANT LABOR AND
RELATED COSTS 739,000 486,000 2,812,000 4,100,000
OCCUPANCY ................. 272,000 34,000 959,000 1,369,000
DEPRECIATION AND
AMORTIZATION OF
FRANCHISE AGREEMENTS ..... 71,000 0 250,000 353,000
ADVERTISING ............... 173,000 46,000 490,000 616,000
ROYALTIES ................. 97,000 40,000 352,000 509,000
OTHER OPERATING
.EXPENSES ............... 220,000 179,000 972,000 1,276,000
-------------- ------------- ------------ -----------
TOTAL RESTAURANT OPERATING
EXPENSES .......... 2,514,000 1,328,000 9,196,000 12,976,000
-------------- ------------- ------------ -----------
RESTAURANT CONTRIBUTION ... $ 300,000 $ (4,000) $ 1,065,000 $ 1,790,000
============== ============= ============ ============
(Restubbed Table Continued from above)
STUART RAY
C&N DINING, INC. INVESTMENTS, INC.
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995
- ----------------- ------------------
<C> <C>
$26,955,000 $41,697,000
8,363,000 13,450,000
6,154,000 12,239,000
4,274,000 4,855,000
83,000 926,000
1,159,000 1,819,000
926,000 1,438,000
2,264,000 3,220,000
--------- -----------
23,223,000 37,947,000
----------- ---------
$ 3,732,000 $ 3,750,000
================== =============
</TABLE>
See notes to historical schedules of restaurant contribution.
F-20
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
FRIEDMAN FOR THE QSC, INC. AND CURTIS JAMES STUART RAY
PERIOD JANUARY 1, RO-LANK, INC. FOR INVESTMENTS, INC. C&N DINING, INC. INVESTMENTS, INC.
1994 THROUGH THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
NOVEMBER 30, 1994 DECEMBER 31, 1994 DECEMBER 31, 1994 DECEMBER 31, 1994 DECEMBER 31, 1994
----------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
RESTAURANT SALES .............. $43,494,000 $10,627,000 $13,242,000 $23,918,000 $36,968,000
RESTAURANT OPERATING
EXPENSES:
Cost of sales ................ 14,133,000 3,451,000 4,203,000 7,221,000 11,866,000
Restaurant labor and
related costs 10,733,000 2,810,000 3,664,000 5,428,000 10,199,000
Occupancy .................... 3,607,000 903,000 1,234,000 3,991,000 4,416,000
Depreciation and amortization
of franchise agreements ..... 4,294,000 257,000 221,000 40,167 776,000
Advertising .................. 2,166,000 475,000 538,000 1,027,000 1,839,000
Royalties .................... 1,499,000 365,000 457,000 822,000 1,275,000
Other operating expenses ..... 3,486,000 1,002,000 1,261,000 2,048,000 3,019,000
----------------- ------------------ ------------------ --------------- -------------
Total restaurant operating
expenses ................... 39,918,000 9,263,000 11,578,000 20,577,167 33,390,000
----------------- ------------------ ------------------ ------------------ -------------
RESTAURANT CONTRIBUTION ....... $ 3,576,000 $ 1,364,000 $ 1,664,000 $ 3,340,833 $ 3,578,000
================= ================== ================== ================== =============
</TABLE>
See notes to historical schedules of restaurant contribution.
F-21
<PAGE>
HISTORICAL SCHEDULES OF RESTAURANT CONTRIBUTION
<TABLE>
<CAPTION>
QSC, INC. AND CURTIS JAMES STUART RAY
FRIEDMAN FOR THE RO-LANK, INC. FOR INVESTMENTS, INC. C&N DINING, INC. INVESTMENTS, INC.
YEAR ENDED THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
RESTAURANT SALES ............. $33,365,000 $9,035,000 $11,252,000 $21,635,000 $34,327,000
RESTAURANT OPERATING
EXPENSES:
Cost of sales ............... 10,825,000 2,857,000 3,618,000 6,440,000 10,923,000
Restaurant labor and
related costs 8,319,000 2,529,000 3,188,000 5,129,000 9,703,000
Occupancy ................... 3,037,000 794,000 1,047,000 3,778,000 4,568,000
Depreciation and
amortization of
franchise agreements ....... 4,299,000 481,000 226,000 39,000 959,000
Advertising ................. 1,870,000 407,000 481,000 978,000 2,170,000
Royalties ................... 1,151,000 310,000 388,000 743,000 1,201,000
Other operating expenses .... 2,686,000 965,000 1,091,000 2,024,000 2,624,000
------------------ ------------------ ------------------ --------------- --------------
Total restaurant
operating expenses ...... 32,187,000 8,343,000 10,039,000 19,131,000 32,148,000
------------------ ------------------ ------------------ --------------- --------------
RESTAURANT CONTRIBUTION ...... $ 1,178,000 $ 692,000 $ 1,213,000 $ 2,504,000 $2,179,000
================== ================== ================== =============== ==============
</TABLE>
See notes to historical schedules of restaurant contribution.
F-22
<PAGE>
NOTES TO THE HISTORICAL SCHEDULES OF
RESTAURANT CONTRIBUTION
1. DESCRIPTION OF BUSINESS
NRE Holdings, Inc. and its wholly-owned subsidiary, National Restaurant
Enterprises, Inc. d/b/a AmeriKing Corporation (consolidated, the "Company"),
were formed on August 17, 1994 to acquire and operate Burger King restaurants
in five states (Illinois, Indiana, Colorado, Texas and Wisconsin) and grow
through the development and acquisition of additional Burger King restaurants
in these and other states.
Effective December 1, 1994, the Company acquired 39 Burger King
restaurants located in the Chicago metropolitan area from Sheldon T. Friedman
("Friedman") for $37,000,000 in cash.
Effective September 13, 1995, the Company acquired 4 existing and 1
developmental Burger King restaurants located in Colorado from DMW, Inc. for
$2,629,000 in cash. On October 25, 1995, the Company acquired 2 restaurants
located in the Chicago metropolitan area from Burger King Corporation ("BKC")
for no consideration. Effective November 21, 1995, the Company acquired 11
Burger King restaurants located in Tennessee and Georgia from QSC, Inc. and
Rolank, Inc. for $8,142,000 in cash.
Effective February 7, 1996, the Company acquired 24 Burger King
restaurants located in Virginia and North Carolina from C&N Dining, Inc. for
$27,469,000 in cash. Concurrent with the C&N Dining acquisition, the company
acquired 12 restaurants located in the Cincinnati metropolitan area from
Curtis James Investments, Inc. for $9,400,000 in cash. On May 11, 1996, the
Company executed purchase agreements to acquire 40 Burger King restaurants
located in Michigan from Stuart Ray Investments, Inc. for $35,600,000 in
cash.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Historical Schedules of Restaurant Contribution (the "Schedules")
include operations of the acquired restaurants for the periods to the earlier
of the date of purchase by the Company or December 31, 1995, and have been
prepared pursuant to Article 3 of Regulation S-X, Section 210.3-02(a).
SALES -- Sales consist primarily of food and premium sales.
COST OF SALES -- Costs of sales consist primarily of restaurant and food
supplies, determined using the first-in, first-out (FIFO) method of inventory
valuation.
RESTAURANT LABOR AND RELATED COSTS --Restaurant labor and related costs
include managers' salaries, hourly wages and related payroll taxes and
benefits.
OCCUPANCY -- Occupancy costs consist of rents, licenses and permits, real
estate taxes and common area maintenance.
DEPRECIATION AND AMORTIZATION OF FRANCHISE AGREEMENTS -- Depreciation is
recorded using accelerated methods permissible under generally accepted
accounting principles over the following useful lives:
<TABLE>
<CAPTION>
<S> <C>
BUILDING IMPROVEMENTS .......................... . 10-20 YEARS
FURNITURE, FIXTURES AND RESTAURANT EQUIPMENT ... 5-10 YEARS
</TABLE>
The franchise agreements with BKC require the Entities to pay a franchise
fee for each restaurant opened. Amortization is recorded on the straight-line
method over the terms of the related franchise agreements. The franchise
agreements generally provide for a term of 20 years with renewal options upon
expiration.
ADVERTISING -- Under the franchise agreements with BKC, monthly
advertising fees are to be paid at 4% of restaurant food sales.
ROYALTIES -- Under the franchise agreements with BKC, monthly royalties
are to be paid at 3.5% of restaurant food sales.
OTHER OPERATING EXPENSES -- Other operating expenses include utilities,
repairs and maintenance, cleaning, security, uniforms, workmen's compensation
and training expenses.
The Schedules do not include amounts relative to interest income. In
addition, the Schedules do not include general and administrative expenses,
interest expense, amortization of deferred organization costs, income tax or
other expenses.
* * * * * *
F-23
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ................................... 3
Summary Consolidated Financial Information .......... 6
Risk Factors ......................................... 8
Use of Proceeds ...................................... 15
Dividend Policy ...................................... 16
Dilution ............................................. 16
Capitalization ....................................... 17
Pro Forma Consolidated Financial Statements ......... 18
Selected Consolidated Financial Information ......... 25
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 27
Business ............................................. 33
Management ........................................... 44
Principal and Selling Stockholders ................... 50
Description of Capital Stock ......................... 52
Description of Certain Indebtedness .................. 56
Certain Transactions ................................. 59
Shares Eligible for Future Sale ...................... 61
Certain U.S. Tax Consequences to Non-U.S.
Stockholders ........................................ 62
Underwriting ......................................... 64
Legal Matters ........................................ 67
Experts .............................................. 67
Available Information ................................ 67
Index to Consolidated Financial Statements .......... F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERINGS, ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
AMERIKING, INC.
COMMON STOCK
0-----------------------------
PROSPECTUS
, 1996
------------------------------
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
EVEREN SECURITIES, INC.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy, nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED MAY 22, 1996
PROSPECTUS
SHARES
AMERIKING, INC.
COMMON STOCK
All of the shares of common stock (the "Common Stock") of AmeriKing, Inc.
(the "Company") offered hereby are being sold by the Company. Of the
shares of Common Stock offered hereby, a total of shares are being
offered hereby in an international offering outside the United States and
Canada (the "International Offering") by the Managers (as defined) and a
total of shares are being offered by the U.S. Underwriters (as defined)
in a concurrent offering in the United States and Canada (the "U.S. Offering"
and, together with the International Offering, the "Offerings").
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will
be between $ and $ per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price.
Application has been made to have the Common Stock quoted on the Nasdaq
National Market under the symbol "AKNG."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share $ $ $
Total (3) $100,000,000 $ $
</TABLE>
- -----------------------------------------------------------------------------
(1) For information regarding indemnification of the Manager and the U.S.
Underwriters, see "Underwriting."
(2) Before deducting expenses estimated at $ payable by the Company.
(3) The Company and certain stockholders of the Company have granted the
U.S. Underwriters a 30-day option to purchase up to additional
shares of Common Stock solely to cover over-allotments, if any. See
"Underwriting." If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $ , $ and $ , respectively. The Company will not receive
any of the proceeds from the sale of Common Stock by such selling
stockholders. See "Underwriting" and "Principal and Selling
Stockholders."
The shares of Common Stock are being offered by the several Managers named
herein, subject to prior sale, when, as and if accepted by them and subject
to certain conditions. It is expected that certificates for the shares of
Common Stock offered hereby will be available for delivery on or about
, 1996, at the offices of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
SMITH BARNEY INC.
PAINEWEBBER INTERNATIONAL
[ ], 1996
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ................................... 3
Summary Consolidated Financial Information .......... 6
Risk Factors ......................................... 8
Use of Proceeds ...................................... 15
Dividend Policy ...................................... 16
Dilution ............................................. 16
Capitalization ....................................... 17
Pro Forma Consolidated Financial Statements ......... 18
Selected Consolidated Financial Information ......... 25
Management's Discussion and Analysis of Financial
Condition and Results of Operatins .................. 27
Business ............................................. 33
Management ........................................... 44
Principal and Selling Stockholders ................... 50
Description of Capital Stock ......................... 52
Description of Certain Indebtedness .................. 56
Certain Transactions ................................. 59
Shares Eligible for Future Sale ...................... 61
Certain U.S. Tax Consequences to Non-U.S.
Stockholders ........................................ 62
Underwriting ......................................... 64
Legal Matters ........................................ 67
Experts .............................................. 67
Available Information ................................ 67
Index to Consolidated Financial Statements .......... F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERINGS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
SHARES
AMERIKING, INC.
COMMON STOCK
-------------------------------
PROSPECTUS
, 1996
-------------------------------
SMITH BARNEY INC.
PAINEWEBBER INTERNATIONAL
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the
distribution of the securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee .. $ 39,655
NASD Filing Fee ....................................... 12,000
Printing and Engraving Expenses ....................... 150,000
Accounting Fees and Expenses .......................... 350,000
Attorneys' Fees and Expenses .......................... 650,000
Transfer Agent's and Registrar's Fees ................. 20,000
Blue Sky Fees and Expenses (including attorneys' fees) 20,000
NASDAQ Listing Fee ....................................
Miscellaneous ......................................... []
Total ............................................... $8,500,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware General Corporation Law (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in
the defense of any lawsuit to which they are made parties by reason of being
or having been such directors or officers, subject to specified conditions
and exclusions; gives a director or officer who successfully defends an
action the right to be so indemnified; and authorizes the Company to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled
under any by-laws, agreement, vote of stockholders or otherwise.
(b) The Amended and Restated Certificate of Incorporation of the Company
requires, and the Amended and Restated By-Laws of the Company provides for,
indemnification of directors, officers, employees and agents to the full
extent permitted by law.
(c) The U.S. Underwriting Agreement and the International Underwriting
Agreement (the forms of which are included as Exhibits 1.1 and 1.2 to this
Registration Statement) provide for the indemnification under certain
circumstances of the Company, its directors and certain of its officers by
the Underwriters.
(d) In accordance with Section 102(b)(7) of the Delaware General
Corporation Law, the Company's Amended and Restated Certificate of
Incorporation provides that directors shall not be personally liable for
monetary damages for breaches of their fiduciary duty as directors except for
(1) breaches of their duty of loyalty to the Company or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct
or knowing violations of law, (3) under Section 174 of the Delaware General
Corporation Law (unlawful payment of dividends or stock purchase or
redemption) or (4) transactions from which a director derives an improper
personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since its incorporation in August 1994, the Company has issued the
following securities:
(a) In connection with its acquisition of certain Burger King restaurants
from the Burger King Corporation and affiliates of Lawrence Jaro and William
Osborn on September 1, 1994 and related financing, the Company issued to (i)
the Jordan Investors 285.31 shares of Class A Common Stock, 500 shares of
Class B Preferred Stock and 1 share of Special Voting Preferred Stock (which
was subsequently cancelled), (ii) advisors to the Company 63.4 shares of
Class A Common Stock, (iii) The First National Bank of Boston warrants to
purchase 31.28 shares of Class B Common Stock, (iv) MCIT PLC 285.31 shares of
Class C Common Stock (which were subsequently converted into Class A Common
Stock), 3,000 shares of Class A(1) Preferred Stock and 500 shares of Class B
Preferred Stock, (v) the management of the Company (and affiliates of
II-1
<PAGE>
management) 366.00 shares of Class D Common Stock, 1,200 shares of Class A(2)
Preferred Stock and 400 shares of Class B Preferred Stock, (v) options to
purchase 5.62 shares of Class D Common Stock to each of two executives of the
Company. The Company also issued to MCIT, PLC $11,000,000 aggregate principal
amount of the Company's 12.75% Note due August 31, 2004 and to affiliates of
Management a series of 12.75% Notes each due August 31, 2004 with an
aggregate principal amount of $4,400,000. Exemption from registration was
claimed on the grounds that the issuance of such securities did not involve a
public offering within the meaning of Section 4(2) of the Securities Act of
1933, as amended.
(b) In connection with its acquisition of certain Burger King restaurants
from Shelley Friedman and affiliates on November 30, 1994 and related
financing, the Company issued to (i) BancBoston Capital Inc. warrants to
purchase 81.08 shares of Class B Common Stock, (ii) BancBoston Investments,
Inc. 1,425 shares of Class A(1) Preferred Stock, 475 shares of Class B
Preferred Stock and $600,000 aggregate principal amount of the Company's 6%
Junior Subordinated Note due March 31, 2005. Exemption from registration was
claimed on the grounds that the issuance of such securities did not involve a
public offering within the meaning of Section 4(2) of the Securities Act of
1933, as amended.
(c) In connection with its acquisition of certain Burger King restaurants
from C&N Dining, Inc. and its affiliates Thirty-Forty, Inc., Houston, Inc.
and Fifth & Race, Inc. on February 7, 1996 and related financing, the Company
issued to PMI Mezzanine Fund, L.P. warrants to purchase 71.72 shares of Class
C Common Stock and $15,000,000 in aggregate principal amount of the Company's
12.5% Senior Subordinated Notes due January 31, 2005. Exemption from
registration was claimed on the grounds that the issuance of such securities
did not involve a public offering within the meaning of Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit Index that immediately precedes such exhibits and is
incorporated herein by reference.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because they are not required, are inapplicable or the required information
has already been provided elsewhere in the registration statement.
ITEM 17. UNDERTAKINGS
The undersigned Company hereby undertakes to provide to the U.S.
Underwriters and the Managers at the closings specified in the Underwriting
Agreement and the International Underwriting Agreement, respectively,
certificates in such denominations and registered in such names as required
by the U.S. Underwriters and the Managers to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions referred to in Item 14, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
II-2
<PAGE>
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Westchester, State of Illinois, on May 22, 1996.
AMERIKING, INC.
By /s/ Lawrence E. Jaro
-----------------------------------
Lawrence E. Jaro
Managing Owner, Chairman and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Lawrence E. Jaro and A. Richard Caputo, Jr., and each of them, the true and
lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned and to file the same, with all exhibits thereto, in any and all
capabilities, to sign any and all amendments and any registration statement
filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended
(including post-effective amendments thereto and other documents in
connection therewith), with the Securities and Exchange Commission, and
hereby grants to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite
and necessary to be done, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amended registration statement has been signed by the following persons
in the capacities indicated on the 22nd day of May, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ----------------------------------------------
<S> <C>
/s/Lawrence E. Jaro
- ------------------------------- Managing Owner, Chairman and Chief Executive
Lawrence E. Jaro Officer (Principal Executive Officer)
/s/William C. Osborn
- -------------------------------
William C. Osborn Managing Owner and Vice Chairman
/s/Gary W. Hubert
- -------------------------------
Gary W. Hubert Director and Senior Vice President
/s/Joel Aaseby
- ------------------------------- Chief Financial Officer and Corporate Secretary
Joel Aaseby (Principal Financial and Accounting Officer)
/s/A. Richard Caputo, Jr.
- -------------------------------
A. Richard Caputo, Jr. Director and Vice President
/s/Thomas H. Quinn
- -------------------------------
Thomas H. Quinn Director
/s/John W. Jordan II
- -------------------------------
John W. Jordan II Director
/s/David W. Zalaznick
- -------------------------------
David W. Zalaznick Director
</TABLE>
II-4
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
AMERIKING, INC.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
1.1 Form of U.S. Underwriting Agreement ..................................................
1.2+ Form of International Underwriting Agreement .........................................
2.1++ Purchase and Sale Agreement, dated September 1, 1994, between Burger King Corporation
("BKC") and National Restaurant Enterprises, Inc. ("Enterprises") ..................
2.2++ Purchase and Sale Agreement, dated September 1, 1994, between Jaro Enterprises, Inc.
and AmeriKing, Inc. (formerly known as NRE Holdings, Inc.) ("AmeriKing") ...........
2.3++ Purchase and Sale Agreement, dated September 1, 1994, between Jaro Restaurants, Inc.
and AmeriKing ......................................................................
2.4++ Purchase and Sale Agreement, dated September 1, 1994, between Tabor Restaurants
Associates, Inc. and AmeriKing .....................................................
2.5++ Purchase and Sale Agreement, dated September, 1, 1994, between JB Restaurants, Inc.
and AmeriKing ......................................................................
2.6++ Purchase and Sale Agreement, dated September 1, 1994, between CastleKing, Inc. and
AmeriKing ..........................................................................
2.7++ Purchase and Sale Agreement, dated September 1, 1994, between Osburger, Inc. and
AmeriKing ..........................................................................
2.8++ Purchase and Sale Agreement, dated September 1, 1994, between White-Osborn
Restaurants, Inc. and AmeriKing ....................................................
2.9++ Purchase and Sale Agreement, dated November 30, 1994, by and among Sheldon T.
Friedman, BNB Land Venture, Inc. and Enterprises ...................................
2.10++ Asset Purchase Agreement, dated July 5, 1995, by and among DMW, Inc., Daniel L. White
and AmeriKing Colorado Corporation I ...............................................
2.11++ Asset Purchase Agreement, dated July 5, 1995, by and among WSG, Inc., Daniel L.
White, Susan J. Wakeman, George Alaiz, Jr. and AmeriKing Colorado Corporation I ....
2.12++ Purchase Agreement, dated November 21, 1995, by and among QSC, Inc., the shareholders
of QSC, Inc. and AmeriKing Tennessee Corporation I .................................
2.13++ Purchase Agreement, dated November 21, 1995, by and among Ro-Lank, Inc., the
shareholders of Ro-Lank, Inc. and AmeriKing Tennessee Corporation I ................
2.14++ Purchase and Sale Agreement, dated November 30, 1995, by and among C&N Dining, Inc.
and affiliates and AmeriKing Virginia Corporation I ................................
2.15++ Amendment No. 1 to Purchase and Sale Agreement, dated February 7, 1996, by and among
C&N Dining, Inc. and affiliates and AmeriKing Virginia Corporation I ...............
2.16++ Asset Purchase Agreement, dated February 7, 1996, between Thirty-Forty, Inc. and
AmeriKing Cincinnati Corporation I .................................................
2.17++ Asset Purchase Agreement, dated February 7, 1996, between Houston, Inc. and AmeriKing
Cincinnati Corporation I ...........................................................
2.18++ Asset Purchase Agreement, dated February 7, 1996, between Fifth & Race, Inc. and
AmeriKing Cincinnati Corporation I .................................................
3.1+ Amended and Restated Certificate of Incorporation of AmeriKing .......................
3.2+ Amended and Restated Bylaws of AmeriKing .............................................
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
4.1 Stockholders Agreement, dated September 1, 1994, by and among AmeriKing and the
stockholders appearing on the signature pages thereto ..............................
4.2 Consent and Amendment No. 1 to Stockholders Agreement, dated November 30, 1994, by
and among AmeriKing and the stockholders appearing on the signature pages thereto ..
4.3 Consent and Amendment No. 2 to Stockholders Agreement, dated February 7, 1996, by and
among AmeriKing and the stockholders appearing on the signature pages thereto ......
4.4+ Form of Amended and Restated Stockholders Agreement, dated , 1996, by and among
AmeriKing and the stockholders appearing on the signature pages thereto ............
4.5 Management Subscription Agreement, dated September 1, 1994, by and among AmeriKing,
Tabor Restaurant Associates, Inc., Jaro Enterprises, Inc., Jaro Restaurants, Inc.,
JB Restaurants, Inc., Castleking, Inc., White-Osborn Restaurants, Inc., Osburger,
Inc., Lawrence Jaro, William Osborn, Gary Hubert, Joel Aaseby, Donald Stahurski and
Scott Vasatka ......................................................................
4.6 Stock Option Agreement, dated September 1, 1994, between AmeriKing and Scott Vasatka
4.7 Stock Option Agreement, dated September 1, 1994, between AmeriKing and Donald
Stahurski ..........................................................................
4.8 Warrant Agreement, dated September 1, 1994, between AmeriKing and The First National
Bank of Boston .....................................................................
4.9 Common Stock Purchase Warrant, dated September 1, 1994, between AmeriKing and
BancBoston Capital Inc. ............................................................
4.10 First Amendment to Common Stock Purchase Warrant, dated November 30, 1994 ...........
4.11 Second Amendment to Common Stock Purchase Warrant, dated February 7, 1996 ...........
4.12 Amended and Restated Note, dated February 7, 1996, from AmeriKing to MCIT PLC in the
aggregate principal amount of $11,000,000 ..........................................
4.13 Amended and Restated Deferred Limited Interest Guaranty, dated February 7, 1996, from
Enterprises to MCIT PLC ............................................................
4.14 Amended and Restated Note, dated February 7, 1996, from AmeriKing to Jaro
Enterprises, Inc. in the aggregate principal amount of $1,224,000 ..................
4.15 Amended and Restated Note, dated February 7, 1996, from AmeriKing to Jaro
Restaurants, Inc. in the aggregate principal amount of $112,000 ....................
4.16 Amended and Restated Note, dated February 7, 1996, from AmeriKing to JB Restaurants,
Inc. in the aggregate principal amount of $2,019,000 ...............................
4.17 Amended and Restated Note, dated February 7, 1996, from AmeriKing to CastleKing, Inc.
in the aggregate principal amount of $385,769 ......................................
4.18 Amended and Restated Note, dated February 7, 1996, from AmeriKing to White-Osborn
Restaurants, Inc. in the aggregate principal amount of $659,231 ....................
4.19 Securities Purchase Agreement, dated November 30, 1994, between AmeriKing and
BancBoston Investments, Inc. .......................................................
4.20 Common Stock Purchase Warrant, dated November 30, 1994, between AmeriKing and
BancBoston Investments, Inc. .......................................................
4.21 Junior Subordinated Note, dated November 30, 1994, from AmeriKing to BancBoston
Investments, Inc. in the aggregate principal amount of $600,000 ....................
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
4.22 Secured Promissory Note, dated November 21, 1995, from AmeriKing Tennessee
Corporation I to BKC in the aggregate principal amount of $6,920,700 ...............
4.23+ Amendment to Second Promissory Note, dated May 21, 1996, from AmeriKing Tennessee
Corporation I to BKC in the aggregate principal amount of $6,093,067 ...............
4.24 Guaranty, dated November 21, 1995, from Lawrence Jaro and William Osborn to BKC .....
4.25+ Ratification of Guaranty, May 21, 1996, from Lawrence Jaro and William Osborn to BKC
4.26 Promissory Note, dated November 29, 1995, from AmeriKing Colorado Corporation I to
Franchise Acceptance Corporation Limited in the aggregate principal amount of
$1,865,000 .........................................................................
4.27 Amendment to Promissory Note, dated December 14, 1995, from AmeriKing Colorado
Corporation I to Franchise Acceptance Corporation Limited ..........................
4.28 Common Stock Purchase Warrant, dated February 7, 1996, from AmeriKing to PMI
Mezzanine Fund, L.P. ...............................................................
4.29 Senior Subordinated Note, dated February 7, 1996, from Enterprises to PMI Mezzanine
Fund, L.P in the aggregate principal amount of $15,000,000. ........................
4.30 Subordinated Guaranty, dated February 7, 1996, from AmeriKing Virginia Corporation I
and AmeriKing Cincinnati Corporation I to PMI Mezzanine Fund, L.P. .................
4.31 Second Amended and Restated Revolving Credit Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ......
4.32 Second Amended and Restated Term Loan A Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ......
4.33 Second Amended and Restated Term Loan B Note, dated February 7, 1996, from
Enterprises to The First National Bank of Boston, the other lending institutions
listed on Schedule 1 thereto, and The First National Bank of Boston, as agent ......
4.34 Limited Guaranty, dated September 1, 1994, from AmeriKing to The First National Bank
of Boston, the other lending institutions listed on Schedule 1 thereto, and The
First National Bank of Boston, as agent ............................................
4.35 Guaranty, dated February 7, 1996, from AmeriKing Virginia Corporation I and AmeriKing
Cincinnati Corporation I to the First National Bank of Boston, the other lending
institutions listed on Schedule 1 thereto, and The First National Bank of Boston, as
agent ..............................................................................
4.36 Unconditional Guaranty of Payment and Performance, dated February 7, 1996, from
Enterprises to FFCA Acquisition Corporation ........................................
5 + Opinion of Mayer, Brown & Platt ......................................................
9.1 Jaro Proxy Agreement, dated September 1, 1994, by and among Lawrence Jaro, Tabor
Restaurant Associates, Inc., Jaro Enterprises, Inc., Jaro Restaurants, Inc. and JB
Restaurants, Inc. ..................................................................
9.2 Osborn Proxy Agreement, dated September 1, 1994, by and among William Osborn,
Castleking, Inc., Osburger, Inc. and White-Osborn, Inc. ............................
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
10.1 Second Amended and Restated Revolving Credit and Term Loan Agreement, dated February
7, 1996, by and among AmeriKing, Enterprises, The First National Bank of Boston, the
other lending institutions listed on Schedule 1 thereto, and The First National Bank
of Boston, as agent ................................................................
10.2 Security Agreement, dated September 1, 1994, by and among Enterprises and The First
National Bank of Boston, the other lending institutions listed on Schedule 1
thereto, and The First National Bank of Boston, as agent ...........................
10.3 Amendment to Security Agreement, dated February 7, 1996, by and among Enterprises and
The First National Bank of Boston, the other lending institutions listed on Schedule
1 thereto, and The First National Bank of Boston, as agent .........................
10.4 Stock Pledge Agreement, dated September 1, 1994, by and among AmeriKing and The First
National Bank of Boston, the other lending institutions listed on Schedule 1
thereto, and The First National Bank of Boston, as agent ...........................
10.5 Amendment to Stock Pledge Agreement, dated February 7, 1996, by and among AmeriKing
and The First National Bank of Boston, the other lending institutions listed on
Schedule 1 thereto, and The First National Bank of Boston, as agent ................
10.6 Security Agreement, dated February 7, 1996, by and among AmeriKing Virginia
Corporation I, AmeriKing Cincinnati Corporation I and The First National Bank of
Boston .............................................................................
10.7 Stock Pledge Agreement, dated February 7, 1996, by and among Enterprises, AmeriKing
Virginia Corporation I, AmeriKing Cincinnati Corporation I and The First National
Bank of Boston .....................................................................
10.8 Amended and Restated Purchase Agreement, dated February 7, 1996, between AmeriKing
and MCIT PLC .......................................................................
10.9 Pledge Agreement, dated September 1, 1994, between AmeriKing and MCIT PLC ...........
10.10 Subordination Agreement, dated September 1, 1994, by and among BKC, MCIT PLC and
AmeriKing ..........................................................................
10.11 Amendment and Consent No. 1 to Securities Purchase Agreement, dated February 7, 1996,
between AmeriKing and BancBoston Investments, Inc. .................................
10.12 Intercreditor Agreement, dated February 7, 1996, by and among BKC, AmeriKing Virginia
Corporation I, AmeriKing Cincinnati Corporation I, Lawrence Jaro, William Osborn,
Gary Hubert, Enterprises, AmeriKing and The First National Bank of Boston ..........
10.13 Stock Pledge Agreement, dated November 21, 1995, between Enterprises and BKC ........
10.14+ Ratification of Stock Pledge Agreement, dated May 21, 1996, between Enterprises and
BKC ................................................................................
10.15 Stock Pledge Agreement, dated November 21, 1995, between Enterprises and The First
National Bank of Boston, the other lending institutions listed on Schedule 1
thereto, and The First National Bank of Boston, as agent ...........................
10.16 Note Purchase Agreement, dated February 7, 1996, by and among AmeriKing, Enterprises
and PMI Mezzanine Fund, L.P. .......................................................
10.17+ Form of Amendment No. 1 to Note Purchase Agreement, by and among AmeriKing,
Enterprises and PMI Mezzanine Fund, L.P. ...........................................
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
10.18 Subordination Agreement, dated February 7, 1996, by and among AmeriKing, Enterprises,
AmeriKing Virginia Corporation I, AmeriKing Cincinnati Corporation I, AmeriKing
Tennessee Corporation I, AmeriKing Colorado Corporation I, Lawrence Jaro, William
Osborn, Gary Hubert and BKC ........................................................
10.19 Sale-Leaseback Agreement, dated February 7, 1996, by and among AmeriKing Virginia
Corporation I, AmeriKing Tennessee Corporation I and FFCA Acquisition Corporation ..
10.20 Lease, dated February 7, 1996, by and among AmeriKing Virginia Corporation I,
AmeriKing Tennessee Corporation I and FFCA Acquisition Corporation .................
10.21 Form of Franchise Agreement between BKC and Franchisee ...............................
10.22 Schedule of AmeriKing Franchise Agreements ...........................................
10.23 Form of Lease Agreement between BKC and Lessee .......................................
10.24 Schedule of AmeriKing Lease Agreements ...............................................
10.25 Form of Guarantee, Indemnification and Acknowledgment of BKC Franchise Agreement ....
10.26 Form of Guarantee, Indemnification and Acknowledgment of BKC Lease Agreement ........
10.27 Capital Expenditure Agreement, dated September 1, 1994, by and among AmeriKing,
Enterprises and BKC ................................................................
10.28 Capital Expenditure Agreement, dated November 21, 1995, by and among Enterprises,
AmeriKing Tennessee Corporation I and BKC ..........................................
10.29 Letter Agreement, dated February 7, 1996, between Enterprises and BKC ...............
10.30 Naparlo Development Agreement, dated February 7, 1996, between AmeriKing Virginia
Corporation I and Joseph J. Naparlo ................................................
10.31 Management Consulting Agreement, dated September 1, 1994, by and among TJC Management
Corporation, AmeriKing and Enterprises .............................................
10.32 Amendment No. 1 to Management Consulting Agreement, dated February 7, 1996, by and
among TJC Management Corporation, AmeriKing and Enterprises ........................
10.33 Intercompany Management Consulting Agreement, dated September 1, 1994 between
Enterprises and AmeriKing ..........................................................
10.34 Amended and Restated Tax Sharing Agreement, dated February 7, 1996, between
Enterprises and AmeriKing ..........................................................
10.35 Employment and Non-Interference Agreement, dated September 1, 1994, between Lawrence
Jaro and Enterprises ...............................................................
10.36 Employment and Non-Interference Agreement, dated September 1, 1994, between William
Osborn and Enterprises .............................................................
10.37 Employment and Non-Interference Agreement, dated September 1, 1994, between Gary
Hubert and Enterprises .............................................................
10.38 Employment and Non-Interference Agreement, dated September 1, 1994, between Joel
Aaseby and Enterprises .............................................................
10.39 Employment and Non-Interference Agreement, dated September 1, 1994, between Scott
Vasatka and Enterprises ............................................................
10.40+ Form of Amendment No. 1 to the TJC Management Consulting Agreement, by and among
AmeriKing, Enterprises and TJC Management Corporation ..............................
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------- ----------------
10.41 Form of Indemnification Agreement by and among AmeriKing and each of the signatories
to this Registration Statement .....................................................
10.42+ Indemnification Agreement between AmeriKing and BKC ..................................
10.43+ AmeriKing, Inc. Stock Option Plan ....................................................
10.44 Lease Agreement for Westchester, Illinois headquarters ...............................
10.45+ Form of Recapitalization Agreement among AmeriKing and the stockholders appearing on
the signature pages thereto ........................................................
10.46+ New Credit Facility ..................................................................
21 Subsidiaries of AmeriKing ............................................................
23.1 Consent of Mayer, Brown & Platt (included in the Opinion of Mayer, Brown & Platt,
filed as Exhibit 5)
23.2 Consent of Deloitte & Touche .........................................................
24 Power of Attorney (included on the signature page in Part II of this Registration
Statement)
27 Financial Data Schedule...............................................................
</TABLE>
- ------------
+ To be filed by amendment.
++ The schedules and exhibits to these agreements have not been filed
pursuant to Item 601(b)(2) of Regulation S-K. Such schedules and exhibits
will be filed supplementally upon the request of the Securities and
Exchange Commission.
[Draft--5/10/96]
[ ] Shares
AMERIKING, INC.
Common Stock
U.S. UNDERWRITING AGREEMENT
June , 1996
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
EVEREN SECURITIES, INC.
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
AmeriKing, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell an aggregate of [ ] shares of its common stock, par
value $0.01 per share (the "Firm Shares"), to the several Underwriters named
in Schedule II hereto (the "U.S. Underwriters") for whom Smith Barney Inc.,
PaineWebber Incorporated and EVEREN Securities, Inc. are acting as
representatives (the "Representatives"). In addition, solely for the purpose
of covering over-allotments, the persons named in Schedule I hereto (the
"Selling Stockholders") propose to sell to the U.S. Underwriters, upon the
terms and conditions set forth in Section 2 hereof, up to an additional [ ]
shares (the "Additional Shares") of the Company's common stock. The Company
and the Selling Stockholders are hereinafter sometimes referred to as the
"Sellers." The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares." The Company's common stock, par
value $0.01 per share, including the Shares and the International
<PAGE>
2
Shares (as defined herein), is hereinafter referred to as the "Common Stock."1
It is understood that the Company and the Selling
Stockholders are concurrently entering into an International Underwriting
Agreement, dated the date hereof (the "International Underwriting Agreement"),
providing for the sale of [ ] shares of the Common Stock by the Company (the
"International Shares"), through arrangements with certain underwriters
outside the United States and Canada (the "Managers"), for whom Smith Barney
Inc. and PaineWebber Incorporated are acting as lead managers (the "Lead
Managers"). The International Shares and the Shares, collectively, are herein
called the "Underwritten Shares."
The Company and the Selling Stockholders also understand
that the Representatives and the Lead Managers have entered into an agreement
(the "Agreement Between U.S. Underwriters and Managers") contemplating the
coordination of certain transactions between the U.S. Underwriters and the
Managers and that, pursuant thereto and subject to the conditions set forth
therein, the U.S. Underwriters may purchase from the Managers a portion of the
International Shares or sell to the Managers a portion of the Shares. The
Company and the Selling Stockholders understand that any such purchases and
sales between the U.S. Underwriters and the Managers shall be governed by the
Agreement Between U.S. Underwriters and Managers and shall not be governed by
the terms of this Agreement or the International Underwriting Agreement.
The Company and the Selling Stockholders wish to confirm as
follows their respective agreements with you and the other several
Underwriters on whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.
- -------------------
1 This Agreement contemplates that (i) only the U.S. Underwriters will buy in
the Green-Shoe and (ii) only Selling Stockholders will sell in the Green-Shoe.
The Selling Stockholders will be made parties to the International
Underwriting Agreement, however, because they will still make representations,
agree to covenants, and give indemnifications.
<PAGE>
3
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1, including
prospectuses subject to completion, relating to the Underwritten Shares. The
term "Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective, and as thereafter amended by post-effective
amendment, and any registration statement and any amendments thereto filed
pursuant to Rule 462(b) of the Act relating to the offering covered by the
initial registration statement (file number [333- ])(the "Rule 462(b)
Registration Statement"). The term "Prospectuses" as used in this Agreement
means the prospectuses in the forms included in the Registration Statement,
or, if the prospectuses included in the Registration Statement omit
information in reliance on Rule 430A under the Act and such information is
included in prospectuses filed with the Commission pursuant to Rule 424(b)
under the Act, the term "Prospectuses" as used in this Agreement means the
prospectuses in the forms included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectuses filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectuses" as used in this Agreement means the prospectuses
subject to completion in the forms included in the Registration Statement at
the time of the initial filing of the Registration Statement with the
Commission, and as such prospectuses shall have been amended from time to time
prior to the date of the Prospectuses.
It is understood that two forms of Prepricing Prospectus and
two forms of Prospectus are to be used in connection with the offering and
sale of the Underwritten Shares: a Prepricing Prospectus and a Prospectus
relating to the Shares that are to be offered and sold in the United States
(as defined herein) or Canada (as defined herein) to U.S. or Canadian Persons
(the "U.S. Prepricing Prospectus" and the "U.S. Prospectus," respectively),
and a Prepricing Prospectus and a Prospectus relating to the International
Shares which are to be offered and sold outside the United States or Canada to
persons other than U.S. or Canadian Persons (the "International Prepricing
Prospectus" and the "International Prospectus," respectively). The
<PAGE>
4
U.S. Prospectus and the International Prospectus are herein collectively
called the "Prospectuses," and the U.S. Pre- pricing Prospectus and the
International Prepricing Prospectus are herein called the "Prepricing
Prospectuses." For purposes of this Agreement: "Rules and Regulations" means
the rules and regulations adopted by the Commission under either the Act or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable; "U.S. or Canadian Person" means any resident or national of the
United States or Canada, any corporation, partnership or other entity created
or organized in or under the laws of the United States or Canada or any estate
or trust the income of which is subject to United States or Canadian income
taxation regardless of the source of its income (other than the foreign branch
of any U.S. or Canadian Person), and includes any United States or Canadian
branch of a person other than a U.S. or Canadian Person; "United States" means
the United States of America (including the states thereof and the District of
Columbia) and its territories, its possessions and other areas subject to its
jurisdiction; and "Canada" means Canada and its territories, its possessions
and other areas subject to its jurisdiction.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to each U.S. Underwriter and, upon the basis of the representations,
warranties and agreements of the Company and the Selling Shareholders
contained herein and subject to all the terms and conditions set forth herein,
each U.S. Underwriter agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $ [ ] per share (the "purchase price per
share"), the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule II hereto (or such number of Firm Shares increased as
set forth in Section 12 hereof).
The Selling Stockholders also agree, subject to all the
terms and conditions set forth herein, to sell to the U.S. Underwriters, and,
upon the basis of the representations, warranties and agreements of the
Company and the Selling Shareholders contained herein and subject to all the
terms and conditions set forth herein, the U.S. Underwriters shall have the
right to purchase from such Selling Stockholders at the purchase price per
share, pursuant to an option (the "over-allotment option") which may be
exercised prior to 9:00 p.m., New York City time, on the 30th day after the
date of the U.S. Prospectus (or, if such 30th day shall be a Saturday or
Sunday or a holiday, on
<PAGE>
5
the next business day thereafter when the New York Stock Exchange is open for
trading), up to an aggregate of [ ] Additional Shares from the Selling
Stockholders (the maximum number of Additional Shares that each of them agrees
to sell upon the exercise by the U.S. Underwriters of the over-allotment
option is set forth opposite their respective names in Schedule I). Additional
Shares may be purchased only for the purpose of covering over-allotments made
in connection with the offering of the Firm shares. The number of Additional
Shares which the U.S. Underwriters elect to purchase upon any exercise of the
over-allotment option shall be provided by each Selling Stockholder in
proportion to the respective maximum numbers of Additional Shares that each
such Selling Stockholder has agreed to sell. Upon any exercise of the
over-allotment option, each U.S. Underwriter, severally and not jointly,
agrees to purchase from each Selling Stockholder the number of Additional
Shares (subject to such adjustments as you may determine in order to avoid
fractional shares) which bears the same proportion to the number of Additional
Shares to be sold by each Selling Stockholder as the number of Firm Shares set
forth opposite the name of such U.S. Underwriter in Schedule II hereto (or
such number of Firm Shares increased as set forth in Section 12 hereof) bears
to the aggregate number of Firm Shares to be sold by the Company.
Certificates in transferable form for the Additional Shares
that each of the Selling Stockholders agrees to sell pursuant to this
Agreement have been placed in custody with [ ] (the "Custodian") for delivery
under this Agreement pursuant to a Custody Agreement and Power of Attorney
(the "Custody Agreement") executed by each of the Selling Stockholders
appointing [ ] and [ ] as agents and attorneys-in-fact (the
"Attorneys-in-Fact"). Each Selling Stockholder agrees that (i) the Additional
Shares represented by the certificates held in custody pursuant to the Custody
Agreement are subject to the interests of the U.S. Underwriters, the Company
and each other Selling Stockholder, (ii) the arrangements made by the Selling
Stockholders for such custody are, except as specifically provided in the
Custody Agreement, irrevocable, and (iii) the obligations of the Selling
Stockholders hereunder and under the Custody Agreement shall not be terminated
by any act of such Selling Stockholder or by operation of law, whether by the
death or incapacity of any Selling Stockholder or the occurrence of any other
event or, if the Selling Stockholder is not a natural person, upon any
<PAGE>
6
dissolution, winding up, distribution of assets or other event affecting the
legal existence of such Selling Stockholder. If any Selling Stockholder shall
die or be incapacitated or if any other event shall occur before the delivery
of the Additional Shares hereunder or if the Selling Stockholder is not a
natural person, shall dissolve, wind up, distribute assets or if any other
event affecting the legal existence of such Selling Stockholder shall occur
before the delivery of the Additional Shares hereunder, certificates for the
Additional Shares of such Selling Stockholder shall be delivered to the
Underwriters by the Attorneys-in-Fact in accordance with the terms and
conditions of this Agreement and the Custody Agreement as if such death or
incapacity, dissolution, winding up or distribution of assets or other event
had not occurred, regardless of whether or not the Attorneys-in-Fact or any
U.S. Underwriter shall have received notice of such death, incapacity,
dissolution, winding up or distribution of assets or other event. Each
Attorney-in-Fact is authorized, on behalf of each of the Selling Stockholders,
to execute this Agreement and any other documents necessary or desirable in
connection with the sale of the Additional Shares to be sold hereunder by such
Selling Stockholder, to make delivery of the certificates for such Additional
Shares, to receive the proceeds of the sale of such Additional Shares, to give
receipts for such proceeds, to pay therefrom any expenses to be borne by such
Selling Stockholder in connection with the sale and public offering of such
Additional Shares, to distribute the balance thereof to such Selling
Stockholder, and to take such other action as may be necessary or desirable in
connection with the transactions contemplated by this Agreement. Each
Attorney- in-Fact agrees to perform his duties under the Custody Agreement.
Each U.S. Underwriter represents, warrants, covenants and
agrees that, except as contemplated under Section 2 of the Agreement Between
U.S. Underwriters and Managers dated the date hereof, (i) it is not purchasing
any Shares for the account of anyone other than a U.S. or Canadian Person,
(ii) it has not offered or sold, and will not offer, sell, resell or deliver,
directly or indirectly, any Shares or distribute any U.S. Prospectus outside
the United States or Canada or to anyone other than a U.S. or Canadian Person,
and (iii) any offer of Shares in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the relevant province
of Canada in which such offer is made.
<PAGE>
7
3. TERMS OF PUBLIC OFFERING. The Sellers have been advised
by you that the U.S. Underwriters propose to make a public offering of their
respective portions of the Shares as soon after the Registration Statement and
this Agreement have become effective as in your judgment is advisable and
initially to offer the Shares upon the terms set forth in the U.S. Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to
the U.S. Underwriters of and payment for the Firm Shares shall be made at the
office of Smith Barney Inc., [388 Greenwich Street, New York, NY 10013], at
10:00 A.M., New York City time, on June [ ], 1996 (the "Closing Date"). The
place of closing for the Firm Shares and the Closing Date may be varied by
agreement between you and the Company.
Delivery to the U.S. Underwriters of and payment for any
Additional Shares to be purchased by the U.S. Underwriters shall be made at
the aforementioned office of Smith Barney Inc. at such time on such date (the
"Option Closing Date"), which may be the same as the Closing Date but shall in
no event be earlier than the Closing Date nor earlier than two nor later than
ten business days after the giving of the notice hereinafter referred to, as
shall be specified in a written notice from you on behalf of the U.S.
Underwriters to the Attorneys-in-Fact of the U.S. Underwriters' determination
to purchase a number, specified in such notice, of Additional Shares. The
place of closing for any Additional Shares and the Option Closing Date for
such Shares may be varied by agreement between you and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional
Shares to be purchased hereunder shall be registered in such names and in such
denominations as you shall request prior to 9:30 A.M., New York City time, on
the second business day preceding the Closing Date or any Option Closing Date,
as the case may be. Such certificates shall be made available to you in New
York City for inspection and packaging not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date or the Option
Closing Date, as the case may be. The certificates and stockpowers evidencing
the Firm Shares and any Additional Shares to be purchased hereunder shall be
delivered to you on the Closing Date or the Option Closing Date, as the case
may be, against payment of the purchase price therefor in immediately
available funds.
<PAGE>
8
5. AGREEMENTS OF THE COMPANY. The Company agrees
with the several U.S. Underwriters as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the Shares
may commence, the Company will endeavor to cause the Registration Statement or
such post-effective amendment to become effective as soon as possible and will
advise you promptly and, if requested by you, will confirm such advice in
writing, when the Registration Statement or such post-effective amendment has
become effective.
(b) The Company will advise you promptly and, if requested
by you, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration Statement, any
Prepricing Prospectuses or the Prospectuses or for additional information;
(ii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) within the period of
time referred to in paragraph (f) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations, or of the happening of any event, including the filing
of any information, documents or reports pursuant to the Exchange Act, that
makes any statement of a material fact made in the Registration Statement or
the Prospectuses (as then amended or supplemented) untrue or which requires
the making of any additions to or changes in the Registration Statement or the
Prospectuses (as then amended or supplemented) in order to state a material
fact required by the Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectuses (as then amended or
supplemented) to comply with the Act or any other law. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge, four
signed copies of the Registration Statement as
<PAGE>
9
originally filed with the Commission and of each amendment thereto, including
financial statements and all exhibits to the Registration Statement, and of
any Rule 462(b) Registration Statement and any amendment thereto, and will
also furnish to you, without charge, such number of conformed copies of the
Registration Statement as originally filed and of each amendment thereto, but
without exhibits, and of any Rule 462(b) Registration Statement and any
amendment thereto, as you may reasonably request.
(d) The Company will not (i) file any amendment to the
Registration Statement, any Rule 462(b) Registration Statement or amendment
thereto, or make any amendment or supplement to the Prospectuses of which you
shall not previously have been advised or to which you shall object after
being so advised or (ii) so long as, in the opinion of counsel for the U.S.
Underwriters, a prospectus is required to be delivered in connection with
sales by any U.S. Underwriter or dealer, file any information, documents or
reports pursuant to the Exchange Act, without delivering a copy of such
information, documents or reports to you, as Representatives of the U.S.
Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement,
the Company has delivered to you, without charge, in such quantities as you
have requested, copies of each form of the U.S. Prepricing Prospectus. The
Company consents to the use, in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the Shares
are offered by the several U.S. Underwriters and by dealers, prior to the date
of the U.S. Prospectus, of each U.S. Prepricing Prospectus so furnished by the
Company.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in
the written opinion of counsel for the U.S. Underwriters a U.S. Prospectus is
required by the Act to be delivered in connection with sales by any U.S.
Underwriter or dealer, the Company will expeditiously deliver to each U.S.
Underwriter and each dealer, without charge, as many copies of the U.S.
Prospectus (and of any amendment or supplement thereto) as you may request.
The Company consents to the use of the U.S. Prospectus (and of any amendment
or supplement thereto) in accordance with the provisions of the Act and with
the securities or Blue Sky laws of the jurisdictions in which the Shares are
offered by
<PAGE>
10
the several U.S. Underwriters and by all dealers to whom Shares may be sold,
both in connection with the offering and sale of the Shares and for such
period of time thereafter as the U.S. Prospectus is required by the Act to be
delivered in connection with sales by any U.S. Underwriter or dealer. If
during such period of time any event shall occur that in the judgment of the
Company or in the written opinion of counsel for the U.S. Underwriters is
required to be set forth in the U.S. Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the U.S. Prospectus
to comply with the Act or any other law, the Company will forthwith prepare
and, subject to the provisions of paragraph (d) above, file with the
Commission an appropriate supplement or amendment thereto and will
expeditiously furnish to the U.S. Underwriters and dealers a reasonable number
of copies thereof. In the event that the Company and you, as Representatives
of the several U.S. Underwriters, agree that the U.S. Prospectus should be
amended or supplemented, the Company, if requested by you, will promptly issue
a press release announcing or disclosing the matters to be covered by the
proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for
the U.S. Underwriters in connection with the registration or qualification of
the Shares for offering and sale by the several U.S. Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as you may
reasonably designate and will file such consents to service of process or
other documents necessary or appropriate in order to effect such registration
or qualification; provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now so qualified or
to take any action that would subject it to service of process in suits, other
than those arising out of the offering or sale of the Shares, in any
jurisdiction where it is not now so subject.
(h) The Company will make generally available to its
security holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter, as soon
as reasonably practicable after the end of such period,
<PAGE>
11
which consolidated earnings statement shall satisfy the provisions of Section
11(a) of the Act.
(i) During the period of five years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission or the Nasdaq
National Market, and (ii) from time to time such other information concerning
the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 12 hereof or by notice given by you
terminating this Agreement pursuant to Section 12 or Section 13 hereof) or if
this Agreement shall be terminated by the U.S. Underwriters because of any
failure or refusal on the part of the Company or any of the Selling
Stockholders to comply with the terms or fulfill any of the conditions of this
Agreement, the Company agrees to reimburse the Representatives for all
reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel for the U.S. Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectuses.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectuses pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.
(m) For a period of 180 days after the date hereof (the
"Lock-up Period"), the Company will not, without the prior written consent of
Smith Barney Inc., offer, sell, contract to sell or otherwise dispose of any
Common Stock (or any securities convertible into or exercisable or
exchangeable for Common Stock) or grant any options or warrants to purchase
Common Stock, except for the sale of Shares to the U.S. Underwriters pursuant
to this Agreement and the Managers pursuant to the International Underwriting
Agreement.
(n) The Company has furnished or will furnish to you
"lock-up" letters, in the form attached hereto as Annex [ ], signed by each of
its current officers and
<PAGE>
12
directors and each holder of capital stock of the Company immediately prior to
the offerings contemplated hereby (including holders of options and warrants
exercisable into shares of Common Stock) (other than the Selling Stockholders
who shall be bound pursuant to Section 6(d)).
(o) Except as stated in this Agreement and in the
International Underwriting Agreement and in the Prepricing Prospectuses and
Prospectuses, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the Common
Stock listed, subject to notice of issuance, on the Nasdaq National Market
concurrently with the effectiveness of the registration statement.
(q) The Company shall take or cause to be taken such actions
as are necessary or required to cause the Recapitalization (the
"Recapitalization"), as described in the Prospectuses under the caption
"Description of Capital Stock--The Recapitalization", to occur on or prior to
the closing hereunder on the Closing Date.
6. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each
of the Selling Stockholders agrees with the several U.S. Underwriters as
follows:
(a) Such Selling Stockholder will cooperate to the extent
necessary to cause the registration statement or any post-effective amendment
thereto to become effective at the earliest possible time.
(b) Such Selling Stockholder will pay all Federal and other
taxes, if any on the transfer or sale of such Shares that are sold by the
Selling Stockholder to the U.S. Underwriters.
(c) Such Selling Stockholder will do or perform all things
required to be done or performed by the Selling Stockholder prior to any
Option Closing Date to satisfy all conditions precedent to the delivery of the
Additional Shares pursuant to this Agreement.
(d) During the Lock-up Period, such Selling Stockholder will
not, without the prior written consent of
<PAGE>
13
Smith Barney Inc., offer, sell, contract to sell or otherwise dispose of any
Common Stock (or any securities convertible into or exercisable or
exchangeable for Common Stock) or grant any options or warrants to purchase
Common Stock, except for the sale of Shares to the Underwriters pursuant to
this Agreement and the Managers pursuant to the International Underwriting
Agreement. In addition, each Selling Stockholder hereby (i) waives any rights
it may have to cause the Company to register pursuant to the Act shares of
Common Stock owned by such Selling Stockholder in connection with the
offerings contemplated hereby and (ii) during the Lock-up Period, such Selling
Stockholder will not exercise any such registration rights and such Selling
Stockholder agrees that the Company shall not be obligated to register any
shares in violation of this Agreement.
(e) Except as stated in this Agreement and the International
Underwriting Agreement and in the Prepricing Prospectuses and the
Prospectuses, such Selling Stockholder has not taken, nor will it take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you promptly, and
if requested by you, will confirm such advice in writing, within the period of
time referred to in Section 5(f) hereof, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations or of the happening of any event or any change in
information relating to such Selling Stockholder or the Company or any new
information relating to the Company or relating to any matter stated in the
Prospectuses or any amendment or supplement thereto which comes to the
attention of such Selling Stockholder that suggest that any statement made in
the Registration Statement or the Prospectuses (as then amended or
supplemented) untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectuses (as then amended or
supplemented) in order to state a material fact required by the Act or the
regulations thereunder to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectuses (as then amended or supplemented) to comply with the Act or
any other law.
<PAGE>
14
(g) Such Selling Stockholder shall take or cause to be taken
such actions as are necessary or required to cause the Recapitalization to
occur on or prior to the closing hereunder on the Closing Date.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each U.S. Underwriter
that:
(a) Each U.S. Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.
(b) The Registration Statement in the form in which it
became or becomes effective and also in such form as it may be when any
post-effective amendment thereto or any Rule 462(b) Registration Statement or
amendment thereto shall become effective and the Prospectuses and any
supplement or amendment thereto when filed with the Commission under Rule
424(b) under the Act, complied or will comply in all material respects with
the provisions of the Act and did not or will not at any such times contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; except that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the Prospectuses
made in reliance upon and in conformity with information relating to any U.S.
Underwriter or Manager furnished to the Company in writing by a U.S.
Underwriter through the Representatives or by a Manager through the Lead
Managers expressly for use therein.
(c) All the outstanding shares of Common Stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights; the Shares to
be issued and sold by the Company have been duly authorized and, when issued
and delivered to the U.S. Underwriters against payment therefor in accordance
with the terms hereof, will be validly issued, fully paid and nonassessable
and free of any preemptive or similar rights; and the capital stock of the
Company conforms to the description thereof in the Registration Statement and
the Prospectuses.
<PAGE>
15
(d) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectuses, and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction where the nature of its properties or
the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify does not have a material
adverse effect on the condition (financial or other), business, properties,
net worth or results of operations of the Company and the Subsidiaries (as
hereinafter defined), taken as a whole (a "Material Adverse Effect").
(e) All the Company's subsidiaries (collectively, the
"Subsidiaries") are listed in an exhibit to the Registration Statement. Each
Subsidiary is a corporation duly organized, validly existing and in good
standing in the jurisdiction of its incorporation, with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing
in each jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification, except
where the failure so to register or qualify does not have a material adverse
effect on the condition (financial or other), business, properties, net worth
or results of operations of such Subsidiary; all the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, and are owned by the Company
directly, or indirectly through one of the other Subsidiaries, free and clear
of any lien, adverse claim, security interest, equity or together encumbrance.
(f) There are no legal or governmental proceedings pending
or, to the knowledge of the Company, threatened, against the Company or any of
the Subsidiaries or to which the Company or any of the Subsidiaries, or to
which any of their respective properties, is subject that are required to be
described in the Registration Statement or the Prospectuses but are not
described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectuses or to be filed as
<PAGE>
16
an exhibit to the Registration Statement that are not
described or filed as required by the Act.
(g) Neither the Company nor any of the Subsidiaries is in
(i) violation of its certificate or articles of incorporation or by-laws, or
other organizational documents, (ii) in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the Company or
any of the Subsidiaries or of any decree of any court or governmental agency
or body having jurisdiction over the Company or any of the Subsidiaries, or
(iii) in default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness
or in any material agreement (including, without limitation, any franchise
agreement), indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound, and no condition or state of facts exists,
which with the passage of time or the giving of notice or both, would
constitute such a default.
(h) Neither the offer, issuance, sale and delivery of the
Shares, the consummation of the Recapitalization, the execution, delivery or
performance of this Agreement, the International Underwriting Agreement, the
Recapitalization Agreement (as hereinafter defined), the Termination Agreement
(as hereinafter defined), the New Credit Facility (as hereinafter defined, the
PMI Agreement (as hereinafter defined) and [ ] (this Agreement and such other
agreements being referred to collectively as the "Transaction Agreements") by
the Company nor the consummation by the Company or the Selling Stockholders of
the transactions contemplated by the Transaction Agreements (i) requires any
consent, approval, authorization or other order of or registration or filing
with, any court, regulatory body, administrative agency or other governmental
body, agency or official (except such as may be required for the registration
of the Shares under the Act and the Exchange Act and compliance with the
securities or Blue Sky laws of various jurisdictions, all of which have been
or will be effected in accordance with this Agreement) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or bylaws, or other
organizational documents, of the Company or any of the Subsidiaries or (ii)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default
<PAGE>
17
under, any agreement (including, without limitation, any franchise agreement),
indenture, lease or other instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, or violates or will violate any statute, law,
regulation or filing or judgment, injunction, order or decree applicable to
the Company or any of the Subsidiaries or any of their respective properties,
or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
(i) The accountants, Deloitte & Touche LLP, who have
certified or shall certify the financial statements included in the
Registration Statement and the Prospectuses (or any amendment or supplement
thereto) are independent public accountants as required by the Act.
(j) (i) The Company's historical financial statements,
together with related schedules and notes included in the Registration
Statement and the Prospectuses (and any amendment or supplement thereto),
present fairly the consolidated financial position, results of operations,
cash flows and changes in stockholders' equity of the Company and the
Subsidiaries, each on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply; and such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; (ii) the Company's pro
forma consolidated financial statements, together with the related notes
included in the Registration Statement and Prospectuses (and any amendment or
supplement thereto), present fairly the information and data set forth
therein, each on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply; and such
pro forma consolidated financial statements and related notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein, and based on reasonable assumptions, and comply in all material
respects with the requirements of the Act; (iii) the historical statements of
restaurant contribution for the restaurants purchased by the Company,
<PAGE>
18
together with related schedules and notes included in the Registration
Statement and the Prospectuses (and any amendment or supplement thereto),
present fairly restaurant contribution for each Burger King restaurant
acquired by the Company to date, each on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply and such historical schedules and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and (iv) the other historical and pro forma, financial and
statistical information and data set forth in the Registration Statement and
the Prospectuses (and any amendment or supplement thereto) are accurately
presented and prepared on a basis consistent with the books and records of the
Company and its subsidiaries. [to be modified as necessary]
(k) The execution and delivery of, and the performance by
the Company of its obligations under, each of the Transaction Agreements have
been duly and validly authorized by the Company, and each of the Transaction
Agreements has been duly executed and delivered by the Company and constitutes
the valid and legally binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as rights to indemnity and
contribution hereunder or thereunder may be limited by federal or state
securities laws or the public policy underlying such laws.
(l) Except as disclosed in the Registration Statement and
the Prospectuses (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectuses (or any amendment or supplement thereto),
neither the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the
capital stock of the Company, or material increase in the short-term debt or
long-term debt, of the Company or any of the Subsidiaries, or any development
having or which may reasonably be expected to have, a Material Adverse Effect.
(m) Each of the Company and the Subsidiaries has
good and marketable title to all property (real and
<PAGE>
19
personal) described in the Prospectuses as being owned by it, free and clear
of all liens, claims, security interests or other encumbrances except such as
are described in the Registration Statement and the Prospectuses or in a
document filed as an exhibit to the Registration Statement and all the
property described in the Prospectuses as being held under lease by each of
the Company and the Subsidiaries is held by it under valid, subsisting and
enforceable leases.
(n) The Company has not distributed and, prior to the later
to occur of (i) the Closing Date or the Option Closing Date, if any, and (ii)
completion of the distribution of the Shares, will not distribute any offering
material in connection with the offering and sale of the Shares other than the
Registration Statement, the Prepricing Prospectuses, the Prospectuses or other
materials, if any, permitted by the Act.
(o) The Company and each of the Subsidiaries has such
permits, licenses, franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own its respective properties and
to conduct its business in the manner described in the Prospectuses, subject
to such qualifications as may be set forth in the Prospectuses; the Company
and each of the Subsidiaries has fulfilled and performed all its material
obligations with respect to such Permits and no event has occurred that
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights
of the holder of any such Permit, subject in each case to such qualification
as may be set forth in the Prospectuses; and, except as described in the
Prospectuses, none of such Permits contains any restriction that is materially
burdensome to the Company or any of the Subsidiaries.
(p) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable
<PAGE>
20
intervals and appropriate action is taken with respect to any differences.
(q) To the Company's knowledge, neither the Company nor any
of its Subsidiaries nor any employee or agent of the Company or any Subsidiary
has made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation, which payment,
receipt or retention of funds is of a character required to be disclosed in
the Prospectuses.
(r) The Company and each of the Subsidiaries have filed all
material tax returns required to be filed, which returns are true, complete
and correct, and neither the Company nor any Subsidiary is in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(s) Except as described in the Prospectuses, no holder of
any security of the Company has any right to require registration of shares of
Common Stock or any other security of the Company because of the filing of the
registration statement or consummation of the transactions contemplated by
this Agreement or the International Underwriting Agreement, or otherwise. No
such rights with respect to shares of Common Stock not listed in Schedule I
hereto were exercised nor will be exercised in connection with the sale of the
Shares and for a period of 180 days after the date hereof. Except as described
in or contemplated by the Prospectuses, there are no outstanding options,
warrants or other rights calling for the issuance of, and there are no
commitments, plans or arrangements to issue, any shares of Common Stock of the
Company or any security convertible into or exchangeable or exercisable for
Common Stock of the Company.
(t) (i) The Company and each of the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in which they are
engaged; (ii) all policies of isurance [and fidelity or surety bonds] insuring
the Company or any of the Subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and effect; (iii) the
Company and the Subsidiaries are in compliance with the terms of such policies
and instruments in all material respects; and (iv) there are no claims by the
Company or any of the Subsidiaries under any such policy
<PAGE>
21
or instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause.
(u) The Company is not now and, upon sale of the Shares to
be issued and sold in accordance herewith and upon application of the net
proceeds to the Company from such sale as described in the Prospectuses under
the caption "Use of Proceeds," will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(v) Except as described in the Prospectuses, the Company and
the Subsidiaries (i) are in compliance with any and all applicable federal,
state and local laws, regulations, rules, ordinances, judgments or decrees
(including those of common law) relating to the protection of human health and
safety, the workplace, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received
all permits, licenses or other approvals required of them under Environmental
Laws to conduct their respective businesses, (iii) are in compliance with all
terms and conditions of any such permit, license or approval and (iv) have not
received any written notice of a claim or violation pursuant to any
Environmental Law except for such noncompliance, failure to receive required
permits, licenses or other approvals, noncompliance with the terms and
conditions of such permits, claims or actions that would not, individually or
in the aggregate, have a material adverse effect on the Company and the
Subsidiaries, taken as a whole. There are no past or present actions,
omissions or conditions regarding the Company, the Subsidiaries or any real
property upon which any of them conduct their respective business operations
that are reasonably likely to form the basis of any claim or violation against
the Company of any of the Subsidiaries (including releases or discharges of
hazardous or toxic substances or wastes) under Environmental Laws except for
such actions, omissions or conditions that would not individually or in the
aggregate, have a material adverse effect on the Company and the Subsidiaries,
taken as a whole.
(w) The Company has complied with all provisions of Florida
Statutes, ss.517.075, relating to issuers doing business with Cuba.
(x) The Company has entered into the Recapital- ization
Agreement (described in the Prospectuses under the caption "Description of
Capital Stock--The Recapital-
<PAGE>
22
ization") (the "Recapitalization Agreement") and has taken all actions as are
necessary and appropriate to cause the Recapitalization to occur and all
conditions precedent to the consummation of the Recapitalization, other than
the closing of the offerings contemplated by this Agreement and the
International Underwriting Agreement, have been satisfied.
(y) The Company has an authorized, issued and outstanding
capitalization as set forth in Part A of Annex [ ] and the holders of all
capital stock of the Company, including holders of options, warrants or other
rights to purchase such capital stock is as set forth in Part B of Annex [ ].
[Annex to be provided by MBP]
(z) After the consummation of the Recapital-
ization, the Company will have an authorized, issued and
outstanding capitalization as set forth in Part C of
Annex [ ]. [Annex to be provided by MBP]
(aa) The Company has entered into the New Credit Facility (as
defined in the Prospectuses) in an aggregate principal amount of $[ ], of
which (i) $[ ] will be available on the Closing Date to repay borrowings under
the Credit Agreement and interest accrued thereunder and to repay all
Subordinated Debt (as defined and described in the Prospectuses under the
caption "Use of Proceeds") and (ii) at least $[ ] will be available on the
Closing Date and thereafter for general corporate purposes, including the
funding of restaurant acquisitions (including the Michigan Acquisition). All
conditions to the borrowings to be made on the Closing Date (other than the
closing of the offerings contemplated by this Agreement and the International
Underwriting Agreement and the delivery by the Company of a borrowing
certificate in accordance with the terms of the New Credit Facility) have been
satisfied.
(bb) The Company has received from BKC a Consent and Agreement
Letter (the "BKC Consent Letter") pursuant to which, among other things, (i)
BKC has given all consents required by it to consummate the transactions
contemplated by this Agreement and the International Underwriting Agreement,
including without limitation, its consent to the issuance and sale by the
Company of the Underwritten Shares, the sale of Additional Shares by Lawrence
Jaro and William Osborn and the amendments to the Company's certificate of
incorporation and bylaws relating the Recapitalization and (ii) has consented
to [DESCRIBE PUBLIC COMPANY CHANGES TO
<PAGE>
23
FRANCHISE AGREEMENT AND UFOC REQUESTED BY THE COMPANY AND AGREED TO BY BKC].
(cc) The Company and TJC Management Company ("TJC") have
entered into an agreement (the "Termination Agreement") which will terminate
the management consulting agreement between the Company and TJC dated
September 1, 1994.
(dd) The Company has entered into an agreement (the "PMI
Agreement") with PMI Mezzanine Fund, L.P. ("PMI") pursuant to which it has
agreed to repurchase warrants covering 71.22 shares of Class C Common Stock of
the Company held by PMI on or prior to the closing hereunder on the Closing
Date and all conditions precedent to the consummation of such repurchase have
been satisfied, other than the closing of the offerings contemplated by this
Agreement and the International Underwriting Agreement.
(ee) [Michigan Acquisition representation.]
8. REPRESENTATIONS AND WARRANTIES OF THE SELLING
STOCKHOLDERS. Each Selling Stockholder represents and warrants to each U.S.
Underwriter that:
(a) Such Selling Stockholder now has, and on any Option
Closing Date will have, valid and marketable title to the Additional Shares to
be sold by such Selling Stockholder, free and clear of any lien, claim,
security interest or other encumbrance, including, without limitation, any
restriction on transfer, except as otherwise described in the Prospectuses.
(b) Such Selling Stockholder now has, and on any Option
Closing Date will have, full legal right, power and authorization, and any
approval required by law, to sell, assign, transfer and deliver such
Additional Shares in the manner provided in this Agreement and the
International Underwriting Agreement, and upon delivery of and payment for
such Additional Shares hereunder, the several U.S. Underwriters will acquire
valid and marketable title to such Additional Shares free and clear of any
lien, claim, security interest, or other encumbrance.
(c) This Agreement, the International Underwriting
Agreement, the Custody Agreement and the Recapitalization Agreement have been
duly authorized, executed and delivered by or on behalf of such Selling
<PAGE>
24
Stockholder and are the valid and binding agreements of such Selling
Stockholder enforceable against such Selling Stockholder in accordance with
their terms, except as rights to indemnity and contribution hereunder or
thereunder may be limited by federal or state securities laws or the public
policy underlying such laws.
(d) Neither the sale of the Additional Shares, the
consummation of the Recapitalization, the execution, delivery or performance
of this Agreement, the International Underwriting Agreement, the Custody
Agreement or the Recapitalization Agreement by or on behalf of such Selling
Stockholder nor the consummation by or on behalf of such Selling Stockholder
of the transactions contemplated hereby and thereby (i) requires any consent,
approval, authorization or other order of, or registration or filing with, any
court, regulatory body, administrative agency or other governmental body,
agency or official (except such as may be required for the registration of the
Shares under the Act and the Exchange Act or compliance with the securities or
Blue Sky laws governing the purchase and distribution of the Shares of various
jurisdictions), or (ii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, or violates or will violate, any
agreement (including any franchise agreement where, even if such Selling
Shareholder is not a party, the Company or a Subsidiary is a party),
indenture, lease or other instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder is or may be bound or to which any
of such Selling Stockholder's property or assets is subject, or violates or
will violate any statute, law, rule, regulation, ruling, judgment, injunction,
order or decree applicable to such Selling Stockholder or to any property of
such Selling Stockholder, or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of such Selling
Stockholder pursuant to the terms of any agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder may be
bound or to which any of the property or assets of such Selling Stockholder is
subject.
(e) The Registration Statement and the Prospectuses, insofar
as they relate to such Selling Shareholder, do not and will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
<PAGE>
25
(f) The representations and warranties of such Selling
Stockholder in the Custody Agreement are, and on the Closing Date and any
Option Closing Date will be, true and correct.
(g) Such Selling Stockholder has not taken, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares, except for the lock-up
arrangements referred to in the Prospectuses.
(h) Such Selling Stockholder does not have any knowledge or
any reason to believe that the Registration Statement or the Prospectuses (or
any amendment or supplement thereto) contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(i) Prior to the Closing Date, such Selling Stockholder has
entered into the Recapitalization Agreement and has taken all actions as are
necessary and appropriate to cause the Recapitalization to occur and all
conditions precedent to the consummation of the Recapitalization, other than
the closing of the Offerings contemplated by this Agreement and the
International Underwriting Agreement, have been satisfied.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The
Company and each Selling Stockholder, jointly and severally, agree to
indemnify and hold harmless each of you and each other U.S. Underwriter and
each person, if any, who controls any U.S. Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act from and against
any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any U.S.
Prepricing Prospectus or in the Registration Statement or the U.S. Prospectus
or in any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or
<PAGE>
26
omitted therefrom in reliance upon and in conformity with the information
relating to such U.S. Underwriter or Manager furnished in writing to the
Company by or on behalf of any U.S. Underwriter through you or by or on behalf
of any Manager through a Lead Manager expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to any U.S. Prepricing Prospectus shall not inure
to the benefit of any U.S. Underwriter (or to the benefit of any person
controlling such U.S. Underwriter) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Shares by such U.S.
Underwriter to any person if a copy of the U.S. Prospectus shall not have been
delivered or sent to such person within the time required by the Act and the
regulations thereunder, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in such U.S.
Prepricing Prospectus was corrected in the U.S. Prospectus, provided that the
Company has delivered the U.S. Prospectus to the several U.S. Underwriters in
requisite quantity on a timely basis to permit such delivery or sending. The
foregoing indemnity agreement shall be in addition to any liability which the
Company or any Selling Stockholder may otherwise have.
(b) If any action, suit or proceeding shall be brought
against any U.S. Underwriter or any person controlling any U.S. Underwriter in
respect of which indemnity may be sought against the Company or any Selling
Stockholder, such U.S. Underwriter or such controlling person shall promptly
notify the parties against whom indemnification is being sought (the
"indemnifying parties"), and such indemnifying parties shall assume the
defense thereof, including the employment of counsel and payment of all fees
and expenses. Such U.S. Underwriter or any such controlling person shall have
the right to employ separate counsel in any such action, suit or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such U.S. Underwriter or such controlling
person unless (i) the indemnifying parties have agreed in writing to pay such
fees and expenses, (ii) the indemnifying parties have failed to assume the
defense and employ counsel, or (iii) the named parties to any such action,
suit or proceeding (including any impleaded parties) include both such U.S.
Underwriter or such controlling person and the indemnifying parties and such
U.S. Underwriter or such controlling person shall have been advised by its
counsel in writing that representation
<PAGE>
27
of such indemnified party and any indemnifying party by the same counsel would
be inappropriate under applicable standards of professional conduct (whether
or not such representation by the same counsel has been proposed) due to
actual or potential differing interests between them (in which case the
indemnifying party shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such U.S. Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such U.S.
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without
their written consent, but if settled with such written consent, or if there
be a final judgment for the plaintiff in any such action, suit or proceeding,
the indemnifying parties agree to indemnify and hold harmless any U.S.
Underwriter, to the extent provided in the preceding paragraph, and any such
controlling person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.
(c) Each U.S. Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement, any person who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and
each Selling Stockholder, to the same extent as the foregoing indemnity from
the Company and the Selling Stockholders to each U.S. Underwriter, but only
with respect to information relating to such U.S. Underwriter furnished in
writing by or on behalf of such U.S. Underwriter through you expressly for use
in the Registration Statement, the U.S. Prospectus or any U.S. Prepricing
Prospectus, or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against the Company, any of its directors, any
such officer, any such controlling person or any Selling Stockholder based on
the Registration Statement,
<PAGE>
28
the U.S. Prospectus or any U.S. Prepricing Prospectus, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against
any U.S. Underwriter pursuant to this paragraph (c), such U.S. Underwriter
shall have the rights and duties given to the Company and the Selling
Stockholders by paragraph (b) above (except that if the Company or the Selling
Stockholders shall have assumed the defense thereof such U.S. Underwriter
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at such U.S. Underwriter's expense), and the Company, its directors,
any such officer, any such controlling person, and each Selling Stockholder
shall have the rights and duties given to the U.S. Underwriters by paragraph
(b) above. The foregoing Indemnity agreement shall be in addition to any
liability which any U.S. Underwriter may otherwise have.
(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the U.S.
Underwriters on the other hand from the offering of the Shares, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Stockholders on the one hand and the U.S. Underwriters on the
other hand in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the U.S. Underwriters
on the other hand shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Stockholders bear to the total underwriting discounts
and commissions received by the U.S. Underwriters, in each case as set forth
in the table on the cover page of the U.S. Prospectus; provided that, in the
event that the
<PAGE>
29
U.S. Underwriters shall have purchased any Additional Shares hereunder, any
determination of the relative benefits received by the Company, the Selling
Stockholders or the U.S. Underwriters from the offering of the Shares shall
include the net proceeds (before deducting expenses) received by the Selling
Stockholders, and the underwriting discounts and commissions received by the
U.S. Underwriters, from the sale of such Additional Shares, in each case
computed on the basis of the respective amounts set forth in the notes to the
table on the cover page of the U.S. Prospectus. The relative fault of the
Company and the Selling Stockholders on the one hand and the U.S. Underwriters
on the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or by the
U.S. Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company, the Selling Stockholders and the U.S.
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by a pro rata allocation (even if
the U.S. Underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
liabilities and expenses referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 9, no U.S. Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds
the amount of any damages which such U.S. Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The U.S. Underwriters' obligations to
<PAGE>
30
contribute pursuant to this Section 9 are several in proportion to the
respective numbers of Firm Shares set forth opposite their names in Schedule
II hereto (or such numbers of Firm Shares increased as set forth in Section 12
hereof) and not joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution
under this Section 9 shall be paid by the indemnifying party to the
indemnified party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this Section
9 and the representations and warranties of the Company and the Selling
Stockholders set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
any U.S. Underwriter or any person controlling any U.S. Underwriter, the
Company, its directors or officers or the Selling Stockholders, any director,
officer or partner of a Selling Stockholder or any person controlling the
Company or any Selling Stockholder, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor
to any U.S. Underwriter or any person controlling any U.S. Underwriter, or to
the Company, its directors or officers, or to any Selling Stockholder, any
director, officer or partner of any Selling Stockholder or any person
controlling the Company or any Selling Stockholder, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 9.
(h) The liability of each Selling Shareholder under the
indemnity and contribution agreements contained in this Section 9 shall be
limited to an amount equal to the initial public offering price of the
Additional Shares sold by such Selling Shareholder.
<PAGE>
31
10. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS. The several
obligations of the U.S. Underwriters to purchase the Firm Shares and the
Additional Shares, as applicable, hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the Shares
may commence, the Registration Statement or such post-effective amendment
shall have become effective not later than 5:30 P.M. New York City time, on
the date hereof, or at such later date and time as shall be consented to in
writing by you, and all filings, if any, required by Rules 424 and 430A under
the Act shall have been timely made; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the knowledge of
the Company or any U.S. Underwriter, threatened by the Commission, and any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectuses or otherwise) shall have been
complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectuses, which in your opinion, as
Representatives of the several U.S. Underwriters, would materially, adversely
affect the market for the Shares, or (ii) any event or development relating to
or involving the Company or any officer or director of the Company or any
Selling Stockholder which makes any statement made in the Prospectuses untrue
or which, in the opinion of the Company and its counsel or the U.S.
Underwriters and their counsel, requires the making of any addition to or
change in the Prospectuses in order to state a material fact required by the
Act or any other law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the
Prospectuses to reflect such event or development would, in your opinion, as
Representatives of the several U.S. Underwriters, materially adversely affect
the market for the Shares.
<PAGE>
32
(c) You shall have received on the Closing Date and any
Option Closing Date, as applicable, an opinion of Mayer, Brown & Platt,
counsel for the Company, dated the Closing Date or any Option Closing Date, as
applicable, and addressed to you, as Representatives of the several U.S.
Underwriters, in substantially the form attached hereto as Annex I.
(d) You shall have received on the Closing Date and any
Option Closing Date, as applicable, an opinion of [ ], counsel for the
Selling Stockholders, dated the Closing Date or any Option Closing Date, as
applicable, and addressed to you, as Representatives of the several U.S.
Underwriters, in substantially the form attached hereto as Annex II.
(e) You shall have received on the Closing Date and any
Option Closing Date, as applicable, an opinion and a Rule 10b-5 statement of
Cravath, Swaine & Moore, counsel for the U.S. Underwriters, dated the Closing
Date or any Option Closing Date, as applicable, and addressed to you, as
Representatives of the several U.S. Underwriters, with respect to matters
agreed to by you.
(f) You shall have received letters addressed to you, as
Representatives of the several U.S. Underwriters, and dated the date hereof
and the Closing Date and any Option Closing Date, as applicable, from Deloitte
& Touche LLP, independent certified public accountants, substantially in the
forms heretofore approved by you.
(g) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date and any Option
Closing Date, as applicable; (ii) there shall not have been any material
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth or contemplated in the Registration Statement
or the Prospectuses (or any amendment or Supplement thereto); (iii) there
shall not have been, since the respective dates as of which information is
given in the Registration Statement and the Prospectuses (or any amendment or
supplement thereto), except as may otherwise be stated in the Registration
Statement and Prospectuses (or any amendment or supplement thereto), any
<PAGE>
33
material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and
the Significant Subsidiaries taken as a whole; (iv) the Company and the
Subsidiaries shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Company and the Subsidiaries, taken as a whole, other than
those reflected in the Registration Statement or the Prospectuses (or any
amendment or supplement thereto); and (v) all the representations and
warranties of the Company contained in this Agreement shall be true and
correct on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date, and you shall have received a certificate,
dated the Closing Date and signed by the chief executive officer and the chief
financial officer of the Company (or such other officers as are acceptable to
you), to the effect set forth in this Section 10(g) and in Section 10(h)
hereof.
(h) The Company shall not have failed at or prior to the
Closing Date and any Option Closing Date, as applicable, to have performed or
complied with any of its agreements herein contained and required to be
performed or complied with by it hereunder at or prior to the Closing Date or
any Option Closing Date, as applicable.
(i) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct, on and as
of the date hereof and on and as of any Option Closing Date as if made on and
as of such Option Closing Date, and you shall have received a certificate,
dated such Option Closing Date and signed by or on behalf of the Selling
Stockholders to the effect set forth in this Section 10(i) and in Section
10(j) hereof.
(j) The Selling Stockholders shall not have failed at or
prior to the Closing Date and any Option Closing Date, as applicable, to have
performed or complied with any of their agreements contained in this Agreement
or the International Underwriting Agreement and required to be performed or
complied with by them at or prior to the Closing Date and any Option Closing
Date, as applicable.
(k) The Sellers shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
reasonably requested.
<PAGE>
34
(l) The Common Stock shall have been listed or approved for
listing subject to notice of issuance, on the Nasdaq National Market.
(m) The closing under the International Underwriting
Agreement shall have occurred concurrently with the closing hereunder on the
Closing Date.
(n) The Company shall have furnished or caused to be
furnished to you an executed Recapitalization Agreement and the consummation
of the Recapitalization shall have occurred concurrently with the closing
hereunder on the Closing Date.
(o) The Company shall have furnished or caused to be
furnished to you the lock-up letters from all officers, directors and current
stockholders of the Company pursuant to Section 5(n) hereto on or prior to the
Closing Date.
(p) The Company shall have furnished or caused to furnished
to you an executed copy of the Termination Agreement on or prior to the
Closing Date.
(q) The Company shall have furnished or caused to be
furnished to you an executed copy of the BKC Consent Letter on or prior to the
Closing Date.
(r) Concurrent with the Closing hereunder on the Closing
Date, the Company shall have borrowed funds under the New Credit Facility
that, together with the proceeds from the offerings contemplated by this
Agreement and the International Underwriting Agreement, will be sufficient to
consummate the transactions described under the caption "Use of Proceeds" in
the Prospectuses.
(s) The Company shall have furnished or caused to be
furnished to you an executed PMI Agreement and the consummation of the PMI
Claw-back shall have occurred concurrently with the closing hereunder on the
Closing Date.
(t) [Michigan Acquisition condition.]
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
<PAGE>
35
Any certificate or document signed by any officer of the
Company or any Attorney-in-Fact or any Selling Stockholder and delivered to
you, as Representatives of the U.S. Underwriters, or to counsel for the U.S.
Underwriters, shall be deemed a representation and warranty by the Company,
the Selling Stockholders or the particular Selling Stockholder, as the case
may be, to each U.S. Underwriter as to the statements made therein.
11. EXPENSES. The Sellers (in proportion to the number of
Shares being offered by each of them, including any Additional Shares which
the U.S. Underwriters shall have elected to purchase) agree to pay the
following costs and expenses and all other costs and expenses incident to the
performance by them of their obligations hereunder: (i) the preparation,
printing or reproduction, and filing with the Commission of the registration
statement (including financial statements and exhibits thereto), each
Prepricing Prospectus, the Prospectus, and each amendment or supplement to any
of them; (ii) the printing (or reproduction) and delivery (including postage,
air freight charges and charges for counting and packaging) of such copies of
the registration statement, each Prepricing Prospectus, the Prospectus, and
all amendments or supplements to any of them as may be reasonably requested
for use in connection with the offering and sale of the Shares; (iii) the
preparation, printing, authentication, issuance and delivery of certificates
for the Shares, including any stamp taxes in connection with the original
issuance and sale of the Shares; (iv) the printing (or reproduction) and
delivery of this Agreement, the preliminary and supplemental Blue Sky
Memoranda and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Shares; (v) the registration
of the Shares under the Exchange Act and the listing of the Shares on the
Nasdaq National Market; (vi) the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of the several states
as provided in Section 5(g) hereof (including the reasonable fees, expenses
and disbursements of counsel for the Underwriters relating to the preparation,
printing or reproduction, and delivery of the preliminary and supplemental
Blue Sky Memoranda and such registration and qualification); (vii) the filing
fees and the fees and expenses of counsel for the Underwriters in connection
with any filings required to be made with the National Association of
Securities Dealers, Inc.; (viii) the transportation and other expenses
incurred by or on behalf of representatives of the Company in connection with
<PAGE>
36
presentations to prospective purchasers of the Shares; and (ix) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company and the Selling
Stockholders.
12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto;
or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several U.S.
Underwriters, by notifying the Company and the Selling Stockholders.
If any one or more of the U.S. Underwriters shall fail or
refuse to purchase Shares which it or they are obligated to purchase hereunder
on the Closing Date, and the aggregate number of Shares which such defaulting
U.S. Underwriter or Underwriters are obligated but fail or refuse to purchase
is not more than one-tenth of the aggregate number of Shares which the U.S.
Underwriters are obligated to purchase on the Closing Date, each
non-defaulting U.S. Underwriter shall be obligated, severally, in the
proportion which the number of Firm Shares set forth opposite its name in
Schedule II hereto bears to the aggregate number of Firm Shares set forth
opposite the names of all non-defaulting U.S. Underwriters or in such other
proportion as you may specify in accordance with Section 20 of the Master
Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting U.S. Underwriter or Underwriters are obligated, but fail
or refuse, to purchase. If any one or more of the U.S. Underwriters shall fail
or refuse to purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the U.S. Underwriters are obligated to purchase on the Closing Date and
arrangements satisfactory to you and the Company for the purchase of such
Shares by one or more non-defaulting U.S. Underwriters or other party or
parties approved by you and the Company are not made within 36 hours after
such default, this Agreement
<PAGE>
37
will terminate without liability on the part of any non-defaulting U.S.
Underwriter or the Company. In any such case which does not result in
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting U.S. Underwriter
from liability in respect of any such default of any such Underwriter under
this Agreement. The term "U.S. Underwriter" as used in this Agreement
includes, for all purposes of this Agreement, any party not listed in Schedule
II hereto who, with your approval and the approval of the Company, purchases
Shares which a defaulting U.S. Underwriter is obligated, but fails or refuses,
to purchase.
Any notice under this Section 12 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.
13. TERMINATION OF AGREEMENT. This Agreement shall be subject
to termination in your absolute discretion, without liability on the part of
any U.S. Underwriter to the Company or any Selling Stockholder, by notice to
the Company, if prior to the Closing Date or any Option Closing Date (if
different from the Closing Date and then only as to the Additional Shares), as
the case may be, (i) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York or Illinois shall have been declared by either
federal or state authorities, or (iii) there shall have occurred any outbreak
or escalation of hostilities or other international or domestic calamity,
crisis or change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it, in
your judgment, impracticable or inadvisable to commence or continue the
offering of the Shares at the offering price to the public set forth on the
cover page of the U.S. Prospectus or to enforce contracts for the resale of
the Shares by the U.S. Underwriters.
Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
<PAGE>
38
14. INFORMATION FURNISHED BY THE U.S. UNDERWRITERS. The
statements set forth in the last paragraph on the cover page, the
stabilization legend on the inside front cover page, and the statements in the
first, second, fourth, ninth, tenth, twelfth and fifteenth paragraphs under
the caption "Underwriting" in any U.S. Prepricing Prospectus and in the U.S.
Prospectus constitute the only information furnished by or on behalf of the
U.S. Underwriters through you as such information is referred to in Sections
7(b) and 9 hereof.
15. MISCELLANEOUS. Except as otherwise provided in Sections 5,
12 and 13 hereof, notice given pursuant to any provision of this Agreement
shall be in writing and shall be delivered (i) if to the Company at the office
of the Company at, AmeriKing, Inc., 2215 Enterprise Drive, Suite 1502,
Westchester, IL 60154, Attention: Lawrence E. Jaro, Chairman; (ii) if to the
Selling Stockholders, at [ ]; or (iii) if to you, as Representatives of the
several U.S. Underwriters, care of Smith Barney Inc., [388 Greenwich Street,
New York, New York 10013], Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit
of the several U.S. Underwriters, the Company, its directors and officers, the
other controlling persons referred to in Section 9 hereof, and the Selling
Stockholders and their respective successors and assigns, to the extent
provided herein, and no other person shall acquire or have any right under or
by virtue of this Agreement. Neither the term "successor" nor the term
"successors and assigns" as used in this Agreement shall include a purchaser
from any U.S. Underwriter of any of the Shares in his status as such
purchaser.
16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
<PAGE>
39
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Selling Stockholders and the several U.S.
Underwriters.
Very truly yours,
AMERIKING, INC.
By
-------------------------------------
Name: Lawrence E. Jaro
Title: Chief Executive Officer
Each of the Selling Stockholders
named in Schedule I hereto
By
-------------------------------------
Name: [ ]
Title: Attorney-in-Fact
By
-------------------------------------
Name: [ ]
Title: Attorney-in-Fact
<PAGE>
40
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several U.S.
Underwriters named in Schedule II
hereto.
SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
EVEREN SECURITIES, INC.
As Representatives of the Several U.S. Underwriters
By SMITH BARNEY INC.
By
------------------------------------
Name:
Title:
<PAGE>
41
SCHEDULE I
AMERIKING, INC.
Additional Shares
Number of
Selling Stockholders Additional Shares
Total........ _________________
<PAGE>
42
SCHEDULE II
AMERIKING, INC.
Number of
Underwriter Firm Shares
Smith Barney Inc. ___
PaineWebber Incorporated
EVEREN Securities, Inc.
[ ]
[ ]
[ ] -----------
Total ...........
Total_____
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made this 1st day of September, 1994, by and between
BURGER KING CORPORATION, a Florida corporation ("BKC") and NATIONAL RESTAURANT
ENTERPRISES, INC., a Delaware corporation ("BUYER").
In consideration of the following mutual covenants and representations,
the parties agree as follows:
1. SUBJECT MATTER
a. Assets
BUYER agrees to purchase from BKC, and BKC agrees to sell, and deliver to
BUYER, all furniture and equipment (the "Assets") located at the Burger King
Restaurants identified below:
Store No. 106, the address of which is 18459 South Halsted Street, Glenwood,
IL 60425
Store No. 128, the address of which is 4848 West 87th Street, Burbank,
IL 60459
Store No. 147, the address of which is 590 Roosevelt Road, Glen Ellyn,
IL 60137
Store No. 189, the address of which is 108 North Larkin Avenue, Joliet,
IL 60435
Store No. 207, the address of which is 2700 South Kedzie Avenue, Chicago,
IL 60623
Store No. 209, the address of which is 176 East Butterfield Road, Elmhurst,
IL 60126
Store No. 213, the address of which is 6701 West Roosevelt Road, Berwyn,
IL 60402
Store No. 240, the address of which is 803 River Oaks Drive, Calumet City,
IL 60409
Store No. 244, the address of which is 3728 South Archer Avenue, Chicago,
IL 60632
Store No. 267, the address of which is 7938 Calumet Avenue, Munster, IN 46321
Store No. 305, the address of which is 10170 West Grand Ave., Franklin Park,
IL 60131
Store No. 381, the address of which is 10341 South Cicero Avenue, Oak Lawn,
IL 60453
Store No. 540, the address of which is 9236 Indianapolis Boulevard, Highland,
IN 46322
Store No. 720, the address of which is 715 North Hobart Road, Hobart, IN 46342
Store No. 1047, the address of which is 807 Lincoln Way, Valparaiso, IN 46383
Store No. 1099, the address of which is 1 S. 722 Summit Ave., Oak Brook Ter.,
IL 60181
Store No. 1103, the address of which is 7140 West 159th Street, Orland Park,
ILL 60462
Store No. 1116, the address of which is 415 Schmale Road, Carol Stream,
IL 60188
Store No. 1118, the address of which is 2607 West Lincoln Highway,
Merrillville, IN 46410
Store No. 1143, the address of which is 7205 Archer Avenue, Summit, IL 60501
Store No. 1170, the address of which is 6930 South Route 83, Willowbrook,
IL 60514
Store No. 1176, the address of which is 18240 S. Kedzie Avenue, Hazelcrest,
IL 60429
Store No. 1216, the address of which is 3219 Chicago Road, S. Chicago Hghts,
IL 60411
Store No. 1217, the address of which is 18156 S. Torrence Avenue, Lansing,
IL 60438
Store No. 1249, the address of which is 12701 S. Ashland Ave., Calumet Park,
IL 60643
1
<PAGE>
Store No. 1254, the address of which is 200 W. 162nd Street, S. Holland,
IL 60473
Store No. 1334, the address of which is 500 S. State Street, Chicago, IL 60605
Store No. 1345, the address of which is 1201 E. Ridge Road, Griffith, IN 46319
Store No. 1355, the address of which is 1048 Sibley Boulevard, Dolton IL 60419
Store No. 1397, the address of which is 14340 S. Cicero Avenue, Midlothian,
IL 60445
Store No. 1413, the address of which is 7432 S. Kostner Avenue, Chicago,
IL 60629
Store No. 1470, the address of which is 400 East Cass, Joliet, IL 60432
Store No. 1500, the address of which is South Lake Mall, Merrillville, IN 46410
Store No. 1645, the address of which is 417 N. Bolingbrook Drive, Bolingbrook,
IL 60440
Store No. 1660, the address of which is 5820 Calumet Avenue, Hammond, IN 46320
Store No. 1786, the address of which is 200 West Monroe, Chicago, IL 60606
Store No. 1819, the address of which is 2 East Chicago, Chicago, IL 60611
Store No. 1825, the address of which is 340 N. Independence, Romeoville,
IL 60441
Store No. 1866, the address of which is 113 West Roosevelt Road, Maywood,
IL 60153
Store No. 2016, the address of which is 500 South Racine, Chicago, IL 60607
Store No. 2120, the address of which is 24 South Michigan Ave., Chicago,
IL 60603
Store No. 2130, the address of which is 20 Surrybrook, Sauk Village, IL 60411
Store No. 2196, the address of which is Brickyard Mall, Chicago, IL 60635
Store No. 2672, the address of which is 340 S. Neltnor, W.Chicago, IL 60185
Store No. 2727, the address of which is 2595 Willow Creek Road, Portage,
IN 46368
Store No. 3021, the address of which is 6904 Kennedy Ave., Hammond, IN 46323
Store No. 3273, the address of which is 2921 Calumet Avenue, Valparaiso,
IN 46383
Store No. 3507, the address of which is 225 North Michigan, Avenue, Chicago,
IL 60601
Store No. 3695, the address of which is 621 West Chicago Avenue, E. Chicago,
IN 46312
Store No. 3821, the address of which is 105 West 61st Avenue, Merillville,
IN 46410
Store No. 4136, the address of which is 5520 West 159th Street, Oak Forest,
IL 60452
Store No. 4205, the address of which is 14601 S. LaGrange Road, Orland Park,
IL 60462
Store No. 4293, the address of which is 5100 W. Cermack Road, Cicero, IL 60650
Store No. 4462, the address of which is 1850 Southlake Mall, Merrillville,
IN 46410
Store No. 4584, the address of which is 2505 W. Jefferson Street, Joliet,
IL 60435
Store No. 4594, the address of which is 4420 West 211th Street, Matteson,
IL 60443
Store No. 4730, the address of which is 112 South State Street, Chicago,
IL 60603
Store No. 5157, the address of which is 194 West Joe Orr Rd., Chicago Heights,
IL 60411
Store No. 5194, the address of which is 1616 North Larkin, Crest Hill,
IL 60435
Store No. 5330, the address of which is 28 E. Jackson Blvd., Chicago,
IL 60604
Store No. 5735, the address of which is 2110 West Galena Boulevard, Aurora,
IL 60506
Store No. 5983, the address of which is 16791 Torrence Avenue, Lansing,
IL 60438
Store No. 5984, the address of which is 2147 South Oak Park Avenue, Berwyn,
IL 60402
Store No. 5986, the address of which is 2501 West Cermack Road, Chicago,
IL 60608
Store No. 6185, the address of which is 7843 Indianapolis Boulevard, Hammond,
IN 46323
Store No. 7045, the address of which is 600 South Newport Road, Pontiac,
IL 61764
Store No. 7403, the address of which is Woodfield Mall-D312, Schaumburg,
IL 60173
Store No. 7545, the address of which is 7279 West 159th Street, Orland Hills,
IL 60477
2
<PAGE>
(Hereinafter the above listed restaurants shall be collectively referred to as
the "Premises" or the "Restaurants").
The parties hereto acknowledge that the general intent of Exhibits "A-1" thru
"A-68" is to transfer the type of assets listed therein and not owned by BKC
under the Lease/Sublease Agreements (as hereinafter defined). Notwithstanding
the foregoing, the lists of the Assets being sold hereunder are attached as
Exhibits "A-1" thru "A-68"; however, BKC shall have no duty to furnish or
replace items listed on Exhibits "A-1" thru "A-68" which are not at the
Premises at Takeover (as hereinafter defined). The sale of the Assets will be
made free and clear of all Claims (as hereinafter defined).
b. Inventory
Within twenty-four (24) hours of the date of Takeover, an inventory shall
be taken by BKC (with the participation of the BUYER) of all useable and
saleable food, paper, new uniforms, currently distributable promotional
premiums, gift certificates and supply inventory at invoice price
("Inventory") located at the Premises. BUYER agrees to purchase the Inventory
from BKC, and BKC agrees to sell the Inventory to BUYER, at the cost reflected
on BKC's current purchase price lists. BUYER understands and agrees that the
Inventory items are not included within the definition of Assets.
On the closing date BUYER agrees to pay to BKC $6,000.00 per Restaurant
or the sum of FOUR HUNDRED AND EIGHT THOUSAND AND NO/100 DOLLARS
($408,000.00), separately and not as part of the Purchase Price (as
hereinafter defined), as partial payment for the Inventory. Following the
taking of the Inventory as described above, BKC and BUYER agree to make
adjustments to the Inventory purchase price for the difference between
$6000.00 and the actual Inventory purchase price. In the event the Inventory
purchase price is less than $6,000.00 per Restaurant, BKC shall, within thirty
(30) days following closing, reimburse BUYER for any overage in payment. In
the event the Inventory purchase price is in excess of $6,000.00 per
Restaurant, BUYER agrees to make payment to BKC within thirty (30) days of the
Closing (as hereinafter defined) for any additional monies which may be due
for the purchase of the Inventory.
c. Store Bank
Upon Takeover, BKC shall leave cash in the total amount of $69,000.00 at
the Premises (the "Store Banks"). The amount for each Restaurant is as
indicated below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Restaurant #106 $ 800.00 Restaurant #128 $1,000.00
Restaurant #147 $ 800.00 Restaurant #189 $1,000.00
Restaurant #207 $ 1,000.00 Restaurant #209 $1,000.00
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Restaurant #213 $ 800.00 Restaurant #240 $ 800.00
Restaurant #244 $1,200.00 Restaurant #267 $1,000.00
Restaurant #305 $1,000.00 Restaurant #381 $1,000.00
Restaurant #540 $1,000.00
Restaurant #720 $1,000.00 Restaurant #1047 $1,000.00
Restaurant #1099 $1,000.00 Restaurant #1103 $1,000.00
Restaurant #1116 $1,000.00 Restaurant #1118 $1,000.00
Restaurant #1143 $1,000.00 Restaurant #1170 $1,000.00
Restaurant #1176 $1,000.00 Restaurant #1216 $1,000.00
Restaurant #1217 $1,000.00 Restaurant #1249 $1,000.00
Restaurant #1254 $1,000.00 Restaurant #1334 $1,200.00
Restaurant #1345 $1,000.00 Restaurant #1355 $1,000.00
Restaurant #1397 $ 800.00 Restaurant #1413 $1,000.00
Restaurant #1470 $1,000.00 Restaurant #1500 $1,000.00
Restaurant #1645 $1,000.00 Restaurant #1660 $1,000.00
Restaurant #1786 $1,500.00 Restaurant #1819 $1,200.00
Restaurant #1825 $1,000.00 Restaurant #1866 $1,000.00
Restaurant #2016 $1,000.00 Restaurant #2120 $1,500.00
Restaurant #2130 $1,000.00 Restaurant #2196 $ 800.00
Restaurant #2672 $1,000.00 Restaurant #2727 $1,000.00
Restaurant #3021 $1,000.00 Restaurant #3273 $ 800.00
Restaurant #3507 $1,200.00 Restaurant #3695 $1,000.00
Restaurant #3821 $1,000.00 Restaurant #4136 $1,000.00
Restaurant #4205 $1,000.00 Restaurant #4293 $1,000.00
Restaurant #4462 $1,000.00 Restaurant #4584 $1,000.00
Restaurant #4594 $1,000.00 Restaurant #4730 $1,800.00
Restaurant #5157 $1,000.00 Restaurant #5194 $1,000.00
Restaurant #5330 $1,200.00 Restaurant #5735 $1,000.00
Restaurant #5983 $1,000.00 Restaurant #5984 $1,000.00
Restaurant #5986 $ 800.00 Restaurant #6185 $ 800.00
Restaurant #7045 $1,000.00 Restaurant #7403 $1,000.00
Restaurant #7545 $1,000.00
</TABLE>
BUYER agrees to buy the Store Banks from BKC and agrees to pay for the Store
Banks separately-not as a part of the Purchase Price (as hereinafter
defined)-at Closing (as hereinafter defined).
2. PURCHASE PRICE AND PAYMENT
The purchase price shall be FORTY-ONE MILLION FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($41,500,000.00) (the "Purchase Price"). On the
date of Closing (as hereinafter defined), BUYER shall pay to BKC FORTY-ONE
MILLION
4
<PAGE>
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($41,500,000.00), plus or minus net
pro-rations (as hereinafter provided) and the amount of any sales or transfer
taxes to be collected under paragraph 14 hereof, and adjusted pursuant to a
Side Letter dated the date hereof between BKC, BUYER, BUYER's parent company
and the Managing Owners and Managing Director under the Franchise Agreements,
attached hereto as Schedule 2 (the "Side Letter") by wire transfer or by a
certified or bank cashier's check, payable to the order of BKC.
3. CLOSING
The closing hereunder ("Closing") shall take place on the
1st day of September, 1994, at the offices of Mayer, Brown & Platt, Chicago,
Illinois at 10:00 A.M. The delivery of the Assets, Inventory and Store Banks,
and the effective date of the Franchise Agreements and Lease/Sublease
Agreements shall be as of the date of transfer of possession of the operation
of the Premises (the "Takeover") which shall be at the close of business on
September 1, 1994.
4. REPRESENTATIONS AND WARRANTIES OF BKC
a. BKC hereby represents and warrants that BKC is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Florida and has the corporate power to own its properties
and to carry on its business as it is now being conducted.
b. BKC hereby represents and warrants that BKC has and will
deliver good and marketable title to all of the Assets, subject to no liens,
mortgages, restrictions, pledges, encumbrances or charges of any kind.
c. BKC hereby represents and warrants that the execution and
delivery by BKC of this Agreement and each of the other instruments and
agreements of BKC provided for herein, and the performance of their obligation
hereunder or thereunder, have been duly and validly authorized by all
necessary corporate action on the part of BKC and its parent company and this
Agreement and any other instruments and agreements delivered or to be
delivered in connection herewith are or will be the valid and binding
obligations of BKC enforceable against it in accordance with their respective
terms.
d. BKC hereby represents and warrants that the execution and
delivery by BKC of this Agreement and each of the other instruments and
agreements of BKC provided for herein and the performance by BKC of its
obligations hereunder or thereunder will not, or with the giving of notice or
the lapse of time or both, would not (i) result in a breach of, or give rise
to termination of, or accelerate the performance required by an terms of any
agreement to which BKC is a party, or constitute a default thereunder, or
result in the creation of any lien, charge or encumbrance upon any of the
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Assets of BKC nor (ii) violate any order, writ, injunction, decree or law.
e. BKC hereby represents and warrants that the financial
information, including sales history and profit and loss statements, provided
to BUYER for the period through July 31, 1994 are true and correct and
accurately represent the activity of each restaurant for the time periods
indicated on such financial information and were prepared in accordance with
generally accepted accounting principles required in a standard Burger King
Franchise Agreement.
f. BKC hereby represents and warrants that BKC currently
receives utility services at the Premises and BKC is not aware of any reason
why a utility company would not continue to supply those utilities to the
Premises in the future. BKC further represents and warrants that BKC will pay
when due all sales, excise and other taxes in respect of the Restaurants
through the date of the Closing, except to the extent already reflected in the
prorations at Closing.
g. BKC hereby represents and warrants that BKC has not
received any written notice from an authorized governmental body stating that
the Restaurants are in violation of the Americans With Disabilities Act.
h. BKC hereby represents and warrants that Schedule 4(h)
contains an accurate list of the current employees at the Restaurants, showing
current rate of cash compensation, date of birth and date of hire.
i. BKC represents and warrants, except as set forth on
Schedule 4(i) BKC does not maintain any "employee welfare benefit plan" or
"employee pension benefit plan" (as those terms are respectively defined in
Sections 3(1) and 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA")), any deferred compensation, incentive or fringe benefit plan that
is not subject to ERISA or any employment agreement. To the best of BKC's
knowledge without an ultimate determination by the Internal Revenue Service,
each Plan listed on Schedule 4(i) that is an employee pension benefit plan
meets the requirements of Sections 401(a) and 501(a) of the Internal Revenue
Code (the "Code") and each Plan listed on Schedule 4(i) that is a "group
health plan" (as defined in Section 607(1) of ERISA or Section 4980B(g) (2) of
the Code) has been operated in compliance with applicable law.
j. BKC hereby represents and warrants that if BKC wishes to
offer employment to any salaried employee of BUYER within six months after the
date of this Agreement, BKC shall first notify Buyer of its intention to
employ such individual and the minimum salary to be paid to such individual.
k. BKC hereby represents and warrants that to BKC's
knowledge, BKC has , owns, possesses or lawfully uses in the operations of the
Restaurants all operating
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permits and licenses (collectively the "Approvals") which materially effect
BKC's ability to operate the Restaurants and BKC, to its knowledge, has not
received notice of a material default with respect to any Approval. BKC
further represents and warrants that BKC is, to the best of its knowledge, in
material compliance with all laws which materially effect BKC's ability to
operate the Restaurants. For purposes of this Section 5(k) only, the standard
for materiality shall be any amount over $500,000.00.
j. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH
IN THIS AGREEMENT, NEITHER BKC NOR ANY OF ITS AGENTS OR PERSONS ACTING ON ITS
BEHALF MAKES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
RELATING TO THE ASSETS OR OTHER PROPERTY THAT IS THE SUBJECT OF THIS
AGREEMENT, AND BKC HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY NOT
SET FORTH IN THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
a. BUYER represents and warrants that the execution and
delivery by BUYER of this Agreement and each of the other instruments and
agreements of BUYER provided for herein, and the performance of their
obligation hereunder or thereunder, have been duly and validly authorized by
all necessary corporate action on the part of BUYER and its parent company and
this Agreement and any other instruments and agreements delivered or to be
delivered in connection herewith are or will be the valid and binding
obligations of BUYER enforceable against it in accordance with their
respective terms.
b. BUYER represents and warrants that the execution and
delivery by BUYER of this Agreement and each of the other instruments and
agreements of BUYER provided for herein and the performance by BUYER of its
obligations hereunder or thereunder will not, or with the giving of notice or
the lapse of time or both, would not (i) result in a breach of, or give rise
to termination of, or accelerate the performance required by any terms of any
agreement to which BUYER is a party, or constitute a default thereunder, or
result in the creation of any lien, charge or encumbrance upon any of the
Assets of BUYER nor (ii) violate any order, writ, injunction, decree or law.
BUYER further represents and warrants that the consent or approval of a third
party is not required in order that BUYER may enter into this Agreement.
Except for Jerry Dunn and Dennis Hogerty, BUYER knows of no broker, finder,
intermediary, or other person acting in a similar capacity who may have been
involved in this transaction who would be entitled to a fee or commission upon
its consummation. Any fee or commission to be paid to Jerry Dunn and Dennis
Hogerty, or any other broker, finder or other intermediary of BUYER shall be
the sole responsibility of BUYER.
c. BUYER represents and warrants that it is not insolvent
and has
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sufficient funds on hand at this time and sufficient borrowing capacity with
responsible financial institutions to purchase the Assets, Inventory and other
property that is the subject of this Agreement on the terms and conditions set
forth in this Agreement.
d. If BUYER wishes to offer employment to any current
salaried employee of BKC within six (6) months after the date of this
Agreement, BUYER shall first notify BKC of its intention to employ such
individual and the minimum salary to be paid to such individual.
e. BUYER represents and warrants that no consent, approval,
authorization, declaration or filing, or the expiration of any waiting period
under the Hart- Scott-Rodino Antitrust Improvements Act of 1976 is required to
be made or obtained (i) in connection with the execution, delivery and
performance by BUYER of this Agreement or (ii) as a condition to the legality,
validity or enforceability of this Agreement. If, after the Closing, it is
determined by the Federal Trade Commission (the "FTC") or the Antitrust
Division of the U.S. Department of Justice (the "Antitrust Division") that a
filing under the HSR Act was required prior to the Closing, BUYER shall
indemnify and hold harmless BKC with respect to any liabilities for failure to
file, including filing fees, late fees, fines, penalties and direct or
consequential damages to BKC.
6. BKC'S OBLIGATIONS CONDITIONAL
The obligations of BKC herein are, at the option of BKC,
subject to the following conditions:
a. All representations and warranties of BUYER contained in
this Agreement shall be true and correct in all material respects on and as of
the date of closing.
b. BUYER shall have performed and complied with the terms and
conditions of this Agreement in all material respects prior to or at the
closing.
7. BUYER'S OBLIGATIONS CONDITIONAL
The obligations of BUYER herein are, at the option of BUYER,
subject to the following conditions:
a. All representations and warranties of BKC contained
in this Agreement shall be true and correct in all material respects on and as
of the date of Closing.
b. BKC shall have performed and complied with the terms
and conditions of this Agreement in all material respects prior to or at the
Closing.
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8. FRANCHISE AND LEASE AGREEMENTS
As a part of the consideration for the execution of this
Agreement, BKC and BUYER shall enter into a BURGER KING(R) Restaurant
Franchise Agreement and a Lease/Sublease Agreements for each of the
Restaurants, pursuant to the terms and conditions of the BURGER KING(R)
Restaurant Franchise Agreement substantially in the form attached hereto as
Exhibit "B" and the Lease/Sublease Agreement substantially in the form
attached hereto as Exhibit "C". The effective date of the Franchise Agreements
and Lease/Sublease Agreements shall be as of the date of Takeover.
9. LEASED EQUIPMENT AND SOFTWARE
The "Assets" listed on Exhibits "A-1" through "A-68" include
certain Assets which are leased by BKC (the "Leased Assets") and certain
computer software programs (the "Software"). The parties shall execute a
separate POS Purchase and License Agreement in the form attached hereto as
Rider "A" and a separate Assignment in the form attached hereto as Rider "B".
These two agreements shall govern the transfer and/or license of the Leased
Assets and Software.
10. INSURANCE
At Closing, all insurance policies relating to the Assets
and other property that is the subject of this Agreement held by or on behalf
of BKC shall be terminated and no longer in force or effect, and BKC shall
have no further liability in respect of maintenance or continuance of such
policies as of the Closing.
11. ADVERTISING FUNDS
The BUYER hereby acknowledges that no advertising funds earned or
accrued as the result of the operation of the Premises by BKC prior to the
date of Takeover shall accrue or inure to BUYER's benefit. The BUYER shall
have the option of purchasing or returning point-of-purchase restaurant
promotional materials ordered prior to the date of Takeover. The possession
and use of such point-of-purchase materials by the BUYER shall be deemed to be
a purchase. The BUYER shall then be required to pay for such promotional
materials, at BKC's cost, upon the receipt of an invoice therefor from BKC.
Freight costs for the return by BUYER to BKC of any point-of-purchase
promotional materials not purchased by BUYER shall be paid by BKC, but only in
the event that the return thereof by the BUYER is made within ten (10) days of
the date the BUYER either receives, or takes possession of, such point-of-
purchase materials.
12. PUBLIC UTILITY SERVICES
The BUYER, on or before the date of Takeover, shall make all necessary
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arrangements for the institution of service by public utilities at the
Premises, for BUYER's account only. The BUYER shall also obtain a final
reading of any and all public utility service meters located at the Premises
prior to Takeover. Any deposits for public utility services made at any time
by BKC shall be returned to BKC forthwith.
13. EXECUTORY CONTRACTS
The BUYER, before the date of closing, agrees to examine all
existing equipment and maintenance contracts, music contracts and all other
executory contracts concerning the operation, use and occupancy of the
Premises, including but not limited to that certain agreement entitled AT&T
Commission Agreement dated February 13, 1991, by and between AT&T
Communications, Inc., ("AT&T") and BKC, (the "AT&T Agreement") (collectively
the "Executory Contracts") each of which shall be delivered to BUYER on or
prior to Closing. If such Executory Contracts (or any of them) may be
terminated, the BUYER shall have the option to either terminate them, or to
assume the obligations of BKC thereunder. Those Executory Contracts which
cannot be terminated are attached as Exhibits "D-1" through "D-68", and BKC's
obligations thereunder in all respects shall hereby be assumed by the BUYER
subject to the proration provisions of paragraph 15 hereof. BKC shall have no
obligation to pay or reimburse to the BUYER any commissions or payments made
by AT&T under the AT&T Agreement to BKC. BUYER must notify AT&T in writing,
with copy of such notification to BKC, that the closing of the transaction
contemplated by this Agreement has occurred and that the BUYER has assumed
BKC's rights and obligations under the AT&T Agreement before BUYER is entitled
to a commission, if any from AT&T.
14. TRANSFER COSTS
All sales, transfer or use taxes and/or other fees which may
be imposed or assessed by taxing authorities pursuant to federal, state or
local laws as the result of the transactions effected by this Agreement,
except those taxes imposed upon the income of BKC, up to TWENTY FIVE THOUSAND
AND NO/100 DOLLARS ($25,000.00), will be split equally between BKC and BUYER.
Any excess above TWENTY FIVE THOUSAND AND NO/100 DOLLARS (($25,000.00) will be
the financial responsibility of the BUYER. In addition to the Purchase Price,
BUYER agrees to remit to BKC at Closing the funds necessary to pay in full any
such tax and/or other fee, and BKC agrees to remit such funds following
Closing to the appropriate state and local taxing authorities. If it is later
determined by audit or otherwise that such funds collected from BUYER were not
sufficient for full payment to the taxing authorities, then BUYER agrees to
immediately reimburse BKC for any additional monies due.
15. ADJUSTMENTS
a. BUYER and BKC agree to adjust and pay their respective
pro-rata
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share of, as of the date of Takeover, any or all taxes, sewer charges, water
charges, public utility service charges, fuel charges, rentals, charges with
respect to the Executory Contracts and other pro-ratable charges attributable
to the operation of the Premises. Real estate (other than real property
transfer or gains ) and personal property taxes which are due and payable
during the tax year in which the Closing occurs shall be prorated as of the
date of the Closing. Any adjustments which are not able to be settled at
Closing shall be settled in good faith at a date subsequent to the Closing.
b. There shall also be an adjustment of up to $8,000.00
for costs incurred by BKC in assisting BUYER in completing the employment
application process.
c. There shall also be an adjustment of up to $10,000.00 for
any costs incurred by BKC in having to change the date of the Closing,
pursuant to a request by BUYER, from the originally scheduled date of August
31, 1994 to September 1, 1994.
16. CAPITAL IMPROVEMENTS
BUYER hereby covenants and agrees to make certain capital
improvements totalling Two Million Two Hundred and Fifty Thousand Dollars
($2,250,000.00) to the Premises ("Capital Improvements") as outlined on
Exhibit "F" attached hereto and entitled "Capital Improvements". The terms and
conditions of this Paragraph 16 shall survive the closing of the transaction
contemplated by this Agreement. BKC hereby agrees for a one (1) year period
commencing as of the date of the Takeover, BKC will not require BUYER to make
material alterations to the Premises, other than the Capital Improvements, in
order to comply with BKC's then current image requirements for Burger King
Restaurants ("Current Image"). Notwithstanding the foregoing, BKC shall not
require BUYER to make Capital Improvements or other significant investment in
Store Nos. 1103, 1413, 1500, 2016, 2196 and 2120 for thirty six (36) months
from Closing unless and until BKC is able to offer, and BUYER is willing to
accept, a Successor Franchise Agreement for any of the aforementioned Stores.
BUYER agrees that the foregoing shall not apply to any maintenance and repair
requirements under the Leases.
17. OPINION OF COUNSEL
The BUYER shall provide, at the Closing, an opinion (the
"Opinion") from Mayer Brown & Platt ("MBP") counsel to the BUYER dated the
Closing Date, addressed to BKC stating that it is MBP's opinion that a) other
than set forth in this Agreement or the Stockholders Agreement dated September
1, 1994 between BUYER's parent company, NRE Holdings, Inc. and the
stockholders named therein, the BKC Guidelines for Approval of Franchisee
Ownership Distribution Plans have been complied with in all respects, b) that
to the best of MBP's knowledge, all registration requirements under federal
and state securities laws (other than anti-fraud provisions) have been
satisfied, and c) that no filing under the HSR Act is required pursuant to
this transaction. Subject the receipt of the
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Opinion by BKC at Closing, BUYER's Distribution Plan
Application is hereby approved.
18. EMPLOYEE RELATIONS
It is understood and agreed that all persons employed at the
Burger King restaurants identified on Schedule 4(h) are, prior to Takeover,
the employees of BKC. BKC agrees to be responsible for the payment to all such
employees of all wages and benefits relating to their employment for periods
before the date of Takeover. BKC shall pay these employees any earned but
unpaid wages and vacation pay no later than the date of Takeover, and BKC
shall process any other BKC benefits to which they may be entitled, including
payment of medical plan claims incurred before such date and providing COBRA
notice, in accordance with the terms of the Employee Benefit Plans. The BUYER
shall not be required to hire any of BKC's former employees subsequent to
Takeover. BKC, with the agreement of BUYER, and in accordance with applicable
laws, may transfer its unemployment and workers' compensation experience
relating to Restaurants to BUYER.
19. INDEMNIFICATION
BUYER and BKC shall each indemnify and save the other harmless
against and from all costs, expenses, liabilities, losses, damages, suits,
actions, fines, penalties, and demands of every kind or nature, including
reasonable counsel fees ("Claims"), by or on behalf of any person, party or
governmental authority whatsoever arising out of the other's breach of a
warranty contained herein, or failure to perform any of the agreements, terms,
covenants, or conditions of this Agreement which it is obligated to perform.
BKC shall indemnify BUYER against any loss incurred by BUYER related to any
Claim arising from events occurring exclusively before the Takeover at any of
the Premises or with respect to persons, employed, served or injured at any of
the Premises exclusively before the Takeover. BUYER shall indemnify BKC
against any loss incurred by BKC related to any Claim arising from events
occurring exclusively after the Takeover at any of the Premises or with
respect to persons, employed, served or injured at any of the Premises
exclusively after the Takeover. To the extent that any Claim arises from
events occurring both before and after the Takeover, BKC shall indemnify BUYER
solely for that portion of the Claim reasonably attributable to events that
took place exclusively before the Takeover. Notwithstanding anything to the
contrary contained herein, the Assets are sold "AS IS, WHERE IS" and BKC shall
have no obligation to indemnify BUYER for any Claim arising from the use or
operation of Assets either before or after the Takeover. The obligation to
indemnify as contained in this Section 19 shall survive the Closing and shall
continue until March 31, 1996.
20. WAIVER OF BULK SALES COMPLIANCE
The BUYER agrees to waive any formal requirements of the Bulk Sales Law
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of the state in which the Premises are located. BKC represents and warrants to
the BUYER that the Assets are free and clear of all debts and encumbrances and
that any trade bills or other obligations owed as a result of the operation of
the Premises prior to the date of Takeover shall be paid by BKC in full as
they fall due.
21. CONDITION OF ASSETS
The BUYER accepts the Assets, and the lands and buildings
which are the subject of the Lease/Subleases referred to in Paragraph 8 of
this Agreement, in an "AS IS" condition as of the date of Closing. BKC shall
repair or replace any Assets damaged or removed between the Closing and the
date of Takeover.
22. CLOSING DOCUMENTS
a. At the Closing, the BUYER shall deliver or cause to be
delivered to BKC the following:
(i) The payment referred to in Paragraph 2 hereof.
(ii) The Franchise Agreements (Exhibit "B") as referred to in
Paragraph 8 hereof, executed by BUYER.
(iii) The Lease/Subleases (Exhibit "C") as referred to in Paragraph
8 hereof, executed by BUYER.
(iv) Such other documents and instruments as may be reasonably
required by, and in form and substance satisfactory to, counsel
for BKC.
(v) The Opinion of Counsel described in Paragraph 17 hereof.
(vi) The Side Letter creating post-Takeover obligations between BKC
and BUYER.
b. At the Closing BKC shall deliver to BUYER the following:
(i) A Bill of Sale in form and substance satisfactory to the
BUYER so as to transfer title to the Assets to BUYER.
(ii) All contracts which relate to any liability or obligation
of BKC which is to be assumed by BUYER as set forth on
Exhibit "D" and in accordance with Paragraph 13.
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23. NOTICES
All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been property given if delivered personally or mailed
first class, postage prepaid, registered or certified mail, return receipt
requested, as follows:
If to BKC: BURGER KING CORPORATION
P.O. Box 020783
Miami, Florida 33102-0783
Attention: General Counsel
BUYER: NATIONAL RESTAURANT ENTERPRISES, INC.
c/o Jordan Enterprises, Inc.
Arbor Lake Centre
Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Either party hereto may change the address or addresses to
which such communications should be directed by giving written notice to the
other party of such change.
24. EXPENSES
BUYER and BKC shall each pay their own expenses in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by it.
25. CAPTION HEADINGS AND CONSTRUCTION OF AGREEMENT
The caption headings are used in this Agreement only as a
matter of convenience and for reference and do not define, limit or describe
the scope of this Agreement nor the intent of any provision. This Agreement
shall be governed by and construed and enforced ion accordance with the laws
of the State of Florida.
26. ENTIRE AGREEMENT: MODIFICATION
This Agreement sets forth the entire agreement and
understanding of the parties in respect to the transactions contemplated by it
and supersedes any and all prior agreements and understandings relating to the
subject matter of this Agreement. No representations, promises, inducement or
statement of intention have been made by BKC to BUYER which is not embodied in
this Agreement or the written statements or other
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documents delivered in connection with it or in connection with the
transactions contemplated by this Agreement. All the terms, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon, and shall inure to the benefit of and be enforceable by the successors
and assigns of BKC. This Agreement and the rights and obligations under it
shall not be assignable by the BUYER except to the extent allowed under that
certain Intercreditor Agreement between BUYER, BKC, The First National Bank of
Boston, Mezzanine Capital & Income Trust 2001 PLC and other shareholders of
BUYER's parent, NRE Holdings, Inc. dated September 1, 1994. This Agreement may
be amended, modified, superseded or cancelled, and any of the terms,
covenants, representations, warranties or conditions hereof may be waived,
only by a written instrument executed by the parties or, in the case of a
waiver, by the party waiving compliance.
27. NON-WAIVER: SURVIVAL
No waiver or waivers by any party of any provision of this
Agreement whether by conduct or otherwise, shall be deemed to be a further or
continuing waiver of that or any other provision of this Agreement. The terms
and conditions of this Agreement and all representations, covenants and
warranties made by BUYER shall survive the date of Closing and shall continue
so long as the BUYER, his successors or assigns retain any interest in a
BURGER KING(R) Restaurant franchise.
28. LIQUIDATED DAMAGES
In the event that the BUYER withdraws from this Agreement,
other than as a result or on account of breach by BKC of any of its
warranties, representations, or covenants made in this Agreement, the
non-refundable earnest money deposit made by the BUYER, if any, shall be
considered as liquidated damages paid to BKC. BKC shall accept this sum in
full payment of all claims against the BUYER and the parties shall have no
further obligation to one another. In this event, all of the terms and
conditions set forth in this Agreement shall be considered void and of no
further force and effect between the parties.
29. COOPERATION
BUYER agrees to cooperate with BKC in defending or settling
any claim or action arising out of BKC's ownership or operation of the Assets
or other property that is the subject of this Agreement at no cost or expense
to BUYER. BKC and BUYER shall each use its best efforts to take all actions
required of it to fulfill its obligations under the terms of this Agreement
and to facilitate the transition and consummation of the transactions
contemplated hereby, including, without limitation, BKC's providing a
compatible format for payroll data that will allow BUYER's payroll provider to
merge payroll data for the persons employed at the Premises into the
provider's master files.
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30. GOVERNING LAW, FORUM
a. This Agreement shall become valid when executed and
accepted by BKC. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida.
b. BUYER and BKC acknowledge and agree that the U.S.
District Court for the Southern District of Florida, or if such court lacks
jurisdiction, the 11th Judicial Circuit (or its successor) in and for Dade
County Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly,
under or in connection with this Agreement and the parties further agree that,
in the event of litigation arising out of or in connection with this Agreement
in these courts, they will not contest or challenge the jurisdiction or venue
of these courts.
This Agreement is hereby executed by the parties effective
on the date indicated on the first page of this Agreement.
BURGER KING CORPORATION
By: /S/ Eugene Feola
Vice President
Attest [SPELLING IN SIGNATURE]
Assistant Secretary
WITNESSES: BUYER: NATIONAL RESTAURANT
ENTERPRISES, INC.
[SPELLINIG IN SIGNATURE]
By: [SPELLING IN SIGNATURE]
Title: President/Managing Owner
[SPELLING IN SIGNATURE]
Attest: [SPELLING IN SIGNATURE]
Title: Secretary
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RIDER A
POS PURCHASE AND LICENSE AGREEMENT
Agreement dated this 1st day of September, 1994, by and
between BURGER KING CORPORATION, a Florida corporation with its principal
offices located at 17777 Old Cutler Road, Miami, Florida 33157 (the "COMPANY")
and NATIONAL RESTAURANT ENTERPRISES, INC., a corporation with its principal
offices located at the address specified opposite its signature below (the
"BUYER"), for the purchase and license by BUYER of products under the terms
and conditions contained in this Agreement.
1. BACKGROUND.
The COMPANY and the BUYER are the parties to a August 31,
1994 Purchase and Sale Agreement (the "P&S") whereby the BUYER has agreed to
purchase certain Assets and execute franchise agreements (the "Franchise
Agreements") and lease/sublease agreements (the "Leases"), all in connection
with the BUYER's acquisition of Burger King (R) Restaurants #106, #128, #147,
#189, #207, #209, #213, #240, #244, #267, #305, #381, #540, #720, #1047,
#1099, #1103, #1116, #1118, #1143, #1170, #1176, #1216, #1217, #1249, #1254,
#1334, #1345, #1355, #1397, #1413, #1470, #1500, #1645, #1660, #1786, #1819,
#1825, #1866, #2016, #2120, #2130, #2196, #2672, #2727, #3021, #3273, #3507,
#3695, #3821, #4136, #4205, #4293, #4462, #4584, #4594, #4730, #5157, #5194,
#5330, #5735, #5983, #5984, #5986, #6185, #7045, #7403, #7545 (the
"Restaurants"). This Agreement is being executed by the COMPANY and the BUYER
in connection with the transfer of certain POS equipment (the "Equipment") and
the license of certain related software (the "Company Programs"), all of which
is to be used in connection with the operation of the Restaurants
(collectively, the "Company Products"). Accordingly, the COMPANY agrees to
sell and/or license to BUYER, and BUYER agrees to purchase and or license, the
products described below, subject to the terms and conditions contained in
this Agreement.
2. TERM.
The term of this Agreement shall commence on the date
specified above (the "Effective Date") and, unless renewed or sooner
terminated in accordance with Section 16 hereof, shall continue until such
time as the Franchise Agreements whereby the BUYER operates the Restaurants
(or any successor agreement) have expired.
3. PURCHASE AND SALE OBLIGATIONS.
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Subject to the terms and conditions of this Agreement, BUYER agrees
to purchase and/or license, and the COMPANY agrees to sell and/or license, the
Company Products specified on Schedule 1 (Equipment) and Schedule 2 (Company
Programs) to this Agreement.
4. PRICE.
The purchase price for the Company Products is included in the purchase
price paid pursuant to the P&S and there shall be no additional charge.
5. TAXES.
BUYER shall be responsible for the payment of all federal, state and
local taxes, levies and assessments, and BUYER shall be responsible for the
payment of all such taxes, levies and/or assessments imposed on Company
Products purchased and/or licensed by BUYER hereunder, excluding taxes based
upon the COMPANY's possession thereof prior to originally scheduled delivery
and taxes on the COMPANY's net income from the transaction. BUYER shall be
responsible for providing in a timely manner all documentation, in the nature
of exemption certificates or otherwise, necessary to allow the COMPANY to
refrain from collections, such as sales tax, which it would otherwise be
obligated to make.
6. LEASED EQUIPMENT
a. The Equipment listed on Schedule 1 is leased by the COMPANY pursuant
to a November 3, 1980 Master Lease, as amended, (the "Equipment Lease") with
Comdisco Inc. The COMPANY agrees that it shall exercise one of its purchase
options under the Equipment Lease and deliver title to the Equipment free and
clear of all claims, liabilities, liens and obligations on or before March 31,
1995 (the "Delivery Date"), without additional charge to the BUYER.
b. Between the date of Closing under the P&S and the Delivery Date (the
"License Period"), the BUYER shall have a license to use the Equipment without
additional charge. Title to the Equipment shall remain with the COMPANY during
the License Period, and the BUYER shall not encumber, assign or sublicense its
rights hereunder nor remove the Equipment from the Premises at which it is
currently located. BUYER shall not alter nor modify the Equipment and shall
operate and use the Leased Equipment with due care. During the License Period,
the risk of loss shall be borne by the BUYER, and the BUYER shall maintain at
its own expense casualty insurance covering the full replacement value of the
Equipment. During the License Period only, the COMPANY shall provide the BUYER
with ordinary maintenance services in the form of a maintenance contract with
the manufacturer or such other party as the COMPANY may in its sole discretion
select, and the BUYER shall pay a pro rata share of the charges
18
<PAGE>
billed to the COMPANY by such manufacturer or other party, as detailed
on Schedule 1a attached hereto and made a part hereof.
c. In the event that the BUYER defaults on any of its obligations under
the Franchise Agreements or the Leases, this license shall terminate
immediately without notice from the COMPANY, and the BUYER's rights to a
transfer of title to the Equipment from the COMPANY shall terminate
immediately without notice from the COMPANY.
7. TITLE.
Title to the Company Products (except in the case of title for Company
Programs licensed pursuant to Section 13 hereof) shall pass to BUYER on the
Delivery Date.
8. SHIPMENT AND DELIVERY.
(a) Delivery Location. The COMPANY shall deliver all Company Products to
BUYER at the Restaurants.
9. ACCEPTANCE. The Company Products delivered under this agreement shall
be deemed accepted to the BUYER on the date of Closing under the P&S.
10. DISCLAIMER OF WARRANTY. THE COMPANY PRODUCTS ARE BEING SOLD AND
LICENSED "AS IS" AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED,
ORAL OR WRITTEN. COMPANY DISCLAIMS ALL WARRANTIES, INCLUDING ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. COMPANY'S
LIABILITY FOR DAMAGES TO BUYER FOR ANY CAUSE WHATSOEVER, REGARDLESS OF THE
FORM OF ANY CLAIM OR ACTION, SHALL NOT EXCEED THE TOTAL PURCHASE PRICE PAID BY
COMPANY FOR THE COMPANY PRODUCTS. COMPANY SHALL IN NO EVENT BE LIABLE FOR ANY
DAMAGES RESULTING FROM LOSS OF DATA, PROFITS OR USE OF EQUIPMENT, OR FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OF OUT OF OR IN
CONNECTION WITH THE USE OR PERFORMANCE OF THE COMPANY PRODUCTS.
11. DOCUMENTATION.
The COMPANY agrees to provide BUYER with such product literature,
operations and maintenance manuals, other information as is mutually agreed,
to enable BUYER to properly maintain the Company Products, provided that in no
event shall the source code or source listings of Company Programs be required
to be disclosed or provided by the COMPANY to BUYER pursuant to this Section
11 or otherwise.
19
<PAGE>
12. PROPRIETARY INFORMATION.
No proprietary information disclosed by either party to the other in
connection with this Agreement shall be disclosed to any person or entity
other than the recipient party's employees and contractors directly involved
with the recipient party's use of such information who are bound by written
agreement to protect the confidentiality of such information, and such
information shall otherwise be protected by the recipient party from
disclosure to others with the same degree of care accorded to its own
proprietary information. All information disclosed by the COMPANY shall be
deemed proprietary. To be subject to this provision, information delivered by
the BUYER must be delivered in writing and designated as proprietary or, if
initially delivered orally, must be confirmed in writing as proprietary within
30 days after the oral disclosure, provided that the contents of the Company
Programs shall be deemed to constitute proprietary information. Information
will not be subject to this provision if it is or becomes a matter of public
knowledge without the fault of the recipient party, if it was a matter of
written record, in the recipient party's files prior to disclosure to it by
the other party, or if it was or is received by the recipient party from a
third person under circumstances permitting its unrestricted disclosure by the
recipient party. Upon termination of this Agreement, each party shall promptly
deliver to the other all proprietary information of the other party in the
possession or control of such party and all copies thereof.
13. SOFTWARE.
(a) Title. Notwithstanding the references in this Agreement to the
purchase of Company Products by BUYER, the parties intend and agree that the
Company Programs necessary for the operation of the Company Products are being
licensed or sublicensed by the COMPANY to BUYER on a non-exclusive basis, and
are not being sold by the COMPANY or purchased by BUYER. The COMPANY shall
retain title to the Company Programs.
(b) Limited Use License. The COMPANY hereby grants to BUYER a
nonexclusive, nontransferable, royalty-free license or sublicense to use the
Company Programs, in object code only, for internal purposes only in
connection with the operation of the Restaurants. BUYER shall not have the
right to disassemble, decompile or otherwise reverse engineer Company
Programs. The foregoing license shall terminate upon the termination or
expiration of this Agreement. BUYER may not assign, sublicense, or encumber
the Company Programs or BUYER's rights hereunder.
(c) Other Software. BUYER acknowledges that the COMPANY does not own the
additional software listed on Schedule 3 hereto and that no rights therein are
being transferred pursuant to this Agreement.
14. INDEMNITIES
20
<PAGE>
(a) By the COMPANY. Except as provided below, the COMPANY shall defend
and indemnify BUYER from and against any damages, liabilities, costs and
expenses (including reasonable attorneys' fees and court costs) arising out of
any claim that the Company Products purchased and/or licensed hereunder
infringe a valid United States patent or copyright or infringe a trade secret
of a third party, provided that (i) BUYER shall have promptly provided the
COMPANY written notice thereof and reasonable cooperation, information, and
assistance in connection therewith, and (ii) the COMPANY shall have sole
control and authority with respect to the defense, settlement, or compromise
thereof. Should any Company Products delivered hereunder become or, in the
COMPANY's opinion, be likely to become the subject of such a claim, the
COMPANY may, at its option, either procure the BUYER the right to continue
using such Company Products, or replace or modify such Company Products so
that they become non-infringing.
The COMPANY shall have no liability or obligation to BUYER hereunder with
respect to any patent, copyright or trade secret infringement or claim thereof
based upon (i) compliance with designs, plans or specifications of BUYER, (ii)
use of the Company Products by BUYER in combination with devices or products
not purchased and/or licensed hereunder where the Company Products would not
themselves be infringing, (iii) use of the Company Products by BUYER in an
application or environment for which such Company Products were not designed
or contemplated, (iv) modifications of the Company Products by BUYER, or (v)
any claims of infringement of a patent, copyright or trade secret in which
BUYER or any affiliate or customer of BUYER has an interest or license. The
COMPANY's liability hereunder shall not exceed the purchase and/or license
price paid by COMPANY for the Company Products found to be infringing. The
foregoing states the entire liability of the COMPANY with respect to
infringement of patents, copyrights and trade secrets by the Company Products
or any part thereof or by their operation.
(b) By BUYER. Except as provided below, BUYER shall defend and indemnify
the COMPANY from and against any damages. liabilities, costs and expenses
(including reasonable attorneys' fees and court costs) incurred by the COMPANY
as a result of or arising from BUYER's activities under this Agreement,
including, without limitation, product liability, customer warranty and
service claims, provided that (i) the COMPANY shall have promptly provided
BUYER written notice thereof and reasonable cooperation, information and
assistance in connection therewith, and (ii) BUYER shall have sole control and
authority with respect to the defense, settlement or compromise thereof.
15. PRODUCT TRADEMARKS AND COPYRIGHTS
(a) Trademark Usage. BUYER agrees that the Company Products purchased
hereunder shall not be resold or leased by BUYER under any COMPANY
21
<PAGE>
trademark, trade name or logo.
(b) Notices. BUYER shall not alter or remove any copyright, trade secret,
proprietary and/or other legal notices contained on or in copies of Company
Products. The existence of any such copyright notice shall not be construed as
an admission, or be deemed to create a presumption, that any publication of
such Company Products has occurred.
16. DEFAULT AND TERMINATION.
(a) Events of Default. The following shall constitute an "Event of
Default" by BUYER under this Agreement:
(i) If BUYER assigns this Agreement or any of BUYER's rights or
obligations hereunder (the word "assign" to include, without limiting the
generality thereof, a transfer of a majority interest in BUYER) without
the prior written consent of COMPANY; or
(ii) If BUYER shall neglect or fail to perform or observe any of its
obligations to the COMPANY under this Agreement, the Franchise
Agreements, the Leases, the P&S or any purchase money note delivered in
connection with the P&S; or
(iii) If there is (w) a dissolution, termination of existence,
liquidation, insolvency or business failure of the BUYER, or the
appointment of a custodian or receiver of any part of the BUYER's
property; (x) a composition or an assignment or trust mortgage for the
benefit of creditors by the BUYER; or (y) the commencement by or against
the BUYER of any proceeding under the United States Bankruptcy Code or
any other federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors
generally.
It shall constitute an "Event of Default" by the COMPANY under this Agreement
if the COMPANY shall neglect or fail to perform or observe any of its
obligations to BUYER hereunder and such failure is not cured within 30 days
after receipt of written notice thereof from BUYER.
(b) Termination. Upon the occurrence of an Event of Default by the BUYER,
this Agreement, including the software license set forth in Paragraph 13,
shall automatically terminate without notice from the COMPANY and, if still in
effect, the license of the Leased Equipment pursuant to paragraph 6 above
shall also terminate.
17. GENERAL PROVISIONS.
22
<PAGE>
(a) Waiver. The waiver by either party of a breach or a default of any
provision of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either party to exercise or avail itself
of any right, power or privilege that it has, or may have hereunder, operate
as a waiver of any right, power or privilege by such party.
(b) No Agency. Nothing contained in this Agreement shall be deemed to
constitute either party as the agent or representative of the other party, or
both parties as joint venturers or partners for any purpose. Neither party
shall be responsible for the acts or omissions of the other party, and neither
party will have authority to speak for, represent or obligate the other party
in any way without prior written authority from the other party.
(c) Survival of Obligations. All obligations of either party, including
obligations under Paragraph 14 hereof, which, by their nature, require
performance after the expiration or termination of this agreement, shall
survive the expiration or termination of this Agreement and continue to be
enforceable.
(d) Severability. In the event that any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, the validity
of the remaining provisions shall not be affected and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular provisions held to be unenforceable.
(e) Governing Law; Jurisdiction and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
The Paries acknowledge and agree that the United States District Court for the
Souther District of Florida, or if such court lacks jurisdiction, the 11th
Judicial Court (or its successor) in and for Dade County, Florida shall be the
venue and exclusive proper forum in which to adjudicate any case or
controversy arising, either directly or indirectly, under or in connection
with this Agreement, related documentation, or any other agreement between the
BUYER and the COMPANY, and the parties further agree that, in the event of
litigation arising out of or in connection with this Agreement, the related
documentation or any other agreement between the BUYER and the COMPANY in
these courts, they will not contest or challenge the jurisdiction or venue of
these courts.
(f) Notices. Any notice or communication from one party to the other
shall be in writing and either personally delivered or sent via certified
mail, postage prepaid and return receipt requested addressed, to such other
party at the address of such party specified in this Agreement or such other
address as either party may from time to time designate by notice hereunder.
23
<PAGE>
(g) Entire Agreement. This Agreement constitutes the entire agreement
between the parties. No waiver, consent modification or change of terms of
this Agreement shall bind either party unless in writing signed by both
parties, and then such waiver, consent, modification or change shall be
effective only in the specific instance and for the specific purpose given.
There are no understandings, agreements, representations or warranties,
expressed or implied, not specified herein regarding this Agreement or the
Company Products purchased and/or licensed hereunder. Only the terms and
conditions contained in this Agreement shall govern the transactions
contemplated hereunder, notwithstanding any additional, different or
conflicting terms which may be contained in any Order or other document
provided by one party to the other. Failure of the COMPANY to object to
provisions contained in any Order or other document provided by BUYER shall
not be construed as a waiver of the terms and conditions of this Agreement nor
an acceptance of any such provision. Retention by BUYER of Company Products
delivered hereunder shall be conclusively deemed to be a confirmation of the
terms and conditions hereof.
(h) Headings. Captions and headings contained in this Agreement have been
included for ease of reference and convenience and shall not be considered in
interpreting or construing this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed as a sealed
instrument as of the date specified above.
BURGER KING CORPORATION
By:
Vice President
Attest
Assistant Secretary
WITNESSES BUYER: NATIONAL RESTAURANT
ENTERPRISES, INC.
[SPELLING IN SIGNATURE]
By: [SPELLING IN SIGNATURE]
Title: Managing Owner
[SPELLING IN SIGNATURE]
Attest [SPELLING IN SIGNATURE]
Title: Secretary
Address:
24
PURCHASE AND SALE AGREEMENT
Among
NRE HOLDINGS, INC.
(as Purchaser)
And
JARO ENTERPRISES, INC.
(as Seller)
- ------------------------------------------------------------------------------
Dated as of September 1, 1994
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
PURCHASE AND SALE; CLOSING
1.1 Assets to Be Conveyed............................................. 2
1.2 Purchase Price for Assets......................................... 3
1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements..................................... 4
1.4 Assumption of Liabilities......................................... 5
1.5 Closing; Deliveries............................................... 7
1.6 Adjustments....................................................... 7
1.7 Petty Cash........................................................ 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Corporate Power.................................. 9
2.2 Governing Instruments............................................. 9
2.3 Due Authorization................................................. 10
2.4 No Violation...................................................... 10
2.5 Consents.......................................................... 10
2.6 Financial Statements.............................................. 11
2.7 Assets............................................................ 12
2.8 Inventory......................................................... 12
2.9 Real Properties; Real Property Leases............................. 13
2.10 Franchise Agreements............................................. 15
2.11 Employment Arrangements.......................................... 15
2.12 Contracts and Arrangements....................................... 16
2.13 ERISA............................................................ 17
2.14 Litigation, Compliance with Regulations and Consents............. 18
2.15 Environmental Matters............................................ 18
2.16 Insurance Policies............................................... 19
2.17 Tax Returns...................................................... 19
2.18 Adverse Restrictions............................................. 20
2.19 Brokers.......................................................... 20
2.20 Material Information............................................. 20
2.21 Continuing Representations....................................... 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power.................................. 21
3.2 Certificate of Incorporation and By-Laws.......................... 21
3.3 Due Authorization................................................. 21
-i-
<PAGE>
Section Page
- ------- ----
3.4 No Violation...................................................... 22
3.5 Consents.......................................................... 22
3.6 Brokers........................................................... 22
3.7 Material Information.............................................. 22
3.8 Continuing Representations........................................ 23
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior to the Closing Date........ 23
4.2 Operation of the Business of Seller............................... 24
4.3 Supplements to Disclosures........................................ 26
4.4 Computer Software................................................. 26
4.5 No Other Asset Sales.............................................. 26
4.6 Regulatory Filing and Consents.................................... 26
4.7 Management Subscription Agreement; Other Actions.................. 27
4.8 Announcements; Confidentiality.................................... 27
4.9 Limitation of Seller's Claims After Closing....................... 28
4.10 Employee Benefit Matters......................................... 29
4.11 Financial Statements and Reports................................. 29
4.12 Bulk Sales....................................................... 30
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Seller and Purchasers............ 30
5.2 Conditions to the Obligations of Seller........................... 31
5.3 Conditions to Obligations of Purchaser............................ 32
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations....................................... 35
6.2 Agreement to Indemnify............................................ 36
6.3 Conditions of Indemnification..................................... 37
6.4 Remedies Cumulative............................................... 38
6.5 Indemnity Enforcement............................................. 38
ARTICLE VII
TERMINATION
7.1 Termination....................................................... 39
7.2 Effect of Termination; Right to Proceed........................... 40
-ii-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances................................................ 41
8.2 Waiver and Amendment.............................................. 41
8.3 Remedies.......................................................... 41
8.4 Expenses.......................................................... 41
8.5 Entire Agreement.................................................. 42
8.6 Definitions....................................................... 42
8.7 Interpretation.................................................... 44
8.8 Notices........................................................... 44
8.9 Successors and Assigns............................................ 45
8.10 LITIGATION........................................................ 45
8.11 ARBITRATION....................................................... 45
8.12 Severability..................................................... 46
8.13 Purchaser's Designated Affiliate................................. 46
8.14 Counterparts..................................................... 46
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel
-iii-
<PAGE>
SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.3(c) Parking and Easements Agreements
1.5(d) Real Property Lease Adjustment Formulae
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
2.14(c) Required Licenses
2.15 Environmental Matters
4.12(b) Creditors Schedule re: Bulk Sales
-iv-
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of September
1, 1994 by and between NRE HOLDINGS, INC., a Delaware corporation with its
principal office at c/o Jordan Industries, Inc., Suite 550, Arborlake Center,
1751 Lake Cook Road, Deerfield, Illinois 60015 ("Purchaser") and JARO
ENTERPRISES, INC. (the "Seller"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, by subscription agreements dated as of September 1, 1994,
certain investors are receiving voting stock and in conjunction with this
Agreement, voting stock and other classes of securities in exchange for the
sale of assets under this Agreement;
WHEREAS, the subscription agreements contemplate certain proposed
transactions, including the transaction described in this Agreement, which are
to be consummated by the Purchaser promptly upon its capitalization;
WHEREAS, the Seller operates the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, the Seller is the owner or lessee of certain personal property
used or held for use in or in connection with the conduct of business at its
Restaurants and the Seller is the lessee of certain buildings, other real
property and land upon and in which its Restaurants are located (individually,
the "Real Property" and collectively, the "Real Properties"), the legal
description of which is set forth on Schedule B hereto;
WHEREAS, the Seller and Purchaser propose to exchange each of the Assets
(as hereinafter defined) of Seller for securities of the Seller and other
consideration specified below; and
WHEREAS, the Seller that occupies Real Property pursuant to a lease
agreement (each, a "Real Property Lease" and, collectively, the "Real Property
Leases") (each such Real Property Lease, together with all amendments,
supplements, and schedules thereto, being listed on Schedule C hereto)
proposes to assign to National Restaurant Enterprises, Inc., a Delaware
corporation and wholly-owned subsidiary of the Purchaser ("Enterprises"), and
Enterprises proposes to accept such
<PAGE>
assignment of, the Seller's leasehold interest with respect to the Real
Property on which its Restaurants are located (each a "Leased Real Property"
and, collectively, the "Leased Real Properties");
WHEREAS, Purchaser proposes to transfer the Restaurants and Assets
acquired pursuant to this Agreement to Enterprises and to cause Enterprises to
assume the Assumed Contracts (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions and
conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, the Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Seller's
shareholders to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to acquire and accept the
assignment, transfer, conveyance and delivery from the Seller at Closing of,
all of the following assets used or located in or held for use in connection
with the Restaurants operated by the Seller (collectively, the "Assets") free
and clear of all Liens:
(a) Restaurant Equipment. All of the machinery, equipment, furnishings,
supplies, uniforms, spare equipment parts and all other personal property
(other than Inventory, as hereinafter defined) owned by the Seller and used or
held for use in, or in connection with, the operation of its Restaurants,
including but not limited to the assets set forth in Schedule 1.1(a) annexed
hereto (collectively, "Restaurant Equipment");
(b) Leasehold Improvements. All trade fixtures, trade equipment or other
personal property placed in the premises by the Seller or any of the foregoing
purchased by the Seller for its Restaurants, excluding any HVAC system located
at the Restaurants and any built-in freezer located at the Restaurants
("Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise Agreement for its
Restaurants, as more fully set forth in
2
<PAGE>
Schedule 1.1(c) annexed hereto ("Franchise Agreements", all subject to the
approval, as necessary, of the Burger King Corporation;
(d) Inventories. All of the food, related paper products and promotional
items owned by the Seller or otherwise used or held for use in or in
connection with the business being conducted at its Restaurants (collectively,
"Inventory"), which, if so directed by Purchaser, Seller shall sell directly
to Enterprises;
(e) Leased Assets. All of the right, title and interest of the Seller in
any item of personal property which is not owned by it but is leased by it or
otherwise is used or held for use, in or in connection with the business being
conducted at its Restaurants, including but not limited to, the assets set
forth on Schedule 1.1(e) annexed hereto (collectively the "Leased Assets");
(f) Goodwill and Other Intangible Assets. All goodwill, going concern
value, contract rights, customer relationships, and other general intangibles
held or used by Seller in connection with its business being operated at the
Restaurant (collectively the "Intangible Assets"); and
(g) Miscellaneous Assets. All of the right, title and interest of the
Seller in any other asset or property owned, leased, subleased, used or held
for use in, or in connection with the business being operated at its
Restaurant (collectively, the "Miscellaneous Assets") and excluding, accounts
receivable, cash, cash equivalents or securities held by Seller.
SECTION 1.2 Purchase Price for Assets.
(a) Seller shall exchange the Restaurant Equipment, Leasehold
Improvements and Miscellaneous Assets for the following consideration to be
delivered by the Purchaser:
(i) $51,000 in cash;
(ii) 90.00 shares of the Purchaser's Class A2 Preferred Stock, $.01
par value per share ("Senior Preferred");
(iii) 30.00 shares of the Purchaser's Class B Preferred Stock, $.01
par value per share (the "Junior Preferred");
(b) Seller shall exchange the Leased Assets, Franchise Agreements and
Intangible Assets for the following consideration to be delivered by the
Purchaser:
3
<PAGE>
(i) $40,000 in cash;
(ii) $1,224,000 in principal amount of Purchaser's 12.75% Notes due
2004 ("Notes");
(iii) 44.3669 shares of the Purchaser's Class D Common Stock, $.01
par value per share; and
(c) Seller shall exchange the Inventory for an amount equal to the cost
therefor as charged to the Seller by its unaffiliated supplier or vendor. At
the Closing, Purchaser shall pay to Seller $6000 per Restaurant for the
Inventory of each Restaurant, that sum being Seller's good faith estimate of
the cost of such Inventory (the "Estimated Inventory Price"). The precise
amount of the cost of the Inventory of the Seller shall be determined by
physical inventories to be taken on the Closing Date in its Restaurants and in
any other location where inventory may be located. Seller and Purchaser shall
each have the right to have at least one of its representatives present at the
taking of such inventories. The representatives shall submit a written report
of the results of such inventories promptly after Closing to both the Seller
and Purchaser. Promptly after receiving such report, the Seller shall then
price the inventories shown on such report by multiplying the physical items
by their cost, determined as aforesaid, and the Seller shall submit such
priced inventory report (the "Priced Inventory Report") to Purchaser. If
Purchaser and the Seller are unable to agree upon the purchase price of the
Inventory within 10 days after the Seller and Purchaser have received the
Priced Inventory Report, such purchase price shall be determined by Deloitte &
Touche, whose determination shall be final and binding upon the Seller and
Purchaser. Within 30 days after the final determination of the purchase price
for the Inventory: (A) if it exceeds the Estimated Inventory Price, Purchaser
shall pay the amount of such excess, by check, to the Seller; or (B) if it is
less than the Estimated Inventory Price, Seller shall pay the amount by check
to the Purchaser.
(d) The Seller and Purchaser shall prepare and file their tax returns and
information statements in a manner consistent with the agreement set forth
above.
SECTION 1.3 Real Properties; Assignments of Leases; Easements and Parking
Agreements. Subject to the terms, provisions and conditions contained in this
Agreement and on the basis of the representations and warranties hereinafter
set forth, at the Closing, the Seller shall assign to Enterprises all of its
leasehold interest in the Leased Real Properties and shall assign, sublease or
otherwise transfer to Enterprises all of its right, title and interest in and
to all parking and other access
4
<PAGE>
agreements or arrangements relating to the Real Properties, as follows:
(a) Assignment of Real Property Leases. At Closing, the Seller shall
assign to Enterprises all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment
and Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A.
The Lease Assignment shall be executed and delivered at Closing by the Seller
and Enterprises.
(b) Lease Assignment Consent. At Closing, the Seller shall deliver to
Enterprises a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the
last sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c) annexed
hereto, with respect to the Seller, sets forth all written or oral parking
leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements"), except for
recorded instruments, pursuant to which the Seller is granted, for use in
connection with its Restaurant, parking privileges or rights, current or
prospective, and/or rights of access of any kind or nature in and to the
applicable Real Property. At Closing the Seller shall deliver to Purchaser
such documentation in form and substance reasonably satisfactory to Purchaser
and its counsel which effectively assigns or transfers the Seller's rights
under both recorded and unrecorded Easements to Enterprises (hereinafter
individually referred to as an "Easement Assignment", and, collectively, as
the "Easement Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby agree and
acknowledge that the Seller is not selling, transferring, assigning,
delivering or otherwise conveying, and Purchaser is not purchasing, receiving,
acquiring or otherwise assuming, any liabilities of the Seller, or any of its
respective Affiliates except as specifically set forth in Sections 1.1,
1.2(a)(vi) and 1.4(b) hereof. Purchaser shall neither be liable for any
liability or obligation of the Seller, or any of its respective Affiliates nor
shall it be required to indemnify the Seller, or any of its respective
Affiliates against any liability or obligation other than those so
specifically assumed or indemnified, as the case may be.
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Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify the Seller, or any of its respective
Affiliates against any liability, obligation, duty or responsibility of the
Seller, or any of its respective Affiliates:
(i) arising from, or out of, the ownership or operations or use of,
or incurred in connection with, or incurred as a result of any claim made
against the Seller, or any of its respective Affiliates in connection
with, any Restaurant, Asset, Real Property, Real Property Lease or
Assumed Contract (as hereinafter defined) on or prior to, or relating to
any time period prior to 6:00 A.M. on the Closing Date;
(ii) arising from or by reason of the transactions contemplated by
this Agreement including, but not limited to, Federal, state or local
income taxes, transfer taxes, sales taxes and other taxes, if any,
arising from or by reason of the receipt of the consideration for the
Assets to be transferred pursuant hereto except as provided in Section
1.6(b);
(iii) with respect to any wages, vacation, compensation, severance
or sick pay or any rights under any stock option, bonus or other
incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or similar
arrangement to which the Seller is a party or for which the Seller is
responsible;
(v) with respect to any "employee benefit plan" as defined in
Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including multi-employer plans as defined in Section
3(37) of ERISA whether arising before, on or after the Closing Date; or
(vi) under any Regulations (as hereinafter defined) relating to
public health and safety and pollution or protection of the environment,
including, without limitation, those relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous
or toxic materials or wastes into ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling
of pollutants, contaminants or hazardous or toxic materials or wastes or
any materials defined or categorized by any of the above as "Hazardous
Materials", "Hazardous Substances", or
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similar or related designations (collectively referred to herein as
"Environmental Laws"); or
(vii) with respect to any causes of action, judgements, claims or
demands related to any occurrence, action or omission by the Seller,
whether through negligence or otherwise, occurring before the Closing.
(b) Assumption of Assumed Contracts. The Seller shall assign to, and
Enterprises shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of the Seller
attributable to the period after 6:00 a.m. the Closing Date, under the
Franchise Agreements, Real Property Leases, Easements, Leased Assets and the
Other Contracts (as hereinafter defined) (collectively, the "Assumed
Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 190 S.
LaSalle Street, Chicago, Illinois 60603- 3441 (or such other location as shall
be agreed upon by the parties) on September 1, 1994, provided, however, that
if, through no fault of the parties hereto, all of the conditions to the
parties' obligations to close hereunder are not satisfied or waived on the
date so designated, the Closing shall be adjourned to a subsequent mutually
agreeable date not later than September 7, 1994, unless further extended by
mutual agreement by the parties. The "Closing Date" is the date Closing
actually takes place.
(b) Delivery of Documents. At the Closing, Seller and Purchaser shall
deliver to each other the respective documents and other items set forth in
Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to (i)
obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Seller or by
the Seller to Purchaser by reason of such adjustments shall be made at the
Closing (by adjustment of the Purchase Price, if practicable) or as soon as
reasonably practicable thereafter.
(b) The parties shall share equally in the payment of all sales taxes,
and transfer taxes, if any, applicable to its transaction at the Closing.
Purchaser and Seller shall share equally all franchise assignment fees to
Burger King Corporation ("Burger King") in connection with the assignment of
the Franchise Agreements to Purchaser.
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(c) The parties shall share equally the cost of Purchaser's obtaining
prior to Closing, if necessary in Purchaser's reasonable judgment, a "Phase 1"
and, if applicable, a "Phase 2" environmental report. Any such reports or
studies prepared or obtained by the Seller prior to negotiations between
Purchaser and the Seller shall be borne by the Seller. At Closing, if
necessary, the parties shall adjust the cost of obtaining said environmental
reports.
(d) All "minimum" or "fixed rentals" and any other monetary obligations
accruing under the Real Property Leases shall be adjusted for the month in
which the Closing occurs. In the event the period used in computing and/or
adjusting percentage rental (hereinafter referred to as the "Adjustment Lease
Year") under any of the Real Property Leases commences before the Closing Date
and ends after the Closing Date, such percentage rental shall be adjusted at
the end of the Adjustment Lease Year for such Real Property Leases so affected
as follows:
(i) Seller shall be required to pay to Purchaser, within 30 days
after the expiration of the Adjustment Lease Year, an amount equal to the
lesser of (1) the amount of percentage rental due for such Adjustment
Lease Year or (2) the "Percentage Rent Contribution" determined by the
following formula:
(A - B) x C x D = Percentage Rent Contribution
---------------
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used
in determining such percentage rental
during such Adjustment Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.6(d);
C = Number of days during the Adjustment Lease
Year prior to, but not including, the
Closing Date; and
D = Percentage rent factor for such Real
Property Lease as indicated in Schedule 1.6(d);
provided, however, that, in the event the above formula yields a negative
amount as the Percentage Rent Contribution, the Percentage Rent
Contribution shall be deemed equal to zero; and
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(ii) Purchaser shall be required to pay directly to the lessor
under the Real Property Lease the percentage rental, if any, due for
the Adjustment Lease Year.
Section 1.7 Petty Cash. Upon the Closing, the Seller shall leave
$1,000.00 in cash at each Restaurant (the "Store Bank"). Purchaser agrees to
purchase each Store Bank separately from the Purchase Price at Closing on a
cash for cash basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with Purchaser
as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is a corporation
duly organized, validly existing and in good standing under the Regulations of
its jurisdiction of incorporation (as set forth on Schedule A hereto) and is
duly qualified and licensed to do business in such jurisdiction which is the
only jurisdiction wherein the character of the Real Properties and other
Assets owned or leased or the nature of the business of the Seller makes such
licensing or qualification to do business necessary. The Seller has full power
and authority (corporate or otherwise) to own its assets, to own or hold under
lease the real property it presently owns or holds under lease including,
without limitation, the Real Properties, and to carry on the business in which
it is engaged at all locations at which it is presently located including,
without limitation, operation of the Restaurants at the Real Properties and to
execute and deliver this Agreement and the other documents and instruments to
be executed and delivered by the Seller, as the case may be, pursuant hereto
or in connection herewith (this Agreement and all other agreements, documents
and instruments to be entered into pursuant to this Agreement or in connection
herewith including all exhibits and schedules annexed hereto and thereto are
collectively referred to herein as the "Transaction Documents") and to
consummate the transactions contemplated hereby and thereby.
SECTION 2.2 Governing Instruments. The copies of the Certificate of
Incorporation and By-Laws of the Seller, and all amendments thereto to date,
as certified by the Secretary of Seller have heretofore been delivered to
Purchaser by Seller, and are complete and correct as of the Closing Date. The
Seller is not in default in the performance, observance or fulfillment of any
of the provisions, terms or conditions of its Certificate of Incorporation or
By-Laws.
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SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other
Transaction Documents by the Seller have been duly obtained. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors and stockholders of the Seller, and
no other acts or proceedings on the part of the Seller or the stockholders of
the Seller are necessary to authorize the execution and delivery of this
Agreement or any of the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby. This Agreement and each of the
other Transaction Documents, upon execution and delivery by the Seller, will
be the legal, valid and binding obligation of the Seller enforceable against
it in accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency and other laws affecting creditors' rights
(collectively, "Bankruptcy Laws") and subject to general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and
thereby, do not, and at Closing will not: (a) violate its Certificate of
Incorporation or By-Laws, as amended; (b) violate or conflict with or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under any agreement, indenture, instrument
or understanding to which the Seller is a party or by which it is bound; (c)
violate any judgment, decree, law, rule or regulation to which the Seller is a
party or by which it is bound; (d) result in the creation of, or give any
party the right to create, any encumbrance upon the property and assets of the
Seller; (e) terminate or modify, or give any third party the right to
terminate or modify, the provisions or terms of any agreement or commitment to
which the Seller is a party or by which the Seller is subject or bound; or (f)
result in any suspension, revocation, impairment, forfeiture or non-renewal of
any permit, license, qualification, authorization or approval applicable to
the Seller.
SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals or other authorizations which the Seller is required to obtain from,
and any filing which the Seller is required to make with, any governmental
authority or agency or any other Person including, but not limited to,
consents required from Burger King (the "Burger King Consents") in connection
with the execution, delivery and consummation of this Agreement and the other
Transaction Documents and the consummation of the
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transactions contemplated hereby or thereby (collectively, the "Required
Consents").
SECTION 2.6 Financial Statements. (a) The Seller has delivered to
Purchaser a balance sheet of the Business as at December 31, 1993 and December
31, 1992 and the related results of operations for the 12 months ended
December 31, 1993 and 1992, respectively. The Seller has delivered to
Purchaser unaudited monthly financial statements for the period from January
1, 1994 through July 31, 1994.
(b) The financial statements of the Seller referred to in Section 2.6(a)
(collectively, the "Financial Statements") are true, correct and complete, are
based on Seller's books and records, have been prepared in accordance with
generally accepted accounting principles consistently applied and accurately
present the assets, liabilities, financial positions and results of operations
of the Seller as at the dates thereof and for the periods covered thereby;
provided, however, that (i) monthly financial statements shall not be required
to reflect standard year-end adjustments and reserves, and (ii) monthly
financial statements may be prepared other than in accordance with generally
accepted accounting principles to the extent that such financial statements
shall not be required to reflect standard year-end adjustments, or contingent
liabilities. The Financial Statements of the Seller reflect or provide for all
material claims against, and all debts and liabilities (of any kind or nature)
of, such Seller, fixed or contingent, as at the dates thereof and for the
periods covered thereby, and the Seller does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever,
not fully reflected or reserved against in such Financial Statements. There
has not been any Material Adverse Change between the date of the Financial
Statements and the date of this Agreement and, except as set forth in Schedule
2.6(b), no fact or condition exists or is contemplated or threatened which
might cause any such Material Adverse Change at any time in the future.
Without limiting the foregoing, since December 31, 1993:
(i) None of the Restaurants, Assets, Real Properties, Real Property
Leases, Assumed Contracts, financial or other condition, or results of
operations of the Seller, has been adversely affected in any material way
as a result of any fire, explosion, accident, casualty, labor
disturbance, requisition or taking of property by any governmental body
or agency, flood, embargo, or act of God or public enemy, or cessation,
interruption or diminution of operations, or any other event, whether or
not covered by insurance;
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(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under Contracts
entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii) annexed hereto,
the Seller has not permitted nor allowed any of its Real Property Leases
or Assets, of or used by it to be mortgaged, pledged or subjected to any
Lien;
(iv) Except for transactions among Affiliates, the Seller has not
paid, loaned or advanced any amounts to, or sold, transferred, leased,
subleased or licensed any Real Properties or Assets to, or entered into
any agreement, or arrangements with, any Affiliate or associate (and any
of such transactions shall have been terminated on or before the Closing
Date); and
(v) The Seller has not agreed, whether in writing or otherwise, to
do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to Purchaser
at Closing, good and marketable title to all of its Assets and Assumed
Contracts free and clear of all Liens. The Assets of the Seller include all of
the operating assets used or held for use in or in connection with the
business being conducted by the Seller at the Restaurants. All the Assets are,
and on the Closing Date will be, in good operating condition and repair,
capable of performing the functions for which such items are currently and
normally used, normal wear and tear excepted. All the Assets conform, and on
the Closing Date will conform, to the standards of Burger King under the terms
and conditions set forth in the applicable Franchise Agreements. On the
Closing Date, each Restaurant, together with its related Assets and Real
Property, taken as a whole, will constitute a fully operable "turn-key" Burger
King restaurant sufficient to permit Purchaser to immediately operate the
business at such Restaurant as presently being conducted therein.
(b) The Seller will transfer and/or assign to Purchaser at Closing all
warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller consists, and at
Closing will consist, of items of quality and quantity usable or salable in
the ordinary course of business. The present quality and quantities of all
Inventory of the Seller are, and the qualities and quantities of all Inventory
outstanding at the Closing will be, reasonable in accordance with the current
specifications of Burger King. At Closing, the Inventory at each Restaurant
shall be sufficient for the
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operation of such Restaurant for at least 48 hours after the Closing Date, and
in no event will there be excess inventory in relation to normal usage.
SECTION 2.9 Real Properties; Real Property Leases. (a) With respect to
Real Properties that are owned by Persons not affiliated with the Seller, to
the knowledge of the Seller, each of such owners has good record and
marketable title in fee simple to such real property.
(b) The Seller has delivered to Purchaser a true and complete copy of the
Real Property Leases applicable to it, together with all amendments thereto
and all such Real Property Leases with such amendments or supplements being
listed and set forth on Schedule C. The Seller does not have knowledge or
information of any facts, circumstances or conditions which do or would in any
way adversely affect the Leased Real Property or the operation thereof or the
business thereon as presently conducted or as intended to be conducted. At or
prior to Closing, the Seller shall cause to be discharged of record all Liens
against the Seller or such Seller's interest affecting its Leased Real
Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(b), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(c) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real Properties
by Seller are in substantial compliance with all Regulations. Set forth on
Schedule 2.9(c) annexed hereto is a true and complete schedule of each
certificate of occupancy for each Restaurant located on the Real Properties,
copies of which certificates of occupancy and all amendments thereto to date
have heretofore been delivered to Purchaser, and which copies are complete and
correct as of the date of this Agreement and will be complete and correct as
of the Closing Date. The Real Properties and the Restaurants located thereon
are in a state of good maintenance and repair and are in good operating
condition, normal wear and tear excepted, and (i) there are no physical or
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mechanical defects to the Seller's knowledge in any of the Real Properties or
Restaurants, including, without limitation, the structural portions of the
Real Properties and Restaurants and the plumbing, heating, air conditioning,
electrical, mechanical, life safety and other systems therein and all such
systems are in good operating condition and repair (normal wear and tear
excepted); and (ii) there are no ongoing repairs to the Real Properties or
Restaurants located thereon being made by or on behalf of any Sellar or being
made by or on behalf of any landlord. All necessary occupancy and other
certificates and Permits, municipal and otherwise, for the lawful use and
occupancy of the Real Properties for the purposes for which they are intended
and to which they are presently devoted including, without limitation, for the
operation of a Burger King restaurant thereon, have been issued and remain
valid. There are no pending or threatened actions or proceedings that might
prohibit, restrict or impair such use and occupancy or result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such
certificates or Permits. All notes or notices of violation of any Regulations,
against or affecting any such Real Properties have been complied with. There
are no outstanding correcting work orders issued to the Seller from any
Federal, State, county, municipal or local government, or the owner of the
Real Properties or any insurance company with respect to any such Real
Properties.
(d) There are no condemnation or eminent domain proceedings of any kind
whatsoever or proceedings of any other kind whatsoever for the taking of the
whole or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of the Seller, threatened against the Real
Properties.
(e) The Real Properties and all improvements thereon represent all of the
locations at which the Seller conducts Business and are, now, and at Closing
will be, the only locations where any of the Assets are or will be located.
(f) All water, sewer, gas, electric, telephone and drainage facilities,
and all other utilities required by any Law or by the normal use and operation
of the Real Properties and the Restaurants located thereon are installed to
the property lines of the respective Real Properties, to the knowledge of the
Seller are connected pursuant to valid Permits, are fully operable and are
adequate to service the Real Properties and the Restaurants located thereon
and to permit full compliance with all Regulations and normal utilization of
the Real Properties and the Restaurants located thereon.
(g) To Seller's knowledge, all licenses, Permits, certificates,
including, without limitation, proof of dedication, required from all
Authorities having jurisdiction over the Real
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Properties, and from any other Persons, for the normal use and operation of
the Real Properties and the Restaurants located thereon and to ensure
vehicular and pedestrian ingress to and egress from the Real Properties and
the Restaurants located thereon have been obtained. To Seller's knowledge the
Easements are valid and binding, in full force and effect and enforceable in
accordance with their respective terms. There are no defaults or offsets which
the owner of such recorded Easements has against the enforcement of such
Easements and neither the Seller nor the owners of the Easements are in
default under such Easements, nor have any events under such Easements
occurred which with notice or the passage of time or both, would constitute a
default under such Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to Purchaser
a true, complete and correct copy of the Franchise Agreement relating to its
Restaurant, including any and all amendments thereto. The Seller and its
Stockholders owns, and at Closing will transfer to Purchaser, its respective
right, title and interest in its Franchise Agreement, free and clear of all
Liens. Subject to the written consent of Burger King, in form satisfactory to
Purchaser and its counsel, which the Seller shall obtain and deliver to
Purchaser and its counsel at or prior to the Closing, the Seller has the
absolute right and authority to sell, assign, transfer and convey its
Franchise Agreement and all other assets being sold or otherwise conveyed to
Purchaser in connection with the Restaurant which it operates in accordance
with the terms and conditions hereof, and there have not been and, except as
set forth on Schedule 2.10, currently there are no claims and the Seller is
not aware of any threatened claims with Burger King pertaining to the
Franchise Agreements. On the Closing Date, neither Burger King nor the Seller
shall be in default under any of the Franchise Agreements and the Franchise
Agreements shall be in full force and effect, the Seller shall not have
received any notice of violation with respect to the Franchise Agreements, and
the Seller does not know or has no reason to know of any event which would
give rise to a violation or default under the Franchise Agreements.
SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor
agreement, any agreement containing severance or termination pay arrangements,
deferred compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other
employee or fringe benefit plan, including vacation plans or programs and sick
leave plans or programs. Except as set forth on Schedule
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2.11(a) hereof, within the last five (5) years the Seller has not experienced
any labor disputes, union organization attempts or any work stoppage due to
labor disagreements. Except as set forth on Schedule 2.11(a) hereof, (i) to
the best knowledge of the Seller, the Seller is in substantial compliance with
all applicable Regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours, and is not engaged in
any unfair labor practice; (ii) there is no unfair labor practice, charge or
complaint against the Seller pending or threatened before the National Labor
Relations Board; (iii) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against or
affecting the Seller; (iv) no question concerning representation has been
raised or is threatened respecting the employees of the Seller; and (v) no
grievance which might have an adverse effect on the Seller or the conduct of
its business nor any arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claims therefor exist.
Schedule 2.11(b) sets forth a true and complete list of the names of all
persons employed by the Seller at the Restaurants as of the date hereof, and
the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), the Seller does not have any Contract
relating to the Restaurants, Assets or Real Properties, including, without
limiting the generality of the foregoing, any (i) Contract for the purchase or
sale of Inventory; (ii) Contract for the purchase or sale of supplies,
services or other items; (iii) Contract for the purchase, sale or lease of any
Restaurant Equipment; (iv) Franchise Agreement or license agreement; and (v)
employment or consulting agreement or pension, disability, profit sharing,
bonus, incentive, insurance, retirement or other employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and correct
copy of each Other Contract applicable to it, together with all amendments (if
oral, a written description of the terms thereof) thereto.
(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of
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the scheduled term thereof or has knowledge of the intent of a party to any
such Other Contract to do the same, nor has any event occurred which, with
notice or the passage of time or both, would constitute a default under any
such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither the
Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14)
and (b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986,
as amended (the "Code")) (collectively, the "Group") presently has or at any
time during the five (5) years before the date of this Agreement had an
obligation to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee
welfare benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA
Plans"). Each ERISA Plan that is an employee pension plan complies in form and
operation with all applicable requirements of section 401(a) and 501(a) of the
Code and each ERISA Plan that is a group health plan (as defined in ERISA
section 607(1) or Code section 4980B(g)(B) has been operated in compliance
with applicable law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not
constitute an "employee benefit plan" as defined in ERISA section 3(3)
(collectively, "Fringe Benefit Plans") currently maintained by the Seller or
to which the Seller has an obligation to contribute. Seller has delivered or
made available to Purchaser true and complete copies of all documents, as they
may have been amended to the date hereof, embodying or relating to the ERISA
Plans or Fringe Benefits Plans.
(c) There are no actions, audits, suits, or claims pending (other than
routine claims for benefits) or, to the knowledge of the Seller, threatened,
against any ERISA Plan or Fringe Benefit Plan or any fiduciary of any such
Plan or against the assets of any such Plan.
(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether
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insured or self-insured) or other employee welfare benefit plan maintained by
the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents. (a)
Except as set forth on Schedule 2.14(a) and except for workers' compensation
or similar claims, there are no claims now pending, or to the best knowledge
of the Seller, in prospect or threatened against, the Seller or any of its
respective officers, directors or partners, at law or in equity including,
without limitation, (i) any voluntary or involuntary proceedings under
Bankruptcy Laws, or (ii) any Action before or by any governmental
instrumentality (domestic or foreign) or arbitrator which involves a claim or
demand for any judgment, decree, liability, action or injunction enjoining an
action, whether or not fully covered by insurance, in connection with the
Assets, Real Property Leases, Assumed Contracts, Real Properties, Restaurants,
business, affairs, properties or assets of the Seller.
(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in substantial compliance
in all respects with all Regulations applicable to its Business, affairs,
properties, or assets. Neither the Seller, nor any officer, director or
authorized agent of the Seller is in default with respect to, and has not been
charged or to its knowledge threatened with, nor is under investigation with
respect to, any violation of any Regulations relating to any aspect of its
Business, affairs, properties or assets including, but not limited to, the
Restaurants, Assets, Real Property Leases, Assumed Contracts, and the Real
Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
Permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the
Assets, Real Property Leases or the Real Properties ("Required Licenses").
Except as set forth in Schedule 2.14(c), the Seller has obtained each of the
Required Licenses and each such Required License, is and on the Closing Date
will be, validly issued and in full force and effect and there are not now
and, at Closing shall not be any claims pending, and to the Seller's
knowledge, any claims in prospect or threatened, challenging the Required
Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in Schedule 2.15
annexed hereto: (i) the Seller has obtained all Licenses which are required
under any Environmental Laws; (ii) to Seller's knowledge, the Seller is in
substantial compliance with all terms and conditions of the Required Licenses
and is also in substantial compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
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schedules and timetables contained in any Environmental Laws or code, plan,
order, decree or judgment relating to public health and safety and pollution
or protection of the environment or any notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) there are no claims,
pending or to Seller's knowledge threatened, against the Seller relating in
any way to any Environmental Law or any Regulation, notice or demand letter
issued, entered, promulgated or approved thereunder; and (iv) the Seller does
not know or have any reason to know of, nor has the Seller received any notice
of any facts, events or conditions which would interfere with or prevent
continued compliance with, or give rise to any common law or legal liability
under any Environmental Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily
insured against by reputable companies in the same or similar business, of
such types and in such amounts (with such deductible amounts) as is customary
for such companies under similar circumstances. All of the applicable
insurance policies are valid and enforceable and in full force and effect and
will be continued in full force and effect up to and including the Closing
Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income tax
returns and all state and local income, franchise and sales tax returns and
all and any other tax return which was required to be filed as of the date of
this Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. The
provision for Taxes shown on the Financial Statements of the Seller was
sufficient to satisfy all taxes due and all assessments received by the Seller
(and all other entities included within the Financial Statements) for all
periods ended on or prior to the date of such Financial Statements. As of the
date hereof, no Taxes are past due, and no Taxes are unpaid and all current
payroll taxes have been paid. The Seller is not aware of any basis upon which
any assessment of additional Taxes could be made, and the Seller has not
signed any extension agreement with the Internal Revenue Service or any other
governmental agency or given waiver of a statute of limitations
with respect to the payment of Taxes for periods for which the statute of
limitations has not expired. The Seller shall be liable for all tax
liabilities in connection with the operation of the Restaurants, the Assets,
the Real Properties, the Real Property Leases, the Easements and Assumed
Contracts, which cover periods prior to the Closing Date. The Seller shall be
liable for half of all transfer, sales and similar tax liabilities, if any, in
connection with the leasing of the Real Properties under the Real Property
Leases, the assignment of the Real Property
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Leases and the Assumed Contracts, and the transfer of any rights under the
Easements. All taxes which the Seller is required by law to withhold or
collect have been duly withheld or collected and to the extent required have
been paid over to the proper governmental authorities on a timely basis or
reflected as an obligation on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, By-Law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or Assumed Contracts. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereunder and thereby will not
result in the violation or breach of, default or the creation of any Lien
under any of the aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a part
in bringing about any of the transactions contemplated by this Agreement or
the other Transaction Documents (including, but not limited to, the leasing of
the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the
transactions contemplated by this Agreement or the other Transaction
Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be
stated herein or therein or which is necessary to make the statements herein
or therein not misleading. There is no fact which the Seller has not disclosed
to Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Seller that:
SECTION 3.1 Organization and Corporate Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and licensed to do business wherein
the character of the Real Properties and other Assets to be purchased makes
such licensing or qualification to do business necessary. Purchaser has full
power and authority (corporate and other) to own or hold under lease its
properties and assets, and execute and deliver this Agreement and the other
Transaction Documents to be executed and delivered by Purchaser pursuant
hereto or in connection herewith and to consummate the transactions
contemplated hereby and thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Seller by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance
or fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The execution
and delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Purchaser and no other corporate acts
or proceedings on the part of Purchaser or its stockholders are necessary to
authorize the execution and delivery of this Agreement or any of the other
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby. This Agreement and each of the other Transaction Documents,
upon execution and delivery by Purchaser, will be the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforcement thereof may be limited by Bankruptcy Laws and
subject to the general principles of equity affecting the right to specific
performance and injunctive relief.
SECTION 3.4 No Violation. The execution, delivery and performance of this
Agreement and the other Transaction Documents
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by Purchaser and the consummation by Purchaser of the transactions contemplated
hereby and thereby do not and at Closing will not (a) violate its Certificate of
Incorporation or By-Laws; (b) violate or conflict with or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under any agreement, indenture, instrument or understanding to which
Purchaser is a party or by which it is bound; (c) violate any judgement decree,
law, rule, or regulation to which Purchaser is a party or by which it is bound;
(d) result in the creation of, or give any party the right to create any
encumbrance upon the property or assets of Purchaser; (e) terminate or modify,
or give any third party the right to terminate or modify, the provisions or
terms of any agreement or commitment to which Purchaser is a party or by which
Purchaser is subject or bound; or (f) result in any suspension, revocation,
impairment, forfeiture or non-renewal of any license, qualification,
authorization or approval applicable to Purchaser.
SECTION 3.5 Consents. Except for the Burger King Consents and the consent
of The First National Bank of Boston (Purchaser's senior lender), Purchaser is
not required to obtain any consents, approvals or other authorizations or to
make any filing with any Authority or any other Person in connection with the
execution, delivery and consummation of this Agreement and other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby.
SECTION 3.6 Brokers. No broker, finder or selling agent has had a part in
bringing about any of the transactions contemplated by this Agreement or the
other Transaction Documents (including, but not limited to, the leasing of the
Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the
transactions contemplated by this Agreement or the other Transaction
Documents.
SECTION 3.7 Material Information. This Agreement, the other Transaction
Documents and any exhibit, schedule, certificate or other information
representation, warranty or other document furnished or to be furnished by
Purchaser to Seller do not (a) contain, nor will the same contain, any untrue
statement of a material fact; or (b) omit, nor will the same omit or fail to
state, a material fact required to be stated herein or therein or which is
necessary to make the statements herein or therein not misleading. There is no
fact which the Purchaser has not disclosed to Seller and its counsel in
writing and of which the Purchaser is aware which materially and adversely
affects or could adversely affect the Business prospects, financial condition,
operations, property or affairs of the Restaurants.
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SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as
of the Closing Date with the same force and effect as if made on and as of
that date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing Date.
(a) Between the date of this Agreement and the Closing Date, the Seller shall
give Purchaser, its directors, officers, employees, accountants, counsel and
other representatives and agents ("Representatives") reasonable access to the
premises, properties, books, financial statements, Contracts, records of the
Seller, relating to the Business, the Restaurants, the Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts, and
shall furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Seller as
Purchaser shall from time to time reasonably request for such purposes as
Purchaser shall require. Any such investigation or examination shall be
conducted as reasonable times and upon reasonable notice to the Seller.
(b) Without in any way limiting the provisions of Section 4.1(a) hereof,
Purchaser shall have the right between the date of this Agreement and the
Closing Date at such time or times as Purchaser reasonably may request (i) to
have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or
other wood-destroying organism present in the Real Properties or Restaurants,
or any damage from prior termites or other wood- destroying organism, and the
Seller will assign to Purchaser at Closing all rights under existing contracts
and policies, if any, with the Seller's exterminating company; and (ii) to
have conducted any environmental audits or studies of the Restaurant, the Real
Property and the Assets, including a "Phase I" and, if the results of such
Phase I so recommends, a "Phase II" environmental study. Notwithstanding
inspections, audits or other studies undertaken by or on behalf of Purchaser
hereunder or any other due diligence investigation undertaken by or on behalf
of Purchaser, Seller shall not be relieved in any way of responsibility for
its warranties, representations and covenants set forth in this Agreement.
SECTION 4.2 Operation of the Business of Seller. Between the date of this
Agreement and the Closing Date, the Seller shall conduct the operation of its
Restaurants in the ordinary and usual course of business, consistent with past
practices and will
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use its best efforts to preserve intact the present business organization with
respect to its Restaurants, to keep available the services of its officers and
employees and to maintain satisfactory relationships with landlords,
franchisors, dealers, licensors, licensees, suppliers, contractors,
distributors, customers and others having business relations with it and its
Restaurants and will maintain its Restaurants, Real Properties, and Assets in
a condition conducive to the operation of the business currently carried on
therein.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or with the prior written consent of
Purchaser, the Seller will not:
(a) Keep and maintain its books of account and records other that in
accordance with generally accepted accounting principles consistent with
past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of the
employees at any of the Restaurants other than in the ordinary course of
business, consistent with past practices; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
permitted by any Welfare Plan, whether past or present; or (iii) commit
itself in relation to its Restaurants, the employees at its Restaurant or
the Real Properties, to any new or renewed Welfare Plan with or for the
benefit of any Person, or to amend any of such Welfare Plans or any of
such agreements in existence on the date hereof;
(d) Fail promptly to notify Purchaser of any unusual developments
with respect to its Restaurants, Assets, Real Properties, Real Property
Leases, the Easements, Assumed Contracts or otherwise in connection with
its business;
(e) Permit any of its insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies are in full force and effect providing coverage, in form,
substance and amount equal to or greater than the coverage under those
canceled, terminated or lapsed for substantially similar premiums;
(f) Amend or terminate its Real Property Leases, or sell, transfer,
mortgage or otherwise dispose of or encumber, or agree to sell, transfer,
mortgage or otherwise dispose of or encumber, its Real Property Leases,
the
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Easements or, except in the ordinary course of business, any of the
Assets or Assumed Contracts;
(g) Allow to occur any default or breach, or event which with the
lapse of time or giving of notice, or both, would constitute a default or
breach under its Real Property Leases, the Easements, its Franchise
Agreement or any of the other Assumed Contracts;
(h) Enter into any other Contracts whether written or oral which,
individual or in the aggregate, would be material to its Restaurants,
Assets, Real Properties, Real Property Leases, the Easements or the
Assumed Contracts, except Contracts for the purchase, sale or lease of
goods or services in the ordinary course of business consistent with past
practice and not in excess of current requirements, or otherwise make any
material change in the conduct of the businesses or operations of the
Seller;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the other
Transaction Documents;
(j) Take any action which would result in any of the representations
or warranties contained in this Agreement or the other Transaction
Documents not being true at and as of the time immediately after such
action at and as of the Closing Date, or in any of the covenants
contained in this Agreement or other Transaction Documents becoming
unperformable or which could have a Material Adverse Effect on the
transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain and
keep its Restaurant, Assets and Real Properties in at least the same
condition and order as exists on the date hereof, reasonable wear and
tear excepted, and fail to perform repairs and maintenance usual and
customary in the ordinary course of business;
(l) Enter into any lease, sublease, license or any other occupancy
agreement, amend or terminate the Easements, the Real Property Leases, or
enter into, amend or terminate any Franchise Agreement, or other Contract
with respect to its Restaurants and Real Properties;
(m) Take any action or allow to occur any event which with the lapse
of time or giving of notice, or both, would allow to lapse any of the
Licenses;
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(n) Operate its Restaurants or otherwise engage in any practices
which would materially affect sales at its Restaurant; or
(o) Agree (in writing or otherwise) to do any of the foregoing.
SECTION 4.3 Supplements to Disclosures. Prior to the Closing Date, the
Seller will promptly supplement or amend the information set forth herein and
in the Schedules and Exhibits referred to herein with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described herein
or in a Schedule or Exhibit or which is necessary to correct any information
herein or in a Schedule or Exhibit or in any representation and warranty,
which has been rendered inaccurate thereby.
SECTION 4.4 Computer Software. The Seller shall provide Purchaser with
computer readable software in a form and language that Franchise Service
Options can use and manipulate, which software shall be used to manage the
Restaurants, including (i) payroll and compensation systems and (ii) sales
reports of the Restaurants on a "restaurant by restaurant" and "day by day"
basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the Closing
Date, the Seller shall not, directly or indirectly and whether by means of a
sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or enter into
any Contract to sell, transfer, assign or dispose, of the Assets or any
interest therein, except for normal operations in the ordinary course of
business; or
(b) encourage, initiate or solicit any inquiries or proposals by, or
engage in any discussions or negotiations with, or furnish any non-public
information to, any Person concerning any such transaction and the Seller
shall promptly communicate to Purchaser the substance of any inquiry or
proposal concerning any such transaction which may be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof
until the Closing Date, each of the parties hereto shall furnish to the other
party hereto such necessary information and reasonable assistance as such
other party may reasonably request in connection with its preparation of
necessary filings or submissions to any governmental agency and the Seller
shall use its best efforts to obtain all Licenses and Required Consents
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from third parties necessary to consummate the transactions contemplated by
this Agreement and the other Transaction Documents. Each party shall furnish
to the other copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Purchaser, Seller or
any of their respective representatives and agents, on the one hand, and any
government agency or authority or third party, on the other hand, with respect
to this Agreement and the other Transaction Documents and transactions
contemplated hereby and thereby.
SECTION 4.7 Management Subscription Agreement; Other Actions. On or
before the Closing in connection with exchanging the Assets for the Class D
Common Stock, the Senior Preferred, the Junior Preferred and the Notes of the
Purchaser (the "Securities") the Seller and Lawrence Jaro, shall execute and
deliver a counterpart of the Management Subscription Agreement of even date
herewith by and among the Seller and Lawrence Jaro, the Purchaser and other
Management Investors (as defined therein), and shall have taken all other
actions and executed and delivered all other agreements and documents
necessary for a valid placement of the Securities by the Purchaser with the
Seller and Lawrence Jaro.
SECTION 4.8 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by Law, no announcement of the
existence or terms of this Agreement or the other Transaction Documents or the
transactions contemplated hereby and thereby shall be made publicly or to the
employees or customers of Seller, by any party to this Agreement or any of its
respective Representatives without the advanced written approval of the other
parties.
(b) Purchaser, on the one hand, and Seller, on the other hand, each shall
hold in strict confidence, and shall use their best efforts to cause all their
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process, or by other requirements of law, all
confidential and proprietary information (collectively, "Confidential
Information") concerning Seller, (in the case of Purchaser) and Purchaser (in
the case of Seller) which is created or obtained prior to, on or after the
date hereof in connection with the transactions contemplated hereby, and
Purchaser, Seller shall not use or disclose to others, or permit the use or
disclosure of, any such information created or obtained except to the extent
that such information can be shown to have been (i) previously known by
Purchaser, and Seller, as the case may be (ii) in the public domain through no
fault of a party or any of its Representatives, and will not release or
disclose such information to any other Person, except its officers, directors,
employees, Representatives and lending institutions who need to know such
information in connection with this Agreement.
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(c) For purposes of this Section 4.8, Purchaser specifically acknowledges
that it and its Representatives will have an opportunity to engage in "due
diligence" with respect to this transaction and which may include the
opportunity to review corporate records, financial and otherwise, interview
certain management personnel, and see and learn of the operation of Seller.
The Confidential Information of Seller, referred to in Section 4.8(b),
includes, without limitation, all schedules, documents, work papers or other
written information, and specifically including financial records, leases,
franchise agreements, corporate minutes, corporate organization documents,
stockholder records, employment records, fringe benefit records, lists of
creditors and suppliers, contracts, loan and security agreements, claims
against Seller, insurance, management and operation procedures and trade
secrets (both as defined by Colorado statutory law and by common law); and any
other proprietary information related to the Business conducted by Seller,
whether or not such information would be legally protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other is
unique and its release or misusage may not be compensable in damages and that
the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.9 Limitation of Seller's Claims After Closing. From and after
the Closing and thereafter so long as the provisions of Article VI are still
applicable, the Seller shall not, without the prior written consent of
Purchaser: (i) engage in any business, which would adversely affect any value
of Purchaser's business; or (ii) take any other action or fail to take any
action, or allow, the occurrence of any event, with respect to the Seller's
assets, which could be reasonably expected to have a Material Adverse Effect
on the Seller's ability to indemnify, defend and hold harmless Purchaser and
its officers, directors and stockholders from and against Damages (as
hereunder defined) pursuant to Article VI; provided, however, that nothing
herein shall preclude the Seller from taking any action to distribute assets
whether in the form of cash or other assets to its Shareholders'.
SECTION 4.10 Employee Benefit Matters. (a) No later than 30 days after
the Closing Date, the Seller shall discharge and satisfy in full any
liabilities it may have with respect to any
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wages, vacation, severance or sick pay, or any rights under any ERISA Plan or
Fringe Benefit Plan.
(b) No later than 30 days after the Closing Date, the Seller shall
discharge and satisfy in full any employment, consulting or similar
arrangement to which the Seller is a party or for which the Seller is
responsible.
(c) The Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Seller,
and to "qualified beneficiaries" of any employee of the Seller or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Seller or an Affiliate of the Seller. The type of coverage shall be that
described in Section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in Section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under Section 4980B of the Code.
(d) Subject to the provisions of this Agreement, Seller and the
stockholders of Seller jointly and severally, hereby agree to indemnify and
hold Purchaser harmless from and against any Damages which arise out of the
failure to comply with the obligations in Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Seller shall deliver to Purchaser:
(i) within five (5) business days after the end of each calendar
month, a written statement, certified by Seller, of the gross sales of
each Restaurant for that month; and
(ii) With respect to the "compiled" Financial Statements delivered
to Purchaser by the Seller, at the request of Purchaser, the Seller shall
(and shall cause their respective Representatives to) cooperate with
Purchaser to have such statements reviewed or audited or further
clarified in such manner as Purchaser may deem necessary or advisable.
Any additional fees paid by the Seller to their respective independent
certified public accountants in connection with such cooperation shall be
borne by Purchaser.
(b) Seller agrees to observe and abide by the provisions of Sections 4.4,
4.5 and 4.7, and Seller and Purchaser agree to observe and abide by the
provisions of Article VIII hereof;
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(c) Seller acknowledges and agrees to be bound by the provisions of
Section 4.6, and 7.1(c); and
(d) Inasmuch as all of the Franchise Agreements are held in individual
names, the Seller shall cause the individual to observe and abide by the
provisions of Section 4.5 insofar as the transfer of such Franchise Agreements
to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser also hereby waives compliance by
Seller with the provisions of any applicable bulk sales state or local tax
laws in effect in the states of Texas and Colorado. Seller hereby warrants and
agrees to pay and discharge, promptly when due, all claims of creditors which
may be asserted against Purchaser by reason of such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth all of the
creditors of the Seller as of the date hereof and the amounts owing to such
creditors as of the date hereof.
(c) The bulk sales laws referred to in Section 4.12(a) hereof are
referred to herein, collectively, as the "Bulk Sales Laws".
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Seller and Purchasers. The
obligations of Purchaser and Seller to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at
or prior to the Closing of the following conditions, except to the extent that
any such condition may have been waived in writing by both Seller and
Purchaser at or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation, inquiry
or other proceeding before any governmental or regulatory authority or
other Person shall have been instituted or shall be pending or threatened
which questions the validity or legality of this Agreement and the other
Transaction Documents and the transactions contemplated hereby and
thereby and which could reasonably be expected to damage materially the
Business or assets of the Seller if the transactions contemplated hereby
or thereby are consummated. No injunction, decree or order shall be in
effect prohibiting consummation of the transactions contemplated by this
Agreement or the other Transaction Documents or which would make the
consummation of such transactions unlawful and no action or proceeding
shall have been instituted and remain pending before an
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Authority to restrain or prohibit the transactions contemplated by this
Agreement and the other Transaction Documents.
SECTION 5.2 Conditions to the Obligations of Seller. The obligations of
the Seller to consummate the transactions contemplated hereby and by the other
Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by the Seller at or prior to the
Closing:
(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby or
thereby shall be true and correct at and as of the Closing Date, with the
same force and effect as if made at and as of the Closing Date; the
Purchaser shall have performed or complied with all agreements and
conditions required by this Agreement and the other Transaction Documents
to be performed or complied with by it on or prior to the Closing Date;
and Seller shall have received a certificate dated the Closing Date in
form satisfactory to him signed by an officer of Purchaser.
(b) Governing Instruments, etc. The Seller shall have received a
certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of Purchaser certifying, among other things, that attached or
appended to such certificate (i) is a true and correct copy of its
Certificate of Incorporation and all amendments if any thereto as of the
date thereof; (ii) is a true and correct copy of its By-Laws; (iii) is a
true copy of all corporate actions taken by it, including resolutions of
its board of directors authorizing the execution and delivery of this
Agreement and each other Transaction Document to be delivered by it
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby; and (iv) are the names and signatures of its duly
elected or appointed officers who are authorized to execute and deliver
this Agreement and any certificate, document or other instrument in
connection herewith.
(c) Payment of Purchase Price. Purchaser shall have tendered to
Seller the Purchase Price payable at Closing in ccordance with Section
1.2(a).
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(d) Assumption of Assumed Contracts. The Seller shall have received
from Purchaser an Assumption Agreement substantially in the form annexed
as Exhibit C hereto.
(e) Opinion of Counsel. The Seller shall have received an opinion of
counsel for Purchaser, as of the Closing Date, substantially in the form
annexed as Exhibit D hereto.
(f) Senior Lender's Consent. Seller shall have been presented
evidence that the Purchaser shall have received, if necessary, the
written consent of its Senior Lender, The First National Bank of Boston,
to the transactions contemplated hereby.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby and by the other
Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The representations,
warranties, covenants and agreements of the Seller contained in this
Agreement and the other Transaction Documents, or otherwise made in
writing by it or on its behalf pursuant hereto or otherwise made in
connection with the transactions contemplated hereby or thereby shall be
true and correct at and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date; the Seller shall
have performed or complied with all agreements and conditions required by
this Agreement and the other Transaction Documents to be performed or
complied with by it on or prior to the Closing Date; and Purchaser shall
have received certificates dated the Closing Date in form satisfactory to
Purchaser signed by the President on behalf of the Seller, as applicable.
(b) Governing Instruments, etc. Purchaser shall have received a
certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of the Seller certifying, among other things, that attached or
appended to such certificate (i) is a true and correct copy of its
Certificate of Incorporation and all amendments if any thereto as of the
date thereof; (ii) is a true and correct copy of its By-Laws; (iii) is a
true copy of all corporate actions taken by it, including resolutions of
its board of directors and stockholders authorizing the execution and
delivery of this Agreement and each other Transaction Document to be
delivered by it pursuant hereto and the
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consummation of the transactions contemplated hereby and thereby; and
(iv) are the names and signatures of its duly elected or appointed
officers who are authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(c) Instruments of Transfer. The Seller shall have delivered to
Purchaser a bill of sale and assignment ("Bill of Sale") substantially in
the form annexed as Exhibit E hereto, a Lease Assignment (if applicable)
and any other documents of transfer which Purchaser reasonably shall
request in order to evidence and effectuate the sale and assignment to
Purchaser of the Assets, the Real Property Leases, the Assumed Contracts
and the consummation of all other transactions contemplated by this
Agreement and the other Transaction Documents.
(d) Consents. The Seller shall have obtained, and delivered to
Purchaser, copies of the Required Consents applicable to it in form and
substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an opinion or
opinions of counsel for Seller, as of the Closing Date, substantially in
the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been no Material
Adverse Change, nor any events which could have a material adverse
change, in the Business, operations, prospects or financial or other
condition of any Restaurant or in the respective Assets or Real
Properties from the date hereof to the Closing Date (the "Interim
Period") nor shall have there been, for all Restaurants in the aggregate,
a decrease of five percent or more in gross sales or gross profit during
the Interim Period, as compared with the same period during the prior
calendar year. For purposes hereof, "Gross Profit" shall mean total gross
sales reduced by the sum of food, labor and paper costs. At Closing,
Purchaser shall have received a certificate dated the Closing Date in
form satisfactory to Purchaser signed by the President on behalf of the
Seller to the foregoing effect.
(g) Environmental Due Diligence. Purchaser shall have completed its
environmental due diligence of the Restaurants, Real Property and Assets
and have received results which are satisfactory to Purchaser in its sole
discretion. In the event Seller shall provide Purchaser with previously
prepared environmental reports, such reports must have been prepared
within 90 days from the date of this
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Agreement, or, in the alternative, such reports must have been updated
within 90 days of the date of this Agreement.
(h) Senior Lender's Consent. Purchaser shall have received, if
necessary, the written consent of its senior lender, The First National
Bank of Boston, to the transactions contemplated hereby.
(i) Other Documents. The Seller shall have delivered to Purchaser:
(i) the Assignment of its Real Property Lease, each Assumed
Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original counterpart of the
Real Property Lease;
(iv) receipts for the Purchase Price paid to Seller by
Purchaser;
(v) certificates dated no earlier than 30 days prior to the
Closing Date, from appropriate authorities in the State of its
jurisdiction of incorporation, as to the good standing of such
Seller;
(vi) an updated schedule of creditors as of the Closing Date;
(vii) executed original of each of the Osborn Proxy Agreement
and the Jaro Proxy Agreement, as defined in the Stockholders
Agreement, of event date herewith; and
(viii) all other documents, instruments and agreements required
to be delivered by such Seller to Purchaser pursuant to this
Agreement and the other Transaction Documents.
(j) Review by Purchaser's Auditor. Purchaser's auditor shall have:
(i) reviewed the financial and accounting system of Seller;
(ii) reviewed and confirmed the financial statements and
results set forth in such statements;
(iii) found no objection to the financial and accounting system
of Seller and Purchaser shall have
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resolved any objection raised by the auditor and presented to the Seller
by the Purchaser.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations. All of the terms and conditions
of this Agreement, together with the warranties, representations, agreements
and covenants contained herein or in any instrument or document delivered or
to be delivered pursuant to this Agreement, shall survive the execution of
this Agreement and the Closing, notwithstanding any investigation heretofore
or hereafter made by or on behalf of any party hereto; provided, however, that
(a) the agreements and covenants (other than the indemnification provisions
set forth in this Article VI, which will survive as provided below) set forth
in this Agreement shall survive and continue until all obligations set forth
therein shall have been performed and satisfied and the applicable statute of
limitations for breaches or defaults of such agreements and covenants has
expired; and (b) all representations and warranties, and the agreements of
Seller and Purchaser to indemnify each other set forth in this Article VI,
shall survive and continue for, and all indemnification claims with respect
thereto shall be made prior to March 31, 1996.
SECTION 6.2 Agreement to Indemnify. Subject to the conditions of this
Article VI:
(a) Purchaser hereby agrees to indemnify, defend and hold harmless
the Seller from and against all demands, claims, actions or causes of
action, assessments, loses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonably
attorney's fees,costs and disbursements and expenses (collectively,
"Damages"), asserted against, resulting to, imposed upon or incurred by
the Seller directly or indirectly, arising out of or resulting from (i) a
breach of any representation, warranty, covenant or agreement of
Purchaser contained in or made pursuant to this Agreement (including but
not limited to enforcement of this Article VI), the other Transaction
Documents or the transactions contemplated hereby or thereby or any facts
or circumstances constituting such breach; and (ii) any indebtedness,
obligation or liability assumed by Purchaser pursuant to Section 1.1,
1.2(a)(vi) and 1.4(b) hereof; and (iii) the operation, use or ownership
of its Restaurants, Assets, Real Property Leases, Real Properties, the
Easements and Assumed Contracts, during, or which have
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otherwise accrued from or otherwise relate to, the period of time after
the Closing Date; and
(b) Seller agrees to indemnify, defend and hold harmless Purchaser
and its officers, directors and stockholders from and against all Damages
asserted against or incurred by Purchaser or such officers, directors and
stockholders, directly or indirectly, arising out of or resulting from:
(i) a breach of any representation, warranty, covenant or agreement of
the Seller contained in or made pursuant to this Agreement (including but
not limited to enforcement of this Article VI) the other Transaction
Documents or any facts or circumstances constituting such a breach; (ii)
any indebtedness, obligations or liabilities of the Seller including, but
not limited to, any liability or obligation set forth in Section 1.4(a),
and the tax liabilities set forth in Section 2.17 other than those
expressly assumed by Purchaser hereunder; (iii) a breach of or otherwise
arising under any Environmental Law (whether now or hereafter in effect),
to the extent the same arises out of any condition or state of facts or
otherwise relates to the period of time commencing on the date Seller was
entitled to possession of the Real Property in question and ending on the
Closing Date; (iv) the operation, use or ownership of the Restaurants,
Assets, Real Properties, Real Property Leases, the Easements and Assumed
Contracts during, or which have otherwise accrued from or otherwise
relate to, the period of time prior to the Closing Date; (v) the Seller's
failure to pay and discharge all claims of creditors which may be
asserted against Purchaser by reason of Purchaser's waiver of compliance
by Seller of the Bulk Sales Laws and (vi) all Damages arising before the
Closing and not expressly assumed in writing by the Purchaser; provided,
however, that Seller's indemnification of Purchaser shall be limited in
aggregate amount as provided in Section 6.5.
SECTION 6.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 6.3 with respect to Damages
for which it must indemnify another party hereunder (collectively, the
"Indemnifiable Claims") shall be subject to the following terms and
conditions:
(a) The indemnified party shall give the indemnifying party notice
of any such Indemnifiable Claim which notice shall set forth in
reasonable detail the basis for and amount of the Indemnifiable Claim,
and the circumstances giving rise thereto. If the Indemnifiable Claim is
a third-party Claim, the notice must contain an copy of any papers served
on the indemnified party.
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(b) If the Indemnifiable Claim is not a third-party Claim, unless
within 30 days of receipt by the indemnifying party of notice of the
Indemnifiable Claim the indemnifying party sends written notice to the
indemnified party disputing the facts giving rise to the Indemnifiable
Claim or the amount of Damages stated in the notice, the Damages stated
in the notice shall become due and payable upon the expiration of such 30
day period. If, however, the indemnifying party disputes the facts giving
rise to the Indemnifiable Claim or the amount of Damages stated in the
notice within such 30 day period and the dispute cannot be resolved
within the following 90 days, the dispute shall be submitted to
arbitration under the rules of the American Arbitration Association in
Chicago, Illinois.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own expense
by representatives of its own choosing reasonably satisfactory to the
indemnified party and will consult with the indemnified party concerning
such defense during the course thereof. If the indemnifying party, within
30 days after receipt of notice of any Indemnifiable Claim (or such
shorter period as is necessary to prevent prejudice to the indemnified
party, if such 30 day period would prejudice the rights of the
indemnified party), fails to defend, the indemnified party will (upon
further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such Indemnifiable Claim on behalf
of and for the account and risk of and at the expense of the indemnifying
party. In addition, if there is a reasonable probability that a
third-party Indemnifiable Claim may materially and adversely affect an
indemnified party, the indemnified party shall have the right, at its own
cost and expense, to defend, compromise or settle such Indemnifiable
Claim.
(d) Anything in this Section 6.3 to the contrary notwithstanding,
neither the indemnifying party nor the indemnified party, as the case may
be, may settle or compromise any Indemnifiable Claim or consent to entry
of any judgment in respect thereof, without the written consent of the
other, which consent may not be unreasonably withheld or delayed.
SECTION 6.4 Remedies Cumulative. The remedies provided in this
Article VI shall be cumulative and shall not preclude the assertion by
any party hereto of any other rights or the seeking of any other remedies
against the other parties hereto.
SECTION 6.5 Indemnity Enforcement. (a) Indemnification Claims shall
be reduced, by and to the extent, that an indemnitee
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shall actually receive proceeds under insurance policies, risk sharing
pools, or similar arrangements specifically as a result of, and in
compensation for, the subject matter of an indemnification Claim by such
indemnitee.
(b) The aggregate value of Purchaser's indemnification claims shall
be limited to the consideration received by the Seller as the Purchase
Price for the Assets and the Purchase Price for the Inventory.
(c) The Purchaser may, in addition to any other rights or remedies
available, set-off any indemnification claims hereunder against any
amounts owing in respect of any of the Securities issued or cash paid by
the Company as part of the Purchase Price for the Assets; provided,
however, that this right of set-off must be exercised against such
Securities and cash in the following order:
(i) interest and principal payments on the Notes;
(ii) dividend, liquidation and redemption payments on the
Senior Preferred and the Junior Preferred;
(iii) dividend liquidation and redemption payments on the Class
D Common Stock; provided that for redemption under this Section 6.5,
the call price of the Class D Common Stock shall be Fair Market
Value, (as defined in the Management Subscription Agreement);
(iv) cash to the extent the cash portion of the Purchase Price
for the Assets and for the Inventory has not been distributed to the
Seller's shareholders and limited by the amount, if any, that the
Seller or Seller's Stockholders have paid federal or state income
taxes thereon or any of them have received a notice or claim
assessing additional tax liabilities upon the Seller as a result of
noncompliance with section 351 and the rules regarding the
installment note regulations under the Internal Revenue Code of
1986, as amended.
(d) The personal liability of any shareholder of Seller under this
Article VI shall be limited to the extent such shareholder personally receives
Securities or cash delivered by the Company as part of the Purchase Price, or
to the extent such shareholder acquires such Securities or cash subsequent to
the Closing in a distribution or dividend from Seller, net of federal and
state income taxes as provided in Section 6.5(c)(iv).
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Seller and Purchaser;
(b) By Seller, if (i) there has been a material misrepresentation or
breach of warranty on the part of Purchaser in the representations and
warranties contained herein and such material misrepresentation or breach
of warranty, if curable, is not cured within 15 days of written notice
thereof from Seller; (ii) Purchaser has committed a material breach of
any covenant imposed upon it hereunder and fails to cure such breach
within 15 days of written notice thereof from Seller; or (iii) any
condition of Seller obligations hereunder becomes incapable of
fulfillment through no fault of such parties and is not waived by such
parties;
(c) By Purchaser, if (i) there has been a material misrepresentation
or breach of warranty on the part of the Seller in the representations
and warranties contained herein and such material misrepresentation or
breach of warranty, if curable, is not cured within 15 days of written
notice thereof from Purchaser; (ii) the Seller has committed a material
breach of any covenant imposed upon it hereunder and fails to cure such
breach within 15 days of written notice thereof from Purchaser; or (iii)
any condition to Purchaser's obligations hereunder becomes incapable of
fulfillment through no fault of Purchaser and is not waived by Purchaser;
(d) By Seller, if the Closing shall not have occurred on or before
September 7, 1994; provided that Seller shall not be entitled to
terminate this Agreement pursuant to this clause if the failure of the
Seller to fulfill any of its obligations under this Agreement shall have
been the reason that the Closing shall not have occurred on or before
said date;
(e) By Purchaser, if the Closing shall not have occurred on or
before September 7, 1994; provided that Purchaser shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
Purchaser to fulfill any of its obligations under this Agreement shall
have been the reason that the Closing shall not have occurred on or
before said date; and
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(f) By Seller or by Purchaser, if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Purchaser, or any Seller from consummating the
transactions contemplated hereby is entered and such judgment,
injunction, order or decree shall become final and nonappealable.
SECTION 7.2 Effect of Termination; Right to Proceed. In the event that a
party wishes to terminate this Agreement pursuant to Section 7.1, it shall
give written notice thereof whereupon all further obligations of the parties
under the Agreement shall terminate without further liability of any party
hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants
and agreements imposed upon it hereunder; (ii) to the extent that any
condition to a party's obligations hereunder become incapable of fulfillment
because of the breach by a party of its obligations hereunder and (iii) that
the agreements contained in Sections 4.8, 9.3 and 9.4 shall survive the
termination hereof. In the event that a condition precedent to its obligation
is not met, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the transactions contemplated hereby. Notwithstanding anything to
the contrary contained herein, no party shall have any obligation to the other
hereunder arising out of the occurrence of an event or circumstance not within
the control of such party which event or circumstance resulted in a
representation or warranty of such party ceasing to be true.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Further Assurances. Each of the parties hereto shall without
further consideration execute and deliver to any other party hereto such other
instruments of transfer and take such other action as any party may reasonably
request to carry out the transactions contemplated by this Agreement and the
other Transaction Documents.
SECTION 8.2 Waiver and Amendment. No provisions of this Agreement may be
amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
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similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 8.3 Remedies. In the event of a default under this Agreement or
the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or
other appropriate proceeding, whether for specific performance, or for an
injunction against a violation of any terms hereof or thereof or in aid of the
exercise of any right, power or remedy granted thereby or by law, equity,
statute or otherwise. The foregoing shall include, but shall not be limited
to, allowance for recovery by the aggrieved party of all of its fees and
expenses and disbursements incurred by it in connection with the transactions
contemplated hereby and in the Transaction Documents, including, without
limitation, the reasonable fees and expenses of its counsel, accountants,
agents and representatives, employed by it. No course of dealing and no delay
on the part of any party in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
or remedies. No right, power or remedy conferred hereby shall be exclusive of
any other right, power or remedy referred to herein or now or hereafter
available at law, in equity, by statute, or otherwise.
SECTION 8.4 Expenses. Upon the execution of this Agreement and the
closing of the Company's acquisition of franchises and other assets, rights
and obligations to certain Burger King restaurants in the Chicago area, the
Purchaser will reimburse the Seller for all reasonable expenses incurred by
the Seller in connection with the authorization, preparation and consummation
of this Agreement and the related transactions, including reasonable
attorneys' and accountants' fees; provided, however, that the aggregate amount
paid to Lawrence Jaro and entities related to Lawrence Jaro and William Osborn
and entities related to William Osborn for reimbursement of accountants' fees
shall not exceed $20,000.
SECTION 8.5 Entire Agreement. This Agreement and the other Transaction
Documents and the Exhibits and Schedules referred to herein and therein
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior arrangements or understandings with
respect thereto.
SECTION 8.6 Definitions. For the purposes of this Agreement:
(i) "affiliate" of any person shall mean any corporation,
proprietorship, partnership or business entity which, directly or
indirectly, owns or controls, is under common ownership or control with,
or is owned or controlled
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by, such person, and any directors, officers, partners or 50% or more
owners of such person.
(ii) "Affiliate" shall mean with respect to any Person, any other
Person that has a relationship with the designated Person whereby either
of such Persons directly or indirectly controls or is controlled by or is
under common control with the other of such Persons.
(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory authority,
whether national, Federal, state or local or otherwise, or any Person
lawfully empowered by any of the foregoing to enforce or seek compliance
with any Regulation.
(iv) "Business" shall mean the business and operations of each
Restaurant conducted or proposed to be conducted by Seller at the date of
this Agreement and/or the Closing Date, and such business and operations
relating to the Assets and Assumed Contracts. Business.
(v) "Contract" shall mean any contract, agreement, purchase order,
sales order, guaranty, option, mortgage, promissory note, assignment,
lease, franchise, commitment, understanding or other binding arrangement,
whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall mean the
power to direct the management and policies of such Person, directly or
indirectly, by or through stock ownership, agency or otherwise, pursuant
to or in connection with a Contract with one more other Persons by or
through stock ownership, agency or otherwise; and the terms "controlling"
and "controlled" shall have meanings correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with respect to
any Person, the certificate of incorporation, articles of incorporation,
bylaws, code of regulations or other organizational or governing
documents howsoever denominated of such Person.
(viii) "Lien" means any security interest, lien, charge, mortgage,
deed, assignment, pledge, hypothecation, encumbrance, easement,
restriction or interest of another Person or any kind or nature.
(ix) "material" means any claim, circumstance or state of facts
which results in, or would reasonably be expected
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to result in, losses or the expenditure or commitment of $25,000 or more,
or which results in any material limitation or restriction on the ability
of the Seller or the Purchaser to conduct the Business.
(x) "Material Adverse Change" means any developments or changes
which would have a material adverse effect.
(xi) "Order" means any decree, order, injunction, rule, judgment,
consent of or by a U.S. Authority.
(xii) "Permits" means any licenses, Permits, variances, interim
permits, permit applications, approvals or other authorizations under any
Regulation applicable to the Business.
(xiii) "Person" shall mean an individual, partnership, corporation,
joint venture, unincorporated organization, cooperative, or a
governmental entity or agency thereof.
(xiv) "Regulation" means any law, statute, regulation, ruling, rule,
Order or Permit, of, administered or enforced by or on behalf of any
Authority, and the certificate of incorporation and By-Laws of the
Seller, as applicable.
(xv) "Taxes" shall mean all taxes, charges, fees, duties, levies or
other assessments, including, without limitation, income, gross receipts,
net proceeds, ad valorem, turnover, real and personal property (tangible
and intangible), sales, use, franchise, excise, value added, license,
payroll, unemployment, environmental, customs duties, capital stock,
disability, stamp, leasing, lease, user, transfer, fuel, excess profits,
occupational and interest equalization, windfall profits, severance and
employees' income withholding and Social Security taxes imposed by the
United States or any foreign country or by any state, municipality,
subdivision or instrumentality of the United States or of any foreign
country or by any other tax Authority, including all applicable penalties
and interest, and such term shall include any interest, penalties or
additions to tax attributable to such Taxes.
SECTION 8.7 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
Agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 8.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and
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delivered personally, sent by telecopier, federal express or other reputable
overnight courier or sent by certified or registered mail, postage prepaid,
return receipt requested, at the addresses set forth below:
(a) if to Purchaser, to:
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
(b) if to Seller, to:
Lawrence Jaro
c/o Ernest J. Panasci, Esq.
Suite 1100
1600 Stout Street
Denver, Colorado 80202
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 8.9 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by the heirs, executor,
personal representatives, legal representatives, successors and assigns of the
parties hereto, and shall not be assignable by either party without the prior
written consent of the other party; provided, however, that the Purchaser may
assign at Purchaser's sole discretion any or all of its interest to a lender
of Purchaser with written notice to Seller.
SECTION 8.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED,
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY
BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED
AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY
OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES
SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT
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JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY
OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE
OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF
SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN
THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR
THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 8.10 SHALL NOT
BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE JURISDICTION.
SECTION 8.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C.
SECTIONS 1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A
COURT OF RECORD.
SECTION 8.12 Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
SECTION 8.13 Purchaser's Designated Affiliate. Purchaser may designate
one or more of its wholly-owned subsidiaries or Affiliates to carry out all or
part of the transactions contemplated hereby to be carried out by Purchaser,
which designation shall not relieve Purchaser of its obligations hereunder.
45
<PAGE>
SECTION 8.14 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
46
<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement as
of the day first above written.
NRE HOLDINGS, INC.
By:____________________________________
Name:
Title:
JARO ENTERPRISES, INC.
By:____________________________________
Name:
Title:
47
PURCHASE AND SALE AGREEMENT
Among
NRE HOLDINGS, INC.
(as Purchaser)
And
JARO RESTAURANTS, INC.
(as Seller)
Dated as of September 1, 1994
<PAGE>
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE; CLOSING
Section Page
1.1 Assets to Be Conveyed................................... 2
1.2 Purchase Price for Assets............................... 3
1.3 Real Properties; Assignments of Leases;
Easements and Parking Agreements.................. 6
1.4 Assumption of Liabilities............................... 6
1.5 Closing; Deliveries..................................... 8
1.6 Adjustments............................................. 8
1.7 Petty Cash.............................................. 10
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Corporate Power........................ 10
2.2 Governing Instruments................................... 11
2.3 Due Authorization....................................... 11
2.4 No Violation............................................ 11
2.5 Consents................................................ 12
2.6 Financial Statements.................................... 12
2.7 Assets.................................................. 13
2.8 Inventory............................................... 14
2.9 Real Properties; Real Property Leases................... 14
2.10 Franchise Agreements.................................... 16
2.11 Employment Arrangements................................. 16
2.12 Contracts and Arrangements.............................. 17
2.13 ERISA................................................... 18
2.14 Litigation, Compliance with Regulations and
Consents.......................................... 19
2.15 Environmental Matters................................... 20
2.16 Insurance Policies...................................... 20
2.17 Tax Returns............................................. 20
2.18 Adverse Restrictions.................................... 21
2.19 Brokers................................................. 21
2.20 Material Information.................................... 21
2.21 Continuing Representations.............................. 22
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power........................ 22
3.2 Certificate of Incorporation and By-Laws................ 22
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Section Page
3.3 Due Authorization....................................... 22
3.4 No Violation............................................ 23
3.5 Consents................................................ 23
3.6 Brokers................................................. 23
3.7 Material Information.................................... 23
3.8 Continuing Representations.............................. 24
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior to
the Closing Date.................................. 24
4.2 Operation of the Business of Seller..................... 25
4.3 Supplements to Disclosures.............................. 27
4.4 Computer Software....................................... 27
4.5 No Other Asset Sales.................................... 27
4.6 Regulatory Filing and Consents.......................... 28
4.7 Management Subscription Agreement; Other Actions........ 28
4.8 Announcements; Confidentiality.......................... 28
4.9 Limitation of Seller's Claims After Closing............. 29
4.10 Employee Benefit Matters................................ 30
4.11 Financial Statements and Reports........................ 30
4.12 Bulk Sales.............................................. 31
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Seller
and Purchasers.................................... 31
5.2 Conditions to the Obligations of Seller................. 32
5.3 Conditions to Obligations of Purchaser.................. 33
6.1 Survival of Representations............................. 36
6.2 Agreement to Indemnify.................................. 36
6.3 Conditions of Indemnification........................... 37
6.4 Remedies Cumulative..................................... 39
6.5 Indemnity Enforcement................................... 39
ARTICLE VII
TERMINATION
7.1 Termination............................................. 40
7.2 Effect of Termination; Right to Proceed................. 41
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ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances..................................... 41
8.2 Waiver and Amendment................................... 41
8.3 Remedies............................................... 42
8.4 Expenses............................................... 42
8.5 Entire Agreement....................................... 42
8.6 Definitions............................................ 42
8.7 Interpretation......................................... 44
8.8 Notices................................................ 45
8.9 Successors and Assigns................................. 45
8.10 LITIGATION............................................. 45
8.11 ARBITRATION............................................ 46
8.12 Severability........................................... 46
8.13 Purchaser's Designated Affiliate....................... 46
8.14 Counterparts........................................... 47
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel
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<PAGE>
SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.3(c) Parking and Easements Agreements
1.5(d) Real Property Lease Adjustment Formulae
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
2.14(c) Required Licenses
2.15 Environmental Matters
4.12(b) Creditors Schedule re:
Bulk Sales
||
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of September
1, 1994 by and between NRE HOLDINGS, INC., a Delaware corporation with its
principal office at c/o Jordan Industries, Inc., Suite 550, Arborlake Center,
1751 Lake Cook Road, Deerfield, Illinois 60015 ("Purchaser") and JARO
RESTAURANTS, INC. (the "Seller"):
W I T N E S S E T H:
WHEREAS, by subscription agreements dated as of September 1, 1994,
certain investors are receiving voting stock and in conjunction with this
Agreement, voting stock and other classes of securities in exchange for the
sale of assets under this Agreement;
WHEREAS, the subscription agreements contemplate certain proposed
transactions, including the transaction described in this Agreement, which are
to be consummated by the Purchaser promptly upon its capitalization;
WHEREAS, the Seller operates the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, the Seller is the owner or lessee of certain personal
property used or held for use in or in connection with the conduct of business
at its Restaurants and the Seller is the lessee of certain buildings, other
real property and land upon and in which its Restaurants are located
(individually, the "Real Property" and collectively, the "Real Properties"),
the legal description of which is set forth on Schedule B hereto;
WHEREAS, the Seller and Purchaser propose to exchange each of the
Assets (as hereinafter defined) of Seller for securities of the Seller and
other consideration specified below; and
WHEREAS, the Seller that occupies Real Property pursuant to a lease
agreement (each, a "Real Property Lease" and, collectively, the "Real Property
Leases") (each such Real Property Lease, together with all amendments,
supplements, and schedules thereto, being listed on Schedule C hereto)
proposes to assign to National Restaurant Enterprises, Inc., a Delaware
corporation and wholly-owned subsidiary of the Purchaser ("Enterprises"), and
Enterprises proposes to accept such assignment of, the Seller's leasehold
interest with respect to
<PAGE>
the Real Property on which its Restaurants are located (each a
"Leased Real Property" and, collectively, the "Leased Real
Properties");
WHEREAS, Purchaser proposes to transfer the Restaurants and Assets
acquired pursuant to this Agreement to Enterprises and to cause Enterprises to
assume the Assumed Contracts (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions
and conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, the Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Seller's
shareholders to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to acquire and accept the
assignment, transfer, conveyance and delivery from the Seller at Closing of,
all of the following assets used or located in or held for use in connection
with the Restaurants operated by the Seller (collectively, the "Assets") free
and clear of all Liens:
(a) Restaurant Equipment. All of the machinery, equipment,
furnishings, supplies, uniforms, spare equipment parts and all other personal
property (other than Inventory, as hereinafter defined) owned by the Seller
and used or held for use in, or in connection with, the operation of its
Restaurants, including but not limited to the assets set forth in Schedule
1.1(a) annexed hereto (collectively, "Restaurant Equipment");
(b) Leasehold Improvements. All trade fixtures, trade
equipment or other personal property placed in the premises by
the Seller or any of the foregoing purchased by the Seller for
its Restaurants, excluding any HVAC system located at the
Restaurants and any built-in freezer located at the Restaurants
("Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise
Agreement for its Restaurants, as more fully set forth in
Schedule 1.1(c) annexed hereto ("Franchise Agreements", all
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subject to the approval, as necessary, of the Burger King
Corporation;
(d) Inventories. All of the food, related paper products and
promotional items owned by the Seller or otherwise used or held for use in or
in connection with the business being conducted at its Restaurants
(collectively, "Inventory"), which, if so directed by Purchaser, Seller shall
sell directly to Enterprises;
(e) Leased Assets. All of the right, title and interest of the Seller
in any item of personal property which is not owned by it but is leased by it
or otherwise is used or held for use, in or in connection with the business
being conducted at its Restaurants, including but not limited to, the assets
set forth on Schedule 1.1(e) annexed hereto (collectively the "Leased
Assets");
(f) Goodwill and Other Intangible Assets. All goodwill,
going concern value, contract rights, customer relationships, and
other general intangibles held or used by Seller in connection
with its business being operated at the Restaurant (collectively
the "Intangible Assets"); and
(g) Miscellaneous Assets. All of the right, title and interest of the
Seller in any other asset or property owned, leased, subleased, used or held
for use in, or in connection with the business being operated at its
Restaurant (collectively, the "Miscellaneous Assets") and excluding, accounts
receivable, cash, cash equivalents or securities held by Seller.
SECTION 1.2 Purchase Price for Assets.
(a) Seller shall exchange the Restaurant Equipment, Leasehold
Improvements and Miscellaneous Assets for the following consideration to be
delivered by the Purchaser:
(i) $ 112,000 in cash;
(ii) 187.50 shares of the Purchaser's Class A2 Preferred Stock,
$.01 par value per share ("Senior Preferred"); and
(iii) 62.50 shares of the Purchaser's Class B Preferred Stock,
$.01 par value per share ("Junior Preferred");
(b) Seller shall exchange the Leased Assets, Franchise Agreements and
Intangible Assets for the following consideration to be delivered by the
Purchaser:
(i) $80,000 in cash;
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(ii) $112,000 in principal amount of Purchaser's 12.75% Notes
due 2004 ("Notes"); and
(iii) 17.1284 shares of the Purchaser's Class D Common Stock,
$.01 par value per share.
(c) Seller shall exchange the Inventory for an amount equal to the cost
therefor as charged to the Seller by its unaffiliated supplier or vendor. At
the Closing, Purchaser shall pay to Seller $6000 per Restaurant for the
Inventory of each Restaurant, that sum being Seller's good faith estimate of
the cost of such Inventory (the "Estimated Inventory Price"). The precise
amount of the cost of the Inventory of the Seller shall be determined by
physical inventories to be taken on the Closing Date in its Restaurants and in
any other location where inventory may be located. Seller and Purchaser shall
each have the right to have at least one of its representatives present at the
taking of such inventories. The representatives shall submit a written report
of the results of such inventories promptly after Closing to both the Seller
and Purchaser. Promptly after receiving such report, the Seller shall then
price the inventories shown on such report by multiplying the physical items
by their cost, determined as aforesaid, and the Seller shall submit such
priced inventory report (the "Priced Inventory Report") to Purchaser. If
Purchaser and the Seller are unable to agree upon the purchase price of the
Inventory within 10 days after the Seller and Purchaser have received the
Priced Inventory Report, such purchase price shall be determined by Deloitte &
Touche, whose determination shall be final and binding upon the Seller and
Purchaser. Within 30 days after the final determination of the purchase price
for the Inventory: (A) if it exceeds the Estimated Inventory Price, Purchaser
shall pay the amount of such excess, by check, to the Seller; or (B) if it is
less than the Estimated Inventory Price, Seller shall pay the amount by check
to the Purchaser.
(d) The Assets with respect to Restaurant #5379 (the "Additional
Restaurant") shall be included in the Assets acquired by the Purchaser
pursuant to this Agreement for which the Purchaser is paying only the
consideration set forth in paragraph 1.2(a) above; provided, however, that the
following terms will apply to the purchase of the Additional Restaurant:
(i) The lease in respect of the Additional Restaurant shall be
modified so that rental expenses shall be reduced to $150,000 on a per
annum basis. If for the period from September 1, 1994 to August 31, 1995,
the additional Restaurant's contribution (the "Contribution") to the
earnings of Enterprises, prior to the allocation of administrative and
overhead expenses, is a deficit, the Seller shall pay or cause Lawrence
Jaro to pay the amount of
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such deficit to Enterprises on October 1, 1995. The foregoing
calculation shall give rise to a one-time obligation.
(ii) Forty-five days after the second anniversary of the Closing,
Enterprises will pay (the "Deferred Payment") to Jaro Restaurants, Inc.
an amount equal to 5.0 multiplied by the Additional Restaurant's
contribution to the earnings of Enterprises prior to the allocation of
administrative and overhead expenses, for the twelve months immediately
preceding such date, in each case calculated as of the date two years and
forty-five days after the Closing. The Purchaser may pay any portion or
all of the Deferred Payment by offsetting dollar-for-dollar any debt or
related costs, expenses or fees payable to Enterprises (the "Deferred
Debt") which Lawrence Jaro, Tabor Restaurants Associates, Inc., Jaro
Enterprises, Inc. or JB Restaurants, Inc. (the "Borrowers") have incurred
and that remain outstanding under the Revolving Credit Agreement (the
"Revolving Credit Agreement") dated August 31, 1994, by and among the
Borrowers and Enterprises, or the related Promissory Note or Guaranty
(each as defined in the Revolving Credit Agreement). If the Deferred Debt
is greater than the Deferred Payment, the Borrowers shall pay the amount
of the difference at the option of the Purchaser in any combination of
cash or a three year promissory note with an applicable interest rate
equal to the interest rate (the "Deferred Interest Rate") applied under
the Revolving Credit and Term Loan Agreement, dated as of September 1,
1993, by and among the Purchaser, Enterprises and The First National Bank
of Boston. If the Deferred Payment is greater than the Deferred Debt, the
Purchaser shall pay the amount of the difference at the option of
Lawrence Jaro in any combination of cash or three year subordinated notes
(in the same form as those included under the Management Subscription
Agreement) with an applicable interest rate equal to the Deferred
Interest Rate.
(e) The Seller and Purchaser shall prepare and file their tax returns
and information statements in a manner consistent with the agreement set forth
above.
SECTION 1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements. Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of the representations and warranties
hereinafter set forth, at the Closing, the Seller shall assign to Enterprises
all of its leasehold interest in the Leased Real Properties and shall
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<PAGE>
assign, sublease or otherwise transfer to Enterprises all of its right, title
and interest in and to all parking and other access agreements or arrangements
relating to the Real Properties, as follows:
(a) Assignment of Real Property Leases. At Closing, the Seller shall
assign to Enterprises all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment
and Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A.
The Lease Assignment shall be executed and delivered at Closing by the Seller
and Enterprises.
(b) Lease Assignment Consent. At Closing, the Seller shall deliver to
Enterprises a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the
last sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c)
annexed hereto, with respect to the Seller, sets forth all written or oral
parking leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements"), except for
recorded instruments, pursuant to which the Seller is granted, for use in
connection with its Restaurant, parking privileges or rights, current or
prospective, and/or rights of access of any kind or nature in and to the
applicable Real Property. At Closing the Seller shall deliver to Purchaser
such documentation in form and substance reasonably satisfactory to Purchaser
and its counsel which effectively assigns or transfers the Seller's rights
under both recorded and unrecorded Easements to Enterprises (hereinafter
individually referred to as an "Easement Assignment", and, collectively, as
the "Easement Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby agree and
acknowledge that the Seller is not selling, transferring, assigning,
delivering or otherwise conveying, and Purchaser is not purchasing, receiving,
acquiring or otherwise assuming, any liabilities of the Seller, or any of its
respective Affiliates except as specifically set forth in Sections 1.1,
1.2(a)(vi) and 1.4(b) hereof. Purchaser shall neither be liable for any
liability or obligation of the Seller, or any of its respective Affiliates nor
shall it be required to indemnify the Seller, or any of its respective
Affiliates against any liability or obligation other than those so
specifically assumed or indemnified, as the case may be.
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<PAGE>
Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify the Seller, or any of its respective
Affiliates against any liability, obligation, duty or responsibility of the
Seller, or any of its respective Affiliates:
(i) arising from, or out of, the ownership or operations or
use of, or incurred in connection with, or incurred as a result of
any claim made against the Seller, or any of its respective
Affiliates in connection with, any Restaurant, Asset, Real Property,
Real Property Lease or Assumed Contract (as hereinafter defined) on
or prior to, or relating to any time period prior to 6:00 A.M. on the
Closing Date;
(ii) arising from or by reason of the transactions
contemplated by this Agreement including, but not limited to,
Federal, state or local income taxes, transfer taxes, sales taxes and
other taxes, if any, arising from or by reason of the receipt of the
consideration for the Assets to be transferred pursuant hereto except
as provided in Section 1.6(b);
(iii) with respect to any wages, vacation, compensation,
severance or sick pay or any rights under any stock option, bonus or
other incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or
similar arrangement to which the Seller is a party or for
which the Seller is responsible;
(v) with respect to any "employee benefit plan" as defined
in Section 3(3) of Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), including multi-employer plans as defined in
Section 3(37) of ERISA whether arising before, on or after the
Closing Date; or
(vi) under any Regulations (as hereinafter defined) relating
to public health and safety and pollution or protection of the
environment, including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes or any materials defined or
categorized by any of the above as "Hazardous Materials", "Hazardous
Substances", or
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<PAGE>
similar or related designations (collectively referred to
herein as "Environmental Laws"); or
(vii) with respect to any causes of action, judgements,
claims or demands related to any occurrence, action or omission by
the Seller, whether through negligence or otherwise, occurring before
the Closing.
(b) Assumption of Assumed Contracts. The Seller shall assign to, and
Enterprises shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of the Seller
attributable to the period after 6:00 a.m. the Closing Date, under the
Franchise Agreements, Real Property Leases, Easements, Leased Assets and the
Other Contracts (as hereinafter defined) (collectively, the "Assumed
Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 190 S.
LaSalle Street, Chicago, Illinois 60603- 3441 (or such other location as shall
be agreed upon by the parties) on September 1, 1994, provided, however, that
if, through no fault of the parties hereto, all of the conditions to the
parties' obligations to close hereunder are not satisfied or waived on the
date so designated, the Closing shall be adjourned to a subsequent mutually
agreeable date not later than September 7, 1994, unless further extended by
mutual agreement by the parties. The "Closing Date" is the date Closing
actually takes place.
(b) Delivery of Documents. At the Closing, Seller and Purchaser shall
deliver to each other the respective documents and other items set forth in
Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to
(i) obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Seller or by
the Seller to Purchaser by reason of such adjustments shall be made at the
Closing (by adjustment of the Purchase Price, if practicable) or as soon as
reasonably practicable thereafter.
(b) The parties shall share equally in the payment of all sales
taxes, and transfer taxes, if any, applicable to its transaction at the
Closing. Purchaser and Seller shall share equally all franchise assignment
fees to Burger King Corporation ("Burger King") in connection with the
assignment of the Franchise Agreements to Purchaser.
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(c) The parties shall share equally the cost of Purchaser's obtaining
prior to Closing, if necessary in Purchaser's reasonable judgment, a "Phase 1"
and, if applicable, a "Phase 2" environmental report. Any such reports or
studies prepared or obtained by the Seller prior to negotiations between
Purchaser and the Seller shall be borne by the Seller. At Closing, if
necessary, the parties shall adjust the cost of obtaining said environmental
reports.
(d) All "minimum" or "fixed rentals" and any other monetary
obligations accruing under the Real Property Leases shall be adjusted for the
month in which the Closing occurs. In the event the period used in computing
and/or adjusting percentage rental (hereinafter referred to as the "Adjustment
Lease Year") under any of the Real Property Leases commences before the
Closing Date and ends after the Closing Date, such percentage rental shall be
adjusted at the end of the Adjustment Lease Year for such Real Property Leases
so affected as follows:
(i) Seller shall be required to pay to Purchaser, within 30
days after the expiration of the Adjustment Lease Year, an amount
equal to the lesser of (1) the amount of percentage rental due for
such Adjustment Lease Year or (2) the "Percentage Rent Contribution"
determined by the following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used
in determining such percentage rental
during such Adjustment
Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.6(d);
C = Number of days during the Adjustment Lease
Year prior to, but not including, the Closing
Date; and
D = Percentage rent factor for such Real Property
Lease as indicated in Schedule 1.6(d);
provided, however, that, in the event the above formula yields a
negative amount as the Percentage Rent Contribution, the Percentage
Rent Contribution shall be deemed equal to zero; and
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(ii) Purchaser shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental, if any,
due for the Adjustment Lease Year.
Section 1.7 Petty Cash. Upon the Closing, the Seller shall leave
$1,000.00 in cash at each Restaurant (the "Store Bank"). Purchaser agrees to
purchase each Store Bank separately from the Purchase Price at Closing on a
cash for cash basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with
Purchaser as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the
Regulations of its jurisdiction of incorporation (as set forth on Schedule A
hereto) and is duly qualified and licensed to do business in such jurisdiction
which is the only jurisdiction wherein the character of the Real Properties
and other Assets owned or leased or the nature of the business of the Seller
makes such licensing or qualification to do business necessary. The Seller has
full power and authority (corporate or otherwise) to own its assets, to own or
hold under lease the real property it presently owns or holds under lease
including, without limitation, the Real Properties, and to carry on the
business in which it is engaged at all locations at which it is presently
located including, without limitation, operation of the Restaurants at the
Real Properties and to execute and deliver this Agreement and the other
documents and instruments to be executed and delivered by the Seller, as the
case may be, pursuant hereto or in connection herewith (this Agreement and all
other agreements, documents and instruments to be entered into pursuant to
this Agreement or in connection herewith including all exhibits and schedules
annexed hereto and thereto are collectively referred to herein as the
"Transaction Documents") and to consummate the transactions contemplated
hereby and thereby.
SECTION 2.2 Governing Instruments. The copies of the Certificate of
Incorporation and By-Laws of the Seller, and all amendments thereto to date,
as certified by the Secretary of Seller have heretofore been delivered to
Purchaser by Seller, and are complete and correct as of the Closing Date. The
Seller is not in default in the performance, observance or fulfillment of any
of the provisions, terms or conditions of its Certificate of Incorporation or
By-Laws.
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SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other
Transaction Documents by the Seller have been duly obtained. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors and stockholders of the Seller, and
no other acts or proceedings on the part of the Seller or the stockholders of
the Seller are necessary to authorize the execution and delivery of this
Agreement or any of the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby. This Agreement and each of the
other Transaction Documents, upon execution and delivery by the Seller, will
be the legal, valid and binding obligation of the Seller enforceable against
it in accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency and other laws affecting creditors' rights
(collectively, "Bankruptcy Laws") and subject to general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and
thereby, do not, and at Closing will not: (a) violate its Certificate of
Incorporation or By-Laws, as amended; (b) violate or conflict with or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under any agreement, indenture, instrument
or understanding to which the Seller is a party or by which it is bound; (c)
violate any judgment, decree, law, rule or regulation to which the Seller is a
party or by which it is bound; (d) result in the creation of, or give any
party the right to create, any encumbrance upon the property and assets of the
Seller; (e) terminate or modify, or give any third party the right to
terminate or modify, the provisions or terms of any agreement or commitment to
which the Seller is a party or by which the Seller is subject or bound; or (f)
result in any suspension, revocation, impairment, forfeiture or non-renewal of
any permit, license, qualification, authorization or approval applicable to
the Seller.
SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals or other authorizations which the Seller is required to obtain from,
and any filing which the Seller is required to make with, any governmental
authority or agency or any other Person including, but not limited to,
consents required from Burger King (the "Burger King Consents") in connection
with the execution, delivery and consummation of this Agreement and the other
Transaction Documents and the consummation of the
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transactions contemplated hereby or thereby (collectively, the
"Required Consents").
SECTION 2.6 Financial Statements. (a) The Seller has delivered to
Purchaser a balance sheet of the Business as at December 31, 1993 and December
31, 1992 and the related results of operations for the 12 months ended
December 31, 1993 and 1992, respectively. The Seller has delivered to
Purchaser unaudited monthly financial statements for the period from January
1, 1994 through July 31, 1994.
(b) The financial statements of the Seller referred to in Section
2.6(a) (collectively, the "Financial Statements") are true, correct and
complete, are based on Seller's books and records, have been prepared in
accordance with generally accepted accounting principles consistently applied
and accurately present the assets, liabilities, financial positions and
results of operations of the Seller as at the dates thereof and for the
periods covered thereby; provided, however, that (i) monthly financial
statements shall not be required to reflect standard year-end adjustments and
reserves, and (ii) monthly financial statements may be prepared other than in
accordance with generally accepted accounting principles to the extent that
such financial statements shall not be required to reflect standard year-end
adjustments, or contingent liabilities. The Financial Statements of the Seller
reflect or provide for all material claims against, and all debts and
liabilities (of any kind or nature) of, such Seller, fixed or contingent, as
at the dates thereof and for the periods covered thereby, and the Seller does
not know of any basis for the assertion against it of any liability or
obligation of any nature whatsoever, not fully reflected or reserved against
in such Financial Statements. There has not been any Material Adverse Change
between the date of the Financial Statements and the date of this Agreement
and, except as set forth in Schedule 2.6(b), no fact or condition exists or is
contemplated or threatened which might cause any such Material Adverse Change
at any time in the future.
Without limiting the foregoing, since December 31, 1993:
(i) None of the Restaurants, Assets, Real Properties, Real
Property Leases, Assumed Contracts, financial or other condition, or
results of operations of the Seller, has been adversely affected in
any material way as a result of any fire, explosion, accident,
casualty, labor disturbance, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or public
enemy, or cessation, interruption or diminution of operations, or any
other event, whether or not covered by insurance;
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(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under
Contracts entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii) annexed
hereto, the Seller has not permitted nor allowed any of its Real
Property Leases or Assets, of or used by it to be mortgaged, pledged
or subjected to any Lien;
(iv) Except for transactions among Affiliates, the Seller
has not paid, loaned or advanced any amounts to, or sold,
transferred, leased, subleased or licensed any Real Properties or
Assets to, or entered into any agreement, or arrangements with, any
Affiliate or associate (and any of such transactions shall have been
terminated on or before the Closing Date); and
(v) The Seller has not agreed, whether in writing or
otherwise, to do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to
Purchaser at Closing, good and marketable title to all of its Assets and
Assumed Contracts free and clear of all Liens. The Assets of the Seller
include all of the operating assets used or held for use in or in connection
with the business being conducted by the Seller at the Restaurants. All the
Assets are, and on the Closing Date will be, in good operating condition and
repair, capable of performing the functions for which such items are currently
and normally used, normal wear and tear excepted. All the Assets conform, and
on the Closing Date will conform, to the standards of Burger King under the
terms and conditions set forth in the applicable Franchise Agreements. On the
Closing Date, each Restaurant, together with its related Assets and Real
Property, taken as a whole, will constitute a fully operable "turn-key" Burger
King restaurant sufficient to permit Purchaser to immediately operate the
business at such Restaurant as presently being conducted therein.
(b) The Seller will transfer and/or assign to Purchaser at Closing
all warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller consists, and at
Closing will consist, of items of quality and quantity usable or salable in
the ordinary course of business. The present quality and quantities of all
Inventory of the Seller are, and the qualities and quantities of all Inventory
outstanding at the Closing will be, reasonable in accordance with the current
specifications of Burger King. At Closing, the Inventory at each Restaurant
shall be sufficient for the
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operation of such Restaurant for at least 48 hours after the Closing Date, and
in no event will there be excess inventory in relation to normal usage.
SECTION 2.9 Real Properties; Real Property Leases. (a) With respect
to Real Properties that are owned by Persons not affiliated with the Seller,
to the knowledge of the Seller, each of such owners has good record and
marketable title in fee simple to such real property.
(b) The Seller has delivered to Purchaser a true and complete copy of
the Real Property Leases applicable to it, together with all amendments
thereto and all such Real Property Leases with such amendments or supplements
being listed and set forth on Schedule C. The Seller does not have knowledge
or information of any facts, circumstances or conditions which do or would in
any way adversely affect the Leased Real Property or the operation thereof or
the business thereon as presently conducted or as intended to be conducted. At
or prior to Closing, the Seller shall cause to be discharged of record all
Liens against the Seller or such Seller's interest affecting its Leased Real
Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(b), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(c) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real Properties
by Seller are in substantial compliance with all Regulations. Set forth on
Schedule 2.9(c) annexed hereto is a true and complete schedule of each
certificate of occupancy for each Restaurant located on the Real Properties,
copies of which certificates of occupancy and all amendments thereto to date
have heretofore been delivered to Purchaser, and which copies are complete and
correct as of the date of this Agreement and will be complete and correct as
of the Closing Date. The Real Properties and the Restaurants located thereon
are in a state of good maintenance and repair and are in good operating
condition, normal wear and tear excepted, and (i) there are no physical or
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mechanical defects to the Seller's knowledge in any of the Real Properties or
Restaurants, including, without limitation, the structural portions of the
Real Properties and Restaurants and the plumbing, heating, air conditioning,
electrical, mechanical, life safety and other systems therein and all such
systems are in good operating condition and repair (normal wear and tear
excepted); and (ii) there are no ongoing repairs to the Real Properties or
Restaurants located thereon being made by or on behalf of any Sellar or being
made by or on behalf of any landlord. All necessary occupancy and other
certificates and Permits, municipal and otherwise, for the lawful use and
occupancy of the Real Properties for the purposes for which they are intended
and to which they are presently devoted including, without limitation, for the
operation of a Burger King restaurant thereon, have been issued and remain
valid. There are no pending or threatened actions or proceedings that might
prohibit, restrict or impair such use and occupancy or result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such
certificates or Permits. All notes or notices of violation of any Regulations,
against or affecting any such Real Properties have been complied with. There
are no outstanding correcting work orders issued to the Seller from any
Federal, State, county, municipal or local government, or the owner of the
Real Properties or any insurance company with respect to any such Real
Properties.
(d) There are no condemnation or eminent domain proceedings of any
kind whatsoever or proceedings of any other kind whatsoever for the taking of
the whole or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of the Seller, threatened against the Real
Properties.
(e) The Real Properties and all improvements thereon represent all of
the locations at which the Seller conducts Business and are, now, and at
Closing will be, the only locations where any of the Assets are or will be
located.
(f) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any Law or by the normal use
and operation of the Real Properties and the Restaurants located thereon are
installed to the property lines of the respective Real Properties, to the
knowledge of the Seller are connected pursuant to valid Permits, are fully
operable and are adequate to service the Real Properties and the Restaurants
located thereon and to permit full compliance with all Regulations and normal
utilization of the Real Properties and the Restaurants located thereon.
(g) To Seller's knowledge, all licenses, Permits, certificates,
including, without limitation, proof of dedication, required from all
Authorities having jurisdiction over the Real
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Properties, and from any other Persons, for the normal use and operation of
the Real Properties and the Restaurants located thereon and to ensure
vehicular and pedestrian ingress to and egress from the Real Properties and
the Restaurants located thereon have been obtained. To Seller's knowledge, the
Easements are valid and binding, in full force and effect and enforceable in
accordance with their respective terms. There are no defaults or offsets which
the owner of such recorded Easements has against the enforcement of such
Easements and neither the Seller nor the owners of the Easements are in
default under such Easements, nor have any events under such Easements
occurred which with notice or the passage of time or both, would constitute a
default under such Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to
Purchaser a true, complete and correct copy of the Franchise Agreement
relating to its Restaurant, including any and all amendments thereto. The
Seller or its Stockholders own, and at Closing will transfer to Purchaser, its
respective right, title and interest in its Franchise Agreement, free and
clear of all Liens. Subject to the written consent of Burger King, in form
satisfactory to Purchaser and its counsel, which the Seller shall obtain and
deliver to Purchaser and its counsel at or prior to the Closing, the Seller
has the absolute right and authority to sell, assign, transfer and convey its
Franchise Agreement and all other assets being sold or otherwise conveyed to
Purchaser in connection with the Restaurant which it operates in accordance
with the terms and conditions hereof, and there have not been and, except as
set forth on Schedule 2.10, currently there are no claims and the Seller is
not aware of any threatened claims with Burger King pertaining to the
Franchise Agreements. On the Closing Date, neither Burger King nor the Seller
shall be in default under any of the Franchise Agreements and the Franchise
Agreements shall be in full force and effect, the Seller shall not have
received any notice of violation with respect to the Franchise Agreements, and
the Seller does not know or has no reason to know of any event which would
give rise to a violation or default under the Franchise Agreements.
SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor
agreement, any agreement containing severance or termination pay arrangements,
deferred compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other
employee or fringe benefit plan, including vacation plans or programs and sick
leave plans or programs. Except as set forth on Schedule
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2.11(a) hereof, within the last five (5) years the Seller has not experienced
any labor disputes, union organization attempts or any work stoppage due to
labor disagreements. Except as set forth on Schedule 2.11(a) hereof, (i) to
the best knowledge of the Seller, the Seller is in substantial compliance with
all applicable Regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours, and is not engaged in
any unfair labor practice; (ii) there is no unfair labor practice, charge or
complaint against the Seller pending or threatened before the National Labor
Relations Board; (iii) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against or
affecting the Seller; (iv) no question concerning representation has been
raised or is threatened respecting the employees of the Seller; and (v) no
grievance which might have an adverse effect on the Seller or the conduct of
its business nor any arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claims therefor exist.
Schedule 2.11(b) sets forth a true and complete list of the names of
all persons employed by the Seller at the Restaurants as of the date hereof,
and the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), the Seller does not have any Contract
relating to the Restaurants, Assets or Real Properties, including, without
limiting the generality of the foregoing, any (i) Contract for the purchase or
sale of Inventory; (ii) Contract for the purchase or sale of supplies,
services or other items; (iii) Contract for the purchase, sale or lease of any
Restaurant Equipment; (iv) Franchise Agreement or license agreement; and (v)
employment or consulting agreement or pension, disability, profit sharing,
bonus, incentive, insurance, retirement or other employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and
correct copy of each Other Contract applicable to it, together with all
amendments (if oral, a written description of the terms thereof) thereto.
(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of
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the scheduled term thereof or has knowledge of the intent of a party to any
such Other Contract to do the same, nor has any event occurred which, with
notice or the passage of time or both, would constitute a default under any
such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither
the Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14)
and (b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986,
as amended (the "Code")) (collectively, the "Group") presently has or at any
time during the five (5) years before the date of this Agreement had an
obligation to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee
welfare benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA
Plans"). Each ERISA Plan that is an employee pension plan complies in form and
operation with all applicable requirements of section 401(a) and 501(a) of the
Code and each ERISA Plan that is a group health plan (as defined in ERISA
section 607(1) or Code section 4980B(g)(B) has been operated in compliance
with applicable law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not
constitute an "employee benefit plan" as defined in ERISA section 3(3)
(collectively, "Fringe Benefit Plans") currently maintained by the Seller or
to which the Seller has an obligation to contribute. Seller has delivered or
made available to Purchaser true and complete copies of all documents, as they
may have been amended to the date hereof, embodying or relating to the ERISA
Plans or Fringe Benefits Plans.
(c) There are no actions, audits, suits, or claims pending (other
than routine claims for benefits) or, to the knowledge of the Seller,
threatened, against any ERISA Plan or Fringe Benefit Plan or any fiduciary of
any such Plan or against the assets of any such Plan.
(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether
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insured or self-insured) or other employee welfare benefit plan
maintained by the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents.
(a) Except as set forth on Schedule 2.14(a) and except for workers'
compensation or similar claims, there are no claims now pending, or to the
best knowledge of the Seller, in prospect or threatened against, the Seller or
any of its respective officers, directors or partners, at law or in equity
including, without limitation, (i) any voluntary or involuntary proceedings
under Bankruptcy Laws, or (ii) any Action before or by any governmental
instrumentality (domestic or foreign) or arbitrator which involves a claim or
demand for any judgment, decree, liability, action or injunction enjoining an
action, whether or not fully covered by insurance, in connection with the
Assets, Real Property Leases, Assumed Contracts, Real Properties, Restaurants,
business, affairs, properties or assets of the Seller.
(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in substantial compliance
in all respects with all Regulations applicable to its Business, affairs,
properties, or assets. Neither the Seller, nor any officer, director or
authorized agent of the Seller is in default with respect to, and has not been
charged or to its knowledge threatened with, nor is under investigation with
respect to, any violation of any Regulations relating to any aspect of its
Business, affairs, properties or assets including, but not limited to, the
Restaurants, Assets, Real Property Leases, Assumed Contracts, and the Real
Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
Permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the
Assets, Real Property Leases or the Real Properties ("Required Licenses").
Except as set forth in Schedule 2.14(c), the Seller has obtained each of the
Required Licenses and each such Required License, is and on the Closing Date
will be, validly issued and in full force and effect and there are not now
and, at Closing shall not be any claims pending, and to the Seller's
knowledge, any claims in prospect or threatened, challenging the Required
Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in Schedule
2.15 annexed hereto: (i) the Seller has obtained all Licenses which are
required under any Environmental Laws; (ii) to Seller's knowledge, the Seller
is in substantial compliance with all terms and conditions of the Required
Licenses and is also in substantial compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
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schedules and timetables contained in any Environmental Laws or code, plan,
order, decree or judgment relating to public health and safety and pollution
or protection of the environment or any notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) there are no claims,
pending or to Seller's knowledge threatened, against the Seller relating in
any way to any Environmental Law or any Regulation, notice or demand letter
issued, entered, promulgated or approved thereunder; and (iv) the Seller does
not know or have any reason to know of, nor has the Seller received any notice
of any facts, events or conditions which would interfere with or prevent
continued compliance with, or give rise to any common law or legal liability
under any Environmental Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily
insured against by reputable companies in the same or similar business, of
such types and in such amounts (with such deductible amounts) as is customary
for such companies under similar circumstances. All of the applicable
insurance policies are valid and enforceable and in full force and effect and
will be continued in full force and effect up to and including the Closing
Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income tax
returns and all state and local income, franchise and sales tax returns and
all and any other tax return which was required to be filed as of the date of
this Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. The
provision for Taxes shown on the Financial Statements of the Seller was
sufficient to satisfy all taxes due and all assessments received by the Seller
(and all other entities included within the Financial Statements) for all
periods ended on or prior to the date of such Financial Statements. As of the
date hereof, no Taxes are past due, and no Taxes are unpaid and all current
payroll taxes have been paid. The Seller is not aware of any basis upon which
any assessment of additional Taxes could be made, and the Seller has not
signed any extension agreement with the Internal Revenue Service or any other
governmental agency or given waiver of a statute of limitations with respect
to the payment of Taxes for periods for which the statute of limitations has
not expired. The Seller shall be liable for all tax liabilities in connection
with the operation of the Restaurants, the Assets, the Real Properties, the
Real Property Leases, the Easements and Assumed Contracts, which cover periods
prior to the Closing Date. The Seller shall be liable for half of all
transfer, sales and similar tax liabilities, if any, in connection with the
leasing of the Real Properties under the Real Property Leases, the assignment
of the Real Property
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Leases and the Assumed Contracts, and the transfer of any rights under the
Easements. All taxes which the Seller is required by law to withhold or
collect have been duly withheld or collected and to the extent required have
been paid over to the proper governmental authorities on a timely basis or
reflected as an obligation on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, By-Law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or Assumed Contracts. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereunder and thereby will not
result in the violation or breach of, default or the creation of any Lien
under any of the aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the
transactions contemplated by this Agreement or the other Transaction
Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be
stated herein or therein or which is necessary to make the statements herein
or therein not misleading. There is no fact which the Seller has not disclosed
to Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Seller that:
SECTION 3.1 Organization and Corporate Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified and licensed to do
business wherein the character of the Real Properties and other Assets to be
purchased makes such licensing or qualification to do business necessary.
Purchaser has full power and authority (corporate and other) to own or hold
under lease its properties and assets, and execute and deliver this Agreement
and the other Transaction Documents to be executed and delivered by Purchaser
pursuant hereto or in connection herewith and to consummate the transactions
contemplated hereby and thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Seller by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance
or fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The
execution and delivery of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Board of Directors of Purchaser and no other
corporate acts or proceedings on the part of Purchaser or its stockholders are
necessary to authorize the execution and delivery of this Agreement or any of
the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by Purchaser, will be the
legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforcement thereof may be
limited by Bankruptcy Laws and subject to the general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 3.4 No Violation. The execution, delivery and
performance of this Agreement and the other Transaction Documents
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by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby and thereby do not and at Closing will not (a) violate its
Certificate of Incorporation or By-Laws; (b) violate or conflict with or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under any agreement, indenture, instrument or
understanding to which Purchaser is a party or by which it is bound; (c)
violate any judgement decree, law, rule, or regulation to which Purchaser is a
party or by which it is bound; (d) result in the creation of, or give any
party the right to create any encumbrance upon the property or assets of
Purchaser; (e) terminate or modify, or give any third party the right to
terminate or modify, the provisions or terms of any agreement or commitment to
which Purchaser is a party or by which Purchaser is subject or bound; or (f)
result in any suspension, revocation, impairment, forfeiture or non-renewal of
any license, qualification, authorization or approval applicable to Purchaser.
SECTION 3.5 Consents. Except for the Burger King Consents and the
consent of The First National Bank of Boston (Purchaser's senior lender),
Purchaser is not required to obtain any consents, approvals or other
authorizations or to make any filing with any Authority or any other Person in
connection with the execution, delivery and consummation of this Agreement and
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 3.6 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the
transactions contemplated by this Agreement or the other Transaction
Documents.
SECTION 3.7 Material Information. This Agreement, the other
Transaction Documents and any exhibit, schedule, certificate or other
information representation, warranty or other document furnished or to be
furnished by Purchaser to Seller do not (a) contain, nor will the same
contain, any untrue statement of a material fact; or (b) omit, nor will the
same omit or fail to state, a material fact required to be stated herein or
therein or which is necessary to make the statements herein or therein not
misleading. There is no fact which the Purchaser has not disclosed to Seller
and its counsel in writing and of which the Purchaser is aware which
materially and adversely affects or could adversely affect the Business
prospects, financial condition, operations, property or affairs of the
Restaurants.
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SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as
of the Closing Date with the same force and effect as if made on and as of
that date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing
Date. (a) Between the date of this Agreement and the Closing Date, the Seller
shall give Purchaser, its directors, officers, employees, accountants, counsel
and other representatives and agents ("Representatives") reasonable access to
the premises, properties, books, financial statements, Contracts, records of
the Seller, relating to the Business, the Restaurants, the Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts, and
shall furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Seller as
Purchaser shall from time to time reasonably request for such purposes as
Purchaser shall require. Any such investigation or examination shall be
conducted as reasonable times and upon reasonable notice to the Seller.
(b) Without in any way limiting the provisions of Section 4.1(a)
hereof, Purchaser shall have the right between the date of this Agreement and
the Closing Date at such time or times as Purchaser reasonably may request (i)
to have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or
other wood-destroying organism present in the Real Properties or Restaurants,
or any damage from prior termites or other wood- destroying organism, and the
Seller will assign to Purchaser at Closing all rights under existing contracts
and policies, if any, with the Seller's exterminating company; and (ii) to
have conducted any environmental audits or studies of the Restaurant, the Real
Property and the Assets, including a "Phase I" and, if the results of such
Phase I so recommends, a "Phase II" environmental study. Notwithstanding
inspections, audits or other studies undertaken by or on behalf of Purchaser
hereunder or any other due diligence investigation undertaken by or on behalf
of Purchaser, Seller shall not be relieved in any way of responsibility for
its warranties, representations and covenants set forth in this Agreement.
SECTION 4.2 Operation of the Business of Seller. Between the date of
this Agreement and the Closing Date, the Seller shall conduct the operation of
its Restaurants in the ordinary and usual course of business, consistent with
past practices and will
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use its best efforts to preserve intact the present business organization with
respect to its Restaurants, to keep available the services of its officers and
employees and to maintain satisfactory relationships with landlords,
franchisors, dealers, licensors, licensees, suppliers, contractors,
distributors, customers and others having business relations with it and its
Restaurants and will maintain its Restaurants, Real Properties, and Assets in
a condition conducive to the operation of the business currently carried on
therein.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, the Seller will not:
(a) Keep and maintain its books of account and records other
that in accordance with generally accepted accounting principles
consistent with past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of
the employees at any of the Restaurants other than in the ordinary
course of business, consistent with past practices; (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit
not required or permitted by any Welfare Plan, whether past or
present; or (iii) commit itself in relation to its Restaurants, the
employees at its Restaurant or the Real Properties, to any new or
renewed Welfare Plan with or for the benefit of any Person, or to
amend any of such Welfare Plans or any of such agreements in
existence on the date hereof;
(d) Fail promptly to notify Purchaser of any unusual
developments with respect to its Restaurants, Assets, Real
Properties, Real Property Leases, the Easements, Assumed Contracts or
otherwise in connection with its business;
(e) Permit any of its insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies are in full force and effect providing coverage,
in form, substance and amount equal to or greater than the coverage
under those canceled, terminated or lapsed for substantially similar
premiums;
(f) Amend or terminate its Real Property Leases, or sell,
transfer, mortgage or otherwise dispose of or encumber, or agree to
sell, transfer, mortgage or otherwise dispose of or encumber, its
Real Property Leases, the
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Easements or, except in the ordinary course of business, any
of the Assets or Assumed Contracts;
(g) Allow to occur any default or breach, or event which
with the lapse of time or giving of notice, or both, would constitute
a default or breach under its Real Property Leases, the Easements,
its Franchise Agreement or any of the other Assumed Contracts;
(h) Enter into any other Contracts whether written or oral
which, individual or in the aggregate, would be material to its
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements or the Assumed Contracts, except Contracts for the
purchase, sale or lease of goods or services in the ordinary course
of business consistent with past practice and not in excess of
current requirements, or otherwise make any material change in the
conduct of the businesses or operations of the Seller;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the
other Transaction Documents;
(j) Take any action which would result in any of the
representations or warranties contained in this Agreement or the
other Transaction Documents not being true at and as of the time
immediately after such action at and as of the Closing Date, or in
any of the covenants contained in this Agreement or other Transaction
Documents becoming unperformable or which could have a Material
Adverse Effect on the transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain
and keep its Restaurant, Assets and Real Properties in at least the
same condition and order as exists on the date hereof, reasonable
wear and tear excepted, and fail to perform repairs and maintenance
usual and customary in the ordinary course of business;
(l) Enter into any lease, sublease, license or any other
occupancy agreement, amend or terminate the Easements, the Real
Property Leases, or enter into, amend or terminate any Franchise
Agreement, or other Contract with respect to its Restaurants and Real
Properties;
(m) Take any action or allow to occur any event which with
the lapse of time or giving of notice, or both, would allow to lapse
any of the Licenses;
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(n) Operate its Restaurants or otherwise engage in any
practices which would materially affect sales at its
Restaurant; or
(o) Agree (in writing or otherwise) to do any of the
foregoing.
SECTION 4.3 Supplements to Disclosures. Prior to the Closing Date,
the Seller will promptly supplement or amend the information set forth herein
and in the Schedules and Exhibits referred to herein with respect to any
matter hereafter arising which, if existing or occurring at or prior to the
date of this Agreement, would have been required to be set forth or described
herein or in a Schedule or Exhibit or which is necessary to correct any
information herein or in a Schedule or Exhibit or in any representation and
warranty, which has been rendered inaccurate thereby.
SECTION 4.4 Computer Software. The Seller shall provide Purchaser
with computer readable software in a form and language that Franchise Service
Options can use and manipulate, which software shall be used to manage the
Restaurants, including (i) payroll and compensation systems and (ii) sales
reports of the Restaurants on a "restaurant by restaurant" and "day by day"
basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the
Closing Date, the Seller shall not, directly or indirectly and whether by
means of a sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or
enter into any Contract to sell, transfer, assign or dispose, of the
Assets or any interest therein, except for normal operations in the
ordinary course of business; or
(b) encourage, initiate or solicit any inquiries or
proposals by, or engage in any discussions or negotiations with, or
furnish any non-public information to, any Person concerning any such
transaction and the Seller shall promptly communicate to Purchaser
the substance of any inquiry or proposal concerning any such
transaction which may be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof
until the Closing Date, each of the parties hereto shall furnish to the other
party hereto such necessary information and reasonable assistance as such
other party may reasonably request in connection with its preparation of
necessary filings or submissions to any governmental agency and the Seller
shall use its best efforts to obtain all Licenses and Required Consents
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from third parties necessary to consummate the transactions contemplated by
this Agreement and the other Transaction Documents. Each party shall furnish
to the other copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Purchaser, Seller or
any of their respective representatives and agents, on the one hand, and any
government agency or authority or third party, on the other hand, with respect
to this Agreement and the other Transaction Documents and transactions
contemplated hereby and thereby.
SECTION 4.7 Management Subscription Agreement; Other Actions. On or
before the Closing in connection with exchanging the Assets for the Class D
Common Stock, the Senior Preferred, the Junior Preferred and the Notes of the
Purchaser (the "Securities") the Seller and Lawrence Jaro, shall execute and
deliver a counterpart of the Management Subscription Agreement of even date
herewith by and among the Seller and Lawrence Jaro, the Purchaser and other
Management Investors (as defined therein), and shall have taken all other
actions and executed and delivered all other agreements and documents
necessary for a valid placement of the Securities by the Purchaser with the
Seller and Lawrence Jaro.
SECTION 4.8 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by Law, no announcement of the
existence or terms of this Agreement or the other Transaction Documents or the
transactions contemplated hereby and thereby shall be made publicly or to the
employees or customers of Seller, by any party to this Agreement or any of its
respective Representatives without the advanced written approval of the other
parties.
(b) Purchaser, on the one hand, and Seller, on the other hand, each
shall hold in strict confidence, and shall use their best efforts to cause all
their Representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or by other requirements of
law, all confidential and proprietary information (collectively, "Confidential
Information") concerning Seller, (in the case of Purchaser) and Purchaser (in
the case of Seller) which is created or obtained prior to, on or after the
date hereof in connection with the transactions contemplated hereby, and
Purchaser, Seller shall not use or disclose to others, or permit the use or
disclosure of, any such information created or obtained except to the extent
that such information can be shown to have been (i) previously known by
Purchaser, and Seller, as the case may be (ii) in the public domain through no
fault of a party or any of its Representatives, and will not release or
disclose such information to any other Person, except its officers, directors,
employees, Representatives and lending institutions who need to know such
information in connection with this Agreement.
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(c) For purposes of this Section 4.8, Purchaser specifically
acknowledges that it and its Representatives will have an opportunity to
engage in "due diligence" with respect to this transaction and which may
include the opportunity to review corporate records, financial and otherwise,
interview certain management personnel, and see and learn of the operation of
Seller. The Confidential Information of Seller, referred to in Section 4.8(b),
includes, without limitation, all schedules, documents, work papers or other
written information, and specifically including financial records, leases,
franchise agreements, corporate minutes, corporate organization documents,
stockholder records, employment records, fringe benefit records, lists of
creditors and suppliers, contracts, loan and security agreements, claims
against Seller, insurance, management and operation procedures and trade
secrets (both as defined by Colorado statutory law and by common law); and any
other proprietary information related to the Business conducted by Seller,
whether or not such information would be legally protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other
is unique and its release or misusage may not be compensable in damages and
that the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.9 Limitation of Seller's Claims After Closing. From and
after the Closing and thereafter so long as the provisions of Article VI are
still applicable, the Seller shall not, without the prior written consent of
Purchaser: (i) engage in any business, which would adversely affect any value
of Purchaser's business; or (ii) take any other action or fail to take any
action, or allow, the occurrence of any event, with respect to the Seller's
assets, which could be reasonably expected to have a Material Adverse Effect
on the Seller's ability to indemnify, defend and hold harmless Purchaser and
its officers, directors and stockholders from and against Damages (as
hereunder defined) pursuant to Article VI; provided, however, that nothing
herein shall preclude the Seller from taking any action to distribute assets
whether in the form of cash or other assets to its Shareholders'.
SECTION 4.10 Employee Benefit Matters. (a) No later than
30 days after the Closing Date, the Seller shall discharge and
satisfy in full any liabilities it may have with respect to any
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wages, vacation, severance or sick pay, or any rights under any ERISA Plan or
Fringe Benefit Plan.
(b) No later than 30 days after the Closing Date, the Seller shall
discharge and satisfy in full any employment, consulting or similar
arrangement to which the Seller is a party or for which the Seller is
responsible.
(c) The Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Seller,
and to "qualified beneficiaries" of any employee of the Seller or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Seller or an Affiliate of the Seller. The type of coverage shall be that
described in Section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in Section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under Section 4980B of the Code.
(d) Subject to the provisions of this Agreement, Seller and the
stockholders of Seller jointly and severally, hereby agree to indemnify and
hold Purchaser harmless from and against any Damages which arise out of the
failure to comply with the obligations in Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Seller shall deliver to Purchaser:
(i) within five (5) business days after the end of each
calendar month, a written statement, certified by Seller, of the
gross sales of each Restaurant for that month; and
(ii) With respect to the "compiled" Financial Statements
delivered to Purchaser by the Seller, at the request of Purchaser,
the Seller shall (and shall cause their respective Representatives
to) cooperate with Purchaser to have such statements reviewed or
audited or further clarified in such manner as Purchaser may deem
necessary or advisable. Any additional fees paid by the Seller to
their respective independent certified public accountants in
connection with such cooperation shall be borne by Purchaser.
(b) Seller agrees to observe and abide by the provisions of Sections
4.4, 4.5 and 4.7, and Seller and Purchaser agree to observe and abide by the
provisions of Article VIII hereof;
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(c) Seller acknowledges and agrees to be bound by the
provisions of Section 4.6 and 7.1(c); and
(d) Inasmuch as all of the Franchise Agreements are held in
individual names, the Seller shall cause the individual to observe and abide
by the provisions of Section 4.5 insofar as the transfer of such Franchise
Agreements to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser also hereby waives compliance
by Seller with the provisions of any applicable bulk sales state or local tax
laws in effect in the states of Texas and Colorado. Seller hereby warrants and
agrees to pay and discharge, promptly when due, all claims of creditors which
may be asserted against Purchaser by reason of such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth all of the
creditors of the Seller as of the date hereof and the amounts owing to such
creditors as of the date hereof.
(c) The bulk sales laws referred to in Section 4.12(a) hereof are
referred to herein, collectively, as the "Bulk Sales Laws".
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Seller and Purchasers.
The obligations of Purchaser and Seller to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at
or prior to the Closing of the following conditions, except to the extent that
any such condition may have been waived in writing by both Seller and
Purchaser at or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation,
inquiry or other proceeding before any governmental or regulatory
authority or other Person shall have been instituted or shall be
pending or threatened which questions the validity or legality of
this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby and which could
reasonably be expected to damage materially the Business or assets of
the Seller if the transactions contemplated hereby or thereby are
consummated. No injunction, decree or order shall be in effect
prohibiting consummation of the transactions contemplated by this
Agreement or the other Transaction Documents or which would make the
consummation of such transactions unlawful and no action or
proceeding shall have been instituted and remain pending before an
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Authority to restrain or prohibit the transactions contemplated by
this Agreement and the other Transaction Documents.
SECTION 5.2 Conditions to the Obligations of Seller. The obligations
of the Seller to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by the Seller at or prior to the
Closing:
(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated
hereby or thereby shall be true and correct at and as of the Closing
Date, with the same force and effect as if made at and as of the
Closing Date; the Purchaser shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Seller shall have received a
certificate dated the Closing Date in form satisfactory to him signed
by an officer of Purchaser.
(b) Governing Instruments, etc. The Seller shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of Purchaser certifying, among other things, that
attached or appended to such certificate (i) is a true and correct
copy of its Certificate of Incorporation and all amendments if any
thereto as of the date thereof; (ii) is a true and correct copy of
its By-Laws; (iii) is a true copy of all corporate actions taken by
it, including resolutions of its board of directors authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation
of the transactions contemplated hereby and thereby; and (iv) are the
names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(c) Payment of Purchase Price. Purchaser shall have
tendered to Seller the Purchase Price payable at Closing in
accordance with Section 1.2(a).
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(d) Assumption of Assumed Contracts. The Seller shall
have received from Purchaser an Assumption Agreement
substantially in the form annexed as Exhibit C hereto.
(e) Opinion of Counsel. The Seller shall have received an
opinion of counsel for Purchaser, as of the Closing Date,
substantially in the form annexed as Exhibit D hereto.
(f) Senior Lender's Consent. Seller shall have been
presented evidence that the Purchaser shall have received, if
necessary, the written consent of its Senior Lender, The First
National Bank of Boston, to the transactions contemplated hereby.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations
of Purchaser to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Seller
contained in this Agreement and the other Transaction Documents, or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated
hereby or thereby shall be true and correct at and as of the Closing
Date with the same force and effect as though made on and as of the
Closing Date; the Seller shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Purchaser shall have received
certificates dated the Closing Date in form satisfactory to Purchaser
signed by the President on behalf of the Seller, as applicable.
(b) Governing Instruments, etc. Purchaser shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of the Seller certifying, among other things,
that attached or appended to such certificate (i) is a true and
correct copy of its Certificate of Incorporation and all amendments
if any thereto as of the date thereof; (ii) is a true and correct
copy of its By-Laws; (iii) is a true copy of all corporate actions
taken by it, including resolutions of its board of directors and
stockholders authorizing the execution and delivery of this Agreement
and each other Transaction Document to be delivered by it pursuant
hereto and the
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consummation of the transactions contemplated hereby and thereby; and
(iv) are the names and signatures of its duly elected or appointed
officers who are authorized to execute and deliver this Agreement and
any certificate, document or other instrument in connection herewith.
(c) Instruments of Transfer. The Seller shall have delivered
to Purchaser a bill of sale and assignment ("Bill of Sale")
substantially in the form annexed as Exhibit E hereto, a Lease
Assignment (if applicable) and any other documents of transfer which
Purchaser reasonably shall request in order to evidence and
effectuate the sale and assignment to Purchaser of the Assets, the
Real Property Leases, the Assumed Contracts and the consummation of
all other transactions contemplated by this Agreement and the other
Transaction Documents.
(d) Consents. The Seller shall have obtained, and delivered
to Purchaser, copies of the Required Consents applicable to it in
form and substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an
opinion or opinions of counsel for Seller, as of the Closing Date,
substantially in the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been no
Material Adverse Change, nor any events which could have a material
adverse change, in the Business, operations, prospects or financial
or other condition of any Restaurant or in the respective Assets or
Real Properties from the date hereof to the Closing Date (the
"Interim Period") nor shall have there been, for all Restaurants in
the aggregate, a decrease of five percent or more in gross sales or
gross profit during the Interim Period, as compared with the same
period during the prior calendar year. For purposes hereof, "Gross
Profit" shall mean total gross sales reduced by the sum of food,
labor and paper costs. At Closing, Purchaser shall have received a
certificate dated the Closing Date in form satisfactory to Purchaser
signed by the President on behalf of the Seller to the foregoing
effect.
(g) Environmental Due Diligence. Purchaser shall have
completed its environmental due diligence of the Restaurants, Real
Property and Assets and have received results which are satisfactory
to Purchaser in its sole discretion. In the event Seller shall
provide Purchaser with previously prepared environmental reports,
such reports must have been prepared within 90 days from the date of
this
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Agreement, or, in the alternative, such reports must have been
updated within 90 days of the date of this Agreement.
(h) Senior Lender's Consent. Purchaser shall have
received, if necessary, the written consent of its senior
lender, The First National Bank of Boston, to the
transactions contemplated hereby.
(i) Other Documents. The Seller shall have delivered
to Purchaser:
(i) the Assignment of its Real Property Lease,
each Assumed Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original
counterpart of the Real Property Lease;
(iv) receipts for the Purchase Price paid to
Seller by Purchaser;
(v) certificates dated no earlier than 30 days
prior to the Closing Date, from appropriate authorities in
the State of its jurisdiction of incorporation, as to the
good standing of such Seller;
(vi) an updated schedule of creditors as of the
Closing Date;
(vii) executed original of each of the Osborn Proxy
Agreement and the Jaro Proxy Agreement, as defined in the
Stockholders Agreement, of event date herewith; and
(viii) all other documents, instruments and
agreements required to be delivered by such Seller to
Purchaser pursuant to this Agreement and the other
Transaction Documents.
(j) Review by Purchaser's Auditor. Purchaser's
auditor shall have:
(i) reviewed the financial and accounting system
of Seller;
(ii) reviewed and confirmed the financial
statements and results set forth in such statements;
(iii) found no objection to the financial and
accounting system of Seller and Purchaser shall have
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resolved any objection raised by the auditor and
presented to the Seller by the Purchaser.
(k) The lease payments in respect of the Additional
Restaurant shall be modified so that rental expenses shall be reduced
to $150,000 per annum.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing, notwithstanding any investigation
heretofore or hereafter made by or on behalf of any party hereto; provided,
however, that (a) the agreements and covenants (other than the indemnification
provisions set forth in this Article VI, which will survive as provided below)
set forth in this Agreement shall survive and continue until all obligations
set forth therein shall have been performed and satisfied and the applicable
statute of limitations for breaches or defaults of such agreements and
covenants has expired; and (b) all representations and warranties, and the
agreements of Seller and Purchaser to indemnify each other set forth in this
Article VI, shall survive and continue for, and all indemnification claims
with respect thereto shall be made prior to March 31, 1996.
SECTION 6.2 Agreement to Indemnify. Subject to the conditions of this
Article VI:
(a) Purchaser hereby agrees to indemnify, defend and hold
harmless the Seller from and against all demands, claims, actions or
causes of action, assessments, loses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and
reasonably attorney's fees,costs and disbursements and expenses
(collectively, "Damages"), asserted against, resulting to, imposed
upon or incurred by the Seller directly or indirectly, arising out of
or resulting from (i) a breach of any representation, warranty,
covenant or agreement of Purchaser contained in or made pursuant to
this Agreement (including but not limited to enforcement of this
Article VI), the other Transaction Documents or the transactions
contemplated hereby or thereby or any facts or circumstances
constituting such breach; and (ii) any indebtedness, obligation or
liability assumed by Purchaser pursuant to Section 1.1, 1.2(a)(vi)
and 1.4(b) hereof; and (iii) the operation, use or ownership of its
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Restaurants, Assets, Real Property Leases, Real Properties, the
Easements and Assumed Contracts, during, or which have otherwise
accrued from or otherwise relate to, the period of time after the
Closing Date; and
(b) Seller agrees to indemnify, defend and hold harmless
Purchaser and its officers, directors and stockholders from and
against all Damages asserted against or incurred by Purchaser or such
officers, directors and stockholders, directly or indirectly, arising
out of or resulting from: (i) a breach of any representation,
warranty, covenant or agreement of the Seller contained in or made
pursuant to this Agreement (including but not limited to enforcement
of this Article VI) the other Transaction Documents or any facts or
circumstances constituting such a breach; (ii) any indebtedness,
obligations or liabilities of the Seller including, but not limited
to, any liability or obligation set forth in Section 1.4(a), and the
tax liabilities set forth in Section 2.17 other than those expressly
assumed by Purchaser hereunder; (iii) a breach of or otherwise
arising under any Environmental Law (whether now or hereafter in
effect), to the extent the same arises out of any condition or state
of facts or otherwise relates to the period of time commencing on the
date Seller was entitled to possession of the Real Property in
question and ending on the Closing Date; (iv) the operation, use or
ownership of the Restaurants, Assets, Real Properties, Real Property
Leases, the Easements and Assumed Contracts during, or which have
otherwise accrued from or otherwise relate to, the period of time
prior to the Closing Date; (v) the Seller's failure to pay and
discharge all claims of creditors which may be asserted against
Purchaser by reason of Purchaser's waiver of compliance by Seller of
the Bulk Sales Laws and (vi) all Damages arising before the Closing
and not expressly assumed in writing by the Purchaser; provided,
however, that Seller's indemnification of Purchaser shall be limited
in aggregate amount as provided in Section 6.5.
SECTION 6.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 6.3 with respect to Damages
for which it must indemnify another party hereunder (collectively, the
"Indemnifiable Claims") shall be subject to the following terms and
conditions:
(a) The indemnified party shall give the indemnifying party
notice of any such Indemnifiable Claim which notice shall set forth
in reasonable detail the basis for and amount of the Indemnifiable
Claim, and the circumstances giving rise thereto. If the
Indemnifiable Claim is a third-
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party Claim, the notice must contain an copy of any papers served on
the indemnified party.
(b) If the Indemnifiable Claim is not a third-party Claim,
unless within 30 days of receipt by the indemnifying party of notice
of the Indemnifiable Claim the indemnifying party sends written
notice to the indemnified party disputing the facts giving rise to
the Indemnifiable Claim or the amount of Damages stated in the
notice, the Damages stated in the notice shall become due and payable
upon the expiration of such 30 day period. If, however, the
indemnifying party disputes the facts giving rise to the
Indemnifiable Claim or the amount of Damages stated in the notice
within such 30 day period and the dispute cannot be resolved within
the following 90 days, the dispute shall be submitted to arbitration
under the rules of the American Arbitration Association in Chicago,
Illinois.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own
expense by representatives of its own choosing reasonably
satisfactory to the indemnified party and will consult with the
indemnified party concerning such defense during the course thereof.
If the indemnifying party, within 30 days after receipt of notice of
any Indemnifiable Claim (or such shorter period as is necessary to
prevent prejudice to the indemnified party, if such 30 day period
would prejudice the rights of the indemnified party), fails to
defend, the indemnified party will (upon further notice to the
indemnifying party) have the right to undertake the defense,
compromise or settlement of such Indemnifiable Claim on behalf of and
for the account and risk of and at the expense of the indemnifying
party. In addition, if there is a reasonable probability that a
third-party Indemnifiable Claim may materially and adversely affect
an indemnified party, the indemnified party shall have the right, at
its own cost and expense, to defend, compromise or settle such
Indemnifiable Claim.
(d) Anything in this Section 6.3 to the contrary
notwithstanding, neither the indemnifying party nor the indemnified
party, as the case may be, may settle or compromise any Indemnifiable
Claim or consent to entry of any judgment in respect thereof, without
the written consent of the other, which consent may not be
unreasonably withheld or delayed.
SECTION 6.4 Remedies Cumulative. The remedies provided in this
Article VI shall be cumulative and shall not preclude the assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other parties hereto.
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SECTION 6.5 Indemnity Enforcement. (a) Indemnification Claims shall
be reduced, by and to the extent, that an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result of, and in compensation for, the subject matter of an
indemnification Claim by such indemnitee.
(b) The aggregate value of Purchaser's indemnification claims shall
be limited to the consideration received by the Seller as the Purchase Price
for the Assets and the Purchase Price for the Inventory.
(c) The Purchaser may, in addition to any other rights or remedies
available, set-off any indemnification claims hereunder against any amounts
owing in respect of any of the Securities issued or cash paid by the Company
as part of the Purchase Price for the Assets; provided, however, that this
right of set-off must be exercised against such Securities and cash in the
following order:
(i) interest and principal payments on the Notes;
(ii) dividend, liquidation and redemption payments on
the Senior Preferred and the Junior Preferred;
(iii) dividend liquidation and redemption payments on the
Class D Common Stock; provided that for redemption under this Section
6.5, the call price of the Class D Common Stock shall be Fair Market
Value, (as defined in the Management Subscription Agreement);
(iv) cash to the extent the cash portion of the Purchase
Price for the Assets and for the Inventory has not been distributed
to the Seller's shareholders and limited by the amount, if any, that
the Seller or Seller's shareholders have paid federal or state income
taxes thereon or any of them have received a notice or claim
assessing additional tax liabilities upon the Seller as a result of
non-compliance with section 351 and the rules regarding the
installment note regulations under the Internal Revenue Code of 1986,
as amended.
(d) The personal liability of any shareholder of Seller under this
Article VI shall be limited to the extent such shareholder personally receives
Securities or cash delivered by the Company as part of the Purchase Price, or
to the extent such shareholder acquires such Securities or cash subsequent to
the Closing in a distribution or dividend from Seller, net of federal and
state income taxes as provided in Section 6.5(c)(iv).
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Seller and Purchaser;
(b) By Seller, if (i) there has been a material
misrepresentation or breach of warranty on the part of Purchaser in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Seller; (ii) Purchaser
has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Seller; or (iii) any condition of Seller
obligations hereunder becomes incapable of fulfillment through no
fault of such parties and is not waived by such parties;
(c) By Purchaser, if (i) there has been a material
misrepresentation or breach of warranty on the part of the Seller in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Purchaser; (ii) the
Seller has committed a material breach of any covenant imposed upon
it hereunder and fails to cure such breach within 15 days of written
notice thereof from Purchaser; or (iii) any condition to Purchaser's
obligations hereunder becomes incapable of fulfillment through no
fault of Purchaser and is not waived by Purchaser;
(d) By Seller, if the Closing shall not have occurred on or
before September 7, 1994; provided that Seller shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
the Seller to fulfill any of its obligations under this Agreement
shall have been the reason that the Closing shall not have occurred
on or before said date;
(e) By Purchaser, if the Closing shall not have occurred on
or before September 7, 1994; provided that Purchaser shall not be
entitled to terminate this Agreement pursuant to this clause if the
failure of Purchaser to fulfill any of its obligations under this
Agreement shall have been the reason that the Closing shall not have
occurred on or before said date; and
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(f) By Seller or by Purchaser, if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Purchaser, or any Seller from
consummating the transactions contemplated hereby is entered and such
judgment, injunction, order or decree shall become final and
nonappealable.
SECTION 7.2 Effect of Termination; Right to Proceed. In the event
that a party wishes to terminate this Agreement pursuant to Section 7.1, it
shall give written notice thereof whereupon all further obligations of the
parties under the Agreement shall terminate without further liability of any
party hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants
and agreements imposed upon it hereunder; (ii) to the extent that any
condition to a party's obligations hereunder become incapable of fulfillment
because of the breach by a party of its obligations hereunder and (iii) that
the agreements contained in Sections 4.8, 9.3 and 9.4 shall survive the
termination hereof. In the event that a condition precedent to its obligation
is not met, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the transactions contemplated hereby. Notwithstanding anything to
the contrary contained herein, no party shall have any obligation to the other
hereunder arising out of the occurrence of an event or circumstance not within
the control of such party which event or circumstance resulted in a
representation or warranty of such party ceasing to be true.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Further Assurances. Each of the parties hereto shall
without further consideration execute and deliver to any other party hereto
such other instruments of transfer and take such other action as any party may
reasonably request to carry out the transactions contemplated by this
Agreement and the other Transaction Documents.
SECTION 8.2 Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
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similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 8.3 Remedies. In the event of a default under this Agreement
or the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or
other appropriate proceeding, whether for specific performance, or for an
injunction against a violation of any terms hereof or thereof or in aid of the
exercise of any right, power or remedy granted thereby or by law, equity,
statute or otherwise. The foregoing shall include, but shall not be limited
to, allowance for recovery by the aggrieved party of all of its fees and
expenses and disbursements incurred by it in connection with the transactions
contemplated hereby and in the Transaction Documents, including, without
limitation, the reasonable fees and expenses of its counsel, accountants,
agents and representatives, employed by it. No course of dealing and no delay
on the part of any party in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
or remedies. No right, power or remedy conferred hereby shall be exclusive of
any other right, power or remedy referred to herein or now or hereafter
available at law, in equity, by statute, or otherwise.
SECTION 8.4 Expenses. Upon the execution of this Agreement and the
closing of the Company's acquisition of franchises and other assets, rights
and obligations to certain Burger King restaurants in the Chicago area, the
Purchaser will reimburse the Seller for all reasonable expenses incurred by
the Seller in connection with the authorization, preparation and consummation
of this Agreement and the related transactions, including reasonable
attorneys' and accountants' fees; provided, however, that the aggregate amount
paid to Lawrence Jaro and entities related to Lawrence Jaro and William Osborn
and entities related to William Osborn for reimbursement of accountants' fees
shall not exceed $20,000.
SECTION 8.5 Entire Agreement. This Agreement and the other
Transaction Documents and the Exhibits and Schedules referred to herein and
therein contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior arrangements or understandings
with respect thereto.
SECTION 8.6 Definitions. For the purposes of this
Agreement:
(i) "affiliate" of any person shall mean any corporation,
proprietorship, partnership or business entity which, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled
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by, such person, and any directors, officers, partners or 50% or more
owners of such person.
(ii) "Affiliate" shall mean with respect to any Person, any
other Person that has a relationship with the designated Person
whereby either of such Persons directly or indirectly controls or is
controlled by or is under common control with the other of such
Persons.
(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iv) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by Seller at
the date of this Agreement and/or the Closing Date, and such business
and operations relating to the Assets and Assumed Contracts.
Business.
(v) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(viii) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(ix) "material" means any claim, circumstance or state
of facts which results in, or would reasonably be expected
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to result in, losses or the expenditure or commitment of $25,000 or
more, or which results in any material limitation or restriction on
the ability of the Seller or the Purchaser to conduct the Business.
(x) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
(xi) "Order" means any decree, order, injunction,
rule, judgment, consent of or by a U.S. Authority.
(xii) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xiii) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xiv) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the certificate of incorporation and
By-Laws of the Seller, as applicable.
(xv) "Taxes" shall mean all taxes, charges, fees, duties,
levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise,
value added, license, payroll, unemployment, environmental, customs
duties, capital stock, disability, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income
withholding and Social Security taxes imposed by the United States or
any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country or by
any other tax Authority, including all applicable penalties and
interest, and such term shall include any interest, penalties or
additions to tax attributable to such Taxes.
SECTION 8.7 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the Agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
SECTION 8.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and
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delivered personally, sent by telecopier, federal express or other reputable
overnight courier or sent by certified or registered mail, postage prepaid,
return receipt requested, at the addresses set forth below:
(a) if to Purchaser, to:
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
(b) if to Seller, to:
Lawrence Jaro
c/o Ernest J. Panasci, Esq.
Suite 1100
1600 Stout Street
Denver, Colorado 80202
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 8.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the heirs,
executor, personal representatives, legal representatives, successors and
assigns of the parties hereto, and shall not be assignable by either party
without the prior written consent of the other party; provided, however, that
the Purchaser may assign at Purchaser's sole discretion any or all of its
interest to a lender of Purchaser with written notice to Seller.
SECTION 8.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
CHICAGO, ILLINOIS AND
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WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF
THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN
THIS SECTION 8.10 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
SECTION 8.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss.
1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD.
SECTION 8.12 Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
SECTION 8.13 Purchaser's Designated Affiliate. Purchaser may
designate one or more of its wholly-owned subsidiaries or Affiliates to carry
out all or part of the transactions contemplated hereby to be carried out by
Purchaser, which designation shall not relieve Purchaser of its obligations
hereunder.
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SECTION 8.14 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
as of the day first above written.
NRE HOLDINGS, INC.
By:
Name:
Title:
JARO RESTAURANTS, INC.
By:
Name:
Title:
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PURCHASE AND SALE AGREEMENT
Among
NRE HOLDINGS, INC.
(as Purchaser)
And
TABOR RESTAURANTS ASSOCIATES, INC.
(as Seller)
Dated as of September 1, 1994
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
PURCHASE AND SALE; CLOSING
1.1 Assets to Be Conveyed........................................... 2
1.2 Purchase Price for Assets....................................... 3
1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements.......................................... 5
1.4 Assumption of Liabilities....................................... 6
1.5 Closing; Deliveries............................................. 8
1.6 Adjustments..................................................... 8
1.7 Petty Cash...................................................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Corporate Power................................ 10
2.2 Governing Instruments........................................... 10
2.3 Due Authorization............................................... 10
2.4 No Violation.................................................... 11
2.5 Consents........................................................ 11
2.6 Financial Statements............................................ 11
2.7 Assets.......................................................... 13
2.8 Inventory....................................................... 13
2.9 Real Properties; Real Property Leases........................... 13
2.10 Franchise Agreements............................................ 16
2.11 Employment Arrangements......................................... 16
2.12 Contracts and Arrangements...................................... 17
2.13 ERISA........................................................... 17
2.14 Litigation, Compliance with Regulations and Consents............ 18
2.15 Environmental Matters........................................... 19
2.16 Insurance Policies.............................................. 20
2.17 Tax Returns..................................................... 20
2.18 Adverse Restrictions............................................ 21
2.19 Brokers......................................................... 21
2.20 Material Information............................................ 21
2.21 Continuing Representations...................................... 21
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Section Page
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power................................ 22
3.2 Certificate of Incorporation and By-Laws........................ 22
3.3 Due Authorization............................................... 22
3.4 No Violation.................................................... 22
3.5 Consents........................................................ 23
3.6 Brokers......................................................... 23
3.7 Material Information............................................ 23
3.8 Continuing Representations...................................... 24
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior to the Closing
Date........................................................ 24
4.2 Operation of the Business of Seller............................. 24
4.3 Supplements to Disclosures...................................... 27
4.4 Computer Software............................................... 27
4.5 No Other Asset Sales............................................ 27
4.6 Regulatory Filing and Consents.................................. 27
4.7 Management Subscription Agreement; Other Actions................ 28
4.8 Announcements; Confidentiality.................................. 28
4.9 Limitation of Seller's Claims After Closing..................... 29
4.10 Employee Benefit Matters........................................ 30
4.11 Financial Statements and Reports................................ 30
4.12 Bulk Sales...................................................... 31
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Seller and Purchasers.......... 31
5.2 Conditions to the Obligations of Seller......................... 32
5.3 Conditions to Obligations of Purchaser.......................... 33
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations..................................... 36
6.2 Agreement to Indemnify.......................................... 37
6.3 Conditions of Indemnification................................... 38
6.4 Remedies Cumulative............................................. 39
6.5 Indemnity Enforcement........................................... 39
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ARTICLE VII
TERMINATION
7.1 Termination..................................................... 40
7.2 Effect of Termination; Right to Proceed......................... 41
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances.............................................. 42
8.2 Waiver and Amendment............................................ 42
8.3 Remedies........................................................ 42
8.4 Expenses........................................................ 42
8.5 Entire Agreement................................................ 43
8.6 Definitions..................................................... 43
8.7 Interpretation.................................................. 45
8.8 Notices......................................................... 45
8.9 Successors and Assigns.......................................... 45
8.10 LITIGATION...................................................... 46
8.11 ARBITRATION..................................................... 46
8.12 Severability.................................................... 46
8.13 Purchaser's Designated Affiliate................................ 47
8.14 Counterparts.................................................... 47
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel
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SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.3(c) Parking and Easements Agreements
1.5(d) Real Property Lease Adjustment Formulae
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
2.14(c) Required Licenses
2.15 Environmental Matters
4.12(b) Creditors Schedule re: Bulk Sales
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of
September 1, 1994 by and between NRE HOLDINGS, INC., a Delaware corporation
with its principal office at c/o Jordan Industries, Inc., Suite 550, Arborlake
Center, 1751 Lake Cook Road, Deerfield, Illinois 60015 ("Purchaser") and TABOR
RESTAURANTS ASSOCIATES, INC., a Colorado corporation (the "Seller"):
W I T N E S S E T H:
WHEREAS, by subscription agreements dated as of September 1, 1994,
certain investors are receiving voting stock, and in conjunction with this
Agreement, voting stock and other classes of securities in exchange for the
sale of assets under this Agreement;
WHEREAS, the subscription agreements contemplate certain proposed
transactions, including the transaction described in this Agreement, which are
to be consummated by the Purchaser promptly upon its capitalization;
WHEREAS, the Seller operates the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, the Seller is the owner or lessee of certain personal
property used or held for use in or in connection with the conduct of business
at its Restaurants and the Seller is the lessee of certain buildings, other
real property and land upon and in which its Restaurants are located, the legal
description of which is set forth on Schedule B hereto;
WHEREAS, the Seller and Purchaser propose to exchange each of the
Assets (as hereinafter defined) of Seller for securities of the Seller and
other consideration specified below; and
WHEREAS, the Seller that occupies Real Property pursuant to a lease
agreement (each, a "Real Property Lease" and, collectively, the "Real Property
Leases") (each such Real Property Lease, together with all amendments,
supplements, and schedules thereto, being listed on Schedule C hereto) proposes
to assign to National Restaurant Enterprises, Inc., a Delaware corporation and
wholly-owned subsidiary of the Purchaser ("Enterprises"), and Enterprises
proposes to accept such
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assignment of, the Seller's leasehold interest with respect to the Real
Property on which its Restaurants are located (each a "Leased Real Property"
and, collectively, the "Leased Real Properties");
WHEREAS, the Seller owns a building and improvements (the
"Improvements"), located and situated in the County of Denver, State of
Colorado, the complete legal description wherein the Improvements are located
is set forth on Schedule D hereto. The Improvements and the Leased Real
Property are referred to collectively, as the "Real Properties" or the "Real
Property");
WHEREAS, Purchaser proposes to transfer the Restaurants and Assets
acquired pursuant to this Agreement to Enterprises and to cause Enterprises to
assume the Assumed Contracts (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions
and conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, the Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Seller's
shareholders to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to acquire and accept the
assignment, transfer, conveyance and delivery from the Seller at Closing of,
all of the following assets used or located in or held for use in connection
with the Restaurants operated by the Seller (collectively, the "Assets") free
and clear of all Liens:
(a) Restaurant Equipment. All of the machinery, equipment,
furnishings, supplies, uniforms, spare equipment parts and all other personal
property (other than Inventory, as hereinafter defined) owned by the Seller and
used or held for use in, or in connection with, the operation of its
Restaurants, including but not limited to the assets set forth in Schedule
1.1(a) annexed hereto (collectively, "Restaurant Equipment");
(b) Leasehold Improvements. All trade fixtures, trade
equipment or other personal property placed in the premises by
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the Seller or any of the foregoing purchased by the Seller for its Restaurants,
excluding any HVAC system located at the Restaurants and any built-in freezer
located at the Restaurants ("Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise
Agreement for its Restaurants, as more fully set forth in
Schedule 1.1(c) annexed hereto ("Franchise Agreements", all
subject to the approval, as necessary, of the Burger King
Corporation;
(d) Inventories. All of the food, related paper products and
promotional items owned by the Seller or otherwise used or held for use in or
in connection with the business being conducted at its Restaurants
(collectively, "Inventory"), which, if so directed by Purchaser, Seller shall
sell directly to Enterprises;
(e) Leased Assets. All of the right, title and interest of the Seller
in any item of personal property which is not owned by it but is leased by it
or otherwise is used or held for use, in or in connection with the business
being conducted at its Restaurants, including but not limited to, the assets
set forth on Schedule 1.1(e) annexed hereto (collectively the "Leased Assets");
(f) Improvements. All of the right, title and interest of
Seller in and to the Improvements;
(g) Goodwill and Other Intangible Assets. All goodwill,
going concern value, contract rights, customer relationships, and
other general intangibles held or used by Seller in connection
with its business being operated at the Restaurant (collectively
the "Intangible Assets"); and
(h) Miscellaneous Assets. All of the right, title and interest of the
Seller in any other asset or property owned, leased, subleased, used or held
for use in, or in connection with the business being operated at its Restaurant
(collectively, the "Miscellaneous Assets") and excluding, accounts receivable,
cash, cash equivalents or securities held by Seller.
SECTION 1.2 Purchase Price for Assets.
(a) Seller shall exchange the Restaurant Equipment, Leasehold
Improvements and Miscellaneous Assets for the following consideration to be
delivered by the Purchaser:
(i) $ $76,000 in cash;
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(ii) 87 shares of the Purchaser's Class A2 Preferred
Stock, $.01 par value per share ("Senior Preferred"); and
(iii) 29 shares of the Purchaser's Class B Preferred Stock,
$.01 par value per share (the "Junior Preferred");
(b) Seller shall exchange the Leased Assets, Franchise
Agreements and Intangible Assets for the following consideration
to be delivered by the Purchaser:
(i) $40,000 in cash;
(ii) 8.1313 shares of the Purchaser's Class D Common
Stock, $.01 par value per share; and
(iii) the discharge or assumption of the principal, accrued
interest, fees and other amounts payable of the Seller's debt
associated with its Restaurants, not to exceed $31,000 (the
"Obligations").
(c) Seller shall exchange the Inventory for an amount equal to the
cost therefor as charged to the Seller by its unaffiliated supplier or vendor.
At the Closing, Purchaser shall pay to Seller $6000 per Restaurant for the
Inventory of each Restaurant, that sum being Seller's good faith estimate of
the cost of such Inventory (the "Estimated Inventory Price"). The precise
amount of the cost of the Inventory of the Seller shall be determined by
physical inventories to be taken on the Closing Date in its Restaurants and in
any other location where inventory may be located. Seller and Purchaser shall
each have the right to have at least one of its representatives present at the
taking of such inventories. The representatives shall submit a written report
of the results of such inventories promptly after Closing to both the Seller
and Purchaser. Promptly after receiving such report, the Seller shall then
price the inventories shown on such report by multiplying the physical items by
their cost, determined as aforesaid, and the Seller shall submit such priced
inventory report (the "Priced Inventory Report") to Purchaser. If Purchaser and
the Seller are unable to agree upon the purchase price of the Inventory within
10 days after the Seller and Purchaser have received the Priced Inventory
Report, such purchase price shall be determined by Deloitte & Touche, whose
determination shall be final and binding upon the Seller and Purchaser. Within
30 days after the final determination of the purchase price for the Inventory:
(A) if it exceeds the Estimated Inventory Price, Purchaser shall pay the amount
of such excess, by check, to the Seller; or (B) if it is less than the
Estimated Inventory Price, Seller shall pay the amount by check to the
Purchaser.
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(d) The Seller and Purchaser shall prepare and file their tax returns
and information statements in a manner consistent with the agreement set forth
above.
SECTION 1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements. Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of the representations and warranties
hereinafter set forth, at the Closing, the Seller shall assign to Enterprises
all of its leasehold interest in the Leased Real Properties and shall assign,
sublease or otherwise transfer to Enterprises all of its right, title and
interest in and to all parking and other access agreements or arrangements
relating to the Real Properties, as follows:
(a) Assignment of Real Property Leases. At Closing, the Seller shall
assign to Enterprises all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment and
Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A. The
Lease Assignment shall be executed and delivered at Closing by the Seller and
Enterprises.
(b) Lease Assignment Consent. At Closing, the Seller shall deliver to
Enterprises a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the last
sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c) annexed
hereto, with respect to the Seller, sets forth all written or oral parking
leases, easements, agreements, grants, licenses, options and any other
agreements (collectively referred to herein as "Easements"), except for
recorded instruments, pursuant to which the Seller is granted, for use in
connection with its Restaurant, parking privileges or rights, current or
prospective, and/or rights of access of any kind or nature in and to the
applicable Real Property. At Closing the Seller shall deliver to Purchaser such
documentation in form and substance reasonably satisfactory to Purchaser and
its counsel which effectively assigns or transfers the Seller's rights under
both recorded and unrecorded Easements to Enterprises (hereinafter individually
referred to as an "Easement Assignment", and, collectively, as the "Easement
Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby
agree and acknowledge that the Seller is not selling,
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transferring, assigning, delivering or otherwise conveying, and Purchaser is
not purchasing, receiving, acquiring or otherwise assuming, any liabilities of
the Seller, or any of its respective Affiliates except as specifically set
forth in Sections 1.1, 1.2(a)(vi) and 1.4(b) hereof. Purchaser shall neither be
liable for any liability or obligation of the Seller, or any of its respective
Affiliates nor shall it be required to indemnify the Seller, or any of its
respective Affiliates against any liability or obligation other than those so
specifically assumed or indemnified, as the case may be.
Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify the Seller, or any of its respective
Affiliates against any liability, obligation, duty or responsibility of the
Seller, or any of its respective Affiliates:
(i) arising from, or out of, the ownership or operations or
use of, or incurred in connection with, or incurred as a result of any
claim made against the Seller, or any of its respective Affiliates in
connection with, any Restaurant, Asset, Real Property, Real Property
Lease or Assumed Contract (as hereinafter defined) on or prior to, or
relating to any time period prior to 6:00 A.M. on the Closing Date;
(ii) arising from or by reason of the transactions
contemplated by this Agreement including, but not limited to, Federal,
state or local income taxes, transfer taxes, sales taxes and other
taxes, if any, arising from or by reason of the receipt of the
consideration for the Assets to be transferred pursuant hereto except
as provided in Section 1.6(b);
(iii) with respect to any wages, vacation, compensation,
severance or sick pay or any rights under any stock option, bonus or
other incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or
similar arrangement to which the Seller is a party or for
which the Seller is responsible;
(v) with respect to any "employee benefit plan" as defined in
Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including multi-employer plans as defined in
Section 3(37) of ERISA whether arising before, on or after the Closing
Date; or
(vi) under any Regulations (as hereinafter defined)
relating to public health and safety and pollution or
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protection of the environment, including, without limitation, those
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes or any materials defined or
categorized by any of the above as "Hazardous Materials", "Hazardous
Substances", or similar or related designations (collectively referred
to herein as "Environmental Laws"); or
(vii) with respect to any causes of action, judgements,
claims or demands related to any occurrence, action or omission by the
Seller, whether through negligence or otherwise, occurring before the
Closing.
(b) Assumption of Assumed Contracts. The Seller shall assign to, and
Enterprises shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of the Seller attributable
to the period after 6:00 a.m. the Closing Date, under the Franchise Agreements,
Real Property Leases, Easements, Leased Assets and the Other Contracts (as
hereinafter defined) (collectively, the "Assumed Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 190 S.
LaSalle Street, Chicago, Illinois 60603-3441 (or such other location as shall
be agreed upon by the parties) on September 1, 1994, provided, however, that
if, through no fault of the parties hereto, all of the conditions to the
parties' obligations to close hereunder are not satisfied or waived on the date
so designated, the Closing shall be adjourned to a subsequent mutually
agreeable date not later than September 7, 1994, unless further extended by
mutual agreement by the parties. The "Closing Date" is the date Closing
actually takes place.
(b) Delivery of Documents. At the Closing, Seller and Purchaser shall
deliver to each other the respective documents and other items set forth in
Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to
(i) obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Seller or by the
Seller to Purchaser by reason of such adjustments shall be made at the
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Closing (by adjustment of the Purchase Price, if practicable) or as soon as
reasonably practicable thereafter.
(b) The parties shall share equally in the payment of all sales taxes,
and transfer taxes, if any, applicable to its transaction at the Closing.
Purchaser and Seller shall share equally all franchise assignment fees to
Burger King Corporation ("Burger King") in connection with the assignment of
the Franchise Agreements to Purchaser.
(c) The parties shall share equally the cost of Purchaser's obtaining
prior to Closing, if necessary in Purchaser's reasonable judgment, a "Phase 1"
and, if applicable, a "Phase 2" environmental report. Any such reports or
studies prepared or obtained by the Seller prior to negotiations between
Purchaser and the Seller shall be borne by the Seller. At Closing, if
necessary, the parties shall adjust the cost of obtaining said environmental
reports.
(d) All "minimum" or "fixed rentals" and any other monetary
obligations accruing under the Real Property Leases shall be adjusted for the
month in which the Closing occurs. In the event the period used in computing
and/or adjusting percentage rental (hereinafter referred to as the "Adjustment
Lease Year") under any of the Real Property Leases commences before the Closing
Date and ends after the Closing Date, such percentage rental shall be adjusted
at the end of the Adjustment Lease Year for such Real Property Leases so
affected as follows:
(i) Seller shall be required to pay to Purchaser, within 30
days after the expiration of the Adjustment Lease Year, an amount
equal to the lesser of (1) the amount of percentage rental due for
such Adjustment Lease Year or (2) the "Percentage Rent Contribution"
determined by the
following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used in
determining such percentage rental during
such Adjustment
Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.6(d);
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C = Number of days during the Adjustment Lease
Year prior to, but not including, the Closing
Date; and
D = Percentage rent factor for such Real Property
Lease as indicated in Schedule 1.6(d);
provided, however, that, in the event the above formula yields a
negative amount as the Percentage Rent Contribution, the Percentage
Rent Contribution shall be deemed equal to zero; and
(ii) Purchaser shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental, if any,
due for the Adjustment Lease Year.
Section 1.7 Petty Cash. Upon the Closing, the Seller shall leave
$1,000.00 in cash at each Restaurant (the "Store Bank"). Purchaser agrees to
purchase each Store Bank separately from the Purchase Price at Closing on a
cash for cash basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with
Purchaser as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the
Regulations of its jurisdiction of incorporation (as set forth on Schedule A
hereto) and is duly qualified and licensed to do business in such jurisdiction
which is the only jurisdiction wherein the character of the Real Properties and
other Assets owned or leased or the nature of the business of the Seller makes
such licensing or qualification to do business necessary. The Seller has full
power and authority (corporate or otherwise) to own its assets, to own or hold
under lease the real property it presently owns or holds under lease including,
without limitation, the Real Properties, and to carry on the business in which
it is engaged at all locations at which it is presently located including,
without limitation, operation of the Restaurants at the Real Properties and to
execute and deliver this Agreement and the other documents and instruments to
be executed and delivered by the Seller, as the case may be, pursuant hereto or
in connection herewith (this Agreement and all other agreements, documents and
instruments to be entered into pursuant to this Agreement or in connection
herewith including all exhibits and schedules annexed hereto and thereto are
collectively referred to herein as the "Transaction Documents")
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and to consummate the transactions contemplated hereby and
thereby.
SECTION 2.2 Governing Instruments. The copies of the Certificate of
Incorporation and By-Laws of the Seller, and all amendments thereto to date, as
certified by the Secretary of Seller have heretofore been delivered to
Purchaser by Seller, and are complete and correct as of the Closing Date. The
Seller is not in default in the performance, observance or fulfillment of any
of the provisions, terms or conditions of its Certificate of Incorporation or
By-Laws.
SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Seller have been duly obtained. The execution and delivery of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors and stockholders of the Seller, and no other acts or
proceedings on the part of the Seller or the stockholders of the Seller are
necessary to authorize the execution and delivery of this Agreement or any of
the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by the Seller, will be the
legal, valid and binding obligation of the Seller enforceable against it in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency and other laws affecting creditors' rights
(collectively, "Bankruptcy Laws") and subject to general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and thereby,
do not, and at Closing will not: (a) violate its Certificate of Incorporation
or By-Laws, as amended; (b) violate or conflict with or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under any agreement, indenture, instrument or understanding to which
the Seller is a party or by which it is bound; (c) violate any judgment,
decree, law, rule or regulation to which the Seller is a party or by which it
is bound; (d) result in the creation of, or give any party the right to create,
any encumbrance upon the property and assets of the Seller; (e) terminate or
modify, or give any third party the right to terminate or modify, the
provisions or terms of any agreement or commitment to which the Seller is a
party or by which the Seller is subject or bound; or (f) result in any
suspension, revocation, impairment, forfeiture or non-renewal of
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any permit, license, qualification, authorization or approval
applicable to the Seller.
SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals or other authorizations which the Seller is required to obtain from,
and any filing which the Seller is required to make with, any governmental
authority or agency or any other Person including, but not limited to, consents
required from Burger King (the "Burger King Consents") in connection with the
execution, delivery and consummation of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby or thereby (collectively, the "Required Consents").
SECTION 2.6 Financial Statements. (a) The Seller has delivered to
Purchaser a balance sheet of the Business as at December 31, 1993 and December
31, 1992 and the related results of operations for the 12 months ended December
31, 1993 and 1992, respectively. The Seller has delivered to Purchaser
unaudited monthly financial statements for the period from January 1, 1994
through July 31, 1994.
(b) The financial statements of the Seller referred to in Section
2.6(a) (collectively, the "Financial Statements") are true, correct and
complete, are based on Seller's books and records, have been prepared in
accordance with generally accepted accounting principles consistently applied
and accurately present the assets, liabilities, financial positions and results
of operations of the Seller as at the dates thereof and for the periods covered
thereby; provided, however, that (i) monthly financial statements shall not be
required to reflect standard year-end adjustments and reserves, and (ii)
monthly financial statements may be prepared other than in accordance with
generally accepted accounting principles to the extent that such financial
statements shall not be required to reflect standard year-end adjustments, or
contingent liabilities. The Financial Statements of the Seller reflect or
provide for all material claims against, and all debts and liabilities (of any
kind or nature) of, such Seller, fixed or contingent, as at the dates thereof
and for the periods covered thereby, and the Seller does not know of any basis
for the assertion against it of any liability or obligation of any nature
whatsoever, not fully reflected or reserved against in such Financial
Statements. There has not been any Material Adverse Change between the date of
the Financial Statements and the date of this Agreement and, except as set
forth in Schedule 2.6(b), no fact or condition exists or is contemplated or
threatened which might cause any such Material Adverse Change at any time in
the future.
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Without limiting the foregoing, since December 31, 1993:
(i) None of the Restaurants, Assets, Real Properties, Real
Property Leases, Assumed Contracts, financial or other condition, or
results of operations of the Seller, has been adversely affected in
any material way as a result of any fire, explosion, accident,
casualty, labor disturbance, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or public
enemy, or cessation, interruption or diminution of operations, or any
other event, whether or not covered by insurance;
(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under Contracts
entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii) annexed
hereto, the Seller has not permitted nor allowed any of its Real
Property Leases or Assets, of or used by it to be mortgaged, pledged
or subjected to any Lien;
(iv) Except for transactions among Affiliates, the Seller has
not paid, loaned or advanced any amounts to, or sold, transferred,
leased, subleased or licensed any Real Properties or Assets to, or
entered into any agreement, or arrangements with, any Affiliate or
associate (and any of such transactions shall have been terminated on
or before the Closing Date); and
(v) The Seller has not agreed, whether in writing or
otherwise, to do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to
Purchaser at Closing, good and marketable title to all of its Assets and
Assumed Contracts free and clear of all Liens. The Assets of the Seller include
all of the operating assets used or held for use in or in connection with the
business being conducted by the Seller at the Restaurants. All the Assets are,
and on the Closing Date will be, in good operating condition and repair,
capable of performing the functions for which such items are currently and
normally used, normal wear and tear excepted. All the Assets conform, and on
the Closing Date will conform, to the standards of Burger King under the terms
and conditions set forth in the applicable Franchise Agreements. On the Closing
Date, each Restaurant, together with its related Assets and Real Property,
taken as a whole, will constitute a fully operable "turn-key" Burger King
restaurant sufficient to permit Purchaser to immediately operate the business
at such Restaurant as presently being conducted therein.
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(b) The Seller will transfer and/or assign to Purchaser at Closing all
warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller consists, and at
Closing will consist, of items of quality and quantity usable or salable in the
ordinary course of business. The present quality and quantities of all
Inventory of the Seller are, and the qualities and quantities of all Inventory
outstanding at the Closing will be, reasonable in accordance with the current
specifications of Burger King. At Closing, the Inventory at each Restaurant
shall be sufficient for the operation of such Restaurant for at least 48 hours
after the Closing Date, and in no event will there be excess inventory in
relation to normal usage.
SECTION 2.9 Real Properties; Real Property Leases. (a) With respect to
Real Properties that are owned by Persons not affiliated with the Seller, to
the knowledge of the Seller, each of such owners has good record and marketable
title in fee simple to such real property.
(b) The Seller has delivered to Purchaser a true and complete copy of
the Real Property Leases applicable to it, together with all amendments thereto
and all such Real Property Leases with such amendments or supplements being
listed and set forth on Schedule C. The Seller does not have knowledge or
information of any facts, circumstances or conditions which do or would in any
way adversely affect the Leased Real Property or the operation thereof or the
business thereon as presently conducted or as intended to be conducted. At or
prior to Closing, the Seller shall cause to be discharged of record all Liens
against the Seller or such Seller's interest affecting its Leased Real
Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(b), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(c) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real
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Properties by Seller are in substantial compliance with all Regulations. Set
forth on Schedule 2.9(c) annexed hereto is a true and complete schedule of each
certificate of occupancy for each Restaurant located on the Real Properties,
copies of which certificates of occupancy and all amendments thereto to date
have heretofore been delivered to Purchaser, and which copies are complete and
correct as of the date of this Agreement and will be complete and correct as of
the Closing Date. The Real Properties and the Restaurants located thereon are
in a state of good maintenance and repair and are in good operating condition,
normal wear and tear excepted, and (i) there are no physical or mechanical
defects to the Seller's knowledge in any of the Real Properties or Restaurants,
including, without limitation, the structural portions of the Real Properties
and Restaurants and the plumbing, heating, air conditioning, electrical,
mechanical, life safety and other systems therein and all such systems are in
good operating condition and repair (normal wear and tear excepted); and (ii)
there are no ongoing repairs to the Real Properties or Restaurants located
thereon being made by or on behalf of any Sellar or being made by or on behalf
of any landlord. All necessary occupancy and other certificates and Permits,
municipal and otherwise, for the lawful use and occupancy of the Real
Properties for the purposes for which they are intended and to which they are
presently devoted including, without limitation, for the operation of a Burger
King restaurant thereon, have been issued and remain valid. There are no
pending or threatened actions or proceedings that might prohibit, restrict or
impair such use and occupancy or result in the suspension, revocation,
impairment, forfeiture or non-renewal of any such certificates or Permits. All
notes or notices of violation of any Regulations, against or affecting any such
Real Properties have been complied with. There are no outstanding correcting
work orders issued to the Seller from any Federal, State, county, municipal or
local government, or the owner of the Real Properties or any insurance company
with respect to any such Real Properties.
(d) There are no condemnation or eminent domain proceedings of any
kind whatsoever or proceedings of any other kind whatsoever for the taking of
the whole or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of the Seller, threatened against the Real
Properties.
(e) The Real Properties and all improvements thereon represent all of
the locations at which the Seller conducts Business and are, now, and at
Closing will be, the only locations where any of the Assets are or will be
located.
(f) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any Law or by the normal use
and operation of the Real Properties and the
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Restaurants located thereon are installed to the property lines of the
respective Real Properties, to the knowledge of the Seller are connected
pursuant to valid Permits, are fully operable and are adequate to service the
Real Properties and the Restaurants located thereon and to permit full
compliance with all Regulations and normal utilization of the Real Properties
and the Restaurants located thereon.
(g) To Seller's knowledge, all licenses, Permits, certificates,
including, without limitation, proof of dedication, required from all
Authorities having jurisdiction over the Real Properties, and from any other
Persons, for the normal use and operation of the Real Properties and the
Restaurants located thereon and to ensure vehicular and pedestrian ingress to
and egress from the Real Properties and the Restaurants located thereon have
been obtained. To Seller's knowledge the Easements are valid and binding, in
full force and effect and enforceable in accordance with their respective
terms. There are no defaults or offsets which the owner of such recorded
Easements has against the enforcement of such Easements and neither the Seller
nor the owners of the Easements are in default under such Easements, nor have
any events under such Easements occurred which with notice or the passage of
time or both, would constitute a default under such Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to
Purchaser a true, complete and correct copy of the Franchise Agreement relating
to its Restaurant, including any and all amendments thereto. The Seller or its
Stockholders own, and at Closing will transfer to Purchaser, its respective
right, title and interest in its Franchise Agreement, free and clear of all
Liens. Subject to the written consent of Burger King, in form satisfactory to
Purchaser and its counsel, which the Seller shall obtain and deliver to
Purchaser and its counsel at or prior to the Closing, the Seller has the
absolute right and authority to sell, assign, transfer and convey its Franchise
Agreement and all other assets being sold or otherwise conveyed to Purchaser in
connection with the Restaurant which it operates in accordance with the terms
and conditions hereof, and there have not been and, except as set forth on
Schedule 2.10, currently there are no claims and the Seller is not aware of any
threatened claims with Burger King pertaining to the Franchise Agreements. On
the Closing Date, neither Burger King nor the Seller shall be in default under
any of the Franchise Agreements and the Franchise Agreements shall be in full
force and effect, the Seller shall not have received any notice of violation
with respect to the Franchise Agreements, and the Seller does not know or has
no reason to know of any event which would give rise to a violation or default
under the Franchise Agreements.
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SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor agreement,
any agreement containing severance or termination pay arrangements, deferred
compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other employee
or fringe benefit plan, including vacation plans or programs and sick leave
plans or programs. Except as set forth on Schedule 2.11(a) hereof, within the
last five (5) years the Seller has not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements. Except
as set forth on Schedule 2.11(a) hereof, (i) to the best knowledge of the
Seller, the Seller is in substantial compliance with all applicable Regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice, charge or complaint against
the Seller pending or threatened before the National Labor Relations Board;
(iii) there is no labor strike, dispute, request for representation, slowdown
or stoppage actually pending or threatened against or affecting the Seller;
(iv) no question concerning representation has been raised or is threatened
respecting the employees of the Seller; and (v) no grievance which might have
an adverse effect on the Seller or the conduct of its business nor any
arbitration proceeding arising out of or under collective bargaining agreements
is pending and no claims therefor exist.
Schedule 2.11(b) sets forth a true and complete list of the names of
all persons employed by the Seller at the Restaurants as of the date hereof,
and the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), the Seller does not have any Contract
relating to the Restaurants, Assets or Real Properties, including, without
limiting the generality of the foregoing, any (i) Contract for the purchase or
sale of Inventory; (ii) Contract for the purchase or sale of supplies, services
or other items; (iii) Contract for the purchase, sale or lease of any
Restaurant Equipment; (iv) Franchise Agreement or license agreement; and (v)
employment or consulting agreement or
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pension, disability, profit sharing, bonus, incentive, insurance, retirement or
other employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and correct
copy of each Other Contract applicable to it, together with all amendments (if
oral, a written description of the terms thereof) thereto.
(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of the scheduled term thereof or has knowledge of the intent of a
party to any such Other Contract to do the same, nor has any event occurred
which, with notice or the passage of time or both, would constitute a default
under any such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither
the Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14) and
(b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986, as
amended (the "Code")) (collectively, the "Group") presently has or at any time
during the five (5) years before the date of this Agreement had an obligation
to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee welfare
benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA Plans").
Each ERISA Plan that is an employee pension plan complies in form and operation
with all applicable requirements of section 401(a) and 501(a) of the Code and
each ERISA Plan that is a group health plan (as defined in ERISA section 607(1)
or Code section 4980B(g)(B) has been operated in compliance with applicable
law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not constitute
an "employee benefit plan" as defined in ERISA section 3(3) (collectively,
"Fringe Benefit Plans") currently maintained by the Seller or to which the
Seller has an obligation to contribute. Seller has delivered or made available
to Purchaser true and complete copies of all documents, as they may have been
amended to the date hereof, embodying or relating to the ERISA Plans or Fringe
Benefits Plans.
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(c) There are no actions, audits, suits, or claims pending (other than
routine claims for benefits) or, to the knowledge of the Seller, threatened,
against any ERISA Plan or Fringe Benefit Plan or any fiduciary of any such Plan
or against the assets of any such Plan.
(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether insured or self-insured) or other employee welfare
benefit plan maintained by the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents. (a)
Except as set forth on Schedule 2.14(a) and except for workers' compensation or
similar claims, there are no claims now pending, or to the best knowledge of
the Seller, in prospect or threatened against, the Seller or any of its
respective officers, directors or partners, at law or in equity including,
without limitation, (i) any voluntary or involuntary proceedings under
Bankruptcy Laws, or (ii) any Action before or by any governmental
instrumentality (domestic or foreign) or arbitrator which involves a claim or
demand for any judgment, decree, liability, action or injunction enjoining an
action, whether or not fully covered by insurance, in connection with the
Assets, Real Property Leases, Assumed Contracts, Real Properties, Restaurants,
business, affairs, properties or assets of the Seller.
(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in substantial compliance in
all respects with all Regulations applicable to its Business, affairs,
properties, or assets. Neither the Seller, nor any officer, director or
authorized agent of the Seller is in default with respect to, and has not been
charged or to its knowledge threatened with, nor is under investigation with
respect to, any violation of any Regulations relating to any aspect of its
Business, affairs, properties or assets including, but not limited to, the
Restaurants, Assets, Real Property Leases, Assumed Contracts, and the Real
Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
Permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the Assets,
Real Property Leases or the Real Properties ("Required Licenses"). Except as
set forth in Schedule 2.14(c), the Seller has obtained each of the Required
Licenses and each such Required License, is and on the Closing Date will be,
validly issued and in full force and effect
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and there are not now and, at Closing shall not be any claims pending, and to
the Seller's knowledge, any claims in prospect or threatened, challenging the
Required Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in Schedule
2.15 annexed hereto: (i) the Seller has obtained all Licenses which are
required under any Environmental Laws; (ii) to Seller's knowledge, the Seller
is in substantial compliance with all terms and conditions of the Required
Licenses and is also in substantial compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Environmental Laws or code, plan,
order, decree or judgment relating to public health and safety and pollution or
protection of the environment or any notice or demand letter issued, entered,
promulgated or approved thereunder; (iii) there are no claims, pending or to
Seller's knowledge threatened, against the Seller relating in any way to any
Environmental Law or any Regulation, notice or demand letter issued, entered,
promulgated or approved thereunder; and (iv) the Seller does not know or have
any reason to know of, nor has the Seller received any notice of any facts,
events or conditions which would interfere with or prevent continued compliance
with, or give rise to any common law or legal liability under any Environmental
Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily insured
against by reputable companies in the same or similar business, of such types
and in such amounts (with such deductible amounts) as is customary for such
companies under similar circumstances. All of the applicable insurance policies
are valid and enforceable and in full force and effect and will be continued in
full force and effect up to and including the Closing Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income tax
returns and all state and local income, franchise and sales tax returns and all
and any other tax return which was required to be filed as of the date of this
Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. The
provision for Taxes shown on the Financial Statements of the Seller was
sufficient to satisfy all taxes due and all assessments received by the Seller
(and all other entities included within the Financial Statements) for all
periods ended on or prior to the date of such Financial Statements. As of the
date hereof, no Taxes are past due, and no Taxes are unpaid and all current
payroll taxes have been paid. The Seller is not aware of any basis upon which
any assessment of additional Taxes could be made, and the Seller has not signed
any extension
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agreement with the Internal Revenue Service or any other governmental agency or
given waiver of a statute of limitations with respect to the payment of Taxes
for periods for which the statute of limitations has not expired. The Seller
shall be liable for all tax liabilities in connection with the operation of the
Restaurants, the Assets, the Real Properties, the Real Property Leases, the
Easements and Assumed Contracts, which cover periods prior to the Closing Date.
The Seller shall be liable for half of all transfer, sales and similar tax
liabilities, if any, in connection with the leasing of the Real Properties
under the Real Property Leases, the assignment of the Real Property Leases and
the Assumed Contracts, and the transfer of any rights under the Easements. All
taxes which the Seller is required by law to withhold or collect have been duly
withheld or collected and to the extent required have been paid over to the
proper governmental authorities on a timely basis or reflected as an obligation
on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, By-Law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or Assumed Contracts. The execution and delivery
of this Agreement and the other Transaction Documents and the consummation of
the transactions contemplated hereunder and thereby will not result in the
violation or breach of, default or the creation of any Lien under any of the
aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be stated
herein or therein or which is necessary to make the statements herein or
therein not misleading. There is no fact which the Seller has not disclosed
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to Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Seller that:
SECTION 3.1 Organization and Corporate Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified and licensed to do business
wherein the character of the Real Properties and other Assets to be purchased
makes such licensing or qualification to do business necessary. Purchaser has
full power and authority (corporate and other) to own or hold under lease its
properties and assets, and execute and deliver this Agreement and the other
Transaction Documents to be executed and delivered by Purchaser pursuant hereto
or in connection herewith and to consummate the transactions contemplated
hereby and thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Seller by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance or
fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The execution
and delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Purchaser and no other corporate acts
or proceedings on the part of Purchaser or its stockholders are necessary to
authorize the execution and delivery of this Agreement or any of
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the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by Purchaser, will be the
legal, valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms, except as enforcement thereof may be limited by
Bankruptcy Laws and subject to the general principles of equity affecting the
right to specific performance and injunctive relief.
SECTION 3.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby and thereby
do not and at Closing will not (a) violate its Certificate of Incorporation or
By-Laws; (b) violate or conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
any agreement, indenture, instrument or understanding to which Purchaser is a
party or by which it is bound; (c) violate any judgement decree, law, rule, or
regulation to which Purchaser is a party or by which it is bound; (d) result in
the creation of, or give any party the right to create any encumbrance upon the
property or assets of Purchaser; (e) terminate or modify, or give any third
party the right to terminate or modify, the provisions or terms of any
agreement or commitment to which Purchaser is a party or by which Purchaser is
subject or bound; or (f) result in any suspension, revocation, impairment,
forfeiture or non-renewal of any license, qualification, authorization or
approval applicable to Purchaser.
SECTION 3.5 Consents. Except for the Burger King Consents and the
consent of The First National Bank of Boston (Purchaser's senior lender),
Purchaser is not required to obtain any consents, approvals or other
authorizations or to make any filing with any Authority or any other Person in
connection with the execution, delivery and consummation of this Agreement and
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 3.6 Brokers. No broker, finder or selling agent has had a part
in bringing about any of the transactions contemplated by this Agreement or the
other Transaction Documents (including, but not limited to, the leasing of the
Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 3.7 Material Information. This Agreement, the other
Transaction Documents and any exhibit, schedule, certificate or other
information representation, warranty or
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other document furnished or to be furnished by Purchaser to Seller do not (a)
contain, nor will the same contain, any untrue statement of a material fact; or
(b) omit, nor will the same omit or fail to state, a material fact required to
be stated herein or therein or which is necessary to make the statements herein
or therein not misleading. There is no fact which the Purchaser has not
disclosed to Seller and its counsel in writing and of which the Purchaser is
aware which materially and adversely affects or could adversely affect the
Business prospects, financial condition, operations, property or affairs of the
Restaurants.
SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing
Date. (a) Between the date of this Agreement and the Closing Date, the Seller
shall give Purchaser, its directors, officers, employees, accountants, counsel
and other representatives and agents ("Representatives") reasonable access to
the premises, properties, books, financial statements, Contracts, records of
the Seller, relating to the Business, the Restaurants, the Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts, and
shall furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Seller as
Purchaser shall from time to time reasonably request for such purposes as
Purchaser shall require. Any such investigation or examination shall be
conducted as reasonable times and upon reasonable notice to the Seller.
(b) Without in any way limiting the provisions of Section 4.1(a)
hereof, Purchaser shall have the right between the date of this Agreement and
the Closing Date at such time or times as Purchaser reasonably may request (i)
to have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or other
wood-destroying organism present in the Real Properties or Restaurants, or any
damage from prior termites or other wood- destroying organism, and the Seller
will assign to Purchaser at Closing all rights under existing contracts and
policies, if any, with the Seller's exterminating company; and (ii) to have
conducted any environmental audits or studies of the Restaurant, the Real
Property and the Assets, including a "Phase I" and, if the results of such
Phase I so recommends, a "Phase II"
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environmental study. Notwithstanding inspections, audits or other studies
undertaken by or on behalf of Purchaser hereunder or any other due diligence
investigation undertaken by or on behalf of Purchaser, Seller shall not be
relieved in any way of responsibility for its warranties, representations and
covenants set forth in this Agreement.
SECTION 4.2 Operation of the Business of Seller. Between the date of
this Agreement and the Closing Date, the Seller shall conduct the operation of
its Restaurants in the ordinary and usual course of business, consistent with
past practices and will use its best efforts to preserve intact the present
business organization with respect to its Restaurants, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with landlords, franchisors, dealers, licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relations with it and its Restaurants and will maintain its Restaurants, Real
Properties, and Assets in a condition conducive to the operation of the
business currently carried on therein.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, the Seller will not:
(a) Keep and maintain its books of account and records other
that in accordance with generally accepted accounting principles
consistent with past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of the
employees at any of the Restaurants other than in the ordinary course
of business, consistent with past practices; (ii) pay or agree to pay
any pension, retirement allowance or other employee benefit not
required or permitted by any Welfare Plan, whether past or present; or
(iii) commit itself in relation to its Restaurants, the employees at
its Restaurant or the Real Properties, to any new or renewed Welfare
Plan with or for the benefit of any Person, or to amend any of such
Welfare Plans or any of such agreements in existence on the date
hereof;
(d) Fail promptly to notify Purchaser of any unusual
developments with respect to its Restaurants, Assets, Real Properties,
Real Property Leases, the Easements, Assumed Contracts or otherwise in
connection with its business;
(e) Permit any of its insurance policies to be
canceled or terminated or any of the coverage thereunder to
lapse, unless simultaneously with such termination,
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cancellation or lapse, replacement policies are in full force and
effect providing coverage, in form, substance and amount equal to or
greater than the coverage under those canceled, terminated or lapsed
for substantially similar premiums;
(f) Amend or terminate its Real Property Leases, or sell,
transfer, mortgage or otherwise dispose of or encumber, or agree to
sell, transfer, mortgage or otherwise dispose of or encumber, its Real
Property Leases, the Easements or, except in the ordinary course of
business, any of the Assets or Assumed Contracts;
(g) Allow to occur any default or breach, or event which with
the lapse of time or giving of notice, or both, would constitute a
default or breach under its Real Property Leases, the Easements, its
Franchise Agreement or any of the other Assumed Contracts;
(h) Enter into any other Contracts whether written or oral
which, individual or in the aggregate, would be material to its
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements or the Assumed Contracts, except Contracts for the purchase,
sale or lease of goods or services in the ordinary course of business
consistent with past practice and not in excess of current
requirements, or otherwise make any material change in the conduct of
the businesses or operations of the Seller;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the other
Transaction Documents;
(j) Take any action which would result in any of the
representations or warranties contained in this Agreement or the other
Transaction Documents not being true at and as of the time immediately
after such action at and as of the Closing Date, or in any of the
covenants contained in this Agreement or other Transaction Documents
becoming unperformable or which could have a Material Adverse Effect
on the transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain
and keep its Restaurant, Assets and Real Properties in at least the
same condition and order as exists on the date hereof, reasonable wear
and tear excepted, and fail to perform repairs and maintenance usual
and customary in the ordinary course of business;
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(l) Enter into any lease, sublease, license or any other
occupancy agreement, amend or terminate the Easements, the Real
Property Leases, or enter into, amend or terminate any Franchise
Agreement, or other Contract with respect to its Restaurants and Real
Properties;
(m) Take any action or allow to occur any event which with
the lapse of time or giving of notice, or both, would allow to lapse
any of the Licenses;
(n) Operate its Restaurants or otherwise engage in any
practices which would materially affect sales at its
Restaurant; or
(o) Agree (in writing or otherwise) to do any of the
foregoing.
SECTION 4.3 Supplements to Disclosures. Prior to the Closing Date, the
Seller will promptly supplement or amend the information set forth herein and
in the Schedules and Exhibits referred to herein with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described herein or
in a Schedule or Exhibit or which is necessary to correct any information
herein or in a Schedule or Exhibit or in any representation and warranty, which
has been rendered inaccurate thereby.
SECTION 4.4 Computer Software. The Seller shall provide Purchaser with
computer readable software in a form and language that Franchise Service
Options can use and manipulate, which software shall be used to manage the
Restaurants, including (i) payroll and compensation systems and (ii) sales
reports of the Restaurants on a "restaurant by restaurant" and "day by day"
basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the
Closing Date, the Seller shall not, directly or indirectly and whether by means
of a sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or
enter into any Contract to sell, transfer, assign or dispose, of the
Assets or any interest therein, except for normal operations in the
ordinary course of business; or
(b) encourage, initiate or solicit any inquiries or proposals
by, or engage in any discussions or negotiations with, or furnish any
non-public information to, any Person concerning any such transaction
and the Seller shall promptly communicate to Purchaser the substance
of any
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inquiry or proposal concerning any such transaction which
may be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof until
the Closing Date, each of the parties hereto shall furnish to the other party
hereto such necessary information and reasonable assistance as such other party
may reasonably request in connection with its preparation of necessary filings
or submissions to any governmental agency and the Seller shall use its best
efforts to obtain all Licenses and Required Consents from third parties
necessary to consummate the transactions contemplated by this Agreement and the
other Transaction Documents. Each party shall furnish to the other copies of
all correspondence, filings or communications (or memoranda setting forth the
substance thereof) between Purchaser, Seller or any of their respective
representatives and agents, on the one hand, and any government agency or
authority or third party, on the other hand, with respect to this Agreement and
the other Transaction Documents and transactions contemplated hereby and
thereby.
SECTION 4.7 Management Subscription Agreement; Other Actions. On or
before the Closing in connection with exchanging the Assets for the Class D
Common Stock, the Senior Preferred, the Junior Preferred and the Notes of the
Purchaser (the "Securities") the Seller and Lawrence Jaro, shall execute and
deliver a counterpart of the Management Subscription Agreement of even date
herewith by and among the Seller and Lawrence Jaro, the Purchaser and other
Management Investors (as defined therein), and shall have taken all other
actions and executed and delivered all other agreements and documents necessary
for a valid placement of the Securities by the Purchaser with the Seller and
Lawrence Jaro.
SECTION 4.8 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by Law, no announcement of the
existence or terms of this Agreement or the other Transaction Documents or the
transactions contemplated hereby and thereby shall be made publicly or to the
employees or customers of Seller, by any party to this Agreement or any of its
respective Representatives without the advanced written approval of the other
parties.
(b) Purchaser, on the one hand, and Seller, on the other hand, each
shall hold in strict confidence, and shall use their best efforts to cause all
their Representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or by other requirements of
law, all confidential and proprietary information (collectively, "Confidential
Information") concerning Seller, (in the case of Purchaser) and Purchaser (in
the case of Seller) which is created or obtained prior to, on or after the date
hereof in connection
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with the transactions contemplated hereby, and Purchaser, Seller shall not use
or disclose to others, or permit the use or disclosure of, any such information
created or obtained except to the extent that such information can be shown to
have been (i) previously known by Purchaser, and Seller, as the case may be
(ii) in the public domain through no fault of a party or any of its
Representatives, and will not release or disclose such information to any other
Person, except its officers, directors, employees, Representatives and lending
institutions who need to know such information in connection with this
Agreement.
(c) For purposes of this Section 4.8, Purchaser specifically
acknowledges that it and its Representatives will have an opportunity to engage
in "due diligence" with respect to this transaction and which may include the
opportunity to review corporate records, financial and otherwise, interview
certain management personnel, and see and learn of the operation of Seller. The
Confidential Information of Seller, referred to in Section 4.8(b), includes,
without limitation, all schedules, documents, work papers or other written
information, and specifically including financial records, leases, franchise
agreements, corporate minutes, corporate organization documents, stockholder
records, employment records, fringe benefit records, lists of creditors and
suppliers, contracts, loan and security agreements, claims against Seller,
insurance, management and operation procedures and trade secrets (both as
defined by Colorado statutory law and by common law; and any other proprietary
information related to the Business conducted by Seller, whether or not such
information would be legally protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other
is unique and its release or misusage may not be compensable in damages and
that the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.9 Limitation of Seller's Claims After Closing. From and
after the Closing and thereafter so long as the provisions of Article VI are
still applicable, the Seller shall not, without the prior written consent of
Purchaser: (i) engage in any business, which would adversely affect any value
of Purchaser's business; or (ii) take any other action or fail to take any
action, or allow, the occurrence of any event, with respect to the Seller's
assets, which could be reasonably expected to have a Material Adverse Effect on
the Seller's
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ability to indemnify, defend and hold harmless Purchaser and its officers,
directors and stockholders from and against Damages (as hereunder defined)
pursuant to Article VI; provided, however, that nothing herein shall preclude
the Seller from taking any action to distribute assets whether in the form of
cash or other assets to its Shareholders'.
SECTION 4.10 Employee Benefit Matters. (a) No later than 30 days after
the Closing Date, the Seller shall discharge and satisfy in full any
liabilities it may have with respect to any wages, vacation, severance or sick
pay, or any rights under any ERISA Plan or Fringe Benefit Plan.
(b) No later than 30 days after the Closing Date, the Seller shall
discharge and satisfy in full any employment, consulting or similar arrangement
to which the Seller is a party or for which the Seller is responsible.
(c) The Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Seller,
and to "qualified beneficiaries" of any employee of the Seller or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Seller or an Affiliate of the Seller. The type of coverage shall be that
described in Section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in Section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under Section 4980B of the Code.
(d) Subject to the provisions of this Agreement, Seller and the
stockholders of Seller jointly and severally, hereby agree to indemnify and
hold Purchaser harmless from and against any Damages which arise out of the
failure to comply with the obligations in Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Seller shall deliver to Purchaser:
(i) within five (5) business days after the end of each
calendar month, a written statement, certified by Seller, of the gross
sales of each Restaurant for that month; and
(ii) With respect to the "compiled" Financial Statements
delivered to Purchaser by the Seller, at the request of Purchaser, the
Seller shall (and shall cause their respective Representatives to)
cooperate with Purchaser to have such statements reviewed or audited
or
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further clarified in such manner as Purchaser may deem necessary or
advisable. Any additional fees paid by the Seller to their respective
independent certified public accountants in connection with such
cooperation shall be borne by Purchaser.
(b) Seller agrees to observe and abide by the provisions of Sections
4.4, 4.5 and 4.7, and Seller and Purchaser agree to observe and abide by the
provisions of Article VIII hereof;
(c) Seller acknowledges and agrees to be bound by the
provisions of Section 4.6 and 7.1(c); and
(d) Inasmuch as all of the Franchise Agreements are held in individual
names, the Seller shall cause the individual to observe and abide by the
provisions of Section 4.5 insofar as the transfer of such Franchise Agreements
to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser also hereby waives compliance
by Seller with the provisions of any applicable bulk sales state or local tax
laws in effect in the states of Texas and Colorado. Seller hereby warrants and
agrees to pay and discharge, promptly when due, all claims of creditors which
may be asserted against Purchaser by reason of such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth all of the
creditors of the Seller as of the date hereof and the amounts owing to such
creditors as of the date hereof.
(c) The bulk sales laws referred to in Section 4.12(a) hereof are
referred to herein, collectively, as the "Bulk Sales Laws".
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Seller and Purchasers.
The obligations of Purchaser and Seller to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at or
prior to the Closing of the following conditions, except to the extent that any
such condition may have been waived in writing by both Seller and Purchaser at
or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation,
inquiry or other proceeding before any governmental or regulatory
authority or other Person shall have been instituted or shall be
pending or threatened which questions the validity or legality of this
Agreement and the
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other Transaction Documents and the transactions contemplated hereby
and thereby and which could reasonably be expected to damage
materially the Business or assets of the Seller if the transactions
contemplated hereby or thereby are consummated. No injunction, decree
or order shall be in effect prohibiting consummation of the
transactions contemplated by this Agreement or the other Transaction
Documents or which would make the consummation of such transactions
unlawful and no action or proceeding shall have been instituted and
remain pending before an Authority to restrain or prohibit the
transactions contemplated by this Agreement and the other Transaction
Documents.
SECTION 5.2 Conditions to the Obligations of Seller. The obligations
of the Seller to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by the Seller at or prior to the
Closing:
(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date,
with the same force and effect as if made at and as of the Closing
Date; the Purchaser shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Seller shall have received a
certificate dated the Closing Date in form satisfactory to him signed
by an officer of Purchaser.
(b) Governing Instruments, etc. The Seller shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of Purchaser certifying, among other things, that
attached or appended to such certificate (i) is a true and correct
copy of its Certificate of Incorporation and all amendments if any
thereto as of the date thereof; (ii) is a true and correct copy of its
By-Laws; (iii) is a true copy of all corporate actions taken by it,
including resolutions of its board of directors authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation of
the transactions contemplated hereby and thereby; and (iv) are
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the names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(c) Payment of Purchase Price. Purchaser shall have
tendered to Seller the Purchase Price payable at Closing in
accordance with Section 1.2(a).
(d) Assumption of Assumed Contracts. The Seller shall
have received from Purchaser an Assumption Agreement
substantially in the form annexed as Exhibit C hereto.
(e) Opinion of Counsel. The Seller shall have received an
opinion of counsel for Purchaser, as of the Closing Date,
substantially in the form annexed as Exhibit D hereto.
(f) Senior Lender's Consent. Seller shall have been presented
evidence that the Purchaser shall have received, if necessary, the
written consent of its Senior Lender, The First National Bank of
Boston, to the transactions contemplated hereby.
(g) Obligations. Seller shall have been presented
evidence that the Purchaser has assumed or extinguished the
Obligations.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby and by the other
Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Seller
contained in this Agreement and the other Transaction Documents, or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date
with the same force and effect as though made on and as of the Closing
Date; the Seller shall have performed or complied with all agreements
and conditions required by this Agreement and the other Transaction
Documents to be performed or complied with by it on or prior to the
Closing Date; and Purchaser shall have received certificates dated the
Closing Date in form satisfactory to Purchaser signed by the President
on behalf of the Seller, as applicable.
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(b) Governing Instruments, etc. Purchaser shall have received
a certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of the Seller certifying, among other things, that attached
or appended to such certificate (i) is a true and correct copy of its
Certificate of Incorporation and all amendments if any thereto as of
the date thereof; (ii) is a true and correct copy of its By-Laws;
(iii) is a true copy of all corporate actions taken by it, including
resolutions of its board of directors and stockholders authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation of
the transactions contemplated hereby and thereby; and (iv) are the
names and signatures of its duly elected or appointed officers who are
authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
(c) Instruments of Transfer. The Seller shall have delivered
to Purchaser a bill of sale and assignment ("Bill of Sale")
substantially in the form annexed as Exhibit E hereto, a Lease
Assignment (if applicable) and any other documents of transfer which
Purchaser reasonably shall request in order to evidence and effectuate
the sale and assignment to Purchaser of the Assets, the Real Property
Leases, the Assumed Contracts and the consummation of all other
transactions contemplated by this Agreement and the other Transaction
Documents.
(d) Consents. The Seller shall have obtained, and delivered
to Purchaser, copies of the Required Consents applicable to it in form
and substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an
opinion or opinions of counsel for Seller, as of the Closing Date,
substantially in the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been
no Material Adverse Change, nor any events which could have
a material adverse change, in the Business, operations,
prospects or financial or other condition of any Restaurant
or in the respective Assets or Real Properties from the date
hereof to the Closing Date (the "Interim Period") nor shall
have there been, for all Restaurants in the aggregate, a
decrease of five percent or more in gross sales or gross
profit during the Interim Period, as compared with the same
period during the prior calendar year. For purposes hereof,
"Gross Profit" shall mean total gross sales reduced by the
sum of food, labor and paper costs. At Closing, Purchaser
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shall have received a certificate dated the Closing Date in form
satisfactory to Purchaser signed by the President on behalf of the
Seller to the foregoing effect.
(g) Environmental Due Diligence. Purchaser shall have
completed its environmental due diligence of the Restaurants, Real
Property and Assets and have received results which are satisfactory
to Purchaser in its sole discretion. In the event Seller shall provide
Purchaser with previously prepared environmental reports, such reports
must have been prepared within 90 days from the date of this
Agreement, or, in the alternative, such reports must have been updated
within 90 days of the date of this Agreement.
(h) Senior Lender's Consent. Purchaser shall have
received, if necessary, the written consent of its senior
lender, The First National Bank of Boston, to the
transactions contemplated hereby.
(i) Other Documents. The Seller shall have delivered
to Purchaser:
(i) the Assignment of its Real Property Lease,
each Assumed Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original
counterpart of the Real Property Lease;
(iv) receipts for the Purchase Price paid to
Seller by Purchaser;
(v) certificates dated no earlier than 30 days prior
to the Closing Date, from appropriate authorities in the
State of its jurisdiction of incorporation, as to the good
standing of such Seller;
(vi) an updated schedule of creditors as of the
Closing Date;
(vii) executed original of each of the Osborn Proxy
Agreement and the Jaro Proxy Agreement, as defined in the
Stockholders Agreement, of event date herewith; and
(viii) all other documents, instruments and
agreements required to be delivered by such Seller to
Purchaser pursuant to this Agreement and the other
Transaction Documents.
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(j) Review by Purchaser's Auditor. Purchaser's
auditor shall have:
(i) reviewed the financial and accounting system
of Seller;
(ii) reviewed and confirmed the financial
statements and results set forth in such statements;
(iii) found no objection to the financial and
accounting system of Seller and Purchaser shall have resolved
any objection raised by the auditor and presented to the
Seller by the Purchaser.
(k) The Obligations (as defined in Section 1.2(a)) shall not
exceed $31,000, and Purchaser shall receive a letter or letters of
discharge from the lender or lenders to which the Obligations are owed
releasing any security or collateral under the Obligations to the
extent such Obligations are discharged by the Purchaser.
(l) Delivery of Bill of Sale. Purchaser shall have received a
Bill of Sale conveying title to the Improvements to Purchaser, and
such documents and/or instruments as are required or customary in the
jurisdiction in which the Improvements are located to convey title to
the Improvements to Purchaser, including, without limitation, transfer
tax affidavits and affidavits and other instruments required under any
environmental or other laws or regulations. All taxes and other
amounts owing in connection with such transfer shall be paid by
Seller.
(m) No Condemnation or Eminent Domain. No portion of the
Improvements or interest therein shall be subject to any condemnation
proceeding, and Seller shall not have received any notice from any
governmental body having the power of eminent domain informing Seller
or Purchaser that such governmental authority intends to take or
condemn all or any portion of the Improvements or any interest
therein.
(n) No Damage to the Improvements; Flood Plain. No portion of
the Improvements or interest therein shall be subject to any damage
resulting from fire or other casualty or cause. No part of the
Improvements shall be located within any flood plain.
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ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing, notwithstanding any investigation
heretofore or hereafter made by or on behalf of any party hereto; provided,
however, that (a) the agreements and covenants (other than the indemnification
provisions set forth in this Article VI, which will survive as provided below)
set forth in this Agreement shall survive and continue until all obligations
set forth therein shall have been performed and satisfied and the applicable
statute of limitations for breaches or defaults of such agreements and
covenants has expired; and (b) all representations and warranties, and the
agreements of Seller and Purchaser to indemnify each other set forth in this
Article VI, shall survive and continue for, and all indemnification claims with
respect thereto shall be made prior to March 31, 1996.
SECTION 6.2 Agreement to Indemnify. Subject to the conditions of this
Article VI:
(a) Purchaser hereby agrees to indemnify, defend and hold
harmless the Seller from and against all demands, claims, actions or
causes of action, assessments, loses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and
reasonably attorney's fees,costs and disbursements and expenses
(collectively, "Damages"), asserted against, resulting to, imposed
upon or incurred by the Seller directly or indirectly, arising out of
or resulting from (i) a breach of any representation, warranty,
covenant or agreement of Purchaser contained in or made pursuant to
this Agreement (including but not limited to enforcement of this
Article VI), the other Transaction Documents or the transactions
contemplated hereby or thereby or any facts or circumstances
constituting such breach; and (ii) any indebtedness, obligation or
liability assumed by Purchaser pursuant to Section 1.1, 1.2(a)(vi) and
1.4(b) hereof; and (iii) the operation, use or ownership of its
Restaurants, Assets, Real Property Leases, Real Properties, the
Easements and Assumed Contracts, during, or which have otherwise
accrued from or otherwise relate to, the period of time after the
Closing Date; and
(b) Seller agrees to indemnify, defend and hold harmless
Purchaser and its officers, directors and stockholders from and
against all Damages asserted against
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or incurred by Purchaser or such officers, directors and stockholders,
directly or indirectly, arising out of or resulting from: (i) a breach
of any representation, warranty, covenant or agreement of the Seller
contained in or made pursuant to this Agreement (including but not
limited to enforcement of this Article VI) the other Transaction
Documents or any facts or circumstances constituting such a breach;
(ii) any indebtedness, obligations or liabilities of the Seller
including, but not limited to, any liability or obligation set forth
in Section 1.4(a), and the tax liabilities set forth in Section 2.17
other than those expressly assumed by Purchaser hereunder; (iii) a
breach of or otherwise arising under any Environmental Law (whether
now or hereafter in effect), to the extent the same arises out of any
condition or state of facts or otherwise relates to the period of time
commencing on the date Seller was entitled to possession of the Real
Property in question and ending on the Closing Date; (iv) the
operation, use or ownership of the Restaurants, Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts
during, or which have otherwise accrued from or otherwise relate to,
the period of time prior to the Closing Date; (v) the Seller's failure
to pay and discharge all claims of creditors which may be asserted
against Purchaser by reason of Purchaser's waiver of compliance by
Seller of the Bulk Sales Laws and (vi) all Damages arising before the
Closing and not expressly assumed in writing by the Purchaser;
provided, however, that Seller's indemnification of Purchaser shall be
limited in aggregate amount as provided in Section 6.5.
SECTION 6.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 6.3 with respect to Damages
for which it must indemnify another party hereunder (collectively, the
"Indemnifiable Claims") shall be subject to the following terms and conditions:
(a) The indemnified party shall give the indemnifying party
notice of any such Indemnifiable Claim which notice shall set forth in
reasonable detail the basis for and amount of the Indemnifiable Claim,
and the circumstances giving rise thereto. If the Indemnifiable Claim
is a third-party Claim, the notice must contain an copy of any papers
served on the indemnified party.
(b) If the Indemnifiable Claim is not a third-party Claim,
unless within 30 days of receipt by the indemnifying party of notice
of the Indemnifiable Claim the indemnifying party sends written notice
to the indemnified party disputing the facts giving rise to the
Indemnifiable Claim or the amount of Damages stated in the notice, the
Damages
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stated in the notice shall become due and payable upon the expiration
of such 30 day period. If, however, the indemnifying party disputes
the facts giving rise to the Indemnifiable Claim or the amount of
Damages stated in the notice within such 30 day period and the dispute
cannot be resolved within the following 90 days, the dispute shall be
submitted to arbitration under the rules of the American Arbitration
Association in Chicago, Illinois.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own
expense by representatives of its own choosing reasonably satisfactory
to the indemnified party and will consult with the indemnified party
concerning such defense during the course thereof. If the indemnifying
party, within 30 days after receipt of notice of any Indemnifiable
Claim (or such shorter period as is necessary to prevent prejudice to
the indemnified party, if such 30 day period would prejudice the
rights of the indemnified party), fails to defend, the indemnified
party will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such
Indemnifiable Claim on behalf of and for the account and risk of and
at the expense of the indemnifying party. In addition, if there is a
reasonable probability that a third-party Indemnifiable Claim may
materially and adversely affect an indemnified party, the indemnified
party shall have the right, at its own cost and expense, to defend,
compromise or settle such Indemnifiable Claim.
(d) Anything in this Section 6.3 to the contrary
notwithstanding, neither the indemnifying party nor the indemnified
party, as the case may be, may settle or compromise any Indemnifiable
Claim or consent to entry of any judgment in respect thereof, without
the written consent of the other, which consent may not be
unreasonably withheld or delayed.
SECTION 6.4 Remedies Cumulative. The remedies provided in this Article
VI shall be cumulative and shall not preclude the assertion by any party hereto
of any other rights or the seeking of any other remedies against the other
parties hereto.
SECTION 6.5 Indemnity Enforcement. (a) Indemnification Claims shall be
reduced, by and to the extent, that an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result of, and in compensation for, the subject matter of an
indemnification Claim by such indemnitee.
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(b) The aggregate value of Purchaser's indemnification claims shall be
limited to the consideration received by the Seller as the Purchase Price for
the Assets and the Purchase Price for the Inventory.
(c) The Purchaser may, in addition to any other rights or remedies
available, set-off any indemnification claims hereunder against any amounts
owing in respect of any of the Securities issued or cash paid by the Company as
part of the Purchase Price for the Assets; provided, however, that this right
of set-off must be exercised against such Securities and cash in the following
order:
(i) dividend, liquidation and redemption payments on
the Senior Preferred and the Junior Preferred;
(ii) dividend liquidation and redemption payments on the
Class D Common Stock; provided that for redemption under this Section
6.5, the call price of the Class D Common Stock shall be Fair Market
Value, (as defined in the Management Subscription Agreement);
(iii) cash to the extent the cash portion of the Purchase
Price for the Assets and for the Inventory has not been distributed to
the Seller's shareholders and limited by the amount, if any, that the
Seller has or Seller's stockholders have paid federal or state income
taxes thereon or any of them have received a notice or claim assessing
additional tax liabilities upon the Seller as a result of
non-compliance with section 351 and the rules regarding the
installment note regulations under the Internal Revenue Code of 1986,
as amended.
(d) The personal liability of any stockholder of Seller under this
Article VI shall be limited to the extent such shareholder personally receives
Securities or cash delivered by the Company as part of the Purchase Price, or
to the extent such shareholder acquires such Securities or cash subsequent to
the Closing in a distribution or dividend from Seller, net of any federal and
state income taxes as provided in Section 6.5(c)(iii).
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
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(a) By mutual written consent of Seller and Purchaser;
(b) By Seller, if (i) there has been a material
misrepresentation or breach of warranty on the part of Purchaser in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Seller; (ii) Purchaser
has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Seller; or (iii) any condition of Seller
obligations hereunder becomes incapable of fulfillment through no
fault of such parties and is not waived by such parties;
(c) By Purchaser, if (i) there has been a material
misrepresentation or breach of warranty on the part of the Seller in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Purchaser; (ii) the
Seller has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Purchaser; or (iii) any condition to Purchaser's
obligations hereunder becomes incapable of fulfillment through no
fault of Purchaser and is not waived by Purchaser;
(d) By Seller, if the Closing shall not have occurred on or
before September 7, 1994; provided that Seller shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
the Seller to fulfill any of its obligations under this Agreement
shall have been the reason that the Closing shall not have occurred on
or before said date;
(e) By Purchaser, if the Closing shall not have occurred on
or before September 7, 1994; provided that Purchaser shall not be
entitled to terminate this Agreement pursuant to this clause if the
failure of Purchaser to fulfill any of its obligations under this
Agreement shall have been the reason that the Closing shall not have
occurred on or before said date; and
(f) By Seller or by Purchaser, if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Purchaser, or any Seller from consummating
the transactions contemplated hereby is entered and such
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judgment, injunction, order or decree shall become final and
nonappealable.
SECTION 7.2 Effect of Termination; Right to Proceed. In the event that
a party wishes to terminate this Agreement pursuant to Section 7.1, it shall
give written notice thereof whereupon all further obligations of the parties
under the Agreement shall terminate without further liability of any party
hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants and
agreements imposed upon it hereunder; (ii) to the extent that any condition to
a party's obligations hereunder become incapable of fulfillment because of the
breach by a party of its obligations hereunder and (iii) that the agreements
contained in Sections 4.8, 9.3 and 9.4 shall survive the termination hereof. In
the event that a condition precedent to its obligation is not met, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
transactions contemplated hereby. Notwithstanding anything to the contrary
contained herein, no party shall have any obligation to the other hereunder
arising out of the occurrence of an event or circumstance not within the
control of such party which event or circumstance resulted in a representation
or warranty of such party ceasing to be true.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Further Assurances. Each of the parties hereto shall
without further consideration execute and deliver to any other party hereto
such other instruments of transfer and take such other action as any party may
reasonably request to carry out the transactions contemplated by this Agreement
and the other Transaction Documents.
SECTION 8.2 Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 8.3 Remedies. In the event of a default under this Agreement
or the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or
other appropriate proceeding,
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whether for specific performance, or for an injunction against a violation of
any terms hereof or thereof or in aid of the exercise of any right, power or
remedy granted thereby or by law, equity, statute or otherwise. The foregoing
shall include, but shall not be limited to, allowance for recovery by the
aggrieved party of all of its fees and expenses and disbursements incurred by
it in connection with the transactions contemplated hereby and in the
Transaction Documents, including, without limitation, the reasonable fees and
expenses of its counsel, accountants, agents and representatives, employed by
it. No course of dealing and no delay on the part of any party in exercising
any right, power or remedy shall operate as a waiver thereof or otherwise
prejudice such party's rights, powers or remedies. No right, power or remedy
conferred hereby shall be exclusive of any other right, power or remedy
referred to herein or now or hereafter available at law, in equity, by statute,
or otherwise.
SECTION 8.4 Expenses. Upon the execution of this Agreement and the
closing of the Company's acquisition of franchises and other assets, rights and
obligations to certain Burger King restaurants in the Chicago area, the
Purchaser will reimburse the Seller for all reasonable expenses incurred by the
Seller in connection with the authorization, preparation and consummation of
this Agreement and the related transactions, including reasonable attorneys'
and accountants' fees; provided, however, that the aggregate amount paid to
Lawrence Jaro and entities related to Lawrence Jaro and William Osborn and
entities related to William Osborn for reimbursement of accountants' fees shall
not exceed $20,000.
SECTION 8.5 Entire Agreement. This Agreement and the other Transaction
Documents and the Exhibits and Schedules referred to herein and therein contain
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior arrangements or understandings with respect
thereto.
SECTION 8.6 Definitions. For the purposes of this
Agreement:
(i) "affiliate" of any person shall mean any corporation,
proprietorship, partnership or business entity which, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled by, such person, and any directors,
officers, partners or 50% or more owners of such person.
(ii) "Affiliate" shall mean with respect to any Person, any
other Person that has a relationship with the designated Person
whereby either of such Persons directly or indirectly controls or is
controlled by or is under common control with the other of such
Persons.
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(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iv) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by Seller at the
date of this Agreement and/or the Closing Date, and such business and
operations relating to the Assets and Assumed Contracts. Business.
(v) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(viii) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(ix) "material" means any claim, circumstance or state of
facts which results in, or would reasonably be expected to result in,
losses or the expenditure or commitment of $25,000 or more, or which
results in any material limitation or restriction on the ability of
the Seller or the Purchaser to conduct the Business.
(x) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
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(xi) "Order" means any decree, order, injunction,
rule, judgment, consent of or by a U.S. Authority.
(xii) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xiii) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xiv) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the certificate of incorporation and
By-Laws of the Seller, as applicable.
(xv) "Taxes" shall mean all taxes, charges, fees, duties,
levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise,
value added, license, payroll, unemployment, environmental, customs
duties, capital stock, disability, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income
withholding and Social Security taxes imposed by the United States or
any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country or by
any other tax Authority, including all applicable penalties and
interest, and such term shall include any interest, penalties or
additions to tax attributable to such Taxes.
SECTION 8.7 Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
Agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 8.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and delivered personally, sent by telecopier, federal
express or other reputable overnight courier or sent by certified or registered
mail, postage prepaid, return receipt requested, at the addresses set forth
below:
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(a) if to Purchaser, to:
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
(b) if to Seller, to:
Lawrence Jaro
c/o Ernest J. Panasci, Esq.
Vinton, Slivka & Panasci
Suite 1100
1600 Stout Street
Denver, Colorado 80202
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 8.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the heirs,
executor, personal representatives, legal representatives, successors and
assigns of the parties hereto, and shall not be assignable by either party
without the prior written consent of the other party; provided, however, that
the Purchaser may assign at Purchaser's sole discretion any or all of its
interest to a lender of Purchaser with written notice to Seller.
SECTION 8.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.
EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A
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SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR
CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS
OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES.
THE CHOICE OF FORUM SET FORTH IN THIS SECTION 8.10 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE JURISDICTION.
SECTION 8.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT
TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss. 1 ET
SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
SECTION 8.12 Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 8.13 Purchaser's Designated Affiliate. Purchaser may designate
one or more of its wholly-owned subsidiaries or Affiliates to carry out all or
part of the transactions contemplated hereby to be carried out by Purchaser,
which designation shall not relieve Purchaser of its obligations hereunder.
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SECTION 8.14 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
as of the day first above written.
NRE HOLDINGS, INC.
By:
------------------------------
Name:
Title:
TABOR RESTAURANTS ASSOCIATES, INC.
By:
-----------------------------
Name:
Title:
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PURCHASE AND SALE AGREEMENT
Among
NRE HOLDINGS, INC.
(as Purchaser)
And
JB RESTAURANTS, INC.
(as Seller)
Dated as of September 1, 1994
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
PURCHASE AND SALE; CLOSING
1.1 Assets to Be Conveyed........................................... 2
1.2 Purchase Price for Assets....................................... 3
1.3 Real Properties; Assignments of Leases; Easements
and Parking Agreements...................................... 5
1.4 Assumption of Liabilities....................................... 6
1.5 Closing; Deliveries............................................. 7
1.6 Adjustments..................................................... 8
1.7 Petty Cash...................................................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Corporate Power................................. 9
2.2 Governing Instruments........................................... 10
2.3 Due Authorization............................................... 10
2.4 No Violation.................................................... 10
2.5 Consents........................................................ 11
2.6 Financial Statements............................................ 11
2.7 Assets.......................................................... 12
2.8 Inventory....................................................... 13
2.9 Real Properties; Real Property Leases........................... 13
2.10 Franchise Agreements............................................ 15
2.11 Employment Arrangements......................................... 17
2.12 Contracts and Arrangements...................................... 17
2.13 ERISA........................................................... 17
2.14 Litigation, Compliance with Regulations and
Consents.................................................... 18
2.15 Environmental Matters........................................... 19
2.16 Insurance Policies.............................................. 19
2.17 Tax Returns..................................................... 20
2.18 Adverse Restrictions............................................ 20
2.19 Brokers......................................................... 20
2.20 Material Information............................................ 21
2.21 Continuing Representations...................................... 21
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Section age
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power................................ 21
3.2 Certificate of Incorporation and By-Laws........................ 21
3.3 Due Authorization............................................... 22
3.4 No Violation.................................................... 22
3.5 Consents........................................................ 22
3.6 Brokers......................................................... 23
3.7 Material Information............................................ 23
3.8 Continuing Representations...................................... 23
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior to the
Closing Date................................................ 23
4.2 Operation of the Business of Seller............................. 24
4.3 Supplements to Disclosures...................................... 26
4.4 Computer Software............................................... 26
4.5 No Other Asset Sales............................................ 26
4.6 Regulatory Filing and Consents.................................. 27
4.7 Management Subscription Agreement; Other Actions................ 27
4.8 Announcements; Confidentiality.................................. 28
4.9 Limitation of Seller's Claims After Closing..................... 29
4.10 Employee Benefit Matters........................................ 29
4.11 Financial Statements and Reports................................ 30
4.12 Bulk Sales...................................................... 30
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Seller and
Purchasers.................................................. 31
5.2 Conditions to the Obligations of Seller......................... 31
5.3 Conditions to Obligations of Purchaser.......................... 33
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations..................................... 36
6.2 Agreement to Indemnify.......................................... 36
6.3 Conditions of Indemnification................................... 37
6.4 Remedies Cumulative............................................. 38
6.5 Indemnity Enforcement........................................... 38
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ARTICLE VII
TERMINATION
7.1 Termination..................................................... 40
7.2 Effect of Termination; Right to Proceed......................... 41
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances.............................................. 41
8.2 Waiver and Amendment............................................ 41
8.3 Remedies........................................................ 42
8.4 Expenses........................................................ 42
8.5 Entire Agreement................................................ 42
8.6 Definitions..................................................... 42
8.7 Interpretation.................................................. 44
8.8 Notices......................................................... 44
8.9 Successors and Assigns.......................................... 45
8.10 LITIGATION...................................................... 45
8.11 ARBITRATION..................................................... 46
8.12 Severability.................................................... 46
8.13 Purchaser's Designated Affiliate................................ 46
8.14 Counterparts.................................................... 47
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel||
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SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.3(c) Parking and Easements Agreements
1.5(d) Real Property Lease Adjustment Formulae
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
2.14(c) Required Licenses
2.15 Environmental Matters
4.12(b) Creditors Schedule re: Bulk Sales
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of
September 1, 1994 by and between NRE HOLDINGS, INC., a Delaware corporation
with its principal office at c/o Jordan Industries, Inc., Suite 550, Arborlake
Center, 1751 Lake Cook Road, Deerfield, Illinois 60015 ("Purchaser") and JB
Restaurants, Inc. (the "Seller"):
W I T N E S S E T H:
WHEREAS, by subscription agreements dated as of September 1, 1994,
certain investors are receiving voting stock and in conjunction with this
Agreement, voting stock and other classes of securities in exchange for the
sale of assets under this Agreement;
WHEREAS, the subscription agreements contemplate certain proposed
transactions, including the transaction described in this Agreement, which are
to be consummated by the Purchaser promptly upon its capitalization;
WHEREAS, the Seller operates the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, the Seller is the owner or lessee of certain personal
property used or held for use in or in connection with the conduct of business
at its Restaurants and the Seller is the lessee of certain buildings, other
real property and land upon and in which its Restaurants are located
(individually, the "Real Property" and collectively, the "Real Properties"),
the legal description of which is set forth on Schedule B hereto;
WHEREAS, the Seller and Purchaser propose to exchange each of the
Assets (as hereinafter defined) of Seller for securities of the Seller and
other consideration specified below; and
WHEREAS, the Seller that occupies Real Property pursuant to a lease
agreement (each, a "Real Property Lease" and, collectively, the "Real Property
Leases") (each such Real Property Lease, together with all amendments,
supplements, and schedules thereto, being listed on Schedule C hereto) proposes
to assign to National Restaurant Enterprises, Inc., a Delaware corporation and
wholly-owned subsidiary of the Purchaser ("Enterprises"), and Enterprises
proposes to accept such
<PAGE>
assignment of, the Seller's leasehold interest with respect to the Real
Property on which its Restaurants are located (each a "Leased Real Property"
and, collectively, the "Leased Real Properties");
WHEREAS, Purchaser proposes to transfer the Restaurants and Assets
purchased pursuant to this Agreement to Enterprises and to cause Enterprises to
assume the Assumed Contracts (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions
and conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, the Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Seller's
shareholders to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to acquire and accept the
assignment, transfer, conveyance and delivery from the Seller at Closing of,
all of the following assets used or located in or held for use in connection
with the Restaurants operated by the Seller (collectively, the "Assets") free
and clear of all Liens:
(a) Restaurant Equipment. All of the machinery, equipment,
furnishings, supplies, uniforms, spare equipment parts and all other personal
property (other than Inventory, as hereinafter defined) owned by the Seller and
used or held for use in, or in connection with, the operation of its
Restaurants, including but not limited to the assets set forth in Schedule
1.1(a) annexed hereto (collectively, "Restaurant Equipment");
(b) Leasehold Improvements. All trade fixtures, trade
equipment or other personal property placed in the premises by
the Seller or any of the foregoing purchased by the Seller for
its Restaurants, excluding any HVAC system located at the
Restaurants and any built-in freezer located at the Restaurants
("Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise
Agreement for its Restaurants, as more fully set forth in
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Schedule 1.1(c) annexed hereto ("Franchise Agreements", all
subject to the approval, as necessary, of the Burger King
Corporation;
(d) Inventories. All of the food, related paper products and
promotional items owned by the Seller or otherwise used or held for use in or
in connection with the business being conducted at its Restaurants
(collectively, "Inventory"), which, if so directed by Purchaser, Seller shall
sell directly to Enterprises;
(e) Leased Assets. All of the right, title and interest of the Seller
in any item of personal property which is not owned by it but is leased by it
or otherwise is used or held for use, in or in connection with the business
being conducted at its Restaurants, including but not limited to, the assets
set forth on Schedule 1.1(e) annexed hereto (collectively the "Leased Assets");
(f) Goodwill and Other Intangible Assets. All goodwill,
going concern value, contract rights, customer relationships, and
other general intangibles held or used by Seller in connection
with its business being operated at the Restaurant (collectively
the "Intangible Assets"); and
(g) Miscellaneous Assets. All of the right, title and interest of the
Seller in any other asset or property owned, leased, subleased, used or held
for use in, or in connection with the business being operated at its Restaurant
(collectively, the "Miscellaneous Assets") and excluding, accounts receivable,
cash, cash equivalents or securities held by Seller.
SECTION 1.2 Purchase Price for Assets.
(a) Seller shall exchange the Restaurant Equipment, Leasehold
Improvements and Miscellaneous Assets for the following consideration to be
delivered by the Purchaser:
(i) $31,000 in cash;
(ii) 550.50 shares of the Purchaser's Class A2
Preferred Stock, $.01 par value per share ("Senior
Preferred"); and
(iii) 183.50 shares of the Purchaser's Class B
Preferred Stock, $.01 par value per share.
(b) Seller shall exchange the Leased Assets, Franchise
Agreements and Intangible Assets for the following consideration
to be delivered by the Purchaser:
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(i) $508,902.68 in cash;
(ii) $2,019,000 in principal amount of Purchaser's
12.75% Notes due 2004 ("Notes");
(iii) 123.7634 shares of the Purchaser's Class D
Common Stock, $.01 par value per share; and
(iv) the discharge or assumption of the principal, accrued
interest, fees and other amounts payable of the Seller's debt
associated with its Restaurants, not to exceed $710,097.32 (the
"Obligations").
(c) Seller shall exchange the Inventory for an amount equal to the
cost therefor as charged to the Seller by its unaffiliated supplier or vendor.
At the Closing, Purchaser shall pay to Seller $6000 per Restaurant for the
Inventory of each Restaurant, that sum being Seller's good faith estimate of
the cost of such Inventory (the "Estimated Inventory Price"). The precise
amount of the cost of the Inventory of the Seller shall be determined by
physical inventories to be taken on the Closing Date in its Restaurants and in
any other location where inventory may be located. Seller and Purchaser shall
each have the right to have at least one of its representatives present at the
taking of such inventories. The representatives shall submit a written report
of the results of such inventories promptly after Closing to both the Seller
and Purchaser. Promptly after receiving such report, the Seller shall then
price the inventories shown on such report by multiplying the physical items by
their cost, determined as aforesaid, and the Seller shall submit such priced
inventory report (the "Priced Inventory Report") to Purchaser. If Purchaser and
the Seller are unable to agree upon the purchase price of the Inventory within
10 days after the Seller and Purchaser have received the Priced Inventory
Report, such purchase price shall be determined by Deloitte & Touche, whose
determination shall be final and binding upon the Seller and Purchaser. Within
30 days after the final determination of the purchase price for the Inventory:
(A) if it exceeds the Estimated Inventory Price, Purchaser shall pay the amount
of such excess, by check, to the Seller; or (B) if it is less than the
Estimated Inventory Price, Seller shall pay the amount by check to the
Purchaser.
(d) The Seller and Purchaser shall prepare and file their tax returns
and information statements in a manner consistent with the agreement set forth
above.
SECTION 1.3 Real Properties; Assignments of Leases;
Easements and Parking Agreements. Subject to the terms,
provisions and conditions contained in this Agreement and on the
basis of the representations and warranties hereinafter set
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forth, at the Closing, the Seller shall assign to Enterprises all of its
leasehold interest in the Leased Real Properties and shall assign, sublease or
otherwise transfer to Enterprises all of its right, title and interest in and
to all parking and other access agreements or arrangements relating to the Real
Properties, as follows:
(a) Assignment of Real Property Leases. At Closing, the Seller shall
assign to Enterprises all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment and
Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A. The
Lease Assignment shall be executed and delivered at Closing by the Seller and
Enterprises.
(b) Lease Assignment Consent. At Closing, the Seller shall deliver to
Enterprises a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the last
sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c) annexed
hereto, with respect to the Seller, sets forth all written or oral parking
leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements"), except for recorded
instruments, pursuant to which the Seller is granted, for use in connection
with its Restaurant, parking privileges or rights, current or prospective,
and/or rights of access of any kind or nature in and to the applicable Real
Property. At Closing the Seller shall deliver to Purchaser such documentation
in form and substance reasonably satisfactory to Purchaser and its counsel
which effectively assigns or transfers the Seller's rights under both recorded
and unrecorded Easements to Enterprises (hereinafter individually referred to
as an "Easement Assignment", and, collectively, as the "Easement Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby agree and
acknowledge that the Seller is not selling, transferring, assigning, delivering
or otherwise conveying, and Purchaser is not purchasing, receiving, acquiring
or otherwise assuming, any liabilities of the Seller, or any of its respective
Affiliates except as specifically set forth in Sections 1.1, 1.2(a)(vi) and
1.4(b) hereof. Purchaser shall neither be liable for any liability or
obligation of the Seller, or any of its respective Affiliates nor shall it be
required to indemnify the Seller, or any of its respective Affiliates against
any liability
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or obligation other than those so specifically assumed or
indemnified, as the case may be.
Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify the Seller, or any of its respective
Affiliates against any liability, obligation, duty or responsibility of the
Seller, or any of its respective Affiliates:
(i) arising from, or out of, the ownership or operations or
use of, or incurred in connection with, or incurred as a result of any
claim made against the Seller, or any of its respective Affiliates in
connection with, any Restaurant, Asset, Real Property, Real Property
Lease or Assumed Contract (as hereinafter defined) on or prior to, or
relating to any time period prior to 6:00 A.M. on the Closing Date;
(ii) arising from or by reason of the transactions
contemplated by this Agreement including, but not limited to, Federal,
state or local income taxes, transfer taxes, sales taxes and other
taxes, if any, arising from or by reason of the receipt of the
consideration for the Assets to be transferred pursuant hereto except
as provided in Section 1.6(b);
(iii) with respect to any wages, vacation, compensation,
severance or sick pay or any rights under any stock option, bonus or
other incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or
similar arrangement to which the Seller is a party or for
which the Seller is responsible;
(v) with respect to any "employee benefit plan" as defined in
Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including multi-employer plans as defined in
Section 3(37) of ERISA whether arising before, on or after the Closing
Date; or
(vi) under any Regulations (as hereinafter defined) relating
to public health and safety and pollution or protection of the
environment, including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or
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wastes or any materials defined or categorized by any of the above as
"Hazardous Materials", "Hazardous Substances", or similar or related
designations (collectively referred to herein as "Environmental
Laws"); or
(vii) with respect to any causes of action, judgements,
claims or demands related to any occurrence, action or omission by the
Seller, whether through negligence or otherwise, occurring before the
Closing.
(b) Assumption of Assumed Contracts. The Seller shall assign to, and
Enterprises shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of the Seller attributable
to the period after 6:00 a.m. the Closing Date, under the Franchise Agreements,
Real Property Leases, Easements, Leased Assets and the Other Contracts (as
hereinafter defined) (collectively, the "Assumed Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 190 S.
LaSalle Street, Chicago, Illinois 60603- 3441 (or such other location as shall
be agreed upon by the parties) on September 1, 1994, provided, however, that
if, through no fault of the parties hereto, all of the conditions to the
parties' obligations to close hereunder are not satisfied or waived on the date
so designated, the Closing shall be adjourned to a subsequent mutually
agreeable date not later than September 7, 1994, unless further extended by
mutual agreement by the parties. The "Closing Date" is the date Closing
actually takes place.
(b) Delivery of Documents. At the Closing, Seller and Purchaser shall
deliver to each other the respective documents and other items set forth in
Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to
(i) obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Seller or by the
Seller to Purchaser by reason of such adjustments shall be made at the Closing
(by adjustment of the Purchase Price, if practicable) or as soon as reasonably
practicable thereafter.
(b) The parties shall share equally in the payment of all sales taxes,
and transfer taxes, if any, applicable to its transaction at the Closing.
Purchaser and Seller shall share equally all franchise assignment fees to
Burger King Corporation
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("Burger King") in connection with the assignment of the
Franchise Agreements to Purchaser.
(c) The parties shall share equally the cost of Purchaser's obtaining
prior to Closing, if necessary in Purchaser's reasonable judgment, a "Phase 1"
and, if applicable, a "Phase 2" environmental report. Any such reports or
studies prepared or obtained by the Seller prior to negotiations between
Purchaser and the Seller shall be borne by the Seller. At Closing, if
necessary, the parties shall adjust the cost of obtaining said environmental
reports.
(d) All "minimum" or "fixed rentals" and any other monetary
obligations accruing under the Real Property Leases shall be adjusted for the
month in which the Closing occurs. In the event the period used in computing
and/or adjusting percentage rental (hereinafter referred to as the "Adjustment
Lease Year") under any of the Real Property Leases commences before the Closing
Date and ends after the Closing Date, such percentage rental shall be adjusted
at the end of the Adjustment Lease Year for such Real Property Leases so
affected as follows:
(i) Seller shall be required to pay to Purchaser, within 30
days after the expiration of the Adjustment Lease Year, an amount
equal to the lesser of (1) the amount of percentage rental due for
such Adjustment Lease Year or (2) the "Percentage Rent Contribution"
determined by the following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term
as defined in such Real Property
Lease used in determining such
percentage rental during such
Adjustment Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.6(d);
C = Number of days during the Adjustment
Lease Year prior to, but not including,
the Closing Date; and
D = Percentage rent factor for such Real
Property Lease as indicated in
Schedule 1.6(d);
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provided, however, that, in the event the above formula yields a
negative amount as the Percentage Rent Contribution, the Percentage
Rent Contribution shall be deemed equal to zero; and
(ii) Purchaser shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental, if any,
due for the Adjustment Lease Year.
Section 1.7 Petty Cash. Upon the Closing, the Seller shall leave
$1,000.00 in cash at each Restaurant (the "Store Bank"). Purchaser agrees to
purchase each Store Bank separately from the Purchase Price at Closing on a
cash for cash basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with
Purchaser as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the
Regulations of its jurisdiction of incorporation (as set forth on Schedule A
hereto) and is duly qualified and licensed to do business in such jurisdiction
which is the only jurisdiction wherein the character of the Real Properties and
other Assets owned or leased or the nature of the business of the Seller makes
such licensing or qualification to do business necessary. The Seller has full
power and authority (corporate or otherwise) to own its assets, to own or hold
under lease the real property it presently owns or holds under lease including,
without limitation, the Real Properties, and to carry on the business in which
it is engaged at all locations at which it is presently located including,
without limitation, operation of the Restaurants at the Real Properties and to
execute and deliver this Agreement and the other documents and instruments to
be executed and delivered by the Seller, as the case may be, pursuant hereto or
in connection herewith (this Agreement and all other agreements, documents and
instruments to be entered into pursuant to this Agreement or in connection
herewith including all exhibits and schedules annexed hereto and thereto are
collectively referred to herein as the "Transaction Documents") and to
consummate the transactions contemplated hereby and thereby.
SECTION 2.2 Governing Instruments. The copies of the Certificate of
Incorporation and By-Laws of the Seller, and all amendments thereto to date, as
certified by the Secretary of Seller have heretofore been delivered to
Purchaser by Seller, and
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are complete and correct as of the Closing Date. The Seller is not in default
in the performance, observance or fulfillment of any of the provisions, terms
or conditions of its Certificate of Incorporation or By-Laws.
SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Seller have been duly obtained. The execution and delivery of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors and stockholders of the Seller, and no other acts or
proceedings on the part of the Seller or the stockholders of the Seller are
necessary to authorize the execution and delivery of this Agreement or any of
the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by the Seller, will be the
legal, valid and binding obligation of the Seller enforceable against it in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency and other laws affecting creditors' rights
(collectively, "Bankruptcy Laws") and subject to general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and thereby,
do not, and at Closing will not: (a) violate its Certificate of Incorporation
or By-Laws, as amended; (b) violate or conflict with or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under any agreement, indenture, instrument or understanding to which
the Seller is a party or by which it is bound; (c) violate any judgment,
decree, law, rule or regulation to which the Seller is a party or by which it
is bound; (d) result in the creation of, or give any party the right to create,
any encumbrance upon the property and assets of the Seller; (e) terminate or
modify, or give any third party the right to terminate or modify, the
provisions or terms of any agreement or commitment to which the Seller is a
party or by which the Seller is subject or bound; or (f) result in any
suspension, revocation, impairment, forfeiture or non-renewal of any permit,
license, qualification, authorization or approval applicable to the Seller.
SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals or other authorizations which the Seller is required to obtain from,
and any filing which the Seller is required to make with, any governmental
authority or agency or
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any other Person including, but not limited to, consents required from Burger
King (the "Burger King Consents") in connection with the execution, delivery
and consummation of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby or thereby (collectively,
the "Required Consents").
SECTION 2.6 Financial Statements. (a) The Seller has delivered to
Purchaser a balance sheet of the Business as at December 31, 1993 and December
31, 1992 and the related results of operations for the 12 months ended December
31, 1993 and 1992, respectively. The Seller has delivered to Purchaser
unaudited monthly financial statements for the period from January 1, 1994
through July 31, 1994.
(b) The financial statements of the Seller referred to in Section
2.6(a) (collectively, the "Financial Statements") are true, correct and
complete, are based on Seller's books and records, have been prepared in
accordance with generally accepted accounting principles consistently applied
and accurately present the assets, liabilities, financial positions and results
of operations of the Seller as at the dates thereof and for the periods covered
thereby; provided, however, that (i) monthly financial statements shall not be
required to reflect standard year-end adjustments and reserves, and (ii)
monthly financial statements may be prepared other than in accordance with
generally accepted accounting principles to the extent that such financial
statements shall not be required to reflect standard year-end adjustments, or
contingent liabilities. The Financial Statements of the Seller reflect or
provide for all material claims against, and all debts and liabilities (of any
kind or nature) of, such Seller, fixed or contingent, as at the dates thereof
and for the periods covered thereby, and the Seller does not know of any basis
for the assertion against it of any liability or obligation of any nature
whatsoever, not fully reflected or reserved against in such Financial
Statements. There has not been any Material Adverse Change between the date of
the Financial Statements and the date of this Agreement and, except as set
forth in Schedule 2.6(b), no fact or condition exists or is contemplated or
threatened which might cause any such Material Adverse Change at any time in
the future.
Without limiting the foregoing, since December 31, 1993:
(i) None of the Restaurants, Assets, Real Properties, Real
Property Leases, Assumed Contracts, financial or other condition, or
results of operations of the Seller, has been adversely affected in
any material way as a result of any fire, explosion, accident,
casualty, labor disturbance, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or public
enemy, or
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cessation, interruption or diminution of operations, or any
other event, whether or not covered by insurance;
(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under Contracts
entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii) annexed
hereto, the Seller has not permitted nor allowed any of its Real
Property Leases or Assets, of or used by it to be mortgaged, pledged
or subjected to any Lien;
(iv) Except for transactions among Affiliates, the Seller has
not paid, loaned or advanced any amounts to, or sold, transferred,
leased, subleased or licensed any Real Properties or Assets to, or
entered into any agreement, or arrangements with, any Affiliate or
associate (and any of such transactions shall have been terminated on
or before the Closing Date); and
(v) The Seller has not agreed, whether in writing or
otherwise, to do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to
Purchaser at Closing, good and marketable title to all of its Assets and
Assumed Contracts free and clear of all Liens. The Assets of the Seller include
all of the operating assets used or held for use in or in connection with the
business being conducted by the Seller at the Restaurants. All the Assets are,
and on the Closing Date will be, in good operating condition and repair,
capable of performing the functions for which such items are currently and
normally used, normal wear and tear excepted. All the Assets conform, and on
the Closing Date will conform, to the standards of Burger King under the terms
and conditions set forth in the applicable Franchise Agreements. On the Closing
Date, each Restaurant, together with its related Assets and Real Property,
taken as a whole, will constitute a fully operable "turn-key" Burger King
restaurant sufficient to permit Purchaser to immediately operate the business
at such Restaurant as presently being conducted therein.
(b) The Seller will transfer and/or assign to Purchaser at Closing all
warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller consists, and at
Closing will consist, of items of quality and quantity usable or salable in the
ordinary course of business. The present quality and quantities of all
Inventory of the Seller are, and the qualities and quantities of all Inventory
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outstanding at the Closing will be, reasonable in accordance with the current
specifications of Burger King. At Closing, the Inventory at each Restaurant
shall be sufficient for the operation of such Restaurant for at least 48 hours
after the Closing Date, and in no event will there be excess inventory in
relation to normal usage.
SECTION 2.9 Real Properties; Real Property Leases. (a) With respect to
Real Properties that are owned by Persons not affiliated with the Seller, to
the knowledge of the Seller, each of such owners has good record and marketable
title in fee simple to such real property.
(b) The Seller has delivered to Purchaser a true and complete copy of
the Real Property Leases applicable to it, together with all amendments thereto
and all such Real Property Leases with such amendments or supplements being
listed and set forth on Schedule C. The Seller does not have knowledge or
information of any facts, circumstances or conditions which do or would in any
way adversely affect the Leased Real Property or the operation thereof or the
business thereon as presently conducted or as intended to be conducted. At or
prior to Closing, the Seller shall cause to be discharged of record all Liens
against the Seller or such Seller's interest affecting its Leased Real
Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(b), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(c) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real Properties
by Seller are in substantial compliance with all Regulations. Set forth on
Schedule 2.9(c) annexed hereto is a true and complete schedule of each
certificate of occupancy for each Restaurant located on the Real Properties,
copies of which certificates of occupancy and all amendments thereto to date
have heretofore been delivered to Purchaser, and which copies are complete and
correct as of the date of this Agreement and will be complete and correct as of
the Closing Date. The Real Properties
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and the Restaurants located thereon are in a state of good maintenance and
repair and are in good operating condition, normal wear and tear excepted, and
(i) there are no physical or mechanical defects to the Seller's knowledge in
any of the Real Properties or Restaurants, including, without limitation, the
structural portions of the Real Properties and Restaurants and the plumbing,
heating, air conditioning, electrical, mechanical, life safety and other
systems therein and all such systems are in good operating condition and repair
(normal wear and tear excepted); and (ii) there are no ongoing repairs to the
Real Properties or Restaurants located thereon being made by or on behalf of
any Sellar or being made by or on behalf of any landlord. All necessary
occupancy and other certificates and Permits, municipal and otherwise, for the
lawful use and occupancy of the Real Properties for the purposes for which they
are intended and to which they are presently devoted including, without
limitation, for the operation of a Burger King restaurant thereon, have been
issued and remain valid. There are no pending or threatened actions or
proceedings that might prohibit, restrict or impair such use and occupancy or
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any such certificates or Permits. All notes or notices of violation of any
Regulations, against or affecting any such Real Properties have been complied
with. There are no outstanding correcting work orders issued to the Seller from
any Federal, State, county, municipal or local government, or the owner of the
Real Properties or any insurance company with respect to any such Real
Properties.
(d) There are no condemnation or eminent domain proceedings of any
kind whatsoever or proceedings of any other kind whatsoever for the taking of
the whole or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of the Seller, threatened against the Real
Properties.
(e) The Real Properties and all improvements thereon represent all of
the locations at which the Seller conducts Business and are, now, and at
Closing will be, the only locations where any of the Assets are or will be
located.
(f) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any Law or by the normal use
and operation of the Real Properties and the Restaurants located thereon are
installed to the property lines of the respective Real Properties, to the
knowledge of the Seller are connected pursuant to valid Permits, are fully
operable and are adequate to service the Real Properties and the Restaurants
located thereon and to permit full compliance with all Regulations and normal
utilization of the Real Properties and the Restaurants located thereon.
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(g) To Seller's knowledge, all licenses, Permits, certificates,
including, without limitation, proof of dedication, required from all
Authorities having jurisdiction over the Real Properties, and from any other
Persons, for the normal use and operation of the Real Properties and the
Restaurants located thereon and to ensure vehicular and pedestrian ingress to
and egress from the Real Properties and the Restaurants located thereon have
been obtained. To the Seller's knowledge the Easements are valid and binding,
in full force and effect and enforceable in accordance with their respective
terms. There are no defaults or offsets which the owner of such recorded
Easements has against the enforcement of such Easements and neither the Seller
nor the owners of the Easements are in default under such Easements, nor have
any events under such Easements occurred which with notice or the passage of
time or both, would constitute a default under such Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to
Purchaser a true, complete and correct copy of the Franchise Agreement relating
to its Restaurant, including any and all amendments thereto. The Seller or its
Stockholders owns, and at Closing will transfer to Purchaser, its respective
right, title and interest in its Franchise Agreement, free and clear of all
Liens. Subject to the written consent of Burger King, in form satisfactory to
Purchaser and its counsel, which the Seller shall obtain and deliver to
Purchaser and its counsel at or prior to the Closing, the Seller has the
absolute right and authority to sell, assign, transfer and convey its Franchise
Agreement and all other assets being sold or otherwise conveyed to Purchaser in
connection with the Restaurant which it operates in accordance with the terms
and conditions hereof, and there have not been and, except as set forth on
Schedule 2.10, currently there are no claims and the Seller is not aware of any
threatened claims with Burger King pertaining to the Franchise Agreements. On
the Closing Date, neither Burger King nor the Seller shall be in default under
any of the Franchise Agreements and the Franchise Agreements shall be in full
force and effect, the Seller shall not have received any notice of violation
with respect to the Franchise Agreements, and the Seller does not know or has
no reason to know of any event which would give rise to a violation or default
under the Franchise Agreements.
SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor agreement,
any agreement containing severance or termination pay arrangements, deferred
compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or
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hospitalization insurance, plan or program or other employee or fringe benefit
plan, including vacation plans or programs and sick leave plans or programs.
Except as set forth on Schedule 2.11(a) hereof, within the last five (5) years
the Seller has not experienced any labor disputes, union organization attempts
or any work stoppage due to labor disagreements. Except as set forth on
Schedule 2.11(a) hereof, (i) to the best knowledge of the Seller, the Seller is
in substantial compliance with all applicable Regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice; (ii) there is no unfair
labor practice, charge or complaint against the Seller pending or threatened
before the National Labor Relations Board; (iii) there is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending or
threatened against or affecting the Seller; (iv) no question concerning
representation has been raised or is threatened respecting the employees of the
Seller; and (v) no grievance which might have an adverse effect on the Seller
or the conduct of its business nor any arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claims therefor exist.
Schedule 2.11(b) sets forth a true and complete list of the names of
all persons employed by the Seller at the Restaurants as of the date hereof,
and the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), the Seller does not have any Contract
relating to the Restaurants, Assets or Real Properties, including, without
limiting the generality of the foregoing, any (i) Contract for the purchase or
sale of Inventory; (ii) Contract for the purchase or sale of supplies, services
or other items; (iii) Contract for the purchase, sale or lease of any
Restaurant Equipment; (iv) Franchise Agreement or license agreement; and (v)
employment or consulting agreement or pension, disability, profit sharing,
bonus, incentive, insurance, retirement or other employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and correct
copy of each Other Contract applicable to it, together with all amendments (if
oral, a written description of the terms thereof) thereto.
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(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of the scheduled term thereof or has knowledge of the intent of a
party to any such Other Contract to do the same, nor has any event occurred
which, with notice or the passage of time or both, would constitute a default
under any such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither
the Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14) and
(b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986, as
amended (the "Code")) (collectively, the "Group") presently has or at any time
during the five (5) years before the date of this Agreement had an obligation
to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee welfare
benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA Plans").
Each ERISA Plan that is an employee pension plan complies in form and operation
with all applicable requirements of section 401(a) and 501(a) of the Code and
each ERISA Plan that is a group health plan (as defined in ERISA section 607(1)
or Code section 4980B(g)(B) has been operated in compliance with applicable
law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not constitute
an "employee benefit plan" as defined in ERISA section 3(3) (collectively,
"Fringe Benefit Plans") currently maintained by the Seller or to which the
Seller has an obligation to contribute. Seller has delivered or made available
to Purchaser true and complete copies of all documents, as they may have been
amended to the date hereof, embodying or relating to the ERISA Plans or Fringe
Benefits Plans.
(c) There are no actions, audits, suits, or claims pending (other than
routine claims for benefits) or, to the knowledge of the Seller, threatened,
against any ERISA Plan or Fringe Benefit Plan or any fiduciary of any such Plan
or against the assets of any such Plan.
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(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether insured or self-insured) or other employee welfare
benefit plan maintained by the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents. (a)
Except as set forth on Schedule 2.14(a) and except for workers' compensation or
similar claims, there are no claims now pending, or to the best knowledge of
the Seller, in prospect or threatened against, the Seller or any of its
respective officers, directors or partners, at law or in equity including,
without limitation, (i) any voluntary or involuntary proceedings under
Bankruptcy Laws, or (ii) any Action before or by any governmental
instrumentality (domestic or foreign) or arbitrator which involves a claim or
demand for any judgment, decree, liability, action or injunction enjoining an
action, whether or not fully covered by insurance, in connection with the
Assets, Real Property Leases, Assumed Contracts, Real Properties, Restaurants,
business, affairs, properties or assets of the Seller.
(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in substantial compliance in
all respects with all Regulations applicable to its Business, affairs,
properties, or assets. Neither the Seller, nor any officer, director or
authorized agent of the Seller is in default with respect to, and has not been
charged or to its knowledge threatened with, nor is under investigation with
respect to, any violation of any Regulations relating to any aspect of its
Business, affairs, properties or assets including, but not limited to, the
Restaurants, Assets, Real Property Leases, Assumed Contracts, and the Real
Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
Permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the Assets,
Real Property Leases or the Real Properties ("Required Licenses"). Except as
set forth in Schedule 2.14(c), the Seller has obtained each of the Required
Licenses and each such Required License, is and on the Closing Date will be,
validly issued and in full force and effect and there are not now and, at
Closing shall not be any claims pending, and to the Seller's knowledge, any
claims in prospect or threatened, challenging the Required Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in
Schedule 2.15 annexed hereto: (i) the Seller has obtained all
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Licenses which are required under any Environmental Laws; (ii) to Seller's
knowledge, the Seller is in substantial compliance with all terms and
conditions of the Required Licenses and is also in substantial compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Laws or code, plan, order, decree or judgment relating to public
health and safety and pollution or protection of the environment or any notice
or demand letter issued, entered, promulgated or approved thereunder; (iii)
there are no claims, pending or to Seller's knowledge threatened, against the
Seller relating in any way to any Environmental Law or any Regulation, notice
or demand letter issued, entered, promulgated or approved thereunder; and (iv)
the Seller does not know or have any reason to know of, nor has the Seller
received any notice of any facts, events or conditions which would interfere
with or prevent continued compliance with, or give rise to any common law or
legal liability under any Environmental Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily insured
against by reputable companies in the same or similar business, of such types
and in such amounts (with such deductible amounts) as is customary for such
companies under similar circumstances. All of the applicable insurance policies
are valid and enforceable and in full force and effect and will be continued in
full force and effect up to and including the Closing Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income tax
returns and all state and local income, franchise and sales tax returns and all
and any other tax return which was required to be filed as of the date of this
Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. The
provision for Taxes shown on the Financial Statements of the Seller was
sufficient to satisfy all taxes due and all assessments received by the Seller
(and all other entities included within the Financial Statements) for all
periods ended on or prior to the date of such Financial Statements. As of the
date hereof, no Taxes are past due, and no Taxes are unpaid and all current
payroll taxes have been paid. The Seller is not aware of any basis upon which
any assessment of additional Taxes could be made, and the Seller has not signed
any extension agreement with the Internal Revenue Service or any other
governmental agency or given waiver of a statute of limitations with respect to
the payment of Taxes for periods for which the statute of limitations has not
expired. The Seller shall be liable for all tax liabilities in connection with
the operation of the Restaurants, the Assets, the Real Properties, the Real
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Property Leases, the Easements and Assumed Contracts, which cover periods prior
to the Closing Date. The Seller shall be liable for half of all transfer, sales
and similar tax liabilities, if any, in connection with the leasing of the Real
Properties under the Real Property Leases, the assignment of the Real Property
Leases and the Assumed Contracts, and the transfer of any rights under the
Easements. All taxes which the Seller is required by law to withhold or collect
have been duly withheld or collected and to the extent required have been paid
over to the proper governmental authorities on a timely basis or reflected as
an obligation on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, By-Law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or Assumed Contracts. The execution and delivery
of this Agreement and the other Transaction Documents and the consummation of
the transactions contemplated hereunder and thereby will not result in the
violation or breach of, default or the creation of any Lien under any of the
aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be stated
herein or therein or which is necessary to make the statements herein or
therein not misleading. There is no fact which the Seller has not disclosed to
Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
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SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Seller that:
SECTION 3.1 Organization and Corporate Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified and licensed to do business
wherein the character of the Real Properties and other Assets to be purchased
makes such licensing or qualification to do business necessary. Purchaser has
full power and authority (corporate and other) to own or hold under lease its
properties and assets, and execute and deliver this Agreement and the other
Transaction Documents to be executed and delivered by Purchaser pursuant hereto
or in connection herewith and to consummate the transactions contemplated
hereby and thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Seller by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance or
fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The execution
and delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Purchaser and no other corporate acts
or proceedings on the part of Purchaser or its stockholders are necessary to
authorize the execution and delivery of this Agreement or any of the other
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby. This Agreement and each of the other Transaction Documents,
upon execution and delivery by Purchaser, will be the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforcement thereof may be
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limited by Bankruptcy Laws and subject to the general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 3.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby and thereby
do not and at Closing will not (a) violate its Certificate of Incorporation or
By-Laws; (b) violate or conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
any agreement, indenture, instrument or understanding to which Purchaser is a
party or by which it is bound; (c) violate any judgement decree, law, rule, or
regulation to which Purchaser is a party or by which it is bound; (d) result in
the creation of, or give any party the right to create any encumbrance upon the
property or assets of Purchaser; (e) terminate or modify, or give any third
party the right to terminate or modify, the provisions or terms of any
agreement or commitment to which Purchaser is a party or by which Purchaser is
subject or bound; or (f) result in any suspension, revocation, impairment,
forfeiture or non-renewal of any license, qualification, authorization or
approval applicable to Purchaser.
SECTION 3.5 Consents. Except for the Burger King Consents and the
consent of The First National Bank of Boston (Purchaser's senior lender),
Purchaser is not required to obtain any consents, approvals or other
authorizations or to make any filing with any Authority or any other Person in
connection with the execution, delivery and consummation of this Agreement and
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 3.6 Brokers. No broker, finder or selling agent has had a part
in bringing about any of the transactions contemplated by this Agreement or the
other Transaction Documents (including, but not limited to, the leasing of the
Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 3.7 Material Information. This Agreement, the other
Transaction Documents and any exhibit, schedule, certificate or other
information representation, warranty or other document furnished or to be
furnished by Purchaser to Seller do not (a) contain, nor will the same contain,
any untrue statement of a material fact; or (b) omit, nor will the same omit or
fail to state, a material fact required to be stated herein or therein or which
is necessary to make the statements herein or therein not misleading. There is
no fact which the Purchaser has
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not disclosed to Seller and its counsel in writing and of which the Purchaser
is aware which materially and adversely affects or could adversely affect the
Business prospects, financial condition, operations, property or affairs of the
Restaurants.
SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing
Date. (a) Between the date of this Agreement and the Closing Date, the Seller
shall give Purchaser, its directors, officers, employees, accountants, counsel
and other representatives and agents ("Representatives") reasonable access to
the premises, properties, books, financial statements, Contracts, records of
the Seller, relating to the Business, the Restaurants, the Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts, and
shall furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Seller as
Purchaser shall from time to time reasonably request for such purposes as
Purchaser shall require. Any such investigation or examination shall be
conducted as reasonable times and upon reasonable notice to the Seller.
(b) Without in any way limiting the provisions of Section 4.1(a)
hereof, Purchaser shall have the right between the date of this Agreement and
the Closing Date at such time or times as Purchaser reasonably may request (i)
to have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or other
wood-destroying organism present in the Real Properties or Restaurants, or any
damage from prior termites or other wooddestroying organism, and the Seller
will assign to Purchaser at Closing all rights under existing contracts and
policies, if any, with the Seller's exterminating company; and (ii) to have
conducted any environmental audits or studies of the Restaurant, the Real
Property and the Assets, including a "Phase I" and, if the results of such
Phase I so recommends, a "Phase II" environmental study. Notwithstanding
inspections, audits or other studies undertaken by or on behalf of Purchaser
hereunder or any other due diligence investigation undertaken by or on behalf
of Purchaser, Seller shall not be relieved in any way of responsibility for its
warranties, representations and covenants set forth in this Agreement.
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SECTION 4.2 Operation of the Business of Seller. Between the date of
this Agreement and the Closing Date, the Seller shall conduct the operation of
its Restaurants in the ordinary and usual course of business, consistent with
past practices and will use its best efforts to preserve intact the present
business organization with respect to its Restaurants, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with landlords, franchisors, dealers, licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relations with it and its Restaurants and will maintain its Restaurants, Real
Properties, and Assets in a condition conducive to the operation of the
business currently carried on therein.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, the Seller will not:
(a) Keep and maintain its books of account and records other
that in accordance with generally accepted accounting principles
consistent with past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of the
employees at any of the Restaurants other than in the ordinary course
of business, consistent with past practices; (ii) pay or agree to pay
any pension, retirement allowance or other employee benefit not
required or permitted by any Welfare Plan, whether past or present; or
(iii) commit itself in relation to its Restaurants, the employees at
its Restaurant or the Real Properties, to any new or renewed Welfare
Plan with or for the benefit of any Person, or to amend any of such
Welfare Plans or any of such agreements in existence on the date
hereof;
(d) Fail promptly to notify Purchaser of any unusual
developments with respect to its Restaurants, Assets, Real Properties,
Real Property Leases, the Easements, Assumed Contracts or otherwise in
connection with its business;
(e) Permit any of its insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies are in full force and effect providing coverage,
in form, substance and amount equal to or greater than the coverage
under those canceled, terminated or lapsed for substantially similar
premiums;
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(f) Amend or terminate its Real Property Leases, or sell,
transfer, mortgage or otherwise dispose of or encumber, or agree to
sell, transfer, mortgage or otherwise dispose of or encumber, its Real
Property Leases, the Easements or, except in the ordinary course of
business, any of the Assets or Assumed Contracts;
(g) Allow to occur any default or breach, or event which with
the lapse of time or giving of notice, or both, would constitute a
default or breach under its Real Property Leases, the Easements, its
Franchise Agreement or any of the other Assumed Contracts;
(h) Enter into any other Contracts whether written or oral
which, individual or in the aggregate, would be material to its
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements or the Assumed Contracts, except Contracts for the purchase,
sale or lease of goods or services in the ordinary course of business
consistent with past practice and not in excess of current
requirements, or otherwise make any material change in the conduct of
the businesses or operations of the Seller;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the other
Transaction Documents;
(j) Take any action which would result in any of the
representations or warranties contained in this Agreement or the other
Transaction Documents not being true at and as of the time immediately
after such action at and as of the Closing Date, or in any of the
covenants contained in this Agreement or other Transaction Documents
becoming unperformable or which could have a Material Adverse Effect
on the transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain
and keep its Restaurant, Assets and Real Properties in at least the
same condition and order as exists on the date hereof, reasonable wear
and tear excepted, and fail to perform repairs and maintenance usual
and customary in the ordinary course of business;
(l) Enter into any lease, sublease, license or any other
occupancy agreement, amend or terminate the Easements, the Real
Property Leases, or enter into, amend or terminate any Franchise
Agreement, or other Contract with respect to its Restaurants and Real
Properties;
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(m) Take any action or allow to occur any event which with
the lapse of time or giving of notice, or both, would allow to lapse
any of the Licenses;
(n) Operate its Restaurants or otherwise engage in any
practices which would materially affect sales at its
Restaurant; or
(o) Agree (in writing or otherwise) to do any of the
foregoing.
SECTION 4.3 Supplements to Disclosures. Prior to the Closing Date, the
Seller will promptly supplement or amend the information set forth herein and
in the Schedules and Exhibits referred to herein with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described herein or
in a Schedule or Exhibit or which is necessary to correct any information
herein or in a Schedule or Exhibit or in any representation and warranty, which
has been rendered inaccurate thereby.
SECTION 4.4 Computer Software. The Seller shall provide Purchaser with
computer readable software in a form and language that Franchise Service
Options can use and manipulate, which software shall be used to manage the
Restaurants, including (i) payroll and compensation systems and (ii) sales
reports of the Restaurants on a "restaurant by restaurant" and "day by day"
basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the
Closing Date, the Seller shall not, directly or indirectly and whether by means
of a sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or
enter into any Contract to sell, transfer, assign or dispose, of the
Assets or any interest therein, except for normal operations in the
ordinary course of business; or
(b) encourage, initiate or solicit any inquiries or proposals
by, or engage in any discussions or negotiations with, or furnish any
non-public information to, any Person concerning any such transaction
and the Seller shall promptly communicate to Purchaser the substance
of any inquiry or proposal concerning any such transaction which may
be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof until
the Closing Date, each of the parties hereto shall furnish to the other party
hereto such necessary information and
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reasonable assistance as such other party may reasonably request in connection
with its preparation of necessary filings or submissions to any governmental
agency and the Seller shall use its best efforts to obtain all Licenses and
Required Consents from third parties necessary to consummate the transactions
contemplated by this Agreement and the other Transaction Documents. Each party
shall furnish to the other copies of all correspondence, filings or
communications (or memoranda setting forth the substance thereof) between
Purchaser, Seller or any of their respective representatives and agents, on the
one hand, and any government agency or authority or third party, on the other
hand, with respect to this Agreement and the other Transaction Documents and
transactions contemplated hereby and thereby.
SECTION 4.7 Management Subscription Agreement; Other Actions. On or
before the Closing in connection with exchanging the Assets for the Class D
Common Stock, the Senior Preferred, the Junior Preferred and the Notes of the
Purchaser (the "Securities") the Seller and Lawrence Jaro, shall execute and
deliver a counterpart of the Management Subscription Agreement of even date
herewith by and among the Seller, Lawrence Jaro, the Purchaser and other
Management Investors (as defined therein), and shall have taken all other
actions and executed and delivered all other agreements and documents necessary
for a valid placement of the Securities by the Purchaser with the Seller and
Lawrence Jaro.
SECTION 4.8 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by Law, no announcement of the
existence or terms of this Agreement or the other Transaction Documents or the
transactions contemplated hereby and thereby shall be made publicly or to the
employees or customers of Seller, by any party to this Agreement or any of its
respective Representatives without the advanced written approval of the other
parties.
(b) Purchaser, on the one hand, and Seller, on the other hand, each
shall hold in strict confidence, and shall use their best efforts to cause all
their Representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or by other requirements of
law, all confidential and proprietary information (collectively, "Confidential
Information") concerning Seller, (in the case of Purchaser) and Purchaser (in
the case of Seller) which is created or obtained prior to, on or after the date
hereof in connection with the transactions contemplated hereby, and Purchaser,
Seller shall not use or disclose to others, or permit the use or disclosure of,
any such information created or obtained except to the extent that such
information can be shown to have been (i) previously known by Purchaser, and
Seller, as the case may be (ii) in the public domain through no fault of a
party or any of
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its Representatives, and will not release or disclose such information to any
other Person, except its officers, directors, employees, Representatives and
lending institutions who need to know such information in connection with this
Agreement.
(c) For purposes of this Section 4.8, Purchaser specifically
acknowledges that it and its Representatives will have an opportunity to engage
in "due diligence" with respect to this transaction and which may include the
opportunity to review corporate records, financial and otherwise, interview
certain management personnel, and see and learn of the operation of Seller. The
Confidential Information of Seller, referred to in Section 4.8(b), includes,
without limitation, all schedules, documents, work papers or other written
information, and specifically including financial records, leases, franchise
agreements, corporate minutes, corporate organization documents, stockholder
records, employment records, fringe benefit records, lists of creditors and
suppliers, contracts, loan and security agreements, claims against Seller,
insurance, management and operation procedures and trade secrets (both as
defined by Texas statutory law and by common law); and any other proprietary
information related to the Business conducted by Seller, whether or not such
information would be legally protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other
is unique and its release or misusage may not be compensable in damages and
that the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.9 Limitation of Seller's Claims After Closing. From and
after the Closing and thereafter so long as the provisions of Article VI are
still applicable, the Seller shall not, without the prior written consent of
Purchaser: (i) engage in any business, which would adversely affect any value
of Purchaser's business; or (ii) take any other action or fail to take any
action, or allow, the occurrence of any event, with respect to the Seller's
assets, which could be reasonably expected to have a Material Adverse Effect on
the Seller's ability to indemnify, defend and hold harmless Purchaser and its
officers, directors and stockholders from and against Damages (as hereunder
defined) pursuant to Article VI; provided, however, that nothing herein shall
preclude the Seller from taking any action to distribute assets whether in the
form of cash or other assets to its Shareholders'.
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SECTION 4.10 Employee Benefit Matters. (a) No later than 30 days after
the Closing Date, the Seller shall discharge and satisfy in full any
liabilities it may have with respect to any wages, vacation, severance or sick
pay, or any rights under any ERISA Plan or Fringe Benefit Plan.
(b) No later than 30 days after the Closing Date, the Seller shall
discharge and satisfy in full any employment, consulting or similar arrangement
to which the Seller is a party or for which the Seller is responsible.
(c) The Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Seller,
and to "qualified beneficiaries" of any employee of the Seller or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Seller or an Affiliate of the Seller. The type of coverage shall be that
described in Section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in Section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under Section 4980B of the Code.
(d) Subject to the provisions of this Agreement, Seller and the
stockholders of Seller jointly and severally, hereby agree to indemnify and
hold Purchaser harmless from and against any Damages which arise out of the
failure to comply with the obligations in Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Seller shall deliver to Purchaser:
(i) within five (5) business days after the end of each
calendar month, a written statement, certified by Seller, of the gross
sales of each Restaurant for that month; and
(ii) With respect to the "compiled" Financial Statements
delivered to Purchaser by the Seller, at the request of Purchaser, the
Seller shall (and shall cause their respective Representatives to)
cooperate with Purchaser to have such statements reviewed or audited
or further clarified in such manner as Purchaser may deem necessary or
advisable. Any additional fees paid by the Seller to their respective
independent certified public accountants in connection with such
cooperation shall be borne by Purchaser.
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(b) Seller agrees to observe and abide by the provisions of Sections
4.4, 4.5 and 4.7, Seller and Purchaser agree to observe and abide by the
provisions of and Article VIII hereof;
(c) Seller acknowledges and agrees to be bound by the
provisions of Section 4.6 and 7.1(c); and
(d) Inasmuch as all of the Franchise Agreements are held in individual
names, the Seller shall cause the individual to observe and abide by the
provisions of Section 4.5 insofar as the transfer of such Franchise Agreements
to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser also hereby waives compliance
by Seller with the provisions of any applicable bulk sales state or local tax
laws in effect in the states of Texas and Colorado. Seller hereby warrants and
agrees to pay and discharge, promptly when due, all claims of creditors which
may be asserted against Purchaser by reason of such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth all of the
creditors of the Seller as of the date hereof and the amounts owing to such
creditors as of the date hereof.
(c) The bulk sales laws referred to in Section 4.12(a) hereof are
referred to herein, collectively, as the "Bulk Sales Laws".
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Seller and Purchasers.
The obligations of Purchaser and Seller to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at or
prior to the Closing of the following conditions, except to the extent that any
such condition may have been waived in writing by both Seller and Purchaser at
or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation,
inquiry or other proceeding before any governmental or regulatory
authority or other Person shall have been instituted or shall be
pending or threatened which questions the validity or legality of this
Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby and which could reasonably be expected
to damage materially the Business or assets of the Seller if the
transactions contemplated hereby or thereby are consummated. No
injunction, decree or order shall be in effect prohibiting
consummation of the
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transactions contemplated by this Agreement or the other Transaction
Documents or which would make the consummation of such transactions
unlawful and no action or proceeding shall have been instituted and
remain pending before an Authority to restrain or prohibit the
transactions contemplated by this Agreement and the other Transaction
Documents.
SECTION 5.2 Conditions to the Obligations of Seller. The obligations
of the Seller to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by the Seller at or prior to the
Closing:
(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date,
with the same force and effect as if made at and as of the Closing
Date; the Purchaser shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Seller shall have received a
certificate dated the Closing Date in form satisfactory to him signed
by an officer of Purchaser.
(b) Governing Instruments, etc. The Seller shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of Purchaser certifying, among other things, that
attached or appended to such certificate (i) is a true and correct
copy of its Certificate of Incorporation and all amendments if any
thereto as of the date thereof; (ii) is a true and correct copy of its
By-Laws; (iii) is a true copy of all corporate actions taken by it,
including resolutions of its board of directors authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation of
the transactions contemplated hereby and thereby; and (iv) are the
names and signatures of its duly elected or appointed officers who are
authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
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(c) Payment of Purchase Price. Purchaser shall have
tendered to Seller the Purchase Price payable at Closing in
accordance with Section 1.2(a).
(d) Assumption of Assumed Contracts. The Seller shall
have received from Purchaser an Assumption Agreement
substantially in the form annexed as Exhibit C hereto.
(e) Opinion of Counsel. The Seller shall have received an
opinion of counsel for Purchaser, as of the Closing Date,
substantially in the form annexed as Exhibit D hereto.
(f) Senior Lender's Consent. Seller shall have been presented
evidence that the Purchaser shall have received, if necessary, the
written consent of its Senior Lender, The First National Bank of
Boston, to the transactions contemplated hereby.
(g) Obligations. Seller shall have been presented
evidence that the Purchaser has extinguished or assumed the
Obligations.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby and by the other
Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Seller
contained in this Agreement and the other Transaction Documents, or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date
with the same force and effect as though made on and as of the Closing
Date; the Seller shall have performed or complied with all agreements
and conditions required by this Agreement and the other Transaction
Documents to be performed or complied with by it on or prior to the
Closing Date; and Purchaser shall have received certificates dated the
Closing Date in form satisfactory to Purchaser signed by the President
on behalf of the Seller, as applicable.
(b) Governing Instruments, etc. Purchaser shall have received
a certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of the Seller certifying, among other things, that attached
or appended to such
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certificate (i) is a true and correct copy of its Certificate of
Incorporation and all amendments if any thereto as of the date
thereof; (ii) is a true and correct copy of its By-Laws; (iii) is a
true copy of all corporate actions taken by it, including resolutions
of its board of directors and stockholders authorizing the execution
and delivery of this Agreement and each other Transaction Document to
be delivered by it pursuant hereto and the consummation of the
transactions contemplated hereby and thereby; and (iv) are the names
and signatures of its duly elected or appointed officers who are
authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
(c) Instruments of Transfer. The Seller shall have delivered
to Purchaser a bill of sale and assignment ("Bill of Sale")
substantially in the form annexed as Exhibit E hereto, a Lease
Assignment (if applicable) and any other documents of transfer which
Purchaser reasonably shall request in order to evidence and effectuate
the sale and assignment to Purchaser of the Assets, the Real Property
Leases, the Assumed Contracts and the consummation of all other
transactions contemplated by this Agreement and the other Transaction
Documents.
(d) Consents. The Seller shall have obtained, and delivered
to Purchaser, copies of the Required Consents applicable to it in form
and substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an
opinion or opinions of counsel for Seller, as of the Closing Date,
substantially in the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been no
Material Adverse Change, nor any events which could have a material
adverse change, in the Business, operations, prospects or financial or
other condition of any Restaurant or in the respective Assets or Real
Properties from the date hereof to the Closing Date (the "Interim
Period") nor shall have there been, for all Restaurants in the
aggregate, a decrease of five percent or more in gross sales or gross
profit during the Interim Period, as compared with the same period
during the prior calendar year. For purposes hereof, "Gross Profit"
shall mean total gross sales reduced by the sum of food, labor and
paper costs. At Closing, Purchaser shall have received a certificate
dated the Closing Date in form satisfactory to Purchaser signed by the
President on behalf of the Seller to the foregoing effect.
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(g) Environmental Due Diligence. Purchaser shall have
completed its environmental due diligence of the Restaurants, Real
Property and Assets and have received results which are satisfactory
to Purchaser in its sole discretion. In the event Seller shall provide
Purchaser with previously prepared environmental reports, such reports
must have been prepared within 90 days from the date of this
Agreement, or, in the alternative, such reports must have been updated
within 90 days of the date of this Agreement.
(h) Senior Lender's Consent. Purchaser shall have
received, if necessary, the written consent of its senior
lender, The First National Bank of Boston, to the
transactions contemplated hereby.
(i) Other Documents. The Seller shall have delivered
to Purchaser:
(i) the Assignment of its Real Property Lease,
each Assumed Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original
counterpart of the Real Property Lease;
(iv) receipts for the Purchase Price paid to
Seller by Purchaser;
(v) certificates dated no earlier than 30 days
prior to the Closing Date, from appropriate authorities in
the State of its jurisdiction of incorporation, as to the
good standing of such Seller;
(vi) an updated schedule of creditors as of the
Closing Date;
(vii) executed original of each of the Osborn
Proxy Agreement and the Jaro Proxy Agreement, as defined in
the Stockholders Agreement, of event date herewith; and
(viii) all other documents, instruments and
agreements required to be delivered by such Seller to
Purchaser pursuant to this Agreement and the other
Transaction Documents.
(j) Review by Purchaser's Auditor. Purchaser's
auditor shall have:
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(i) reviewed the financial and accounting
system of Seller;
(ii) reviewed and confirmed the financial
statements and results set forth in such statements;
(iii) found no objection to the financial and
accounting system of Seller and Purchaser shall have resolved
any objection raised by the auditor and presented to the
Seller by the Purchaser.
(k) The Obligations (as defined in Section 1.2(a)) shall not
exceed $709,000, and Purchaser shall receive a letter or letters of
discharge from the lender or lenders to which the Obligations are owed
releasing any security or collateral under the Obligations to the
extent such Obligations are discharged by the Purchaser.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing, notwithstanding any investigation
heretofore or hereafter made by or on behalf of any party hereto; provided,
however, that (a) the agreements and covenants (other than the indemnification
provisions set forth in this Article VI, which will survive as provided below)
set forth in this Agreement shall survive and continue until all obligations
set forth therein shall have been performed and satisfied and the applicable
statute of limitations for breaches or defaults of such agreements and
covenants has expired; and (b) all representations and warranties, and the
agreements of Seller and Purchaser to indemnify each other set forth in this
Article VI, shall survive and continue for, and all indemnification claims with
respect thereto shall be made prior to March 31, 1996.
SECTION 6.2 Agreement to Indemnify. Subject to the conditions of this
Article VI:
(a) Purchaser hereby agrees to indemnify, defend and hold
harmless the Seller from and against all demands, claims, actions or
causes of action, assessments, loses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and
reasonably attorney's
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fees,costs and disbursements and expenses (collectively, "Damages"),
asserted against, resulting to, imposed upon or incurred by the Seller
directly or indirectly, arising out of or resulting from (i) a breach
of any representation, warranty, covenant or agreement of Purchaser
contained in or made pursuant to this Agreement (including but not
limited to enforcement of this Article VI), the other Transaction
Documents or the transactions contemplated hereby or thereby or any
facts or circumstances constituting such breach; and (ii) any
indebtedness, obligation or liability assumed by Purchaser pursuant to
Section 1.1, 1.2(a)(vi) and 1.4(b) hereof; and (iii) the operation,
use or ownership of its Restaurants, Assets, Real Property Leases,
Real Properties, the Easements and Assumed Contracts, during, or which
have otherwise accrued from or otherwise relate to, the period of time
after the Closing Date; and
(b) Seller agrees to indemnify, defend and hold harmless
Purchaser and its officers, directors and stockholders from and
against all Damages asserted against or incurred by Purchaser or such
officers, directors and stockholders, directly or indirectly, arising
out of or resulting from: (i) a breach of any representation,
warranty, covenant or agreement of the Seller contained in or made
pursuant to this Agreement (including but not limited to enforcement
of this Article VI) the other Transaction Documents or any facts or
circumstances constituting such a breach; (ii) any indebtedness,
obligations or liabilities of the Seller including, but not limited
to, any liability or obligation set forth in Section 1.4(a), and the
tax liabilities set forth in Section 2.17 other than those expressly
assumed by Purchaser hereunder; (iii) a breach of or otherwise arising
under any Environmental Law (whether now or hereafter in effect), to
the extent the same arises out of any condition or state of facts or
otherwise relates to the period of time commencing on the date Seller
was entitled to possession of the Real Property in question and ending
on the Closing Date; (iv) the operation, use or ownership of the
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements and Assumed Contracts during, or which have otherwise
accrued from or otherwise relate to, the period of time prior to the
Closing Date; (v) the Seller's failure to pay and discharge all claims
of creditors which may be asserted against Purchaser by reason of
Purchaser's waiver of compliance by Seller of the Bulk Sales Laws (vi)
all Damages arising before the Closing and not expressly assumed in
writing by the Purchaser; provided, however, that Seller's
indemnification of Purchaser shall be limited in aggregate amount as
provided in Section 6.5 and (vii) the failure of any portion of any
property which is currently used in
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connection with the operation of Store 3051 in Vidor, Texas to be
located within the premises demised under the lease, as assigned to
Purchaser as of the date hereof, pertaining to such store, but only to
the extent the aggregate of all such Damages under this clause (vii)
exceeds $20,000.
SECTION 6.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 6.3 with respect to Damages
for which it must indemnify another party hereunder (collectively, the
"Indemnifiable Claims") shall be subject to the following terms and conditions:
(a) The indemnified party shall give the indemnifying party
notice of any such Indemnifiable Claim which notice shall set forth in
reasonable detail the basis for and amount of the Indemnifiable Claim,
and the circumstances giving rise thereto. If the Indemnifiable Claim
is a third-party Claim, the notice must contain an copy of any papers
served on the indemnified party.
(b) If the Indemnifiable Claim is not a third-party Claim,
unless within 30 days of receipt by the indemnifying party of notice
of the Indemnifiable Claim the indemnifying party sends written notice
to the indemnified party disputing the facts giving rise to the
Indemnifiable Claim or the amount of Damages stated in the notice, the
Damages stated in the notice shall become due and payable upon the
expiration of such 30 day period. If, however, the indemnifying party
disputes the facts giving rise to the Indemnifiable Claim or the
amount of Damages stated in the notice within such 30 day period and
the dispute cannot be resolved within the following 90 days, the
dispute shall be submitted to arbitration under the rules of the
American Arbitration Association in Chicago, Illinois.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own
expense by representatives of its own choosing reasonably satisfactory
to the indemnified party and will consult with the indemnified party
concerning such defense during the course thereof. If the indemnifying
party, within 30 days after receipt of notice of any Indemnifiable
Claim (or such shorter period as is necessary to prevent prejudice to
the indemnified party, if such 30 day period would prejudice the
rights of the indemnified party), fails to defend, the indemnified
party will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such
Indemnifiable Claim on behalf of and for the account and risk of and
at the expense of the indemnifying party. In addition, if there is a
reasonable probability that a third-party
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Indemnifiable Claim may materially and adversely affect an indemnified
party, the indemnified party shall have the right, at its own cost and
expense, to defend, compromise or settle such Indemnifiable Claim.
(d) Anything in this Section 6.3 to the contrary
notwithstanding, neither the indemnifying party nor the indemnified
party, as the case may be, may settle or compromise any Indemnifiable
Claim or consent to entry of any judgment in respect thereof, without
the written consent of the other, which consent may not be
unreasonably withheld or delayed.
SECTION 6.4 Remedies Cumulative. The remedies provided in this Article
VI shall be cumulative and shall not preclude the assertion by any party hereto
of any other rights or the seeking of any other remedies against the other
parties hereto.
SECTION 6.5 Indemnity Enforcement. (a) Indemnification Claims shall be
reduced, by and to the extent, that an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result of, and in compensation for, the subject matter of an
indemnification Claim by such indemnitee.
(b) The aggregate value of Purchaser's indemnification claims shall be
limited to the consideration received by the Seller as the Purchase Price for
the Assets and the Purchase Price for the Inventory.
(c) The Purchaser may, in addition to any other rights or remedies
available, set-off any indemnification claims hereunder against any amounts
owing in respect of any of the Securities issued or cash paid by the Company as
part of the Purchase Price for the Assets; provided, however, that this right
of set-off must be exercised against such Securities and cash in the following
order:
(i) interest and principal payments on the Notes;
(ii) dividend, liquidation and redemption payments on
the Senior Preferred and the Junior Preferred;
(iii) dividend liquidation and redemption payments on the
Class D Common Stock; provided that for redemption under this Section
6.5, the call price of the Class D Common Stock shall be Fair Market
Value, (as defined in the Management Subscription Agreement);
(iv) cash to the extent the cash portion of the
Purchase Price for the Assets and for the Inventory has not
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been distributed to the Seller's shareholders and limited by the
amount, if any, that the Seller or Seller's Stockholders have paid
federal or state income taxes thereon or any of them have received a
notice or claim assessing additional tax liabilities upon the Seller
as a result of non-compliance with section 351 and the rules regarding
the installment note regulations under the Internal Revenue Code of
1986, as amended.
(d) The personal liability of any shareholder of Seller under this
Article VI shall be limited to the extent such shareholder personally receives
Securities or cash delivered by the Company as part of the Purchase Price, or
to the extent such shareholder acquires such Securities or cash subsequent to
the Closing in a distribution or dividend from Seller, net of federal and state
income taxes as provided in Section 6.5(c)(iv).
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Seller and Purchaser;
(b) By Seller, if (i) there has been a material
misrepresentation or breach of warranty on the part of Purchaser in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Seller; (ii) Purchaser
has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Seller; or (iii) any condition of Seller
obligations hereunder becomes incapable of fulfillment through no
fault of such parties and is not waived by such parties;
(c) By Purchaser, if (i) there has been a material
misrepresentation or breach of warranty on the part of the Seller in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Purchaser; (ii) the
Seller has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Purchaser; or (iii) any condition to Purchaser's
obligations hereunder becomes incapable of
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fulfillment through no fault of Purchaser and is not waived
by Purchaser;
(d) By Seller, if the Closing shall not have occurred on or
before September 7, 1994; provided that Seller shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
the Seller to fulfill any of its obligations under this Agreement
shall have been the reason that the Closing shall not have occurred on
or before said date;
(e) By Purchaser, if the Closing shall not have occurred on
or before September 7, 1994; provided that Purchaser shall not be
entitled to terminate this Agreement pursuant to this clause if the
failure of Purchaser to fulfill any of its obligations under this
Agreement shall have been the reason that the Closing shall not have
occurred on or before said date; and
(f) By Seller or by Purchaser, if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Purchaser, or any Seller from consummating
the transactions contemplated hereby is entered and such judgment,
injunction, order or decree shall become final and nonappealable.
SECTION 7.2 Effect of Termination; Right to Proceed. In the event that
a party wishes to terminate this Agreement pursuant to Section 7.1, it shall
give written notice thereof whereupon all further obligations of the parties
under the Agreement shall terminate without further liability of any party
hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants and
agreements imposed upon it hereunder; (ii) to the extent that any condition to
a party's obligations hereunder become incapable of fulfillment because of the
breach by a party of its obligations hereunder and (iii) that the agreements
contained in Sections 4.8, 9.3 and 9.4 shall survive the termination hereof. In
the event that a condition precedent to its obligation is not met, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
transactions contemplated hereby. Notwithstanding anything to the contrary
contained herein, no party shall have any obligation to the other hereunder
arising out of the occurrence of an event or circumstance not within the
control of such party which event or circumstance resulted in a representation
or warranty of such party ceasing to be true.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Further Assurances. Each of the parties hereto shall
without further consideration execute and deliver to any other party hereto
such other instruments of transfer and take such other action as any party may
reasonably request to carry out the transactions contemplated by this Agreement
and the other Transaction Documents.
SECTION 8.2 Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 8.3 Remedies. In the event of a default under this Agreement
or the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or
other appropriate proceeding, whether for specific performance, or for an
injunction against a violation of any terms hereof or thereof or in aid of the
exercise of any right, power or remedy granted thereby or by law, equity,
statute or otherwise. The foregoing shall include, but shall not be limited to,
allowance for recovery by the aggrieved party of all of its fees and expenses
and disbursements incurred by it in connection with the transactions
contemplated hereby and in the Transaction Documents, including, without
limitation, the reasonable fees and expenses of its counsel, accountants,
agents and representatives, employed by it. No course of dealing and no delay
on the part of any party in exercising any right, power or remedy shall operate
as a waiver thereof or otherwise prejudice such party's rights, powers or
remedies. No right, power or remedy conferred hereby shall be exclusive of any
other right, power or remedy referred to herein or now or hereafter available
at law, in equity, by statute, or otherwise.
SECTION 8.4 Expenses. Upon the execution of this Agreement and the
closing of the Company's acquisition of franchises and other assets, rights and
obligations to certain Burger King restaurants in the Chicago area, the
Purchaser will reimburse the Seller for all reasonable expenses incurred by the
Seller in connection with the authorization, preparation and consummation of
this Agreement and the related transactions, including reasonable attorneys'
and accountants' fees; provided, however, that the aggregate amount paid to
Lawrence Jaro and entities related to Lawrence Jaro and William Osborn and
entities related
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to William Osborn for reimbursement of accountants' fees shall
not exceed $20,000.
SECTION 8.5 Entire Agreement. This Agreement and the other Transaction
Documents and the Exhibits and Schedules referred to herein and therein contain
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior arrangements or understandings with respect
thereto.
SECTION 8.6 Definitions. For the purposes of this
Agreement:
(i) "affiliate" of any person shall mean any corporation,
proprietorship, partnership or business entity which, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled by, such person, and any directors,
officers, partners or 50% or more owners of such person.
(ii) "Affiliate" shall mean with respect to any Person, any
other Person that has a relationship with the designated Person
whereby either of such Persons directly or indirectly controls or is
controlled by or is under common control with the other of such
Persons.
(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iv) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by Seller at the
date of this Agreement and/or the Closing Date, and such business and
operations relating to the Assets and Assumed Contracts. Business.
(v) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms
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"controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(viii) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(ix) "material" means any claim, circumstance or state of
facts which results in, or would reasonably be expected to result in,
losses or the expenditure or commitment of $25,000 or more, or which
results in any material limitation or restriction on the ability of
the Seller or the Purchaser to conduct the Business.
(x) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
(xi) "Order" means any decree, order, injunction,
rule, judgment, consent of or by a U.S. Authority.
(xii) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xiii) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xiv) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the certificate of incorporation and
By-Laws of the Seller, as applicable.
(xv) "Taxes" shall mean all taxes, charges, fees, duties,
levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise,
value added, license, payroll, unemployment, environmental, customs
duties, capital stock, disability, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income
withholding and Social Security taxes
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imposed by the United States or any foreign country or by any state,
municipality, subdivision or instrumentality of the United States or
of any foreign country or by any other tax Authority, including all
applicable penalties and interest, and such term shall include any
interest, penalties or additions to tax attributable to such Taxes.
SECTION 8.7 Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
Agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 8.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and delivered personally, sent by telecopier, federal
express or other reputable overnight courier or sent by certified or registered
mail, postage prepaid, return receipt requested, at the addresses set forth
below:
(a) if to Purchaser, to:
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
(b) if to Seller, to:
Lawrence Jaro
c/o Ernest J. Panasci, Esq.
Suite 1100
1600 Stout Street
Denver, Colorado 80202
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 8.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the heirs,
executor, personal representatives,
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legal representatives, successors and assigns of the parties hereto, and shall
not be assignable by either party without the prior written consent of the
other party; provided, however, that the Purchaser may assign at Purchaser's
sole discretion any or all of its interest to a lender of Purchaser with
written notice to Seller.
SECTION 8.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.
EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY
THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET
FORTH IN THIS SECTION 8.10 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF
ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
SECTION 8.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT
TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss. 1 ET
SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
SECTION 8.12 Severability. Whenever possible, each
provision in this Agreement shall be interpreted in such a manner
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as to be effective and valid under applicable law. If any provision of this
Agreement shall be prohibited or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
SECTION 8.13 Purchaser's Designated Affiliate. Purchaser may designate
one or more of its wholly-owned subsidiaries or Affiliates to carry out all or
part of the transactions contemplated hereby to be carried out by Purchaser,
which designation shall not relieve Purchaser of its obligations hereunder.
SECTION 8.14 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
as of the day first above written.
NRE HOLDINGS, INC.
By:
Name:
Title:
JB RESTAURANTS, INC.:
By:
Name:
Title:
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PURCHASE AND SALE AGREEMENT
Among
NRE HOLDINGS, INC.
(as Purchaser)
And
CASTLEKING, INC.
(as Seller)
Dated as of September 1, 1994
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TABLE OF CONTENTS
Section Page
ARTICLE I
PURCHASE AND SALE; CLOSING
1.1 Assets to Be Conveyed............................................. 2
1.2 Purchase Price for Assets......................................... 3
1.3 Real Properties; Assignments of Leases; Easements
and Parking Agreements....................................... 4
1.4 Assumption of Liabilities......................................... 5
1.5 Closing; Deliveries............................................... 7
1.6 Adjustments....................................................... 7
1.7 Petty Cash........................................................ 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Corporate Power.................................. 9
2.2 Governing Instruments............................................. 9
2.3 Due Authorization................................................. 10
2.4 No Violation...................................................... 10
2.5 Consents.......................................................... 10
2.6 Financial Statements.............................................. 11
2.7 Assets............................................................ 12
2.8 Inventory......................................................... 12
2.9 Real Properties; Real Property Leases............................. 13
2.10 Franchise Agreements.............................................. 15
2.11 Employment Arrangements........................................... 15
2.12 Contracts and Arrangements........................................ 16
2.13 ERISA............................................................. 17
2.14 Litigation, Compliance with Regulations and
Consents..................................................... 18
2.15 Environmental Matters............................................. 18
2.16 Insurance Policies................................................ 19
2.17 Tax Returns....................................................... 19
2.18 Adverse Restrictions.............................................. 20
2.19 Brokers........................................................... 20
2.20 Material Information.............................................. 20
2.21 Continuing Representations........................................ 21
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Section Page
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power.................................. 21
3.2 Certificate of Incorporation and By-Laws.......................... 21
3.3 Due Authorization................................................. 21
3.4 No Violation...................................................... 22
3.5 Consents.......................................................... 22
3.6 Brokers........................................................... 22
3.7 Material Information.............................................. 22
3.8 Continuing Representations........................................ 23
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior to the
Closing Date................................................. 23
4.2 Operation of the Business of Seller............................... 24
4.3 Supplements to Disclosures........................................ 26
4.4 Computer Software................................................. 26
4.5 No Other Asset Sales.............................................. 26
4.6 Regulatory Filing and Consents.................................... 26
4.7 Management Subscription Agreement; Other Actions.................. 27
4.8 Announcements; Confidentiality.................................... 27
4.9 Limitation of Seller's Claims After Closing....................... 28
4.10 Employee Benefit Matters.......................................... 29
4.11 Financial Statements and Reports.................................. 29
4.12 Bulk Sales........................................................ 30
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Seller and
Purchasers................................................... 30
5.2 Conditions to the Obligations of Seller........................... 31
5.3 Conditions to Obligations of Purchaser............................ 32
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations....................................... 35
6.2 Agreement to Indemnify............................................ 36
6.3 Conditions of Indemnification..................................... 37
6.4 Remedies Cumulative............................................... 38
6.5 Indemnity Enforcement............................................. 38
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Section Page
ARTICLE VII
TERMINATION
7.1 Termination....................................................... 39
7.2 Effect of Termination; Right to Proceed........................... 40
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances................................................ 41
8.2 Waiver and Amendment.............................................. 41
8.3 Remedies.......................................................... 41
8.4 Expenses.......................................................... 41
8.5 Entire Agreement.................................................. 42
8.6 Definitions....................................................... 42
8.7 Interpretation.................................................... 44
8.8 Notices........................................................... 44
8.9 Successors and Assigns............................................ 45
8.10 LITIGATION........................................................ 45
8.11 ARBITRATION....................................................... 45
8.12 Severability...................................................... 46
8.13 Purchaser's Designated Affiliate.................................. 46
8.14 Counterparts...................................................... 46
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel
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SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.3(c) Parking and Easements Agreements
1.5(d) Real Property Lease Adjustment Formulae
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
2.14(c) Required Licenses
2.15 Environmental Matters
4.12(b) Creditors Schedule re: Bulk Sales
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of
September 1, 1994 by and between NRE HOLDINGS, INC., a Delaware corporation
with its principal office at c/o Jordan Industries, Inc., Suite 550, Arborlake
Center, 1751 Lake Cook Road, Deerfield, Illinois 60015 ("Purchaser") and
CASTLEKING,
INC. (the "Seller"):
W I T N E S S E T H:
WHEREAS, by subscription agreements dated as of September 1, 1994,
certain investors are receiving voting stock and in conjunction with this
Agreement, voting stock and other classes of securities in exchange for the
sale of assets under this Agreement;
WHEREAS, the subscription agreements contemplate certain proposed
transactions, including the transaction described in this Agreement, which are
to be consummated by the Purchaser promptly upon its capitalization;
WHEREAS, the Seller operates the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, the Seller is the owner or lessee of certain personal
property used or held for use in or in connection with the conduct of business
at its Restaurants and the Seller is the lessee of certain buildings, other
real property and land upon and in which its Restaurants are located
(individually, the "Real Property" and collectively, the "Real Properties"),
the legal description of which is set forth on Schedule B hereto;
WHEREAS, the Seller and Purchaser propose to exchange each of the
Assets (as hereinafter defined) of Seller for securities of the Seller and
other consideration specified below; and
WHEREAS, the Seller that occupies Real Property pursuant to a lease
agreement (each, a "Real Property Lease" and, collectively, the "Real Property
Leases") (each such Real Property Lease, together with all amendments,
supplements, and schedules thereto, being listed on Schedule C hereto) proposes
to assign to National Restaurant Enterprises, Inc., a Delaware corporation and
wholly-owned subsidiary of the Purchaser ("Enterprises"), and Enterprises
proposes to accept such
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assignment of, the Seller's leasehold interest with respect to the Real
Property on which its Restaurants are located (each a "Leased Real Property"
and, collectively, the "Leased Real Properties");
WHEREAS, Purchaser proposes to transfer the Restaurants and Assets
acquired pursuant to this Agreement to Enterprises and to cause Enterprises to
assume the Assumed Contracts (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions
and conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, the Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Seller's
shareholders to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to acquire and accept the
assignment, transfer, conveyance and delivery from the Seller at Closing of,
all of the following assets used or located in or held for use in connection
with the Restaurants operated by the Seller (collectively, the "Assets") free
and clear of all Liens:
(a) Restaurant Equipment. All of the machinery, equipment,
furnishings, supplies, uniforms, spare equipment parts and all other personal
property (other than Inventory, as hereinafter defined) owned by the Seller and
used or held for use in, or in connection with, the operation of its
Restaurants, including but not limited to the assets set forth in Schedule
1.1(a) annexed hereto (collectively, "Restaurant Equipment");
(b) Leasehold Improvements. All trade fixtures, trade
equipment or other personal property placed in the premises by
the Seller or any of the foregoing purchased by the Seller for
its Restaurants, excluding any HVAC system located at the
Restaurants and any built-in freezer located at the Restaurants
("Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise
Agreement for its Restaurants, as more fully set forth in
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Schedule 1.1(c) annexed hereto ("Franchise Agreements", all
subject to the approval, as necessary, of the Burger King
Corporation;
(d) Inventories. All of the food, related paper products and
promotional items owned by the Seller or otherwise used or held for use in or
in connection with the business being conducted at its Restaurants
(collectively, "Inventory"), which, if so directed by Purchaser, Seller shall
sell directly to Enterprises;
(e) Leased Assets. All of the right, title and interest of the Seller
in any item of personal property which is not owned by it but is leased by it
or otherwise is used or held for use, in or in connection with the business
being conducted at its Restaurants, including but not limited to, the assets
set forth on Schedule 1.1(e) annexed hereto (collectively the "Leased Assets");
(f) Goodwill and Other Intangible Assets. All goodwill,
going concern value, contract rights, customer relationships, and
other general intangibles held or used by Seller in connection
with its business being operated at the Restaurant (collectively
the "Intangible Assets"); and
(g) Miscellaneous Assets. All of the right, title and interest of the
Seller in any other asset or property owned, leased, subleased, used or held
for use in, or in connection with the business being operated at its Restaurant
(collectively, the "Miscellaneous Assets") and excluding, accounts receivable,
cash, cash equivalents or securities held by Seller.
SECTION 1.2 Purchase Price for Assets.
(a) Seller shall exchange the Restaurant Equipment, Leasehold
Improvements and Miscellaneous Assets for the following consideration to be
delivered by the Purchaser:
(i) 187.5 shares of the Purchaser's Class A2
Preferred Stock, $.01 par value per share ("Senior
Preferred");
(ii) 62.5 shares of the Purchaser's Class B Preferred
Stock, $.01 par value per share ("Junior Preferred"); and
(iii) 26.8763 shares of the Purchaser's Class D Common Stock,
$.01 par value per share.
(b) Seller shall exchange the Leased Assets, Franchise
Agreements and Intangible Assets for the following consideration
to be delivered by the Purchaser:
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(i) $89,231 in cash; and
(ii) $385,769 in principal amount of Purchaser's
12.75% Notes due 2004 ("Notes").
(c) Seller shall exchange the Inventory for an amount equal to the
cost therefor as charged to the Seller by its unaffiliated supplier or vendor.
At the Closing, Purchaser shall pay to Seller $6000 per Restaurant for the
Inventory of each Restaurant, that sum being Seller's good faith estimate of
the cost of such Inventory (the "Estimated Inventory Price"). The precise
amount of the cost of the Inventory of the Seller shall be determined by
physical inventories to be taken on the Closing Date in its Restaurants and in
any other location where inventory may be located. Seller and Purchaser shall
each have the right to have at least one of its representatives present at the
taking of such inventories. The representatives shall submit a written report
of the results of such inventories promptly after Closing to both the Seller
and Purchaser. Promptly after receiving such report, the Seller shall then
price the inventories shown on such report by multiplying the physical items by
their cost, determined as aforesaid, and the Seller shall submit such priced
inventory report (the "Priced Inventory Report") to Purchaser. If Purchaser and
the Seller are unable to agree upon the purchase price of the Inventory within
10 days after the Seller and Purchaser have received the Priced Inventory
Report, such purchase price shall be determined by Deloitte & Touche, whose
determination shall be final and binding upon the Seller and Purchaser. Within
30 days after the final determination of the purchase price for the Inventory:
(A) if it exceeds the Estimated Inventory Price, Purchaser shall pay the amount
of such excess, by check, to the Seller; or (B) if it is less than the
Estimated Inventory Price, Seller shall pay the amount by check to the
Purchaser.
(d) The Seller and Purchaser shall prepare and file their tax returns
and information statements in a manner consistent with the agreement set forth
above.
SECTION 1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements. Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of the representations and warranties
hereinafter set forth, at the Closing, the Seller shall assign to Enterprises
all of its leasehold interest in the Leased Real Properties and shall assign,
sublease or otherwise transfer to Enterprises all of its right, title and
interest in and to all parking and other access agreements or arrangements
relating to the Real Properties, as follows:
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(a) Assignment of Real Property Leases. At Closing, the Seller shall
assign to Enterprises all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment and
Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A. The
Lease Assignment shall be executed and delivered at Closing by the Seller and
Enterprises.
(b) Lease Assignment Consent. At Closing, the Seller shall deliver to
Enterprises a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the last
sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c) annexed
hereto, with respect to the Seller, sets forth all written or oral parking
leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements"), except for recorded
instruments, pursuant to which the Seller is granted, for use in connection
with its Restaurant, parking privileges or rights, current or prospective,
and/or rights of access of any kind or nature in and to the applicable Real
Property. At Closing the Seller shall deliver to Purchaser such documentation
in form and substance reasonably satisfactory to Purchaser and its counsel
which effectively assigns or transfers the Seller's rights under both recorded
and unrecorded Easements to Enterprises (hereinafter individually referred to
as an "Easement Assignment", and, collectively, as the "Easement Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby agree and
acknowledge that the Seller is not selling, transferring, assigning, delivering
or otherwise conveying, and Purchaser is not purchasing, receiving, acquiring
or otherwise assuming, any liabilities of the Seller, or any of its respective
Affiliates except as specifically set forth in Sections 1.1, 1.2(a)(vi) and
1.4(b) hereof. Purchaser shall neither be liable for any liability or
obligation of the Seller, or any of its respective Affiliates nor shall it be
required to indemnify the Seller, or any of its respective Affiliates against
any liability or obligation other than those so specifically assumed or
indemnified, as the case may be.
Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify the Seller, or any of its respective
Affiliates against any liability, obligation, duty or
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responsibility of the Seller, or any of its respective
Affiliates:
(i) arising from, or out of, the ownership or operations or
use of, or incurred in connection with, or incurred as a result of any
claim made against the Seller, or any of its respective Affiliates in
connection with, any Restaurant, Asset, Real Property, Real Property
Lease or Assumed Contract (as hereinafter defined) on or prior to, or
relating to any time period prior to 6:00 A.M. on the Closing Date;
(ii) arising from or by reason of the transactions
contemplated by this Agreement including, but not limited to, Federal,
state or local income taxes, transfer taxes, sales taxes and other
taxes, if any, arising from or by reason of the receipt of the
consideration for the Assets to be transferred pursuant hereto except
as provided in Section 1.6(b);
(iii) with respect to any wages, vacation, compensation,
severance or sick pay or any rights under any stock option, bonus or
other incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or
similar arrangement to which the Seller is a party or for
which the Seller is responsible;
(v) with respect to any "employee benefit plan" as defined in
Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including multi-employer plans as defined in
Section 3(37) of ERISA whether arising before, on or after the Closing
Date; or
(vi) under any Regulations (as hereinafter defined) relating
to public health and safety and pollution or protection of the
environment, including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes or any materials defined or
categorized by any of the above as "Hazardous Materials", "Hazardous
Substances", or similar or related designations (collectively referred
to herein as "Environmental Laws"); or
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(vii) with respect to any causes of action, judgements,
claims or demands related to any occurrence, action or omission by the
Seller, whether through negligence or otherwise, occurring before the
Closing.
(b) Assumption of Assumed Contracts. The Seller shall assign to, and
Enterprises shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of the Seller attributable
to the period after 6:00 a.m. the Closing Date, under the Franchise Agreements,
Real Property Leases, Easements, Leased Assets and the Other Contracts (as
hereinafter defined) (collectively, the "Assumed Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 190 S.
LaSalle Street, Chicago, Illinois 60603- 3441 (or such other location as shall
be agreed upon by the parties) on September 1, 1994, provided, however, that
if, through no fault of the parties hereto, all of the conditions to the
parties' obligations to close hereunder are not satisfied or waived on the date
so designated, the Closing shall be adjourned to a subsequent mutually
agreeable date not later than September 7, 1994, unless further extended by
mutual agreement by the parties. The "Closing Date" is the date Closing
actually takes place.
(b) Delivery of Documents. At the Closing, Seller and Purchaser shall
deliver to each other the respective documents and other items set forth in
Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to
(i) obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Seller or by the
Seller to Purchaser by reason of such adjustments shall be made at the Closing
(by adjustment of the Purchase Price, if practicable) or as soon as reasonably
practicable thereafter.
(b) The parties shall share equally in the payment of all sales taxes,
and transfer taxes, if any, applicable to its transaction at the Closing.
Purchaser and Seller shall share equally all franchise assignment fees to
Burger King Corporation ("Burger King") in connection with the assignment of
the Franchise Agreements to Purchaser.
(c) The parties shall share equally the cost of Purchaser's obtaining
prior to Closing, if necessary in Purchaser's reasonable judgment, a "Phase 1"
and, if applicable, a "Phase 2"
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environmental report. Any such reports or studies prepared or obtained by the
Seller prior to negotiations between Purchaser and the Seller shall be borne by
the Seller. At Closing, if necessary, the parties shall adjust the cost of
obtaining said environmental reports.
(d) All "minimum" or "fixed rentals" and any other monetary
obligations accruing under the Real Property Leases shall be adjusted for the
month in which the Closing occurs. In the event the period used in computing
and/or adjusting percentage rental (hereinafter referred to as the "Adjustment
Lease Year") under any of the Real Property Leases commences before the Closing
Date and ends after the Closing Date, such percentage rental shall be adjusted
at the end of the Adjustment Lease Year for such Real Property Leases so
affected as follows:
(i) Seller shall be required to pay to Purchaser, within 30
days after the expiration of the Adjustment Lease Year, an amount
equal to the lesser of (1) the amount of percentage rental due for
such Adjustment Lease Year or (2) the "Percentage Rent Contribution"
determined by the following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used in
determining such percentage rental during
such Adjustment
Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.6(d);
C = Number of days during the Adjustment Lease
Year prior to, but not including, the Closing
Date; and
D = Percentage rent factor for such Real Property
Lease as indicated in Schedule 1.6(d);
provided, however, that, in the event the above formula yields a
negative amount as the Percentage Rent Contribution, the Percentage
Rent Contribution shall be deemed equal to zero; and
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(ii) Purchaser shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental, if any,
due for the Adjustment Lease Year.
Section 1.7 Petty Cash. Upon the Closing, the Seller shall leave
$1,000.00 in cash at each Restaurant (the "Store Bank"). Purchaser agrees to
purchase each Store Bank separately from the Purchase Price at Closing on a
cash for cash basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with
Purchaser as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the
Regulations of its jurisdiction of incorporation (as set forth on Schedule A
hereto) and is duly qualified and licensed to do business in such jurisdiction
which is the only jurisdiction wherein the character of the Real Properties and
other Assets owned or leased or the nature of the business of the Seller makes
such licensing or qualification to do business necessary. The Seller has full
power and authority (corporate or otherwise) to own its assets, to own or hold
under lease the real property it presently owns or holds under lease including,
without limitation, the Real Properties, and to carry on the business in which
it is engaged at all locations at which it is presently located including,
without limitation, operation of the Restaurants at the Real Properties and to
execute and deliver this Agreement and the other documents and instruments to
be executed and delivered by the Seller, as the case may be, pursuant hereto or
in connection herewith (this Agreement and all other agreements, documents and
instruments to be entered into pursuant to this Agreement or in connection
herewith including all exhibits and schedules annexed hereto and thereto are
collectively referred to herein as the "Transaction Documents") and to
consummate the transactions contemplated hereby and thereby.
SECTION 2.2 Governing Instruments. The copies of the Certificate of
Incorporation and By-Laws of the Seller, and all amendments thereto to date, as
certified by the Secretary of Seller have heretofore been delivered to
Purchaser by Seller, and are complete and correct as of the Closing Date. The
Seller is not in default in the performance, observance or fulfillment of any
of the provisions, terms or conditions of its Certificate of Incorporation or
By-Laws.
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SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Seller have been duly obtained. The execution and delivery of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors and stockholders of the Seller, and no other acts or
proceedings on the part of the Seller or the stockholders of the Seller are
necessary to authorize the execution and delivery of this Agreement or any of
the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by the Seller, will be the
legal, valid and binding obligation of the Seller enforceable against it in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency and other laws affecting creditors' rights
(collectively, "Bankruptcy Laws") and subject to general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and thereby,
do not, and at Closing will not: (a) violate its Certificate of Incorporation
or By-Laws, as amended; (b) violate or conflict with or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under any agreement, indenture, instrument or understanding to which
the Seller is a party or by which it is bound; (c) violate any judgment,
decree, law, rule or regulation to which the Seller is a party or by which it
is bound; (d) result in the creation of, or give any party the right to create,
any encumbrance upon the property and assets of the Seller; (e) terminate or
modify, or give any third party the right to terminate or modify, the
provisions or terms of any agreement or commitment to which the Seller is a
party or by which the Seller is subject or bound; or (f) result in any
suspension, revocation, impairment, forfeiture or non-renewal of any permit,
license, qualification, authorization or approval applicable to the Seller.
SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals or other authorizations which the Seller is required to obtain from,
and any filing which the Seller is required to make with, any governmental
authority or agency or any other Person including, but not limited to, consents
required from Burger King (the "Burger King Consents") in connection with the
execution, delivery and consummation of this Agreement and the other
Transaction Documents and the consummation of the
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transactions contemplated hereby or thereby (collectively, the
"Required Consents").
SECTION 2.6 Financial Statements. (a) The Seller has delivered to
Purchaser a balance sheet of the Business as at December 31, 1993 and December
31, 1992 and the related results of operations for the 12 months ended December
31, 1993 and 1992, respectively. The Seller has delivered to Purchaser
unaudited monthly financial statements for the period from January 1, 1994
through July 31, 1994.
(b) The financial statements of the Seller referred to in Section
2.6(a) (collectively, the "Financial Statements") are true, correct and
complete, are based on Seller's books and records, have been prepared in
accordance with generally accepted accounting principles consistently applied
and accurately present the assets, liabilities, financial positions and results
of operations of the Seller as at the dates thereof and for the periods covered
thereby; provided, however, that (i) monthly financial statements shall not be
required to reflect standard year-end adjustments and reserves, and (ii)
monthly financial statements may be prepared other than in accordance with
generally accepted accounting principles to the extent that such financial
statements shall not be required to reflect standard year-end adjustments, or
contingent liabilities. The Financial Statements of the Seller reflect or
provide for all material claims against, and all debts and liabilities (of any
kind or nature) of, such Seller, fixed or contingent, as at the dates thereof
and for the periods covered thereby, and the Seller does not know of any basis
for the assertion against it of any liability or obligation of any nature
whatsoever, not fully reflected or reserved against in such Financial
Statements. There has not been any Material Adverse Change between the date of
the Financial Statements and the date of this Agreement and, except as set
forth in Schedule 2.6(b), no fact or condition exists or is contemplated or
threatened which might cause any such Material Adverse Change at any time in
the future.
Without limiting the foregoing, since December 31, 1993:
(i) None of the Restaurants, Assets, Real Properties, Real
Property Leases, Assumed Contracts, financial or other condition, or
results of operations of the Seller, has been adversely affected in
any material way as a result of any fire, explosion, accident,
casualty, labor disturbance, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or public
enemy, or cessation, interruption or diminution of operations, or any
other event, whether or not covered by insurance;
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(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under Contracts
entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii) annexed
hereto, the Seller has not permitted nor allowed any of its Real
Property Leases or Assets, of or used by it to be mortgaged, pledged
or subjected to any Lien;
(iv) Except for transactions among Affiliates, the Seller has
not paid, loaned or advanced any amounts to, or sold, transferred,
leased, subleased or licensed any Real Properties or Assets to, or
entered into any agreement, or arrangements with, any Affiliate or
associate (and any of such transactions shall have been terminated on
or before the Closing Date); and
(v) The Seller has not agreed, whether in writing or
otherwise, to do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to
Purchaser at Closing, good and marketable title to all of its Assets and
Assumed Contracts free and clear of all Liens. The Assets of the Seller include
all of the operating assets used or held for use in or in connection with the
business being conducted by the Seller at the Restaurants. All the Assets are,
and on the Closing Date will be, in good operating condition and repair,
capable of performing the functions for which such items are currently and
normally used, normal wear and tear excepted. All the Assets conform, and on
the Closing Date will conform, to the standards of Burger King under the terms
and conditions set forth in the applicable Franchise Agreements. On the Closing
Date, each Restaurant, together with its related Assets and Real Property,
taken as a whole, will constitute a fully operable "turn-key" Burger King
restaurant sufficient to permit Purchaser to immediately operate the business
at such Restaurant as presently being conducted therein.
(b) The Seller will transfer and/or assign to Purchaser at Closing all
warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller consists, and at
Closing will consist, of items of quality and quantity usable or salable in the
ordinary course of business. The present quality and quantities of all
Inventory of the Seller are, and the qualities and quantities of all Inventory
outstanding at the Closing will be, reasonable in accordance with the current
specifications of Burger King. At Closing, the Inventory at each Restaurant
shall be sufficient for the
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operation of such Restaurant for at least 48 hours after the Closing Date, and
in no event will there be excess inventory in relation to normal usage.
SECTION 2.9 Real Properties; Real Property Leases. (a) With respect to
Real Properties that are owned by Persons not affiliated with the Seller, to
the knowledge of the Seller, each of such owners has good record and marketable
title in fee simple to such real property.
(b) The Seller has delivered to Purchaser a true and complete copy of
the Real Property Leases applicable to it, together with all amendments thereto
and all such Real Property Leases with such amendments or supplements being
listed and set forth on Schedule C. The Seller does not have knowledge or
information of any facts, circumstances or conditions which do or would in any
way adversely affect the Leased Real Property or the operation thereof or the
business thereon as presently conducted or as intended to be conducted. At or
prior to Closing, the Seller shall cause to be discharged of record all Liens
against the Seller or such Seller's interest affecting its Leased Real
Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(b), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(c) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real Properties
by Seller are in substantial compliance with all Regulations. Set forth on
Schedule 2.9(c) annexed hereto is a true and complete schedule of each
certificate of occupancy for each Restaurant located on the Real Properties,
copies of which certificates of occupancy and all amendments thereto to date
have heretofore been delivered to Purchaser, and which copies are complete and
correct as of the date of this Agreement and will be complete and correct as of
the Closing Date. The Real Properties and the Restaurants located thereon are
in a state of good maintenance and repair and are in good operating condition,
normal wear and tear excepted, and (i) there are no physical or
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mechanical defects to the Seller's knowledge in any of the Real Properties or
Restaurants, including, without limitation, the structural portions of the Real
Properties and Restaurants and the plumbing, heating, air conditioning,
electrical, mechanical, life safety and other systems therein and all such
systems are in good operating condition and repair (normal wear and tear
excepted); and (ii) there are no ongoing repairs to the Real Properties or
Restaurants located thereon being made by or on behalf of any Sellar or being
made by or on behalf of any landlord. All necessary occupancy and other
certificates and Permits, municipal and otherwise, for the lawful use and
occupancy of the Real Properties for the purposes for which they are intended
and to which they are presently devoted including, without limitation, for the
operation of a Burger King restaurant thereon, have been issued and remain
valid. There are no pending or threatened actions or proceedings that might
prohibit, restrict or impair such use and occupancy or result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such
certificates or Permits. All notes or notices of violation of any Regulations,
against or affecting any such Real Properties have been complied with. There
are no outstanding correcting work orders issued to the Seller from any
Federal, State, county, municipal or local government, or the owner of the Real
Properties or any insurance company with respect to any such Real Properties.
(d) There are no condemnation or eminent domain proceedings of any
kind whatsoever or proceedings of any other kind whatsoever for the taking of
the whole or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of the Seller, threatened against the Real
Properties.
(e) The Real Properties and all improvements thereon represent all of
the locations at which the Seller conducts Business and are, now, and at
Closing will be, the only locations where any of the Assets are or will be
located.
(f) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any Law or by the normal use
and operation of the Real Properties and the Restaurants located thereon are
installed to the property lines of the respective Real Properties, to the
knowledge of the Seller are connected pursuant to valid Permits, are fully
operable and are adequate to service the Real Properties and the Restaurants
located thereon and to permit full compliance with all Regulations and normal
utilization of the Real Properties and the Restaurants located thereon.
(g) To Seller's knowledge, all licenses, Permits, certificates,
including, without limitation, proof of dedication, required from all
Authorities having jurisdiction over the Real
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Properties, and from any other Persons, for the normal use and operation of the
Real Properties and the Restaurants located thereon and to ensure vehicular and
pedestrian ingress to and egress from the Real Properties and the Restaurants
located thereon have been obtained. To Seller's knowledge the Easements are
valid and binding, in full force and effect and enforceable in accordance with
their respective terms. There are no defaults or offsets which the owner of
such recorded Easements has against the enforcement of such Easements and
neither the Seller nor the owners of the Easements are in default under such
Easements, nor have any events under such Easements occurred which with notice
or the passage of time or both, would constitute a default under such Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to
Purchaser a true, complete and correct copy of the Franchise Agreement relating
to its Restaurant, including any and all amendments thereto. The Seller or its
stockholder owns, and at Closing will transfer to Purchaser, its respective
right, title and interest in its Franchise Agreement, free and clear of all
Liens. Subject to the written consent of Burger King, in form satisfactory to
Purchaser and its counsel, which the Seller shall obtain and deliver to
Purchaser and its counsel at or prior to the Closing, the Seller has the
absolute right and authority to sell, assign, transfer and convey its Franchise
Agreement and all other assets being sold or otherwise conveyed to Purchaser in
connection with the Restaurant which it operates in accordance with the terms
and conditions hereof, and there have not been and, except as set forth on
Schedule 2.10, currently there are no claims and the Seller is not aware of any
threatened claims with Burger King pertaining to the Franchise Agreements. On
the Closing Date, neither Burger King nor the Seller shall be in default under
any of the Franchise Agreements and the Franchise Agreements shall be in full
force and effect, the Seller shall not have received any notice of violation
with respect to the Franchise Agreements, and the Seller does not know or has
no reason to know of any event which would give rise to a violation or default
under the Franchise Agreements.
SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor agreement,
any agreement containing severance or termination pay arrangements, deferred
compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other employee
or fringe benefit plan, including vacation plans or programs and sick leave
plans or programs. Except as set forth on Schedule
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2.11(a) hereof, within the last five (5) years the Seller has not experienced
any labor disputes, union organization attempts or any work stoppage due to
labor disagreements. Except as set forth on Schedule 2.11(a) hereof, (i) to the
best knowledge of the Seller, the Seller is in substantial compliance with all
applicable Regulations respecting employment and employment practices, terms
and conditions of employment and wages and hours, and is not engaged in any
unfair labor practice; (ii) there is no unfair labor practice, charge or
complaint against the Seller pending or threatened before the National Labor
Relations Board; (iii) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against or
affecting the Seller; (iv) no question concerning representation has been
raised or is threatened respecting the employees of the Seller; and (v) no
grievance which might have an adverse effect on the Seller or the conduct of
its business nor any arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claims therefor exist.
Schedule 2.11(b) sets forth a true and complete list of the names of
all persons employed by the Seller at the Restaurants as of the date hereof,
and the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), the Seller does not have any Contract
relating to the Restaurants, Assets or Real Properties, including, without
limiting the generality of the foregoing, any (i) Contract for the purchase or
sale of Inventory; (ii) Contract for the purchase or sale of supplies, services
or other items; (iii) Contract for the purchase, sale or lease of any
Restaurant Equipment; (iv) Franchise Agreement or license agreement; and (v)
employment or consulting agreement or pension, disability, profit sharing,
bonus, incentive, insurance, retirement or other employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and correct
copy of each Other Contract applicable to it, together with all amendments (if
oral, a written description of the terms thereof) thereto.
(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of
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the scheduled term thereof or has knowledge of the intent of a party to any
such Other Contract to do the same, nor has any event occurred which, with
notice or the passage of time or both, would constitute a default under any
such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither
the Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14) and
(b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986, as
amended (the "Code")) (collectively, the "Group") presently has or at any time
during the five (5) years before the date of this Agreement had an obligation
to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee welfare
benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA Plans").
Each ERISA Plan that is an employee pension plan complies in form and operation
with all applicable requirements of section 401(a) and 501(a) of the Code and
each ERISA Plan that is a group health plan (as defined in ERISA section 607(1)
or Code section 4980B(g)(B) has been operated in compliance with applicable
law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not constitute
an "employee benefit plan" as defined in ERISA section 3(3) (collectively,
"Fringe Benefit Plans") currently maintained by the Seller or to which the
Seller has an obligation to contribute. Seller has delivered or made available
to Purchaser true and complete copies of all documents, as they may have been
amended to the date hereof, embodying or relating to the ERISA Plans or Fringe
Benefits Plans.
(c) There are no actions, audits, suits, or claims pending (other than
routine claims for benefits) or, to the knowledge of the Seller, threatened,
against any ERISA Plan or Fringe Benefit Plan or any fiduciary of any such Plan
or against the assets of any such Plan.
(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether
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insured or self-insured) or other employee welfare benefit plan
maintained by the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents. (a)
Except as set forth on Schedule 2.14(a) and except for workers' compensation or
similar claims, there are no claims now pending, or to the best knowledge of
the Seller, in prospect or threatened against, the Seller or any of its
respective officers, directors or partners, at law or in equity including,
without limitation, (i) any voluntary or involuntary proceedings under
Bankruptcy Laws, or (ii) any Action before or by any governmental
instrumentality (domestic or foreign) or arbitrator which involves a claim or
demand for any judgment, decree, liability, action or injunction enjoining an
action, whether or not fully covered by insurance, in connection with the
Assets, Real Property Leases, Assumed Contracts, Real Properties, Restaurants,
business, affairs, properties or assets of the Seller.
(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in substantial compliance in
all respects with all Regulations applicable to its Business, affairs,
properties, or assets. Neither the Seller, nor any officer, director or
authorized agent of the Seller is in default with respect to, and has not been
charged or to its knowledge threatened with, nor is under investigation with
respect to, any violation of any Regulations relating to any aspect of its
Business, affairs, properties or assets including, but not limited to, the
Restaurants, Assets, Real Property Leases, Assumed Contracts, and the Real
Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
Permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the Assets,
Real Property Leases or the Real Properties ("Required Licenses"). Except as
set forth in Schedule 2.14(c), the Seller has obtained each of the Required
Licenses and each such Required License, is and on the Closing Date will be,
validly issued and in full force and effect and there are not now and, at
Closing shall not be any claims pending, and to the Seller's knowledge, any
claims in prospect or threatened, challenging the Required Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in Schedule
2.15 annexed hereto: (i) the Seller has obtained all Licenses which are
required under any Environmental Laws; (ii) to Seller's knowledge, the Seller
is in substantial compliance with all terms and conditions of the Required
Licenses and is also in substantial compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
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schedules and timetables contained in any Environmental Laws or code, plan,
order, decree or judgment relating to public health and safety and pollution or
protection of the environment or any notice or demand letter issued, entered,
promulgated or approved thereunder; (iii) there are no claims, pending or to
Seller's knowledge threatened, against the Seller relating in any way to any
Environmental Law or any Regulation, notice or demand letter issued, entered,
promulgated or approved thereunder; and (iv) the Seller does not know or have
any reason to know of, nor has the Seller received any notice of any facts,
events or conditions which would interfere with or prevent continued compliance
with, or give rise to any common law or legal liability under any Environmental
Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily insured
against by reputable companies in the same or similar business, of such types
and in such amounts (with such deductible amounts) as is customary for such
companies under similar circumstances. All of the applicable insurance policies
are valid and enforceable and in full force and effect and will be continued in
full force and effect up to and including the Closing Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income tax
returns and all state and local income, franchise and sales tax returns and all
and any other tax return which was required to be filed as of the date of this
Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. The
provision for Taxes shown on the Financial Statements of the Seller was
sufficient to satisfy all taxes due and all assessments received by the Seller
(and all other entities included within the Financial Statements) for all
periods ended on or prior to the date of such Financial Statements. As of the
date hereof, no Taxes are past due, and no Taxes are unpaid and all current
payroll taxes have been paid. The Seller is not aware of any basis upon which
any assessment of additional Taxes could be made, and the Seller has not signed
any extension agreement with the Internal Revenue Service or any other
governmental agency or given waiver of a statute of limitations with respect to
the payment of Taxes for periods for which the statute of limitations has not
expired. The Seller shall be liable for all tax liabilities in connection with
the operation of the Restaurants, the Assets, the Real Properties, the Real
Property Leases, the Easements and Assumed Contracts, which cover periods prior
to the Closing Date. The Seller shall be liable for half of all transfer, sales
and similar tax liabilities, if any, in connection with the leasing of the Real
Properties under the Real Property Leases, the assignment of the Real Property
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Leases and the Assumed Contracts, and the transfer of any rights under the
Easements. All taxes which the Seller is required by law to withhold or collect
have been duly withheld or collected and to the extent required have been paid
over to the proper governmental authorities on a timely basis or reflected as
an obligation on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, By-Law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or Assumed Contracts. The execution and delivery
of this Agreement and the other Transaction Documents and the consummation of
the transactions contemplated hereunder and thereby will not result in the
violation or breach of, default or the creation of any Lien under any of the
aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be stated
herein or therein or which is necessary to make the statements herein or
therein not misleading. There is no fact which the Seller has not disclosed to
Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Seller that:
SECTION 3.1 Organization and Corporate Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified and licensed to do business
wherein the character of the Real Properties and other Assets to be purchased
makes such licensing or qualification to do business necessary. Purchaser has
full power and authority (corporate and other) to own or hold under lease its
properties and assets, and execute and deliver this Agreement and the other
Transaction Documents to be executed and delivered by Purchaser pursuant hereto
or in connection herewith and to consummate the transactions contemplated
hereby and thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Seller by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance or
fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The execution
and delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Purchaser and no other corporate acts
or proceedings on the part of Purchaser or its stockholders are necessary to
authorize the execution and delivery of this Agreement or any of the other
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby. This Agreement and each of the other Transaction Documents,
upon execution and delivery by Purchaser, will be the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforcement thereof may be limited by Bankruptcy Laws and
subject to the general principles of equity affecting the right to specific
performance and injunctive relief.
SECTION 3.4 No Violation. The execution, delivery and
performance of this Agreement and the other Transaction Documents
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by Purchaser and the consummation by Purchaser of the transactions contemplated
hereby and thereby do not and at Closing will not (a) violate its Certificate
of Incorporation or By-Laws; (b) violate or conflict with or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under any agreement, indenture, instrument or
understanding to which Purchaser is a party or by which it is bound; (c)
violate any judgement decree, law, rule, or regulation to which Purchaser is a
party or by which it is bound; (d) result in the creation of, or give any party
the right to create any encumbrance upon the property or assets of Purchaser;
(e) terminate or modify, or give any third party the right to terminate or
modify, the provisions or terms of any agreement or commitment to which
Purchaser is a party or by which Purchaser is subject or bound; or (f) result
in any suspension, revocation, impairment, forfeiture or non-renewal of any
license, qualification, authorization or approval applicable to Purchaser.
SECTION 3.5 Consents. Except for the Burger King Consents and the
consent of The First National Bank of Boston (Purchaser's senior lender),
Purchaser is not required to obtain any consents, approvals or other
authorizations or to make any filing with any Authority or any other Person in
connection with the execution, delivery and consummation of this Agreement and
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 3.6 Brokers. No broker, finder or selling agent has had a part
in bringing about any of the transactions contemplated by this Agreement or the
other Transaction Documents (including, but not limited to, the leasing of the
Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 3.7 Material Information. This Agreement, the other
Transaction Documents and any exhibit, schedule, certificate or other
information representation, warranty or other document furnished or to be
furnished by Purchaser to Seller do not (a) contain, nor will the same contain,
any untrue statement of a material fact; or (b) omit, nor will the same omit or
fail to state, a material fact required to be stated herein or therein or which
is necessary to make the statements herein or therein not misleading. There is
no fact which the Purchaser has not disclosed to Seller and its counsel in
writing and of which the Purchaser is aware which materially and adversely
affects or could adversely affect the Business prospects, financial condition,
operations, property or affairs of the Restaurants.
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SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing
Date. (a) Between the date of this Agreement and the Closing Date, the Seller
shall give Purchaser, its directors, officers, employees, accountants, counsel
and other representatives and agents ("Representatives") reasonable access to
the premises, properties, books, financial statements, Contracts, records of
the Seller, relating to the Business, the Restaurants, the Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts, and
shall furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Seller as
Purchaser shall from time to time reasonably request for such purposes as
Purchaser shall require. Any such investigation or examination shall be
conducted as reasonable times and upon reasonable notice to the Seller.
(b) Without in any way limiting the provisions of Section 4.1(a)
hereof, Purchaser shall have the right between the date of this Agreement and
the Closing Date at such time or times as Purchaser reasonably may request (i)
to have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or other
wood-destroying organism present in the Real Properties or Restaurants, or any
damage from prior termites or other wooddestroying organism, and the Seller
will assign to Purchaser at Closing all rights under existing contracts and
policies, if any, with the Seller's exterminating company; and (ii) to have
conducted any environmental audits or studies of the Restaurant, the Real
Property and the Assets, including a "Phase I" and, if the results of such
Phase I so recommends, a "Phase II" environmental study. Notwithstanding
inspections, audits or other studies undertaken by or on behalf of Purchaser
hereunder or any other due diligence investigation undertaken by or on behalf
of Purchaser, Seller shall not be relieved in any way of responsibility for its
warranties, representations and covenants set forth in this Agreement.
SECTION 4.2 Operation of the Business of Seller. Between the date of
this Agreement and the Closing Date, the Seller shall conduct the operation of
its Restaurants in the ordinary and usual course of business, consistent with
past practices and will
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use its best efforts to preserve intact the present business organization with
respect to its Restaurants, to keep available the services of its officers and
employees and to maintain satisfactory relationships with landlords,
franchisors, dealers, licensors, licensees, suppliers, contractors,
distributors, customers and others having business relations with it and its
Restaurants and will maintain its Restaurants, Real Properties, and Assets in a
condition conducive to the operation of the business currently carried on
therein.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, the Seller will not:
(a) Keep and maintain its books of account and records other
that in accordance with generally accepted accounting principles
consistent with past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of the
employees at any of the Restaurants other than in the ordinary course
of business, consistent with past practices; (ii) pay or agree to pay
any pension, retirement allowance or other employee benefit not
required or permitted by any Welfare Plan, whether past or present; or
(iii) commit itself in relation to its Restaurants, the employees at
its Restaurant or the Real Properties, to any new or renewed Welfare
Plan with or for the benefit of any Person, or to amend any of such
Welfare Plans or any of such agreements in existence on the date
hereof;
(d) Fail promptly to notify Purchaser of any unusual
developments with respect to its Restaurants, Assets, Real Properties,
Real Property Leases, the Easements, Assumed Contracts or otherwise in
connection with its business;
(e) Permit any of its insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies are in full force and effect providing coverage,
in form, substance and amount equal to or greater than the coverage
under those canceled, terminated or lapsed for substantially similar
premiums;
(f) Amend or terminate its Real Property Leases, or sell,
transfer, mortgage or otherwise dispose of or encumber, or agree to
sell, transfer, mortgage or otherwise dispose of or encumber, its Real
Property Leases, the
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Easements or, except in the ordinary course of business, any
of the Assets or Assumed Contracts;
(g) Allow to occur any default or breach, or event which with
the lapse of time or giving of notice, or both, would constitute a
default or breach under its Real Property Leases, the Easements, its
Franchise Agreement or any of the other Assumed Contracts;
(h) Enter into any other Contracts whether written or oral
which, individual or in the aggregate, would be material to its
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements or the Assumed Contracts, except Contracts for the purchase,
sale or lease of goods or services in the ordinary course of business
consistent with past practice and not in excess of current
requirements, or otherwise make any material change in the conduct of
the businesses or operations of the Seller;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the other
Transaction Documents;
(j) Take any action which would result in any of the
representations or warranties contained in this Agreement or the other
Transaction Documents not being true at and as of the time immediately
after such action at and as of the Closing Date, or in any of the
covenants contained in this Agreement or other Transaction Documents
becoming unperformable or which could have a Material Adverse Effect
on the transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain
and keep its Restaurant, Assets and Real Properties in at least the
same condition and order as exists on the date hereof, reasonable wear
and tear excepted, and fail to perform repairs and maintenance usual
and customary in the ordinary course of business;
(l) Enter into any lease, sublease, license or any other
occupancy agreement, amend or terminate the Easements, the Real
Property Leases, or enter into, amend or terminate any Franchise
Agreement, or other Contract with respect to its Restaurants and Real
Properties;
(m) Take any action or allow to occur any event which with
the lapse of time or giving of notice, or both, would allow to lapse
any of the Licenses;
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(n) Operate its Restaurants or otherwise engage in any
practices which would materially affect sales at its
Restaurant; or
(o) Agree (in writing or otherwise) to do any of the
foregoing.
SECTION 4.3 Supplements to Disclosures. Prior to the Closing Date, the
Seller will promptly supplement or amend the information set forth herein and
in the Schedules and Exhibits referred to herein with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described herein or
in a Schedule or Exhibit or which is necessary to correct any information
herein or in a Schedule or Exhibit or in any representation and warranty, which
has been rendered inaccurate thereby.
SECTION 4.4 Computer Software. The Seller shall provide Purchaser with
computer readable software in a form and language that Franchise Service
Options can use and manipulate, which software shall be used to manage the
Restaurants, including (i) payroll and compensation systems and (ii) sales
reports of the Restaurants on a "restaurant by restaurant" and "day by day"
basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the
Closing Date, the Seller shall not, directly or indirectly and whether by means
of a sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or
enter into any Contract to sell, transfer, assign or dispose, of the
Assets or any interest therein, except for normal operations in the
ordinary course of business; or
(b) encourage, initiate or solicit any inquiries or proposals
by, or engage in any discussions or negotiations with, or furnish any
non-public information to, any Person concerning any such transaction
and the Seller shall promptly communicate to Purchaser the substance
of any inquiry or proposal concerning any such transaction which may
be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof until
the Closing Date, each of the parties hereto shall furnish to the other party
hereto such necessary information and reasonable assistance as such other party
may reasonably request in connection with its preparation of necessary filings
or submissions to any governmental agency and the Seller shall use its best
efforts to obtain all Licenses and Required Consents
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from third parties necessary to consummate the transactions contemplated by
this Agreement and the other Transaction Documents. Each party shall furnish to
the other copies of all correspondence, filings or communications (or memoranda
setting forth the substance thereof) between Purchaser, Seller or any of their
respective representatives and agents, on the one hand, and any government
agency or authority or third party, on the other hand, with respect to this
Agreement and the other Transaction Documents and transactions contemplated
hereby and thereby.
SECTION 4.7 Management Subscription Agreement; Other Actions. On or
before the Closing in connection with exchanging the Assets for the Class D
Common Stock, the Senior Preferred, the Junior Preferred and the Notes of the
Purchaser (the "Securities") the Seller and William Osborn, shall execute and
deliver a counterpart of the Management Subscription Agreement of even date
herewith by and among the Seller and William Osborn, the Purchaser and other
Management Investors (as defined therein), and shall have taken all other
actions and executed and delivered all other agreements and documents necessary
for a valid placement of the Securities by the Purchaser with the Seller and
William Osborn.
SECTION 4.8 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by Law, no announcement of the
existence or terms of this Agreement or the other Transaction Documents or the
transactions contemplated hereby and thereby shall be made publicly or to the
employees or customers of Seller, by any party to this Agreement or any of its
respective Representatives without the advanced written approval of the other
parties.
(b) Purchaser, on the one hand, and Seller, on the other hand, each
shall hold in strict confidence, and shall use their best efforts to cause all
their Representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or by other requirements of
law, all confidential and proprietary information (collectively, "Confidential
Information") concerning Seller, (in the case of Purchaser) and Purchaser (in
the case of Seller) which is created or obtained prior to, on or after the date
hereof in connection with the transactions contemplated hereby, and Purchaser,
Seller shall not use or disclose to others, or permit the use or disclosure of,
any such information created or obtained except to the extent that such
information can be shown to have been (i) previously known by Purchaser, and
Seller, as the case may be (ii) in the public domain through no fault of a
party or any of its Representatives, and will not release or disclose such
information to any other Person, except its officers, directors, employees,
Representatives and lending institutions who need to know such information in
connection with this Agreement.
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(c) For purposes of this Section 4.8, Purchaser specifically
acknowledges that it and its Representatives will have an opportunity to engage
in "due diligence" with respect to this transaction and which may include the
opportunity to review corporate records, financial and otherwise, interview
certain management personnel, and see and learn of the operation of Seller. The
Confidential Information of Seller, referred to in Section 4.8(b), includes,
without limitation, all schedules, documents, work papers or other written
information, and specifically including financial records, leases, franchise
agreements, corporate minutes, corporate organization documents, stockholder
records, employment records, fringe benefit records, lists of creditors and
suppliers, contracts, loan and security agreements, claims against Seller,
insurance, management and operation procedures and trade secrets (both as
defined by Colorado statutory law and by common law); and any other proprietary
information related to the Business conducted by Seller, whether or not such
information would be legally protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other
is unique and its release or misusage may not be compensable in damages and
that the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.9 Limitation of Seller's Claims After Closing. From and
after the Closing and thereafter so long as the provisions of Article VI are
still applicable, the Seller shall not, without the prior written consent of
Purchaser: (i) engage in any business, which would adversely affect any value
of Purchaser's business; or (ii) take any other action or fail to take any
action, or allow, the occurrence of any event, with respect to the Seller's
assets, which could be reasonably expected to have a Material Adverse Effect on
the Seller's ability to indemnify, defend and hold harmless Purchaser and its
officers, directors and stockholders from and against Damages (as hereunder
defined) pursuant to Article VI; provided, however, that nothing herein shall
preclude the Seller from taking any action to distribute assets whether in the
form of cash or other assets to its Shareholders.
SECTION 4.10 Employee Benefit Matters. (a) No later than
30 days after the Closing Date, the Seller shall discharge and
satisfy in full any liabilities it may have with respect to any
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wages, vacation, severance or sick pay, or any rights under any ERISA Plan or
Fringe Benefit Plan.
(b) No later than 30 days after the Closing Date, the Seller shall
discharge and satisfy in full any employment, consulting or similar arrangement
to which the Seller is a party or for which the Seller is responsible.
(c) The Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Seller,
and to "qualified beneficiaries" of any employee of the Seller or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Seller or an Affiliate of the Seller. The type of coverage shall be that
described in Section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in Section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under Section 4980B of the Code.
(d) Subject to the provisions of this Agreement, Seller and the
stockholders of Seller jointly and severally, hereby agree to indemnify and
hold Purchaser harmless from and against any Damages which arise out of the
failure to comply with the obligations in Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Seller shall deliver to Purchaser:
(i) within five (5) business days after the end of each
calendar month, a written statement, certified by Seller, of the gross
sales of each Restaurant for that month; and
(ii) With respect to the "compiled" Financial Statements
delivered to Purchaser by the Seller, at the request of Purchaser, the
Seller shall (and shall cause their respective Representatives to)
cooperate with Purchaser to have such statements reviewed or audited
or further clarified in such manner as Purchaser may deem necessary or
advisable. Any additional fees paid by the Seller to their respective
independent certified public accountants in connection with such
cooperation shall be borne by Purchaser.
(b) Seller agrees to observe and abide by the provisions of Sections
4.4, 4.5 and 4.7, and Seller and Purchaser agree to observe and abide by the
provisions of Article VIII hereof;
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(c) Seller acknowledges and agrees to be bound by the
provisions of Section 4.6 and 7.1(c); and
(d) Inasmuch as all of the Franchise Agreements are held in individual
names, the Seller shall cause the individual to observe and abide by the
provisions of Section 4.5 insofar as the transfer of such Franchise Agreements
to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser also hereby waives compliance
by Seller with the provisions of any applicable bulk sales state or local tax
laws in effect in the states of Texas and Colorado. Seller hereby warrants and
agrees to pay and discharge, promptly when due, all claims of creditors which
may be asserted against Purchaser by reason of such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth all of the
creditors of the Seller as of the date hereof and the amounts owing to such
creditors as of the date hereof.
(c) The bulk sales laws referred to in Section 4.12(a) hereof are
referred to herein, collectively, as the "Bulk Sales Laws".
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Seller and Purchasers.
The obligations of Purchaser and Seller to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at or
prior to the Closing of the following conditions, except to the extent that any
such condition may have been waived in writing by both Seller and Purchaser at
or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation,
inquiry or other proceeding before any governmental or regulatory
authority or other Person shall have been instituted or shall be
pending or threatened which questions the validity or legality of this
Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby and which could reasonably be expected
to damage materially the Business or assets of the Seller if the
transactions contemplated hereby or thereby are consummated. No
injunction, decree or order shall be in effect prohibiting
consummation of the transactions contemplated by this Agreement or the
other Transaction Documents or which would make the consummation of
such transactions unlawful and no action or proceeding shall have been
instituted and remain pending before an
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Authority to restrain or prohibit the transactions contemplated by
this Agreement and the other Transaction Documents.
SECTION 5.2 Conditions to the Obligations of Seller. The obligations
of the Seller to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by the Seller at or prior to the
Closing:
(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date,
with the same force and effect as if made at and as of the Closing
Date; the Purchaser shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Seller shall have received a
certificate dated the Closing Date in form satisfactory to him signed
by an officer of Purchaser.
(b) Governing Instruments, etc. The Seller shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of Purchaser certifying, among other things, that
attached or appended to such certificate (i) is a true and correct
copy of its Certificate of Incorporation and all amendments if any
thereto as of the date thereof; (ii) is a true and correct copy of its
By-Laws; (iii) is a true copy of all corporate actions taken by it,
including resolutions of its board of directors authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation of
the transactions contemplated hereby and thereby; and (iv) are the
names and signatures of its duly elected or appointed officers who are
authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
(c) Payment of Purchase Price. Purchaser shall have
tendered to Seller the Purchase Price payable at Closing in
accordance with Section 1.2(a).
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(d) Assumption of Assumed Contracts. The Seller shall
have received from Purchaser an Assumption Agreement
substantially in the form annexed as Exhibit C hereto.
(e) Opinion of Counsel. The Seller shall have received an
opinion of counsel for Purchaser, as of the Closing Date,
substantially in the form annexed as Exhibit D hereto.
(f) Senior Lender's Consent. Seller shall have been presented
evidence that the Purchaser shall have received, if necessary, the
written consent of its Senior Lender, The First National Bank of
Boston, to the transactions contemplated hereby.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby and by the other
Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Seller
contained in this Agreement and the other Transaction Documents, or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date
with the same force and effect as though made on and as of the Closing
Date; the Seller shall have performed or complied with all agreements
and conditions required by this Agreement and the other Transaction
Documents to be performed or complied with by it on or prior to the
Closing Date; and Purchaser shall have received certificates dated the
Closing Date in form satisfactory to Purchaser signed by the President
on behalf of the Seller, as applicable.
(b) Governing Instruments, etc. Purchaser shall have received
a certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of the Seller certifying, among other things, that attached
or appended to such certificate (i) is a true and correct copy of its
Certificate of Incorporation and all amendments if any thereto as of
the date thereof; (ii) is a true and correct copy of its By-Laws;
(iii) is a true copy of all corporate actions taken by it, including
resolutions of its board of directors and stockholders authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the
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consummation of the transactions contemplated hereby and thereby; and
(iv) are the names and signatures of its duly elected or appointed
officers who are authorized to execute and deliver this Agreement and
any certificate, document or other instrument in connection herewith.
(c) Instruments of Transfer. The Seller shall have delivered
to Purchaser a bill of sale and assignment ("Bill of Sale")
substantially in the form annexed as Exhibit E hereto, a Lease
Assignment (if applicable) and any other documents of transfer which
Purchaser reasonably shall request in order to evidence and effectuate
the sale and assignment to Purchaser of the Assets, the Real Property
Leases, the Assumed Contracts and the consummation of all other
transactions contemplated by this Agreement and the other Transaction
Documents.
(d) Consents. The Seller shall have obtained, and delivered
to Purchaser, copies of the Required Consents applicable to it in form
and substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an
opinion or opinions of counsel for Seller, as of the Closing Date,
substantially in the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been no
Material Adverse Change, nor any events which could have a material
adverse change, in the Business, operations, prospects or financial or
other condition of any Restaurant or in the respective Assets or Real
Properties from the date hereof to the Closing Date (the "Interim
Period") nor shall have there been, for all Restaurants in the
aggregate, a decrease of five percent or more in gross sales or gross
profit during the Interim Period, as compared with the same period
during the prior calendar year. For purposes hereof, "Gross Profit"
shall mean total gross sales reduced by the sum of food, labor and
paper costs. At Closing, Purchaser shall have received a certificate
dated the Closing Date in form satisfactory to Purchaser signed by the
President on behalf of the Seller to the foregoing effect.
(g) Environmental Due Diligence. Purchaser shall have
completed its environmental due diligence of the Restaurants, Real
Property and Assets and have received results which are satisfactory
to Purchaser in its sole discretion. In the event Seller shall provide
Purchaser with previously prepared environmental reports, such reports
must have been prepared within 90 days from the date of this
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Agreement, or, in the alternative, such reports must have been updated
within 90 days of the date of this Agreement.
(h) Senior Lender's Consent. Purchaser shall have
received, if necessary, the written consent of its senior
lender, The First National Bank of Boston, to the
transactions contemplated hereby.
(i) Other Documents. The Seller shall have delivered
to Purchaser:
(i) the Assignment of its Real Property Lease,
each Assumed Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original
counterpart of the Real Property Lease;
(iv) receipts for the Purchase Price paid to
Seller by Purchaser;
(v) certificates dated no earlier than 30 days prior
to the Closing Date, from appropriate authorities in the
State of its jurisdiction of incorporation, as to the good
standing of such Seller;
(vi) an updated schedule of creditors as of the
Closing Date;
(vii) executed original of each of the Osborn Proxy
Agreement and the Jaro Proxy Agreement, as defined in the
Stockholders Agreement, of event date herewith; and
(viii) all other documents, instruments and
agreements required to be delivered by such Seller to
Purchaser pursuant to this Agreement and the other
Transaction Documents.
(j) Review by Purchaser's Auditor. Purchaser's
auditor shall have:
(i) reviewed the financial and accounting system
of Seller;
(ii) reviewed and confirmed the financial
statements and results set forth in such statements;
(iii) found no objection to the financial and
accounting system of Seller and Purchaser shall have
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resolved any objection raised by the auditor and
presented to the Seller by the Purchaser.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing, notwithstanding any investigation
heretofore or hereafter made by or on behalf of any party hereto; provided,
however, that (a) the agreements and covenants (other than the indemnification
provisions set forth in this Article VI, which will survive as provided below)
set forth in this Agreement shall survive and continue until all obligations
set forth therein shall have been performed and satisfied and the applicable
statute of limitations for breaches or defaults of such agreements and
covenants has expired; and (b) all representations and warranties, and the
agreements of Seller, and Purchaser to indemnify each other set forth in this
Article VI, shall survive and continue for, and all indemnification claims with
respect thereto shall be made prior to March 31, 1996.
SECTION 6.2 Agreement to Indemnify. Subject to the conditions of this
Article VI:
(a) Purchaser hereby agrees to indemnify, defend and hold
harmless the Seller from and against all demands, claims, actions or
causes of action, assessments, loses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and
reasonably attorney's fees,costs and disbursements and expenses
(collectively, "Damages"), asserted against, resulting to, imposed
upon or incurred by the Seller directly or indirectly, arising out of
or resulting from (i) a breach of any representation, warranty,
covenant or agreement of Purchaser contained in or made pursuant to
this Agreement (including but not limited to enforcement of this
Article VI), the other Transaction Documents or the transactions
contemplated hereby or thereby or any facts or circumstances
constituting such breach; and (ii) any indebtedness, obligation or
liability assumed by Purchaser pursuant to Section 1.1, 1.2(a)(vi) and
1.4(b) hereof; and (iii) the operation, use or ownership of its
Restaurants, Assets, Real Property Leases, Real Properties, the
Easements and Assumed Contracts, during, or which have otherwise
accrued from or otherwise relate to, the period of time after the
Closing Date; and
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(b) Seller agrees to indemnify, defend and hold harmless
Purchaser and its officers, directors and stockholders from and
against all Damages asserted against or incurred by Purchaser or such
officers, directors and stockholders, directly or indirectly, arising
out of or resulting from: (i) a breach of any representation,
warranty, covenant or agreement of the Seller contained in or made
pursuant to this Agreement (including but not limited to enforcement
of this Article VI) the other Transaction Documents or any facts or
circumstances constituting such a breach; (ii) any indebtedness,
obligations or liabilities of the Seller including, but not limited
to, any liability or obligation set forth in Section 1.4(a), and the
tax liabilities set forth in Section 2.17 other than those expressly
assumed by Purchaser hereunder; (iii) a breach of or otherwise arising
under any Environmental Law (whether now or hereafter in effect), to
the extent the same arises out of any condition or state of facts or
otherwise relates to the period of time commencing on the date Seller
was entitled to possession of the Real Property in question and ending
on the Closing Date; (iv) the operation, use or ownership of the
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements and Assumed Contracts during, or which have otherwise
accrued from or otherwise relate to, the period of time prior to the
Closing Date; (v) the Seller's failure to pay and discharge all claims
of creditors which may be asserted against Purchaser by reason of
Purchaser's waiver of compliance by Seller of the Bulk Sales Laws and
(vi) all Damages arising before the Closing and not expressly assumed
in writing by the Purchaser; provided, however, that Seller's
indemnification of Purchaser shall be limited in aggregate amount as
provided in Section 6.5.
SECTION 6.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 6.3 with respect to Damages
for which it must indemnify another party hereunder (collectively, the
"Indemnifiable Claims") shall be subject to the following terms and conditions:
(a) The indemnified party shall give the indemnifying party
notice of any such Indemnifiable Claim which notice shall set forth in
reasonable detail the basis for and amount of the Indemnifiable Claim,
and the circumstances giving rise thereto. If the Indemnifiable Claim
is a third-party Claim, the notice must contain an copy of any papers
served on the indemnified party.
(b) If the Indemnifiable Claim is not a third-party Claim,
unless within 30 days of receipt by the indemnifying party of notice
of the Indemnifiable Claim the indemnifying
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party sends written notice to the indemnified party disputing the
facts giving rise to the Indemnifiable Claim or the amount of Damages
stated in the notice, the Damages stated in the notice shall become
due and payable upon the expiration of such 30 day period. If,
however, the indemnifying party disputes the facts giving rise to the
Indemnifiable Claim or the amount of Damages stated in the notice
within such 30 day period and the dispute cannot be resolved within
the following 90 days, the dispute shall be submitted to arbitration
under the rules of the American Arbitration Association in Chicago,
Illinois.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own
expense by representatives of its own choosing reasonably satisfactory
to the indemnified party and will consult with the indemnified party
concerning such defense during the course thereof. If the indemnifying
party, within 30 days after receipt of notice of any Indemnifiable
Claim (or such shorter period as is necessary to prevent prejudice to
the indemnified party, if such 30 day period would prejudice the
rights of the indemnified party), fails to defend, the indemnified
party will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such
Indemnifiable Claim on behalf of and for the account and risk of and
at the expense of the indemnifying party. In addition, if there is a
reasonable probability that a third-party Indemnifiable Claim may
materially and adversely affect an indemnified party, the indemnified
party shall have the right, at its own cost and expense, to defend,
compromise or settle such Indemnifiable Claim.
(d) Anything in this Section 6.3 to the contrary
notwithstanding, neither the indemnifying party nor the indemnified
party, as the case may be, may settle or compromise any Indemnifiable
Claim or consent to entry of any judgment in respect thereof, without
the written consent of the other, which consent may not be
unreasonably withheld or delayed.
SECTION 6.4 Remedies Cumulative. The remedies provided in this Article
VI shall be cumulative and shall not preclude the assertion by any party hereto
of any other rights or the seeking of any other remedies against the other
parties hereto.
SECTION 6.5 Indemnity Enforcement. (a) Indemnification Claims shall be
reduced, by and to the extent, that an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result
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of, and in compensation for, the subject matter of an
indemnification Claim by such indemnitee.
(b) The aggregate value of Purchaser's indemnification claims shall be
limited to the consideration received by the Seller as the Purchase Price for
the Assets and the Purchase Price for the Inventory.
(c) The Purchaser may, in addition to any other rights or remedies
available, set-off any indemnification claims hereunder against any amounts
owing in respect of any of the Securities issued or cash paid by the Company as
part of the Purchase Price for the Assets; provided, however, that this right
of set-off must be exercised against such Securities and cash in the following
order:
(i) interest and principal payments on the Notes;
(ii) dividend, liquidation and redemption payments on
the Senior Preferred and the Junior Preferred;
(iii) dividend liquidation and redemption payments on the
Class D Common Stock; provided that for redemption under this Section
6.5, the call price of the Class D Common Stock shall be Fair Market
Value, (as defined in the Management Subscription Agreement);
(iv) cash to the extent the cash portion of the Purchase
Price for the Assets and for the Inventory has not been distributed to
the Seller's shareholders and limited by the amount, if any, that the
Seller or Seller's stockholders have paid federal or state income
taxes thereon or any of them have received a notice or claim assessing
additional tax liabilities upon the Seller as a result of
non-compliance with section 351 and the rules regarding the
installment note regulations under the Internal Revenue Code of 1986,
as amended.
(d) The personal liability of any shareholder of Seller under this
Article VI shall be limited to the extent such shareholder personally receives
Securities or cash delivered by the Company as part of the Purchase Price, or
to the extent such shareholder acquires such Securities or cash subsequent to
the Closing in a distribution or dividend from Seller, net of federal and state
income taxes as provided in Section 6.5(c)(iv).
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Seller and Purchaser;
(b) By Seller, if (i) there has been a material
misrepresentation or breach of warranty on the part of Purchaser in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Seller; (ii) Purchaser
has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Seller; or (iii) any condition of Seller
obligations hereunder becomes incapable of fulfillment through no
fault of such parties and is not waived by such parties;
(c) By Purchaser, if (i) there has been a material
misrepresentation or breach of warranty on the part of the Seller in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Purchaser; (ii) the
Seller has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Purchaser; or (iii) any condition to Purchaser's
obligations hereunder becomes incapable of fulfillment through no
fault of Purchaser and is not waived by Purchaser;
(d) By Seller, if the Closing shall not have occurred on or
before September 7, 1994; provided that Seller shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
the Seller to fulfill any of its obligations under this Agreement
shall have been the reason that the Closing shall not have occurred on
or before said date;
(e) By Purchaser, if the Closing shall not have occurred on
or before September 7, 1994; provided that Purchaser shall not be
entitled to terminate this Agreement pursuant to this clause if the
failure of Purchaser to fulfill any of its obligations under this
Agreement shall have been the reason that the Closing shall not have
occurred on or before said date; and
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(f) By Seller or by Purchaser, if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Purchaser, or any Seller from consummating
the transactions contemplated hereby is entered and such judgment,
injunction, order or decree shall become final and nonappealable.
SECTION 7.2 Effect of Termination; Right to Proceed. In the event that
a party wishes to terminate this Agreement pursuant to Section 7.1, it shall
give written notice thereof whereupon all further obligations of the parties
under the Agreement shall terminate without further liability of any party
hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants and
agreements imposed upon it hereunder; (ii) to the extent that any condition to
a party's obligations hereunder become incapable of fulfillment because of the
breach by a party of its obligations hereunder and (iii) that the agreements
contained in Sections 4.8, 9.3 and 9.4 shall survive the termination hereof. In
the event that a condition precedent to its obligation is not met, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
transactions contemplated hereby. Notwithstanding anything to the contrary
contained herein, no party shall have any obligation to the other hereunder
arising out of the occurrence of an event or circumstance not within the
control of such party which event or circumstance resulted in a representation
or warranty of such party ceasing to be true.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Further Assurances. Each of the parties hereto shall
without further consideration execute and deliver to any other party hereto
such other instruments of transfer and take such other action as any party may
reasonably request to carry out the transactions contemplated by this Agreement
and the other Transaction Documents.
SECTION 8.2 Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
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similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 8.3 Remedies. In the event of a default under this Agreement
or the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or
other appropriate proceeding, whether for specific performance, or for an
injunction against a violation of any terms hereof or thereof or in aid of the
exercise of any right, power or remedy granted thereby or by law, equity,
statute or otherwise. The foregoing shall include, but shall not be limited to,
allowance for recovery by the aggrieved party of all of its fees and expenses
and disbursements incurred by it in connection with the transactions
contemplated hereby and in the Transaction Documents, including, without
limitation, the reasonable fees and expenses of its counsel, accountants,
agents and representatives, employed by it. No course of dealing and no delay
on the part of any party in exercising any right, power or remedy shall operate
as a waiver thereof or otherwise prejudice such party's rights, powers or
remedies. No right, power or remedy conferred hereby shall be exclusive of any
other right, power or remedy referred to herein or now or hereafter available
at law, in equity, by statute, or otherwise.
SECTION 8.4 Expenses. Upon the execution of this Agreement and the
closing of the Company's acquisition of franchises and other assets, rights and
obligations to certain Burger King restaurants in the Chicago area, the
Purchaser will reimburse the Seller for all reasonable expenses incurred by the
Seller in connection with the authorization, preparation and consummation of
this Agreement and the related transactions, including reasonable attorneys'
and accountants' fees; provided, however, that the aggregate amount paid to
Lawrence Jaro and entities related to Lawrence Jaro and William Osborn and
entities related to William Osborn for reimbursement of accountants' fees shall
not exceed $20,000.
SECTION 8.5 Entire Agreement. This Agreement and the other Transaction
Documents and the Exhibits and Schedules referred to herein and therein contain
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior arrangements or understandings with respect
thereto.
SECTION 8.6 Definitions. For the purposes of this
Agreement:
(i) "affiliate" of any person shall mean any corporation,
proprietorship, partnership or business entity which, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled
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by, such person, and any directors, officers, partners or 50% or more
owners of such person.
(ii) "Affiliate" shall mean with respect to any Person, any
other Person that has a relationship with the designated Person
whereby either of such Persons directly or indirectly controls or is
controlled by or is under common control with the other of such
Persons.
(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iv) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by Seller at the
date of this Agreement and/or the Closing Date, and such business and
operations relating to the Assets and Assumed Contracts. Business.
(v) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(viii) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(ix) "material" means any claim, circumstance or state
of facts which results in, or would reasonably be expected
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to result in, losses or the expenditure or commitment of $25,000 or
more, or which results in any material limitation or restriction on
the ability of the Seller or the Purchaser to conduct the Business.
(x) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
(xi) "Order" means any decree, order, injunction,
rule, judgment, consent of or by a U.S. Authority.
(xii) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xiii) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xiv) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the certificate of incorporation and
By-Laws of the Seller, as applicable.
(xv) "Taxes" shall mean all taxes, charges, fees, duties,
levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise,
value added, license, payroll, unemployment, environmental, customs
duties, capital stock, disability, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income
withholding and Social Security taxes imposed by the United States or
any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country or by
any other tax Authority, including all applicable penalties and
interest, and such term shall include any interest, penalties or
additions to tax attributable to such Taxes.
SECTION 8.7 Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
Agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 8.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and
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delivered personally, sent by telecopier, federal express or other reputable
overnight courier or sent by certified or registered mail, postage prepaid,
return receipt requested, at the addresses set forth below:
(a) if to Purchaser, to:
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
(b) if to Seller, to:
William Osborn
Vinton, Slivka & Panasci, P.C.
c/o Ernest J. Panasci, Esq.
Suite 1100
1600 Stout Street
Denver, Colorado 80202
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 8.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the heirs,
executor, personal representatives, legal representatives, successors and
assigns of the parties hereto, and shall not be assignable by either party
without the prior written consent of the other party; provided, however, that
the Purchaser may assign at Purchaser's sole discretion any or all of its
interest to a lender of Purchaser with written notice to Seller.
SECTION 8.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR
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INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION
AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED
UPON FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND
AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE
PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED
OR CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR
AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED
STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 8.10 SHALL NOT BE DEEMED
TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE JURISDICTION.
SECTION 8.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT
TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss. 1 ET
SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
SECTION 8.12 Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 8.13 Purchaser's Designated Affiliate. Purchaser may designate
one or more of its wholly-owned subsidiaries or Affiliates to carry out all or
part of the transactions contemplated hereby to be carried out by Purchaser,
which designation shall not relieve Purchaser of its obligations hereunder.
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SECTION 8.14 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
as of the day first above written.
NRE HOLDINGS, INC.
By:
Name:
Title:
CASTLEKING, INC.
By:
Name:
Title:
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PURCHASE AND SALE AGREEMENT
Among
NRE HOLDINGS, INC.
(as Purchaser)
And
OSBURGER, INC.
(as Seller)
Dated as of September 1, 1994
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
PURCHASE AND SALE; CLOSING
1.1 Assets to Be Conveyed............................................. 2
1.2 Purchase Price for Assets......................................... 3
1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements..................................... 4
1.4 Assumption of Liabilities......................................... 5
1.5 Closing; Deliveries............................................... 7
1.6 Adjustments....................................................... 7
1.7 Petty Cash ....................................................... 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Corporate Power.................................. 9
2.2 Governing Instruments............................................. 9
2.3 Due Authorization................................................. 9
2.4 No Violation...................................................... 10
2.5 Consents ....................................................... 10
2.6 Financial Statements.............................................. 10
2.7 Assets ....................................................... 12
2.8 Inventory ....................................................... 12
2.9 Real Properties; Real Property Leases............................. 12
2.10 Franchise Agreements............................................. 15
2.11 Employment Arrangements.......................................... 15
2.12 Contracts and Arrangements....................................... 16
2.13 ERISA ....................................................... 16
2.14 Litigation, Compliance with Regulations and Consents............. 17
2.15 Environmental Matters............................................ 18
2.16 Insurance Policies............................................... 19
2.17 Tax Returns...................................................... 19
2.18 Adverse Restrictions............................................. 20
2.19 Brokers ....................................................... 20
2.20 Material Information............................................. 20
2.21 Continuing Representations....................................... 20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power.................................. 21
3.2 Certificate of Incorporation and By-Laws.......................... 21
3.3 Due Authorization................................................. 21
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Section Page
3.4 No Violation...................................................... 21
3.5 Consents ....................................................... 22
3.6 Brokers ....................................................... 22
3.7 Material Information.............................................. 22
3.8 Continuing Representations........................................ 23
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior to the Closing
Date................................................... 23
4.2 Operation of the Business of Seller............................... 23
4.3 Supplements to Disclosures........................................ 26
4.4 Computer Software................................................. 26
4.5 No Other Asset Sales.............................................. 26
4.6 Regulatory Filing and Consents.................................... 26
4.7 Management Subscription Agreement; Other Actions.................. 27
4.8 Announcements; Confidentiality.................................... 27
4.9 Limitation of Seller's Claims After Closing....................... 28
4.10 Employee Benefit Matters......................................... 29
4.11 Financial Statements and Reports................................. 29
4.12 Bulk Sales....................................................... 30
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Seller and Purchasers............ 30
5.2 Conditions to the Obligations of Seller........................... 31
5.3 Conditions to Obligations of Purchaser............................ 32
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations....................................... 35
6.2 Agreement to Indemnify............................................ 36
6.3 Conditions of Indemnification..................................... 37
6.4 Remedies Cumulative............................................... 38
6.5 Indemnity Enforcement............................................. 38
ARTICLE VII
TERMINATION
7.1 Termination....................................................... 39
7.2 Effect of Termination; Right to Proceed........................... 40
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Section Page
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances................................................ 41
8.2 Waiver and Amendment.............................................. 41
8.3 Remedies ....................................................... 41
8.4 Expenses ....................................................... 41
8.5 Entire Agreement.................................................. 42
8.6 Definitions....................................................... 42
8.7 Interpretation.................................................... 44
8.8 Notices ....................................................... 44
8.9 Successors and Assigns............................................ 45
8.10 LITIGATION....................................................... 45
8.11 ARBITRATION...................................................... 45
8.12 Severability..................................................... 46
8.13 Purchaser's Designated Affiliate................................. 46
8.14 Counterparts..................................................... 46
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel
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SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.3(c) Parking and Easements Agreements
1.5(d) Real Property Lease Adjustment Formulae
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
2.14(c) Required Licenses
2.15 Environmental Matters
4.12(b) Creditors Schedule re: Bulk Sales
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of
September 1, 1994 by and between NRE HOLDINGS, INC., a Delaware corporation
with its principal office at c/o Jordan Industries, Inc., Suite 550, Arborlake
Center, 1751 Lake Cook Road, Deerfield, Illinois 60015 ("Purchaser") and
OSBURGER, INC. (the "Seller"):
W I T N E S S E T H:
WHEREAS, the Seller operates the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, the Seller is the owner or lessee of certain personal
property used or held for use in or in connection with the conduct of business
at its Restaurants and the Seller is the lessee of certain buildings, other
real property and land upon and in which its Restaurants are located
(individually, the "Real Property" and collectively, the "Real Properties"),
the legal description of which is set forth on Schedule B hereto;
WHEREAS, the Seller and Purchaser propose to exchange each of the
Assets (as hereinafter defined) of Seller for securities of the Seller and
other consideration specified below; and
WHEREAS, the Seller that occupies Real Property pursuant to a lease
agreement (each, a "Real Property Lease" and, collectively, the "Real Property
Leases") (each such Real Property Lease, together with all amendments,
supplements, and schedules thereto, being listed on Schedule C hereto) proposes
to assign to National Restaurant Enterprises, Inc., a Delaware corporation and
wholly-owned subsidiary of the Purchaser ("Enterprises"), and Enterprises
proposes to accept such assignment of, the Seller's leasehold interest with
respect to the Real Property on which its Restaurants are located (each a
"Leased Real Property" and, collectively, the "Leased Real Properties");
WHEREAS, Purchaser proposes to transfer the Restaurants and Assets
purchased pursuant to this Agreement to Enterprises and to cause Enterprises to
assume the Assumed Contracts (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions
and conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, the Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Seller's
shareholders to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to purchase and accept the
assignment, transfer, conveyance and delivery from the Seller at Closing of,
all of the following assets used or located in or held for use in connection
with the Restaurants operated by the Seller (collectively, the "Assets") free
and clear of all Liens:
(a) Restaurant Equipment. All of the machinery, equipment,
furnishings, supplies, uniforms, spare equipment parts and all other personal
property (other than Inventory, as hereinafter defined) owned by the Seller and
used or held for use in, or in connection with, the operation of its
Restaurants, including but not limited to the assets set forth in Schedule
1.1(a) annexed hereto (collectively, "Restaurant Equipment");
(b) Leasehold Improvements. All trade fixtures, trade
equipment or other personal property placed in the premises by
the Seller or any of the foregoing purchased by the Seller for
its Restaurants, excluding any HVAC system located at the
Restaurants and any built-in freezer located at the Restaurants
("Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise
Agreement for its Restaurants, as more fully set forth in
Schedule 1.1(c) annexed hereto ("Franchise Agreements", all
subject to the approval, as necessary, of the Burger King
Corporation;
(d) Inventories. All of the food, related paper products and
promotional items owned by the Seller or otherwise used or held for use in or
in connection with the business being conducted at its Restaurants
(collectively, "Inventory"), which, if so directed by Purchaser, Seller shall
sell directly to Enterprises;
(e) Leased Assets. All of the right, title and interest of the Seller
in any item of personal property which is not owned by it but is leased by it
or otherwise is used or held for use, in or in connection with the business
being conducted at its Restaurants, including but not limited to, the assets
set forth on Schedule 1.1(e) annexed hereto (collectively the "Leased Assets");
(f) Goodwill and Other Intangible Assets. All goodwill,
going concern value, contract rights, customer relationships, and
other general intangibles held or used by Seller in connection
with its business being operated at the Restaurant (collectively
the "Intangible Assets"); and
(g) Miscellaneous Assets. All of the right, title and interest of the
Seller in any other asset or property owned, leased, subleased, used or held
for use in, or in connection with the business being operated at its Restaurant
(collectively, the "Miscellaneous Assets") and excluding, accounts receivable,
cash, cash equivalents or securities held by Seller.
SECTION 1.2 Purchase Price for Assets.
(a) Seller shall exchange the Restaurant Equipment,
Leasehold Improvements, Leased Assets, Franchise Agreements,
Intangible Assets and Miscellaneous Assets for $100,000 in cash
to be delivered by the Purchaser.
(b) Seller shall exchange the Inventory for an amount equal to the cost
therefor as charged to the Seller by its unaffiliated supplier or vendor. At
the Closing, Purchaser shall pay to Seller $6000 per Restaurant for the
Inventory of each Restaurant, that sum being Seller's good faith estimate of
the cost of such Inventory (the "Estimated Inventory Price"). The precise
amount of the cost of the Inventory of the Seller shall be determined by
physical inventories to be taken on the Closing Date in its Restaurants and in
any other location where inventory may be located. Seller and Purchaser shall
each have the right to have at least one of its representatives present at the
taking of such inventories. The representatives shall submit a written report
of the results of such inventories promptly after Closing to both the Seller
and Purchaser. Promptly after receiving such report, the Seller shall then
price the inventories shown on such report by multiplying the physical items by
their cost, determined as aforesaid, and the Seller shall submit such priced
inventory report (the "Priced Inventory Report") to Purchaser. If Purchaser and
the Seller are unable to agree upon the purchase price of the Inventory within
10 days after the Seller and Purchaser have received the Priced Inventory
Report, such purchase price shall be determined by Deloitte & Touche, whose
determination shall be final and binding upon the Seller and Purchaser. Within
30 days after the final determination of the purchase price for the Inventory:
(A) if it exceeds the Estimated Inventory Price, Purchaser shall pay the amount
of such excess, by check, to the Seller; or (B) if it is less than the
Estimated Inventory Price, Seller shall pay the amount by check to the
Purchaser.
(c) The Seller and Purchaser shall prepare and file their tax returns
and information statements in a manner consistent with the agreement set forth
above.
SECTION 1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements. Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of the representations and warranties
hereinafter set forth, at the Closing, the Seller shall assign to Enterprises
all of its leasehold interest in the Leased Real Properties and shall assign,
sublease or otherwise transfer to Enterprises all of its right, title and
interest in and to all parking and other access agreements or arrangements
relating to the Real Properties, as follows:
(a) Assignment of Real Property Leases. At Closing, the Seller shall
assign to Enterprises all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment and
Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A. The
Lease Assignment shall be executed and delivered at Closing by the Seller and
Enterprises.
(b) Lease Assignment Consent. At Closing, the Seller shall deliver to
Enterprises a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the last
sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c) annexed
hereto, with respect to the Seller, sets forth all written or oral parking
leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements"), except for recorded
instruments, pursuant to which the Seller is granted, for use in connection
with its Restaurant, parking privileges or rights, current or prospective,
and/or rights of access of any kind or nature in and to the applicable Real
Property. At Closing the Seller shall deliver to Purchaser such documentation
in form and substance reasonably satisfactory to Purchaser and its counsel
which effectively assigns or transfers the Seller's rights under
both recorded and unrecorded Easements to Enterprises (hereinafter individually
referred to as an "Easement Assignment", and, collectively, as the "Easement
Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby agree and
acknowledge that the Seller is not selling, transferring, assigning, delivering
or otherwise conveying, and Purchaser is not purchasing, receiving, acquiring
or otherwise assuming, any liabilities of the Seller, or any of its respective
Affiliates except as specifically set forth in Sections 1.1, 1.2(a)(vi) and
1.4(b) hereof. Purchaser shall neither be liable for any liability or
obligation of the Seller, or any of its respective Affiliates nor shall it be
required to indemnify the Seller, or any of its respective Affiliates against
any liability or obligation other than those so specifically assumed or
indemnified, as the case may be.
Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify the Seller, or any of its respective
Affiliates against any liability, obligation, duty or responsibility of the
Seller, or any of its respective Affiliates:
(i) arising from, or out of, the ownership or operations or
use of, or incurred in connection with, or incurred as a result of any
claim made against the Seller, or any of its respective Affiliates in
connection with, any Restaurant, Asset, Real Property, Real Property
Lease or Assumed Contract (as hereinafter defined) on or prior to, or
relating to any time period prior to 6:00 A.M. on the Closing Date;
(ii) arising from or by reason of the transactions
contemplated by this Agreement including, but not limited to, Federal,
state or local income taxes, transfer taxes, sales taxes and other
taxes, if any, arising from or by reason of the receipt of the
consideration for the Assets to be transferred pursuant hereto except
as provided in Section 1.6(b);
(iii) with respect to any wages, vacation, compensation,
severance or sick pay or any rights under any stock option, bonus or
other incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or
similar arrangement to which the Seller is a party or for
which the Seller is responsible;
(v) with respect to any "employee benefit plan" as defined in
Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including multi-employer plans as defined in
Section 3(37) of ERISA whether arising before, on or after the Closing
Date; or
(vi) under any Regulations (as hereinafter defined) relating
to public health and safety and pollution or protection of the
environment, including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes or any materials defined or
categorized by any of the above as "Hazardous Materials", "Hazardous
Substances", or similar or related designations (collectively referred
to herein as "Environmental Laws"); or
(vii) with respect to any causes of action, judgements,
claims or demands related to any occurrence, action or omission by the
Seller, whether through negligence or otherwise, occurring before the
Closing.
(b) Assumption of Assumed Contracts. The Seller shall assign to, and
Enterprises shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of the Seller attributable
to the period after 6:00 a.m. the Closing Date, under the Franchise Agreements,
Real Property Leases, Easements, Leased Assets and the Other Contracts (as
hereinafter defined) (collectively, the "Assumed Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 190 S.
LaSalle Street, Chicago, Illinois 60603-3441 (or such other location as shall
be agreed upon by the parties) on September 1, 1994, provided, however, that
if, through no fault of the parties hereto, all of the conditions to the
parties' obligations to close hereunder are not satisfied or waived on the date
so designated, the Closing shall be adjourned to a subsequent mutually
agreeable date not later than September 7, 1994, unless further extended by
mutual agreement by the parties. The "Closing Date" is the date Closing
actually takes place.
(b) Delivery of Documents. At the Closing, Seller and Purchaser shall
deliver to each other the respective documents and other items set forth in
Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to
(i) obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Seller or by the
Seller to Purchaser by reason of such adjustments shall be made at the Closing
(by adjustment of the Purchase Price, if practicable) or as soon as reasonably
practicable thereafter.
(b) The parties shall share equally in the payment of all sales taxes,
and transfer taxes, if any, applicable to its transaction at the Closing.
Purchaser and Seller shall share equally all franchise assignment fees to
Burger King Corporation ("Burger King") in connection with the assignment of
the Franchise Agreements to Purchaser.
(c) The parties shall share equally the cost of Purchaser's obtaining
prior to Closing, if necessary in Purchaser's reasonable judgment, a "Phase 1"
and, if applicable, a "Phase 2" environmental report. Any such reports or
studies prepared or obtained by the Seller prior to negotiations between
Purchaser and the Seller shall be borne by the Seller. At Closing, if
necessary, the parties shall adjust the cost of obtaining said environmental
reports.
(d) All "minimum" or "fixed rentals" and any other monetary
obligations accruing under the Real Property Leases shall be adjusted for the
month in which the Closing occurs. In the event the period used in computing
and/or adjusting percentage rental (hereinafter referred to as the "Adjustment
Lease Year") under any of the Real Property Leases commences before the Closing
Date and ends after the Closing Date, such percentage rental shall be adjusted
at the end of the Adjustment Lease Year for such Real Property Leases so
affected as follows:
(i) Seller shall be required to pay to Purchaser, within 30
days after the expiration of the Adjustment Lease Year, an amount
equal to the lesser of (1) the amount of percentage rental due for
such Adjustment Lease Year or (2) the "Percentage Rent Contribution"
determined by the following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used in
determining such percentage rental during
such Adjustment Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.6(d);
C = Number of days during the Adjustment Lease
Year prior to, but not including, the Closing
Date; and
D = Percentage rent factor for such Real Property
Lease as indicated in Schedule 1.6(d);
provided, however, that, in the event the above formula yields a
negative amount as the Percentage Rent Contribution, the Percentage
Rent Contribution shall be deemed equal to zero; and
(ii) Purchaser shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental, if any,
due for the Adjustment Lease Year.
Section 1.7 Petty Cash. Upon the Closing, the Seller shall leave
$1,000.00 in cash at each Restaurant (the "Store Bank"). Purchaser agrees to
purchase each Store Bank separately from the Purchase Price at Closing on a
cash for cash basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with
Purchaser as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the
Regulations of its jurisdiction of incorporation (as set forth on Schedule A
hereto) and is duly qualified and licensed to do business in such jurisdiction
which is the only jurisdiction wherein the character of the Real Properties and
other Assets owned or leased or the nature of the business of the Seller makes
such licensing or qualification to do business necessary. The Seller has full
power and authority (corporate or otherwise) to own its assets, to own or hold
under lease the real property it presently owns or holds under lease including,
without limitation, the Real Properties, and to carry on the business in which
it is engaged at all locations at which it is presently located including,
without limitation, operation of the Restaurants at the Real Properties and to
execute and deliver this Agreement and the other documents and instruments to
be executed and delivered by the Seller, as the case may be, pursuant hereto or
in connection herewith (this Agreement and all other agreements, documents and
instruments to be entered into pursuant to this Agreement or in connection
herewith including all exhibits and schedules annexed hereto and thereto are
collectively referred to herein as the "Transaction Documents") and to
consummate the transactions contemplated hereby and thereby.
SECTION 2.2 Governing Instruments. The copies of the Certificate of
Incorporation and By-Laws of the Seller, and all amendments thereto to date, as
certified by the Secretary of Seller have heretofore been delivered to
Purchaser by Seller, and are complete and correct as of the Closing Date. The
Seller is not in default in the performance, observance or fulfillment of any
of the provisions, terms or conditions of its Certificate of Incorporation or
By-Laws.
SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Seller have been duly obtained. The execution and delivery of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors and stockholders of the Seller, and no other acts or
proceedings on the part of the Seller or the stockholders of the Seller are
necessary to authorize the execution and delivery of this Agreement or any of
the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by the Seller, will be the
legal, valid and binding obligation of the Seller enforceable against it in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency and other laws affecting creditors' rights
(collectively, "Bankruptcy Laws") and subject to general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and thereby,
do not, and at Closing will not: (a) violate its Certificate of Incorporation
or By-Laws, as amended; (b) violate or conflict with or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute
a default) under any agreement, indenture, instrument or understanding to which
the Seller is a party or by which it is bound; (c) violate any judgment, decree,
law, rule or regulation to which the Seller is a party or by which it is bound;
(d) result in the creation of, or give any party the right to create, any
encumbrance upon the property and assets of the Seller; (e) terminate or modify,
or give any third party the right to terminate or modify, the provisions or
terms of any agreement or commitment to which the Seller is a party or by which
the Seller is subject or bound; or (f) result in any suspension, revocation,
impairment, forfeiture or non-renewal of any permit, license, qualification,
authorization or approval applicable to the Seller.
SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals or other authorizations which the Seller is required to obtain from,
and any filing which the Seller is required to make with, any governmental
authority or agency or any other Person including, but not limited to, consents
required from Burger King (the "Burger King Consents") in connection with the
execution, delivery and consummation of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby or thereby (collectively, the "Required Consents").
SECTION 2.6 Financial Statements. (a) The Seller has delivered to
Purchaser a balance sheet of the Business as at December 31, 1993 and December
31, 1992 and the related results of operations for the 12 months ended December
31, 1993 and 1992, respectively. The Seller has delivered to Purchaser
unaudited monthly financial statements for the period from January 1, 1994
through July 31, 1994.
(b) The financial statements of the Seller referred to in Section
2.6(a) (collectively, the "Financial Statements") are true, correct and
complete, are based on Seller's books and records, have been prepared in
accordance with generally accepted accounting principles consistently applied
and accurately present the assets, liabilities, financial positions and results
of operations of the Seller as at the dates thereof and for the periods covered
thereby; provided, however, that (i) monthly financial statements shall not be
required to reflect standard year-end adjustments and reserves, and (ii)
monthly financial statements may be prepared other than in accordance with
generally accepted accounting principles to the extent that such financial
statements shall not be required to reflect standard year-end adjustments, or
contingent liabilities. The Financial Statements of the Seller reflect or
provide for all material claims against, and all debts and liabilities (of any
kind or nature) of, such Seller, fixed or contingent, as at the dates
thereof and for the periods covered thereby, and the Seller does not know of
any basis for the assertion against it of any liability or obligation of any
nature whatsoever, not fully reflected or reserved against in such Financial
Statements. There has not been any Material Adverse Change between the date of
the Financial Statements and the date of this Agreement and, except as set
forth in Schedule 2.6(b), no fact or condition exists or is contemplated or
threatened which might cause any such Material Adverse Change at any time in
the future.
Without limiting the foregoing, since December 31, 1993:
(i) None of the Restaurants, Assets, Real Properties, Real
Property Leases, Assumed Contracts, financial or other condition, or
results of operations of the Seller, has been adversely affected in
any material way as a result of any fire, explosion, accident,
casualty, labor disturbance, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or public
enemy, or cessation, interruption or diminution of operations, or any
other event, whether or not covered by insurance;
(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under Contracts
entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii) annexed
hereto, the Seller has not permitted nor allowed any of its Real
Property Leases or Assets, of or used by it to be mortgaged, pledged
or subjected to any Lien;
(iv) Except for transactions among Affiliates, the Seller has
not paid, loaned or advanced any amounts to, or sold, transferred,
leased, subleased or licensed any Real Properties or Assets to, or
entered into any agreement, or arrangements with, any Affiliate or
associate (and any of such transactions shall have been terminated on
or before the Closing Date); and
(v) The Seller has not agreed, whether in writing or
otherwise, to do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to
Purchaser at Closing, good and marketable title to all of its Assets and
Assumed Contracts free and clear of all Liens. The Assets of the Seller include
all of the operating assets used or held for use in or in connection with the
business being conducted by the Seller at the Restaurants. All the Assets are,
and on the Closing Date will be, in good operating condition
and repair, capable of performing the functions for which such items are
currently and normally used, normal wear and tear excepted. All the Assets
conform, and on the Closing Date will conform, to the standards of Burger King
under the terms and conditions set forth in the applicable Franchise
Agreements. On the Closing Date, each Restaurant, together with its related
Assets and Real Property, taken as a whole, will constitute a fully operable
"turn-key" Burger King restaurant sufficient to permit Purchaser to immediately
operate the business at such Restaurant as presently being conducted therein.
(b) The Seller will transfer and/or assign to Purchaser at Closing all
warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller consists, and at
Closing will consist, of items of quality and quantity usable or salable in the
ordinary course of business. The present quality and quantities of all
Inventory of the Seller are, and the qualities and quantities of all Inventory
outstanding at the Closing will be, reasonable in accordance with the current
specifications of Burger King. At Closing, the Inventory at each Restaurant
shall be sufficient for the operation of such Restaurant for at least 48 hours
after the Closing Date, and in no event will there be excess inventory in
relation to normal usage.
SECTION 2.9 Real Properties; Real Property Leases. (a) With respect to
Real Properties that are owned by Persons not affiliated with the Seller, to
the knowledge of the Seller, each of such owners has good record and marketable
title in fee simple to such real property.
(b) The Seller has delivered to Purchaser a true and complete copy of
the Real Property Leases applicable to it, together with all amendments thereto
and all such Real Property Leases with such amendments or supplements being
listed and set forth on Schedule C. The Seller does not have knowledge or
information of any facts, circumstances or conditions which do or would in any
way adversely affect the Leased Real Property or the operation thereof or the
business thereon as presently conducted or as intended to be conducted. At or
prior to Closing, the Seller shall cause to be discharged of record all Liens
against the Seller or such Seller's interest affecting its Leased Real
Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(b), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(c) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real Properties
by Seller are in substantial compliance with all Regulations. Set forth on
Schedule 2.9(c) annexed hereto is a true and complete schedule of each
certificate of occupancy for each Restaurant located on the Real Properties,
copies of which certificates of occupancy and all amendments thereto to date
have heretofore been delivered to Purchaser, and which copies are complete and
correct as of the date of this Agreement and will be complete and correct as of
the Closing Date. The Real Properties and the Restaurants located thereon are
in a state of good maintenance and repair and are in good operating condition,
normal wear and tear excepted, and (i) there are no physical or mechanical
defects to the Seller's knowledge in any of the Real Properties or Restaurants,
including, without limitation, the structural portions of the Real Properties
and Restaurants and the plumbing, heating, air conditioning, electrical,
mechanical, life safety and other systems therein and all such systems are in
good operating condition and repair (normal wear and tear excepted); and (ii)
there are no ongoing repairs to the Real Properties or Restaurants located
thereon being made by or on behalf of any Sellar or being made by or on behalf
of any landlord. All necessary occupancy and other certificates and Permits,
municipal and otherwise, for the lawful use and occupancy of the Real
Properties for the purposes for which they are intended and to which they are
presently devoted including, without limitation, for the operation of a Burger
King restaurant thereon, have been issued and remain valid. There are no
pending or threatened actions or proceedings that might prohibit, restrict or
impair such use and occupancy or result in the suspension, revocation,
impairment, forfeiture or non-renewal of any such certificates or Permits. All
notes or notices of violation of any Regulations, against or affecting any such
Real Properties have been complied with. There are no outstanding correcting
work orders issued to the Seller from any Federal, State, county, municipal or
local government, or the owner of the Real Properties or any insurance company
with respect to any such Real Properties.
(d) There are no condemnation or eminent domain proceedings
of any kind whatsoever or proceedings of any other kind whatsoever for the
taking of the whole or any part of the Real Properties for public or
quasi-public use pending or, to the knowledge of the Seller, threatened against
the Real Properties.
(e) The Real Properties and all improvements thereon represent all of
the locations at which the Seller conducts Business and are, now, and at
Closing will be, the only locations where any of the Assets are or will
belocated.
(f) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any Law or by the normal use
and operation of the Real Properties and the Restaurants located thereon are
installed to the property lines of the respective Real Properties, to the
knowledge of the Seller are connected pursuant to valid Permits, are fully
operable and are adequate to service the Real Properties and the Restaurants
located thereon and to permit full compliance with all Regulations and normal
utilization of the Real Properties and the Restaurants located thereon.
(g) To Seller's knowledge, all licenses, Permits, certificates,
including, without limitation, proof of dedication, required from all
Authorities having jurisdiction over the Real Properties, and from any other
Persons, for the normal use and operation of the Real Properties and the
Restaurants located thereon and to ensure vehicular and pedestrian ingress to
and egress from the Real Properties and the Restaurants located thereon have
been obtained. To Seller's knowledge the Easements are valid and binding, in
full force and effect and enforceable in accordance with their respective
terms. There are no defaults or offsets which the owner of such recorded
Easements has against the enforcement of such Easements and neither the Seller
nor the owners of the Easements are in default under such Easements, nor have
any events under such Easements occurred which with notice or the passage of
time or both, would constitute a default under such Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to
Purchaser a true, complete and correct copy of the Franchise Agreement relating
to its Restaurant, including any and all amendments thereto. The Seller or its
Stockholders own, and at Closing will transfer to Purchaser, its respective
right, title and interest in its Franchise Agreement, free and clear of all
Liens. Subject to the written consent of Burger King, in form satisfactory to
Purchaser and its counsel, which the Seller shall obtain and deliver to
Purchaser and its counsel at or prior to the Closing, the Seller has the
absolute right and authority to sell, assign, transfer and convey its Franchise
Agreement and all other assets being sold or otherwise conveyed to Purchaser in
connection with the Restaurant which it operates in accordance with the terms
and conditions hereof, and there have not been and, except as set forth on
Schedule 2.10, currently there are no claims and the Seller is not aware of any
threatened claims with Burger King pertaining to the Franchise Agreements. On
the Closing Date, neither Burger King nor the Seller shall be in default under
any of the Franchise Agreements and the Franchise Agreements shall be in full
force and effect, the Seller shall not have received any notice of violation
with respect to the Franchise Agreements, and the Seller does not know or has no
reason to know of any event which would give rise to a violation or default
under the Franchise Agreements.
SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor agreement,
any agreement containing severance or termination pay arrangements, deferred
compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other employee
or fringe benefit plan, including vacation plans or programs and sick leave
plans or programs. Except as set forth on Schedule 2.11(a) hereof, within the
last five (5) years the Seller has not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements. Except
as set forth on Schedule 2.11(a) hereof, (i) to the best knowledge of the
Seller, the Seller is in substantial compliance with all applicable Regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice, charge or complaint against
the Seller pending or threatened before the National Labor Relations Board;
(iii) there is no labor strike, dispute, request for representation, slowdown
or stoppage actually pending or threatened against or affecting the Seller;
(iv) no question concerning representation has been raised or is threatened
respecting the employees of the Seller; and (v) no grievance which might have
an adverse effect on the Seller or the conduct of its business nor any
arbitration proceeding arising out of or under collective bargaining agreements
is pending and no claims therefor exist.
Schedule 2.11(b) sets forth a true and complete list of the names of
all persons employed by the Seller at the Restaurants as of the date hereof,
and the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), the Seller does not have any Contract
relating to the Restaurants, Assets or Real Properties, including, without
limiting the generality of the foregoing, any (i) Contract for the purchase or
sale of Inventory; (ii) Contract for the purchase or sale of supplies, services
or other items; (iii) Contract for the purchase, sale or lease of any Restaurant
Equipment; (iv) Franchise Agreement or license agreement; and (v) employment or
consulting agreement or pension, disability, profit sharing, bonus, incentive,
insurance, retirement or other employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and correct
copy of each Other Contract applicable to it, together with all amendments (if
oral, a written description of the terms thereof) thereto.
(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of the scheduled term thereof or has knowledge of the intent of a
party to any such Other Contract to do the same, nor has any event occurred
which, with notice or the passage of time or both, would constitute a default
under any such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither
the Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14) and
(b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986, as
amended (the "Code")) (collectively, the "Group") presently has or at any time
during the five (5) years before the date of this Agreement had an obligation
to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee welfare
benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA Plans").
Each ERISA Plan that is an employee pension plan complies in form and operation
with all applicable requirements of section 401(a) and 501(a) of the Code and
each ERISA Plan that is a group health plan (as defined in ERISA section 607(1)
or Code section 4980B(g)(B) has been operated in compliance with applicable
law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not constitute
an "employee benefit plan" as defined in ERISA section 3(3) (collectively,
"Fringe Benefit Plans") currently maintained by the Seller or to which the
Seller has an obligation to contribute. Seller has delivered or made available
to Purchaser true and complete copies of all documents, as they may have been
amended to the date hereof, embodying or relating to the ERISA Plans or Fringe
Benefits Plans.
(c) There are no actions, audits, suits, or claims pending (other than
routine claims for benefits) or, to the knowledge of the Seller, threatened,
against any ERISA Plan or Fringe Benefit Plan or any fiduciary of any such Plan
or against the assets of any such Plan.
(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether insured or self-insured) or other employee welfare
benefit plan maintained by the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents. (a)
Except as set forth on Schedule 2.14(a) and except for workers' compensation or
similar claims, there are no claims now pending, or to the best knowledge of
the Seller, in prospect or threatened against, the Seller or any of its
respective officers, directors or partners, at law or in equity including,
without limitation, (i) any voluntary or involuntary proceedings under
Bankruptcy Laws, or (ii) any Action before or by any governmental
instrumentality (domestic or foreign) or arbitrator which involves a claim or
demand for any judgment, decree, liability, action or injunction enjoining an
action, whether or not fully covered by insurance, in connection with the
Assets, Real Property Leases, Assumed Contracts, Real Properties, Restaurants,
business, affairs, properties or assets of the Seller.
(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in substantial compliance in
all respects with all Regulations applicable to its Business, affairs,
properties, or assets. Neither the Seller, nor any officer, director or
authorized agent of the Seller is in default with respect to, and has not been
charged or to its knowledge threatened with, nor is under investigation with
respect to, any violation of any Regulations relating to any aspect of its
Business, affairs, properties or assets including, but not limited to, the
Restaurants, Assets, Real Property Leases, Assumed Contracts, and the Real
Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
Permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the Assets,
Real Property Leases or the Real Properties ("Required Licenses"). Except as
set forth in Schedule 2.14(c), the Seller has obtained each of the Required
Licenses and each such Required License, is and on the Closing Date will be,
validly issued and in full force and effect and there are not now and, at
Closing shall not be any claims pending, and to the Seller's knowledge, any
claims in prospect or threatened, challenging the Required Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in Schedule
2.15 annexed hereto: (i) the Seller has obtained all Licenses which are
required under any Environmental Laws; (ii) to Seller's knowledge, the Seller
is in substantial compliance with all terms and conditions of the Required
Licenses and is also in substantial compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Environmental Laws or code, plan,
order, decree or judgment relating to public health and safety and pollution or
protection of the environment or any notice or demand letter issued, entered,
promulgated or approved thereunder; (iii) there are no claims, pending or to
Seller's knowledge threatened, against the Seller relating in any way to any
Environmental Law or any Regulation, notice or demand letter issued, entered,
promulgated or approved thereunder; and (iv) the Seller does not know or have
any reason to know of, nor has the Seller received any notice of any facts,
events or conditions which would interfere with or prevent continued compliance
with, or give rise to any common law or legal liability under any Environmental
Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily insured
against by reputable companies in the same or similar business, of such types
and in such amounts (with such deductible amounts) as is customary for such
companies under similar circumstances. All of the applicable insurance policies
are valid and enforceable and in full force and effect and will be continued in
full force and effect up to and including the Closing Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income tax
returns and all state and local income, franchise and sales tax returns and all
and any other tax return which was required to be filed as of the date of this
Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. The
provision for Taxes shown on the Financial Statements of the Seller was
sufficient to satisfy all taxes due and all assessments received by the Seller
(and all other entities included within the Financial Statements) for all
periods ended on or prior to the date of such Financial Statements. As of the
date hereof, no Taxes are past due, and no Taxes are unpaid and all current
payroll taxes have been paid. The Seller is not aware of any basis upon which
any assessment of additional Taxes could be made, and the Seller has not signed
any extension agreement with the Internal Revenue Service or any other
governmental agency or given waiver of a statute of limitations with respect to
the payment of Taxes for periods for which the statute of limitations has not
expired. The Seller shall be liable for all tax liabilities in connection with
the operation of the Restaurants, the Assets, the Real Properties, the Real
Property Leases, the Easements and Assumed Contracts, which cover periods prior
to the Closing Date. The Seller shall be liable for half of all transfer, sales
and similar tax liabilities, if any, in connection with the leasing of the Real
Properties under the Real Property Leases, the assignment of the Real Property
Leases and the Assumed Contracts, and the transfer of any rights under the
Easements. All taxes which the Seller is required by law to withhold or collect
have been duly withheld or collected and to the extent required have been paid
over to the proper governmental authorities on a timely basis or reflected as an
obligation on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, By-Law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or Assumed Contracts. The execution and delivery
of this Agreement and the other Transaction Documents and the consummation of
the transactions contemplated hereunder and thereby will not result in the
violation or breach of, default or the creation of any Lien under any of the
aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be stated
herein or therein or which is necessary to make the statements herein or
therein not misleading. There is no fact which the Seller has not disclosed to
Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Seller that:
SECTION 3.1 Organization and Corporate Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified and licensed to do business
wherein the character of the Real Properties and other Assets to be purchased
makes such licensing or qualification to do business necessary. Purchaser has
full power and authority (corporate and other) to own or hold under lease its
properties and assets, and execute and deliver this Agreement and the other
Transaction Documents to be executed and delivered by Purchaser pursuant hereto
or in connection herewith and to consummate the transactions contemplated
hereby and thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Seller by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance or
fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The execution
and delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Purchaser and no other corporate acts
or proceedings on the part of Purchaser or its stockholders are necessary to
authorize the execution and delivery of this Agreement or any of the other
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby. This Agreement and each of the other Transaction Documents,
upon execution and delivery by Purchaser, will be the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforcement thereof may be limited by Bankruptcy Laws and
subject to the general principles of equity affecting the right to specific
performance and injunctive relief.
SECTION 3.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby and thereby
do not and at Closing will not (a) violate its Certificate of Incorporation or
By-Laws; (b) violate or conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
any agreement, indenture, instrument or understanding to which Purchaser is a
party or by which it is bound; (c) violate any judgement decree, law, rule, or
regulation to which Purchaser is a party or by which it is bound; (d) result in
the creation of, or give any party the right to create any encumbrance upon the
property or assets of Purchaser; (e) terminate or modify, or give any third
party the right to terminate or modify, the provisions or terms of any
agreement or commitment to which Purchaser is a party or by which Purchaser is
subject or bound; or (f) result in any suspension, revocation, impairment,
forfeiture or non-renewal of any license, qualification, authorization or
approval applicable to Purchaser.
SECTION 3.5 Consents. Except for the Burger King Consents and the
consent of The First National Bank of Boston (Purchaser's senior lender),
Purchaser is not required to obtain any consents, approvals or other
authorizations or to make any filing with any Authority or any other Person in
connection with the execution, delivery and consummation of this Agreement and
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 3.6 Brokers. No broker, finder or selling agent
has had a part in bringing about any of the transactions contemplated by this
Agreement or the other Transaction Documents (including, but not limited to,
the leasing of the Real Properties and the assignment of the Real Property
Leases) and no commission or other fee is due to any party in connection with
the transactions contemplated by this Agreement or the other Transaction
Documents.
SECTION 3.7 Material Information. This Agreement, the other
Transaction Documents and any exhibit, schedule, certificate or other
information representation, warranty or other document furnished or to be
furnished by Purchaser to Seller do not (a) contain, nor will the same contain,
any untrue statement of a material fact; or (b) omit, nor will the same omit or
fail to state, a material fact required to be stated herein or therein or which
is necessary to make the statements herein or therein not misleading. There is
no fact which the Purchaser has not disclosed to Seller and its counsel in
writing and of which the Purchaser is aware which materially and adversely
affects or could adversely affect the Business prospects, financial condition,
operations, property or affairs of the Restaurants.
SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing
Date. (a) Between the date of this Agreement and the Closing Date, the Seller
shall give Purchaser, its directors, officers, employees, accountants, counsel
and other representatives and agents ("Representatives") reasonable access to
the premises, properties, books, financial statements, Contracts, records of
the Seller, relating to the Business, the Restaurants, the Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts, and
shall furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Seller as
Purchaser shall from time to time reasonably request for such purposes as
Purchaser shall require. Any such investigation or examination shall be
conducted as reasonable times and upon reasonable notice to the Seller.
(b) Without in any way limiting the provisions of Section 4.1(a)
hereof, Purchaser shall have the right between the date of this Agreement and
the Closing Date at such time or times as Purchaser reasonably may request (i)
to have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or other
wood-destroying organism present in the Real Properties or Restaurants, or any
damage from prior termites or other wooddestroying organism, and the Seller will
assign to Purchaser at Closing all rights under existing contracts and policies,
if any, with the Seller's exterminating company; and (ii) to have conducted any
environmental audits or studies of the Restaurant, the Real Property and the
Assets, including a "Phase I" and, if the results of such Phase I so recommends,
a "Phase II" environmental study. Notwithstanding inspections, audits or other
studies undertaken by or on behalf of Purchaser hereunder or any other due
diligence investigation undertaken by or on behalf of Purchaser, Seller shall
not be relieved in any way of responsibility for its warranties, representations
and covenants set forth in this Agreement.
SECTION 4.2 Operation of the Business of Seller. Between the date of
this Agreement and the Closing Date, the Seller shall conduct the operation of
its Restaurants in the ordinary and usual course of business, consistent with
past practices and will use its best efforts to preserve intact the present
business organization with respect to its Restaurants, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with landlords, franchisors, dealers, licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relations with it and its Restaurants and will maintain its Restaurants, Real
Properties, and Assets in a condition conducive to the operation of the
business currently carried on therein.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, the Seller will not:
(a) Keep and maintain its books of account and records other
that in accordance with generally accepted accounting principles
consistent with past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of the
employees at any of the Restaurants other than in the ordinary course
of business, consistent with past practices; (ii) pay or agree to pay
any pension, retirement allowance or other employee benefit not
required or permitted by any Welfare Plan, whether past or present; or
(iii) commit itself in relation to its Restaurants, the employees at
its Restaurant or the Real Properties, to any new or renewed Welfare
Plan with or for the benefit of any Person, or to amend any of such
Welfare Plans or any of such agreements in existence on the date
hereof;
(d) Fail promptly to notify Purchaser of any unusual
developments with respect to its Restaurants, Assets, Real Properties,
Real Property Leases, the Easements, Assumed Contracts or otherwise in
connection with its business;
(e) Permit any of its insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies are in full force and effect providing coverage,
in form, substance and amount equal to or greater than the coverage
under those canceled, terminated or lapsed for substantially similar
premiums;
(f) Amend or terminate its Real Property Leases, or sell,
transfer, mortgage or otherwise dispose of or encumber, or agree to
sell, transfer, mortgage or otherwise dispose of or encumber, its Real
Property Leases, the Easements or, except in the ordinary course of
business, any of the Assets or Assumed Contracts;
(g) Allow to occur any default or breach, or event which with
the lapse of time or giving of notice, or both, would constitute a
default or breach under its Real Property Leases, the Easements, its
Franchise Agreement or any of the other Assumed Contracts;
(h) Enter into any other Contracts whether written or oral
which, individual or in the aggregate, would be material to its
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements or the Assumed Contracts, except Contracts for the purchase,
sale or lease of goods or services in the ordinary course of business
consistent with past practice and not in excess of current
requirements, or otherwise make any material change in the conduct of
the businesses or operations of the Seller;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the other
Transaction Documents;
(j) Take any action which would result in any of the
representations or warranties contained in this Agreement or the other
Transaction Documents not being true at and as of the time immediately
after such action at and as of the Closing Date, or in any of the
covenants contained in this Agreement or other Transaction Documents
becoming unperformable or which could have a Material Adverse Effect
on the transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain
and keep its Restaurant, Assets and Real Properties in at least the
same condition and order as exists on the date hereof, reasonable wear
and tear excepted, and fail to perform repairs and maintenance usual
and customary in the ordinary course of business;
(l) Enter into any lease, sublease, license or any other
occupancy agreement, amend or terminate the Easements, the Real
Property Leases, or enter into, amend or terminate any Franchise
Agreement, or other Contract with respect to its Restaurants and Real
Properties;
(m) Take any action or allow to occur any event which with
the lapse of time or giving of notice, or both, would allow to lapse
any of the Licenses;
(n) Operate its Restaurants or otherwise engage in any
practices which would materially affect sales at its
Restaurant; or
(o) Agree (in writing or otherwise) to do any of the
foregoing.
SECTION 4.3 Supplements to Disclosures. Prior to the Closing Date, the
Seller will promptly supplement or amend the information set forth herein and
in the Schedules and Exhibits referred to herein with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described herein or
in a Schedule or Exhibit or which is necessary to correct any information
herein or in a Schedule or Exhibit or in any representation and warranty, which
has been rendered inaccurate thereby.
SECTION 4.4 Computer Software. The Seller shall provide Purchaser with
computer readable software in a form and language that Franchise Service
Options can use and manipulate, which software shall be used to manage the
Restaurants, including (i) payroll and compensation systems and (ii) sales
reports of the Restaurants on a "restaurant by restaurant" and "day by day"
basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the
Closing Date, the Seller shall not, directly or indirectly and whether by means
of a sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or
enter into any Contract to sell, transfer, assign or dispose, of the
Assets or any interest therein, except for normal operations in the
ordinary course of business; or
(b) encourage, initiate or solicit any inquiries or proposals
by, or engage in any discussions or negotiations with, or furnish any
non-public information to, any Person concerning any such transaction
and the Seller shall promptly communicate to Purchaser the substance
of any inquiry or proposal concerning any such transaction which may
be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof until
the Closing Date, each of the parties hereto shall furnish to the other party
hereto such necessary information and reasonable assistance as such other party
may reasonably request in connection with its preparation of necessary filings
or submissions to any governmental agency and the Seller shall use its best
efforts to obtain all Licenses and Required Consents from third parties
necessary to consummate the transactions contemplated by this Agreement and the
other Transaction Documents. Each party shall furnish to the other copies of
all correspondence, filings or communications (or memoranda setting forth the
substance thereof) between Purchaser, Seller or any of their respective
representatives and agents, on the one hand, and any government agency or
authority or third party, on the other hand, with respect to this Agreement and
the other Transaction Documents and transactions contemplated hereby and
thereby.
SECTION 4.7 [INTENTIONALLY BLANK]
SECTION 4.8 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by Law, no announcement of the
existence or terms of this Agreement or the other Transaction Documents or the
transactions contemplated hereby and thereby shall be made publicly or to the
employees or customers of Seller, by any party to this Agreement or any of its
respective Representatives without the advanced written approval of the other
parties.
(b) Purchaser, on the one hand, and Seller, on the other hand, each
shall hold in strict confidence, and shall use their best efforts to cause all
their Representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or by other requirements of
law, all confidential and proprietary information (collectively, "Confidential
Information") concerning Seller, (in the case of Purchaser) and Purchaser (in
the case of Seller) which is created or obtained prior to, on or after the date
hereof in connection with the transactions contemplated hereby, and Purchaser,
Seller shall not use or disclose to others, or permit the use or disclosure of,
any such information created or obtained except to the extent that such
information can be shown to have been (i) previously known by Purchaser, and
Seller, as the case may be (ii) in the public domain through no fault of a party
or any of its Representatives, and will not release or disclose such information
to any other Person, except its officers, directors, employees, Representatives
and lending institutions who need to know such information in connection with
this Agreement.
(c) For purposes of this Section 4.8, Purchaser specifically
acknowledges that it and its Representatives will have an opportunity to engage
in "due diligence" with respect to this transaction and which may include the
opportunity to review corporate records, financial and otherwise, interview
certain management personnel, and see and learn of the operation of Seller. The
Confidential Information of Seller, referred to in Section 4.8(b), includes,
without limitation, all schedules, documents, work papers or other written
information, and specifically including financial records, leases, franchise
agreements, corporate minutes, corporate organization documents, stockholder
records, employment records, fringe benefit records, lists of creditors and
suppliers, contracts, loan and security agreements, claims against Seller,
insurance, management and operation procedures and trade secrets (both as
defined by Colorado statutory law and by common law); and any other proprietary
information related to the Business conducted by Seller, whether or not such
information would be legally protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other
is unique and its release or misusage may not be compensable in damages and
that the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.9 Limitation of Seller's Claims After Closing. From and
after the Closing and thereafter so long as the provisions of Article VI are
still applicable, the Seller shall not, without the prior written consent of
Purchaser: (i) engage in any business, which would adversely affect any value
of Purchaser's business; or (ii) take any other action or fail to take any
action, or allow, the occurrence of any event, with respect to the Seller's
assets, which could be reasonably expected to have a Material Adverse Effect on
the Seller's ability to indemnify, defend and hold harmless Purchaser and its
officers, directors and stockholders from and against Damages (as hereunder
defined) pursuant to Article VI; provided, however, that nothing herein shall
preclude the Seller from taking any action to distribute assets whether in the
form of cash or other assets to its Shareholders'.
SECTION 4.10 Employee Benefit Matters. (a) No later than 30 days after
the Closing Date, the Seller shall discharge and satisfy in full any
liabilities it may have with respect to any wages, vacation, severance or sick
pay, or any rights under any ERISA Plan or Fringe Benefit Plan.
(b) No later than 30 days after the Closing Date, the Seller shall
discharge and satisfy in full any employment, consulting or similar arrangement
to which the Seller is a party or for which the Seller is responsible.
(c) The Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Seller,
and to "qualified beneficiaries" of any employee of the Seller or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Seller or an Affiliate of the Seller. The type of coverage shall be that
described in Section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in Section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under Section 4980B of the Code.
(d) Subject to the provisions of this Agreement, Seller and the
stockholders of Seller jointly and severally, hereby agree to indemnify and
hold Purchaser harmless from and against any Damages which arise out of the
failure to comply with the obligations in Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Seller shall deliver to Purchaser:
(i) within five (5) business days after the end of each
calendar month, a written statement, certified by Seller, of the gross
sales of each Restaurant for that month; and
(ii) With respect to the "compiled" Financial Statements
delivered to Purchaser by the Seller, at the request of Purchaser, the
Seller shall (and shall cause their respective Representatives to)
cooperate with Purchaser to have such statements reviewed or audited
or further clarified in such manner as Purchaser may deem necessary
or advisable. Any additional fees paid by the Seller to their
respective independent certified public accountants in connection
with such cooperation shall be borne by Purchaser.
(b) Seller agrees to observe and abide by the provisions of Sections
4.4, 4.5 and 4.7, and Seller and Purchaser agree to observe and abide by the
provisions of Article VIII hereof;
(c) Seller acknowledges and agrees to be bound by the
provisions of Section 4.6 and 7.1(c); and
(d) Inasmuch as all of the Franchise Agreements are held in individual
names, the Seller shall cause the individual to observe and abide by the
provisions of Section 4.5 insofar as the transfer of such Franchise Agreements
to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser also hereby waives compliance
by Seller with the provisions of any applicable bulk sales state or local tax
laws in effect in the states of Texas and Colorado. Seller hereby warrants and
agrees to pay and discharge, promptly when due, all claims of creditors which
may be asserted against Purchaser by reason of such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth all of the
creditors of the Seller as of the date hereof and the amounts owing to such
creditors as of the date hereof.
(c) The bulk sales laws referred to in Section 4.12(a) hereof are
referred to herein, collectively, as the "Bulk Sales Laws".
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Seller and Purchasers.
The obligations of Purchaser and Seller to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at or
prior to the Closing of the following conditions, except to the extent that any
such condition may have been waived in writing by both Seller and Purchaser at
or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation,
inquiry or other proceeding before any governmental or regulatory
authority or other Person shall have been instituted or shall be
pending or threatened which questions the validity or legality of this
Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby and which could reasonably be expected
to damage materially the Business or assets of the Seller if the
transactions contemplated hereby or thereby are consummated. No
injunction, decree or order shall be in effect prohibiting consummation
of the transactions contemplated by this Agreement or the other
Transaction Documents or which would make the consummation of such
transactions unlawful and no action or proceeding shall have been
instituted and remain pending before an Authority to restrain or
prohibit the transactions contemplated by this Agreement and the other
Transaction Documents.
SECTION 5.2 Conditions to the Obligations of Seller. The obligations
of the Seller to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by the Seller at or prior to the
Closing:
(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date,
with the same force and effect as if made at and as of the Closing
Date; the Purchaser shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Seller shall have received a
certificate dated the Closing Date in form satisfactory to him signed
by an officer of Purchaser.
(b) Governing Instruments, etc. The Seller shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of Purchaser certifying, among other things, that
attached or appended to such certificate (i) is a true and correct
copy of its Certificate of Incorporation and all amendments if any
thereto as of the date thereof; (ii) is a true and correct copy of its
By-Laws; (iii) is a true copy of all corporate actions taken by it,
including resolutions of its board of directors authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation of
the transactions contemplated hereby and thereby; and (iv) are
the names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(c) Payment of Purchase Price. Purchaser shall have
tendered to Seller the Purchase Price payable at Closing in
accordance with Section 1.2(a).
(d) Assumption of Assumed Contracts. The Seller shall
have received from Purchaser an Assumption Agreement
substantially in the form annexed as Exhibit C hereto.
(e) Opinion of Counsel. The Seller shall have received an
opinion of counsel for Purchaser, as of the Closing Date,
substantially in the form annexed as Exhibit D hereto.
(f) Senior Lender's Consent. Seller shall have been presented
evidence that the Purchaser shall have received, if necessary, the
written consent of its Senior Lender, The First National Bank of
Boston, to the transactions contemplated hereby.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby and by the other
Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Seller
contained in this Agreement and the other Transaction Documents, or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated hereby
or thereby shall be true and correct at and as of the Closing Date
with the same force and effect as though made on and as of the Closing
Date; the Seller shall have performed or complied with all agreements
and conditions required by this Agreement and the other Transaction
Documents to be performed or complied with by it on or prior to the
Closing Date; and Purchaser shall have received certificates dated the
Closing Date in form satisfactory to Purchaser signed by the President
on behalf of the Seller, as applicable.
(b) Governing Instruments, etc. Purchaser shall have
received a certificate, dated the Closing Date, of the
Secretary or Assistant Secretary of the Seller certifying,
among other things, that attached or appended to such certificate (i)
is a true and correct copy of its Certificate of Incorporation and all
amendments if any thereto as of the date thereof; (ii) is a true and
correct copy of its By-Laws; (iii) is a true copy of all corporate
actions taken by it, including resolutions of its board of directors
and stockholders authorizing the execution and delivery of this
Agreement and each other Transaction Document to be delivered by it
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby; and (iv) are the names and signatures of its duly
elected or appointed officers who are authorized to execute and
deliver this Agreement and any certificate, document or other
instrument in connection herewith.
(c) Instruments of Transfer. The Seller shall have delivered
to Purchaser a bill of sale and assignment ("Bill of Sale")
substantially in the form annexed as Exhibit E hereto, a Lease
Assignment (if applicable) and any other documents of transfer which
Purchaser reasonably shall request in order to evidence and effectuate
the sale and assignment to Purchaser of the Assets, the Real Property
Leases, the Assumed Contracts and the consummation of all other
transactions contemplated by this Agreement and the other Transaction
Documents.
(d) Consents. The Seller shall have obtained, and delivered
to Purchaser, copies of the Required Consents applicable to it in form
and substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an
opinion or opinions of counsel for Seller, as of the Closing Date,
substantially in the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been no
Material Adverse Change, nor any events which could have a material
adverse change, in the Business, operations, prospects or financial or
other condition of any Restaurant or in the respective Assets or Real
Properties from the date hereof to the Closing Date (the "Interim
Period") nor shall have there been, for all Restaurants in the
aggregate, a decrease of five percent or more in gross sales or gross
profit during the Interim Period, as compared with the same period
during the prior calendar year. For purposes hereof, "Gross Profit"
shall mean total gross sales reduced by the sum of food, labor and
paper costs. At Closing, Purchaser shall have received a certificate
dated the Closing Date in form satisfactory to Purchaser signed by the
President on behalf of the Seller to the foregoing effect.
(g) Environmental Due Diligence. Purchaser shall have
completed its environmental due diligence of the Restaurants, Real
Property and Assets and have received results which are satisfactory
to Purchaser in its sole discretion. In the event Seller shall provide
Purchaser with previously prepared environmental reports, such reports
must have been prepared within 90 days from the date of this
Agreement, or, in the alternative, such reports must have been updated
within 90 days of the date of this Agreement.
(h) Senior Lender's Consent. Purchaser shall have
received, if necessary, the written consent of its senior
lender, The First National Bank of Boston, to the
transactions contemplated hereby.
(i) Other Documents. The Seller shall have delivered
to Purchaser:
(i) the Assignment of its Real Property Lease,
each Assumed Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original
counterpart of the Real Property Lease;
(iv) receipts for the Purchase Price paid to
Seller by Purchaser;
(v) certificates dated no earlier than 30 days prior
to the Closing Date, from appropriate authorities in the
State of its jurisdiction of incorporation, as to the good
standing of such Seller;
(vi) an updated schedule of creditors as of the
Closing Date;
(vii) executed original of each of the Osborn Proxy
Agreement and the Jaro Proxy Agreement, as defined in the
Stockholders Agreement, of event date herewith; and
(viii) all other documents, instruments and
agreements required to be delivered by such Seller to
Purchaser pursuant to this Agreement and the other
Transaction Documents.
(j) Review by Purchaser's Auditor. Purchaser's
auditor shall have:
(i) reviewed the financial and accounting system
of Seller;
(ii) reviewed and confirmed the financial
statements and results set forth in such statements;
(iii) found no objection to the financial and
accounting system of Seller and Purchaser shall have resolved
any objection raised by the auditor and presented to the
Seller by the Purchaser.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing, notwithstanding any investigation
heretofore or hereafter made by or on behalf of any party hereto; provided,
however, that (a) the agreements and covenants (other than the indemnification
provisions set forth in this Article VI, which will survive as provided below)
set forth in this Agreement shall survive and continue until all obligations
set forth therein shall have been performed and satisfied and the applicable
statute of limitations for breaches or defaults of such agreements and
covenants has expired; and (b) all representations and warranties, and the
agreements of Seller and Purchaser to indemnify each other set forth in this
Article VI, shall survive and continue for, and all indemnification claims with
respect thereto shall be made prior to March 31, 1996.
SECTION 6.2 Agreement to Indemnify. Subject to the conditions of this
Article VI:
(a) Purchaser hereby agrees to indemnify, defend and hold
harmless the Seller from and against all demands, claims, actions or
causes of action, assessments, loses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and
reasonably attorney's fees,costs and disbursements and expenses
(collectively, "Damages"), asserted against, resulting to, imposed
upon or incurred by the Seller directly or indirectly, arising out of
or resulting from (i) a breach of any representation, warranty,
covenant or agreement of Purchaser contained in or made pursuant to
this Agreement (including but not limited to enforcement of this
Article VI), the other Transaction Documents or the transactions
contemplated hereby or thereby or any facts or circumstances
constituting such breach; and (ii) any indebtedness, obligation or
liability assumed by Purchaser pursuant to Section 1.1, 1.2(a)(vi)
and 1.4(b) hereof; and (iii) the operation, use or ownership of its
Restaurants, Assets, Real Property Leases, Real Properties, the
Easements and Assumed Contracts, during, or which have otherwise
accrued from or otherwise relate to, the period of time after the
Closing Date; and
(b) Seller agrees to indemnify, defend and hold harmless
Purchaser and its officers, directors and stockholders from and
against all Damages asserted against or incurred by Purchaser or such
officers, directors and stockholders, directly or indirectly, arising
out of or resulting from: (i) a breach of any representation,
warranty, covenant or agreement of the Seller contained in or made
pursuant to this Agreement (including but not limited to enforcement
of this Article VI) the other Transaction Documents or any facts or
circumstances constituting such a breach; (ii) any indebtedness,
obligations or liabilities of the Seller including, but not limited
to, any liability or obligation set forth in Section 1.4(a), and the
tax liabilities set forth in Section 2.17 other than those expressly
assumed by Purchaser hereunder; (iii) a breach of or otherwise arising
under any Environmental Law (whether now or hereafter in effect), to
the extent the same arises out of any condition or state of facts or
otherwise relates to the period of time commencing on the date Seller
was entitled to possession of the Real Property in question and ending
on the Closing Date; (iv) the operation, use or ownership of the
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements and Assumed Contracts during, or which have otherwise
accrued from or otherwise relate to, the period of time prior to the
Closing Date; (v) the Seller's failure to pay and discharge all claims
of creditors which may be asserted against Purchaser by reason of
Purchaser's waiver of compliance by Seller of the Bulk Sales Laws and
(vi) all Damages arising before the Closing and not expressly assumed
in writing by the Purchaser; provided, however, that Seller's
indemnification of Purchaser shall be limited in aggregate amount as
provided in Section 6.5.
SECTION 6.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 6.3 with respect to Damages
for which it must indemnify another party hereunder (collectively, the
"Indemnifiable Claims") shall be subject to the following terms and conditions:
(a) The indemnified party shall give the indemnifying
party notice of any such Indemnifiable Claim which notice shall set
forth in reasonable detail the basis for and amount of the
Indemnifiable Claim, and the circumstances giving rise thereto. If the
Indemnifiable Claim is a third-party Claim, the notice must contain an
copy of any papers served on the indemnified party.
(b) If the Indemnifiable Claim is not a third-party Claim,
unless within 30 days of receipt by the indemnifying party of notice
of the Indemnifiable Claim the indemnifying party sends written notice
to the indemnified party disputing the facts giving rise to the
Indemnifiable Claim or the amount of Damages stated in the notice, the
Damages stated in the notice shall become due and payable upon the
expiration of such 30 day period. If, however, the indemnifying party
disputes the facts giving rise to the Indemnifiable Claim or the
amount of Damages stated in the notice within such 30 day period and
the dispute cannot be resolved within the following 90 days, the
dispute shall be submitted to arbitration under the rules of the
American Arbitration Association in Chicago, Illinois.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own
expense by representatives of its own choosing reasonably satisfactory
to the indemnified party and will consult with the indemnified party
concerning such defense during the course thereof. If the indemnifying
party, within 30 days after receipt of notice of any Indemnifiable
Claim (or such shorter period as is necessary to prevent prejudice to
the indemnified party, if such 30 day period would prejudice the
rights of the indemnified party), fails to defend, the indemnified
party will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such
Indemnifiable Claim on behalf of and for the account and risk of and
at the expense of the indemnifying party. In addition, if there is a
reasonable probability that a third-party Indemnifiable Claim may
materially and adversely affect an indemnified party, the indemnified
party shall have the right, at its own cost and expense, to defend,
compromise or settle such Indemnifiable Claim.
(d) Anything in this Section 6.3 to the contrary
notwithstanding, neither the indemnifying party nor the indemnified
party, as the case may be, may settle or compromise any Indemnifiable
Claim or consent to entry of any judgment in respect thereof, without
the written consent of the other, which consent may not be
unreasonably withheld or delayed.
SECTION 6.4 Remedies Cumulative. The remedies provided in this Article
VI shall be cumulative and shall not preclude the assertion by any party hereto
of any other rights or the seeking of any other remedies against the other
parties hereto.
SECTION 6.5 Indemnity Enforcement. (a) Indemnification Claims shall be
reduced, by and to the extent, that an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result of, and in compensation for, the subject matter of an
indemnification Claim by such indemnitee.
(b) The aggregate value of Purchaser's indemnification claims shall be
limited to the consideration received by the Seller as the Purchase Price for
the Assets and the Purchase Price for the Inventory.
(c) The Purchaser may, in addition to any other rights or remedies
available, set-off any indemnification claims hereunder against any amounts
owing in respect of any of cash paid by the Company as the Purchase Price for
the Assets; provided, however, that this right of set-off must be exercised
against the cash to the extent the Purchase Price for the Assets and for the
Inventory has not been distributed to the Seller's shareholders and limited by
the amount, if any, that the Seller or Seller's Stockholders have paid federal
or state income taxes thereon or any of them have received a notice or claim
assessing additional tax liabilities upon the Seller as a result of
non-compliance with section 351 and the rules regarding the installment note
regulations under the Internal Revenue Code of 1986, as amended.
(d) The personal liability of any shareholder of Seller under this
Article VI shall be limited to the extent such shareholder personally receives
cash delivered by the Company as the Purchase Price, or to the extent such
shareholder acquires such cash subsequent to the Closing in a distribution or
dividend from Seller net of federal and state income taxes as provided in
Section 6.5(c).
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Seller and Purchaser;
(b) By Seller, if (i) there has been a material
misrepresentation or breach of warranty on the part of Purchaser in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Seller; (ii) Purchaser
has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Seller; or (iii) any condition of Seller
obligations hereunder becomes incapable of fulfillment through no
fault of such parties and is not waived by such parties;
(c) By Purchaser, if (i) there has been a material
misrepresentation or breach of warranty on the part of the Seller in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Purchaser; (ii) the
Seller has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Purchaser; or (iii) any condition to Purchaser's
obligations hereunder becomes incapable of fulfillment through no
fault of Purchaser and is not waived by Purchaser;
(d) By Seller, if the Closing shall not have occurred on or
before September 7, 1994; provided that Seller shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
the Seller to fulfill any of its obligations under this Agreement
shall have been the reason that the Closing shall not have occurred on
or before said date;
(e) By Purchaser, if the Closing shall not have occurred on
or before September 7, 1994; provided that Purchaser shall not be
entitled to terminate this Agreement pursuant to this clause if the
failure of Purchaser to fulfill any of its obligations under this
Agreement shall have been the reason that the Closing shall not have
occurred on or before said date; and
(f) By Seller or by Purchaser, if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Purchaser, or any Seller from consummating
the transactions contemplated hereby is entered and such judgment,
injunction, order or decree shall become final and nonappealable.
SECTION 7.2 Effect of Termination; Right to Proceed. In the event that
a party wishes to terminate this Agreement pursuant to Section 7.1, it shall
give written notice thereof whereupon all further obligations of the parties
under the Agreement shall terminate without further liability of any party
hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants and
agreements imposed upon it hereunder; (ii) to the extent that any condition to
a party's obligations hereunder become incapable of fulfillment because of the
breach by a party of its obligations hereunder and (iii) that the agreements
contained in Sections 4.8, 9.3 and 9.4 shall survive the termination hereof. In
the event that a condition precedent to its obligation is not met, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
transactions contemplated hereby. Notwithstanding anything to the contrary
contained herein, no party shall have any obligation to the other hereunder
arising out of the occurrence of an event or circumstance not within the
control of such party which event or circumstance resulted in a representation
or warranty of such party ceasing to be true.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Further Assurances. Each of the parties hereto shall
without further consideration execute and deliver to any other party hereto
such other instruments of transfer and take such other action as any party may
reasonably request to carry out the transactions contemplated by this Agreement
and the other Transaction Documents.
SECTION 8.2 Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 8.3 Remedies. In the event of a default under this Agreement
or the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or other
appropriate proceeding, whether for specific performance, or for an injunction
against a violation of any terms hereof or thereof or in aid of the exercise of
any right, power or remedy granted thereby or by law, equity, statute or
otherwise. The foregoing shall include, but shall not be limited to, allowance
for recovery by the aggrieved party of all of its fees and expenses and
disbursements incurred by it in connection with the transactions contemplated
hereby and in the Transaction Documents, including, without limitation, the
reasonable fees and expenses of its counsel, accountants, agents and
representatives, employed by it. No course of dealing and no delay on the part
of any party in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such party's rights, powers or remedies. No
right, power or remedy conferred hereby shall be exclusive of any other right,
power or remedy referred to herein or now or hereafter available at law, in
equity, by statute, or otherwise.
SECTION 8.4 Expenses. Upon the execution of this Agreement and the
closing of the Company's acquisition of franchises and other assets, rights and
obligations to certain Burger King restaurants in the Chicago area, the
Purchaser will reimburse the Seller for all reasonable expenses incurred by the
Seller in connection with the authorization, preparation and consummation of
this Agreement and the related transactions, including reasonable attorneys'
and accountants' fees; provided, however, that the aggregate amount paid to
Lawrence Jaro and entities related to Lawrence Jaro and William Osborn and
entities related to William Osborn for reimbursement of accountants' fees shall
not exceed $20,000.
SECTION 8.5 Entire Agreement. This Agreement and the other Transaction
Documents and the Exhibits and Schedules referred to herein and therein contain
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior arrangements or understandings with respect
thereto.
SECTION 8.6 Definitions. For the purposes of this
Agreement:
(i) "affiliate" of any person shall mean any corporation,
proprietorship, partnership or business entity which, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled by, such person, and any directors,
officers, partners or 50% or more owners of such person.
(ii) "Affiliate" shall mean with respect to any Person, any
other Person that has a relationship with the designated Person
whereby either of such Persons directly or indirectly controls or is
controlled by or is under common control with the other of such
Persons.
(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iv) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by Seller at the
date of this Agreement and/or the Closing Date, and such business and
operations relating to the Assets and Assumed Contracts. Business.
(v) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(viii) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(ix) "material" means any claim, circumstance or state of
facts which results in, or would reasonably be expected to result in,
losses or the expenditure or commitment of $25,000 or more, or which
results in any material limitation or restriction on the ability of
the Seller or the Purchaser to conduct the Business.
(x) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
(xi) "Order" means any decree, order, injunction,
rule, judgment, consent of or by a U.S. Authority.
(xii) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xiii) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xiv) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the certificate of incorporation and
By-Laws of the Seller, as applicable.
(xv) "Taxes" shall mean all taxes, charges, fees, duties,
levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise,
value added, license, payroll, unemployment, environmental, customs
duties, capital stock, disability, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income
withholding and Social Security taxes imposed by the United States or
any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country or by
any other tax Authority, including all applicable penalties and
interest, and such term shall include any interest, penalties or
additions to tax attributable to such Taxes.
SECTION 8.7 Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
Agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 8.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and delivered personally, sent by telecopier, federal
express or other reputable overnight courier or sent by certified or registered
mail, postage prepaid, return receipt requested, at the addresses set forth
below:
(a) if to Purchaser, to:
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
(b) if to Seller, to:
with a copy to:
William Osborn
Vinton, Slivka & Panasci
c/o Ernest J. Panasci, Esq.
Suite 1100
1600 Stout Street
Denver, Colorado 80202
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 8.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the heirs,
executor, personal representatives, legal representatives, successors and
assigns of the parties hereto, and shall not be assignable by either party
without the prior written consent of the other party; provided, however, that
the Purchaser may assign at Purchaser's sole discretion any or all of its
interest to a lender of Purchaser with written notice to Seller.
SECTION 8.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED
BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS. EACH OF THE PARTIES HERETO
ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED
AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN
ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW
OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR
INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT
JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY
OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE
OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF
SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN
THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS
OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 8.10 SHALL
NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE JURISDICTION.
SECTION 8.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT
TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss. 1 ET
SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
SECTION 8.12 Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 8.13 Purchaser's Designated Affiliate. Purchaser may
designate one or more of its wholly-owned subsidiaries or Affiliates to carry
out all or part of the transactions contemplated hereby to be carried out by
Purchaser, which designation shall not relieve Purchaser of its obligations
hereunder.
SECTION 8.14 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
as of the day first above written.
NRE HOLDINGS, INC.
By:
--------------------
Name:
Title:
OSBURGER, INC.
By:
--------------------
Name:
Title:
PURCHASE AND SALE AGREEMENT
Among
NRE HOLDINGS, INC.
(as Purchaser)
And
WHITE-OSBORN RESTAURANTS, INC.
(as Seller)
Dated as of September 1, 1994
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
PURCHASE AND SALE; CLOSING
1.1 Assets to Be Conveyed................................... 2
1.2 Purchase Price for Assets............................... 3
1.3 Real Properties; Assignments of Leases; Easements
and Parking Agreements................................ 5
1.4 Assumption of Liabilities............................... 5
1.5 Closing; Deliveries..................................... 7
1.6 Adjustments............................................. 7
1.7 Petty Cash.............................................. 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Corporate Power........................ 9
2.2 Governing Instruments................................... 10
2.3 Due Authorization....................................... 10
2.4 No Violation............................................ 10
2.5 Consents................................................ 11
2.6 Financial Statements.................................... 11
2.7 Assets.................................................. 12
2.8 Inventory............................................... 13
2.9 Real Properties; Real Property Leases................... 13
2.10 Franchise Agreements.................................... 15
2.11 Employment Arrangements................................. 15
2.12 Contracts and Arrangements.............................. 16
2.13 ERISA................................................... 17
2.14 Litigation, Compliance with Regulations and Consents.... 18
2.15 Environmental Matters................................... 19
2.16 Insurance Policies...................................... 19
2.17 Tax Returns............................................. 19
2.18 Adverse Restrictions.................................... 20
2.19 Brokers................................................. 20
2.20 Material Information.................................... 20
2.21 Continuing Representations.............................. 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power........................ 21
3.2 Certificate of Incorporation and By-Laws................ 21
3.3 Due Authorization....................................... 21
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<PAGE>
Section Page
3.4 No Violation............................................ 22
3.5 Consents................................................ 22
3.6 Brokers................................................. 22
3.7 Material Information.................................... 22
3.8 Continuing Representations.............................. 23
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior to the Closing
Date................................................... 23
4.2 Operation of the Business of Seller..................... 24
4.3 Supplements to Disclosures.............................. 26
4.4 Computer Software....................................... 26
4.5 No Other Asset Sales.................................... 26
4.6 Regulatory Filing and Consents.......................... 27
4.7 Management Subscription Agreement; Other Actions........ 27
4.8 Announcements; Confidentiality.......................... 27
4.9 Limitation of Seller's Claims After Closing............. 28
4.10 Employee Benefit Matters................................ 29
4.11 Financial Statements and Reports........................ 29
4.12 Bulk Sales.............................................. 30
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Seller and
Purchasers........................................... 30
5.2 Conditions to the Obligations of Seller................. 31
5.3 Conditions to Obligations of Purchaser.................. 32
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations............................. 35
6.2 Agreement to Indemnify.................................. 36
6.3 Conditions of Indemnification........................... 37
6.4 Remedies Cumulative..................................... 38
6.5 Indemnity Enforcement................................... 38
ARTICLE VII
TERMINATION
7.1 Termination............................................. 39
7.2 Effect of Termination; Right to Proceed................. 40
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<PAGE>
Section Page
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances...................................... 41
8.2 Waiver and Amendment.................................... 41
8.3 Remedies................................................ 41
8.4 Expenses................................................ 41
8.5 Entire Agreement........................................ 42
8.6 Definitions............................................. 42
8.7 Interpretation.......................................... 44
8.8 Notices................................................. 44
8.9 Successors and Assigns.................................. 45
8.10 LITIGATION.............................................. 45
8.11 ARBITRATION............................................. 45
8.12 Severability............................................ 46
8.13 Purchaser's Designated Affiliate........................ 46
8.14 Counterparts............................................ 46
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel
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<PAGE>
SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.3(c) Parking and Easements Agreements
1.5(d) Real Property Lease Adjustment Formulae
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
2.14(c) Required Licenses
2.15 Environmental Matters
4.12(b) Creditors Schedule re: Bulk Sales
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<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of
September 1, 1994 by and between NRE HOLDINGS, INC., a Delaware corporation
with its principal office at c/o Jordan Industries, Inc., Suite 550, Arborlake
Center, 1751 Lake Cook Road, Deerfield, Illinois 60015 ("Purchaser") and
WHITE-OSBORN RESTAURANTS, INC. (the "Seller"):
W I T N E S S E T H:
WHEREAS, by subscription agreements dated as of September 1, 1994,
certain investors are receiving voting stock and in conjunction with this
Agreement, voting stock and other classes of securities in exchange for the
sale of assets under this Agreement;
WHEREAS, the subscription agreements contemplate certain proposed
transactions, including the transaction described in this Agreement, which are
to be consummated by the Purchaser promptly upon its capitalization;
WHEREAS, the Seller operates the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, the Seller is the owner or lessee of certain personal
property used or held for use in or in connection with the conduct of business
at its Restaurants and the Seller is the lessee of certain buildings, other
real property and land upon and in which its Restaurants are located
(individually, the "Real Property" and collectively, the "Real Properties"),
the legal description of which is set forth on Schedule B hereto;
WHEREAS, the Seller and Purchaser propose to exchange each of the
Assets (as hereinafter defined) of Seller for securities of the Seller and
other consideration specified below; and
WHEREAS, the Seller that occupies Real Property pursuant to a lease
agreement (each, a "Real Property Lease" and, collectively, the "Real Property
Leases") (each such Real Property Lease, together with all amendments,
supplements, and schedules thereto, being listed on Schedule C hereto)
proposes to assign to National Restaurant Enterprises, Inc., a Delaware
corporation and wholly-owned subsidiary of the Purchaser ("Enterprises"), and
Enterprises proposes to accept such assignment of, the Seller's leasehold
interest with respect to
<PAGE>
the Real Property on which its Restaurants are located (each a "Leased Real
Property" and, collectively, the "Leased Real Properties");
WHEREAS, Purchaser proposes to transfer the Restaurants and Assets
acquired pursuant to this Agreement to Enterprises and to cause Enterprises to
assume the Assumed Contracts (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions
and conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, the Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Seller's
shareholders to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to acquire and accept the
assignment, transfer, conveyance and delivery from the Seller at Closing of,
all of the following assets used or located in or held for use in connection
with the Restaurants operated by the Seller (collectively, the "Assets") free
and clear of all Liens:
(a) Restaurant Equipment. All of the machinery, equipment,
furnishings, supplies, uniforms, spare equipment parts and all other personal
property (other than Inventory, as hereinafter defined) owned by the Seller
and used or held for use in, or in connection with, the operation of its
Restaurants, including but not limited to the assets set forth in Schedule
1.1(a) annexed hereto (collectively, "Restaurant Equipment");
(b) Leasehold Improvements. All trade fixtures, trade
equipment or other personal property placed in the premises by
the Seller or any of the foregoing purchased by the Seller for
its Restaurants, excluding any HVAC system located at the
Restaurants and any built-in freezer located at the Restaurants
("Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise
Agreement for its Restaurants, as more fully set forth in
Schedule 1.1(c) annexed hereto ("Franchise Agreements", all
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<PAGE>
subject to the approval, as necessary, of the Burger King Corporation;
(d) Inventories. All of the food, related paper products and
promotional items owned by the Seller or otherwise used or held for use in or
in connection with the business being conducted at its Restaurants
(collectively, "Inventory"), which, if so directed by Purchaser, Seller shall
sell directly to Enterprises;
(e) Leased Assets. All of the right, title and interest of the Seller
in any item of personal property which is not owned by it but is leased by it
or otherwise is used or held for use, in or in connection with the business
being conducted at its Restaurants, including but not limited to, the assets
set forth on Schedule 1.1(e) annexed hereto (collectively the "Leased
Assets");
(f) Goodwill and Other Intangible Assets. All goodwill,
going concern value, contract rights, customer relationships, and
other general intangibles held or used by Seller in connection
with its business being operated at the Restaurant (collectively
the "Intangible Assets"); and
(g) Miscellaneous Assets. All of the right, title and interest of the
Seller in any other asset or property owned, leased, subleased, used or held
for use in, or in connection with the business being operated at its
Restaurant (collectively, the "Miscellaneous Assets") and excluding, accounts
receivable, cash, cash equivalents or securities held by Seller.
SECTION 1.2 Purchase Price for Assets.
(a) Seller shall exchange the Restaurant Equipment, Leasehold
Improvements and Miscellaneous Assets for the following consideration to be
delivered by the Purchaser:
(i) 75.00 shares of the Purchaser's Class A2
Preferred Stock, $.01 par value per share ("Senior
Preferred");
(ii) 25.00 shares of the Purchaser's Class B Preferred
Stock, $.01 par value per share ("Junior Preferred");
(iii) 33.3637 shares of the Purchaser's Class D Common
Stock, $.01 par value per share.
(b) Seller shall exchange the Leased Assets, Franchise
Agreements and Intangible Assets for the following consideration
to be delivered by the Purchaser:
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<PAGE>
(i) $110,769 in cash;
(ii) $659,231 in principal amount of Purchaser's
12.75% Notes due 2004 ("Notes");
(iii) 22.5 shares of the Senior Preferred; and
(iv) 7.5 shares of the Purchaser's Class B Preferred Stock,
$.01 par value per share.
(c) Seller shall exchange the Inventory for an amount equal to the
cost therefor as charged to the Seller by its unaffiliated supplier or vendor.
At the Closing, Purchaser shall pay to Seller $6000 per Restaurant for the
Inventory of each Restaurant, that sum being Seller's good faith estimate of
the cost of such Inventory (the "Estimated Inventory Price"). The precise
amount of the cost of the Inventory of the Seller shall be determined by
physical inventories to be taken on the Closing Date in its Restaurants and in
any other location where inventory may be located. Seller and Purchaser shall
each have the right to have at least one of its representatives present at the
taking of such inventories. The representatives shall submit a written report
of the results of such inventories promptly after Closing to both the Seller
and Purchaser. Promptly after receiving such report, the Seller shall then
price the inventories shown on such report by multiplying the physical items
by their cost, determined as aforesaid, and the Seller shall submit such
priced inventory report (the "Priced Inventory Report") to Purchaser. If
Purchaser and the Seller are unable to agree upon the purchase price of the
Inventory within 10 days after the Seller and Purchaser have received the
Priced Inventory Report, such purchase price shall be determined by Deloitte &
Touche, whose determination shall be final and binding upon the Seller and
Purchaser. Within 30 days after the final determination of the purchase price
for the Inventory: (A) if it exceeds the Estimated Inventory Price, Purchaser
shall pay the amount of such excess, by check, to the Seller; or (B) if it is
less than the Estimated Inventory Price, Seller shall pay the amount by check
to the Purchaser.
(d) The Seller and Purchaser shall prepare and file their tax returns
and information statements in a manner consistent with the agreement set forth
above.
SECTION 1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements. Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of the representations and warranties
hereinafter set forth, at the Closing, the Seller shall assign to Enterprises
all of its leasehold interest in the Leased Real Properties and shall
assign, sublease or otherwise transfer to Enterprises all of its
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<PAGE>
right, title and interest in and to all parking and other access agreements or
arrangements relating to the Real Properties, as follows:
(a) Assignment of Real Property Leases. At Closing, the Seller shall
assign to Enterprises all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment
and Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A.
The Lease Assignment shall be executed and delivered at Closing by the Seller
and Enterprises.
(b) Lease Assignment Consent. At Closing, the Seller shall deliver to
Enterprises a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the
last sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c)
annexed hereto, with respect to the Seller, sets forth all written or oral
parking leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements"), except for
recorded instruments, pursuant to which the Seller is granted, for use in
connection with its Restaurant, parking privileges or rights, current or
prospective, and/or rights of access of any kind or nature in and to the
applicable Real Property. At Closing the Seller shall deliver to Purchaser
such documentation in form and substance reasonably satisfactory to Purchaser
and its counsel which effectively assigns or transfers the Seller's rights
under both recorded and unrecorded Easements to Enterprises (hereinafter
individually referred to as an "Easement Assignment", and, collectively, as
the "Easement Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby agree and
acknowledge that the Seller is not selling, transferring, assigning,
delivering or otherwise conveying, and Purchaser is not purchasing, receiving,
acquiring or otherwise assuming, any liabilities of the Seller, or any of its
respective Affiliates except as specifically set forth in Sections 1.1,
1.2(a)(vi) and 1.4(b) hereof. Purchaser shall neither be liable for any
liability or obligation of the Seller, or any of its respective Affiliates nor
shall it be required to indemnify the Seller, or any of its respective
Affiliates against any liability or obligation other than those so
specifically assumed or indemnified, as the case may be.
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Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify the Seller, or any of its respective
Affiliates against any liability, obligation, duty or responsibility of the
Seller, or any of its respective Affiliates:
(i) arising from, or out of, the ownership or operations or
use of, or incurred in connection with, or incurred as a result of
any claim made against the Seller, or any of its respective
Affiliates in connection with, any Restaurant, Asset, Real Property,
Real Property Lease or Assumed Contract (as hereinafter defined) on
or prior to, or relating to any time period prior to 6:00 A.M. on the
Closing Date;
(ii) arising from or by reason of the transactions
contemplated by this Agreement including, but not limited to,
Federal, state or local income taxes, transfer taxes, sales taxes and
other taxes, if any, arising from or by reason of the receipt of the
consideration for the Assets to be transferred pursuant hereto except
as provided in Section 1.6(b);
(iii) with respect to any wages, vacation, compensation,
severance or sick pay or any rights under any stock option, bonus or
other incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or
similar arrangement to which the Seller is a party or for
which the Seller is responsible;
(v) with respect to any "employee benefit plan" as defined
in Section 3(3) of Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), including multi-employer plans as defined in
Section 3(37) of ERISA whether arising before, on or after the
Closing Date; or
(vi) under any Regulations (as hereinafter defined) relating
to public health and safety and pollution or protection of the
environment, including, without limitation, those relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants or hazardous or toxic materials or wastes or any
materials defined or categorized by any of the above as "Hazardous
Materials", "Hazardous Substances", or
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similar or related designations (collectively referred to herein as
"Environmental Laws"); or
(vii) with respect to any causes of action, judgements,
claims or demands related to any occurrence, action or omission by
the Seller, whether through negligence or otherwise, occurring before
the Closing.
(b) Assumption of Assumed Contracts. The Seller shall assign to, and
Enterprises shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of the Seller
attributable to the period after 6:00 a.m. the Closing Date, under the
Franchise Agreements, Real Property Leases, Easements, Leased Assets and the
Other Contracts (as hereinafter defined) (collectively, the "Assumed
Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 190 S.
LaSalle Street, Chicago, Illinois 60603- 3441 (or such other location as shall
be agreed upon by the parties) on September 1, 1994, provided, however, that
if, through no fault of the parties hereto, all of the conditions to the
parties' obligations to close hereunder are not satisfied or waived on the
date so designated, the Closing shall be adjourned to a subsequent mutually
agreeable date not later than September 7, 1994, unless further extended by
mutual agreement by the parties. The "Closing Date" is the date Closing
actually takes place.
(b) Delivery of Documents. At the Closing, Seller and Purchaser shall
deliver to each other the respective documents and other items set forth in
Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to
(i) obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Seller or by
the Seller to Purchaser by reason of such adjustments shall be made at the
Closing (by adjustment of the Purchase Price, if practicable) or as soon as
reasonably practicable thereafter.
(b) The parties shall share equally in the payment of all sales
taxes, and transfer taxes, if any, applicable to its transaction at the
Closing. Purchaser and Seller shall share equally all franchise assignment
fees to Burger King Corporation ("Burger King") in connection with the
assignment of the Franchise Agreements to Purchaser.
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(c) The parties shall share equally the cost of Purchaser's obtaining
prior to Closing, if necessary in Purchaser's reasonable judgment, a "Phase 1"
and, if applicable, a "Phase 2" environmental report. Any such reports or
studies prepared or obtained by the Seller prior to negotiations between
Purchaser and the Seller shall be borne by the Seller. At Closing, if
necessary, the parties shall adjust the cost of obtaining said environmental
reports.
(d) All "minimum" or "fixed rentals" and any other monetary
obligations accruing under the Real Property Leases shall be adjusted for the
month in which the Closing occurs. In the event the period used in computing
and/or adjusting percentage rental (hereinafter referred to as the "Adjustment
Lease Year") under any of the Real Property Leases commences before the
Closing Date and ends after the Closing Date, such percentage rental shall be
adjusted at the end of the Adjustment Lease Year for such Real Property Leases
so affected as follows:
(i) Seller shall be required to pay to Purchaser, within 30
days after the expiration of the Adjustment Lease Year, an amount
equal to the lesser of (1) the amount of percentage rental due for
such Adjustment Lease Year or (2) the "Percentage Rent Contribution"
determined by the following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used
in determining such percentage rental
during such Adjustment Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.6(d);
C = Number of days during the Adjustment Lease
Year prior to, but not including, the Closing
Date; and
D = Percentage rent factor for such Real Property
Lease as indicated in Schedule 1.6(d);
provided, however, that, in the event the above formula yields a
negative amount as the Percentage Rent Contribution, the Percentage
Rent Contribution shall be deemed equal to zero; and
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(ii) Purchaser shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental, if any,
due for the Adjustment Lease Year.
Section 1.7 Petty Cash. Upon the Closing, the Seller shall leave
$1,000.00 in cash at each Restaurant (the "Store Bank"). Purchaser agrees to
purchase each Store Bank separately from the Purchase Price at Closing on a
cash for cash basis.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with
Purchaser as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is a
corporation duly organized, validly existing and in good standing under the
Regulations of its jurisdiction of incorporation (as set forth on Schedule A
hereto) and is duly qualified and licensed to do business in such jurisdiction
which is the only jurisdiction wherein the character of the Real Properties
and other Assets owned or leased or the nature of the business of the Seller
makes such licensing or qualification to do business necessary. The Seller has
full power and authority (corporate or otherwise) to own its assets, to own or
hold under lease the real property it presently owns or holds under lease
including, without limitation, the Real Properties, and to carry on the
business in which it is engaged at all locations at which it is presently
located including, without limitation, operation of the Restaurants at the
Real Properties and to execute and deliver this Agreement and the other
documents and instruments to be executed and delivered by the Seller, as the
case may be, pursuant hereto or in connection herewith (this Agreement and all
other agreements, documents and instruments to be entered into pursuant to
this Agreement or in connection herewith including all exhibits and schedules
annexed hereto and thereto are collectively referred to herein as the
"Transaction Documents") and to consummate the transactions contemplated
hereby and thereby.
SECTION 2.2 Governing Instruments. The copies of the Certificate of
Incorporation and By-Laws of the Seller, and all amendments thereto to date,
as certified by the Secretary of Seller have heretofore been delivered to
Purchaser by Seller, and are complete and correct as of the Closing Date. The
Seller is not in default in the performance, observance or fulfillment of any
of the provisions, terms or conditions of its Certificate of Incorporation or
By-Laws.
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SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other
Transaction Documents by the Seller have been duly obtained. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors and stockholders of the Seller, and
no other acts or proceedings on the part of the Seller or the stockholders of
the Seller are necessary to authorize the execution and delivery of this
Agreement or any of the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby. This Agreement and each of the
other Transaction Documents, upon execution and delivery by the Seller, will
be the legal, valid and binding obligation of the Seller enforceable against
it in accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency and other laws affecting creditors' rights
(collectively, "Bankruptcy Laws") and subject to general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and
thereby, do not, and at Closing will not: (a) violate its Certificate of
Incorporation or By-Laws, as amended; (b) violate or conflict with or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under any agreement, indenture, instrument
or understanding to which the Seller is a party or by which it is bound; (c)
violate any judgment, decree, law, rule or regulation to which the Seller is a
party or by which it is bound; (d) result in the creation of, or give any
party the right to create, any encumbrance upon the property and assets of the
Seller; (e) terminate or modify, or give any third party the right to
terminate or modify, the provisions or terms of any agreement or commitment to
which the Seller is a party or by which the Seller is subject or bound; or (f)
result in any suspension, revocation, impairment, forfeiture or non-renewal of
any permit, license, qualification, authorization or approval applicable to
the Seller.
SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals or other authorizations which the Seller is required to obtain from,
and any filing which the Seller is required to make with, any governmental
authority or agency or any other Person including, but not limited to,
consents required from Burger King (the "Burger King Consents") in connection
with the execution, delivery and consummation of this Agreement and
the other Transaction Documents and the consummation of the
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transactions contemplated hereby or thereby (collectively, the "Required
Consents").
SECTION 2.6 Financial Statements. (a) The Seller has delivered to
Purchaser a balance sheet of the Business as at December 31, 1993 and December
31, 1992 and the related results of operations for the 12 months ended
December 31, 1993 and 1992, respectively. The Seller has delivered to
Purchaser unaudited monthly financial statements for the period from January
1, 1994 through July 31, 1994.
(b) The financial statements of the Seller referred to in Section
2.6(a) (collectively, the "Financial Statements") are true, correct and
complete, are based on Seller's books and records, have been prepared in
accordance with generally accepted accounting principles consistently applied
and accurately present the assets, liabilities, financial positions and
results of operations of the Seller as at the dates thereof and for the
periods covered thereby; provided, however, that (i) monthly financial
statements shall not be required to reflect standard year-end adjustments and
reserves, and (ii) monthly financial statements may be prepared other than in
accordance with generally accepted accounting principles to the extent that
such financial statements shall not be required to reflect standard year-end
adjustments, or contingent liabilities. The Financial Statements of the Seller
reflect or provide for all material claims against, and all debts and
liabilities (of any kind or nature) of, such Seller, fixed or contingent, as
at the dates thereof and for the periods covered thereby, and the Seller does
not know of any basis for the assertion against it of any liability or
obligation of any nature whatsoever, not fully reflected or reserved against
in such Financial Statements. There has not been any Material Adverse Change
between the date of the Financial Statements and the date of this Agreement
and, except as set forth in Schedule 2.6(b), no fact or condition exists or is
contemplated or threatened which might cause any such Material Adverse Change
at any time in the future.
Without limiting the foregoing, since December 31, 1993:
(i) None of the Restaurants, Assets, Real Properties, Real
Property Leases, Assumed Contracts, financial or other condition, or
results of operations of the Seller, has been adversely affected in
any material way as a result of any fire, explosion, accident,
casualty, labor disturbance, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or public
enemy, or cessation, interruption or diminution of operations, or any
other event, whether or not covered by insurance;
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(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under
Contracts entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii) annexed
hereto, the Seller has not permitted nor allowed any of its Real
Property Leases or Assets, of or used by it to be mortgaged, pledged
or subjected to any Lien;
(iv) Except for transactions among Affiliates, the Seller
has not paid, loaned or advanced any amounts to, or sold,
transferred, leased, subleased or licensed any Real Properties or
Assets to, or entered into any agreement, or arrangements with, any
Affiliate or associate (and any of such transactions shall have been
terminated on or before the Closing Date); and
(v) The Seller has not agreed, whether in writing or
otherwise, to do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to
Purchaser at Closing, good and marketable title to all of its Assets and
Assumed Contracts free and clear of all Liens. The Assets of the Seller
include all of the operating assets used or held for use in or in connection
with the business being conducted by the Seller at the Restaurants. All the
Assets are, and on the Closing Date will be, in good operating condition and
repair, capable of performing the functions for which such items are currently
and normally used, normal wear and tear excepted. All the Assets conform, and
on the Closing Date will conform, to the standards of Burger King under the
terms and conditions set forth in the applicable Franchise Agreements. On the
Closing Date, each Restaurant, together with its related Assets and Real
Property, taken as a whole, will constitute a fully operable "turn-key" Burger
King restaurant sufficient to permit Purchaser to immediately operate the
business at such Restaurant as presently being conducted therein.
(b) The Seller will transfer and/or assign to Purchaser at Closing
all warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller consists, and at
Closing will consist, of items of quality and quantity usable or salable in
the ordinary course of business. The present quality and quantities of all
Inventory of the Seller are, and the qualities and quantities of all Inventory
outstanding at the Closing will be, reasonable in accordance with the current
specifications of Burger King. At Closing, the Inventory at each Restaurant
shall be sufficient for the
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operation of such Restaurant for at least 48 hours after the Closing Date, and
in no event will there be excess inventory in relation to normal usage.
SECTION 2.9 Real Properties; Real Property Leases. (a) With respect
to Real Properties that are owned by Persons not affiliated with the Seller,
to the knowledge of the Seller, each of such owners has good record and
marketable title in fee simple to such real property.
(b) The Seller has delivered to Purchaser a true and complete copy of
the Real Property Leases applicable to it, together with all amendments
thereto and all such Real Property Leases with such amendments or supplements
being listed and set forth on Schedule C. The Seller does not have knowledge
or information of any facts, circumstances or conditions which do or would in
any way adversely affect the Leased Real Property or the operation thereof or
the business thereon as presently conducted or as intended to be conducted. At
or prior to Closing, the Seller shall cause to be discharged of record all
Liens against the Seller or such Seller's interest affecting its Leased Real
Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(b), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(c) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real Properties
by Seller are in substantial compliance with all Regulations. Set forth on
Schedule 2.9(c) annexed hereto is a true and complete schedule of each
certificate of occupancy for each Restaurant located on the Real Properties,
copies of which certificates of occupancy and all amendments thereto to date
have heretofore been delivered to Purchaser, and which copies are complete and
correct as of the date of this Agreement and will be complete and correct as
of the Closing Date. The Real Properties and the Restaurants located thereon
are in a state of good maintenance and repair and are in good operating
condition, normal wear and tear excepted, and (i) there are no physical or
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mechanical defects to the Seller's knowledge in any of the Real Properties or
Restaurants, including, without limitation, the structural portions of the
Real Properties and Restaurants and the plumbing, heating, air conditioning,
electrical, mechanical, life safety and other systems therein and all such
systems are in good operating condition and repair (normal wear and tear
excepted); and (ii) there are no ongoing repairs to the Real Properties or
Restaurants located thereon being made by or on behalf of any Sellar or being
made by or on behalf of any landlord. All necessary occupancy and other
certificates and Permits, municipal and otherwise, for the lawful use and
occupancy of the Real Properties for the purposes for which they are intended
and to which they are presently devoted including, without limitation, for the
operation of a Burger King restaurant thereon, have been issued and remain
valid. There are no pending or threatened actions or proceedings that might
prohibit, restrict or impair such use and occupancy or result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such
certificates or Permits. All notes or notices of violation of any Regulations,
against or affecting any such Real Properties have been complied with. There
are no outstanding correcting work orders issued to the Seller from any
Federal, State, county, municipal or local government, or the owner of the
Real Properties or any insurance company with respect to any such Real
Properties.
(d) There are no condemnation or eminent domain proceedings of any
kind whatsoever or proceedings of any other kind whatsoever for the taking of
the whole or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of the Seller, threatened against the Real
Properties.
(e) The Real Properties and all improvements thereon represent all of
the locations at which the Seller conducts Business and are, now, and at
Closing will be, the only locations where any of the Assets are or will be
located.
(f) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any Law or by the normal use
and operation of the Real Properties and the Restaurants located thereon are
installed to the property lines of the respective Real Properties, to the
knowledge of the Seller are connected pursuant to valid Permits, are fully
operable and are adequate to service the Real Properties and the Restaurants
located thereon and to permit full compliance with all Regulations and normal
utilization of the Real Properties and the Restaurants located thereon.
(g) To Seller's knowledge, all licenses, Permits,
certificates, including, without limitation, proof of dedication,
required from all Authorities having jurisdiction over the Real
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Properties, and from any other Persons, for the normal use and operation of
the Real Properties and the Restaurants located thereon and to ensure
vehicular and pedestrian ingress to and egress from the Real Properties and
the Restaurants located thereon have been obtained. To Seller's knowledge the
Easements are valid and binding, in full force and effect and enforceable in
accordance with their respective terms. There are no defaults or offsets which
the owner of such recorded Easements has against the enforcement of such
Easements and neither the Seller nor the owners of the Easements are in
default under such Easements, nor have any events under such Easements
occurred which with notice or the passage of time or both, would constitute a
default under such Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to
Purchaser a true, complete and correct copy of the Franchise Agreement
relating to its Restaurant, including any and all amendments thereto. The
Seller or its Stockholders own, and at Closing will transfer to Purchaser, its
respective right, title and interest in its Franchise Agreement, free and
clear of all Liens. Subject to the written consent of Burger King, in form
satisfactory to Purchaser and its counsel, which the Seller shall obtain and
deliver to Purchaser and its counsel at or prior to the Closing, the Seller
has the absolute right and authority to sell, assign, transfer and convey its
Franchise Agreement and all other assets being sold or otherwise conveyed to
Purchaser in connection with the Restaurant which it operates in accordance
with the terms and conditions hereof, and there have not been and, except as
set forth on Schedule 2.10, currently there are no claims and the Seller is
not aware of any threatened claims with Burger King pertaining to the
Franchise Agreements. On the Closing Date, neither Burger King nor the Seller
shall be in default under any of the Franchise Agreements and the Franchise
Agreements shall be in full force and effect, the Seller shall not have
received any notice of violation with respect to the Franchise Agreements, and
the Seller does not know or has no reason to know of any event which would
give rise to a violation or default under the Franchise Agreements.
SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor
agreement, any agreement containing severance or termination pay arrangements,
deferred compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other
employee or fringe benefit plan, including vacation plans or programs and
sick leave plans or programs. Except as set forth on Schedule
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2.11(a) hereof, within the last five (5) years the Seller has not experienced
any labor disputes, union organization attempts or any work stoppage due to
labor disagreements. Except as set forth on Schedule 2.11(a) hereof, (i) to
the best knowledge of the Seller, the Seller is in substantial compliance with
all applicable Regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours, and is not engaged in
any unfair labor practice; (ii) there is no unfair labor practice, charge or
complaint against the Seller pending or threatened before the National Labor
Relations Board; (iii) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against or
affecting the Seller; (iv) no question concerning representation has been
raised or is threatened respecting the employees of the Seller; and (v) no
grievance which might have an adverse effect on the Seller or the conduct of
its business nor any arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claims therefor exist.
Schedule 2.11(b) sets forth a true and complete list of the names of
all persons employed by the Seller at the Restaurants as of the date hereof,
and the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), the Seller does not have any Contract
relating to the Restaurants, Assets or Real Properties, including, without
limiting the generality of the foregoing, any (i) Contract for the purchase or
sale of Inventory; (ii) Contract for the purchase or sale of supplies,
services or other items; (iii) Contract for the purchase, sale or lease of any
Restaurant Equipment; (iv) Franchise Agreement or license agreement; and (v)
employment or consulting agreement or pension, disability, profit sharing,
bonus, incentive, insurance, retirement or other employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and
correct copy of each Other Contract applicable to it, together with all
amendments (if oral, a written description of the terms thereof) thereto.
(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of
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the scheduled term thereof or has knowledge of the intent of a party to any
such Other Contract to do the same, nor has any event occurred which, with
notice or the passage of time or both, would constitute a default under any
such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither
the Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14)
and (b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986,
as amended (the "Code")) (collectively, the "Group") presently has or at any
time during the five (5) years before the date of this Agreement had an
obligation to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee
welfare benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA
Plans"). Each ERISA Plan that is an employee pension plan complies in form and
operation with all applicable requirements of section 401(a) and 501(a) of the
Code and each ERISA Plan that is a group health plan (as defined in ERISA
section 607(1) or Code section 4980B(g)(B) has been operated in compliance
with applicable law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not
constitute an "employee benefit plan" as defined in ERISA section 3(3)
(collectively, "Fringe Benefit Plans") currently maintained by the Seller or
to which the Seller has an obligation to contribute. Seller has delivered or
made available to Purchaser true and complete copies of all documents, as they
may have been amended to the date hereof, embodying or relating to the ERISA
Plans or Fringe Benefits Plans.
(c) There are no actions, audits, suits, or claims pending (other
than routine claims for benefits) or, to the knowledge of the Seller,
threatened, against any ERISA Plan or Fringe Benefit Plan or any fiduciary of
any such Plan or against the assets of any such Plan.
(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether
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insured or self-insured) or other employee welfare benefit plan maintained by
the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents.
(a) Except as set forth on Schedule 2.14(a) and except for workers'
compensation or similar claims, there are no claims now pending, or to the
best knowledge of the Seller, in prospect or threatened against, the Seller or
any of its respective officers, directors or partners, at law or in equity
including, without limitation, (i) any voluntary or involuntary proceedings
under Bankruptcy Laws, or (ii) any Action before or by any governmental
instrumentality (domestic or foreign) or arbitrator which involves a claim or
demand for any judgment, decree, liability, action or injunction enjoining an
action, whether or not fully covered by insurance, in connection with the
Assets, Real Property Leases, Assumed Contracts, Real Properties, Restaurants,
business, affairs, properties or assets of the Seller.
(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in substantial compliance
in all respects with all Regulations applicable to its Business, affairs,
properties, or assets. Neither the Seller, nor any officer, director or
authorized agent of the Seller is in default with respect to, and has not been
charged or to its knowledge threatened with, nor is under investigation with
respect to, any violation of any Regulations relating to any aspect of its
Business, affairs, properties or assets including, but not limited to, the
Restaurants, Assets, Real Property Leases, Assumed Contracts, and the Real
Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
Permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the
Assets, Real Property Leases or the Real Properties ("Required Licenses").
Except as set forth in Schedule 2.14(c), the Seller has obtained each of the
Required Licenses and each such Required License, is and on the Closing Date
will be, validly issued and in full force and effect and there are not now
and, at Closing shall not be any claims pending, and to the Seller's
knowledge, any claims in prospect or threatened, challenging the Required
Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in Schedule
2.15 annexed hereto: (i) the Seller has obtained all Licenses which are
required under any Environmental Laws; (ii) to Seller's knowledge, the Seller
is in substantial compliance with all terms and conditions of the Required
Licenses and is also in substantial compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
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schedules and timetables contained in any Environmental Laws or code, plan,
order, decree or judgment relating to public health and safety and pollution
or protection of the environment or any notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) there are no claims,
pending or to Seller's knowledge threatened, against the Seller relating in
any way to any Environmental Law or any Regulation, notice or demand letter
issued, entered, promulgated or approved thereunder; and (iv) the Seller does
not know or have any reason to know of, nor has the Seller received any notice
of any facts, events or conditions which would interfere with or prevent
continued compliance with, or give rise to any common law or legal liability
under any Environmental Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily
insured against by reputable companies in the same or similar business, of
such types and in such amounts (with such deductible amounts) as is customary
for such companies under similar circumstances. All of the applicable
insurance policies are valid and enforceable and in full force and effect and
will be continued in full force and effect up to and including the Closing
Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income tax
returns and all state and local income, franchise and sales tax returns and
all and any other tax return which was required to be filed as of the date of
this Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. The
provision for Taxes shown on the Financial Statements of the Seller was
sufficient to satisfy all taxes due and all assessments received by the Seller
(and all other entities included within the Financial Statements) for all
periods ended on or prior to the date of such Financial Statements. As of the
date hereof, no Taxes are past due, and no Taxes are unpaid and all current
payroll taxes have been paid. The Seller is not aware of any basis upon which
any assessment of additional Taxes could be made, and the Seller has not
signed any extension agreement with the Internal Revenue Service or any other
governmental agency or given waiver of a statute of limitations with respect
to the payment of Taxes for periods for which the statute of limitations has
not expired. The Seller shall be liable for all tax liabilities in connection
with the operation of the Restaurants, the Assets, the Real Properties, the
Real Property Leases, the Easements and Assumed Contracts, which cover periods
prior to the Closing Date. The Seller shall be liable for half of all
transfer, sales and similar tax liabilities, if any, in connection with the
leasing of the Real Properties
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under the Real Property Leases, the assignment of the Real Property Leases and
the Assumed Contracts, and the transfer of any rights under the Easements. All
taxes which the Seller is required by law to withhold or collect have been
duly withheld or collected and to the extent required have been paid over to
the proper governmental authorities on a timely basis or reflected as an
obligation on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, By-Law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or Assumed Contracts. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereunder and thereby will not
result in the violation or breach of, default or the creation of any Lien
under any of the aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the
transactions contemplated by this Agreement or the other Transaction
Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be
stated herein or therein or which is necessary to make the statements herein
or therein not misleading. There is no fact which the Seller has not disclosed
to Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Seller that:
SECTION 3.1 Organization and Corporate Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified and licensed to do
business wherein the character of the Real Properties and other Assets to be
purchased makes such licensing or qualification to do business necessary.
Purchaser has full power and authority (corporate and other) to own or hold
under lease its properties and assets, and execute and deliver this Agreement
and the other Transaction Documents to be executed and delivered by Purchaser
pursuant hereto or in connection herewith and to consummate the transactions
contemplated hereby and thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Seller by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance
or fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The
execution and delivery of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Board of Directors of Purchaser and no other
corporate acts or proceedings on the part of Purchaser or its stockholders are
necessary to authorize the execution and delivery of this Agreement or any of
the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by Purchaser, will be the
legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforcement thereof may be
limited by Bankruptcy Laws and subject to the general principles of equity
affecting the right to specific performance and injunctive relief.
SECTION 3.4 No Violation. The execution, delivery and
performance of this Agreement and the other Transaction Documents
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by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby and thereby do not and at Closing will not (a) violate its
Certificate of Incorporation or By-Laws; (b) violate or conflict with or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under any agreement, indenture, instrument or
understanding to which Purchaser is a party or by which it is bound; (c)
violate any judgement decree, law, rule, or regulation to which Purchaser is a
party or by which it is bound; (d) result in the creation of, or give any
party the right to create any encumbrance upon the property or assets of
Purchaser; (e) terminate or modify, or give any third party the right to
terminate or modify, the provisions or terms of any agreement or commitment to
which Purchaser is a party or by which Purchaser is subject or bound; or (f)
result in any suspension, revocation, impairment, forfeiture or non-renewal of
any license, qualification, authorization or approval applicable to Purchaser.
SECTION 3.5 Consents. Except for the Burger King Consents and the
consent of The First National Bank of Boston (Purchaser's senior lender),
Purchaser is not required to obtain any consents, approvals or other
authorizations or to make any filing with any Authority or any other Person in
connection with the execution, delivery and consummation of this Agreement and
other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 3.6 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee is due to any party in connection with the
transactions contemplated by this Agreement or the other Transaction
Documents.
SECTION 3.7 Material Information. This Agreement, the other
Transaction Documents and any exhibit, schedule, certificate or other
information representation, warranty or other document furnished or to be
furnished by Purchaser to Seller do not (a) contain, nor will the same
contain, any untrue statement of a material fact; or (b) omit, nor will the
same omit or fail to state, a material fact required to be stated herein or
therein or which is necessary to make the statements herein or therein not
misleading. There is no fact which the Purchaser has not disclosed to Seller
and its counsel in writing and of which the Purchaser is aware which
materially and adversely affects or could adversely affect the Business
prospects, financial condition, operations, property or affairs of the
Restaurants.
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SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as
of the Closing Date with the same force and effect as if made on and as of
that date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing
Date. (a) Between the date of this Agreement and the Closing Date, the Seller
shall give Purchaser, its directors, officers, employees, accountants, counsel
and other representatives and agents ("Representatives") reasonable access to
the premises, properties, books, financial statements, Contracts, records of
the Seller, relating to the Business, the Restaurants, the Assets, Real
Properties, Real Property Leases, the Easements and Assumed Contracts, and
shall furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of the Seller as
Purchaser shall from time to time reasonably request for such purposes as
Purchaser shall require. Any such investigation or examination shall be
conducted as reasonable times and upon reasonable notice to the Seller.
(b) Without in any way limiting the provisions of Section 4.1(a)
hereof, Purchaser shall have the right between the date of this Agreement and
the Closing Date at such time or times as Purchaser reasonably may request (i)
to have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or
other wood-destroying organism present in the Real Properties or Restaurants,
or any damage from prior termites or other wooddestroying organism, and the
Seller will assign to Purchaser at Closing all rights under existing contracts
and policies, if any, with the Seller's exterminating company; and (ii) to
have conducted any environmental audits or studies of the Restaurant, the Real
Property and the Assets, including a "Phase I" and, if the results of such
Phase I so recommends, a "Phase II" environmental study. Notwithstanding
inspections, audits or other studies undertaken by or on behalf of Purchaser
hereunder or any other due diligence investigation undertaken by or on behalf
of Purchaser, Seller shall not be relieved in any way of responsibility for
its warranties, representations and covenants set forth in this Agreement.
SECTION 4.2 Operation of the Business of Seller. Between the date of
this Agreement and the Closing Date, the Seller shall conduct the operation of
its Restaurants in the ordinary and usual course of business, consistent with
past practices and will
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use its best efforts to preserve intact the present business organization with
respect to its Restaurants, to keep available the services of its officers and
employees and to maintain satisfactory relationships with landlords,
franchisors, dealers, licensors, licensees, suppliers, contractors,
distributors, customers and others having business relations with it and its
Restaurants and will maintain its Restaurants, Real Properties, and Assets in
a condition conducive to the operation of the business currently carried on
therein.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, the Seller will not:
(a) Keep and maintain its books of account and records other
that in accordance with generally accepted accounting principles
consistent with past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of
the employees at any of the Restaurants other than in the ordinary
course of business, consistent with past practices; (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit
not required or permitted by any Welfare Plan, whether past or
present; or (iii) commit itself in relation to its Restaurants, the
employees at its Restaurant or the Real Properties, to any new or
renewed Welfare Plan with or for the benefit of any Person, or to
amend any of such Welfare Plans or any of such agreements in
existence on the date hereof;
(d) Fail promptly to notify Purchaser of any unusual
developments with respect to its Restaurants, Assets, Real
Properties, Real Property Leases, the Easements, Assumed Contracts or
otherwise in connection with its business;
(e) Permit any of its insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies are in full force and effect providing coverage,
in form, substance and amount equal to or greater than the coverage
under those canceled, terminated or lapsed for substantially similar
premiums;
(f) Amend or terminate its Real Property Leases, or sell,
transfer, mortgage or otherwise dispose of or encumber, or agree to
sell, transfer, mortgage or otherwise dispose of or encumber, its
Real Property Leases, the
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Easements or, except in the ordinary course of business, any of the
Assets or Assumed Contracts; (g) Allow to occur any default or
breach, or event which with the lapse of time or giving of notice, or
both, would constitute a default or breach under its Real Property
Leases, the Easements, its Franchise Agreement or any of the other
Assumed Contracts;
(h) Enter into any other Contracts whether written or oral
which, individual or in the aggregate, would be material to its
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements or the Assumed Contracts, except Contracts for the
purchase, sale or lease of goods or services in the ordinary course
of business consistent with past practice and not in excess of
current requirements, or otherwise make any material change in the
conduct of the businesses or operations of the Seller;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the
other Transaction Documents;
(j) Take any action which would result in any of the
representations or warranties contained in this Agreement or the
other Transaction Documents not being true at and as of the time
immediately after such action at and as of the Closing Date, or in
any of the covenants contained in this Agreement or other Transaction
Documents becoming unperformable or which could have a Material
Adverse Effect on the transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain
and keep its Restaurant, Assets and Real Properties in at least the
same condition and order as exists on the date hereof, reasonable
wear and tear excepted, and fail to perform repairs and maintenance
usual and customary in the ordinary course of business;
(l) Enter into any lease, sublease, license or any other
occupancy agreement, amend or terminate the Easements, the Real
Property Leases, or enter into, amend or terminate any Franchise
Agreement, or other Contract with respect to its Restaurants and Real
Properties;
(m) Take any action or allow to occur any event which with
the lapse of time or giving of notice, or both, would allow to lapse
any of the Licenses;
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(n) Operate its Restaurants or otherwise engage in any
practices which would materially affect sales at its
Restaurant; or
(o) Agree (in writing or otherwise) to do any of the
foregoing.
SECTION 4.3 Supplements to Disclosures. Prior to the Closing Date,
the Seller will promptly supplement or amend the information set forth herein
and in the Schedules and Exhibits referred to herein with respect to any
matter hereafter arising which, if existing or occurring at or prior to the
date of this Agreement, would have been required to be set forth or described
herein or in a Schedule or Exhibit or which is necessary to correct any
information herein or in a Schedule or Exhibit or in any representation and
warranty, which has been rendered inaccurate thereby.
SECTION 4.4 Computer Software. The Seller shall provide Purchaser
with computer readable software in a form and language that Franchise Service
Options can use and manipulate, which software shall be used to manage the
Restaurants, including (i) payroll and compensation systems and (ii) sales
reports of the Restaurants on a "restaurant by restaurant" and "day by day"
basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the
Closing Date, the Seller shall not, directly or indirectly and whether by
means of a sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or
enter into any Contract to sell, transfer, assign or dispose, of the
Assets or any interest therein, except for normal operations in the
ordinary course of business; or
(b) encourage, initiate or solicit any inquiries or
proposals by, or engage in any discussions or negotiations with, or
furnish any non-public information to, any Person concerning any such
transaction and the Seller shall promptly communicate to Purchaser
the substance of any inquiry or proposal concerning any such
transaction which may be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof
until the Closing Date, each of the parties hereto shall furnish to the other
party hereto such necessary information and reasonable assistance as such
other party may reasonably request in connection with its preparation of
necessary filings or submissions to any governmental agency and the Seller
shall use its best efforts to obtain all Licenses and Required Consents
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from third parties necessary to consummate the transactions contemplated by
this Agreement and the other Transaction Documents. Each party shall furnish
to the other copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Purchaser, Seller or
any of their respective representatives and agents, on the one hand, and any
government agency or authority or third party, on the other hand, with respect
to this Agreement and the other Transaction Documents and transactions
contemplated hereby and thereby.
SECTION 4.7 Management Subscription Agreement; Other Actions. On or
before the Closing in connection with exchanging the Assets for the Class D
Common Stock, the Senior Preferred, the Junior Preferred and the Notes of the
Purchaser (the "Securities") the Seller and William Osborn shall execute and
deliver a counterpart of the Management Subscription Agreement of even date
herewith by and among the Seller and William Osborn, the Purchaser and other
Management Investors (as defined therein), and shall have taken all other
actions and executed and delivered all other agreements and documents
necessary for a valid placement of the Securities by the Purchaser with the
Seller, William Osborn and the other Management Investors.
SECTION 4.8 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by Law, no announcement of the
existence or terms of this Agreement or the other Transaction Documents or the
transactions contemplated hereby and thereby shall be made publicly or to the
employees or customers of Seller, by any party to this Agreement or any of its
respective Representatives without the advanced written approval of the other
parties.
(b) Purchaser, on the one hand, and Seller, on the other hand, each
shall hold in strict confidence, and shall use their best efforts to cause all
their Representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or by other requirements of
law, all confidential and proprietary information (collectively, "Confidential
Information") concerning Seller, (in the case of Purchaser) and Purchaser (in
the case of Seller) which is created or obtained prior to, on or after the
date hereof in connection with the transactions contemplated hereby, and
Purchaser, Seller shall not use or disclose to others, or permit the use or
disclosure of, any such information created or obtained except to the extent
that such information can be shown to have been (i) previously known by
Purchaser, and Seller, as the case may be (ii) in the public domain through no
fault of a party or any of its Representatives, and will not release or
disclose such information to any other Person, except its officers, directors,
employees, Representatives and lending institutions who need to know such
information in connection with this Agreement.
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(c) For purposes of this Section 4.8, Purchaser specifically
acknowledges that it and its Representatives will have an opportunity to
engage in "due diligence" with respect to this transaction and which may
include the opportunity to review corporate records, financial and otherwise,
interview certain management personnel, and see and learn of the operation of
Seller. The Confidential Information of Seller, referred to in Section 4.8(b),
includes, without limitation, all schedules, documents, work papers or other
written information, and specifically including financial records, leases,
franchise agreements, corporate minutes, corporate organization documents,
stockholder records, employment records, fringe benefit records, lists of
creditors and suppliers, contracts, loan and security agreements, claims
against Seller, insurance, management and operation procedures and trade
secrets (both as defined by Colorado statutory law and by common law); and any
other proprietary information related to the Business conducted by Seller,
whether or not such information would be legally protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other
is unique and its release or misusage may not be compensable in damages and
that the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.9 Limitation of Seller's Claims After Closing. From and
after the Closing and thereafter so long as the provisions of Article VI are
still applicable, the Seller shall not, without the prior written consent of
Purchaser: (i) engage in any business, which would adversely affect any value
of Purchaser's business; or (ii) take any other action or fail to take any
action, or allow, the occurrence of any event, with respect to the Seller's
assets, which could be reasonably expected to have a Material Adverse Effect
on the Seller's ability to indemnify, defend and hold harmless Purchaser and
its officers, directors and stockholders from and against Damages (as
hereunder defined) pursuant to Article VI; provided, however, that nothing
herein shall preclude the Seller from taking any action to distribute assets
whether in the form of cash or other assets to its Shareholders'.
SECTION 4.10 Employee Benefit Matters. (a) No later than
30 days after the Closing Date, the Seller shall discharge and
satisfy in full any liabilities it may have with respect to any
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wages, vacation, severance or sick pay, or any rights under any ERISA Plan or
Fringe Benefit Plan.
(b) No later than 30 days after the Closing Date, the Seller shall
discharge and satisfy in full any employment, consulting or similar
arrangement to which the Seller is a party or for which the Seller is
responsible.
(c) The Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Seller,
and to "qualified beneficiaries" of any employee of the Seller or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Seller or an Affiliate of the Seller. The type of coverage shall be that
described in Section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in Section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under Section 4980B of the Code.
(d) Subject to the provisions of this Agreement, Seller and the
Stockholders of Seller jointly and severally, hereby agree to indemnify and
hold Purchaser harmless from and against any Damages which arise out of the
failure to comply with the obligations in Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Seller shall deliver to Purchaser:
(i) within five (5) business days after the end of each
calendar month, a written statement, certified by Seller, of the
gross sales of each Restaurant for that month; and
(ii) With respect to the "compiled" Financial Statements
delivered to Purchaser by the Seller, at the request of Purchaser,
the Seller shall (and shall cause their respective Representatives
to) cooperate with Purchaser to have such statements reviewed or
audited or further clarified in such manner as Purchaser may deem
necessary or advisable. Any additional fees paid by the Seller to
their respective independent certified public accountants in
connection with such cooperation shall be borne by Purchaser.
(b) Seller agrees to observe and abide by the provisions of Sections
4.4, 4.5 and 4.7, and Seller and Purchaser agree to observe and abide by the
provisions of Article VIII hereof;
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(c) Seller acknowledges and agrees to be bound by the
provisions of Section 4.6 and 7.1(c); and
(d) Inasmuch as all of the Franchise Agreements are held in
individual names, the Seller shall cause the individual to observe and abide
by the provisions of Section 4.5 insofar as the transfer of such Franchise
Agreements to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser also hereby waives compliance
by Seller with the provisions of any applicable bulk sales state or local tax
laws in effect in the states of Texas and Colorado. Seller hereby warrants and
agrees to pay and discharge, promptly when due, all claims of creditors which
may be asserted against Purchaser by reason of such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth all of the
creditors of the Seller as of the date hereof and the amounts owing to such
creditors as of the date hereof.
(c) The bulk sales laws referred to in Section 4.12(a) hereof are
referred to herein, collectively, as the "Bulk Sales Laws".
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Seller and Purchasers.
The obligations of Purchaser and Seller to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at
or prior to the Closing of the following conditions, except to the extent that
any such condition may have been waived in writing by both Seller and
Purchaser at or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation,
inquiry or other proceeding before any governmental or regulatory
authority or other Person shall have been instituted or shall be
pending or threatened which questions the validity or legality of
this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby and which could
reasonably be expected to damage materially the Business or assets of
the Seller if the transactions contemplated hereby or thereby are
consummated. No injunction, decree or order shall be in effect
prohibiting consummation of the transactions contemplated by this
Agreement or the other Transaction Documents or which would make the
consummation of such transactions unlawful and no action or
proceeding shall have been instituted and remain pending before an
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Authority to restrain or prohibit the transactions contemplated by
this Agreement and the other Transaction Documents.
SECTION 5.2 Conditions to the Obligations of Seller. The obligations
of the Seller to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by the Seller at or prior to the
Closing:
(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated
hereby or thereby shall be true and correct at and as of the Closing
Date, with the same force and effect as if made at and as of the
Closing Date; the Purchaser shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Seller shall have received a
certificate dated the Closing Date in form satisfactory to him signed
by an officer of Purchaser.
(b) Governing Instruments, etc. The Seller shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of Purchaser certifying, among other things, that
attached or appended to such certificate (i) is a true and correct
copy of its Certificate of Incorporation and all amendments if any
thereto as of the date thereof; (ii) is a true and correct copy of
its By-Laws; (iii) is a true copy of all corporate actions taken by
it, including resolutions of its board of directors authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation
of the transactions contemplated hereby and thereby; and (iv) are the
names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(c) Payment of Purchase Price. Purchaser shall have
tendered to Seller the Purchase Price payable at Closing in
accordance with Section 1.2(a).
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(d) Assumption of Assumed Contracts. The Seller shall
have received from Purchaser an Assumption Agreement
substantially in the form annexed as Exhibit C hereto.
(e) Opinion of Counsel. The Seller shall have received an
opinion of counsel for Purchaser, as of the Closing Date,
substantially in the form annexed as Exhibit D hereto.
(f) Senior Lender's Consent. Seller shall have been
presented evidence that the Purchaser shall have received, if
necessary, the written consent of its Senior Lender, The First
National Bank of Boston, to the transactions contemplated hereby.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations
of Purchaser to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Seller
contained in this Agreement and the other Transaction Documents, or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated
hereby or thereby shall be true and correct at and as of the Closing
Date with the same force and effect as though made on and as of the
Closing Date; the Seller shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Purchaser shall have received
certificates dated the Closing Date in form satisfactory to Purchaser
signed by the President on behalf of the Seller, as applicable.
(b) Governing Instruments, etc. Purchaser shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of the Seller certifying, among other things,
that attached or appended to such certificate (i) is a true and
correct copy of its Certificate of Incorporation and all amendments
if any thereto as of the date thereof; (ii) is a true and correct
copy of its By-Laws; (iii) is a true copy of all corporate actions
taken by it, including resolutions of its board of directors and
stockholders authorizing the execution and delivery of this Agreement
and each other Transaction Document to be delivered by it pursuant
hereto and the
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consummation of the transactions contemplated hereby and thereby; and
(iv) are the names and signatures of its duly elected or appointed
officers who are authorized to execute and deliver this Agreement and
any certificate, document or other instrument in connection herewith.
(c) Instruments of Transfer. The Seller shall have delivered
to Purchaser a bill of sale and assignment ("Bill of Sale")
substantially in the form annexed as Exhibit E hereto, a Lease
Assignment (if applicable) and any other documents of transfer which
Purchaser reasonably shall request in order to evidence and
effectuate the sale and assignment to Purchaser of the Assets, the
Real Property Leases, the Assumed Contracts and the consummation of
all other transactions contemplated by this Agreement and the other
Transaction Documents.
(d) Consents. The Seller shall have obtained, and delivered
to Purchaser, copies of the Required Consents applicable to it in
form and substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an
opinion or opinions of counsel for Seller, as of the Closing Date,
substantially in the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been no
Material Adverse Change, nor any events which could have a material
adverse change, in the Business, operations, prospects or financial
or other condition of any Restaurant or in the respective Assets or
Real Properties from the date hereof to the Closing Date (the
"Interim Period") nor shall have there been, for all Restaurants in
the aggregate, a decrease of five percent or more in gross sales or
gross profit during the Interim Period, as compared with the same
period during the prior calendar year. For purposes hereof, "Gross
Profit" shall mean total gross sales reduced by the sum of food,
labor and paper costs. At Closing, Purchaser shall have received a
certificate dated the Closing Date in form satisfactory to Purchaser
signed by the President on behalf of the Seller to the foregoing
effect.
(g) Environmental Due Diligence. Purchaser shall have
completed its environmental due diligence of the Restaurants, Real
Property and Assets and have received results which are satisfactory
to Purchaser in its sole discretion. In the event Seller shall
provide Purchaser with previously prepared environmental reports,
such reports must have been prepared within 90 days from the date of
this
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Agreement, or, in the alternative, such reports must have been
updated within 90 days of the date of this Agreement.
(h) Senior Lender's Consent. Purchaser shall have
received, if necessary, the written consent of its senior
lender, The First National Bank of Boston, to the
transactions contemplated hereby.
(i) Other Documents. The Seller shall have delivered
to Purchaser:
(i) the Assignment of its Real Property Lease,
each Assumed Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original
counterpart of the Real Property Lease;
(iv) receipts for the Purchase Price paid to
Seller by Purchaser;
(v) certificates dated no earlier than 30 days
prior to the Closing Date, from appropriate authorities in
the State of its jurisdiction of incorporation, as to the
good standing of such Seller;
(vi) an updated schedule of creditors as of the
Closing Date;
(vii) executed original of each of the Osborn Proxy
Agreement and the Jaro Proxy Agreement, as defined in the
Stockholders Agreement, of event date herewith; and
(viii) all other documents, instruments and
agreements required to be delivered by such Seller to
Purchaser pursuant to this Agreement and the other
Transaction Documents.
(j) Review by Purchaser's Auditor. Purchaser's
auditor shall have:
(i) reviewed the financial and accounting system
of Seller;
(ii) reviewed and confirmed the financial
statements and results set forth in such statements;
(iii) found no objection to the financial and
accounting system of Seller and Purchaser shall have
resolved any objection raised by the auditor and presented
to the Seller by the Purchaser.
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ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing, notwithstanding any investigation
heretofore or hereafter made by or on behalf of any party hereto; provided,
however, that (a) the agreements and covenants (other than the indemnification
provisions set forth in this Article VI, which will survive as provided below)
set forth in this Agreement shall survive and continue until all obligations
set forth therein shall have been performed and satisfied and the applicable
statute of limitations for breaches or defaults of such agreements and
covenants has expired; and (b) all representations and warranties, and the
agreements of Seller and Purchaser to indemnify each other set forth in this
Article VI, shall survive and continue for, and all indemnification claims
with respect thereto shall be made prior to March 31, 1996.
SECTION 6.2 Agreement to Indemnify. Subject to the conditions of this
Article VI:
(a) Purchaser hereby agrees to indemnify, defend and hold
harmless the Seller from and against all demands, claims, actions or
causes of action, assessments, loses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and
reasonably attorney's fees,costs and disbursements and expenses
(collectively, "Damages"), asserted against, resulting to, imposed
upon or incurred by the Seller directly or indirectly, arising out of
or resulting from (i) a breach of any representation, warranty,
covenant or agreement of Purchaser contained in or made pursuant to
this Agreement (including but not limited to enforcement of this
Article VI), the other Transaction Documents or the transactions
contemplated hereby or thereby or any facts or circumstances
constituting such breach; and (ii) any indebtedness, obligation or
liability assumed by Purchaser pursuant to Section 1.1, 1.2(a)(vi)
and 1.4(b) hereof; and (iii) the operation, use or ownership of its
Restaurants, Assets, Real Property Leases, Real Properties, the
Easements and Assumed Contracts, during, or which have otherwise
accrued from or otherwise relate to, the period of time after the
Closing Date; and
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(b) Seller agrees to indemnify, defend and hold harmless
Purchaser and its officers, directors and stockholders from and
against all Damages asserted against or incurred by Purchaser or such
officers, directors and stockholders, directly or indirectly, arising
out of or resulting from: (i) a breach of any representation,
warranty, covenant or agreement of the Seller contained in or made
pursuant to this Agreement (including but not limited to enforcement
of this Article VI) the other Transaction Documents or any facts or
circumstances constituting such a breach; (ii) any indebtedness,
obligations or liabilities of the Seller including, but not limited
to, any liability or obligation set forth in Section 1.4(a), and the
tax liabilities set forth in Section 2.17 other than those expressly
assumed by Purchaser hereunder; (iii) a breach of or otherwise
arising under any Environmental Law (whether now or hereafter in
effect), to the extent the same arises out of any condition or state
of facts or otherwise relates to the period of time commencing on the
date Seller was entitled to possession of the Real Property in
question and ending on the Closing Date; (iv) the operation, use or
ownership of the Restaurants, Assets, Real Properties, Real Property
Leases, the Easements and Assumed Contracts during, or which have
otherwise accrued from or otherwise relate to, the period of time
prior to the Closing Date; (v) the Seller's failure to pay and
discharge all claims of creditors which may be asserted against
Purchaser by reason of Purchaser's waiver of compliance by Seller of
the Bulk Sales Laws and (vi) all Damages arising before the Closing
and not expressly assumed in writing by the Purchaser; provided,
however, that Seller's indemnification of Purchaser shall be limited
in aggregate amount as provided in Section 6.5.
SECTION 6.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 6.3 with respect to Damages
for which it must indemnify another party hereunder (collectively, the
"Indemnifiable Claims") shall be subject to the following terms and
conditions:
(a) The indemnified party shall give the indemnifying party
notice of any such Indemnifiable Claim which notice shall set forth
in reasonable detail the basis for and amount of the Indemnifiable
Claim, and the circumstances giving rise thereto. If the
Indemnifiable Claim is a third-party Claim, the notice must contain
an copy of any papers served on the indemnified party.
(b) If the Indemnifiable Claim is not a third-party
Claim, unless within 30 days of receipt by the indemnifying
party of notice of the Indemnifiable Claim the indemnifying party
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sends written notice to the indemnified party disputing the facts
giving rise to the Indemnifiable Claim or the amount of Damages
stated in the notice, the Damages stated in the notice shall become
due and payable upon the expiration of such 30 day period. If,
however, the indemnifying party disputes the facts giving rise to the
Indemnifiable Claim or the amount of Damages stated in the notice
within such 30 day period and the dispute cannot be resolved within
the following 90 days, the dispute shall be submitted to arbitration
under the rules of the American Arbitration Association in Chicago,
Illinois.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own
expense by representatives of its own choosing reasonably
satisfactory to the indemnified party and will consult with the
indemnified party concerning such defense during the course thereof.
If the indemnifying party, within 30 days after receipt of notice of
any Indemnifiable Claim (or such shorter period as is necessary to
prevent prejudice to the indemnified party, if such 30 day period
would prejudice the rights of the indemnified party), fails to
defend, the indemnified party will (upon further notice to the
indemnifying party) have the right to undertake the defense,
compromise or settlement of such Indemnifiable Claim on behalf of and
for the account and risk of and at the expense of the indemnifying
party. In addition, if there is a reasonable probability that a
third-party Indemnifiable Claim may materially and adversely affect
an indemnified party, the indemnified party shall have the right, at
its own cost and expense, to defend, compromise or settle such
Indemnifiable Claim.
(d) Anything in this Section 6.3 to the contrary
notwithstanding, neither the indemnifying party nor the indemnified
party, as the case may be, may settle or compromise any Indemnifiable
Claim or consent to entry of any judgment in respect thereof, without
the written consent of the other, which consent may not be
unreasonably withheld or delayed.
SECTION 6.4 Remedies Cumulative. The remedies provided in this
Article VI shall be cumulative and shall not preclude the assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other parties hereto.
SECTION 6.5 Indemnity Enforcement. (a) Indemnification Claims shall
be reduced, by and to the extent, that an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result
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of, and in compensation for, the subject matter of an indemnification Claim by
such indemnitee.
(b) The aggregate value of Purchaser's indemnification claims shall
be limited to the consideration received by the Seller as the Purchase Price
for the Assets and the Purchase Price for the Inventory.
(c) The Purchaser may, in addition to any other rights or remedies
available, set-off any indemnification claims hereunder against any amounts
owing in respect of any of the Securities issued or cash paid by the Company
as part of the Purchase Price for the Assets; provided, however, that this
right of set-off must be exercised against such Securities and cash in the
following order:
(i) interest and principal payments on the Notes;
(ii) dividend, liquidation and redemption payments on
the Senior Preferred and the Junior Preferred;
(iii) dividend liquidation and redemption payments on the
Class D Common Stock; provided that for redemption under this Section
6.5, the call price of the Class D Common Stock shall be Fair Market
Value, (as defined in the Management Subscription Agreement);
(iv) cash to the extent the cash portion of the Purchase
Price for the Assets and for the Inventory has not been distributed
to the Seller's shareholders and limited by the amount, if any, that
the Seller or Seller's Stockholders have paid federal or state income
taxes thereon or any of them have has received a notice or claim
assessing additional tax liabilities upon the Seller as a result of
non-compliance with section 351 and the rules regarding the
installment note regulations under the Internal Revenue Code of 1986,
as amended.
(d) The personal liability of any shareholder of Seller under this
Article VI shall be limited to the extent such shareholder personally receives
Securities or cash delivered by the Company as part of the Purchase Price, or
to the extent such shareholder acquires such Securities or cash subsequent to
the Closing in a distribution or dividend from Seller, net of federal and
state income taxes as provided in Section 6.5(c)(iv).
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Seller and Purchaser;
(b) By Seller, if (i) there has been a material
misrepresentation or breach of warranty on the part of Purchaser in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Seller; (ii) Purchaser
has committed a material breach of any covenant imposed upon it
hereunder and fails to cure such breach within 15 days of written
notice thereof from Seller; or (iii) any condition of Seller
obligations hereunder becomes incapable of fulfillment through no
fault of such parties and is not waived by such parties;
(c) By Purchaser, if (i) there has been a material
misrepresentation or breach of warranty on the part of the Seller in
the representations and warranties contained herein and such material
misrepresentation or breach of warranty, if curable, is not cured
within 15 days of written notice thereof from Purchaser; (ii) the
Seller has committed a material breach of any covenant imposed upon
it hereunder and fails to cure such breach within 15 days of written
notice thereof from Purchaser; or (iii) any condition to Purchaser's
obligations hereunder becomes incapable of fulfillment through no
fault of Purchaser and is not waived by Purchaser;
(d) By Seller, if the Closing shall not have occurred on or
before September 7, 1994; provided that Seller shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
the Seller to fulfill any of its obligations under this Agreement
shall have been the reason that the Closing shall not have occurred
on or before said date;
(e) By Purchaser, if the Closing shall not have occurred on
or before September 7, 1994; provided that Purchaser shall not be
entitled to terminate this Agreement pursuant to this clause if the
failure of Purchaser to fulfill any of its obligations under this
Agreement shall have been the reason that the Closing shall not have
occurred on or before said date; and
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(f) By Seller or by Purchaser, if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Purchaser, or any Seller from
consummating the transactions contemplated hereby is entered and such
judgment, injunction, order or decree shall become final and
nonappealable.
SECTION 7.2 Effect of Termination; Right to Proceed. In the event
that a party wishes to terminate this Agreement pursuant to Section 7.1, it
shall give written notice thereof whereupon all further obligations of the
parties under the Agreement shall terminate without further liability of any
party hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants
and agreements imposed upon it hereunder; (ii) to the extent that any
condition to a party's obligations hereunder become incapable of fulfillment
because of the breach by a party of its obligations hereunder and (iii) that
the agreements contained in Sections 4.8, 9.3 and 9.4 shall survive the
termination hereof. In the event that a condition precedent to its obligation
is not met, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the transactions contemplated hereby. Notwithstanding anything to
the contrary contained herein, no party shall have any obligation to the other
hereunder arising out of the occurrence of an event or circumstance not within
the control of such party which event or circumstance resulted in a
representation or warranty of such party ceasing to be true.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Further Assurances. Each of the parties hereto shall
without further consideration execute and deliver to any other party hereto
such other instruments of transfer and take such other action as any party may
reasonably request to carry out the transactions contemplated by this
Agreement and the other Transaction Documents.
SECTION 8.2 Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
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similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 8.3 Remedies. In the event of a default under this Agreement
or the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or
other appropriate proceeding, whether for specific performance, or for an
injunction against a violation of any terms hereof or thereof or in aid of the
exercise of any right, power or remedy granted thereby or by law, equity,
statute or otherwise. The foregoing shall include, but shall not be limited
to, allowance for recovery by the aggrieved party of all of its fees and
expenses and disbursements incurred by it in connection with the transactions
contemplated hereby and in the Transaction Documents, including, without
limitation, the reasonable fees and expenses of its counsel, accountants,
agents and representatives, employed by it. No course of dealing and no delay
on the part of any party in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
or remedies. No right, power or remedy conferred hereby shall be exclusive of
any other right, power or remedy referred to herein or now or hereafter
available at law, in equity, by statute, or otherwise.
SECTION 8.4 Expenses. Upon the execution of this Agreement and the
closing of the Company's acquisition of franchises and other assets, rights
and obligations to certain Burger King restaurants in the Chicago area, the
Purchaser will reimburse the Seller for all reasonable expenses incurred by
the Seller in connection with the authorization, preparation and consummation
of this Agreement and the related transactions, including reasonable
attorneys' and accountants' fees; provided, however, that the aggregate amount
paid to Lawrence Jaro and entities related to Lawrence Jaro and William Osborn
and entities related to William Osborn for reimbursement of accountants' fees
shall not exceed $20,000.
SECTION 8.5 Entire Agreement. This Agreement and the other
Transaction Documents and the Exhibits and Schedules referred to herein and
therein contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior arrangements or understandings
with respect thereto.
SECTION 8.6 Definitions. For the purposes of this Agreement:
(i) "affiliate" of any person shall mean any corporation,
proprietorship, partnership or business entity which, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled
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by, such person, and any directors, officers, partners or 50% or more
owners of such person.
(ii) "Affiliate" shall mean with respect to any Person, any
other Person that has a relationship with the designated Person
whereby either of such Persons directly or indirectly controls or is
controlled by or is under common control with the other of such
Persons.
(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iv) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by Seller at
the date of this Agreement and/or the Closing Date, and such business
and operations relating to the Assets and Assumed Contracts.
Business.
(v) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(viii) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(ix) "material" means any claim, circumstance or state
of facts which results in, or would reasonably be expected
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to result in, losses or the expenditure or commitment of $25,000 or
more, or which results in any material limitation or restriction on the
ability of the Seller or the Purchaser to conduct the Business.
(x) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
(xi) "Order" means any decree, order, injunction,
rule, judgment, consent of or by a U.S. Authority.
(xii) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xiii) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xiv) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the certificate of incorporation and
By-Laws of the Seller, as applicable.
(xv) "Taxes" shall mean all taxes, charges, fees, duties,
levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise,
value added, license, payroll, unemployment, environmental, customs
duties, capital stock, disability, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income
withholding and Social Security taxes imposed by the United States or
any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country or by
any other tax Authority, including all applicable penalties and
interest, and such term shall include any interest, penalties or
additions to tax attributable to such Taxes.
SECTION 8.7 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the Agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
SECTION 8.8 Notices. All notices, consents, requests,
instructions, approvals and other communications provided for herein shall be
validly given, made or served in writing and
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delivered personally, sent by telecopier, federal express or other reputable
overnight courier or sent by certified or registered mail, postage prepaid,
return receipt requested, at the addresses set forth below:
(a) if to Purchaser, to:
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
(b) if to Seller, to:
William Osborn
c/o Ernest J. Panasci, Esq.
Suite 1100
1600 Stout Street
Denver, Colorado 80202
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 8.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the heirs,
executor, personal representatives, legal representatives, successors and
assigns of the parties hereto, and shall not be assignable by either party
without the prior written consent of the other party; provided, however, that
the Purchaser may assign at Purchaser's sole discretion any or all of its
interest to a lender of Purchaser with written notice to Seller.
SECTION 8.10 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT
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JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS AND
WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH
PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND
SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE
OF FORUM SET FORTH IN THIS SECTION 8.10 SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
SECTION 8.11 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss.
1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD.
SECTION 8.12 Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
SECTION 8.13 Purchaser's Designated Affiliate. Purchaser may
designate one or more of its wholly-owned subsidiaries or Affiliates to carry
out all or part of the transactions contemplated hereby to be carried out by
Purchaser, which designation shall not relieve Purchaser of its obligations
hereunder.
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<PAGE>
SECTION 8.14 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
as of the day first above written.
NRE HOLDINGS, INC.
By:
Name:
Title:
WHITE-OSBORN RESTAURANTS, INC.:
By:
Name:
Title:
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EXECUTION COPY
PURCHASE EXECUTION AND SALE AGREEMENT
DATED AS OF
SEPTEMBER 30, 1994
BETWEEN
BNB LAND VENTURES, INC.
AND
NATIONAL RESTAURANT ENTERPRISES, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
1. SUBJECT MATTER.......................................................... 1
a. Assets......................................................... 1
b. Inventory...................................................... 1
c. Store Bank..................................................... 2
d. Real Properties; Assignments of Leases; Easements
and Parking Agreements......................................... 2
e. Assumption of Liabilities...................................... 2
2. PURCHASE PRICE AND PAYMENT.............................................. 3
3. CLOSING................................................................. 3
a. Date........................................................... 3
b. Delivery of Documents.......................................... 3
c. Adjustments.................................................... 3
4. REPRESENTATIONS AND WARRANTIES OF SELLER................................ 4
a. Organization................................................... 4
b. Title.......................................................... 4
c. Due Authorization.............................................. 5
d. No Violation................................................... 5
e. Financial Information.......................................... 5
f. Employees...................................................... 5
g. Offers of Employment........................................... 5
h. Contracts and Arrangements..................................... 5
i. Compliance with Regulations.................................... 5
j. Assets......................................................... 6
k. Real Properties; Real Property Leases.......................... 6
l. Continuing Representations..................................... 7
5. REPRESENTATIONS AND WARRANTIES OF BUYER................................. 7
a. Organization and Corporate Power............................... 7
b. Certificate of Incorporation and By-Laws....................... 7
c. Due Authorization.............................................. 7
d. No Violation................................................... 7
e. Consents....................................................... 7
f. Solvency....................................................... 7
g. Offers of Employment........................................... 8
h. Employment Agreement........................................... 8
i. Continuing Representations..................................... 8
6. CONDITIONS TO OBLIGATIONS OF PARTIES.................................... 8
a. Impediments to Closing......................................... 8
b. Buyer Requirements............................................. 8
c. Seller Requirements............................................ 9
7. FRANCHISE AND LEASE AGREEMENTS.......................................... 12
8. LEASED EQUIPMENT AND SOFTWARE........................................... 12
9. ADVERTISING FUNDS....................................................... 12
10. PUBLIC UTILITY SERVICES................................................ 12
<PAGE>
11. TRANSFER COSTS......................................................... 13
12. EMPLOYEE RELATIONS..................................................... 13
13. INDEMNIFICATION........................................................ 13
14. WAIVER OF BULK SALES COMPLIANCE........................................ 14
15. TERMINATION............................................................ 14
a. Events of Termination.......................................... 14
b. Effect of Termination; Right to Proceed........................ 14
16. MISCELLANEOUS.......................................................... 15
a. Waiver and Amendment........................................... 15
b. Entire Agreement............................................... 15
c. Definitions.................................................... 15
d. Interpretation................................................. 16
e. Notices........................................................ 16
h. Successors and Assigns......................................... 17
i. Litigation..................................................... 17
j. Arbitration.................................................... 17
k. Severability................................................... 18
l. Buyer's Designated Affiliate................................... 18
m. Counterparts................................................... 18
n. Announcements; Confidentiality................................. 18
17. EXPENSES............................................................... 18
18. COOPERATION............................................................ 18
19. PURCHASE OPTION........................................................ 19
20. BROKERS................................................................ 21
21. BKC GUARANTEES......................................................... 21
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<PAGE>
EXHIBIT A - Lease Assignment
EXHIBIT B - Lease Agreement
EXHIBIT C - Assumption Agreement
EXHIBIT D - Opinion of Counsel for Buyer
EXHIBIT E - Non-Competition Agreement
EXHIBIT F - Lease Guarantee
EXHIBIT G - Franchise Guarantee
EXHIBIT H - Bill of Sale
EXHIBIT I - Opinion of Counsel for Seller
SCHEDULE A - List of Burger King Franchises
SCHEDULE B - List of Real Property
SCHEDULE C - Real Property Lease
SCHEDULE D - Leased Assets
SCHEDULE 1(a) - List of Assets
SCHEDULE 1(d)(iii) - List of Easements
SCHEDULE 2 - Purchase Price Allocation
SCHEDULE 4(f) - List of Required Consents
SCHEDULE 4(i) - List of Employees at the Restaurants
SCHEDULE 4(j) - Employee Benefit Plans
SCHEDULE 4(m) - Other Contracts
SCHEDULE 4(n) - Compliance with Regulations
SCHEDULE 4(r)(i) - Permitted Liens
SCHEDULE 4(r)(ii) - Real Property Defaults
SCHEDULE 4(r)(iii) - Certificates of Occupancy for each Restaurant
located on the Real Properties
SCHEDULE 5(g) - List of Salaried Employees
-ii-
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of the 30th
day of September, 1994, (the "Effective Date") by and between BNB Land
Ventures, Inc., an Illinois corporation ("Seller") Sheldon Friedman
("Friedman") and National Restaurant Enterprises, Inc., a Delaware corporation
("Buyer").
WHEREAS, Seller operates the Burger King restaurants respectively
identified by address and Burger King franchise number opposite their names on
Schedule A annexed hereto (each restaurant is hereinafter sometimes referred
to individually as a "Restaurant" and collectively as the "Restaurants");
WHEREAS, Seller and/or its Affiliates are the owner or lessee of certain
personal property used or held for use in or in connection with the conduct of
business at the Restaurants and Seller and/or its Affiliates are the lessee of
certain buildings, other real property and land upon and in which the
Restaurants are located (individually, the "Real Property" and collectively,
the "Real Properties"), the legal description of which shall be to Seller's
knowledge set forth on Schedule B annexed hereto on or prior to the Closing
Date;
WHEREAS, Seller proposes to sell, and Buyer proposes to purchase, all of
the Assets (as hereinafter defined);
WHEREAS, Seller and/or its Affiliates occupy Real Property pursuant to a
lease agreement (each, a "Real Property Lease" and, collectively, the "Real
Property Leases") (a copy of each such Real Property Lease, together with all
amendments, supplements and schedules thereto which are in Seller's possession,
shall be attached as Schedule C hereto on or prior to the Closing Date)
proposes to assign to Buyer, and Buyer proposes to accept such assignment of,
Seller's leasehold interest with respect to the Real Property on which a
Restaurant is located (each a "Leased Real Property" and, collectively, the
"Leased Real Properties"); and
WHEREAS, Buyer proposes to assume the Real Property Leases and Assumed
Contracts (as hereinafter defined).
In consideration of the following mutual covenants and representations,
the parties agree as follows:
1. SUBJECT MATTER
a. Assets. Buyer agrees to purchase from Seller, and Seller agrees to
sell, and deliver to Buyer, all furniture, equipment, trade fixtures,
franchise rights and other assets owned by Seller related thereto
(collectively, the "Assets") located at the Restaurants. A list of the Assets
shall be attached as Schedule 1(a) hereto on or prior to the Closing Date. The
sale of the Assets will be made free and clear of all Claims (as hereinafter
defined).
b. Inventory. Within twenty-four (24) hours prior to the date of
Takeover, an inventory shall be taken by Seller (with the participation of the
Buyer) of all food, paper, new uniforms, current promotional items, unopened
supply inventory and other miscellaneous items (the "Inventory") located at
the Restaurants. Buyer agrees to purchase the Inventory from Seller, and
Seller agrees to sell the Inventory to Buyer, at Seller's actual Inventory
purchase price.
On the Closing Date, Buyer agrees to pay to Seller the sum of $6,000
per Restaurant separately and not as part of the Purchase Price, as partial
payment for the Inventory. Following the taking of the Inventory as described
above, Seller and Buyer agree to make adjustments to the Inventory purchase
price for the difference between the amount paid on the Closing Date and
Seller's actual Inventory purchase price. In the event the Inventory purchase
price is less than $6,000 per Restaurant, Seller shall, within thirty (30)
days of the Closing Date, reimburse Buyer for any overage in payment. In the
event the Inventory purchase price is in excess of $6,000 per Restaurant,
Buyer agrees to make payment to Seller within thirty (30) days of the Closing
Date for any additional monies which may be due for the purchase of the
Inventory.
<PAGE>
c. Store Bank. Upon Takeover, Seller shall leave cash (the
"Store Banks") in the amount of no less than $1,000 at each Restaurant. Buyer
agrees to purchase the Store Banks from Seller and agrees to pay for the Store
Banks in addition to the Purchase Price at Closing.
d. Real Properties; Assignments of Leases; Easements and
Parking Agreements. Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of the representations and warranties
hereinafter set forth, at the Closing, Seller shall assign to Buyer all of
Seller's leasehold interest in the Leased Real Properties and shall assign,
sublease or otherwise transfer to Buyer all of its right, title and interest
in and to all parking and other access agreements or arrangements relating to
the Real Properties, as follows:
(i) At Closing, the Seller shall assign to Buyer all of the
Seller's right, title and interest as tenant under the applicable
Real Property Lease by delivery to Buyer of a standard Burger King
Lease Assignment and Consent to be provided by Burger King
Corporation ("BKC") on or prior to the Closing Date (the "Lease
Assignments"). The Lease Assignments shall be executed and delivered
at Closing by Seller and Buyer.
(ii) Prior to Closing, Seller shall cooperate with Buyer in
Buyer's attempt to obtain a Consent to Assignment and Estoppel
Certificate in substantially the form attached as Exhibit A hereto
(the "Lease Assignment Consent"), to the extent required by the
underlying lease for the Leased Real Properties, pursuant to which
the respective landlords for each Leased Real Property, as
applicable, shall: (i) acknowledge and consent to the applicable
Lease Assignment and (ii) confirm all of the information set forth in
the last sentence of Section 4(k)(ii), to the extent required by the
underlying lease for the Leased Real Properties.
(iii) Prior to Closing, Seller shall cooperate with Buyer in
Buyer's attempt to describe on Schedule 1(d)(iii), all written or
oral parking leases, easements, agreements, grants, licenses, options
and any other agreement in Seller's or its Affiliates' possession
(collectively referred to herein as "Easements"), except for recorded
instruments, pursuant to which Seller is granted, for use in
connection with any Restaurant, parking privileges or rights, current
or prospective, and/or rights of access of any kind or nature in and
to the applicable Real Property. On or prior to Closing, Seller shall
cooperate with Buyer in Buyer's attempt to obtain documentation in
form and substance reasonably satisfactory to Buyer and its counsel
which effectively assigns or transfers Seller's rights and
obligations under both recorded and unrecorded Easements to Buyer,
which documentation shall, to Seller's and its counsel's reasonable
satisfaction, operate to cause Buyer to assume such rights and
obligations (hereinafter individually referred to as an "Easement
Assignment", and, collectively, as the "Easement Assignments").
(iv) At Closing, Seller shall deliver to Buyer a Lease
Agreement substantially in the form attached as Exhibit B hereto (the
"Lease Agreement") with respect to each Real Property owned by Seller
and/or its Affiliates on which a Restaurant is located.
e. Assumption of Liabilities. The parties hereto hereby
agree and acknowledge that Seller is not selling, transferring, assigning,
delivering or otherwise conveying, and Buyer is not purchasing, receiving,
acquiring or otherwise assuming, any liabilities of Seller, or any of its
Affiliates, except as specifically set forth in this Section 1(e). Buyer shall
neither be liable for any liability or obligation of Seller, or any of its
Affiliates, nor shall it be required to indemnify Seller, or any of its
Affiliates, against any liability or obligation other than those so
specifically assumed or indemnified, as the case may be. Seller shall assign
to, and Buyer shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of Seller attributable to
the period from and after the Closing Date, under the Franchise Agreements,
Real Property Leases, Easements and the Other Contracts (as hereinafter
defined) (collectively, the "Assumed Contracts").
2
<PAGE>
2. PURCHASE PRICE AND PAYMENT
The purchase price for the Assets shall be thirty-seven
million dollars ($37,000,000) (the "Purchase Price"). On the Closing Date,
Buyer shall pay to Seller, by wire transfer, (i) $37,000,000, (ii) plus or
minus net pro-rations as set forth in Section 3(c) and (iii) plus the amount
of any sales or transfer taxes to be collected from the Buyer under Section 11
hereof, by wire transfer or by a certified or bank cashier's check, payable to
the order of Seller. Amounts payable with respect to Inventory shall be paid
as set forth in Section 1(b). The Purchase Price shall be allocated among the
Assets as set forth on Schedule 2, which shall be mutually agreed to between
Buyer and Seller prior to the Closing Date. Both Buyer and Seller shall
prepare all tax returns and reports, including without limitation Internal
Revenue Service Form 8594, consistently with such allocation and the
allocation to the Inventory and the Store Banks pursuant to Sections 1(b) and
1(c), respectively.
3. CLOSING
a. Date. The closing hereunder ("Closing") shall take place
on the 27th day of October, 1994 (the "Closing Date"), at the offices of
Mayer, Brown & Platt, 190 S. LaSalle Street, Chicago, Illinois, at 10:00 A.M.
or as soon thereafter as is practicable, subject to the provisions of Section
15. The delivery of the Assets, Inventory and Store Banks, and the effective
date of the Burger King Franchise Agreements (the "Franchise Agreements"), the
Lease Agreements and the BKC Lease Assignments Lease shall be as of the date
of transfer of possession of the operation of the Restaurants (the "Takeover")
which shall be immediately after the close of business for each Restaurant on
the Closing Date.
b. Delivery of Documents. At the Closing, Seller and Buyer
shall deliver to each other the respective documents and other items set forth
in Section 6.
c. Adjustments.
(i) All customary prorations with respect to (w) obligations
under the Assumed Contracts, (x) utility and fuel charges, if any,
(y) personal property taxes and (z) other proratable charges related
to the operation of the Restaurants shall be adjusted between the
parties as of 6:00 A.M. on the date immediately following the Closing
Date. Payment, if any, owed by Buyer to Seller or by Seller to Buyer
by reason of such adjustments shall be made at the Closing (by
adjustment of the Purchase Price, if practicable) or as soon
thereafter as reasonably practicable. Any refunds or commissions
received by Buyer following the Closing Date which relate to the
operation of the Business prior to the Closing Date shall be prorated
by Buyer and any amounts payable for the period prior to the Closing
Date shall be remitted to the Seller. In addition, real estate taxes
(other than real property transfer or gains taxes) which are due and
payable during the tax year in which the Closing occurs shall, when
received, be prorated as of the Closing Date.
(ii) The parties shall share the payment of all sales and
transfer taxes in the manner described in Section 11, and shall pay
such taxes at the Closing. Buyer and Seller shall share equally all
franchise assignment fees to BKC in connection with the assignment
of the Franchise Agreements to Buyer. Seller will pay when due all
sales, excise and other taxes in respect of the Restaurants through
the Closing Date, except to the extent already reflected in the
prorations at Closing.
(iii) All "minimum" or "fixed rentals" and any other
monetary obligations accruing under the Real Property Leases shall be
adjusted for the month in which the Closing occurs. In the event the
period used in computing and/or adjusting percentage rental
(hereinafter referred to as the "Adjustment Lease Year") under any of
the Real Property Leases commences before the Closing Date and ends
after the Closing Date, such percentage rental shall be adjusted at
the end of the Adjustment Lease Year for such Real Property Leases so
affected as follows:
(A) Seller shall be required to pay to Buyer,
within 30 days after the expiration of the Adjustment Lease
Year, an amount equal to the lesser of (1) the amount of
percentage rental
3
<PAGE>
due for such Adjustment Lease Year or (2) the "Percentage
Rent Contribution" determined by the following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used
in determining such percentage rental
during such Adjustment Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in Schedule C;
C = Number of days during the Adjustment Lease
Year prior to and including the Closing
Date; and
D = Percentage rent factor for such Real
Property Lease as indicated in Schedule C;
provided, however, that, in the event the above formula
yields a negative amount as the Percentage Rent
Contribution, the Percentage Rent Contribution shall be
deemed equal to zero; and
(B) Buyer shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental,
if any, due for the Adjustment Lease Year.
4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants, covenants and agrees to and with Buyer
as follows:
a. Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois
and has the corporate power to own its properties and to carry on its business
as it is now being conducted.
b. Title. Seller has and will deliver, and upon Closing,
Buyer will have, good and marketable title to all of the Assets, subject to no
Liens of any kind.
c. Due Authorization. The execution and delivery by Seller
of this Agreement and each of the other instruments and agreements of Seller
provided for herein, and the performance of Seller's obligations hereunder or
thereunder, have been duly and validly authorized by all necessary corporate
action on the part of Seller, and this Agreement and any other instruments and
agreements delivered or to be delivered in connection herewith are or will be
the valid and binding obligations of Seller enforceable against it in
accordance with their respective terms.
d. No Violation. The execution and delivery by Seller of
this Agreement and each of the other instruments and agreements of Seller
provided for herein and the performance by Seller of its obligations hereunder
or thereunder will not, or with the giving of notice or the lapse of time or
both, would not (i) result in a breach of, or give rise to termination of, or
accelerate the performance required by any terms of any agreement to which
Seller is a party, or constitute a default thereunder, or result in the
creation of any Lien upon any of the Assets of Seller nor (ii) violate any
order, writ, injunction, decree or law.
e. Financial Information. The financial information related
to the Restaurants, including sales history and profit and loss statements,
provided to Buyer for the period through May 31, 1994, and monthly financial
statements to be provided, as available, through the Closing Date (the
"Financial Statements"), are true and correct in all material respects and
accurately represent the activity of each Restaurant for the time
4
<PAGE>
periods indicated on such Financial Statements. The Financial Statements were
prepared in accordance with generally accepted accounting principles
consistently applied; provided, however, that monthly financial statements may
be prepared other than in accordance with generally accepted accounting
principles to the extent that such financial statements shall not be required
to reflect standard year-end adjustments, reserves or contingent liabilities.
Notwithstanding the foregoing, Seller makes no representation nor provides any
projection or assurances under this Section 4(e) as to the financial results
of the Business after the date of Takeover, it being understood that the
representations for this Section 4(e) relate only to the historical financial
results and condition of the Business prior to the Closing Date.
f. Employees. On or prior to the Closing Date, Schedule 4(f)
shall set forth, to Seller's knowledge, a list of the employees at the
Restaurants as of the date of Schedule 4(f), showing current rate of cash
compensation (including bonuses), title, date of birth and years of service.
Subject to the consent of employees which Buyer elects to hire, Seller will
provide Buyer the personnel records of the employees Buyer hires.
g. Offers of Employment. If Seller wishes to offer
employment to any salaried employee of Buyer within six (6) months after the
date of this Agreement, Seller shall first notify Buyer of its intention to
employ such individual and the minimum salary to be paid to such individual.
h. Contracts and Arrangements. Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 4(m)
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), to Seller's knowledge, Seller does
not have any Contract relating to the Restaurants, Assets or Real Properties,
including, without limiting the generality of the foregoing, any (i) Contract
for the purchase or sale of Inventory; (ii) Contract for the purchase or sale
of supplies, services or other items; (iii) Contract for the purchase, sale or
lease of any restaurant equipment; (iv) franchise agreement or license
agreement; and (v) employment or consulting agreement or pension, disability,
profit sharing, bonus, incentive, insurance, retirement or other employee
benefit agreement.
i. Compliance with Regulations. Except as set forth on
Schedule 4(i) to be attached hereto on or prior to the Closing Date: (i) to
Seller's knowledge, Seller has obtained all Licenses necessary to operate the
Restaurants in material compliance with all Environmental Laws; (ii) to
Seller's knowledge, Seller has operated the Restaurants in material compliance
with all terms and conditions of all Approvals and in material compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Laws and codes, plans, orders, decrees or judgments relating to
public health and safety and pollution or protection of the environment or any
notice or demand letter issued, entered, promulgated or approved thereunder;
(iii) to Seller's knowledge, there are no claims, pending or threatened,
against Seller relating in any way to any Environmental Law or any Regulation,
notice or demand letter issued, entered, promulgated or approved thereunder;
and (iv) Seller does not know or have any reason to know of, nor has Seller
received any notice of any facts, events or conditions which would interfere
with or prevent continued material compliance with any common law or legal
liability under any Environmental Law.
j. Assets. To Seller's knowledge, the Assets of Seller
include all of the operating assets used or held for use in or in connection
with the Business. On the Closing Date, each Restaurant, together with its
related Assets, Leased Assets and Real Property, taken as a whole, will
constitute a fully operable Burger King restaurant sufficient to permit Buyer
to immediately operate the business at such Restaurant as presently being
conducted therein.
k. Real Properties; Real Property Leases.
(i) With respect to the Real Properties that are owned by
Seller and/or its Affiliates, to Seller's knowledge, each of such
owners has good and marketable title in fee simple to such Real
Property, free of all Liens on the Closing Date except those
acceptable to Buyer.
5
<PAGE>
(ii) On or prior to the Closing Date, Seller will deliver to
Buyer a true and complete copy of the Real Property Leases applicable
to it, together with all amendments and supplements thereto, other
than those Real Property Leases listed on Schedule 4(k)(ii). Seller
shall use commercially reasonable efforts to supply Buyer with copies
of all Real Property Leases listed on Schedule 4(k)(ii) on or prior
to the Closing Date. At or prior to Closing, Seller shall cause to be
discharged of record all Liens against Seller or Seller's interest
affecting its Leased Real Property. To Seller's knowledge, each Real
Property Lease is valid and binding, in full force and effect, and
enforceable in accordance with its terms. Except as set forth in
Schedule 4(k)(ii), and except for such matters as may otherwise be
disclosed to Buyer and consented to by Buyer in writing prior to the
Closing Date, to Seller's knowledge, there are not existing defaults
or offsets which any of the applicable landlords has against the
enforcement of its Real Property Lease by Seller thereunder and
Seller is not in default under the applicable Real Property Lease,
nor have any events under any such Real Property Lease occurred
which, with the giving of notice or passage of time or both, would
constitute a default thereunder.
(iii) Schedule 4(k)(iii), to be attached hereto on or prior
to the Closing Date, shall consist of a copy of each business permit
for each Restaurant located on the Real Properties, with all
amendments thereto, each of which, to Seller's knowledge, will be
complete and correct as of the Closing Date.
(iv) To Seller's knowledge, there are no condemnation or
eminent domain proceedings of any kind whatsoever or other
proceedings of any other kind whatsoever for the taking of the whole
or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of Seller, threatened against the Real
Properties.
(v) To Seller's knowledge, the Real Properties and all
improvements thereon represent all of the locations at which any of
the Assets are or will be located.
l. Continuing Representations. Seller hereby represents
and warrants that the representations and warranties of Seller herein
contained shall be true and correct on and as of the Closing Date with the
same force and effect as if made on and as of that date.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants, covenants and agrees to and with Seller
as follows:
a. Organization and Corporate Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and licensed to do business wherein
the character of the Real Properties and other Assets to be purchased makes
such licensing or qualification to do business necessary. Buyer has full power
and authority (corporate and other) to own or hold under lease its properties
and assets, and execute and deliver this Agreement and the other Transaction
Documents to be executed and delivered by Buyer pursuant hereto or in
connection herewith and to consummate the transactions contemplated hereby and
thereby.
b. Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Buyer and all amendments thereto
to date, as certified by the Secretary of Buyer, have heretofore been
delivered to Seller by Buyer, and are complete and correct as of the Closing
Date. Buyer is not in default in the performance, observance or fulfillment of
any of the terms or conditions of its Certificate of Incorporation or By-Laws.
c. Due Authorization. The execution and delivery by Buyer of
this Agreement and each of the other instruments and agreements of Buyer
provided for herein, and the performance of their obligation hereunder or
thereunder, have been duly and validly authorized by all necessary corporate
action on the part of Buyer and its parent company and this Agreement and any
other instruments and agreements delivered or to be delivered in connection
herewith are or will be the valid and binding obligations of Buyer enforceable
against it in accordance with their respective terms.
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d. No Violation. The execution and delivery by Buyer of this
Agreement and each of the other instruments and agreements of Buyer provided
for herein and the performance by Buyer of its obligations hereunder or
thereunder will not, or with the giving of notice or the lapse of time or
both, would not (i) result in a breach of, or give rise to termination of, or
accelerate the performance required by any terms of any agreement to which
Buyer is a party, or constitute a default thereunder, or result in the
creation of any lien, charge or encumbrance upon any of the Assets of Buyer
nor (ii) violate any order, writ, injunction, decree or law. Buyer knows of no
broker, finder, intermediary, or other person acting in a similar capacity who
may have been involved in this transaction who would be entitled to a fee or
commission upon its consummation. Any fee or commission to be paid to any
broker, finder or other intermediary of Buyer shall be the sole responsibility
of Buyer.
e. Consents. Except for the Burger King Consents and the
consents of The First National Bank of Boston ("FNBB"), certain Affiliates of
The Jordan Company ("Jordan Affiliates") and licenses from municipalities,
Buyer is not required to obtain any consents, approvals or other
authorizations or to make any filing with any Authority or any other Person in
connection with the execution, delivery and consummation of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
f. Solvency. Buyer is not insolvent and shall have
sufficient funds on hand and sufficient borrowing capacity with responsible
financial institutions on the Closing Date to purchase the Assets, Inventory,
Store Banks and other property that is the subject of this Agreement on the
terms and conditions set forth in this Agreement.
g. Offers of Employment. Buyer has not offered employment
to any current salaried employee of Seller, except as otherwise set forth on
Schedule 5(g), to be attached hereto on or prior to the Closing Date.
h. Employment Agreement. Except for those individuals listed
on Schedule 5(g), to be attached hereto on or prior to the Closing Date, Buyer
has not entered into any agreements to employ in the future, nor does Buyer
intend to offer employment to, any current salaried employee of Seller within
six (6) months after the date of this Agreement. If Buyer wishes to offer
employment to any current salaried employee of Seller within such six (6)
month period, Buyer shall first notify Seller of its intention to employ such
individual and the minimum salary to be paid to such individual."
i. Continuing Representations. The representations and
warranties of Buyer herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
6. CONDITIONS TO OBLIGATIONS OF PARTIES
a. Impediments to Closing. The obligations of Buyer and
Seller to consummate the transactions contemplated hereby and by the other
Transaction Documents are subject to the satisfaction at or prior to the
Closing of the conditions set forth in this Section 6, except to the extent
that any such condition may have been waived in writing by Buyer and Seller at
or prior to the Closing; provided, however, that absent such waiver, the
Closing shall not operate to waive compliance with any term or condition of
the Agreement:
(i) No suit, action, investigation, inquiry or other
proceeding before any Authority or other Person shall have been
instituted or shall be pending or threatened which questions the
validity or legality of this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby and
which could reasonably be expected to damage materially the Business
or assets of Seller if the transactions contemplated hereby or
thereby are consummated. No injunction, decree or order shall be in
effect prohibiting consummation of the transactions contemplated by
this Agreement or the other Transaction Documents or which would make
the consummation of such transactions unlawful and no action or
proceeding shall have been instituted and remain pending before an
Authority to restrain or prohibit the transactions contemplated by
this Agreement and the other Transaction Documents.
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b. Buyer Requirements. The obligations of Seller to
consummate the transactions contemplated hereby and by the other Transaction
Documents are subject to the satisfaction at or prior to the Closing of the
following conditions, except to the extent that any such condition may have
been waived in writing by Seller at or prior to the Closing:
(i) The representations, warranties, covenants and
agreements of Buyer contained in this Agreement and the other
Transaction Documents or otherwise made in writing by it or on its
behalf pursuant hereto or otherwise made in connection with the
transactions contemplated hereby or thereby shall be true and correct
at and as of the Closing Date, with the same force and effect as if
made at and as of the Closing Date; the Buyer shall have performed or
complied with all agreements and conditions required by this
Agreement and the other Transaction Documents to be performed or
complied with by it on or prior to the Closing Date; and Seller shall
have received a certificate dated the Closing Date in form
satisfactory to it signed by an officer of Buyer to the effect stated
above.
(ii) Seller shall have received a certificate, dated the
Closing Date, of the Secretary or Assistant Secretary of Buyer
certifying, among other things, that attached or appended to such
certificate (A) is a true and correct copy of its Certificate of
Incorporation and all amendments if any thereto as of the date
thereof; (B) is a true and correct copy of its By-Laws; (C) is a
true copy of all corporate actions taken by it, including
resolutions of its board of directors authorizing the execution and
delivery of this Agreement and each other Transaction Document to be
delivered by it pursuant hereto and the consummation of the
transactions contemplated hereby and thereby; and (D) are the names
and signatures of its duly elected or appointed officers who are
authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(iii) Buyer shall have tendered to Seller the cash portion
of the Purchase Price payable at Closing in accordance with Section
2.
(iv) Seller shall have received from Buyer an Assumption
Agreement substantially in the form attached as Exhibit C hereto.
(v) Seller shall have received an opinion of counsel for
Buyer, as of the Closing Date, substantially in the form attached as
Exhibit D hereto, which opinion shall state that no filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 is required to
be made in connection with this Agreement and the transactions
contemplated hereby.
(vi) Seller shall have received from Buyer a Non-Competition
Agreement substantially in the form attached as Exhibit E hereto (the
"Non-Competition Agreement").
(vii) Seller shall have received from Buyer a Lease
Guarantee in substantially the form attached as Exhibit F hereto (the
"Lease Guarantee").
(viii) Seller shall have received from Buyer executed copies
of the Lease Agreement.
(ix) Seller shall have received from Buyer a Franchise
Guarantee in substantially the form attached as Exhibit G hereto (the
"Franchise Guarantee").
(x) Seller shall have received from Buyer the Escrow
Agreement.
(xi) Seller shall have received from Buyer certificates
dated no earlier than thirty (30) days prior to the Closing Date,
from appropriate authorities in the States of Delaware, Illinois and
Wisconsin as to the good standing of Buyer.
(xii) Buyer shall have delivered to Seller executed copies
of state tax sales for resale certificates for the states of Illinois
and Wisconsin.
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(xiii) Buyer shall have delivered to Seller evidence of
Buyer's execution and delivery of all Transaction Documents,
including those required by BKC.
(xiv) Seller shall have received from Buyer all other
documents, instrument and agreements required to be delivered by
Buyer to Seller pursuant to this Agreement and the other Transaction
Documents.
c. Seller Requirements. The obligations of Buyer to
consummate the transactions contemplated hereby and by the other Transaction
Documents are subject to the satisfaction at or prior to the Closing of the
following additional conditions, except to the extent that any such condition
may have been waived in writing by Buyer at or prior to the Closing:
(i) The representations, warranties, covenants and
agreements of Seller contained in this Agreement and the other
Transaction Documents or otherwise made in writing by it or on its
behalf pursuant hereto or otherwise made in connection with the
transactions contemplated hereby or thereby shall be true and correct
at and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date; Seller shall have
performed or complied with all agreements and conditions required by
this Agreement and the other Transaction Documents to be performed or
complied with by it on or prior to the Closing Date; and Buyer shall
have received a certificate dated the Closing Date in form
satisfactory to Buyer signed by an officer of Seller to the effect
stated above.
(ii) Buyer shall have received a certificate, dated the
Closing Date, of the Secretary or Assistant Secretary of Seller
certifying, among other things, that attached or appended to such
certificate (A) is a true and correct copy of Seller's Governing
Instrument and all amendments if any thereto as of the date thereof;
(B) is a true copy of all actions taken by it authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by Seller pursuant hereto and the
consummation of the transactions contemplated hereby and thereby; and
(C) are the names and signatures of its duly elected or appointed
officers who are authorized to execute and deliver this Agreement and
any certificate, document or other instrument in connection herewith.
(iii) Seller shall have delivered to Buyer a bill of sale
and assignment ("Bill of Sale") substantially in the form attached as
Exhibit H hereto, a Lease Assignment (if applicable) and any other
documents of transfer which Buyer reasonably shall request in order
to evidence and effectuate the sale and assignment to Buyer of the
Assets, the Real Property Leases, the Assumed Contracts and the
consummation of all other transactions contemplated by this Agreement
and the other Transaction Documents.
(iv) Seller shall have obtained, and delivered to Buyer,
copies of all consents, approvals or other authorizations which
Seller is required to obtain from, and any filing which Seller is
required to make with, any governmental authority or agency or any
other Person including, but not limited to, consents required from
Burger King (the "Burger King Consents") in connection with the
execution, delivery and consummation of this Agreement and the other
Transaction Documents and the consummation of the transactions
contemplated hereby or thereby (collectively, the "Required
Consents"), in form and substance satisfactory to Buyer.
Notwithstanding the foregoing, Buyer shall be solely responsible for
obtaining any consents or approvals necessary for Buyer to purchase
the Assets or operate the Business from and after the Closing Date.
(v) Buyer shall have received an opinion of counsel for
Seller, as of the Closing Date, substantially in the form attached as
Exhibit I hereto.
(vi) Seller shall have delivered to Buyer an executed copy
of the Non-Competition Agreement.
(vii) Buyer shall have received, if necessary, the written
consent of FNBB and the Jordan Affiliates, in their sole discretion,
to the transactions contemplated hereby.
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(viii) Buyer and its representatives shall have completed,
to their complete satisfaction, an investigation and examination of
all aspects of the Restaurants and the Assets, including the
Financial Statements. No employee or representative of Buyer will
perform on-site due diligence on any of the Restaurants without
Seller's prior approval, at which time such employee or
representative will be accompanied by Seller or its designee. Buyer
shall have completed its review of the Restaurants to confirm that the
equipment in the Restaurants is in proper working order and that the
Restaurants conform in all material respects to Burger King standards
(the "Walk-Thru"). Buyer shall itemize any deficiencies noted in the
Walk-Thru and provide such list to Seller prior to the Closing Date.
Buyer and Seller shall negotiate to determine which deficiencies
shall be corrected by Seller on or prior to the Closing Date.
(ix) Seller shall have delivered to Buyer for each
Restaurant, as applicable:
A. the Assignment of its Real Property Lease, each Assumed
Contract, the Lease Agreement and the Lease Assignment;
provided, however, that Buyer shall be responsible for the
preparation and delivery of documents in accordance with the
provisions of Section 1(d);
B. the Easement Assignments; provided, however, that Buyer
shall be responsible for the preparation and delivery of
documents in accordance with the provisions of Section 1(d);
C. to the extent available, a fully executed original
counterpart of each Real Property Lease in Seller's possession;
D. receipts for funds paid to Seller by Buyer;
E. certificates dated no earlier than thirty (30) days
prior to the Closing Date, from appropriate authorities in the
States of Illinois and Wisconsin as to the good standing of
Seller;
F. all other documents, instruments and agreements
required to be delivered by such Seller to Buyer pursuant to
this Agreement and the other Transaction Documents.
(x) Buyer's auditor shall have:
A. reviewed the financial and accounting system of Seller;
B. reviewed and confirmed the Financial Statements and
results set forth in the Financial Statements;
C. found no objection to the financial and accounting
system of Seller, or Seller and Buyer shall have resolved any
objection raised by the auditor and presented to Seller by
Buyer.
(xi) Buyer shall have received, five (5) days prior to the
Closing Date, copies of all schedules to this Agreement. Seller shall
promptly disclose to Buyer any information contained in its
representations and warranties or the schedules which, because of an
event occurring after the Effective Date, is incomplete or is no
longer correct as of all times after the Effective Date until the
Closing Date.
(xii) Between the Effective Date and the Closing Date,
Seller shall conduct the operation of its Restaurants in the ordinary
and usual course of business, consistent with past practices and will
use its best efforts to preserve intact the present business
organization with respect to its Restaurants, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with landlords, franchisors, dealers, licensors,
licensees, suppliers, contractors, distributors, customers and others
having business relations with it and its Restaurants and will maintain
its Restaurants, Real
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Properties, and Assets in a condition conducive to
the operation of the business currently carried on therein.
(xiii) Seller shall have described on Schedule 6(c)(xiv) any
"employee welfare benefit plan" or "employee pension benefit plan"
(as those terms are respectively defined in sections 3(1) and 3(2) of
the Employee Retirement Income Security Act of 1974 ("ERISA")), any
deferred compensation, incentive or fringe benefit plan that is not
subject to ERISA or any employment agreement maintained by Seller
and/or its Affiliates. Seller shall have provided to Buyer copy of
any written plan or agreement listed on Schedule 6(c)(xiv) ("Employee
Benefit Plan").
(xiv) Seller shall have provided to Buyer copies of all
operating permits and licenses (collectively, the "Approvals") which
are in Seller's possession.
(xv) Seller shall have forwarded to Buyer any notice
evidencing noncompliance with any Regulation or Approval with respect
to the Assets, Leased Assets, Restaurants and Real Properties.
(xvi) Seller shall have provided to Buyer copies of all
documents with respect to any action, suit of proceeding with has
been brought by or on behalf of Seller with respect to the Assets or
the Business.
7. FRANCHISE AND LEASE AGREEMENTS
On or prior to the Closing Date, Buyer and Messrs. Jaro,
Osborn and Hubert, as applicable, shall enter into BKC Franchise Agreements,
BKC Lease/Sublease Agreements and BKC Guarantees for the Restaurants pursuant
to the terms and conditions of the standard forms of such agreements;
provided, however, that the rental terms of the BKC Lease/Sublease Agreements
and the Lease Assignments shall be as set forth in Exhibit 2 to the letter of
intent, dated August 11, 1994, between Seller and Buyer.
8. LEASED EQUIPMENT AND SOFTWARE
The "Assets" to be listed on Schedule D will include certain
Assets which are leased by Seller (the "Leased Assets") and certain computer
software programs (the "Software"). On or prior to the Closing Date, Buyer and
Seller shall execute such agreements as are necessary to transfer from Seller
to Buyer the rights and obligations with respect to the Leased Assets and
Software.
9. ADVERTISING FUNDS
Buyer hereby acknowledges that no advertising funds earned
or accrued as the result of the operation of the Restaurants by Seller prior
to the date of Takeover shall accrue or inure to Buyer's benefit. Buyer shall
purchase all point-of-purchase restaurant promotional materials ordered by
Seller for use in the Restaurants prior to the date of Takeover. Buyer shall
be required to pay for such promotional materials, at Seller's cost, upon the
receipt of an invoice therefor from Seller.
10. PUBLIC UTILITY SERVICES
Buyer, on or before the date of Takeover, shall make all
necessary arrangements for the institution of service by public utilities at
the Restaurants, for Buyer's account only. Buyer shall also obtain a final
reading of any and all public utility service meters located at the
Restaurants prior to Takeover. Any deposits for public utility services made
at any time by Seller shall be returned to Seller forthwith.
11. TRANSFER COSTS
All sales, transfer or use taxes and/or other fees which may
be imposed or assessed by taxing authorities pursuant to federal, state or
local laws as the result of the transactions effected by this Agreement,
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except those taxes imposed upon the income of Seller, which shall be the
responsibility of Seller, shall be paid by the Buyer.
12. EMPLOYEE RELATIONS
It is understood and agreed that all persons employed at the
Restaurants are, prior to Takeover, the employees of Seller. Seller agrees to
be responsible for the payment to all such employees of all wages and benefits
relating to their employment for periods before the date of Takeover. Seller
shall pay these employees any earned but unpaid wages and vacation pay in the
ordinary course and in accordance with past practices, but in any event no
later than ten (10) business days after the date of Takeover, and Seller shall
process any other Seller benefits to which they may be entitled, including
payment of medical plan claims incurred on or before such date and providing
COBRA notice, in accordance with the terms of the Employee Benefit Plans.
Buyer shall not be required to hire any of Seller's former employees
subsequent to Takeover. Seller, with the agreement of Buyer, may transfer its
unemployment and workers' compensation experience relating to the Restaurants
to Buyer.
13. INDEMNIFICATION
a. Buyer and Seller shall each indemnify and save the other
harmless against and from all costs, expenses, liabilities, losses, damages,
suits, actions, fines, penalties, and demands of every kind or nature,
including reasonable counsel fees and enforcement costs (collectively,
"Claims"), by or on behalf of any person, party or governmental authority
whatsoever arising out of the other's failure to perform any of the
agreements, terms, covenants, or conditions of this Agreement which it is
obligated to perform. Seller and Friedman, jointly and severally, shall
indemnify Buyer against any loss incurred by Buyer related to any Claim,
violations of Regulations or other circumstances arising from events occurring
prior to the Takeover at any of the Restaurants or with respect to persons,
employed, served or injured at any of the Restaurants prior to the Takeover.
Buyer shall indemnify Seller and Friedman against any loss incurred by Seller
or Friedman related to any Claim, violations of Regulations or other
circumstances arising from events occurring subsequent to the Takeover at any
of the Restaurants or with respect to persons, employed, served or injured at
any of the Restaurants subsequent to the Takeover. To the extent that any
Claim, violation of Regulations or other circumstance arises from events
occurring both before and after the Takeover, Seller shall indemnify Buyer
solely for that portion of the Claim reasonably attributable to events that
took place on or before the Takeover and Buyer shall indemnify Seller and
Friedman for that portion of the Claim, violation of Regulations or other
circumstance reasonably attributable to events that took place subsequent to
the Takeover. The obligation to indemnify as contained in this Section 13
shall survive the Closing and shall continue until March 31, 1996.
b. SELLER'S AND FRIEDMAN'S AGGREGATE LIABILITY FOR CLAIMS
ASSERTED PURSUANT TO THIS SECTION 13 FOR MISREPRESENTATION OR FOR BREACH OF
REPRESENTATION OR WARRANTY MADE IN THIS AGREEMENT OR IN THE TRANSACTION
DOCUMENTS SHALL BE LIMITED TO $3,000,000.
c. No Claim for breach of representation or warranty shall
be honored until the aggregate amount of such Claims asserted by the claiming
party is at least $700,000, at which time all such individual claims in excess
of $10,000 may be asserted by such party.
d. In the event that Buyer discovers, on or prior to the
Closing Date, facts or circumstances that Buyer reasonably believes would
result in a material Claim against Seller or Friedman, Buyer shall promptly
notify Seller and Friedman of the facts, circumstances and nature of such
Claim.
14. WAIVER OF BULK SALES COMPLIANCE
Buyer agrees to waive any formal requirements of the bulk
sales law of the states in which the Restaurants are located. Seller
represents and warrants to Buyer that, as of the Closing Date, the Assets are
free and clear of all debts and encumbrances and that any trade bills or other
obligations owed as a result of the operation of the Restaurants prior to the
date of Takeover shall be paid in full as they fall due. Seller agrees
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to indemnify Buyer with respect to any Claims arising in connection with any
applicable bulk sales law, including any similar regulation with respect to
state and local taxes.
15. TERMINATION
a. Events of Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(i) By mutual written consent of Seller and Buyer;
(ii) By Seller, if the Closing shall not have occurred on or
before November 30, 1994; provided that Seller shall not be entitled
to terminate this Agreement pursuant to this clause if the failure of
Seller to fulfill any of its obligations under this Agreement (other
than as a result of Seller and Buyer's inability to agree upon the
final forms of the exhibits hereto) shall have been the reason that
the Closing shall not have occurred on or before said date;
(iii) By Buyer, for any reason or no reason, which shall
include, without limitation, Buyer's dissatisfaction with the results
of its due diligence investigation of the Restaurants, the Assets and
the Financial Statements; and
(iv) By Seller or by Buyer, if there shall be any law or
Regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Buyer or Seller from
consummating the transactions contemplated hereby is entered and such
judgment, injunction, order or decree shall become final and
nonappealable.
b. Effect of Termination; Right to Proceed. In the event
that a party wishes to terminate this Agreement, it shall give written notice
thereof whereupon all further obligations of the parties under the Agreement
shall terminate without further liability of any party hereunder, except that
the agreements contained in Sections 16(n) and 17 shall survive the
termination hereof. In the event that a condition precedent to its obligation
is not met, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the transactions contemplated hereby. Notwithstanding anything to
the contrary contained herein, no party shall have any obligation to the other
hereunder arising out of the occurrence of an event or circumstance not within
the control of such party which event or circumstance resulted in a
representation or warranty of such party ceasing to be true.
16. MISCELLANEOUS
a. Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
b. Entire Agreement. This Agreement and the other
Transaction Documents and the exhibits and schedules referred to herein and
therein contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior arrangements or understandings
with respect thereto; provided, however, that the provisions of Section 9 of
the letter of intent, dated August 11, 1994, between Buyer and Friedman, shall
remain in effect through the Closing Date. All exhibits and schedules referred
to herein are intended to be and hereby are specifically made a part of this
Agreement.
c. Definitions. For the purposes of this Agreement:
(i) "Affiliate" of any person shall mean any person,
corporation, proprietorship, partnership or business entity which,
directly or indirectly, owns or controls, is under common ownership
or control with, or is owned or controlled by, such person, and any
directors, officers, partners or 50% or more
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owners of such person. For purposes of this Agreement, Sheldon
Friedman shall be deemed an Affiliate of Seller and Messrs. Jaro,
Osborn and Hubert shall be deemed to be Affiliates of Buyer.
(ii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iii) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by Seller at
the date of this Agreement and/or the Closing Date, and such business
and operations relating to the Assets and Assumed Contracts.
(iv) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(v) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vi) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(vii) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(viii) "material" means any claim, circumstance or state of
facts which results in, or would reasonably be expected to result in,
losses or the expenditure or commitment of $250,000 or more, or which
results in any material limitation or restriction on the ability of
Seller or Buyer to conduct the Business.
(ix) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
(x) "Order" means any decree, order, injunction, rule,
judgment, consent of or by a U.S. Authority.
(xi) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xii) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xiii) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the certificate of incorporation and
By-Laws of the Seller, as applicable.
(xiv) "Seller's knowledge" and "the knowledge of Seller"
shall each mean to the best of Friedman's knowledge, including
knowledge of Seller's books and records, without independent
investigation.
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(xv) "Transaction Documents" shall mean this Agreement and
all other agreements, documents and all instruments to be entered
into pursuant to this Agreement or in connection herewith including
all exhibits and schedules annexed hereto and thereto.
d. Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
e. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and delivered personally, sent by telecopier,
federal express or other reputable overnight courier or sent by certified or
registered mail, postage prepaid, return receipt requested, at the addresses
set forth below:
f. if to Buyer, to:
National Restaurant Enterprises, Inc.
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: A. Richard Caputo, Jr.
g. if to Seller, to:
BNB Land Ventures, Inc.
1020 North Milwaukee Avenue
Suite 360
Deerfield, IL 60015
Attention: Sheldon Friedman
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by FedEx or other reputable overnight courier and (iv) upon receipt by
the sender of telecopier confirmation, if sent by telecopier.
h. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the heirs,
executor, personal representatives, legal representatives, successors and
assigns of the parties hereto, and shall not be assignable by either party
without the prior written consent of the other party; provided, however, that
the Buyer may assign at Buyer's sole discretion any or all of its interest to
a lender of Buyer with written notice to Seller.
i. Litigation. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.
EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND
SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO
THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED
BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF
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FORUM SET FORTH IN THIS SECTION 16(j) SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
j. Arbitration. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. SECTIONS
1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD. IN THE EVENT THAT ANY PARTY HERETO SHALL MAKE A CLAIM FOR
INDEMNIFICATION PURSUANT TO SECTION 13 HEREOF, AND SUCH CLAIM SHALL BE FINALLY
AND CONCLUSIVELY DENIED, THE PARTY MAKING SUCH CLAIM SHALL PAY, IN ADDITION TO
ITS OWN COUNSEL FEES AND ENFORCEMENT COSTS, THE COUNSEL FEES AND ENFORCEMENT
COSTS OF THE OTHER PARTIES HERETO WITH RESPECT TO SUCH CLAIM.
k. Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
l. Buyer's Designated Affiliate. Buyer may designate one or
more of its wholly-owned subsidiaries or Affiliates to carry out all or part
of the transactions contemplated hereby to be carried out by Buyer, which
designation shall not relieve Buyer of its obligations hereunder.
m. Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
n. Announcements; Confidentiality. From the Effective Date
until Closing, except as required by law, no announcement of the existence or
terms of this Agreement or the other Transaction Documents or the transactions
contemplated hereby and thereby shall be made publicly or to the employees or
customers of Seller by any party to this Agreement or any of its respective
representatives without the advanced written approval of the other parties
hereto; provided, however, that Seller may notify such of its employees as is
necessary to consummate the transactions contemplated by this Agreement. From
and after the Effective Date, neither Seller, Friedman nor their respective
Affiliates shall disclose to any Person, including but not limited to any
Burger King franchisee, the terms and conditions of this Agreement, other than
as necessary to consummate the transactions contemplated by this Agreement.
17. EXPENSES
(a) Allocation. Except as otherwise provided herein, Seller
shall pay all of its expenses (including the fees and expenses of its
accountants, brokers, financial advisors and counsel) in connection with the
transactions contemplated hereunder. Except as otherwise provided herein,
Buyer shall pay all of its expenses (including the fees and expenses of its
accountants, brokers, financial advisors and counsel) in connection with the
transactions contemplated hereunder. Notwithstanding the foregoing, the
following expenses shall be allocated as set forth below:
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(i) Seller will pay any outstanding obligations it has to
the current employees of the Restaurants in the ordinary course and
in accordance with past practice, but in no event later than ten (10)
business days after the Date of Takeover.
(ii) Buyer will be required to pay any equipment maintenance
costs or other similar contracts which have been prepaid by Seller at
the time of Closing.
18. COOPERATION
Seller and Buyer shall each use its best efforts to take all
actions required of it to fulfill its obligations under the terms of this
Agreement and to facilitate the transition and consummation of the
transactions contemplated hereby, including, without limitation, Seller using
commercially reasonable efforts to provide (i) a compatible format for payroll
data that will allow Buyer's payroll provider to merge payroll data for the
persons employed at the Restaurants into the provider's master files and (ii)
point of sale information on all transactions at the Restaurants occurring
coincident with or after the Takeover. Buyer agrees to cooperate with Seller
in defending or settling any claim or action arising out of Seller's ownership
or operation of the Assets or other property that is the subject of this
Agreement.
19. PURCHASE OPTION
(a) Buyer, and its assignees and designees, shall have the
right, at any time and from time to time commencing on the Closing Date and
ending on the date which is the fourth anniversary of the Closing Date, both
dates inclusive (the "Option Period"), to purchase any or all of the parcels
of land described on Schedule 19 to be attached hereto, on or prior to the
Closing Date, and made a part hereof, together with all easements, rights of
way, privileges, appurtenances and other rights, if any, pertaining thereto,
all buildings and improvements thereon, and all fixtures, machinery and
equipment attached to or appurtenant thereto (all of the foregoing,
collectively, the "Owned Properties" and individually, an "Owned Property"),
by delivering to Seller from time to time during the Option Period a notice
(each, a "Purchase Option Notice") indicating Buyer's (or Buyer's assignee or
designee) desire to exercise the purchase option contained in this Section,
which notice shall specify the date (each, an "Option Closing Date"), which
shall be not less than thirty nor more than ninety days from the date of such
Purchase Option Notice, for the conveyance of the Owned Property, or the Owned
Properties, as the case may be, which Buyer (or Buyer's assignee or designee)
has elected to purchase and the location for the closing of the purchase. The
purchase price (each, a "Purchase Price") for each Owned Property shall be (i)
ten (10) multiplied by (ii) the "Base Rent" (as defined in the applicable
lease) payable under the lease pertaining to such Owned Property between Buyer
and Seller, or Seller's Affiliate, as the case may be, for the twelve month
period immediately preceding the giving of the Purchase Option Notice with
respect to such Owned Property (the "Prior Year's Base Rent"); provided,
however, in the event Buyer shall purchase (or attempt to purchase but be
unable to do so as the result of any matter outside of Buyer's control) all,
but not less than all, of the Owned Properties through the sending of a single
Purchase Option Notice during the Option Period, the Purchase Price for all of
the Owned Properties shall be (i) nine and one-half (9.5) multiplied by (ii)
the Prior Year's Base Rent. Buyer shall order title insurance commitments with
respect to each Owned Property prior to the Closing Date and shall, promptly
upon receipt of such title commitments, identify to Seller those Liens which
are unacceptable to Buyer. Seller shall deliver to Buyer a Disclosure Document
in form and substance as required under the Illinois Real Estate Property
Transfer Act ("IRPTA") in the manner required by IRPTA with respect to each
Owned Property. Each Owned Property shall be conveyed subject only to those
matters acceptable to Buyer pursuant to Section 4(k)(i) hereto with respect to
such Owned Property and any other matters previously consented to by Buyer in
writing (collectively, the "Permitted Exceptions"). Seller shall, at Seller's
sole cost and expense, remove any and all Liens with respect to any Owned
Property, other than the Permitted Exceptions pertaining to such Owned
Property and any Liens placed on the Owned Property by Buyer,
prior to the Option Closing Date for such Owned Property, so that Buyer (or
its assignee or designee) may obtain on the Option Closing Date for such Owned
Property an owner's title insurance policy (together with such endorsements as
Buyer shall reasonably request, which endorsements shall be paid for by Buyer,
other than with respect to those endorsements which are necessary to clear
Liens required to be released pursuant to this Agreement, which endorsements
shall be paid for by Seller), at regular rates at Seller's expense, in form
and substance and from a title insurer reasonably satisfactory to Buyer,
containing as exceptions only the Permitted Exceptions pertaining to such
Owned Property, any Liens placed on the Owned Property by Buyer,
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and any ALTA standard printed exceptions other than those which may be removed
through appropriate endorsements or the execution and delivery by Seller and or
Seller's Affiliate of a standard form owner's affidavit or the delivery of an
ALTA survey of the Owned Property, which shall be supplied at Buyer's expense.
All state and county transfer and other taxes payable upon the conveyance of
any Owned Property shall be paid by Seller on the Option Closing Date, all
municipal transfer and other taxes payable upon the conveyance of any Owned
Property shall be paid by Buyer on the Option Closing Date, and all other
items shall be apportioned as such items are customarily apportioned in
connection with the sale of similar properties similarly located. On each
Option Closing Date, Seller shall deliver, or cause to be delivered, to Buyer,
with respect to each Owned Property being conveyed on such date, the following
documents in form and substance reasonably satisfactory to Buyer:
(i) a Special Warranty Deed (each, a "Deed"), so as to convey to
Buyer (or Buyer's assignee or designee) title to such Owned Property,
free of all Liens other than the Permitted Exceptions, which Deed
shall be in recordable form, stamped, duly executed and acknowledged,
together with any other conveyance documents necessary or appropriate
to convey all right, title and interest to such Owned Property;
(ii) all notices, correspondence, documents, surveys, reports,
studies, agreements, plans, specifications, certificates of
occupancy, permits, licenses, records and instruments in the
possession of, or reasonably obtainable by, Seller and/or Seller's
Affiliates pertaining to such Owned Property;
(iii) a "non-foreign person affidavit" that meets the requirements of
Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended,
and contains the Seller's or Seller's Affiliate's taxpayer
identification number; and
(iv) such other documents, including, without limitation, transfer
tax declarations, conveyancing documents, title affidavits and
statements, corporate and partnership resolutions, and legal opinions
as may be requested by Buyer (or Buyer's assignee or designee) or are
required to be delivered to consummate the transactions contemplated
hereunder.
(b) Each of the representations and warranties with respect to any
Owned Property contained in Sections 4(a)-(d) this Agreement which is the
subject of a Purchase Option Notice shall be deemed to be remade by Seller as
of the date of the receipt of such Purchase Option Notice and as of the date
of the Option Closing Date pertaining to such Owned Property. If any such
representations or warranties are untrue, Seller shall notify Buyer promptly,
and in any event at least ten (10) business days prior to such Option Closing
Date (or immediately if such condition arises within ten (10) business days of
such Option Closing Date). Notwithstanding anything to the contrary contained
in this Agreement, in the event that Buyer (or Buyer's assignee or designee)
shall send a Purchase Option Notice and shall thereafter, at any time prior to
the acceptance of the Deed pertaining to any Owned Property which is the
subject of such Purchase Option Notice, elect for any reason or for no reason
not to purchase any Owned Property or Owned Properties which were the subject
of such Purchase Option Notice, Buyer (or Buyer's assignee or designee) may
rescind such Purchase Option Notice with respect to any such Owned Property or
Owned Properties, and thereafter any such Owned Property or Owned Properties
shall continue to be subject to the purchase option granted hereunder during
the Option Period. In the event that Seller shall be unable to comply with any
provisions of this Agreement, Buyer (or Buyer's assignee or designee) shall be
entitled to any and all remedies available at law or in equity including,
without limitation, the right to specific performance. Buyer and Seller shall,
on the Closing Date, execute an instrument in recordable form and otherwise in
form and substance satisfactory to Buyer, for each of the Owned Properties,
describing the purchase option contained in this Section, which instruments
shall be recorded by Buyer in the appropriate county land records promptly
after the Closing Date.
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(c) The purchase option set forth in this Section 19 shall terminate
in the event that Buyer shall (i) sell all or substantially all of its assets
to, or (ii) merge with, a Person other than an Affiliate of Buyer.
20. BROKERS
(a) To Seller's knowledge, except for Wayne Miller, there is no
broker, finder, intermediary or other person acting in a similar capacity who
is involved in the transactions contemplated by this Agreement, who would be
entitled to a fee or commission upon the Closing. Any fee or commission to be
paid to Wayne Miller shall be the sole responsibility of Seller.
(b) Except for fees payable to members of Buyer's management, FNBB,
and the Jordan Affiliates, including for the purposes of this Section 20(b)
TJC Management Corporation, Buyer knows of no broker, finder, intermediary or
other person acting in a similar capacity who is involved in the transactions
contemplated by this Agreement, who would be entitled to a fee or commission
upon the Closing. Any fee or commission to be paid to the parties enumerated
in this Section 20(b) shall be the sole responsibility of Buyer.
21. BKC GUARANTEES
Buyer hereby agrees with Seller that Buyer and Messrs.
Jaro, Osborn and Hubert, respectively, shall only agree with BKC to be
released from their respective guarantees of obligations to BKC in the event
that Seller and Friedman are released from their respective guarantees of
obligations to BKC with respect to the Restaurants.
19
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This Agreement is hereby executed by the parties as of the Effective
Date indicated on the first page of this Agreement.
BNB LAND VENTURES, INC.
By:
Title:
By: Sheldon Friedman
NATIONAL RESTAURANT
ENTERPRISES, INC.
By: A. Richard Caputo, Jr.
Title: Vice President
20
ASSET PURCHASE AGREEMENT
among
DMW, INC., THE SHAREHOLDER OF DMW, INC.
and
AMERIKING COLORADO CORPORATION I
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- PURCHASE AND SALE OF ASSETS .................................. 2
1.1 Purchase and Sale ....................................... 2
1.2 Store Bank .............................................. 3
1.3 Inventory ............................................... 3
1.4 Purchase Price for Assets; Allocations .................. 3
1.5 Consulting and Noncompetition Agreement ................. 3
1.6 Liabilities of Seller.................................... 3
1.7 Prorations............................................... 4
1.8 Exclusion of Assets...................................... 4
ARTICLE II -- CLOSING AND TERMINATION...................................... 4
2.1 Time, Date and Place..................................... 4
2.2 Termination.............................................. 4
2.3 Effect of Termination.................................... 5
ARTICLE III -- REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDER................................ 5
3.1 Ownership of Seller's Stock.............................. 5
3.2 Due Organization; Name and Address; Good Standing,
Authority of Seller...................................... 5
3.3 Authorization and Validity of Agreements................. 5
3.4 Agreement Not in Conflict with
Other Instruments;Required Approvals Obtained............ 6
3.5 Conduct of Business in Compliance with
Regulatory and Contractual Requirements.................. 6
3.6 Legal Proceedings........................................ 6
3.7 Financial Information.................................... 7
3.8 Tax Matters.............................................. 7
3.9 Franchise Agreements..................................... 7
3.10 Title to Assets; Equipment and Fixed Assets.............. 7
3.11 Records.................................................. 7
3.12 Employment Matters....................................... 8
3.13 Absence of Certain Changes or Events..................... 8
3.14 Adverse Conditions....................................... 9
3.15 Leases................................................... 9
3.16 Bonus, Pension or Other Plans, etc....................... 9
3.17 Full Disclosure.......................................... 9
3.18 No Brokerage............................................. 9
3.19 Seller's Franchise Agreement............................. 9
3.20 Operation of Business ................................... 10
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............. 10
4.1 Due Organization; Good Standing; Power................... 10
4.2 Authorization and Validity of Documents.................. 10
4.3 No Brokerage............................................. 10
<PAGE>
4.4 Obligations Assumed...................................... 10
4.5 Burger King Obligations.................................. 10
ARTICLE V -- SELLER AND SHAREHOLDER'S COVENANTS............................ 10
5.1 Affirmative Covenants........................................ 10
ARTICLE VI -- OPINIONS OF COUNSEL.......................................... 12
6.1 Opinion of Seller's and Shareholder's Counsel............ 12
6.1.1 Ownership of Seller's Stock..................... 12
6.1.2 Due Organization; Good Standing; Authority of
Seller.......................................... 12
6.1.3 Authorization and Validity of Agreements........ 12
6.1.4 Agreement Not in Conflict with
Other Instruments; Required Approvals
Obtained........................................ 12
6.1.5 Legal Proceedings............................... 13
6.2 Opinion of Purchaser's Counsel........................... 13
6.2.1 Due Organization; Good Standing; Authority of
Purchaser....................................... 13
6.2.2 Authorization and Validity of Agreements........ 13
ARTICLE VII -- CONDITIONS.................................................. 13
7.1 Seller's Conditions to Close............................. 13
7.2 Purchaser's Conditions to Close.......................... 14
7.3 Contemporaneous Transfer................................. 17
ARTICLE VIII -- INDEMNIFICATION ........................................... 17
8.1 Indemnification By Seller And Shareholder................ 17
8.2 Indemnification by Purchaser............................. 17
8.3 Defense of Claims........................................ 18
ARTICLE IX -- MISCELLANEOUS................................................ 19
9.1 Survival of Representations, Warranties and
Agreements............................................... 19
9.2 Notices.................................................. 19
9.3 Entire Agreement......................................... 20
9.4 Assignability............................................ 20
9.5 Binding Effect; Benefit.................................. 20
9.6 Severability............................................. 20
9.7 Amendment; Waiver........................................ 20
9.8 Section Headings......................................... 21
9.9 Counterparts............................................. 21
9.10 Applicable Law; Jurisdiction and Venue; Service of
Process.................................................. 21
9.11 Remedies................................................. 21
9.12 Further Assurances....................................... 21
9.13 Use of Genders........................................... 21
9.14 Risk of Loss............................................. 22
9.15 Negotiations with Other Persons.......................... 22
9.16 Expenses of Transactions................................. 22
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 5th day of July, 1995, among DMW, INC., a Colorado corporation (the
"Seller"); and DANIEL L. WHITE (referred to as the "Shareholder"), and
AMERIKING COLORADO CORPORATION I, a Delaware corporation (the "Purchaser").
R E C I T A L S:
WHEREAS, the Seller operates three Burger King restaurants (the
"Business") located at (1) 2708 11th Avenue, Greeley, Colorado and identified by
Burger King Store No. 2942; (2) 102 East 29th Street, Loveland, Colorado and
identified by Burger King Store No. 4361; and (3) 1250 S. Hover Street,
Longmont, Colorado and identified by Burger King Store No. 4690 (hereinafter,
collectively referred to as the "Restaurants");
WHEREAS, the Shareholder owns of record and beneficially all of the
outstanding shares of the capital stock of the Seller, and is a director and
officer of the Seller;
WHEREAS, the Seller desires to sell, assign, transfer and deliver to
the Purchaser, and the Purchaser desires to purchase from the Seller, certain
of the assets of the Seller as described in ARTICLE I hereof on the terms and
subject to the conditions hereinafter contained;
WHEREAS, the Purchaser and the Shareholder desire to enter into
certain agreements between them providing for, among other things, the
provision of certain services by Daniel L. White for the Purchaser, on the
terms and subject to the conditions hereinafter contained;
WHEREAS, Seller occupies real property (the "Premises") pursuant to
Lease Agreements (the "Real Property Leases") which Seller proposes to assign
to Purchaser, and Purchaser proposes to agree to such assignments of Seller's
leasehold interests with respect to the Real Property Leases; and
WHEREAS, Purchaser proposes to assume the Real Property Leases and
assume certain contracts as set forth herein.
NOW THEREFORE, in consideration of the Recitals that shall be deemed
to be a substantive part of this Agreement and the mutual covenants, promises,
agreements, representations and warranties contained in this Agreement, the
parties hereto do hereby covenant, promise, agree, represent and warrant as
follows:
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-- PURCHASE AND SALE OF ASSETS
.0 Purchase and Sale. On the terms and subject to the
conditions set forth in this Agreement, at the Closing on the Closing Date (as
such terms are defined in Section 2.1 hereof), the Seller shall sell, assign,
transfer and deliver to the Purchaser and the Purchaser shall purchase from
the Seller all of the right, title and interest of Seller in and to the
following assets of the Seller (all of which assets of the Seller are
hereinafter collectively referred to as the "Assets"):
.0 All of the Seller's equipment, furniture, materials and
supplies, including, but not limited to, all of the equipment, furniture,
materials and supplies described in EXHIBIT 1.1.1 attached hereto and
incorporated by reference herein (the "Equipment").
.1 All of the Seller's fixed assets, including, but not limited
to, all of the fixed assets described in EXHIBIT 1.1.2 attached hereto and
incorporated by reference herein (the "Fixed Assets").
.2 All of the Seller's accounts receivables (excluding rebates
from Seller's vendors).
.3 All of the Seller's saleable, usable and merchantable
Inventory (as hereinafter defined) located at the Restaurants.
.4 All of the Seller's rights under the following Seller's
Burger King Franchise Agreements between Seller and Burger King Corporation,
copies of which are attached hereto as EXHIBIT 1.1.5 and incorporated by
reference herein (collectively and individually the "Franchise Agreements"): (i)
Franchise Agreement dated May 20, 1980 relating to Franchise #2942 located in
Greeley, Colorado, (ii) Franchise Agreement dated January 24, 1985 relating to
Franchise #4361 located in Loveland, Colorado, and (iii) Franchise Agreement
dated September 19, 1985 relating to Franchise #4690 located in Longmont,
Colorado.
.5 All of the Seller's leasehold and tenant improvements
(excluding fixtures that have become part of the real property to which they are
attached).
.6 All of the Seller's customer lists and customer sales files
("Customer Lists").
.7 All of the Seller's leasehold interests in the Real Property
Leases. At the Closing, the Seller shall assign to the Purchaser all of
Seller's leasehold interest in the Real Property Leases, parking and other
access agreements relating to the Premises. Prior to the Closing, Seller shall
deliver to Purchaser three (i) Lease Assignment and Assumption Agreements (the
"Lease Assignments") , and (ii) Consents to Assignment, Estoppel, and Releases
in the form of EXHIBIT 1.1.8 (A) and (B) attached hereto and incorporated by
reference herein.
.8 All of the Seller's goodwill and original copies of all of
Seller's employment and personnel records, books and records relating or
pertaining to Seller's Business, including all sales records and similar data
(hereinafter collectively referred to as the "Records"); the
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Seller shall deliver to the Purchaser copies of the Records upon the written
request of the Purchaser. Seller reserves the right to inspect such records at
such reasonable times and places after Closing for any legitimate business
purpose including tax audits.
.1 Store Bank. Upon the Closing, Seller shall leave cash
(the "Store Bank") in the amount of not less than $1,000 at each of the
Restaurants. Purchaser agrees to purchase the Store Bank at each Restaurant
from Seller and agrees to pay for the Store Bank in addition to the Purchase
Price at Closing.
.2 Inventory. Within 24 hours prior to the date of the Closing,
an inventory shall be taken by Seller (with the participation of the
Purchaser) of all merchantable food, paper, new uniforms, current promotional
items, supply inventory (including but not limited to, consumables, operating
and cleaning supplies) and other miscellaneous items (the "Inventory") located
at the Restaurants. Purchaser agrees to purchase the Inventory from Seller,
and Seller agrees to sell the Inventory to Purchaser, at Seller's actual
Inventory purchase price. On the Closing Date, Purchaser agrees to pay the
Seller the sum of $6,000 per Restaurant separately and not as part of the
Purchase Price, as partial payment for the Inventory. Following the taking of
the Inventory as discussed above, Seller and Purchaser agree to make
adjustments to the Inventory purchase price for the difference between the
amount paid on the Closing Date and Seller's actual Inventory purchase price.
In the event the Inventory purchase price is less than $18,000 for all
Restaurants, Seller shall within fifteen (15) days of the Closing Date,
reimburse Purchaser for any overage in payment. In the event the Inventory
purchase price is in excess of $18,000 for all Restaurants, Purchaser agrees
to make payment to the Seller within fifteen (15) days of the Closing Date of
any additional monies which may be due for the purchase of the Inventory.
.3 Purchase Price for Assets; Allocations. The purchase price
for the Assets shall be $2,040,000 adjusted pursuant to Section 1.7 (the
"Purchase Price"), plus (i) the dollar amount in the Store Bank at the Closing
Date; and (ii) $18,000 for the estimated value of the Inventory at the Closing
Date. The parties agree that the Purchase Price for the Assets shall be
allocated among the Assets in the manner set forth on EXHIBIT 1.4, which shall
be mutually agreed to by Seller and Purchaser prior to the Closing Date. The
total purchase price shall be paid in cash at closing.
.4 Consulting and Noncompetition Agreement. At the Closing, the
Purchaser, the Shareholder, WSG, Inc. and Seller shall enter into a Consulting
and Noncompetition Agreement in the form attached hereto as EXHIBIT 1.5
(hereinafter referred to as the "Consulting and Noncompetition Agreement")
pursuant to which Shareholder shall render consulting services to the
Purchaser for a period of one (1) year from and after the Closing Date and the
Seller, WSG, Inc., and Shareholder shall agree not to compete with the
business of the Purchaser for five (5) years from and after the Closing Date.
.5 Liabilities of Seller. Except as set forth in this Section
1.6, the Seller shall be and remain solely liable and responsible for all
debts, obligations, duties, and liabilities of the Seller and its business.
The Purchaser does not and shall not assume, agree to pay or pay any debts,
obligations, duties or liabilities of any nature of the Seller or its
business, including, but not limited, to any debts, obligations, duties or
liabilities relating to the Seller's employees or employee benefit plans,
regardless of whether any such debt, obligation, duties or liability arises
under any contract, agreement, practice,
3
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arrangement, statute, law, ordinance, rule, regulation or otherwise,
and nothing in this Agreement or otherwise is intended or shall be construed
to the contrary. The parties further covenant, promise and agree that the
Purchaser is not and shall not be obligated or required to employ any of the
Seller's employees. Notwithstanding the foregoing, Purchaser agrees to assume
from and after the Closing Date all of the rights and obligations of the
Seller attributable to the period from and after the Closing Date under the
Franchise Agreement, the Real Property Leases and the Contracts (as
hereinafter defined) (collectively, the "Assumed Contracts").
.6 Prorations. All customary prorations with respect to
obligations under the Assumed Contracts, utility and fuel charges, personal
property taxes and other proratable charges related to the operation of the
Restaurants shall be adjusted between the parties as of 6:00 a.m. on the
Closing Date. Payment of the amount due by reason of the foregoing prorations
shall be made at the Closing or as soon thereafter as reasonably practicable.
All real estate taxes which are due and payable during the tax year in which
the Closing occurs shall, when received, be prorated as of the Closing Date.
All rentals, including minimum and percentage rentals, and other monetary
obligations under the Real Property Leases shall be adjusted for the month in
which the Closing occurs.
.7 Exclusion of Assets. Those assets of the Seller and/or
Shareholder as set forth in full in EXHIBIT 1.8 attached hereto and
incorporated herein (the "Excluded Assets") are not being purchased by the
Purchaser.
I -- CLOSING AND TERMINATION
.0 Time, Date and Place. The closing of the purchase and sale
of the Assets and the other transactions contemplated by this Agreement
(referred to throughout this Agreement as the "Closing") shall take place at
the law offices of FREEBORN & PETERS, 950 Seventeenth Street, Suite 2600,
Denver, Colorado 80202. The time, place and date of the Closing are referred
to throughout this Agreement as the "Closing Date."
Unless this Agreement is terminated as provided for herein, the
Closing shall occur on the later of (i) August 31, 1995; and (ii) ten (10)
days following the satisfaction of all conditions precedent set forth in
ARTICLE VII. If such day is not a business day then the Closing shall occur on
the next succeeding business day.
.1 Termination.
.0 If the Closing contemplated hereunder has not
occurred on or before September 30, 1995, either Purchaser or Seller may
terminate this Agreement upon written notice to the other party.
.1 If any of the representations, warranties or
covenants of Seller or the Shareholders are found to be untrue or breached in
any material respect, at or prior to Closing, and Seller or the Shareholders
shall not have cured such breach within 30 days after Purchaser shall have given
written notice to Seller of the existence of such breach, Purchaser may
terminate this Agreement upon written notice to Seller.
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.2 This Agreement may be terminated by the written
agreement of Purchaser and Seller. This Agreement may be terminated by Purchaser
in its sole discretion if any of the contingencies set forth in Sections 7.2.8,
7.2.9 or 7.2.10.7 are not met to Purchaser's satisfaction.
.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 2.2, this Agreement shall be
of no further force and effect, with no liabilities or obligations to any
party under this Agreement; provided, however, that the parties shall not be
released from any liabilities, claims or actions regarding the falsity in any
material respect of a representation or warranty set forth in ARTICLE III or
ARTICLE IV or a failure to perform or comply with any material obligation
under this Agreement.
II -- REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDER
The Seller and the Shareholder, jointly and severally, represent and
warrant to the Purchaser as of the date hereof and as of the Closing on the
Closing Date each of the following:
.0 Ownership of Seller's Stock. The Shareholder is the sole and
exclusive record and beneficial owner of all of the outstanding shares of the
capital stock of the Seller. The Shareholder has duly approved the Seller's
sale, assignment, transfer and delivery of the Assets to the Purchaser in
accordance with the terms of this Agreement, the consummation of all the
transactions contemplated hereby and the Seller entering into the Consulting
and Noncompetition Agreement.
.1 Due Organization; Name and Address; Good Standing, Authority
of Seller. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado. The only name and
business address of the Seller which has been used by the Seller at any time
within the past three years ending at the date of this Agreement is 2605 64th
Avenue, Greeley, Colorado 80634. The Seller has full right, power and
authority to own, lease and operate its properties and assets, and to carry on
its Business. The Seller is duly licensed, qualified and authorized to do
business in each jurisdiction in which the properties and assets owned by
it or the nature of the business conducted by it make such licensing,
qualification and authorization legally necessary. The Seller is not in breach
or violation of, and the execution, delivery and performance of this Agreement
will not result in a breach or violation of, any of the provisions of the
Seller's articles of incorporation, as amended to the date of this Agreement
(the "Articles") or by-laws, as amended to the date of this Agreement (the
"By-Laws"), or any agreement to which it is a party.
.2 Authorization and Validity of Agreements. The Seller and the
Shareholder have the legal capacity, right, power, and authority to enter into
this Agreement and the Consulting and Noncompetition Agreement. The Seller has
the full right, power and authority to execute, acknowledge, seal and deliver
this Agreement and to perform the transactions contemplated by this Agreement.
The execution, acknowledgment, sealing and delivery of this Agreement by the
Seller and the Shareholder and the performance by the Seller and the Shareholder
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate and shareholder action. This Agreement has been duly
executed, acknowledged, sealed and delivered by the Seller and Shareholder and
is the legal, valid and binding obligation of the Seller and Shareholder
enforceable against the Seller and Shareholder, respectively, in accordance
with its
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terms. The Consulting and Noncompetition Agreement, when executed,
acknowledged, sealed and delivered by the Seller and the Shareholder, will be
the legal, valid and binding obligation of the Seller and the Shareholder,
respectively, enforceable against the Seller and against the Shareholder,
respectively, in accordance with its terms, except in each case as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors rights
generally.
.3 Agreement Not in Conflict with Other Instruments; Required
Approvals Obtained. The execution, acknowledgment, sealing, delivery, and
performance of this Agreement and the Consulting and Noncompetition Agreement
by the parties thereto, and the consummation of the transactions contemplated
by this Agreement and the Consulting and Noncompetition Agreement will not (a)
violate or require any consent, approval, or filing under, (i) any common law,
law, statute, ordinance, rule or regulation (collectively referred to
throughout this Agreement as "Laws") of any federal, state or local government
(collectively referred to throughout this Agreement as "Governments") or any
agency, bureau, commission, instrumentality or judicial body of any
Governments (collectively referred to throughout this Agreement as
"Governmental Agencies"), or (ii) any judgment, injunction, order, writ or
decree of any court, arbitrator, Government or Governmental Agency by which
the Seller or any of the Assets is bound; (b) conflict with, require any
consent, approval, or filing under, result in the breach or termination of any
provision of, constitute a default under, or result in the creation of any
claim, security interest, lien, charge, or encumbrance upon any of the Assets
pursuant to (i) the Seller's Articles or By-Laws, (ii) any indenture,
mortgage, deed of trust, license, permit, approval, consent, franchise, lease,
contract, or other instrument, document or agreement to which the Seller is a
party or by which the Seller, or any of the Assets is bound, or (iii) any
judgment, injunction, order, writ or decree of any court, arbitrator,
Government or Governmental Agency by which the Seller or any of the Assets is
bound; and all permits, licenses and authorizations of any Government or
Governmental Agency required to be obtained by the Seller prior to the
Closing, shall have been obtained and shall be in full force and effect as of
the Closing Date.
.4 Conduct of Business in Compliance with Regulatory and
Contractual Requirements. To the best of Seller's and Shareholder's knowledge,
the Seller has conducted and is conducting its business in compliance with all
applicable Laws of all Governments and Governmental Agencies.
.5 Legal Proceedings. There is no action, suit, proceeding,
claim or arbitration, or any investigation by any person or entity, including,
but not limited to, any Government or Governmental Agency, (i) pending, to
which the Seller or the Shareholder is a party, or to the knowledge of the
Seller or the Shareholder, threatened against or relating to the Seller, the
Seller's business or the Assets, or (ii) challenging the Seller's or the
Shareholder's right to execute, acknowledge, seal, deliver, perform under or
consummate the transactions contemplated by this Agreement and, as respects the
Seller and Daniel L. White, the Consulting and Noncompetition Agreement, or
(iii) asserting any right with respect to any of the Assets, and, in each such
case, there is no basis for any such action, suit, proceeding, claim,
arbitration or investigation.
.6 Financial Information. Attached hereto as EXHIBIT 3.7 are
copies of the unaudited Balance Sheets of Seller as of September 30, 1994 and
March 31, 1995, and the Operating Statements of the Seller for the periods
October 1, 1992 to September 30, 1993, October 1, 1993 to September
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30, 1994, and an interim statement from October 1, 1994 to March 31, 1995, which
are being provided by the Seller and the Shareholder to the Purchaser (the
"Financial Statements"). The Financial Statements are in accordance with the
books and records of the Seller, are true, correct and complete and accurately
present the Seller's financial position as of the dates set forth therein and
the results of the Seller's operations for the periods then ended; all such
Financial Statements are in conformity with the accounting principles
historically utilized by the Seller and applied on a consistent basis during
each period and on a basis consistent with that of prior periods. Until the
Closing Date, Seller shall deliver to Purchaser month end balance sheets and
income statements within 15 days of the end of each month.
.7 Tax Matters. All tax returns of the Seller as filed by the
Seller with the Internal Revenue Service (the "IRS") and all information
reported on the returns are true, accurate, and complete. The Seller is not a
party to, and is not aware of, any pending or threatened action, suit,
proceeding, or assessment against it for the collection of taxes by any
Government or Governmental Agency. The Seller has duly and timely filed with
all appropriate Governments and Governmental Agencies, all tax returns,
information returns, and reports required to be filed by the Seller. The
Seller has paid in full all taxes, interest, penalties, assessments and
deficiencies owed by the Seller to all taxing authorities. All taxes and other
assessments and levies which the Seller is required by applicable Law to
withhold or to collect have been duly withheld and collected and have been
paid over to the proper Governments and Governmental Agencies or are properly
held by the Seller for such payment. All claims by the IRS or any state taxing
authorities for taxes due and payable by the Seller have been paid by the
Seller. The Seller is not a party to, and is not aware of, any pending or
threatened action, suit, proceeding, or assessment against it for the
collection of taxes by any Government or Governmental Agency.
.8 Franchise Agreements. The Franchise Agreements are full,
complete, unamended, true and correct Franchise Agreements between Seller and
Burger King Corporation, which are, and shall continue to be until the Closing
on the Closing date, in full force and effect.
.9 Title to Assets; Equipment and Fixed Assets. The Seller has
sole and exclusive, good and marketable title to all of the Assets and the
same shall be free and clear of any and all pledges, claims, threats, liens,
restrictions, agreements, leases, security interests, charges and encumbrances
at the time of Closing. All of the Equipment and Fixed Assets are in good,
working and operating condition and repair, reasonable wear and tear excepted,
fit for their intended purposes, and free from any defects known to the Seller
or to the Shareholder.
.10 Records. The Records that have been delivered by the Seller
to the Purchaser or that shall be delivered by the Seller to the Purchaser are
true, complete and correct.
.11 Employment Matters.
.0 None of the Seller's employees are covered by a
collective bargaining agreement or are represented by a labor organization, and
no petition for representation concerning any of the Seller's employees has been
filed with the National Labor Relations Board; the Seller is not aware of any
union organizational activity and has no reason to believe that any such
activity is being contemplated. To the best of Seller's knowledge, Seller has
not engaged in any unfair labor practice.
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.1 To the best of Seller's knowledge Seller is not in
violation of applicable equal employment opportunity wage and hour requirement
or any other Laws of any Government or Governmental Agency relating to
employment; there are no active, pending, or threatened administrative or
judicial proceedings under any Laws of any Government or Governmental Agency;
there are no claims, charges, and employment related suits which have occurred
within the last three years or are presently pending or threatened under any
employment related Laws of any Government or Governmental Agency; and the Seller
is not subject to any judgments, decrees, conciliation agreements and settlement
agreements concerning employment related matters.
.2 The Seller has not entered into any employment
agreements with any of its employees, and all employees may be terminated at
will; there is no contractual obligation or special termination or severance
arrangement in respect of any of Seller's employees; and there is no provision
of any agreement or arrangement with any of the Seller's employees, or any other
legal or contractual requirement, which would obligate the Seller to require
the Purchaser of the Assets to employ any of the Seller's employees.
.3 The Seller has paid all wages, bonuses, commissions
and other benefits and sums due (and all required taxes, insurance, social
security and withholding thereon), including all accrued vacation, accrued sick
leave, accrued benefits and accrued payments (and pro rata accruals for a
portion of a year) to its employees.
.4 The Purchaser is under no obligation or duty, whether
under any contract, agreement, understanding or arrangement or under any
applicable Law of any Government or Governmental Agency to assume or be
responsible for any obligation, duty or liability, now existing or hereafter
arising, relating to or in connection with the Seller's employees or any
compensation, benefits or benefit plans in respect of the Seller's employees, or
otherwise arising out of or in connection with the transactions contemplated by
this Agreement, and the Seller has made no commitment and is under no obligation
to cause the Purchaser of the Assets to assume or to be responsible for any such
obligation, duty or liability.
.12 Absence of Certain Changes or Events. Since September 30,
1994, the Seller has not engaged in or experienced any of the following:
.0 Sold, assigned, transferred, leased, disposed of, or
agreed to sell, assign, transfer, lease, or dispose of, any of the Assets,
except Inventory sold in the ordinary course of the Seller's business, as such
business has been operated historically.
.1 Made any capital expenditure in excess of One
Thousand Dollars ($1,000) or entered into any contract, agreement, arrangement,
understanding or commitment therefor, or acquired or leased any assets or
property of any third person or party other than in the ordinary course of
Seller's business, as such business has been operated historically.
.2 Suffered any material adverse change in Seller's
operations, earnings, assets, liabilities, or business (financial or otherwise).
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.3 Failed to pay any indebtedness or other obligation,
including any taxes and other charges, when due.
.13 Adverse Conditions. Except as set forth in EXHIBIT 3.14,
attached hereto and incorporated by reference herein, neither Seller nor the
Shareholder has any knowledge of any past, present or future condition, facts
or circumstances which has materially affected or which might materially
affect adversely the business of the Seller or prevent the Purchaser from
carrying on the Seller's business.
.14 Leases. Attached hereto as EXHIBIT 3.15 and incorporated by
reference herein is a list of the following, which is accurate and complete as
of the date hereof: all leases, contracts, licenses, agreements or other
commitments of Seller as obligor involving a liability, obligation, contingent
liability or contingent obligation in excess of $1,000.
.15 Bonus, Pension or Other Plans, etc. Seller is not a party
to, does not maintain or make any contribution to, and Seller has not incurred
any liability or expense with respect to any employment agreement, current or
future pension, retirement, deferred compensation, bonus, profit-sharing,
insurance or similar plan, agreement, arrangements or formal or informal
understandings for the benefit of employees, in each case whether or not
legally binding.
.16 Full Disclosure. This Agreement (including the Exhibits
hereto) does not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements contained herein not
misleading. There is no fact known to the Seller or to the Shareholder which
is not disclosed in this Agreement which materially adversely affects the
accuracy of the representations and warranties contained in this Agreement or
the Seller's financial condition, operations, business, earnings, assets, or
liabilities.
.17 No Brokerage. Neither the Seller nor the Shareholder has
incurred any obligation or liability, contingent or otherwise, for brokerage
fees, finder's fees, agent's commissions, or the like in connection with this
Agreement or the transactions contemplated hereby.
.18 Seller's Franchise Agreement. The Seller is not in breach of
or default under any provision of any of the Franchise Agreements, and no
condition exists which, with passage of time or the giving of notice or both,
will result in a breach or default by the Seller of any provision of any of
the Franchise Agreements.
.19 Operation of Business. Since March 31, 1995, the Seller and
the Shareholder have used, and from the date hereof until the Closing the
Seller and the Shareholder shall use, their best efforts to preserve the
Business of the Seller.
III -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller and
Shareholder, jointly and severally, as of the date hereof and as of the
Closing on the Closing Date each of the following:
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.0 Due Organization; Good Standing; Power. The Purchaser is a
corporation duly incorporated, validly existing, and in good standing under
the laws of the State of Delaware. The Purchaser has full right, power and
authority to enter into this Agreement and the Consulting and Noncompetition
Agreement and to perform its obligations hereunder and thereunder.
.1 Authorization and Validity of Documents. The execution,
delivery and performance by the Purchaser of this Agreement and the Consulting
and Noncompetition Agreement and the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Purchaser. This
Agreement has been duly executed, acknowledged, sealed and delivered by the
Purchaser and is a legal, valid and binding obligation of the Purchaser, and
the Consulting and Noncompetition Agreement, when executed and delivered, will
be legal, valid and binding obligation of the Purchaser, each enforceable
against the Purchaser in accordance with its terms except as such enforceability
may be limited by general principles of equity, bankruptcy, insolvency,
moratorium and similar laws relating to creditors' rights generally.
.2 No Brokerage. The Purchaser has not incurred any obligation
or liability, contingent or otherwise, for brokerage fees, finder's fees,
agent's commissions, or the like in connection with this Agreement or the
transactions contemplated hereby.
.3 Obligations Assumed. Purchaser covenants that it will pay all
obligations assumed by it under this Agreement.
.4 Burger King Obligations. Except as set forth on EXHIBIT 4.5
attached hereto, Purchaser is not in default of any of its obligations to the
Burger King Corporation.
IV -- SELLER AND SHAREHOLDER'S COVENANTS
.0 Affirmative Covenants. The Seller and the Shareholder, jointly
and severally, covenant, promise and agree that from the date hereof and until
the Closing the Seller and the Shareholder shall, and the Shareholder shall
cause the Seller to perform and comply with each of the following:
.0 Continue to operate the business of the Seller
diligently, and not take any action, omit to take any action, or engage in any
transaction other than in acts or transactions in the ordinary course of
business, as such business has been operated historically.
.1 Preserve the Business of Seller and preserve the
relationship of the Business with suppliers, customers, Burger King Corporation
and others.
.2 Maintain and continue normal and usual
maintenance and repair of the Equipment, the Fixed Assets, and all other assets
being sold and transferred to the Purchaser herein.
.3 Cooperate with the Purchaser to achieve an
orderly transition of the Business of the Seller to the Purchaser and an orderly
transfer of the Assets to the Purchaser.
.4 Pay or provide for payment of all sales, use,
personal property, social security, withholding, payroll, unemployment
compensation, income and other taxes, assessments,
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fees and public charges due and payable by the Seller in respect of its Business
and the Assets through the Closing Date and any portion thereof applicable to
any period prior to the Closing Date.
.5 Pay all wages, bonuses, commissions and other
employment benefits and sums (and all required taxes, insurance and withholding
thereon), including all accrued vacation, accrued sick leave, accrued benefits
and accrued payments (and pro rata accruals for a portion of a year) due to
Seller's employees through the Closing Date.
.6 Maintain in effect all insurance policies and
other employee benefits covering any employee claims which may be incurred
through the Closing Date.
.7 Fully perform and comply with all covenants,
promises and agreements hereunder which are required to be performed or complied
with by the Seller and the Shareholder prior to or at the Closing, and exert
their best efforts to completely satisfy and fulfill all conditions precedent to
Seller's and Shareholder's obligations to close hereunder at the Closing on the
Closing Date.
.8 Exert their best efforts to prevent the
occurrence of any event which could result in any of Seller's or the
Shareholder's representations and warranties contained in this Agreement not
being true and correct at or as of the time immediately after the occurrence of
such event, and the Seller and the Shareholder shall promptly notify the
Purchaser of the occurrence of any event or the discovery of any fact which
would cause any of their covenants, promises and agreements to be breached or
violated or any of their representations and warranties to become not true and
correct or which could interfere with or prevent the consummation of the
transactions contemplated hereby.
.9 Provide the Purchaser and its representatives,
subject to the restrictions contained in Section 7.2.9, with full access during
normal business hours to all of the Seller's properties, assets and Records,
provide the Purchaser and its representatives with such financial and operating
data and other information with respect to the Seller's Business, Assets and
properties as the Purchaser shall from time to time request, and permit the
Purchaser and its representatives to consult with the Seller's representatives,
officers, employees and accountants up to the time of Closing and for 120 days
thereafter.
.10 Take no action which is or would cause a
violation of any Laws of any Governments or Governmental Agencies.
V -- OPINIONS OF COUNSEL
.0 Opinion of Seller's and Shareholder's Counsel. At the
Closing, the Seller and the Shareholder shall deliver to the Purchaser the
opinion of their counsel, dated as of the Closing Date, as to the following:
.0 Ownership of Seller's Stock. The Shareholder is
the sole and exclusive record and beneficial owner of all of the outstanding
shares of the capital stock of the Seller. The Shareholder has duly approved the
Seller's sale, assignment, transfer and delivery of the Assets to the
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Purchaser in accordance with the terms of this Agreement, the consummation of
all the transactions contemplated hereby, and the Seller entering into the
Consulting and Noncompetition Agreement.
.1 Due Organization; Good Standing; Authority of
Seller. The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Colorado. The Seller has full
right, power, and authority to own, lease and operate its properties and assets,
and to carry on its Business. The Seller is duly licensed, qualified and
authorized to do business in each jurisdiction in which the properties and
assets owned by it or the nature of the business conducted by it make such
licensing, qualification and authorization legally necessary. The Seller is not
in breach or violation of, and the execution, delivery and performance of this
Agreement will not result in a breach or violation of, any of the provisions of
the Seller's Articles or By-Laws.
.2 Authorization and Validity of Agreements. The
Seller and the Shareholder have the legal capacity, right, power and authority
to enter into this Agreement and the Seller and the Shareholder have the legal
capacity, right, power and authority to enter into the Consulting and
Noncompetition Agreement. The Seller has the full right, power and authority to
execute, acknowledge, seal and deliver this Agreement and to perform the
transactions contemplated by this Agreement. The execution, acknowledgment,
sealing and delivery of this Agreement by the Seller and the Shareholder and the
performance by the Seller and Shareholder of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate and
shareholder action. This Agreement has been duly executed, acknowledged,
sealed and delivered by the Seller and by the Shareholder and is the legal,
valid and binding obligation of the Seller and the Shareholder, enforceable
against the Seller and the Shareholder in accordance with its terms. The
Consulting and Noncompetition Agreement, when executed, will be the legal,
valid and binding obligation of the Seller and the Shareholder, enforceable
against the Seller and the Shareholder in accordance with its terms, except in
each case as such enforceability may be limited by general principles of
equity, bankruptcy, insolvency, moratorium and similar laws relating to
creditors' rights generally.
.3 Agreement Not in Conflict with Other
Instruments; Required Approvals Obtained. The execution, acknowledgment,
sealing, delivery, and performance of this Agreement and the Consulting and
Noncompetition Agreement by the Seller and the Shareholder, and the
consummation of the transactions contemplated by this Agreement and the
Consulting and Noncompetition Agreement will not (a) violate or require any
consent, approval, or filing under, (i) any Laws of any Governments or any
Governmental Agencies, or (ii) any judgment, injunction, order, writ or decree
of any court, arbitrator, Government or Governmental Agency by which the
Seller or any of the Assets or the Shareholder are bound; (b) to the best of
Seller's and Shareholder's knowledge, conflict with, require any consent,
approval, or filing under, result in the breach or termination of any
provision of, constitute a default under, or result in the creation of any
claim, security interest, lien, charge, or encumbrance upon any of the Assets
pursuant to, (i) the Seller's Articles or By-Laws; (ii) any indenture,
mortgage, deed of trust, license, permit, approval, consent, franchise, lease,
contract, or other instrument, document or agreement to which the Seller is a
party or named; or (iii) any judgment, injunction, order, writ or decree of
any court, arbitrator, Government or Governmental Agency by which the Seller
or any of the Assets is bound.
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.4 Legal Proceedings. There is no action, suit,
proceeding, claim or arbitration, or any investigation by any person or entity,
including any Government or Governmental Agency, (i) pending, to which the
Seller or the Shareholder is a party, or to the knowledge of the Seller or the
Shareholder, threatened against or relating to the Seller, the Seller's business
or any of the Assets, or (ii) challenging the Seller's or the Shareholder's
right to execute, acknowledge, seal, deliver, perform under or consummate the
transactions contemplated by this Agreement and the Consulting and
Noncompetition Agreement, or (iii) asserting any right with respect to any of
the Assets; and there is no basis for any such action, suit, proceeding,
claim, arbitration or investigation.
.1 Opinion of Purchaser's Counsel. At the Closing, the
Purchaser shall deliver to the Seller and to the Shareholder the opinion of
its counsel, dated as of the Closing Date, as to the following:
.0 Due Organization; Good Standing; Authority of
Purchaser. The Purchaser is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Delaware. The Purchaser has
all requisite corporate power to execute, acknowledge, seal and deliver this
Agreement and the Consulting and Noncompetition Agreement and to perform its
obligations hereunder and thereunder.
.1 Authorization and Validity of Agreements. The
execution, delivery, and performance of this Agreement and the consummation by
the Purchaser of the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Purchaser. This Agreement has been duly
executed, acknowledged, sealed and delivered by the Purchaser and is the legal,
valid, and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms except as such enforceability may be
limited by general principles of equity, bankruptcy, insolvency, moratorium and
similar laws relating to creditors' rights generally.
VI -- CONDITIONS
.0 Seller's Conditions to Close. The Seller's obligation to
close the transactions contemplated hereby at the Closing shall be subject to
the complete satisfaction and fulfillment of all of the following conditions
precedent, any or all of which may be waived in whole or in part by
the Seller (but no such waiver of any such condition precedent shall be or
constitute a waiver of any covenant, promise, agreement, representation or
warranty made by the Purchaser in this Agreement):
.0 All representations and warranties made by the
Purchaser in this Agreement shall be complete and accurate at and as of the
Closing on the Closing Date. Seller shall have been furnished with a
certificate, signed by the Purchaser, and dated the Closing Date to the
foregoing effect.
.1 All covenants, promises and agreements made by
the Purchaser in this Agreement and all other actions required to be performed
or complied with by the Purchaser under this Agreement prior to or at the
Closing shall have been fully performed or complied with by the Purchaser.
Seller shall have been furnished with a certificate, signed by the Purchaser,
and dated the Closing Date to the foregoing effect.
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.2 The Purchaser shall deliver to the Seller by
wire transfer the amount of cash set forth in Section 1.4 of this Agreement.
7.1.4 National Restaurant Enterprises, Inc., the
parent corporation of Purchaser, shall also be a signatory to the Lease
Assignments of the Real Property Leases for each of the Restaurants.
7.1.5 Purchaser shall reimburse Seller, in an amount
not to exceed $5,000, for expenses paid in cash by Seller relating to the filing
of an alternate dispute resolution concerning the potential opening of a Burger
King Restaurant in close proximity to Seller's Greeley Restaurant #2942.
.1 Purchaser's Conditions to Close. The Purchaser's obligation
to close the transactions contemplated hereby at the Closing shall be subject
to the complete satisfaction and fulfillment of all of the following
conditions precedent, any or all of which may be waived in whole or in part by
the Purchaser (but no such waiver of any such condition precedent shall be or
constitute a waiver of any covenant, promise, agreement, representation or
warranty made by the Seller and the Shareholder in this Agreement):
.0 All representations and warranties made by the
Seller and the Shareholder in this Agreement shall be complete and accurate at
and as of the Closing on the Closing Date. Purchaser shall have been furnished
with a certificate, signed by the Shareholder and Seller, and dated the Closing
Date to the foregoing effect.
.1 All covenants, promises and agreements made by
the Seller and the Shareholder in this Agreement and all other actions required
to be performed or complied with by the Seller and the Shareholder under this
Agreement prior to or at the Closing shall have been fully performed or complied
with by the Seller and the Shareholder. Purchaser shall have been furnished with
a certificate, signed by the Shareholder and Seller, and dated the Closing Date
to the foregoing effect.
.2 Seller shall have obtained, and delivered to
Purchaser, copies of all consents, approvals or other authorizations which
Seller is required to obtain from, and any filing which Seller is required to
make with, any governmental authority or agency or any other person including,
but not limited to, consents required from Burger King (the "Burger King
Consents") in connection with the execution, delivery and consummation of this
Agreement and the other documents associated herewith and the consummation of
the transactions contemplated hereby or thereby (collectively, the "Required
Consents"), in form and substance satisfactory to Purchaser. Notwithstanding the
foregoing, Purchaser shall be solely responsible for obtaining any consents or
approvals necessary for Purchaser to purchase the Assets or operate the Business
from and after the Closing Date.
.3 The Purchaser shall have received all things
required to be delivered or furnished to the Purchaser by the Seller and the
Shareholder hereunder prior to or at the Closing.
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<PAGE>
.4 All necessary permits, licenses and approvals
required to be obtained by Purchaser shall have been obtained and paid for by
Purchaser or Purchaser shall have exercised all reasonable efforts to obtain
same.
.5 There shall not have occurred any material
adverse change in the business of Seller or in the Assets.
.6 Purchaser shall have received an opinion of
counsel for Seller and the Shareholder, as of the Closing Date, as required by
Section 6.1 hereof.
.7 Purchaser shall have received, if necessary,
the written consent of the lender of National Restaurant Enterprises, Inc., the
parent corporation of Purchaser ("NRE"), to the transactions contemplated hereby
within thirty days of the execution of this Agreement by all parties.
.8 Purchaser and its representatives shall have
completed, to their complete satisfaction, an investigation and examination of
all aspects of the Restaurants and the Assets, including the Financial
Statements. No employee or representative of Purchaser will perform on-site due
diligence of the Restaurants without Seller's prior approval, at which time such
employee or representative will be accompanied by Seller or its designee.
Purchaser shall have completed its review of the Restaurants to confirm the
Equipment in the Restaurants is in proper working order and that the Restaurants
conform in all material respects to Burger King standards (the "Walk-Thru") that
apply to the Restaurants. Purchaser shall itemize any deficiencies noted in the
Walk-Thru and provide such list to Seller prior to the Closing Date. Seller
shall correct the deficiencies prior to the Closing Date if the total cost of
such corrections does not exceed $6,000. If the total cost does exceed this
amount, Seller shall have the option, exercisable within ten (10) days of
receiving notice of the corrections, to pay for the corrections or terminate
this Agreement.
.9 Seller shall have delivered to Purchaser the
following documents:
.0 the Lease Assignments of its Real
Property Leases, each Assumed Contract, and the Consents to Assignment,
Estoppel, and Releases;
.1 any required easement assignments;
.2 to the extent available, a fully
executed original counterpart of each Real Property Lease in Seller's
possession;
.3 a receipt for funds paid to Seller
by Purchaser;
.4 certificates dated no earlier than
thirty (30) days prior to the Closing Date, from the Secretary of State for the
State of Colorado as to the good standing of Seller; and
.5 all other documents, instruments and
agreements required to be delivered by the Seller to Purchaser pursuant to this
Agreement.
15
<PAGE>
.10 Between the date of this Agreement and the Closing
Date, Seller shall conduct the operation of its Restaurants in the ordinary and
usual course of business, consistent with past practices and will use its best
efforts to preserve intact the present business organization with respect to its
Restaurants, to keep available the services of its officers and employees and to
maintain satisfactory relationships with landlords, franchisors, dealers,
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relations with it and its Restaurants and will maintain its
Restaurants, real property, and Assets in a condition conducive to the
operation of the business currently carried on therein.
.11 Seller shall have provided to Purchaser copies of all
operating permits and licenses (collectively, the "Approvals") which are in
Seller's possession.
.12 Seller shall have provided to Purchaser copies of all
documents with respect to any actions, suit or proceeding which has been brought
by or on behalf of Seller with respect to the Assets or the Business.
.13 The Seller shall execute, acknowledge, seal, and
deliver to the Purchaser a Bill of Sale and Assignment in the form attached
hereto as EXHIBIT 7.2.14 and incorporated herein by reference pursuant to which
the Seller shall sell, assign, and transfer to the Purchaser the Assets and the
Inventory.
.14 The Seller shall execute, acknowledge, seal and
deliver to the Purchaser a Warranty Assignment in the form attached hereto as
EXHIBIT 7.2.15 and incorporated herein by reference pursuant to which the Seller
shall sell, assign and transfer to the Purchaser the Franchise Agreements.
.15 The Shareholder, the Seller, WSG, Inc. and the
Purchaser shall execute, acknowledge, seal and deliver the Consulting and
Noncompetition Agreement attached hereto as EXHIBIT 1.5.
.16 Purchaser shall have contemporaneously acquired the
Burger King Restaurant owned by WSG, Inc., a corporation that is controlled by
Daniel L. White.
.17 Seller shall have previously delivered to Purchaser
the Real Property Leases and Purchaser shall have twenty days thereafter to
review such Real Property Leases to ensure that each of them are satisfactory to
Purchaser, in its sole discretion.
7.2.19 No later than fourteen (14) days prior to Closing,
Purchaser's auditor shall have (i) reviewed the financial and accounting
system of Seller; (ii) reviewed and confirmed the Financial Statements and
results set forth in the Financial Statements; and (iii) found no objection to
the financial and accounting system of Seller, or Seller and Purchaser shall
have resolved any objection raised by the auditor and presented to Seller by
Purchaser.
7.2.20 The Board of Directors of NRE shall have approved
this Agreement and the transactions contemplated herein within 15 days of the
date of this Agreement.
16
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.2 Contemporaneous Transfer. All transfers, assignments,
conveyances, and transactions under this Agreement shall be effected
contemporaneously for present value between and among the Seller, the
Shareholder and the Purchaser.
VII -- INDEMNIFICATION
.0 Indemnification By Seller And Shareholder. The Seller and
the Shareholder, jointly and severally, shall defend, indemnify and hold
harmless the Purchaser, its officers, directors, shareholders, agents,
servants and employees and their respective heirs, personal and legal
representatives, guardians, successors and assigns, from and against any and
all claims, threats, liabilities, taxes, interest, fines, penalties, suits,
actions, proceedings, demands, damages, losses, costs and expenses (including
attorneys' and experts' fees and court costs) of every kind and nature arising
out of, resulting from, or in connection with the following:
.0 Any misrepresentation or breach by the Seller or
the Shareholder of any representation or warranty contained in this Agreement.
.1 Any nonperformance, failure to comply or breach
by Seller or the Shareholder of any covenant, promise or agreement of the Seller
or the Shareholder contained in this Agreement.
.2 Any debts, obligations, duties and liabilities
of the Seller and the Shareholder (except those assumed by Purchaser).
.3 Any matter, act, thing or occurrence caused by
or resulting from any act or omission of Seller or the Shareholder prior to or
at the Closing.
.1 Indemnification by Purchaser. Purchaser shall defend,
indemnify and hold harmless the Seller, the Shareholder and their respective
heirs, personal and legal representatives, guardians, successors and assigns,
from and against any and all claims, threats, liabilities, taxes, interest,
fines, penalties, suits, actions, proceedings, demands, damages, losses, costs
and expenses (including attorneys' and experts' fees and court costs) of every
kind and nature arising out of, resulting from, or in connection with the
following:
.0 Any misrepresentation, omission or breach by
Purchaser of any representation or warranty contained in this Agreement.
.1 Any nonperformance, failure to comply or breach
by the Purchaser of any covenant, promise or agreement of the Purchaser
contained in this Agreement.
.2 Defense of Claims. In the event of any claim, threat,
liability, tax, interest, fine, penalty, suit, action, proceeding, demand,
damage, loss, cost or expense with respect to which indemnity is or may be
sought hereunder (an "Indemnity Claim"), the indemnified party shall promptly
notify the indemnifying party of such Indemnity Claim, specifying in
reasonable detail the Indemnity Claim and the circumstances under which it
arose. The indemnifying party may elect to assume the defense of such
Indemnity Claim, at its own expense, by written notice to the indemnified
17
<PAGE>
party given within 10 days after the indemnifying party receives notice of the
Indemnity Claim, and the indemnifying party shall promptly engage counsel
reasonably acceptable to the indemnified party to direct and conduct such
defense; provided, however, that the indemnified party shall have the right to
engage its own counsel, at its own expense, to participate in such defense. In
the event the indemnifying party does not so elect to assume the defense of
such Indemnity Claim in the manner specified above, or if, in the reasonable
opinion of counsel to the indemnified party, there are defenses available to
the indemnified party which are different from or additional to those
available to the indemnifying party or which give rise to a material conflict
between the defense of the indemnified party and of the indemnifying party,
then upon notice to the indemnifying party, the indemnified party may elect to
engage separate counsel to conduct its defense, at the expense of the
indemnifying party, and the indemnifying party shall not have the right to
direct or conduct such defense.
In the event the indemnifying party assumes the defense of any
Indemnity Claim, it may at any time notify the indemnified party of its
intention to settle, compromise or satisfy such Indemnity Claim and may make
such settlement, compromise or satisfaction (at its own expense) unless within
20 days after the giving of such notice the indemnified party shall give
notice to the indemnifying party of its intention to assume the defense of the
Indemnity Claim, in which event the indemnifying party shall be relieved of
its duty hereunder to indemnify the indemnified party. Unless the indemnified
party shall have given the notice referred to in the preceding sentence, (i)
the indemnified party shall not consent to or make any settlement, compromise
or satisfaction with respect to the Indemnity Claim without the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld, and (ii) any settlement, compromise or satisfaction made by the
indemnifying party with respect to such Indemnity Claim shall be deemed to
have been consented to by and shall be binding upon the indemnified party.
18
<PAGE>
VIII -- MISCELLANEOUS
.0 Survival of Representations, Warranties and Agreements. All
of the representations, warranties, covenants, promises and agreements of the
parties contained in this Agreement (or in any document delivered or to be
delivered pursuant to this Agreement or at or in connection with the Closing)
shall survive the execution, acknowledgment, sealing and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
.1 Notices. All notices, requests, demands, consents, and other
communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either
(a) by personal delivery with a receipted copy of such delivery, or (b) by
certified or registered United States mail, return receipt requested, postage
prepaid, to the following addresses:
(i) If to Seller, to:
DMW, Inc.
2605 64th Avenue
Greeley, Colorado 80634
Telefax No.: (970) 352-7842
with a copy to:
Curt D. Rautenstraus, Esq.
Rautenstraus Joss & Christman, P.C.
P.O. Box 55
824 Pine Street
Louisville, Colorado 80027
Telefax No.: (303) 666-5724
(ii) If to the Shareholder, to:
Daniel L. White
2605 64th Avenue
Greeley, Colorado 80634
(iii) If to the Purchaser:
Lawrence E. Jaro, Chief Executive Officer
Ameriking Colorado Corporation I
2215 Enterprise Drive
Westchester, IL 60154
Telefax No.: (708) 947-2160
19
<PAGE>
with copies to:
A. Richard Caputo
The Jordan Company
9 West 57th Street, Suite 4000
New York, New York 10019
Telefax No.: (212) 755-5263
and
Ernest J. Panasci, Esq.
FREEBORN & PETERS
950 Seventeenth Street
Suite 2600
Denver, CO 80202
Telefax No.: (303) 628-4240
or to such other address of which written notice in accordance with this
Section 9.2 shall have been provided to the other parties. Notices may only be
given in the manner hereinabove described in this Section 9.2 and shall be
deemed received three (3) days after given in such manner.
.2 Entire Agreement. This Agreement (including the Exhibits
hereto) constitutes the full, entire and integrated agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior negotiations, correspondence, understandings and agreements among the
parties hereto respecting the subject matter hereof.
.3 Assignability. This Agreement shall not be assignable by any
party hereto without the prior written consent of the other parties hereto.
.4 Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal and legal representatives, guardians, successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights, remedies, obligations, or liabilities.
.5 Severability. Any provision of this Agreement which is held
by a court of competent jurisdiction to be prohibited or unenforceable only
shall be ineffective only to the extent of such prohibition or
unenforceability, without invalidating or rendering unenforceable the
remaining provisions of this Agreement.
.6 Amendment; Waiver. No provision of this Agreement may be
amended, waived or otherwise modified without the prior written consent of all
of the parties hereto. No action taken pursuant to this Agreement, including
any investigation by or on behalf of any party shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement herein contained. The waiver by any party
hereto of a breach of any provision or condition contained in this Agreement
shall not operate or be construed as a waiver of any subsequent breach or of any
other conditions hereof.
20
<PAGE>
.7 Section Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
.9 Applicable Law; Jurisdiction and Venue; Service of Process.
This Agreement was made in the State of Colorado, and shall be governed by,
construed, interpreted and enforced in accordance with the laws of the State
of Colorado. Any suits, proceedings and other actions relating to, arising out
of or in connection with this Agreement shall be submitted to the in personam
jurisdiction of the courts of the State of Colorado and venue for all such
suits, proceedings and other actions shall be in Denver County, Colorado. The
Seller, the Shareholder and the Purchaser hereby waive any claim against or
objection to in personam jurisdiction and venue in the courts of City and
County of Denver, Colorado.
.10 Remedies. The parties hereto acknowledge that in the event
of a breach of this Agreement, any claim for monetary damages hereunder may
not constitute an adequate remedy, and that it may therefore be necessary for
the protection of the parties to carry out the terms of this Agreement to
apply for the specific performance of the provisions hereof. It is accordingly
hereby agreed by all parties that no objection to the form of the action or
the relief prayed for in any proceeding for specific performance of this
Agreement shall be raised by any party, in order that such relief may be
expeditiously obtained by an aggrieved party. All parties may proceed to
protect and enforce their rights hereunder by a suit in equity, transaction at
law or other appropriate proceeding, whether for specific performance or for
an injunction against a violation of the terms hereof or in aid of the
exercise of any right, power or remedy granted hereunder or by law, equity or
statute or otherwise. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy shall operate as a
waiver thereof or otherwise prejudice its rights, powers or remedies, and no
right, power or remedy conferred hereby shall be exclusive of any other right,
power or remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise.
.11 Further Assurances. The Seller and the Shareholder jointly
and severally agree to execute, acknowledge, seal and deliver, after the date
hereof, without additional consideration, such further assurances, instruments
and documents, and to take such further actions, as the Purchaser may
reasonably request in order to fulfill the intent of this Agreement and the
transactions contemplated hereby.
.12 Use of Genders. Whenever used in this Agreement, the
singular shall include the plural and vice versa, and the use of any gender
shall include all genders and the neuter.
.13 Risk of Loss. All risk of loss of damage to or destruction
of the Assets, in whole or in part, shall be and remain with the Seller until
the Closing and all of the transactions contemplated hereby shall have been
consummated.
21
<PAGE>
.14 Negotiations with Other Persons. Until the earlier of the
Closing or the termination of this Agreement as provided herein, neither the
Seller nor the Shareholder shall initiate, encourage the initiation by others,
or participate in any discussion or negotiations with any other person or
entity relating to the sale of any or all of the Assets, the business of the
Seller or any securities of the Seller. From the date of this Agreement and
until after the Closing and the consummation of the transactions contemplated
by this Agreement, the Shareholder shall not offer for sale, sell or otherwise
transfer (with or without consideration) any securities of the Seller owned of
record or beneficially by him.
.15 Expenses of Transactions. All sales, transfer and use taxes
incurred in connection with the sale, assignment, transfer and delivery of the
Assets shall be paid by the Seller.
[REMAINDER OF PAGE IS INTENTIONALLY BLANK AS THIS
AGREEMENT CONTAINS NO ADDITIONAL SECTIONS.]
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement under seal, with the intention of making it a sealed
instrument, on the date first above written.
Seller:
ATTEST: DMW, INC.
________________________________ By:______________________________
Daniel L. White, President
WITNESS: SHAREHOLDER:
- --------------------------------- ---------------------------------
Daniel L. White
Purchaser:
ATTEST: AMERIKING COLORADO CORPORATION I
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief
Executive Officer
23
<PAGE>
EXHIBIT LIST
1.1.1 Equipment, Materials, Furniture and Supplies
1.1.2 Fixed Assets
1.1.5 Franchise Agreements
#2942 (Greeley)
#4361 (Loveland)
#4690 (Longmont)
1.1.8 (a) Lease Assignment and Assumption Agreement
(b) Consent to Assignment, Estoppel, and Release
1.4 Allocation of Purchase Price
1.5 Consulting and Noncompetition Agreement
1.8 Excluded Assets
3.7 Financial Statements
Unaudited Balance Sheets as of September 30, 1994
Unaudited Balance Sheets as of March 31, 1995
Operating Statements for October 1, 1992 through
September 30, 1993 Operating Statements for October
1, 1993 through September 30, 1994 Operating
Statements for October 1, 1994 through September
30, 1995
3.14 Adverse Conditions
3.15 List of Contracts, Licenses and Agreements involving
liabilities of more than $1000
4.5 Defaults under the Burger King Franchise Agreements
7.2.14 Bill of Sale and Assignment
7.2.15 Warranty Assignment
24
ASSET PURCHASE AGREEMENT
among
WSG, INC., THE SHAREHOLDERS OF WSG, INC.
and
AMERIKING COLORADO CORPORATION I
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- PURCHASE AND SALE OF ASSETS.....................................1
1.1 Purchase and Sale..................................................1
1.2 Store Bank.........................................................3
1.3 Inventory..........................................................3
1.4 Purchase Price for Assets; Allocations.............................3
1.5 Consulting and Noncompetition Agreement............................3
1.6 Liabilities of Seller..............................................3
1.7 Prorations.........................................................4
ARTICLE II -- CLOSING AND TERMINATION.......................................4
2.1 Time, Date and Place...............................................4
2.2 Termination........................................................4
2.3 Effect of Termination..............................................5
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER......5
3.1 Ownership of Seller's Stock........................................5
3.2 Due Organization; Name and Address; Good Standing;
Authority of Seller..............................................5
3.3 Authorization And Validity of Agreements...........................5
3.4 Agreement Not in Conflict with Other Instruments; Required
Approvals Obtained...............................................6
3.5 Conduct of Business in Compliance with Regulatory and
Contractual Requirements.........................................6
3.6 Legal Proceedings..................................................7
3.7 Financial Information..............................................7
3.8 Tax Matters........................................................7
3.9 Franchise Agreement................................................8
3.10 Title to Assets; Equipment and Fixed Assets........................8
3.11 Records............................................................8
3.12 Employment Matters.................................................8
3.13 Absence of Certain Changes or Events...............................9
3.14 Adverse Conditions.................................................9
3.15 Leases............................................................10
3.16 Bonus, Pension or Other Plans, etc................................10
3.17 Full Disclosure...................................................10
3.18 No Brokerage......................................................10
3.19 Seller's Franchise Agreement......................................10
3.20 Operation of Business.............................................10
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............10
4.1 Due Organization; Good Standing; Power............................10
<PAGE>
4.2 Authorization and Validity of Documents...........................11
4.3 No Brokerage......................................................11
4.4 Obligations Assumed...............................................11
ARTICLE V -- SELLER AND SHAREHOLDERS' COVENANTS.............................11
5.1 Affirmative Covenants.................................................11
ARTICLE VI -- OPINIONS OF COUNSEL...........................................13
6.1 Opinion of Seller's and Shareholders' Counsel.....................13
6.1.1 Ownership of Seller's Stock.......................................13
6.1.2 Due Organization; Good Standing; Authority of Seller..............13
6.1.3 Authorization and Validity of Agreements..........................13
6.1.4 Agreement Not in Conflict with Other Instruments;
Required Approvals Obtained......................................13
6.1.5 Legal Proceedings.................................................14
6.2 Opinion of Purchaser's Counsel....................................14
6.2.1 Due Organization; Good Standing; Authority Of Purchaser...........14
6.2.2 Authorization and Validity of Agreements..........................14
ARTICLE VII -- CONDITIONS...................................................15
7.1 Seller's Conditions to Close......................................15
7.2 Purchaser's Conditions to Close...................................15
7.3 Contemporaneous Transfer..........................................18
ARTICLE VIII -- INDEMNIFICATION.............................................18
8.1 Indemnification by Seller and Shareholders........................18
8.2 Indemnification by Purchaser......................................19
8.3 Defense of Claims.................................................19
ARTICLE IX -- MISCELLANEOUS.................................................20
9.1 Survival of Representations, Warranties and Agreements............20
9.2 Notices...........................................................20
9.3 Entire Agreement..................................................21
9.4 Assignability.....................................................21
9.5 Binding Effect; Benefit...........................................22
9.6 Severability......................................................22
9.7 Amendment; Waiver.................................................22
9.8 Section Headings..................................................22
9.9 Counterparts......................................................22
9.10 Applicable Law; Jurisdiction and Venue; Service of Process........22
9.11 Remedies..........................................................22
9.12 Further Assurances................................................23
9.13 Use of Genders....................................................23
9.14 Risk of Loss......................................................23
9.15 Negotiations with Other Persons...................................23
9.16 Expenses of Transactions..........................................23
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (The "Agreement") is made and entered into
this 5th day of July, 1995, among WSG, INC., a Colorado Corporation (the
"Seller"); and DANIEL L. WHITE, SUSAN J. WAKEMAN and GEORGE ALANIZ, JR.
(collectively, jointly and severally, referred to as the "Shareholders"); and
AMERIKING COLORADO CORPORATION I, a Delaware Corporation (the "Purchaser").
R E C I T A L S:
WHEREAS, the Seller operates one Burger King Restaurant (the "Business")
Located at 2000 N. Main Street, Longmont, Colorado and identified by Burger
King Store No. 7885 (Hereinafter referred to as the "Restaurant");
WHEREAS, the Shareholders own of record and beneficially all of the
outstanding shares of the capital stock of the Seller;
WHEREAS, the Seller desires to sell, assign, transfer and deliver to the
Purchaser, and the Purchaser desires to purchase from the Seller, certain of
the assets of the seller described in ARTICLE I hereof on the terms and subject
to the conditions hereinafter contained;
WHEREAS, the Purchaser and Daniel L. White desire to enter into certain
agreements providing for, among other things, the provision of certain services
by Daniel L. White for the Purchaser, on the terms and subject to the
conditions hereinafter contained;
WHEREAS, Seller occupies real property (the "Premises") pursuant to a
Lease Agreement (the "Real Property Lease") which Seller proposes to assign to
Purchaser, and Purchaser proposes to agree to such assignment of Seller's
leasehold interest with respect to the Real Property Lease; and
WHEREAS, Purchaser proposes to assume the Real Property Lease and assume
certain contracts as set forth herein.
NOW THEREFORE, in consideration of the Recitals that shall be deemed to be
a substantive part of this Agreement and the mutual covenants, promises,
agreements, representations and warranties contained in this Agreement, the
parties hereto do hereby covenant, promise, agree, represent and warrant as
follows:
-- PURCHASE AND SALE OF ASSETS
.0 Purchase and Sale. On the terms and subject to the conditions set forth
in this Agreement, at the Closing on the Closing Date (as such terms are defined
in Section 2.1 hereof), the Seller shall sell, assign, transfer and deliver to
the Purchaser and the Purchaser shall purchase from the Seller all of the
right, title and interest of Seller in and to the
<PAGE>
following assets of the Seller (all of which assets of the Seller are
hereinafter collectively referred to as the "Assets"):
.0 All of the Seller's Equipment, furniture, materials and supplies,
including, but not limited to, all of the equipment, furniture, materials and
supplies described in EXHIBIT 1.1.1 attached hereto and incorporated by
reference herein (the "Equipment").
.1 All of the Seller's fixed assets, including, but not limited to,
all of the fixed assets described in EXHIBIT 1.1.2 attached hereto and
incorporated by reference herein (the "Fixed Assets").
.2 All of the Seller's accounts receivables (excluding rebates from
Seller's vendors).
.3 All of the Seller's saleable, usable and merchantable Inventory
(as hereinafter defined) located at the Restaurant.
.4 All of the Seller's rights under the Burger King Franchise
Agreement between Seller and Burger King Corporation dated July 5, 1993, a copy
of which is attached hereto as EXHIBIT 1.1.5 and incorporated by reference
herein (the "Franchise Agreement").
.5 All of the Seller's leasehold and tenant improvements (excluding
fixtures that have become part of the real property to which they are
attached).
.6 All of the Seller's customer lists and customer sales files
("Customer Lists").
.7 All of the Seller's leasehold interests in the Real Property
Lease. At the Closing, the Seller shall assign to the Purchaser all of Seller's
leasehold interests in the Real Property Lease, parking and other access
agreements relating to the Premises. Prior to the Closing, Seller shall deliver
to Purchaser a (i) Lease Assignment and Assumption Agreement (the "Lease
Assignment"), and (ii) Consent to Assignment, Estoppel, and Release in the form
of EXHIBITS 1.1.8 (a) and (b) attached hereto and incorporated by reference
herein.
.8 All of the Seller's goodwill and original copies of all of
Seller's employment and personnel records, books and records relating or
pertaining to Seller's Business, including all sales records and similar data
(hereinafter collectively referred to as the "Records"); the Seller shall
deliver to the Purchaser copies of the Records upon the written request of the
Purchaser. Seller reserves the right to inspect such records at such reasonable
times and places after Closing for any legitimate business purpose including
tax audits.
2
<PAGE>
.1 Store Bank. Upon the Closing, Seller shall leave cash (the "Store
Bank") in the amount of not less than $1,000 at the Restaurant. Purchaser
agrees to purchase the Store Bank from Seller and agrees to pay for the Store
Bank in addition to the Purchase Price at closing.
.2 Inventory. Within 24 hours prior to the date of the Closing, an
inventory shall be taken by Seller (with the participation of the Purchaser) of
all merchantable food, paper, new uniforms, current promotional items, supply
inventory (including but not limited to, consumables, operating and cleaning
supplies) and other miscellaneous items (collectively, the "Inventory") located
at the Restaurant. Purchaser agrees to purchase the inventory from Seller, and
Seller agrees to sell the Inventory to Purchaser, at Seller's actual Inventory
purchase price. On the Closing Date, Purchaser agrees to pay the Seller the sum
of $6,000 separately and not as part of the Purchase Price, as partial payment
for the inventory. Following the taking of the Inventory as discussed above,
Seller and Purchaser agree to make adjustments to the Inventory purchase price
for the difference between the amount paid on the Closing Date and Seller's
actual Inventory purchase price. In the event the Inventory purchase price is
less than $6,000, Seller shall within fifteen (15) days of the Closing Date,
reimburse Purchaser for any overage in payment. In the event the Inventory
purchase price is in excess of $6,000, Purchaser agrees to make payment to the
Seller within fifteen (15) days of the Closing Date of any additional monies
which may be due for the purchase of the Inventory.
.3 Purchase Price for Assets; Allocations. The purchase price for the
Assets shall be $560,000 adjusted pursuant to Section 1.7 (The "Purchase
Price"), plus (i) the dollar amount in the Store Bank at the Closing Date; and
(ii) $6,000 for the estimated value of the Inventory at the Closing Date. The
parties agree that the Purchase Price for the Assets shall be allocated among
the Assets in the manner set forth on EXHIBIT 1.4 attached hereto and
incorporated by reference herein, which shall be mutually agreed to by Seller
and purchaser prior to the Closing Date. The total purchase price shall be paid
at Closing.
.4 Consulting and Noncompetition Agreement. At the Closing, the Purchaser,
DMW, Inc., Daniel L. White and the Seller shall enter into the Consulting and
Noncompetition Agreement in the form attached hereto as EXHIBIT 1.5
(hereinafter referred to as the "Consulting and Noncompetition Agreement") and
incorporated by reference herein, pursuant to which Daniel L. White shall agree
to render consulting services to the Purchaser for a period of one (1) year
commencing on the Closing Date and the Seller, DMW, Inc. And Daniel L. White
shall agree not to compete with the business of the Purchaser for five (5)
years from and after the Closing Date.
.5 Liabilities of Seller. Except as set forth in this Section 1.6, the
Seller shall be and remain solely liable and responsible for all debts,
obligations, duties, and liabilities of the Seller and its business. The
Purchaser does not and shall not assume, agree to pay or pay any debts,
obligations, duties or liabilities of any nature of the Seller or its business,
including, but not limited to, any debts, obligations, duties or liabilities
relating to the Seller's employees or employee benefit plans, regardless of
whether any such debt,
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obligation, duties or liability arises under any contract, Agreement, practice,
arrangement, statute, law, ordinance, rule, regulation or otherwise, and nothing
in this Agreement or otherwise is intended or shall be construed to the
contrary. The parties further covenant, promise and agree that the Purchaser is
not and shall not be obligated or required to employ any of the Seller's
employees. Notwithstanding the foregoing, Purchaser agrees to assume from and
after the Closing Date all of the rights and obligations of the Seller
attributable to the period from and after the Closing Date under the Franchise
Agreement, the Real Property Lease and the Contracts (as hereinafter defined)
(collectively the "Assumed Contracts").
.6 Prorations. All customary prorations with respect to obligations under
the Assumed Contracts, utility and fuel charges, personal property taxes and
other proratable charges related to the operation of the Restaurant shall be
adjusted between the parties as of 6:00 a.m. on the Closing Date. Payment of
the amount due by reason of the foregoing prorations shall be made at the
Closing or as soon thereafter as reasonably practicable. All real estate taxes
which are due and payable during the tax year in which the Closing occurs
shall, when received, be prorated as of the Closing Date. All rentals,
including minimum and percentage rentals, and other monetary obligations under
the Real Property Lease shall be adjusted for the month in which the Closing
occurs.
I -- CLOSING AND TERMINATION
.0 Time, Date And Place. The closing of the purchase and sale of the
Assets and the other transactions contemplated by this agreement (referred to
throughout this Agreement as the "Closing") shall take place at the law offices
of FREEBORN & PETERS, 950 Seventeenth Street, Suite 2600, Denver, Colorado
80202. The time, place and date of the Closing are referred to throughout this
Agreement as the "Closing Date."
Unless this Agreement is terminated as provided for herein, the Closing
shall occur on the later of (i) August 31, 1995; and (ii) ten (10) days
following the satisfaction of all conditions precedent set forth in ARTICLE
VII. If such day is not a business day then the Closing shall occur on the next
succeeding business day.
.1 Termination.
.0 If the Closing contemplated hereunder has not occurred on or
before September 30, 1995, either Purchaser or Seller may terminate this
Agreement upon written notice to the other party.
.1 If any of the representations, warranties or covenants of Seller
or the Shareholders are found to be untrue or breached in any material respect,
at or prior to Closing, and Seller or the Shareholders shall not have cured
such breach within 30 days after Purchaser shall have given written notice to
Seller of the existence of such breach, Purchaser may terminate this Agreement
upon written notice to Seller.
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.2 This Agreement may be terminated by the written agreement of
Purchaser and Seller. This Agreement may be terminated by Purchaser in its sole
discretion if any of the contingencies set forth in Sections 7.2.8, 7.2.9 or
7.2.10.7 are not met to Purchaser's satisfaction.
.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 2.2, this Agreement shall be of no
further force and effect, with no liabilities or obligations to any party under
this Agreement; provided, however, that the parties shall not be released from
any liabilities, claims or actions regarding the falsity in any material
respect of a representation or warranty set forth in ARTICLE III or ARTICLE IV
or a failure to perform or comply with any material obligation under this
Agreement.
II -- REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDERS
The Seller and the Shareholders, jointly and severally, represent and
warrant to the Purchaser as of the date hereof and as of the Closing Date each
of the following:
.0 Ownership of Seller's Stock. The Shareholders are the sole and
exclusive record and beneficial owners of all of the outstanding shares of the
capital stock of the Seller. The Shareholders have duly approved the Seller's
sale, assignment, transfer and delivery of the Assets to the Purchaser in
accordance with the terms of this Agreement, the consummation of all the
transactions contemplated hereby and the Seller entering into the consulting
and Noncompetition Agreement.
.1 Due Organization; Name and Address; Good Standing; Authority of Seller.
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the state of Colorado. The only name and business
address of the Seller which has been used by the Seller at any time within the
past three years ending at the date of the Agreement is WSG, Inc., 2000 N. Main
Street, Longmont, Colorado. The Seller has full right, power and authority to
own, lease and operate its properties and assets, and to carry on its Business.
The Seller is duly licensed, qualified and authorized to do business in each
jurisdiction in which the properties and assets owned by it or the nature of
the business conducted by it make such licensing, qualification and
authorization legally necessary. The Seller is not in breach or violation of,
and the execution, delivery and performance of this Agreement will not result
in a breach or violation of, any of the provisions of the Seller's articles of
incorporation, as amended to the date of this Agreement (the "Articles") or
by-laws, as amended to the date of this Agreement (the "By-Laws") or any
agreement to which it is a party.
.2 Authorization and Validity of Agreements. The Seller and the
Shareholders have the legal capacity, right, power and authority to enter into
this Agreement and the Seller and Daniel L. White have the legal capacity,
right, power and authority to enter into the Consulting and Noncompetition
Agreement. The Seller has the full right, power and
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authority to execute, acknowledge, seal and deliver this Agreement and to
perform the transactions contemplated by this Agreement. The execution,
acknowledgment, Sealing and delivery of this Agreement by the Seller and the
Shareholders and the performance by the Seller and the Shareholders of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate and shareholder action. This Agreement has been duly
executed, acknowledged, sealed and delivered by the Seller and the
Shareholders, and is the legal, valid and binding obligation of the Seller and
the Shareholders, enforceable against the Seller and the Shareholders,
respectively, in accordance with its terms. The Consulting and Noncompetition
Agreement, when executed, acknowledged, sealed and delivered by the Seller and
Daniel L. White, will be the legal, valid and binding obligation of the Seller
and Daniel L. White, respectively, enforceable against the Seller and against
Daniel L. White, respectively, in accordance with its terms, except in each
case as such enforceability may be limited by general principles of equity,
bankruptcy, insolvency, moratorium and similar laws relating to creditors
rights generally.
.3 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained. The execution, acknowledgment, sealing, delivery, and performance of
this Agreement and the Consulting and Noncompetition Agreement by the parties
thereto, and the consummation of the transactions contemplated by this
Agreement and the Consulting and Noncompetition Agreement will not (a) violate
or require any consent, approval, or filing under (i) any common law, law,
statute, ordinance, rule or regulation (collectively referred to throughout
this Agreement as "Laws") of any federal, state or local government
(collectively referred to throughout this Agreement as "Governments") or any
agency, bureau, commission, instrumentality or judicial body of any Governments
(collectively referred to throughout this Agreement as "Governmental
Agencies"), or (ii) any judgment, injunction, order, writ or decree of any
court, arbitrator, Government or Governmental Agency by which the Seller or any
of the Assets is bound; (b) conflict with, require any consent, approval, or
filing under, result in the breach or termination of any provision of,
constitute a default under, or result in the creation of any claim, security
interest, lien, charge, or encumbrance upon any of the Assets pursuant to any
of (i) the Seller's Articles or By-Laws, (ii) any indenture, mortgage, deed of
trust, license, permit, approval, consent, franchise, lease, contract, or other
instrument, document or agreement to which the Seller is a party or by which
the Seller, or any of the Assets is bound, or (iii) any judgment, injunction,
order, writ or decree of any court, arbitrator, Government or Governmental
Agency by which the Seller or any of the Assets is bound; and all permits,
licenses and authorizations of any Government or Governmental Agency required
to be obtained by the Seller prior to the Closing, shall have been obtained and
shall be in full force and effect as of the Closing Date.
.4 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. To the best of Seller's and Shareholders' knowledge, the Seller
has conducted and is conducting its business in compliance with all applicable
Laws of all Governments and Governmental Agencies.
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.5 Legal Proceedings. There is no action, suit, proceeding, claim or
arbitration, or any investigation by any person or entity, including, but not
limited to, any Government or Governmental Agency (i) pending, to which the
Seller or any of the Shareholders is a party, or to the knowledge of the Seller
or any of the Shareholders, threatened against or relating to the Seller, the
Seller's business or any of the Assets, or (ii) challenging the Seller's or the
Shareholders' right to execute, acknowledge, seal, deliver, perform under or
consummate the transactions contemplated by this Agreement and, as respects the
Seller and Daniel L. White, the Consulting and Noncompetition Agreement, or
(iii) asserting any right with respect to any of the Assets; and, in each such
case, there is no basis for any such action, suit, proceeding, claim,
arbitration or investigation.
.6 Financial Information. Attached hereto as EXHIBIT 3.7 and incorporated
by reference herein are copies of the unaudited Balance Sheets of Seller as of
September 30, 1994 and March 31, 1995, and the Operating Statements of the
Seller for the periods July 5, 1993 to September 30, 1993, October 1, 1993 to
September 30, 1994, and an interim statement from October 1, 1994 to March 31,
1995, which is being provided by the Seller and the Shareholders to the
purchaser (the "Financial Statements"). The Financial Statements are in
accordance with the books and records of the Seller, are true, correct and
complete and accurately present the Seller's financial position as of the dates
set forth therein and the results of the Seller's operations for the periods
then ended, and Seller and the Shareholders know of no subsequent events that
would materially affect the Financial Statements; all such Financial Statements
are in conformity with the accounting principles historically utilized by the
Seller and such accounting principles were applied on a consistent basis during
each period and on a basis consistent with that of prior periods. Until the
Closing Date, Seller shall deliver month end balance sheets and income
statements within 15 days of the end of each month.
.7 Tax Matters. All tax returns of the Seller as filed by the Seller with
the Internal Revenue Service (the "IRS") and all information reported on the
returns are true, accurate, and complete. The Seller is not a party to, and is
not aware of, any pending or threatened action, suit, proceeding, or assessment
against it for the collection of taxes by any Government or Governmental
Agency. The Seller has duly and timely filed with all appropriate Governments
and Governmental Agencies, all tax returns, information returns, and reports
required to be filed by the Seller. The Seller has paid in full all taxes,
interest, penalties, assessments and deficiencies owed by the Seller to all
taxing authorities. All taxes and other assessments and levies which the Seller
is required by applicable Law to withhold or to collect have been duly withheld
and collected and have been paid over to the proper governments and
Governmental Agencies or are properly held by the Seller for such payment. All
claims by the IRS or any state taxing authorities for taxes due and payable by
the Seller have been paid by the Seller. The Seller is not a party to, and is
not aware of, any pending or threatened action, suit, proceeding, or assessment
against it for the collection of taxes by any Government or Governmental
Agency.
.8 Franchise Agreement. The Franchise Agreement is the full, complete,
unamended, true and correct Franchise Agreement between Seller and Burger King
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Corporation which is, and shall continue to be until the Closing on the Closing
Date, in full force and effect.
.9 Title to Assets; Equipment and Fixed Assets. The Seller has sole and
exclusive, good and marketable title to all of the assets and the same shall be
free and clear of any and all pledges, claims, threats, liens, restrictions,
agreements, leases, security interests, charges and encumbrances at the time of
Closing. All of the Equipment and Fixed Assets are in good, working and
operating condition and repair, reasonable wear and tear excepted, fit for
their intended purposes, and free from any defects known to the Seller or to
any of the Shareholders.
.10 Records. The Records that have been delivered by the Seller to the
Purchaser or that shall be delivered by the Seller to the Purchaser are true,
complete and correct.
.11 Employment Matters.
.0 None of the Seller's employees are covered by a collective
bargaining agreement or are represented by a labor organization, and no
petition for representation concerning any of the Seller's employees has been
filed with the National Labor Relations board; the Seller is not aware of any
union organizational activity and has no reason to believe that any such
activity is being contemplated. To the best of Seller's knowledge, Seller has
not engaged in any unfair labor practice.
.1 To the best of Seller's knowledge Seller is not in violation of
applicable equal employment opportunity wage and hour requirement or any other
Laws of any Government or Governmental Agency relating to employment; there are
no active, pending, or threatened administrative or judicial proceedings under
any Laws of any Government or Governmental Agency; there are no claims,
charges, and employment related suits which have occurred within the last three
years or are presently pending or threatened under any employment related Laws
of any Government or Governmental Agency; and the Seller is not subject to any
judgments, decrees, conciliation agreements and settlement agreements
concerning employment related matters.
.2 The Seller has not entered into any employment agreements with any
of its employees, and all employees may be terminated at will; there is no
contractual obligation or special termination or severance arrangement in
respect of any of Seller's employees; and there is no provision of any
agreement or arrangement with any of the Seller's employees, or any other legal
or contractual requirement, which would obligate the Seller to require the
Purchaser of the Assets to employ any of the Seller's employees.
.3 The Seller has paid all wages, bonuses, commissions and other
benefits and sums due (and all required taxes, insurance, social security and
withholding thereon), including all accrued vacation, accrued sick leave,
accrued benefits and accrued payments (and pro rata accruals for a portion of
the year) to its employees.
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.4 The Purchaser is under no obligation or duty, whether under any
contract, agreement, understanding or arrangement or under any applicable Law
of any Government or Governmental Agency to assume or be responsible for any
obligation, duty or liability, now existing or hereafter arising, relating to
or in connection with the Seller's employees or any compensation, benefits or
benefit plans in respect of the Seller's employees, or otherwise arising out of
or in connection with the transactions contemplated by this Agreement, and the
Seller has made no commitment and is under no obligation to cause the Purchaser
of the Assets to assume or to be responsible for any such obligation, duty or
liability.
.12 Absence of Certain Changes or Events. Since September 30, 1994, the
Seller has not engaged in or experienced any of the following:
.0 Sold, assigned, transferred, leased, disposed of, or agreed to
sell, assign, transfer, lease, or dispose of, any of the Assets, except
inventory sold in the ordinary course of the Seller's business, as such
business has been operated historically.
.1 Made any capital expenditure in excess of One Thousand Dollars
($1,000) or entered into any contract, agreement, arrangement, understanding or
commitment therefor, or acquired or leased any assets or property of any third
person or party other than in the ordinary course of Seller's business, as such
business has been operated historically.
.2 Suffered any material adverse change in Seller's operations,
earnings, assets, liabilities, or business (financial or otherwise).
.3 Failed to pay any indebtedness or other obligation, including any
taxes and other charges, when due.
.13 Adverse Conditions. Except as set forth in EXHIBIT 3.14, attached
hereto and incorporated by reference herein, neither Seller nor any of the
Shareholders have any knowledge of any past, present or future condition, facts
or circumstances which have materially affected or which might materially
affect adversely the business of the Seller or prevent the Purchaser from
carrying on the Seller's business.
.14 Leases. Attached hereto as EXHIBIT 3.15 and incorporated by reference
herein is a list of the following, which is accurate and complete as of the
date hereof: all leases, contracts, licenses, agreements or other commitments
of Seller as obligor involving a liability or obligation in excess of $1,000.
.15 Bonus, Pension or Other Plans, etc. Seller is not a party to, does not
maintain or make any contribution to, and Seller has not incurred any liability
or expense with respect to any employment agreement, current or future pension,
retirement, deferred compensation, bonus, profit-sharing, insurance or similar
plan, agreement, arrangements or
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formal or informal understandings for the benefit of employees, in each case
whether or not legally binding.
.16 Full Disclosure. This Agreement (including the Exhibits hereto) does
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein not misleading.
There is no fact known to the Seller or to any of the Shareholders which is not
disclosed in this Agreement which materially adversely affects the accuracy of
the representations and warranties contained in this Agreement or the Seller's
financial condition, operations, business, earnings, assets or liabilities.
.17 No brokerage. Neither the Seller nor any of the Shareholders have
incurred any obligation or liability, contingent or otherwise, for brokerage
fees, finder's fees, agent's commissions, or the like in connection with this
Agreement or the transactions contemplated hereby.
.18 Seller's Franchise Agreement. The Seller is not in breach of or
default under any provision of the Franchise Agreement, and no condition exists
which, with passage of time or the giving of notice or both, will result in a
breach or default by the Seller of any provision of the Franchise Agreement.
.19 Operation of Business. Since March 31, 1995, the Seller and the
Shareholders have used, and from the date hereof until the Closing the Seller
and the Shareholders shall use, their best efforts to preserve the Business of
the Seller.
III -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller and Shareholders as of
the date hereof and as of the Closing on the Closing Date each of the
following:
.0 Due Organization; Good Standing; Power. The Purchaser is a corporation
duly incorporated, validly existing, and in good standing under the Laws of the
State of DeLaware. The Purchaser has full right, power and authority to enter
into this Agreement and the Consulting and Noncompetition Agreement and to
perform its obligations hereunder and thereunder.
.1 Authorization and Validity of Documents. The execution, delivery and
performance by the Purchaser of this Agreement and the Consulting and
Noncompetition Agreement and the transactions contemplated hereby and thereby,
have been duly and validly authorized by the Purchaser. This Agreement has been
duly executed, acknowledged, sealed and delivered by the Purchaser and is a
legal, valid and binding obligation of the Purchaser, and the Consulting and
Noncompetition Agreement, when executed and delivered, will be the legal, valid
and binding obligation of the Purchaser, each enforceable against the Purchaser
in accordance with its terms except as such against the Purchaser in accordance
with its terms except as such
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enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar Laws relating to creditors' rights generally.
.2 No Brokerage. The Purchaser has not incurred any obligation or
liability, contingent or otherwise, for brokerage fees, finder's fees, agent's
commissions, or the like in connection with this Agreement or the transactions
contemplated hereby.
.3 Obligations Assumed. Purchaser covenants that it will pay all
obligations assumed by it under this Agreement.
.4 Burger King Obligations. Except as set forth on EXHIBIT 4.5 attached
hereto and incorporated by reference herein, Purchaser is not in default of any
of its obligations to the Burger King Corporation.
IV -- SELLER AND SHAREHOLDERS' COVENANTS
.0 Affirmative Covenants. The Seller and each of the Shareholders, jointly
and severally, covenant, promise and agree that from the date hereof and until
the Closing the Seller and the Shareholders shall, and the shareholders shall
cause the Seller to perform and comply with each of the following:
.0 Continue to operate the Business of the Seller diligently; and not
take any action, omit to take any action, or engage in any transaction other
than in acts or transactions in the ordinary course of business, as such
business has been operated historically.
.1 Preserve the Business of Seller and preserve the relationship of
the Business with suppliers, customers, Burger King Corporation and others.
.2 Maintain and continue normal and usual maintenance and repair of
the Equipment and the Fixed Assets and all other assets being sold and
transferred to Purchaser herein.
.3 Cooperate with the Purchaser to achieve an orderly transition of
the Business of the Seller to the Purchaser and an orderly transfer of the
Assets to the Purchaser.
.4 Pay or provide for payment of all sales, use, personal property,
social security, withholding, payroll, unemployment compensation, income and
other taxes, assessments, fees and public charges due and payable by the Seller
in respect of its business and the Assets through the Closing Date and any
portion thereof applicable to any period prior to the Closing Date.
.5 Pay all wages, bonuses, commissions and other employment benefits
and sums (and all required taxes, insurance and withholding thereon), including
all
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accrued vacation, accrued sick leave, accrued benefits and accrued payments
(and pro rata accruals for a portion of a year) due to Seller's employees
through the Closing Date.
.6 Maintain in effect all insurance policies and other employee
benefits covering any employee claims which may be incurred through the Closing
Date.
.7 Fully perform and comply with all covenants, promises and
agreements hereunder which are required to be performed or complied with by the
Seller and the Shareholders prior to or at the Closing, and exert their best
efforts to completely satisfy and fulfill all conditions precedent to Seller's
and the Shareholders' obligations to close hereunder at the Closing on the
Closing Date.
.8 Exert their best efforts to prevent the occurrence of any event
which could result in any of Seller's or the Shareholders' representations and
warranties contained in this Agreement not being true and correct at or as of
the time immediately after the occurrence of such event, and the Seller and the
Shareholders shall promptly notify the Purchaser of the occurrence of any event
or the discovery of any fact which would cause any of their covenants, promises
and agreements to be breached or violated or any of their representations and
warranties to become not true and correct or which could interfere with or
prevent the consummation of the transactions contemplated hereby.
.9 Provide the Purchaser and its representatives, subject to the
restrictions contained in Section 7.2.9, With full access during normal
business hours to all of the Seller's properties, assets and Records, provide
the Purchaser and its representatives with such financial and operating data
and other information with respect to the Seller's Business, Assets and
properties as the Purchaser shall from time to time request, and permit the
Purchaser and its representatives to consult with the Seller's representatives,
officers, employees and accountants up to the time of Closing and for 120 days
thereafter.
.10 Take no action which is or would cause a violation of any Laws of
any Governments or Governmental Agencies.
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v -- OPINIONS OF COUNSEL
.0 Opinion of Seller's and Shareholders' Counsel. At the Closing, the
Seller and the Shareholders shall deliver to the Purchaser the opinion of their
counsel, dated as of the Closing Date, as to the following:
.0 Ownership of Seller's Stock. The Shareholders are the sole and
exclusive record and beneficial owners of all of the outstanding shares of the
capital stock of the Seller. The Shareholders have duly approved the sale,
assignment, transfer and delivery of the Assets to the Purchaser in accordance
with the terms of this Agreement, the consummation of all the transactions
contemplated hereby and the Seller entering into the Consulting and
Noncompetition Agreement.
.1 Due Organization; Good Standing; Authority of Seller. The Seller
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of Colorado. The Seller has full right, power, and
authority to own, lease and operate its properties and assets, and to carry on
its Business. The Seller is duly licensed, qualified and authorized to do
business in each jurisdiction in which the properties and assets owned by it or
the nature of the business conducted by it make such licensing, qualification
and authorization legally necessary. The Seller is not in breach or violation
of, and the execution, delivery and performance of this Agreement will not
result in a breach or violation of, any of the provisions of the Seller's
Articles or By-Laws.
.2 Authorization and Validity of Agreements. The Seller and the
Shareholders have the legal capacity, right, power and authority to enter into
this agreement and the Seller and Daniel L. White have the legal capacity,
right, power and authority to enter into the Consulting and Noncompetition
Agreement. The Seller has the full right, power and authority to execute,
acknowledge, seal and deliver this Agreement and to perform the transactions
contemplated by this Agreement. The execution, acknowledgment, sealing and
delivery of this Agreement by the Seller and the Shareholders and the
performance by the Seller and Shareholders of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate and
shareholder action. This Agreement has been duly executed, acknowledged, sealed
and delivered by the Seller and by each of the shareholders and is the legal,
valid and binding obligation of the Seller and each of the Shareholders,
enforceable against the Seller and each of the Shareholders in accordance with
its terms. The Consulting and Noncompetition Agreement when executed, will be
the legal, valid and binding obligation of Seller and Daniel L. White,
enforceable against each of them in accordance with its terms, except in each
case as such enforceability may be limited by general principles of equity,
bankruptcy, insolvency, moratorium and similar Laws relating to creditors'
rights generally.
.3 Agreement Not in Conflict with Other Instruments; Required
Approvals Obtained. The execution, acknowledgment, sealing, delivery, and
performance of this Agreement by the Seller and the Shareholders and the
execution, acknowledgment, sealing and delivery of the Consulting and
Noncompetition Agreement by the Seller and
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Daniel L. White, and the consummation of the transactions contemplated by this
Agreement and the Consulting and Noncompetition Agreement will not (a) violate
or require any consent, approval, or filing under (i) any Laws of any
Governments or any Governmental Agencies, or (ii) any judgment, injunction,
order, writ or decree of any court, arbitrator, Government or Governmental
Agency by which the Seller or any of the Assets or any of the Shareholders are
bound; (b) to the best of Seller's and Shareholders' knowledge, conflict with,
require any consent, approval, or filing under, result in the breach or
termination of any provision of, constitute a default under, or result in the
creation of any claim, security interest, lien, charge, or encumbrance upon any
of the Assets pursuant to (i) the Seller's Articles or By-Laws; (ii) any
indenture, mortgage, deed of trust, license, permit, approval, consent,
franchise, lease, contract, or other instrument, document or agreement to which
the Seller is named or a party; or (iii) any judgment, injunction, order, writ
or decree of any court, arbitrator, Government or Governmental Agency by which
the Seller or any of the Assets is Bound.
.4 Legal Proceedings. There is no action, suit, proceeding, claim or
arbitration, or any investigation by any person or entity, including any
Government or Governmental Agency (i) pending, to which the Seller or any of
the Shareholders is a party, or to the knowledge of the Seller or any of the
Shareholders, threatened against or relating to the Seller, the Seller's
business or any of the Assets, or (ii) challenging the Seller's or any of the
Shareholders' right to execute, acknowledge, seal, deliver, perform under or
consummate the transactions contemplated by this Agreement and, as respects the
Seller and Daniel L. White, the Consulting and Noncompetition Agreement, or
(iii) asserting any right with respect to any of the Assets; and there is no
basis for any such action, suit, proceeding, claim, arbitration or
investigation.
.1 Opinion of Purchaser's Counsel. At the Closing, the Purchaser
shall deliver to the Seller and the Shareholders the opinion of its counsel,
dated as of the Closing Date, as to the following:
.0 Due Organization; Good Standing; Authority of Purchaser. The
Purchaser is a corporation duly incorporated, validly existing, and in good
standing under the Laws of the State of DeLaware. The Purchaser has all
requisite corporate power to execute, acknowledge, seal and deliver this
Agreement and the Consulting and Noncompetition Agreement and to perform its
obligations hereunder and thereunder.
.1 Authorization and Validity of Agreements. The execution,
delivery, and performance of this agreement and the consummation by the
Purchaser of the transactions contemplated hereby have been duly and validly
authorized by the Purchaser. This Agreement has been duly executed,
acknowledged, sealed and delivered by the Purchaser and is the legal, valid,
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms except as such enforceability may be limited by
general principles of equity, bankruptcy, insolvency, moratorium and similar
Laws relating to creditors' rights generally.
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<PAGE>
VI -- CONDITIONS
.0 Seller's Conditions to Close. The Seller's obligation to close the
transactions contemplated hereby at the Closing shall be subject to the
complete satisfaction and fulfillment of all of the following conditions
precedent, any or all of which may be waived in whole or in part by the Seller
(but no such waiver of any such condition precedent shall be or constitute a
waiver of any covenant, promise, agreement, representation or warranty made by
the Purchaser in this Agreement):
.0 All representations and warranties made by the Purchaser in this
Agreement shall be complete and accurate at and as of the Closing on the
Closing Date. Seller shall have been furnished with a certificate, signed by
the Purchaser, and dated the Closing Date to the foregoing effect.
.1 All covenants, promises and agreements made by the Purchaser in
this Agreement and all other actions required to be performed or complied with
by the Purchaser under this Agreement prior to or at the Closing shall have
been fully performed or complied with by the Purchaser. Seller shall have been
furnished with a certificate, signed by Purchaser, and dated the Closing Date
to the foregoing effect.
.2 The Purchaser shall deliver to the Seller by wire transfer the
amount set forth in Section 1.4 of this Agreement.
.3 National Restaurant Enterprises, Inc., The parent corporation of
Purchaser, shall also be a signatory to the Lease Assignment of the Real
Property Lease for the Restaurant.
.1 Purchaser's Conditions to Close. The Purchaser's obligation to close
the transactions contemplated hereby at the Closing shall be subject to the
complete satisfaction and fulfillment of all of the following conditions
precedent, any or all of which may be waived in whole or in part by the
Purchaser (but no such waiver of any such condition precedent shall be or
constitute a waiver of any covenant, promise, agreement, representation or
warranty made by the Seller or the Shareholders in this Agreement):
.0 All representations and warranties made by the Seller and the
Shareholders in this Agreement shall be complete and accurate at and as of the
Closing on the Closing Date. Purchaser shall have been furnished with a
certificate, signed by the Shareholders and Seller, and dated the Closing Date
to the foregoing effect.
.1 All covenants, promises and agreements made by the Seller and the
Shareholders in this Agreement and all other actions required to be performed
or complied with by the Seller and the Shareholders under this Agreement prior
to or at the Closing shall have been fully performed or complied with by the
Seller and the Shareholders. Purchaser shall have been furnished with a
certificate, signed by the Shareholders and Seller, and dated the Closing Date
to the foregoing effect.
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<PAGE>
.2 Seller shall have obtained, and delivered to Purchaser, copies of all
consents, approvals or other authorizations which Seller is required to obtain
from, and any filing which Seller is required to make with, any Governmental
authority or agency or any other person including, but not limited to, consents
required from Burger King Corporation (the "Burger King Consents") in
connection with the execution, delivery and consummation of this Agreement and
the other documents associated herewith and the consummation of the
transactions contemplated hereby or thereby (collectively, the "Required
Consents"), in form and substance satisfactory to Purchaser. Notwithstanding
the foregoing, Purchaser shall be solely responsible for obtaining any consents
or approvals necessary for Purchaser to purchase the Assets or operate the
Business from and after the Closing Date.
.3 The Purchaser shall have received all things required to be delivered
or furnished to the Purchaser by the Seller and the Shareholders hereunder
prior to or at the Closing.
.4 All necessary permits, licenses and approvals required to be obtained
by Purchaser shall have been obtained by Purchaser or Purchaser shall have
exercised all reasonable efforts to obtain same.
.5 There shall not have occurred any material adverse change in the
business of Seller or in the Assets.
.6 Purchaser shall have received the opinion of counsel for Seller and the
Shareholders, as of the Closing Date, as required by Section 6.1 hereof.
.7 Purchaser shall have received, if necessary, the written consent of the
lender of National Restaurant Enterprises, Inc., the parent corporation of
Purchaser ("NRE"), to the transactions contemplated hereby within thirty days
of the execution of this agreement by all parties.
.8 Purchaser and its representatives shall have completed, to their
complete satisfaction, an investigation and examination of all aspects of the
Restaurant and the Assets, including the Financial Statements. No employee or
representative of Purchaser will perform on-site due diligence of the Restaurant
without Seller's prior approval, at which time such employee or representative
will be accompanied by Seller or its designee. Purchaser shall have completed
its review of the Restaurant to confirm that the Equipment in the Restaurant is
in proper working order and that the Restaurant conforms in all material
respects to Burger King standards (the "Walk-Thru") that apply to the
Restaurant. Purchaser shall itemize any deficiencies noted in the Walk-Thru and
provide such list to Seller prior to the Closing Date. Seller shall correct the
deficiencies prior to the Closing Date if the total cost of such corrections
does not exceed $2,000. If the total cost does exceed this amount, Seller shall
have the option, exercisable within ten (10) days of receiving notice of the
corrections, to pay for the corrections or terminate this Agreement.
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<PAGE>
.9 Seller shall have delivered to Purchaser the following documents:
.0 The Lease Assignment of its Real Property Lease, each Assumed
Contract, and the Consent to Assignment, Estoppel, and Release;
.1 any required easement assignments;
.2 to the extent available, a fully executed original counterpart of
the Real Property Lease in Seller's possession;
.3 a receipt for funds paid to Seller by Purchaser;
.4 certificates dated no earlier than thirty (30) days prior to the
Closing Date, from the Secretary of State for the State of Colorado as to the
good standing of Seller; and
.5 all other documents, instruments and agreements required to be
delivered by the Seller to Purchaser pursuant to this Agreement.
.10 Between the date of this Agreement and the Closing Date, Seller shall
have conducted the operation of its Restaurant in the ordinary and usual course
of business, consistent with past practices and will use its best efforts to
preserve intact the present business organization with respect to its
Restaurant, to keep available the services of its officers and employees and to
maintain satisfactory relationships with landlords, franchisors, dealers,
licensors, licensees, suppliers, contractors, distributors, customers and
others having business relations with it and its Restaurant and will maintain
its Restaurant, real property, and Assets in a condition conducive to the
operation of the business currently carried on therein.
.11 Seller shall have provided to Purchaser copies of all operating
permits and licenses (collectively, the "Approvals") which are in Seller's
possession.
.12 Seller shall have provided to Purchaser copies of all documents with
respect to any actions, suit or proceeding which has been brought by or on
behalf of Seller with respect to the Assets or the Business.
.13 The Seller shall execute, acknowledge, seal, and deliver to the
Purchaser a Bill of Sale and Assignment in the form attached hereto as EXHIBIT
7.2.14 and incorporated herein by reference pursuant to which the Seller shall
sell, assign, and transfer to the Purchaser the Assets and the Inventory.
.14 The Seller shall execute, acknowledge, seal and deliver to the
Purchaser a Warranty Assignment in the form attached hereto as EXHIBIT 7.2.15
and incorporated herein by reference pursuant to which the Seller shall sell,
assign and transfer to the Purchaser the Franchise Agreement.
17
<PAGE>
.15 Daniel L. White, Seller, DMW, Inc., and the Purchaser shall execute,
acknowledge, seal and deliver the consulting and Noncompetition Agreement
attached hereto as EXHIBIT 1.5.
.16 Purchaser shall contemporaneously acquire the Burger King Restaurants
owned by DMW, Inc., a corporation that is controlled by Daniel L. White.
.17 Seller shall have previously delivered to Purchaser the Real Property
Lease and Purchaser shall have twenty days thereafter to review the Real
Property Lease to ensure that it is satisfactory to Purchaser in its sole
discretion.
7.2.19 No later than fourteen (14) days prior to Closing, Purchaser's
auditor shall have (i) reviewed the financial and accounting system of Seller;
(ii) reviewed and confirmed the Financial Statements and results set forth in
the Financial Statements; and (iii) found no objection to the financial and
accounting system of Seller, or Seller and Purchaser shall have resolved any
objection raised by the auditor and presented to Seller by Purchaser.
7.2.20 The Board of Directors of NRE shall have approved this Agreement
and the transactions contemplated herein within 15 days of the date of this
Agreement.
.2 Contemporaneous Transfer. All transfers, assignments, conveyances, and
transactions under this Agreement shall be effected contemporaneously for
present value between the Seller, the Shareholders and the Purchaser.
VII -- INDEMNIFICATION
.0 Indemnification By Seller and Shareholders. The Seller and the
Shareholders, jointly and severally, shall defend, indemnify and hold harmless
the Purchaser, its officers, directors, shareholders, agents, servants and
employees and their respective heIRS, personal and legal representatives,
guardians, successors and assigns, from and against any and all claims,
threats, liabilities, taxes, interest, fines, penalties, suits, actions,
proceedings, demands, damages, losses, costs and expenses (including attorneys'
and experts' fees and court costs) of every kind and nature arising out of,
resulting from, or in connection with the following:
.0 Any misrepresentation or breach by the Seller or by any of the
Shareholders of any representation or warranty contained in this Agreement.
.1 Any nonperformance, failure to comply or breach by Seller or by
any of the Shareholders of any covenant, promise or agreement of the Seller or
of any of the Shareholders contained in this Agreement.
18
<PAGE>
.2 Any debts, obligations, duties and liabilities of the Seller and
the Shareholders (except those assumed by Purchaser).
.3 Any matter, act, thing or occurrence caused by or resulting from
any act or omission of Seller or of any of the Shareholders prior to the
Closing.
.1 Indemnification by Purchaser. Purchaser shall defend, indemnify and
hold harmless the Seller, the Shareholders and their respective heirs, personal
and legal representatives, guardians, successors and assigns, from and against
any and all claims, threats, liabilities, taxes, interest, fines, penalties,
suits, actions, proceedings, demands, damages, losses, costs and expenses
(including attorneys' and experts' fees and court costs) of every kind and
nature arising out of, resulting from, or in connection with the following:
.0 Any misrepresentation, omission or breach by Purchaser of any
representation or warranty contained in this Agreement.
.1 Any nonperformance, failure to comply or breach by the Purchaser
of any covenant, promise or agreement of the Purchaser contained in this
Agreement.
.2 Defense of Claims. In the event of any claim, threat, liability, tax,
interest, fine, penalty, suit, action, proceeding, demand, damage, loss, cost
or expense with respect to which indemnity is or may be sought hereunder (an
"Indemnity Claim"), the indemnified party shall promptly notify the
indemnifying party of such Indemnity Claim, specifying in reasonable detail the
Indemnity Claim and the circumstances under which it arose. The indemnifying
party may elect to assume the defense of such Indemnity Claim, at its own
expense, by written notice to the indemnified party given within 10 days after
the indemnifying party receives notice of the Indemnity Claim, and the
indemnifying party shall promptly engage counsel reasonably acceptable to the
indemnified party to direct and conduct such defense; provided, however, that
the indemnified party shall have the right to engage its own counsel, at its
own expense, to participate in such defense. In the event the indemnifying
party does not so elect to assume the defense of such Indemnity Claim in the
manner specified above, or if, in the reasonable opinion of counsel to the
indemnified party, there are defenses available to the indemnified party which
are different from or additional to those available to the indemnifying party
or which give rise to a material conflict between the defense of the
indemnified party and of the indemnifying party, then upon notice to the
indemnifying party, the indemnified party may elect to engage separate counsel
to conduct its defense, at the expense of the indemnifying party, and the
indemnifying party shall not have the right to direct or conduct such defense.
In the event the indemnifying party assumes the defense of any Indemnity
Claim, it may at any time notify the indemnified party of its intention to
settle, compromise or satisfy such Indemnity Claim and may make such
settlement, compromise or satisfaction (at its own expense) unless within 20
days after the giving of such notice the indemnified party shall give notice to
the indemnifying party of its intention to assume the defense of the
19
<PAGE>
Indemnity Claim, in which event the indemnifying party shall be relieved of
its duty hereunder to indemnify the indemnified party. Unless the indemnified
party shall have given the notice referred to in the preceding sentence, (i)
the indemnified party shall not consent to or make any settlement, compromise
or satisfaction with respect to the Indemnity Claim without the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld, and (ii) any settlement, compromise or satisfaction made by the
indemnifying party with respect to such Indemnity Claim shall be deemed to
have been consented to by and shall be binding upon the indemnified party.
VIII -- MISCELLANEOUS
.0 Survival of Representations, Warranties and Agreements. All of the
representations, warranties, covenants, promises and agreements of the parties
contained in this Agreement (or in any document delivered or to be delivered
pursuant to this Agreement or at or in connection with the Closing) shall
survive the execution, acknowledgment, sealing and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
.1 Notices. All notices, requests, demands, consents, and other
communications which are required or may be given under this agreement
(collectively, the "Notices") shall be in writing and shall be given either (a)
by personal delivery with a receipted copy of such delivery, or (b) by
certified or registered United States mail, return receipt requested, postage
prepaid, to the following addresses:
(i) if to Seller, to:
WSG, Inc.
2605 64th Avenue
Greeley, CO 80634
Telefax No.: (970) 352-7842
20
<PAGE>
with a copy to:
Curt D. Rautenstraus, Esq.
Rautenstraus Joss & Christman, P.C.
P.O. Box 55
824 Pine Street
Louisville, Colorado 80027
Telefax no.: (303) 666-5724
(ii) if to the Shareholders, to:
Daniel L. White
2605 64th Avenue
Greeley, Colorado 80634
(iii) if to the Purchaser, to:
Lawrence E. Jaro, Chief Executive Officer
Ameriking Colorado Corporation I
2215 Enterprise Drive, Suite 1502
Westchester, IL 60154
Telefax No.: (708) 947-2160
with copies to:
A. Richard Caputo Ernest J. Panasci, Esq.
The Jordan Company Freeborn & Peters
9 West 57th Street, Suite 4000 950 Seventeenth Street, Suite 2600
New York, New York 10019 Denver, Colorado 80202
Telefax No.: (212) 755-5263 Telefax No.: (303) 628-4240
Or to such other address of which written notice in accordance with this
Section 9.2 shall have been provided to the other parties. Notices may only be
given in the manner hereinabove described in this Section 9.2 and shall be
deemed received three (3) days after given in such manner.
.2 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the full, entire and integrated agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
negotiations, correspondence, understandings and agreements among the parties
hereto respecting the subject matter hereof.
.3 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties hereto.
21
<PAGE>
.4 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heIRS, personal and
legal representatives, guardians, successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended to confer upon any other person
any rights, remedies, obligations, or liabilities.
.5 Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable shall be
ineffective only to the extent of such prohibition or unenforceability, without
invalidating or rendering unenforceable the remaining provisions of this
Agreement.
.6 Amendment; Waiver. No provision of this Agreement may be amended,
waived or otherwise modified without the prior written consent of all of the
parties hereto. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement herein contained. The waiver by any party
hereto of a breach of any provision or condition contained in this agreement
shall not operate or be construed as a waiver of any subsequent breach or of
any other conditions hereof.
.7 Section Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
.9 Applicable Law; Jurisdiction and Venue; Service of Process. This
Agreement was made in the State of Colorado, and shall be governed by,
construed, interpreted and enforced in accordance with the Laws of the State of
Colorado. Any suits, proceedings and other actions relating to, arising out of
or in connection with this Agreement shall be submitted to the in personam
jurisdiction of the courts of the State of Colorado and venue for all such
suits, proceedings and other actions shall be in Denver County, Colorado. The
Seller, each of the Shareholders and the Purchaser hereby waive any claim
against or objection to in personam jurisdiction and venue in the courts of
City and County of Denver, Colorado.
.10 Remedies. The parties hereto acknowledge that in the event of a breach
of this Agreement, any claim for monetary damages hereunder may not constitute
an adequate remedy, and that it may therefore be necessary for the protection
of the parties to carry out the terms of this Agreement to apply for the
specific performance of the provisions hereof. It is accordingly hereby agreed
by all parties that no objection to the form of the action or the relief prayed
for in any proceeding for specific performance of this Agreement shall be
raised by any party, in order that such relief may be expeditiously
22
<PAGE>
obtained by an aggrieved party. All parties may proceed to protect and enforce
their rights hereunder by a suit in equity, transaction at Law or other
appropriate proceeding, whether for specific performance or for an injunction
against a violation of the terms hereof or in aid of the exercise of any right,
power or remedy granted hereunder or by Law, equity or statute or otherwise. No
course of dealing and no delay on the part of any party hereto in exercising
any right, power or remedy shall operate as a waiver thereof or otherwise
prejudice its rights, powers or remedies, and no right, power or remedy
conferred hereby shall be exclusive of any other right, power or remedy
referred to herein or now or hereafter available at Law, in equity, by statute
or otherwise.
.11 Further Assurances. The Seller and each of the Shareholders jointly
and severally agree to execute, acknowledge, seal and deliver, after the date
hereof, without additional consideration, such further assurances, instruments
and documents, and to take such further actions, as the Purchaser may
reasonably request in order to fulfill the intent of this Agreement and the
transactions contemplated hereby.
.12 Use of Genders. Whenever used in this Agreement, the singular shall
include the plural and vice versa, and the use of any gender shall include all
genders and the neuter.
.13 Risk of Loss. All risk of loss of damage to or destruction of the
Assets, in whole or in part, shall be and remain with the Seller until the
Closing and all of the transactions contemplated hereby shall have been
consummated.
.14 Negotiations with Other Persons. Until the earlier of the Closing or
the termination of this Agreement as provided herein, neither the Seller nor
the Shareholders shall initiate, encourage the initiation by others, or
participate in any discussion or negotiations with any other person or entity
relating to the sale of any or all of the Assets, the business of the Seller or
any securities of the Seller. From the date of this Agreement and until after
the Closing and the consummation of the transactions contemplated by this
Agreement, the Shareholders shall not offer for sale, sell or otherwise
transfer (with or without consideration) any securities of the Seller owned of
record or beneficially by them.
.15 Expenses of Transactions. All sales, transfer and use taxes incurred
in connection with the sale, assignment, transfer and delivery of the Equipment
and the fixed Assets shall be paid by the Seller.
[FINAL SECTION OF THIS AGREEMENT IS DIRECTLY ABOVE.]
23
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement under seal, with the intention of making it a sealed
instrument, on the date fIRSt above written.
SELLER:
ATTEST: WSG, INC.
________________________________ By:______________________________
Daniel L. White, President
WITNESS: SHAREHOLDERS:
- --------------------------------- ---------------------------------
Daniel L. White
- --------------------------------- ---------------------------------
Susan J. Wakeman
- --------------------------------- ----------------------------------
George Alaniz, Jr.
Purchaser:
ATTEST: AMERIKING COLORADO
CORPORATION I
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief Executive
Officer
24
PURCHASE AGREEMENT
AMONG
QSC, INC., RONNY D. LANKFORD,
ROBERT W. LANKFORD AND MICHAEL A. REED
AND
AMERIKING TENNESSEE CORPORATION I
BUYER
November 21, 1995
<PAGE>
TABLE OF CONTENTS
1. Definitions..............................................................1
2. Purchase and Sale of Target's Shares and Certain Properties..............6
(a) Basic Transaction..............................................6
(b) Purchase Price.................................................6
(c) The Closing....................................................8
(d) Deliveries at the Closing......................................8
(e) Escrow Provisions..............................................8
(f) Provisions as to Escrow Agent.................................10
3. Representations and Warranties Concerning the Transaction...............11
(a) Representations and Warranties of the Sellers.................11
(b) Representations and Warranties of the Buyer...................13
(a) Organization, Qualification and Corporate Power...............14
(b) Capitalization................................................15
(c) Noncontravention..............................................15
(d) Brokers' Fees.................................................16
(e) Title to Assets...............................................16
(f) Subsidiaries..................................................16
(g) Financial Statements..........................................16
(h) Events Subsequent to Most Recent Fiscal Year End..............17
(i) Undisclosed Liabilities.......................................19
(j) Legal Compliance..............................................20
(k) Tax Matters...................................................20
(1) Real Property.................................................21
(m) Intellectual Property.........................................24
(n) Tangible Assets...............................................25
(o) Inventory.....................................................25
(p) Contracts.....................................................25
(q) Notes and Accounts Receivable.................................27
(r) Powers of Attorney............................................27
(s) Insurance.....................................................27
(t) Litigation....................................................28
(u) Product Warranty..............................................28
(v) Product Liability.............................................28
(w) Employees.....................................................29
(x) Employee Benefits.............................................29
(y) Guaranties....................................................30
(z) Environment, Health, and Safety...............................30
(aa) Certain Business Relationships with the Target...............31
(ab) Cleveland Restaurant.........................................31
(ab) Disclosure...................................................31
5. Pre-Closing Covenants...................................................31
(a) General.......................................................31
(b) Notices and Consents..........................................31
<PAGE>
(c) Operation of Business.........................................32
(d) Preservation of Business......................................32
(e) Full Access...................................................32
(f) Notice of Developments........................................32
(g) Exclusivity...................................................32
(h) Title Insurance...............................................33
(i) Surveys.......................................................34
(j) Chapter 11....................................................35
(k) Schedules and Exhibits........................................35
6. Post-Closing Covenants..................................................35
(a) General.......................................................35
(b) Litigation Support............................................35
(c) Transition....................................................36
(d) Confidentiality...............................................36
(e) Covenant Not to Compete.......................................37
(f) Payment of Debts or Release or Parties........................37
(g) Indemnification of Sellers Regarding Leases and
Franchise Agreements.....................................37
(h) Employment of Loretta Lankford................................38
(i) Insurance Coverage............................................38
(j) Access to Records.............................................38
(k) S Election....................................................38
7. Conditions to Obligation to Close.......................................38
(a) Conditions to Obligation of the Buyer.........................38
(b) Conditions to Obligation of the Sellers.......................42
8. Remedies for Breaches of This Agreement.................................44
(a) Survival of Representations and Warranties....................44
(b) Indemnification Provisions for Benefit of the Buyer.
........................................................44
(c) Indemnification Provisions for Benefit of the Sellers
........................................................45
(d) Matters Involving Third Parties...............................45
(e) Determination of Adverse Consequences.........................48
(f) intentionally omitted.........................................48
(g) Other Indemnification Provisions..............................48
9. Termination.............................................................49
(a) Termination of Agreement......................................49
(b) Effect of Termination.........................................50
10. Miscellaneous..........................................................50
(a) Nature of Certain Obligations.................................50
(b) Press Releases and Public Announcements.......................50
(c) No Third-Party Beneficiaries..................................51
(d) Entire Agreement..............................................51
<PAGE>
(e) Succession and Assignment.....................................51
(f) Counterparts..................................................51
(g) Headings......................................................51
(h) Notices.......................................................51
(i) Governing Law.................................................52
(j) Amendments and Waivers........................................53
(k) Severability..................................................53
(1) Expenses......................................................53
(m) Construction..................................................53
(n) Incorporation of Exhibits and Schedules.......................54
(o) Specific Performance..........................................54
(p) Submission to Jurisdiction....................................54
<PAGE>
PURCHASE AGREEMENT
Agreement entered into November 21, 1995, by and among AMERIKING
TENNESSEE CORPORATION I, a Delaware corporation (the "Buyer"), and RONNY D.
LANKFORD, ROBERT W. LANKFORD, MICHAEL A. REED, and QSC, INC. (collectively the
"Sellers") (the "Agreement"). The Buyer and the Sellers are referred to
collectively herein as the "Parties."
Ronny D. Lankford, Robert W. Lankford and Michael A. Reed in the
aggregate own all of the outstanding capital stock of QSC, INC., a Tennessee
corporation (collectively the "Target").
Target owns and operates eight (8) Burger King Restaurants described
on Schedule 1 attached hereto.
The Franchise Agreements under which Target operates said Burger
King Restaurants are held as set forth on Schedule 1 attached hereto and the
real property and improvements on and in which such restaurants are operated
are held as indicated on Schedule 1.
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of the Target, certain real property, leaseholds,
buildings, and franchise rights, in return for cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, abilities, obligations, Taxes, liens, lows,
expenses, and fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
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"Basis" means any past or present fact, situation, circumstances,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available
to the public.
"Deferred Intercompany Transaction" has the meaning set forth in
Treas. Reg. Section 1. 150213.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Employee Benefit" means any fringe benefit plan or program provided
for or available to employees of the Target.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
"ERISA "means the Employee Retirement Income Security Act of 1974,
as amended.
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"Extremely Hazardous Substance" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Financial Statement" has the meaning set forth in Section 4(g)
below.
"Indemnified Party " has the meaning set forth in Section 8(d)
below.
"Indemnifying Party" has the meaning set forth in Section 8(d)
below.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks, service
marks, trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivation and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (c) all copyrightable works, all copyright
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registration and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, knowhow, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Knowledge" mean actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Location" means the site of each of the eight (8) Burger King
Restaurants which restaurants are owned and operated
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by the Target. "Locations" means the eight (8) sites
collectively.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" means the Financial Statements
set forth in Section 4(g) below.
"Most Recent Fiscal Month End" means October 31, 1995.
"Most Recent Fiscal Year End" means December 31, 1994.
" Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable [or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings], (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct
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the voting of sufficient securities to elect a majority of the
directors.
"Survey" has the meaning set forth in Section 5(i) below.
"Target" has the meaning set forth in the preface above.
"Target's Shares" means any share of the Common Stock of the Target.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec.
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or any similar tax), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
2. Purchase and Sale of Target's Shares and Certain Properties.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agree to purchase from the Sellers, and the Sellers
agree to sell to the Buyer, for the consideration specified below in this
Section 2 the following:
(i) All of the issued and outstanding shares in Target;
(ii) Burger King Franchise Agreements for each Location with
respect to which Sellers are franchisees;
(iii) Renewal rights for the Burger King Franchise Agreement
for each Location.
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(iv) All of the building leases and ground leases for each
Location including, without limitation, Target's Cleveland, Tennessee
restaurant (BKC 4959) (the "Cleveland Restaurant") with respect to which
Sellers are lessees, including all options to purchase and rights of first
refusal included in any leases or the amendments thereto.
This Agreement is one of two contracts being contemporaneously
executed with the other being one between Buyer and Ro-Lank, Inc., et al. The
Closing under this Agreement is contingent upon both contracts closing
contemporaneously. The failure of either of the contracts to close
contemporaneously renders this Agreement and all obligations under it null and
void, and this Agreement shall not be effective unless the other referenced
contracts are executed by the parties thereto.
(b) Purchase Price. The Buyer agrees to pay to the Sellers the sum
of Four Million Two Hundred Forty-Five Thousand Nine Hundred Fourteen
($4,245,914.00) Dollars (as adjusted as provided herein) (the "Purchase
Price"). The Purchase Price shall be allocated among the items being purchased
as the Parties may agree at or before Closing and such allocations shall be
reflected on the Closing Statement, as such term is hereinafter defined.
The Purchase Price will be payable as follows:
(i) The sum of Seventy-Five Thousand and No/100 ($75,000.00)
Dollars (the "Deposit") will be paid at Closing by the Buyer to be held in an
interest-bearing account by the Escrow Agent to be held and applied in
accordance with the terms of Section 2(e) of this Agreement.
(ii) The sum of Fifty-Six Thousand and no/100 ($56,000.00)
shall be paid over to Blue Ridge Foods, Inc. pursuant to that certain Release
Agreement dated November 21, 1995 (the "Blue Ridge Release").
(iii) The balance of the Purchase Price shall be paid at
Closing by wire transfer.
(iv) In addition to the Purchase Price, Buyer shall pay to
Sellers the cost of the inventory on hand at each Location including current
kids' toys, current promotional items and current promotional premiums as of
midnight prior to Closing. Payment for the inventory shall be made within
twelve (12) business days of the Closing Date.
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(v) Purchase Price Adjustments. The Purchase Price shall be
adjusted by adding the following items: (i) reductions in Target's aggregate
principal indebtedness (including Target' s prepetition indebtedness) from Two
Million Sixty-Six Thousand Ninety and No/100 ($2,066,090.00) Dollars, (ii)
Target's prepaid expenses, (iii) Target's cash balances; and (iv) prorata
portion of rebates received by Target from Carolina Franchise Association and
RSI Buying Co-op; and deducting the amount of Target's wages, bonuses,
salaries, debts, accounts payable and trade payables, of any nature
whatsoever, whether due or accrued, including, without limitation, amounts due
under Target's Plan of Reorganization, excluding those debts set forth in
Section 6(f). Such adjustments shall be calculated as of the Closing Date and
shall be reflected in a closing statement (the "Closing Statement") to be
signed by the Parties and delivered at the Closing. To the extent that such
purchase price adjustments cannot be calculated precisely as of the Closing
Date, such adjustments shall be applied as credits or debits, as the case may
be, against the inventory purchase provided herein.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at a mutually agreeable site
on or before November 21, 1995, commencing at 9:00 a.m. local time on or such
other date as the Buyer and the Sellers may mutually determine (the "Closing
Date"); provided, however, that Buyer shall have the right to extend the
Closing Date for thirty (30) days and if the Closing Date is extended the
Parties agree to enter a management agreement for the operation of the
Locations, to be in form and substance agreeable to the Parties.
(d) Deliveries at the Closing. (i) The Sellers will deliver to the
Buyer the various certificates, instruments, and documents referred to in
Section 7(a) below, (ii) the Buyer will deliver to the Sellers the various
certificates, instruments, and documents referred to in Section 7(b) below,
(iii) the Sellers will deliver to the Buyer stock certificates representing
all of Sellers' Target Shares, endorsed in blank or accompanied by duly
executed assignment documents, (iv) the Buyer will deliver to each of the
Sellers the consideration specified in Section 2(b) above, (v) the Sellers
will deliver assignments necessary to convey the building leases and franchise
agreements as indicated on Schedule 1, (vi) Sellers will pay at Closing or
deliver evidence of prior payment of all outstanding accounts payable and
obligations of Target, including, but not limited to, legal fees and expenses
accrued through the Closing Date with respect to the litigation described in
Sections 4(i) and 4(t) and the Schedule
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of Litigation, and (vii) Sellers will deliver at Closing releases of Target
from any guarantees.
(e) Escrow Provisions.
(i) Appointment of Escrow Agent. The parties hereby designate
Miller & Martin, Attorneys at Law, to act as Escrow Agent hereunder. The
Escrow Agent shall be bound by the provisions of this Section 2(e), but not by
any other provisions of this agreement.
(ii) The Deposit. Upon the execution of this Agreement, Buyer
has delivered to the Escrow Agent the Deposit as provided in Section 2, and
the Escrow Agent hereby acknowledges receipt thereof. The Escrow Agent shall
hold the Deposit in an interest bearing account which is insured by the
Federal Deposit Insurance Corporation. The Escrow Agent shall not be
responsible for any loss resulting from any such investment.
(iii) Disposition Of Deposit in the Event the Closing does Not
Occur.
(a) Delivery to Sellers. In the event that this Agreement is
properly terminated by Sellers pursuant to Section 9(a)(iv), then the Escrow
Agent shall deliver the deposit, including any interest thereon, to Sellers,
and Buyer shall have no further liabilities or obligations to Seller hereunder
or with respect to the transactions contemplated hereby.
(b) Delivery to Buyer. In the event that this Agreement is
terminated in any manner other than as specified in subparagraph (a) above,
the Escrow Agent shall deliver the Deposit, including any interest thereon, to
Buyer.
(c) Payment as Liquidated Damages. The Parties expressly acknowledge
that the sums referred to above in subparagraph (a) to be paid over to Sellers
are agreed upon as liquidated damages and not as a penalty and that such sums
have been computed and estimated as a reasonable forecast of probable actual
loss to Seller because of difficulty of estimating with exactness the damages
which would actually result.
(iv) Disposition Of Deposit in the Event the Closing Does
Occur.
(a) Hold as Reserve. The Escrow Agent shall hold the
Deposit in reserve for seventy-five (75) days after the
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Closing Date to apply against any liabilities or obligations of Target or of
Sellers which may arise subsequent to Closing which Sellers have agreed to
indemnify Buyer against under this Agreement. Buyer shall be entitled to
payment from the Deposit for any amount which Sellers are obligated to
indemnify Buyer under this Agreement.
(b) Delivery to Sellers. Upon the expiration of the
seventy-five (75) day period described in subparagraph (a) above, if Buyer has
made no notification to Sellers of any claim for indemnification pursuant to
this Agreement, then the Escrow Agent shall deliver the Deposit, including any
interest thereon to the Seller.
(f) Provisions as to Escrow Agent.
(a) The Escrow Agent shall be protected in
acting upon any written notice, statement, certificate, waiver, consent or
other instrument or document which the Escrow Agent believes to be genuine.
(b) It is understood and agreed that the duties of the
Escrow Agent hereunder are purely ministerial in nature and that the Escrow
Agent shall not be liable for any error or judgement, or for any act done or
step taken or omitted in good faith, or for anything which the Escrow Agent
may do or refrain from doing in connection with this Agreement, except that
the Escrow Agent shall be liable for its own gross negligence or willful
misconduct. In no event shall the Escrow Agent be required to account for any
application of funds subsequent to disposition thereof in accordance with this
Agreement by the Escrow Agent.
(c) The Escrow Agent may consult with and obtain
advice from legal counsel in the event of any dispute or question as to the
construction of any of the provisions hereof or the Escrow Agent's duties
hereunder, the Escrow Agent shall incur no liability and shall be fully
protected in acting in accordance with the opinion of its legal counsel. The
Escrow Agent shall not be responsible in any manner whatsoever for any failure
or inability of any of the other parties hereto, or anyone else, to perform or
comply with any provisions of this Agreement or any other agreement or
undertaking.
(d) If at any time the Escrow Agent shall be in doubt
as to the party or parties entitled to receive any or all of the Deposit, the
Escrow Agent may apply to a court for a
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determination of the party or parties entitled to receive the same, and the
Escrow Agent shall incur no liability therefor.
(e) If at any time the Escrow Agent shall receive
conflicting notices, claims, demands or instructions with respect to any
disbursement from the Deposit, or if for any other reason its shall be unable
in good faith to determine the party or parties entitled to receive a
disbursement from the Deposit, the Escrow Agent may refuse to make such
disbursement until the Escrow Agent shall have received instructions in
writing signed by all of the other parties hereto, or until directed by a
final order of a court (in an action brought by the Escrow Agent pursuant to
paragraph (d) above or by any other person), whereupon the Escrow Agent shall
make such disbursement in accordance with such instructions or order.
(f) Exclusions from Target's Assets. Sellers shall
have the right to receive at Closing certain administrative assets of Target
set forth in the Schedule of Excluded Administrative Assets which are not
involved directly in restaurant operations. The conveyance of such items to
Sellers shall not reduce the Purchase Price.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the
Sellers represents and warrants to the Buyer that the statements contained in
this Section 3(a) are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a) with respect to himself or itself).
(i) Organization of Certain Sellers. If the Seller is a
corporation or partnership, the Seller is duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation
or formation.
(ii) Authorization of Transaction. Subject to receiving a
waiver of the right of first refusal from Burger King Corporation and from
Ralph E. Manning (or expiration of the period within which such right is
exercisable), the Sellers have full power and authority (including, if the
Seller is a corporation or partnership, full corporate or partnership power
and authority) to execute and deliver this Agreement and to perform his or its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the
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Sellers, enforceable in accordance with its terms and conditions. The Sellers
need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which the Sellers are subject
or, if any of Sellers is a corporation or partnership, any provision of its
charter, bylaws, or partnership agreement, or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or other
arrangement to which any of the Sellers is a party or by which he, she or it
is bound or to which any of his, her or its assets is subject.
(iv) Broker's Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement as a result of any
agreements, contracts or actions by Sellers.
(v) Target Shares. The Sellers hold of record and, except
for the shareholders' agreement between the Sellers which shall be terminated
at Closing by written instrument in the form attached to this Agreement as
Exhibit 3(a)(v), own beneficially free and clear of any restrictions on
transfer, Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands the number of Target
Shares as follows:
Name Number of Shares
Ronny D. Lankford 1,000
Robert W. Lankford 1,000
Michael A. Reed 1,000
The Target Shares represent all of the issued and outstanding stock of Target.
The Sellers are not a party to any option, warrant, purchase right, or other
contract or commitment that could require the Sellers to sell, transfer, or
otherwise dispose of any capital stock of the Target (other than this
Agreement). The Sellers are not a party to any voting trust, proxy, or other
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agreement or understanding with respect to the voting of any
capital stock of the Target.
(vi) Franchise Agreements. The Sellers or Target own Franchise
Agreements with Burger King for each Location as indicated on Schedule 1. The
Franchise Agreements are in full force and effect and are free and clear of
any liens or encumbrances. Sellers shall provide Buyer with copies of
Franchise Agreements for each Location.
(vii) Real Property. Target owns the real property and
improvements for the Athens Burger King Location.
(viii) Leaseholds. Sellers or Target own a leasehold interest
under Leases for each of the Locations as indicated in Schedule 1, except for
the Athens Burger King which Location is owned by Target. All Leases are from
third parties which are not related or affiliated with Target in any manner
whatsoever, other than the lease of the Cleveland Location from LRL
Development Associates.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)).
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware
and is duly qualified to transact business in Tennessee and Georgia.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and all other agreements contemplated herein and to
perform its obligations hereunder and thereunder. This Agreement and all other
agreements contemplated herein constitute the valid and legally binding
obligations of the Buyer, enforceable in accordance with their terms and
conditions. The Buyer need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
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(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which the Buyer are subject
or any provision of their charters or bylaws or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which they are bound or to
which any of their assets are subject.
(iv) Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated, except for any fees to be paid by Buyer to
National Restaurant Enterprises, Inc. or The Jordan Company.
(v) Investment. The Buyer is acquiring the Target's shares for
investment purposes and are not acquiring the Target's Shares with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act.
4. Representations and Warranties Concerning the Target and the Properties.
The Sellers represent and warrant to the Buyer that the statements contained
in this Section 4 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 4).
(a) Organization, Qualification and Corporate Power. The Target is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation and the Target is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. The Target has full
corporate power and authority and all licenses, permits and authorizations
necessary to carry on the businesses in which it is engaged (and in which it
presently proposes to engage) and to own and use the properties owned and used
by it. The Sellers shall deliver to the Buyer a list of the directors and
officers of the Target, correct and complete copies of the charter, bylaws and
corporate records of the Target (as amended to date). The
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minute books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of the Target are correct and
complete. Target is not in default under or in violation of any provision of
its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the
Target consists of 100,000 Target Shares, of which 3,000 Target Shares are
issued and outstanding and no Target Shares are held in treasury. All of the
issued and outstanding Target Shares have been duly authorized, are validly
issued, fully paid, and non-assessable, and are held of record by the
respective Sellers as set forth in Section 3(a)(v). Except for the
shareholders' agreement among the Sellers (which shall be terminated at or
prior to Closing), there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Target to issue, sell or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Target.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target is subject or any provision
of the charter or by-laws of the Target (except for restrictions on the
transferability of Target stock set forth in Target's charter) (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Target is a party or by
which it is bound or to which any of its assets are subject (or result in the
imposition of any Security Interest upon any of its assets). The Target does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
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(d) Brokers' Fees. Except for the fee payable to Brennan, Dyer &
Company, payable by the Sellers at Closing, the Target does not have any
Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement, and
Sellers agree to indemnify and hold Buyer harmless from and against any and
all claims for such fees.
(e) Title to Assets. Except as disclosed in this Agreement, the
Target has good and marketable title to, or a valid leasehold interest in, the
properties and assets used by it, located on its premises, or shown on the
Most Recent Balance Sheet.
(f) Subsidiaries. The Target has no subsidiaries.
(g) Financial Statements. Sellers have delivered to Buyer the
following financial statements (the "Financial Statements"):
(i) Balance Sheet as of December 31, 1994 and related
statements of income, stockholders' equity and cash flows for the year then
ended, as reviewed by Hazlett, Lewis & Bieter.
(ii) Monthly Internal Financial Statements for Target and
Individual Restaurants as of October 31, 1995.
The Financial Statements were prepared in substantial conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby, (subject to normal year-end
adjustments with respect to the interim financial statements referred to in
Section 4(g)(ii)), are correct and complete, and are consistent with the books
and records of the Target (which books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, or results of operations of the
Target which have not occurred in the Ordinary Course of Business. Without
limiting the generality of the foregoing, since that date:
(i) the Target has not sold, leased, transferred or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
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(ii) the Target has not entered into any agreement, contract,
lease or license (or series of related agreements, contracts, leases, and
licenses) outside the Ordinary Course of Business (except for a six (6) month
increase of one (1%) percent in advertising contribution to Burger King
Corporation commencing May 1, 1995);
(iii) no party (including the Target) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases and licenses) to which the
Target is a party or by which it is bound;
(iv) Except for a security interest in Target's furniture,
fixture and equipment given to NationsBank of Tennessee to secure the debt
listed in Section 6(f), the Target has not imposed any Security Interest upon
any of its assets, tangible or intangible;
(v) the Target has not made any capital expenditure (or series
of related capital expenditures) outside the Ordinary Course of Business;
(vi) the Target has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(vii) the Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation except to NationsBank of
Tennessee as noted in Section 6(f);
(viii) the Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Target has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) outside
the Ordinary Course of Business;
(x) the Target has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
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(xi) there has been no change made or authorized in the charter
or bylaws of the Target;
(xii) the Target has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(xiii) the Target has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property other than
normal wear and tear;
(xiv) the Target has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees (except
as set forth on the Schedule of Employee Loans to be provided by Sellers to
Buyer at Closing outside the Ordinary Course of Business;
(xv) except as provided in Section 7(b)(xv) and for the
Lankford Agreement, as hereinafter defined, the Target has not entered into
any employment contract or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or agreement;
(xvi) the Target has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvii) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xviii) the Target has not made any change in employment terms
for any of its directors, officers, and employees outside the Ordinary Course
of Business;
(xix) the Target has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xx) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course
of Business involving the Target; and
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(xxi) the Target has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Target has no Liability (and to
Sellers' knowledge there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i) the pending
litigation entitled Deborah S. Carnes v. Burger King Corporation, Ro-Lank,
Inc. and Ro-Lank, Inc., d/b/a Burger King and Lisa D. Ritch v. Burger King
Corporation, Ro-Lank, Inc., and Ro-Lank, Inc., d/b/a Burger King in the
Chancery Court of Hamilton County, Tennessee and (ii) the matters set forth on
the Schedule of Litigation to be provided by Sellers to Buyer at Closing.
(j) Legal Compliance. The Target and its predecessors and
Affiliates, has substantially complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
(k) Tax Matters.
(i) The Target has filed all Tax Returns that it was required
to file. To Sellers' knowledge, all such Tax Returns were correct and complete
in all respects. All Taxes owed by the Target (whether or not shown on any Tax
Return) have been paid. The Target is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where the Target does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of the Target that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Target has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(iii) No Seller or director or officer (or employee responsible
for Tax matters) of the Target has any knowledge of any Basis for any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax Liability of
the Target
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either (A) claimed or raised by any authority in writing or (B)
as to which any of the Sellers and the directors and officers (and employees
responsible for Tax matters) of the Target has Knowledge based upon personal
contact with any agent of such authority. The Target has no Tax Returns that
have been audited, except for sales tax audits through May, 1994, by the
Tennessee Department of Revenue (which audit has been closed and all
assessments resulting therefrom have been paid), and no Tax Returns that
currently are the subject of audit. The Sellers have delivered to the Buyer
correct and complete copies of all federal income Tax Returns filed,
examination reports, and statements of deficiencies assessed against or agreed
to by the Target for all years ending after December 31, 1991.
(iv) The Target has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Target has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. The Target has not made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Target has not been a United States real
property holding corporation within the meaning of Code Sec. 97(c)(2). The
Target has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Sec. 6662. The Target is not a party to any Tax
allocation or sharing agreement. The Target (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return or (B) has no
Liability for the Taxes of any Person (other than the Target) under Treas.
Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(vi) Sellers have provided or shall provide Buyer the following
information with respect to the Target as of the most recent practicable date
(A) the tax basis of the Target in its assets; (B) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax or excess charitable contribution allocable to the Target; and (C)
the amount of any deferred gain or loss allocable to the Target arising out of
any deferred intercompany transaction.
(1) Real Property.
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(i) The Target owns, or as of the Closing Date, will own, the
real property which is the Location of the Athens Burger King and Sellers
shall provide Buyer with the legal description of said real property.
(A) as of the Closing Date, the Target will have good and
marketable title to the parcel of real property, free and clear of any
Security Interest, easement, covenant or other restriction, except for
installments of special assessments not yet delinquent, recorded easements,
covenants, and other restrictions which do not impair the current use,
occupancy, or value, or the marketability of title, of the property subject
thereto, and except for the bank debt set forth in Section 6(f);
(B) there are no pending or, to Sellers' Knowledge,
threatened condemnation proceedings, lawsuits, or administrative actions
relating to the property or other matters affecting and adversely the current
use, occupancy, or value thereof;
(C) the legal description for the parcel contained in the
deed thereof will describe such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels of
land, are not in violation of applicable setback requirements, zoning laws,
and ordinances (and none of the properties or buildings or improvements
thereon are subject to "permitted nonconforming structure" classifications),
and do not encroach on any easement which may burden the land, and the land
does not serve any adjoining property for any purpose inconsistent with the
use of the land, and the property is not located within any flood plain or
subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;
(D) all facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated and
maintained substantially in accordance with applicable laws, rules, and
regulations;
(E) there are no leases, subleases, licenses, concessions,
or other agreements, written or oral, granting to any party or parties the
right of use or occupancy of any portion of the parcel of real property;
(F) except for rights of first refusal held by Burger King
Corporation and Manning, there are no outstanding
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options or rights of first refusal to purchase the parcel of real property, or
any portion thereof or interest therein;
(G) there are no parties (other than the Target) in
possession of the parcel of real property;
(H) all facilities located on the parcel of real property
are supplied with utilities and other services necessary for the operation of
such facilities, including gas electricity, water, telephone, sanitary, sewer,
and storm sewer, all of which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations and are provided via
public roads or via permanent, irrevocable, appurtenant easements benefitting
the parcel of real property; and
(I) the parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of real
property, and access to the property is provided by paved public right-of-way
with adequate curb cuts available.
(ii) Except for the Athens Burger King all of the
Locations are leased as indicated in Schedule 1. The Sellers have heretofor
delivered to the Buyer correct and complete copies of the leases and
subleases, including all assignments of such leases and subleases. With
respect to each lease:
(A) subject to receiving the consent of lessors of
Locations leased to Sellers, the lease is legal, valid, binding, enforceable,
and in full force and effect;
(B) the lease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(C) no party to the lease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease has repudiated any provision
thereof;
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease;
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(F) neither Sellers nor Target has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold;
(G) all facilities leased thereunder have received all
approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained substantially in accordance with applicable laws, rules, and
regulations;
(H) all facilities leased thereunder are supplied with
utilities and other services necessary for the operation of said facilities;
and
(I) the landlords under the Leases are not related to or
affiliated with Sellers in any manner whatsoever, except for the Cleveland
Location lease from LRL Development Associates.
(m) Intellectual Property.
(i) The Target owns or has the right to use pursuant
to the Franchise Agreements, all Intellectual Property necessary or desirable
for the operation of the businesses of the Target as presently conducted. Each
item of Intellectual Property used by the Target immediately prior to the
Closing hereunder will be owned or available for use by the Target on
identical terms and conditions immediately subsequent to the Closing
hereunder. Target has taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that it uses.
(ii) Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Sellers and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Target has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that Target must license or refrain from using
any Intellectual Property rights of any third party). No third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of any of the Target.
(iii) [intentionally deleted]
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(n) Tangible Assets. Except as set forth in the Schedule
of Exceptions to Tangible Personal Property Owned or Leased heretofor
delivered to Buyer, the Sellers or Target own or lease all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
their businesses as presently conducted. Each such tangible asset is in good,
merchantable, operable or reasonably repairable condition suitable for the
purpose for which it is being used and will be in good working order as of the
closing.
(o) Inventory. The inventory of the Target consists of
food, supplies, current kids' toys, current promotional items, and current
promotional premiums, all of which are merchantable and fit for the purpose
for which it was procured or manufactured, and none of which is spoiled,
obsolete, damaged or defective.
(p) Contracts. Sellers have provided Buyer with copies of
the following contracts and other agreements to which any of the Target is a
party,
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements)
for the purchase or sale of food, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, or under which it has
imposed a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Sellers and their
Affiliates;
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other plan
or arrangement for the benefit of its current or former directors, officers,
and employees;
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(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis providing
annual compensation and/or providing severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees (except for
the employee loans set forth on the Schedule of Employee Loans to be provided
by Sellers to Buyer at Closing outside the Ordinary Course of Business (all
such advancements or loans to be paid at closing); and
(xi) any agreement under which the consequences of a
default or termination could have a material adverse effect on the business,
financial condition, operations, results of operations of the Target;
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement described above and a written summary setting forth the
terms and conditions of each oral agreement described above. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts
receivable of the Target are reflected properly on their books and records,
are valid receivable subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts.
(r) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Target.
(s) Insurance. Sellers have provided Buyer the following
information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage
and bond and surety arrangements) to which Target has been a party, a named
insured, or otherwise
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the beneficiary of coverage at any time within the past three (3)
years;
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis) and amount
(including a description of the deductibles and ceilings are calculated and
operate) of coverage; and
(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements (including any workmen's
compensation coverage audit).
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither the Target nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. The Target has been
covered during the past three (3) years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. There are no self-insurance arrangements affecting the
Target.
(t) Litigation. Except for the litigation set forth in
Section 4(i) and the matters set forth on the Schedule of Litigation, the
Target (i) is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is not a party or, is to Sellers' Knowledge,
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the Sellers and the directors and officers (and employees
with responsibility for litigation
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matters) of the Target has any reason to believe that any action, suit,
pending hearing, or investigation may be brought or threatened against the
Target.
(u) Product Warranty. All of the food produced, sold, or
delivered by the Target has been in conformity with all applicable franchise
standards and all express and implied warranties, and the Target has no
Liability (and to Sellers' knowledge there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability) for damages in
connection therewith.
(v) Product Liability. Other than as set forth in the
Schedule of Litigation or as otherwise described in this Agreement, the Target
has no Liability (and to Sellers' knowledge there is no Basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability) arising out of any
injury to individuals or property as a result of the ownership, possession, or
use of any kids' toys, promotional items, promotional premiums or any other
product produced, sold, or delivered by the Target.
(w) Employees. To the Knowledge of any of the Sellers and
the directors and officers (and employees with responsibility for employment
matters) of the Target, no key restaurant employee, or group of employees has
any plans to terminate employment with the Target, except in the Ordinary
Course of Business. Target is not a party to or bound by any collective
bargaining agreement, nor have any of them experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Target has not committed any unfair labor practice. None of the
Sellers and the directors and officers (and employees with responsibility for
employment matters) of the Target has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of any of the Target. The Target has not knowingly
employed anyone under the age of sixteen (16) years old in the previous three
(3) years.
(x) Employee Benefits.
(i) The Sellers have provided Buyer a schedule of
each Employee Benefit that the Target provides, maintains or to which the
Target contributes.
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(A) Each such Employee Benefit complies in form and in
operation in all respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
(B) All required reports and descriptions have been filed
or distributed appropriately with respect to each such Employee Benefit.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
each such Employee Benefit in accordance with the past custom and practice of
the Target; provided, however, that Buyer acknowledges that manager bonuses
accrued to the Closing Date have not been paid. Sellers will provide Buyer
with a Schedule of such accrued, unpaid bonuses prior to closing. All premiums
or other payments for all periods ending on or before the Closing Date have
been paid with respect to each such Employee Benefit.
(D) [Intentionally deleted]
(y) Guaranties. Other than as set forth in Section 6(f),Target is
not a guarantor or otherwise is liable for any Liability or obligation
(including indebtedness) of any other Person, except by endorsement of
negotiable instruments for deposit or collection and similar transactions in
the Ordinary Course of Business.
(z) Environment, Health, and Safety.
(i) To the best of Sellers' Knowledge, the Target
and its predecessors have complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against it
alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Target and its predecessors have obtained and been in
substantial compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has complied
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in,
all Environmental, Health, and Safety Laws.
(ii) To the best of Sellers' Knowledge, the Target has no
Liability (and the Target and its predecessors have not
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handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against the Target
giving rise to any Liability) for damage to any site, location, or body of
water (surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental
Health, and Safety Law.
(iii) To the best of Sellers' Knowledge, all properties
and equipment used in the business of the Target, and its predecessors have
been free of asbestos, PCB'S, methylene chloride, trichloroethylene, l,
2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances.
(aa) Certain Business Relationships with the Target.
Except as disclosed in this Agreement, none of the Sellers and their
Affiliates (other than LRL Development Associates and QED, Inc.) has been
involved in any business arrangement or relationship with the Target and none
of the Sellers and their Affiliates (other than LRL Development Associates and
QED, Inc.) owns any asset, tangible or intangible, which is used in the
business of the Target. All such business arrangements and relationships are
to be terminated prior to or at Closing.
(ab) Cleveland Restaurant. The acquisition by QSC of
the lessee's interest under that certain Ground Lease dated June 1, 1985 from
Evelyn P. Clowers and H. Frederick Clowers as lessors in which Target operates
the Cleveland Restaurant has been consummated pursuant to the terms of that
certain Leasehold Purchase Agreement dated November 21, 1995 (the "Leasehold
Purchase Agreement") among LRL Development Associates, Michael A. Reed, Ronny
D. Lankford, Robert W. Lankford and Target. All property acquired by Target
thereunder is transferred to Buyer under this Agreement. Target further
represents and warrants that all representations and warranties made to it in
the Leasehold Purchase Agreement are true and correct as of the date of this
Agreement.
(ac) Disclosure. To Sellers' Knowledge, the
representations and warranties contained in this Section 4 do not contain any
untrue statement of fact or omit to state any fact necessary in order to make
the statements and information contained in this Section 4 not misleading.
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5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of Agreement and the
Closing.
(a) General. Each of parties will use his or its best efforts
to take all action and to do all things, in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).
(b) Notices and Consents. The Sellers will and will cause the
Target to give any notices to third parties, and will and will cause the
Target to use its best efforts to obtain any third party consents, that may be
necessary or that the Buyer may request in connection with the matters
referred to in Section 4(c) above.
(c) Operation of Business. The Sellers will not cause or permit
the Target to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit the Target
to (i) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock or (ii) otherwise engage in any practice, take any action,
or enter into any transaction of the sort described in Section 4(h) above.
(d) Preservation of Business. The Sellers will cause the Target
to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with franchisor, lessors, licensors, suppliers, customers, and employees.
(e) Full Access. Each of the Sellers will permit and the
Sellers will cause the Target to permit, representatives of the Buyer to have
full access to all premises, properties, personnel books, records (including
Tax records), contracts, and documents of or pertaining to each of the Target
during business hours at prearranged appointment times and (at Sellers'
option) accompanied by one of Sellers or a representative of Sellers.
(f) Notice of Developments. The Sellers will give prompt
written notice to the Buyer of any material adverse development causing a
breach of any of the representations and warranties in Section 4 above. Each
Party will give prompt written notice to the others of any material adverse
development
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causing a breach of any of his or its own representations and
warranties in Section 3 above.
(g) Exclusivity. Except for the necessary contact with Ralph E.
Manning and Burger King Corporation relative to their respective rights of
first refusal, none of the Sellers will (and the Sellers will not cause or
permit the Target to) (i) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets of the Target (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. None of the Sellers will vote their
Shares in favor of any such acquisition structured as a merger, consolidation,
or share exchange. The Sellers will notify the Buyer immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
(h) Title Insurance. If requested by Buyer, the Sellers will
cause the Target to obtain (at Buyer's expense and through attorney of Buyer's
choice) the following title insurance commitments, policies, and riders for
the Athens and Cleveland Locations in preparation for the Closing:
(i) With respect to each parcel of real estate that any of
the Target owns, an ALTA Owner's Policy of Title Insurance Form B-1987 (or
equivalent policy acceptable to the Buyer if the real property is located in a
state in which an ALTA Owner's Policy of Title Insurance Form B-1987 is not
available) issued by a title insurer satisfactory to the Buyer (and, if
requested by the Buyer, reinsured in whole or in part by one or more insurance
companies and pursuant to a direct access agreement acceptable to the Buyer),
in such amount as the Buyer may determine to be the fair market value of such
real property (including all improvements located thereon), insuring title to
such real property to be in the Target as of the Closing (subject only to the
title exceptions acceptable to Buyer's attorney; and
(ii) With respect to each parcel of real estate that the
Target leases, an ALTA Leasehold Owner' s Policy of Title Insurance- 1987 (or
equivalent policy acceptable to the Buyer if the real property is located in a
state in which an ALTA Leasehold Owner's Policy of Title Insurance-1987 is not
available) issued by a title insurer satisfactory to the Buyer
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(and, if requested by the Buyer, reinsured in whole or in part by one or more
insurance companies and pursuant to a direct access agreement acceptable to
the Buyer) in such amount as the Buyer may determine (taking into account the
time cost of money using the Applicable Rate as the discount rate and such
other factors as whether the fair market rental value of the premises exceeds
the stipulated consideration in the lease, whether the tenant has any option
to renew or extend, whether the tenant owns any improvements located on the
premises, whether the tenant is permitted to sublease, and whether the tenant
would owe any amount under the lease if evicted), insuring title to the
leasehold or subleasehold estate to be in the Target or its Subsidiary as of
the Closing (subject only to the title exceptions acceptable to Buyer'
attorney).
Each title insurance policy delivered under Section
5(h)(i) and Section 5(h)(ii) above shall (A) insure title to the real property
and all recorded easements benefiting such real property, (B) contain an
"extended coverage endorsement" insuring over the general exceptions contained
customarily in such policies, (C) contain an ALTA Zoning Endorsement 3.1 (or
equivalent), (D) contain an endorsement insuring that the real property
described in the title insurance policy is the same real estate as shown on
the Survey delivered with respect to such property, (E) contain an endorsement
insuring that each street adjacent to the real property is a public street and
that there is direct and unencumbered pedestrian and vehicular access to such
street from the real property, (F) contain an inflation endorsement providing
for annual adjustments in the amount of coverage corresponding to the annual
percentage increase, if any, in the United States Department of Commerce
Composite Construction Index, (C) if the real property consists of more than
one record parcel, contain a "contiguity" endorsement insuring that all of the
record parcels are contiguous to one another, and (H) contain a
"non-imputation" endorsement to the effect that title defects known to the
officers, directors, and stockholders of the owner prior to the Closing shall
not be deemed "facts known to the insured" for purposes of the policy.
(i) Surveys. With respect to each parcel of real property
as to which a title insurance policy is to be procured pursuant to Section
5(h) above, the Sellers will cause the Target to procure in preparation for
the Closing a current survey of the real property certified to the Buyer,
prepared by a licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such
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surveys, and showing access affirmatively to public streets and roads (the
"Survey"). The Survey shall not disclose any survey defect or encroachment
from or onto the real property which has not been cured or insured over prior
to the Closing.
(j) Chapter 11. Prior to or simultaneous with Closing, Sellers
will cause Target to be discharged from Chapter 11 proceedings and to pay all
costs, expenses and fees owing under Target's Amended Plan of Reorganization
prior to Closing.
(k) Schedules and Exhibits. Sellers shall promptly provide
Buyer with copies of the schedules and Exhibits which this Agreement sets
forth. Buyer shall promptly notify Sellers of any objections to said documents
to give Sellers the opportunity prior to closing to cure said objections.
6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8
below). The Sellers acknowledge and agree that from and after the Closing the
Buyer will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating
to the Target.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding
hearing, investigation, charge, complaint claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving any of the Target, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
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(c) Transition. None of the Sellers will take any action that
is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target from
maintaining the same business relationships with the Target after the Closing
as it maintained with the Target prior to the Closing. Each of the Sellers
will refer all customer inquiries relating to the businesses of the Target to
the Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which
are in his or its possession. In the event that any of the Sellers is
requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 6(d). If, in the absence
of a protective order or the receipt of a waiver hereunder, any of the
Sellers, is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that Seller may
disclose the Confidential Information to the tribunal, provided, however, that
the disclosing Seller shall use his or its best efforts to obtain, at the
request of the Buyer, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to
be disclosed as the Buyer shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
(e) Covenant Not to Compete. At closing, Sellers shall execute
and deliver a covenant (collectively the "Non-Competition Agreements") not to
compete directly or indirectly with the businesses that Target conduct. Said
covenant shall be in form and substance approved by Buyer's attorney.
(f) Payment of Debts or Release or Parties. Simultaneous with
Closing, Buyer will cause Target to pay in full or have Ronny D. Lankford,
Robert W. Lankford and Michael A. Reed released from the following debts:
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(i)(a) NationsBank of Tennessee - Debtor: QSC;
Guarantors - Reed, Lankford & Lankford; current
principal amount: $307,535 (as of October 31,
1995); Security: machinery, equipment, real
estate.
(b) NationsBank of Tennessee - Debtor: QSC, Ro-
Lank; Guarantors: Reed, Lankford & Lankford;
current principal amount $643,503 (as of October
31,1995); Security: machinery and equipment.
(ii) First National Bank and Trust Company,
Athens, Tennessee - Debtor; LRL Associates,
Guarantor: QSC, Reed, Lankford, Lankford; current
principal amount: $730,072 (as of October 31,
1995); Security: real estate, machinery and
equipment.
(iii) Cleveland Bank and Trust Company $281,529
(as of October 31, 1995)
(g) Indemnification of Sellers Regarding Leases and Franchise
Agreements. Buyer shall indemnify and hold harmless Sellers from any loss,
damage or expense as a result of breach of or default under the Leases of
Target Locations or the Burger King Franchise Agreements for the Target
Locations which are the result of matters occurring after Closing.
(h) Employment of Loretta Lankford. Buyer, or Buyer's
Affiliate, shall employ Loretta Lankford pursuant to the terms of the Amended
and Restated Employment Agreement (the "Lankford Agreement"), such agreement
to be in form and substance satisfactory to Buyer and Seller.
(i) Insurance Coverage. Buyer shall maintain in force with
respect to Target and its operations the same insurance coverage in place as
of the Closing Date or shall replace such coverage with coverage which is at
least comparable with such insurance.
(j) Access to Records. Buyer shall afford Sellers access to
Target books and records in existence as of the Closing Date at such
reasonable times and places as Buyer and Sellers may agree.
(k) S Election. Buyer and Seller acknowledge and agree that
Target's S Corporation election will terminate pursuant to IRC 1362(d)(2) as a
result of the sale of stock under this
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Agreement. The termination will result in two short taxable years: 1) the "S
Short Year" and 2) the "C Short Year." Each year shall be treated separately
under normal tax accounting rules. Prorata allocations shall not apply
pursuant to IRC 1362(e)(6)(D). Sellers shall be responsible at their expense
for filing Form 1120S for the S Short Year. Target shall provide any
information necessary to assist Sellers in filing the Form 1120S for the S
Short Year. Seller shall be responsible for any tax liability attributable to
the S Short Year.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all material
respects at and as of the Closing Date, and Buyer shall have received all
Schedules and Exhibits referred to in such Sections;
(ii) the Sellers shall have performed and complied with
all of their covenants hereunder in all material respects through the Closing;
(iii) the Sellers and the Target shall have procured all
of the third party consents specified in Section 5(b) above;
(iv) the Buyer has received all of the title insurance
commitments, policies, and riders specified in Section 5(h) above, and all of
the surveys specified in Section 5(i) above;
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (C) affect adversely the right of the
Buyer to own the Target Shares and to control the Target, or (D) affect
adversely the right of any of the Target to own its assets and to operate its
businesses (and
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no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(vi) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in
Section 7(a)(i)-(iv) is satisfied in all respects;
(vii) the Closing shall occur contemporaneously with the
closings under a purchase agreement of even date herewith between Buyer and
Ro-Lank, Inc.;
(viii) the Sellers have received waivers of rights of first
refusal from Burger King Corporation and Manning in form and content
satisfactory to Buyer' counsel or the rights of first refusal shall not have
been exercised within the required period of time;
(ix) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance satisfactory to Buyer's counsel
addressed to the Buyer, and dated as of the Closing Date;
(x) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Target, other
than those whom the Buyer shall have specified in writing at least five
business days prior to the Closing;
(xi) the transactions contemplated in the Leasehold
Purchase Agreement shall have been consummated.
(xii) the Buyer shall have obtained on terms and
conditions satisfactory to it all of the financing it needs in order to
consummate the transactions contemplated hereby and fund the working capital
requirements of the Target after the Closing;
(xiii) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be satisfactory in form and
substance to the Buyer;
(xiv) Target shall have paid or payment shall be made from
closing funds by the closing attorney of all Target's accounts payable and
obligations of any nature whatsoever, whether due or accrued with the
exception of the debts set forth in Section 6(f);
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(xv) Target shall have been discharged from Chapter 11
under the Bankruptcy Code and all matters relative thereto shall have been
resolved to the satisfaction of Buyer's attorney, including Target's and
Sellers' compliance with the terms of Target's Amended Plan of Reorganization
confirmed by the Bankruptcy Court;
(xvi) Buyer's attorney shall be satisfied that in his
opinion the threatened litigation described in Section 4(i) is of such a
nature that the Sellers' indemnification and the existing insurance adequately
protects the Target and Buyer; and
(xvii) Buyer and Buyer's Attorney shall be satisfied with
the schedules and exhibits which Sellers and Target provide pursuant to this
Agreement;
(xviii) the parties shall have executed, or caused the
execution of, the Closing Statement, the Non-Competition Agreements and the
Lankford Agreement;
(xix) Receipt of "payoff" letters, in form and substance
suitable to Buyer, from each holder of Target's indebtedness and receipt of
UCC-3 Termination Statements from each holder of a security interest in
Target's assets;
(xx) Receipt of such estoppel, consent, attornment and
non-disturbance agreements from Target's landlords and holders of mortgages on
each Location as Buyer may reasonably require;
(xxi) Receipt of a release in form and substance
satisfactory to Buyer relative to certain controversies between Sellers and
Ralph W. Manning, Evelyn C. Manning and Evi-Mann Foods, Inc. (the "Manning
Release");
(xxii) Receipt of the Blue Ridge Release;
(xxiii) Receipt of evidence satisfactory to Buyer that all
restrictions upon transfer of Target's stock under any shareholder agreement
among the shareholders of Target have been waived or terminated.
(xxiv) Receipt of a certificate of the Secretary of Target
relating to the charter, bylaws, officers and directors and corporate records
of Target;
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(xxv) Sellers shall have delivered to Buyer certificates
representing their shares of Target stock properly endorsed for transfer;
(xxvi) Receipt of a copy of Target's (i) charter,
certified by the Secretary of State of Tennessee, and (ii) bylaws, certified
by Target's secretary; and
(xxvii) Receipt of Certificate of Existence relative to
Target issued by the Secretary of State of Tennessee.
(xxviii) Receipt of a quitclaim deed and bill of sale
conveying all right, title and interest in the Athens Location from LRL
Development Associates to Target.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of
the Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending for
threatened before any court or quasi judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation (and no such injunction, judgment,
order, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certification to the effect that each of the conditions specified above in
Section 7(b)(i)-(iii) is satisfied in all respects;
(v) the Target, shall have received all authorizations,
consents, and approvals of governments and
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governmental agencies required to consummate the transactions contemplated
under this Agreement including but not limited to those referred to in
Sections 3(a)(ii), 3(b)(ii), and 4(c) above;
(vi) Burger King Corporation and Manning shall have waived
their rights of first refusal or such rights of first refusal shall not have
been exercised within the required period of time.
(vii) the Sellers shall have received from counsel to the
Buyer an opinion in form and substance satisfactory to Sellers' attorney,
addressed to the Sellers, and dated as of the Closing Date; and
(viii) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers.
(ix) the Closing shall occur contemporaneously with the
closing under the Agreement between Buyer and Ro-Lank, Inc., et al. of even
date herewith.
(x) the parties shall have executed, or caused the
execution and delivery of, the Closing Statement and the Non-Competition
Agreements, and the Lankford Agreement.
(xi) Receipt of the Blue Ridge Release;
(xii) Receipt of the Manning Release;
(xiii) Receipt of a certificate of the Secretary of Buyer
relating to the articles, bylaws, officers and directors of Buyer;
(xiv) Receipt of good standing certificate relative to
Buyer issued by the Secretaries of State of Delaware, Georgia and Tennessee;
and
(xv) Buyer shall have acknowledged its agreement to the
matters set forth in that certain letter dated November 21, 1995 from Buyer to
Sellers in the form attached as Exhibit 7(b)(xv).
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The Sellers may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Parties
contained in this Agreement shall survive the Closing hereunder (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches (or in the
event any third party alleges facts that, if true, would mean any of the
Sellers has breached) any of their representations, warranties, and covenants
contained herein (other than the covenants in Section 2(a) above and the
representations and warranties in Section 3(a) above), and, provided that the
Buyer make a written claim for indemnification against any of the Sellers
pursuant to Section 10(h) below within the applicable survival period, then
each of the Sellers agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
the Buyer may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by
the breach (or the alleged breach).
(ii) In the event any of the Sellers breaches (or in the
event any third party alleges facts that, if true, would mean any of the
Sellers has breached) any of his or its covenants in Section 2(a) above or any
of his or its representations and warranties in Section 3(a) above, and, claim
for indemnification against the Seller pursuant to Section 10(h) below within
applicable survival period pursuant to Section 8(a) above, then the Seller
agrees to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyer may suffer after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach).
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(iii) Each of the Sellers agrees to indemnify the Buyer
from and against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
any Liability of the Target for the unpaid Taxes of any Person (other than the
Target) under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or
otherwise.
(iv) Each of the Sellers agrees to indemnify the Buyer
from and against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of. relating to, in the nature of, or caused by
the litigation described in Section 4(i), or set forth on the Schedule of
Litigation, including legal fees and expenses associated therewith.
(c) Indemnification Provisions for Benefit of the Sellers. In
the event the Buyer breach (or in the event any third party alleges facts
that, if true, would mean the Buyer have breached) any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section 8(a) above, provided that any of the
Sellers makes a written claim for indemnification against the Buyer pursuant
to Section 10(h) below within such survival period, then the Buyer agree to
indemnify each of the Sellers from and against the entirety of any Adverse
Consequences the Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Seller may suffer
after the end of any applicable survival period) resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so
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long as (A) the Indemnifying Party notifies the Indemnified Party in writing
within (15 days) after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party indemnify the Indemnified Party from
and against the entirety of any Adverse Consequences the Indemnified Party may
suffer regular from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party
Claim and fulfill its indemnification obligations hereunder, (C) the Third
Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (D) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or practice
adverse to the continuing business interests of the Indemnified Party, and (E)
the Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(d)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim, without the prior
written consent of the Indemnified Party.
(iv) In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including attorneys' fees and expenses), and (C) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Section
8.
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(v) When a Loss not arising from a Third Party Claim is
paid or is otherwise fixed or determined, then the Buyer or the Sellers, as
the case may be, claiming indemnification under this Agreement shall give the
other notice of such Loss, in reasonable detail and specifying the amount of
such Loss, and the Sections of this Agreement upon which the claim for
indemnification for such Loss is based. If the recipient of the notice desires
to dispute such claim, it shall, within 30 days after receipt of notice of the
claim of Loss against it pursuant to this clause, give counternotice, setting
forth the basis for disputing such claim to the Buyer or the Sellers. If such
counternotice is not given within such thirty-day period or if the Buyer or
the Sellers acknowledge liability for indemnification, then such Loss shall be
promptly satisfied.
(vi) If within 30 days after the receipt of counternotice
by the Buyer or the Sellers, the Buyer and the Sellers shall not have reached
agreement as to the claim in question, then the claim for indemnification
shall be submitted to and settled by arbitration as hereinafter provided (it
being expressly understood and agreed that if such counternotice is duly
given, it is the intention of the parties to this Agreement that any such
claim shall be resolved by arbitration as provided in this subsection).
Arbitration shall be by a single arbitrator experienced in the matters at
issue and selected by the Buyer and the Sellers in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in such place in the metropolitan Chattanooga,
Tennessee area as may be specified by the arbitrator (or any place agreed to
by the Seller, the Buyer and the arbitrator), and shall be conducted in
accordance with the Commercial Arbitration Rules existing at the date thereof
of the American Arbitration Association to the extent not inconsistent with
this Agreement. The decision of the arbitrator shall be final and binding as
to any matters submitted under this Agreement, and to the extent the decision
is that a Loss has been suffered for which either party is to be indemnified
under this Agreement, it shall be promptly paid by the other party, and in the
case of Buyer it will be paid by the Escrow Agent to the extent escrow funds
are available; provided, however, that, if necessary, such decision and
satisfaction procedure may be enforced by either the Buyer or the Sellers in
any court of record having jurisdiction over the subject matter or over any of
the parties to this Agreement. The determination of which party (or
combination thereof) bears the costs and expenses incurred in connection with
any such arbitration proceeding shall be determined by the arbitrator.
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(e) Determination of Adverse Consequences. The Parties shall
take into account the time cost of money (using the Wall Street Journal Prime
Rate as the discount rate) in determining Adverse Consequences for purposes of
this Section 8. All indemnification payments under this Section 8 shall be
deemed adjustments to the Purchase Price.
(f) intentionally omitted
(g) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. Each of the Sellers hereby agrees that
he or it will not make any claim for indemnification against the Target by
reason of the fact that he or it was a director, officer, employee, or agent
of any such entity or was serving at the request of any such entity as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding compiling claim, or
demand brought by the Buyer against such Seller (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to this Agreement,
applicable law or otherwise).
9. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Buyer and Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Sellers on or before the (30th) day following the date
of this Agreement if Buyer as a result of its continuing business, legal and
accounting due diligence regarding the Target become aware of matters which
have a material adverse effect on the Target, the Target's assets, or the
Target's business operations;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing (A) in the
event any of the Sellers has breached any
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material representation, warranty, or covenant contained in this Agreement in
any material respect, the Buyer have notified the Sellers of the breach and
the breach has continued without cure for a period of 30 days after the notice
of breach or (B) if the Closing shall not have occurred on or before November
30, 1995, by reason of the failure of any condition precedent under Section
7(a) hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant contained in this
Agreement); and
(iv) the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the event
the Buyer have breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, any of the Sellers has
notified the Buyer of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach or (B) if the Closing shall
not have occurred on or before November 30, 1995, by reason of the failure of
any condition precedent under Sections 7(b)(i) - (iv), (vii), (x), (xiii) -
(xv) hereof (unless the failure results primarily from any of the Sellers
themselves breaching any representation, warranty, or covenant contained in
this Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 9(a) above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach). In the
event of termination pursuant to Section 9(a) above, the Earnest Money will be
returned to Buyer unless the termination is by Sellers pursuant to Section
9(a)(iv)(A) in which event the Earnest Money shall be paid to Sellers,
provided that if the termination is by Buyer under Section 9(a)(ii), the
Parties shall submit the question of actual damages suffered by Sellers to
binding arbitration.
10. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in Section 2(a)
above concerning the sale of his or its Shares to the Buyer and the
representations and warranties of each of the Sellers in Section 3(a) above
concerning the transaction are several obligations. This means that the
particular Seller making the representation, warranty, or covenant will be
solely responsible to the extent provided in Section 8 above for any
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Adverse Consequences the Buyer may suffer as a result of any breach thereof.
(ii) The remainder of the representations, warranties, and
covenants in this Agreement are joint and several obligations. This means that
each Seller will be responsible to the extent provided in Section 8 above for
the entirety of any Adverse Consequences the Buyer may suffer as a result of
any breach thereof.
(b) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
Buyer and the Sellers.
(c) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the
prior written approval of the Buyer and the Sellers; provided, however, that
the Buyer may (i) assign any or all of its rights and interests hereunder to
one or more of its Affiliates and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
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(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to the Sellers to: Copy to:
Ronny D. Lankford W. Scott McGinness, Jr. Esq.
9408 Mountain Shadow Drive Miller & Martin
Chattanooga, TN 37421 Suite 1000 Volunteer Building
832 Georgia Avenue
Chattanooga, TN 37402
If to the Buyer: Copy to:
AmeriKing Tennessee The Jordan Company
Corporation I 9 West 57th Street, 40th Floor
c/o AmeriKing New York, NY 10019
2214 Enterprise Drive ATTN: A. Richard Caputo, Jr.
Suite 1502
Westchester, IL 60154
ATTN: Lawrence Jaro
and to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019-5820
ATTN: Martin J. Collins
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Tennessee
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Tennessee or any
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other jurisdiction). Each of the Parties agrees that the other Parties shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and
the matter (subject to the provisions set forth in Section 10(p) below), in
addition to any other remedy to which they may be entitled, at law or in
equity.
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed
by the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(1) Expenses. Except as set forth herein, each of the Parties
and the Target, will bear his or its own costs and expenses, (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. The Sellers agree that the Buyer has not
borne and will not bear any of the Sellers' costs and expenses (including any
of their legal fees and expenses) in connection with this Agreement or any of
the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. The Parties
intend that each representation, warranty, and covenant contained herein shall
48
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have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement which Sellers and Target are to provide
to Buyer prior to Closing are incorporated herein by reference anc made a part
hereof.
(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the provisions
set forth in 10(p) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in Chattanooga,
Tennessee, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to this Agreement in
any other court. Each of the Parties waives any defense of inconvenient forum
to the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto.
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
Buyer:
AMERIKING TENNESSEE CORPORATION I
By:_______________________________
Title:____________________________
SELLERS:
----------------------------------
Ronny D. Lankford
-----------------------------------
Robert W. Lankford
----------------------------------
Michael A. Reed
QSC, INC.
By:_______________________________
Its:_________________________
The undersigned Escrow Agent does hereby execute this
Agreement for the purpose of being bound by the provisions of Section 2(e).
MILLER & MARTIN, ESCROW AGENT
By:_______________________________
50
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BKC
Rest. Location Franchisee Real Estate Interest
No.
4959 Cleveland, TN Michael A. Reed Ground Lease, Sublease
Ronny D. Lankford to QSC, Inc. (as
Robert W. Lankford successor to WTH, Inc.)
("RLL") - lessee
5195 Brainerd Road QSC, Inc. (as QSC, Inc. - lessee
Chattanooga, TN successor to WTH,
Inc.)
5873 Athens, TN RLL QSC, Inc. - fee owner
4445 Lee Highway RLL RLL - lessee
Chattanooga, TN
5355 23rd Street RLL QSC, Inc. - lessee
Chattanooga, TN
3964 Hixson, TN RLL RLL - lessee
2585 Ft. Oglethorpe QSC, Inc. (as QSC, Inc. (as successor
Georgia successor to WTH, to WTH, Inc.) - lessee
Inc.)
2769 Calhoun, GA QSC, Inc. (as QSC, Inc. (as successor
successor to WTH, to WTH, Inc.) - lessee
Inc.)
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SCHEDULE 2
To be provided within 30 days of the date of this Agreement.
PURCHASE AGREEMENT
AMONG
RO-LANK, INC., RONNY D. LANKFORD AND
ROBERT W. LANKFORD
AND
AMERIKING TENNESSEE CORPORATION I
BUYER
November 21, 1995
<PAGE>
TABLE OF CONTENTS
1. Definitions..............................................................1
2. Purchase and Sale of Target's Shares and Certain Properties..............5
(a) Basic Transaction..............................................5
(b) Purchase Price.................................................6
(c) The Closing....................................................7
(d) Deliveries at the Closing......................................7
(e) Escrow Provisions..............................................8
3. Representations and Warranties Concerning the Transaction...............10
(a) Representations and Warranties of the Sellers.................11
(b) Representations and Warranties of the Buyer...................13
4. Representations and Warranties Concerning the Target and the Properties.14
(a) Organization, Qualification, and Corporate Power..............14
(b) Capitalization................................................14
(c) Noncontravention..............................................15
(d) Brokers' Fees.................................................15
(e) Title to Assets...............................................15
(f) Subsidiaries..................................................15
(g) Financial Statements..........................................16
(h) Events Subsequent to Most Recent Fiscal Year End..............16
(i) Undisclosed Liabilities.......................................18
(j) Legal Compliance..............................................19
(k) Tax Matters...................................................19
(1) Real Property.................................................21
(m) Intellectual Property.........................................22
(n) Tangible Assets...............................................22
(o) Inventory.....................................................23
(p) Contracts.....................................................23
(q) Notes and Accounts Receivable.................................24
(r) Powers of Attorney............................................24
(s) Insurance.....................................................24
(t) Litigation....................................................25
(u) Product Warranty..............................................26
(v) Product Liability.............................................26
(w) Employees.....................................................26
(x) Employee Benefits.............................................27
(y) Guaranties....................................................27
(z) Environment Health and Safety.................................27
(aa) Certain Business Relationships with the Target...............28
(ab) Disclosure...................................................28
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5. Pre-Closing Covenants...................................................29
(a) General.......................................................29
(b) Notices and Consents..........................................29
(c) Operation of Business.........................................29
(d) Preservation of Business......................................29
(e) Full Access...................................................29
(f) Notice of Developments........................................30
(g) Exclusivity...................................................30
(h) Title Insurance...............................................30
(i) Surveys.......................................................30
(j) Schedules and Exhibits........................................30
6. Post-Closing Covenants..................................................30
(a) General.......................................................30
(b) Litigation Support............................................31
(c) Transition....................................................31
(d) Confidentiality...............................................31
(e) Covenant Not to Compete.......................................32
(f) Payment of Debts or Release of Parties........................32
(g) Indemnification of Sellers Regarding Leases and Franchise
Agreements...............................................32
(h) Employment of Loretta Lankford................................32
(i) Insurance Coverage............................................33
(j) Access to Records.............................................33
(k) S Election....................................................33
7. Conditions to Obligation to Close.......................................33
(a) Conditions to Obligation of the Buyer.........................33
(b) Conditions to Obligation of the Sellers.......................36
8. Remedies for Breaches of This Agreement.................................38
(a) Survival of Representations and Warranties....................38
(b) Indemnification Provisions for Benefit of the Buyer...........38
(c) Indemnification Provisions for Benefit of the Sellers.........39
(d) Matters Involving Third Parties...............................40
(e) Determination of Adverse Consequences.........................42
(f) intentionally omitted.........................................42
(g) Other Indemnification Provisions..............................42
9. Termination.............................................................43
(a) Termination of Agreement......................................43
(b) Effect of Termination.........................................44
10. Miscellaneous..........................................................44
(a) Nature of Certain Obligations.................................44
(b) Press Releases and Public Announcements.......................45
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(c) No Third-Party Beneficiaries..................................45
(d) Entire Agreement..............................................45
(e) Succession and Assignment.....................................45
(f) Counterparts..................................................45
(g) Headings......................................................45
(h) Notices.......................................................45
(i) Governing Law.................................................46
(j) Amendments and Waivers........................................47
(k) Severability..................................................47
(1) Expenses......................................................47
(m) Construction..................................................47
(n) Incorporation of Exhibits and Schedules.......................48
(o) Specific Performance..........................................48
(p) Submission to Jurisdiction....................................48
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PURCHASE AGREEMENT
Agreement entered into November 21, 1995, by and among
AMERIKING TENNESSEE CORPORATION I, a Delaware corporation (the
"Buyer"), and RONNY D. LANKFORD, ROBERT W. LANKFORD, and RO-LANK,
INC. (collectively the "Sellers")(the "Agreement"). The Buyer and
the Sellers are referred to collectively herein as the "Parties."
Ronny D. Lankford and Robert W. Lankford in the aggregate
own all of the outstanding capital stock of RO-LANK, INC., a Tennessee
corporation (collectively the "Target").
Target owns and operates three (3) Burger King Restaurants
described on Schedule 1 attached hereto.
The Franchise Agreements under which Target operates said
Burger King Restaurants are held as set forth on Schedule 1 attached hereto
and the real property on and improvements in which such restaurants are
operated are held as indicated on Schedule 1.
This Agreement contemplates a transaction in which the Buyer
will purchase from the Sellers, and the Sellers will sell to the Buyer, all of
the outstanding capital stock of the Target, leaseholds, buildings, and
certain franchise rights, in return for cash.
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, abilities, obligations, Taxes,
liens, lows, expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation,
circumstances, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"Buyer" has the meaning set forth in the preface above.
<PAGE>
"Closing" has the meaning set forth in Section 2(c)
below.
"Closing Date" has the meaning set forth in Section 2(c)
below.
"Confidential Information means any information concerning
the businesses and affairs of the Target that is not already generally
available to the public.
"Deferred Intercompany Transaction" has the meaning set
forth in Treas. Reg. Section 1. 1502-13.
"Disclosure Schedule" has the meaning set forth in
Section 4 below.
"Employee Benefit" means any fringe benefit plan or program
provided for or available to employees of the Target.
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof concerning pollution or
protection of the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes.
"ERISA "means the Employee Retirement Income Security Act
of 1974, as amended.
"Extremely Hazardous Substance" has the meaning set forth
in Sec. 302 of the Emergency Planning and Community Right-to-Know
Act of 1986, as amended.
"Financial Statement" has the meaning set forth in
Section 4(g) below.
<PAGE>
"Indemnified Party " has the meaning set forth in Section
8(d) below.
"Indemnifying Party" has the meaning set forth in Section
8(d) below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivation and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyright and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registration and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" mean actual knowledge after reasonable
investigation.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Location" means the site of each of the three (3) Burger
King Restaurants which restaurants are owned and operated by the Target.
"Locations" means the three (3) sites collectively.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Most Recent Financial Statements" mean the Financial
Statements set forth in Section 4(g) below.
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"Most Recent Fiscal Month End" means October 31, 1995.
"Most Recent Fiscal Year End" means December 31, 1994.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in Section
2(b) below.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable
[or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings], (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing
of money.
"Sellers" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to
elect a majority of the directors.
"Survey" has the meaning set forth in Section 5(i) below.
"Target" has the meaning set forth in the preface above.
"Target's Shares" means any share of the Common Stock of
the Target.
"Tax" means any federal, state, local, or foreign income
gross receipts, license, payroll, employment, excise, severance,
4
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stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or any similar tax), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section
8(d) below.
2. Purchase and Sale of Target's Shares and Certain Properties.
(a) Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Sellers,
and the Sellers agrees to sell to the Buyer, for the consideration specified
below in this Section 2 the following:
(i) All of the issued and outstanding shares in
Target;
(ii) Burger King Franchise Agreements for each
Location with respect to which Sellers are franchisees;
(iii) All of the building leases and ground leases
for each Location, with respect to which Sellers are lessees.
This Agreement is one of two contracts being
contemporaneously executed with the other being one between Buyer and QSC,
Inc., et al. The Closing under this Agreement is contingent upon both
contracts closing contemporaneously. The failure of either of the contracts to
close contemporaneously renders this Agreement and all obligations under it
null and void and this Agreement shall not be effective unless the other
referenced contracts are executed by the parties thereto.
(b) Purchase Price. The Buyer agrees to pay to the Sellers
the sum of One Million Eight Hundred Twenty-Nine Thousand Nine Hundred
Ninety-six and No/100 ($1,829,996.00) Dollars, as adjusted as provided herein,
(the "Purchase Price"). The Purchase Price shall be allocated among the items
being purchased as the Parties may agree at or before Closing and such
allocation shall be
5
<PAGE>
reflected on The Closing Statement, as such term is hereinafter defined.
The Purchase Price will be payable as follows;
(i) The sum of Twenty-Five Thousand and No/100
($25,000.00) Dollars (the "Deposit") will be paid at Closing by the Buyer to
be held in an interest-bearing account by the Escrow Agent to be held and
applied in accordance with the terms of Section 2(e) of this Agreement.
(ii) The sum of Nineteen Thousand and no/100 Dollars
($19,000.00) shall be paid over to Blue Ridge Foods, Inc. pursuant to that
certain Release Agreement dated November 21, 1995 (the "Blue Ridge Release").
(iii) The balance of the Purchase Price shall be paid
at Closing by wire transfer.
(iv) In addition to the Purchase Price, Buyer shall
pay to Sellers the cost of the inventory on hand at each Location including
current kid's toys, current promotional items and current promotional
premiums, as of midnight prior to Closing. Payment for the inventory shall be
made within twelve (12) business days of the Closing Date.
(v) Purchase Price Adjustments; The Purchase Price
shall be adjusted by adding the following items: (i) Target's prepaid
expenses, (ii) Target's cash balances and (iii) prorata portion of rebates
received by Target from Carolina franchise Association and RSI Buying Coop;
and deducting the amount of Target's wages, bonuses, salaries, debts, accounts
payable and trade payables of any nature whatsoever, whether due or accrued,
including, without limitation, but including those debts set forth in Section
6(f). Such adjustments shall be calculated as of the Closing Date and shall be
reflected in a closing statement (the "Closing Statement") to be signed by the
Parties and delivered at the Closing. To the extent that such purchase price
adjustments cannot be calculated precisely as of the Closing Date, such
adjustments shall be applied as credits or debits, as the case may be, against
the inventory purchase provided herein.
(c) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable site on or before November 21, 1995, commencing at 9:00 a.m. local
time on or such other date as the Buyer and the Sellers may mutually determine
(the "Closing Date"); provided, however, that Buyer shall have the right to
extend the
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Closing Date for thirty (30) days and if the Closing Date is extended the
Parties agree to enter a management agreement for the operation of the
Locations, to be in form and substance agreeable to the Parties.
(d) Deliveries at the Closing. (i) The Sellers will deliver
to the Buyer the various certificates, instruments, and documents referred to
in Section 7(a) below, (ii) the Buyer will deliver to the Sellers the various
certificates, instruments, and documents referred to in Section 7(b) below,
(iii) the Sellers will deliver to the Buyer stock certificates representing
all of his Target Shares, endorsed in blank or accompanied by duly executed
assignment documents, (iv) the Buyer will deliver to each of the Sellers the
consideration specified in Section 2(b) above, (v) the Sellers will deliver
assignments necessary to convey the building leases and franchise agreements
as indicated on Schedule 1, (vi) Sellers will pay at Closing or deliver
evidence of prior payment of all outstanding accounts payable and obligations
of Target, including, but not limited to, legal fees and expenses accrued
through the Closing Date with respect to the litigation described in Sections
4(i) and 4(t) and the Schedule of Litigation, and (vii) Sellers will deliver
at Closing releases of Target from any guarantees.
(e) Escrow Provisions.
(i) Appointment of Escrow Agent. The Parties hereby
designate Miller & Martin, Attorneys at Law, to act as Escrow Agent hereunder.
The Escrow Agent shall be bound by the provisions of this Section 2(e), but
not by any other provisions of this agreement.
(ii) The Deposit. Upon the execution of this
Agreement, Buyer has delivered to the Escrow Agent the Deposit as provided in
Section 2, and the Escrow Agent hereby acknowledges receipt thereof. The
Escrow Agent shall hold the Deposit in an interest bearing account which is
insured by the Federal Deposit Insurance Corporation. The Escrow Agent shall
not be responsible for any loss resulting from any such investment.
(iii) Disposition of Deposit in the Event the
Closing Does Not occur.
(a) Delivery to Sellers. In the event that this
Agreement is properly terminated by Sellers pursuant to Section 9 (a)(iv),
then the Escrow Agent shall deliver the deposit, including any interest
thereon, to Sellers, and Buyer shall have no further
7
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liabilities or obligations to Seller hereunder or with respect to the
transactions contemplated hereby.
(b) Delivery to Buyer. In the event that this Agreement is
terminated in any manner other than as specified in subparagraph (a) above,
the Escrow Agent shall deliver the Deposit, including any interest thereon, to
Buyer.
(c) Payment as Liquidated Damages. The Parties expressly acknowledge that
the sums referred to above in subparagraph (a) to be paid over to Sellers are
agreed upon as liquidated damages and not as a penalty and that such sums have
been computed and estimated as a reasonable forecast of probable actual loss
to Seller because of difficulty of estimating with exactness the damages which
would actually result.
(iv) Disposition Of Deposit in the Event the Closing
Does Occur.
(a) Hold as Reserve. The Escrow Agent shall hold the Deposit
in reserve for seventy-five (75) days after the Closing Date to apply against
any liabilities or obligations of Target or of Sellers which may arise
subsequent to Closing which Sellers have agreed to indemnify Buyer against
under this Agreement. Buyer shall be entitled to payment from the Deposit for
any amount which Sellers are obligated to indemnify Buyer under this
Agreement.
(b) Delivery to Sellers. Upon the expiration of the
seventy-five (75) day period described in subparagraph (a) above, if Buyer has
made no notification to Sellers of any claim for indemnification pursuant to
this Agreement, then the Escrow Agent shall deliver the Deposit, including any
interest thereon to the Seller.
(v) Provisions as to Escrow Agent.
(a) The Escrow Agent shall be protected in acting upon any
written notice, statement, certificate, waiver, consent or other instrument or
document which the Escrow Agent believes to be genuine.
(b) It is understood and agreed that the duties of the Escrow
Agent hereunder are purely ministerial in nature and that the Escrow Agent
shall not be liable for any error or judgement, or for any act done or step
taken or omitted in good faith, or for anything which the Escrow Agent may do
or refrain from doing in connection with this Agreement, except that the
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Escrow Agent shall be liable for its own gross negligence or willful
misconduct. In no event shall the Escrow Agent be required to account for any
application of funds subsequent to Disposition thereof in accordance with this
Agreement by the Escrow Agent.
(c) The Escrow Agent may consult with and obtain advice
from legal counsel in the event of any dispute or question as to the
construction of any of the provisions hereof or the Escrow Agent's duties
hereunder, the Escrow Agent shall incur no liability and shall be fully
protected in acting in accordance with the opinion of its legal counsel. The
Escrow Agent shall not be responsible in any manner whatsoever for any failure
or inability of any of the other parties hereto, or anyone else, to perform or
comply with any provisions of this Agreement or any other agreement or
undertaking.
(d) If at any time the Escrow Agent shall be in doubt as to
the party or parties entitled to receive any or all of the Deposit, the Escrow
Agent may apply to a court for a determination of the party or parties
entitled to receive the same, and the Escrow Agent shall incur no liability
therefor.
(e) If at any time the Escrow Agent shall receive
conflicting notices, claims, demands or instructions with respect to any
disbursement from the Deposit, or if for any other reason its shall be unable
in good faith to determine the party or parties entitled to receive a
disbursement from the Deposit, the Escrow Agent may refuse to make such
disbursement until the Escrow Agent shall have received instructions in
writing signed by all of the other parties hereto, or until directed by a
final order of a court (in an action brought by the Escrow Agent pursuant to
paragraph (d) above or by any other person), whereupon the Escrow Agent shall
make such disbursement in accordance with such instructions or order.
(f) Exclusions from Target's Assets. Sellers shall have the
right to receive at Closing certain administrative assets of Target set forth
in the Schedule of Excluded Administrative Assets which are not involved
directly in restaurant operations. The conveyance of such items to Sellers
shall not reduce the Purchase Price.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Seller
represents and warrants to the Buyer that the statements contained in this
Section 3(a) are correct and complete as of the date of this Agreement and
will be correct and complete
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as of the Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this ss. 3(a) with
respect to himself or itself).
(i) Organization of Certain Sellers. If the Seller
is a corporation or partnership, the Seller is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or formation .
(ii) Authorization of Transaction. Subject to
receiving a waiver of the right of first refusal from Burger King Corporation,
the Sellers have full power and authority (including, if the Seller is a
corporation or partnership, full corporate or partnership power and authority)
to execute and deliver this Agreement and to perform his or its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Sellers, enforceable in accordance with its terms and conditions. The
Sellers need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and
the Delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Sellers are
subject or, if any of Sellers is a corporation or partnership, any provision
of its charter, bylaws, or partnership agreement, or (B) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which any of the Sellers is a party or by which he,
she or it is bound or to which any of his, her or its assets is subject except
for any fees to be paid by Buyer to National Restaurant Enterprises, Inc. or
The Jordan Company.
(iv) Broker's Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement as a result of any
agreements, contracts or actions by Sellers.
(v) Target Shares. The Sellers hold of record and,
except for the Shareholders Agreement between the Sellers which shall be
terminated by written instrument in the form attached
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hereto as Exhibit 3(a)(v) at Closing, own beneficially free and clear of any
restrictions on transfer, Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands the
number of Target Shares as follows:
Name Number of Shares
Ronny D. Lankford 25,000
Robert W. Lankford 25,000
The Target Shares represent all of the issued and outstanding stock of Target.
The Sellers are not a party to any option, warrant, purchase right, or other
contract or commitment that could require the Sellers to sell, transfer, or
otherwise dispose of any capital stock of the Target (other than this
Agreement). The Sellers are not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Target.
(vi) Franchise Agreements. The Sellers or Target own
Franchise Agreements with Burger King for each Location as indicated on
Schedule 1. The Franchise Agreements are in full force and effect and are free
and clear of any liens or encumbrances. Sellers shall provide Buyer with
copies of Franchise Agreements for each Location.
(vii) Real Property. Target does not own any real
property.
(viii) Leaseholds. Sellers or Target own a leasehold
interest under Leases for each of the Locations as indicated on Schedule 1.
All Leases are from third parties which are not related to or affiliated with
Sellers in any manner whatsoever.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in this
3(b) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then as though the
Closing Date were substituted for the date of this Agreement throughout this
3(b)).
(i) Organization of the Buyer. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of Delaware and is duly qualified to transact business in Tennessee.
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(ii) Authorization of Transaction. The Buyer has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and all other agreements contemplated herein and to
perform their obligations hereunder and thereunder. This Agreement and all
other agreements contemplated herein constitute the valid and legally binding
obligations of the Buyer, enforceable in accordance with their terms and
conditions. The Buyer need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
(iii) Noncontravention. Neither the execution and the
Delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Buyer is subject or any provision of their charters or bylaws or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which any
Seller could become liable or obligated, except for any fees to be paid to
National Restaurant Enterprises, Inc. or The Jordan Company.
(v) Investment. The Buyer is acquiring the Target's
share for investment purposes and is not acquiring the Target's Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
4. Representations and Warranties Concerning the Target and the Properties.
The Sellers represent and warrant to the Buyer that the statements contained
in this Section 4 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 4).
(a) Organization, Qualification, and Corporate Power. The
Target is a corporation duly organized, validly existing, and in
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good standing under the laws of the jurisdiction of its incorporation. The
Target is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required. The Target
has full corporate power and authority and all licenses, permits and
authorizations necessary to carry on the businesses in which it is engaged
(and in which it presently proposes to engage) and to own and use the
properties owned and used by it. The Sellers shall deliver to the Buyer a list
of the directors and officers of the Target, correct and complete copies of
the charter, bylaws and corporate records of the Target as amended to date).
The minute books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of the Target are correct and
complete. Target is not in default under or in violation of any provision of
its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of
the Target consists of 100,000 Target Shares, of which 50,000 Target Shares
are issued and outstanding and no Target Shares are held in treasury. All of
the issued and outstanding Target Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Sellers as set forth in Section 3(a). Except for the shareholders
agreement among Sellers (which shall be terminated at or prior to Closing),
there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Target to issue, sell or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Target. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of the Target.
(c) Noncontravention. Neither the execution and the Delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which the Target is subject
or any provision of the charter or by-laws of the Target (except for
restrictions on the transferability of Target stock set forth in Ro-Lank's
by-laws) (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Target is a
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party or by which it is bound or to which any of its assets are subject (or
result in the imposition of any Security Interest upon any of its assets). The
Target does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Except for the fee payable to Brennan,
Dyer & Company, payable by the Sellers at Closing, the Target does not have
any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement, and Sellers agree to indemnify and hold Buyer harmless from and
against any an all claims for such fees.
(e) Title to Assets. Except as disclosed in this Agreement,
the Target has good and marketable title to, or a valid leasehold interest in,
the properties and assets used by it, located on its premises, or shown on the
Most Recent Balance Sheet.
(f) Subsidiaries. The Target has no subsidiaries.
(g) Financial Statements. Sellers have delivered to Buyer
the following financial statements (the "Financial Statements"):
(i) Balance Sheet as of December 31, 1994 and
related statements of income, stockholders' equity and cash flows for the year
then ended, as reviewed by Hazlett, Lewis & Bieter.
(ii) Monthly Internal Financial Statements for
Target and Individual Restaurants as of October 31, 1995.
The Financial Statements were prepared in substantial conformity with
generally accepted accounting principles and applied on a consistent basis
throughout the periods covered thereby, (subject to normal year end
adjustments with respect to the interim financial statements referred to in
4(g)(ii)), are correct and complete, and are consistent with the books and
records of the Target (which books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Year End. Since
the Most Recent Fiscal Year End, there has not been any material adverse
change in the business, financial condition, operations, or results of
operations of the Target which have not occurred in the Ordinary Course of
Business. Without limiting the generality of the foregoing, since that date:
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(i) the Target has not sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(ii) the Target has not entered into any agreement,
contract, lease or license (or series of related agreements, contracts,
leases, and licenses) outside the Ordinary Course of Business (except for a
six (6) month increase of one (1%) percent in advertising contribution to
Burger King Corporation commencing May 1, 1995);
(iii) no party (including the Target) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases and licenses) to which the
Target is a party or by which it is bound;
(iv) except for a security interest in Target's
furniture, fixtures, and equipment given to NationsBank of Tennessee to secure
the debt listed in Section 6(f), the Target has not imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) the Target has not made any capital expenditure
(or series of related capital expenditures) outside the Ordinary
Course of Business;
(vi) the Target has not made any capital investment
in, any loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and acquisitions)
outside the Ordinary Course of Business;
(vii) the Target has not issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation except to
NationsBank of Tennessee as noted in Section 6(f);
(viii) the Target has not delayed or postponed the
payment of accounts payable and other Liabilities outside the
ordinary Course of Business;
(ix) the Target has not canceled, compromised,
waived, or released any right or claim (or series of related rights
and claims) outside the Ordinary Course of Business;
(x) the Target has not granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
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(xi) there has been no change made or authorized in
the charter or bylaws of the Target;
(xii) the Target has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) the Target has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property other than normal wear and tear;
(xiv) the Target has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees (except as set
forth on the Schedule of Employee Loans to be provided by Sellers to Buyer at
Closing outside the Ordinary Course of Business;
(xv) except as provided in Section 7(b)(xiv) and the
Lankford Agreement, as hereinafter defined, the Target has not entered into
any employment contract or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or agreement;
(xvi) the Target has not granted any increase in the
base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvii) the Target has not adopted, amended, modified,
or terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xviii) the Target has not made any change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xix) the Target has not made or pledged to make any
charitable or other capital contribution outside the Ordinary
Course of Business;
(xx) there has not been any other material
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving the Target; and
(xxi) the Target has not committed to any of the
foregoing.
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(i) Undisclosed Liabilities. The Target has no Liability
(and to Sellers' knowledge there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i) the pending
litigation entitled Deborah S. Carnes v. Burger King Corporation, Ro-Lank,
Inc. and Ro-Lank, Inc., d/b/a Burger King and Lisa D. Ritch v. Burger King
Corporation, Ro-Lank, Inc., and Ro-Lank, Inc., d/b/a Burger King in the
Chancery Court of Hamilton County, Tennessee and (ii) the matters set forth on
the Schedule of Litigation to be provided by Sellers to Buyer at Closing.
(j) Legal Compliance. The Target and its predecessors and
Affiliates, has substantially complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
(k) Tax Matters.
(i) The Target has filed all Tax Returns that it was
required to file. To Sellers' knowledge, all such Tax Returns were correct and
complete in all respects. All Taxes owed by the Target (whether or not shown
on any Tax Return) have been paid. The Target is not currently the beneficiary
of any extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where the Target does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the
Target that arose in connection with any failure (or alleged failure) to pay
any Tax.
(ii) The Target has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Target has any Knowledge of any Basis for
any authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of the Target either (A) claimed or raised by any authority in
writing or (B) as to which any of the Sellers and the directors and officers
(and employees responsible for Tax matters) of the Target has Knowledge based
upon
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personal contact with any agent of such authority. The Target hasno Tax
Returns that have been audited, except for sales tax audits through May, 1994
(which audit has been closed and all assessments resulting therefrom have been
paid), by the Tennessee Department of Revenue, and no Tax Returns that
currently are the subject of audit. The Sellers have delivered to the Buyer
correct and complete copies of all federal income Tax Returns filed,
examination reports, and statements of deficiencies assessed against or agreed
to by the Target for all years ending after December 31, 1991.
(iv) The Target has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) The Target has not filed a consent under Code
Sec. 341(f) concerning collapsible corporations. The Target has not made any
payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Code Sec. 28OG. The Target has not been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2). The Target has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Code Sec. 6662. The Target is not
a party to any Tax allocation or sharing agreement. The Target (A) has not
been a member of an Affiliated Group filing a consolidated federal income Tax
Return or (B) has no Liability for the Taxes of any Person (other than the
Target) under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(vi) Sellers have provided or shall provide Buyer
the following information with respect to the Target as of the most recent
practicable date (A) the tax basis of the Target in its assets; (B) the amount
of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax or excess charitable contribution allocable to the
Target; and (C) the amount of any deferred gain or loss allocable to the
Target arising out of any deferred intercompany transaction.
(vii) The unpaid Taxes of the Target (A) did not, as
of the Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (B) do not exceed
that reserve as adjusted for the passage of time through the Closing Date in
accordance with
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the past custom and practice of the Target in filing its Tax Returns.
(1) Real Property.
(i) The Target does not own any real property.
(ii) All of the Locations are leased to the Target as
indicated in Schedule 1. The Sellers have heretofore delivered to the Buyer
correct and complete copies of the leases. With respect to each lease:
(A) subject to receiving the consent of Lessors of any
Locations leased to Sellers, the lease is legal, valid, binding, enforceable,
and in full force and effect;
(B) the lease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(C) no party to the lease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease has repudiated any provision
thereof;
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease;
(F) neither Sellers nor Target has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold;
(G) all facilities leased thereunder have received all
approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained substantially in accordance with applicable laws, rules, and
regulations;
(H) all facilities leased thereunder are supplied with
utilities and other services necessary for the operation of said facilities;
and
(I) [intentionally deleted]
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(J) the landlords under the Leases are not related to or
affiliated with Sellers in any manner whatsoever.
(m) Intellectual Property.
(i) The Target owns or has the right to use pursuant
to the Franchise Agreements, all Intellectual Property necessary or desirable
for the operation of the businesses of the Target as presently conducted. Each
item of Intellectual Property used by the Target immediately prior to the
Closing hereunder will be owned or available for use by the Target on
identical terms and conditions immediately subsequent to the Closing
hereunder. Target has taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that it uses.
(ii) Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Sellers and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Target has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that Target must license or refrain from using
any Intellectual Property rights of any third party). No third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of any of the Target.
(iii) [intentionally deleted].
(n) Tangible Assets. Except as set forth in the Schedule
of Exceptions to Tangible Personal Property Owned or Leased
heretofor delivered to Buyer, the Sellers or Target own or lease
all buildings, machinery, equipment, and other tangible assets
necessary for the conduct of their businesses as presently conducted. Each
such tangible asset is in good, merchantable, operable or reasonably
repairable condition, is suitable for the purpose for which it is being used
and will be in good working order as of the Closing.
(o) Inventory. The inventory of the Target consists of food,
supplies, and current kids' toys, current promotional items, current
promotional premiums, all of which are merchantable and fit for the purpose
for which it was procured or manufactured, and none of which is spoiled,
obsolete, damaged or defective.
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(p) Contracts. Sellers have provided Buyer with copies of
the following contracts and other agreements to which any of the
Target is a party,
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements)
for the purchase or sale of food, commodities, supplies, products,
or other personal property, or for the furnishing or receipt of
services;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, or under which it has
imposed a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Sellers and their
Affiliates;
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other plan
or arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
and/or providing severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees (except for
the loans to employees set forth on the Schedule of Employee Loans, to be
provided by Sellers to Buyer at Closing outside the Ordinary Course of
Business (all such advancements or loans to be paid at closing); and
(xi) any agreement under which the consequences of
a default or termination could have a material adverse effect on
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the business, financial condition, operations, results of operations of the
Target.
The Sellers have delivered or will deliver prior to Closing to the Buyer a
correct and complete copy of each written agreement described above and a
written summary setting forth the terms and conditions of each oral agreement
described above. With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts
receivable of the Target are reflected properly on their books and records,
are valid receivable subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts.
(r) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Target.
(s) Insurance. Sellers have provided Buyer the following
information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage
and bond and surety arrangements) to which Target has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past
three (3) years;
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis) and amount
(including a description of the deductibles and ceilings are calculated and
operate) of coverage; and
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(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements (including any
workmen's compensation coverage audit).
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither the Target nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. The Target has been
covered during the past three (3) years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. There are no self-insurance arrangements affecting the
Target.
(t) Litigation. Except for the pending litigation set
forth in Section 4(i) and the matters set forth on the Schedule of Litigation,
the Target (i) is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is not a party or, is to Sellers' Knowledge
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the Sellers and the directors and officers (and employees
with responsibility for litigation matters) of the Target has any reason to
believe that any action, suit, pending hearing, or investigation may be
brought or threatened against the Target.
(u) Product Warranty. All of the food produced, sold,
leased, or delivered by the Target has been in conformity with all applicable
franchise standards and all express and implied warranties, and the Target has
no Liability (and to Sellers' Knowledge there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability) for damages in
connection therewith.
(v) Product Liability. Other than as set forth in the
Schedule of Litigation, the Target has no Liability (and to Sellers' Knowledge
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge,
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complaint, claim, or demand against it giving rise to any Liability) arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of any kids' toys, promotional items, promotional premises
or any other product produced, sold, leased, or delivered by the Target.
(w) Employees. To the Knowledge of any of the Sellers and
the directors and officers (and employees with responsibility for employment
matters) of the Target, no key restaurant employee, or group of employees has
any plans to terminate employment with the Target, except in the Ordinary
Course of Business. Target is not a party to or bound by any collective
bargaining agreement, nor have any of them experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Target has not committed any unfair labor practice. None of the
Sellers and the directors and officers (and employees with responsibility for
employment matters) of the Target has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of any of the Target. The Target has not knowingly
employed anyone under the age of sixteen (16) years old in the previous three
(3) years.
(x) Employee Benefits.
(i) The Sellers have provided Buyer a schedule of each
Employee Benefit that the Target provides, maintains or to which the Target
contributes.
(A) Each such Employee Benefit complies in form and in
operation in all respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
(B) All required reports and descriptions have been filed or
distributed appropriately with respect to each such Employee
Benefit.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
each such Employee Benefit in accordance with the past custom and practice of
the Target, provided, however, that Buyer acknowledges that manager bonuses
accrued to the Closing have not been paid. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with respect
to each such Employee Benefit.
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(D) [Intentionally deleted]
(y) Guaranties. Other than as set forth in Section 6(f), the
Target is not a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person, except by endorsement
of negotiable instruments for deposit or collection and similar transactions
in the Ordinary Course of Business.
(z) Environment Health and Safety.
(i) To the best of Sellers' knowledge, the Target
and its predecessors has complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against it
alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Target and its predecessors have obtained and been in
substantial compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has complied
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in,
all Environmental, Health, and Safety Laws.
(ii) To the best of Seller's Knowledge, the Target
has no Liability (and the Target and its predecessors have not handled or
disposed of any substance, arranged for the disposal of any substance, exposed
any employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could form the Basis for
any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Target giving rise to any
Liability) for damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health, and Safety Law.
(iii) To the best of Sellers' Knowledge, all
properties and equipment used in the business of the Target, and its
predecessors have been free of asbestos, PCB'S, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
(aa) Certain Business Relationships with the Target. Except
as disclosed in this Agreement, none of the Sellers and their Affiliates
(except for QED, Inc.) has been involved in any business arrangement or
relationship with the Target and none of
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the Sellers and their Affiliates (except for QED, Inc.) owns any asset,
tangible or intangible, which is used in the business of the Target. All such
business arrangements and relationships are to be terminated prior to or at
Closing.
(ab) Disclosure. To Sellers' Knowledge, the
representations and warranties contained in this Section 4 do not contain any
untrue statement of fact or omit to state any fact necessary in order to make
the statements and information contained in this Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of Agreement and the Closing.
(a) General. Each of parties will use his or its best
efforts to take all action and to do all things, in order to consummate and
make effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).
(b) Notices and Consents. The Sellers will and will cause
the Target to give any notices to third parties, and will and will cause the
Target to use its best efforts to obtain any third party consents, that may be
necessary or that the Buyer may request in connection with the matters
referred to in Section 4(c) above.
(c) Operation of Business. The Sellers will not cause or
permit the Target to engage in any practice, take any action, or enter into
any transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit the Target
to (i) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock or (ii) otherwise engage in any practice, take any action,
or enter into any transaction of the sort described in Section 4(h) above.
(d) Preservation of Business. The Sellers will cause the
Target to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with franchisor, lessors, licensors, suppliers, customers, and employees.
(e) Full Access. Each of the Sellers will permit and the
Sellers will cause the Target to permit, representatives of the Buyer to have
full access to all premises, properties, personnel books, records (including
Tax records), contracts, and documents of or pertaining to each of the Target
during business hours at
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prearranged appointment times and (at Sellers' option) accompanied by one of
Sellers or a representative of Sellers.
(f) Notice of Developments. The Sellers will give prompt
written notice to the Buyer of any material adverse development causing a
breach of any of the representations and warranties in 4 above. Each Party
will give prompt written notice to the others of any material adverse
development causing a breach of any of his or its own representations and
warranties in Section 3 above.
(g) Exclusivity. Except for the necessary contact with
Burger King Corporation relative to its rights of first refusal, none of the
Sellers will (and the Sellers will not cause or permit the Target to) (i)
solicit, initiate, or encourage the submission of any proposal or offer from
any Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of the Target (including
any acquisition structured as a merger, consolidation, or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers will vote their Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange. The
Sellers will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
(h) Title Insurance. [intentionally deleted]
(i) Surveys. [intentionally deleted]
(j) Schedules and Exhibits. Sellers shall promptly provide
Buyer with copies of all documents, schedules and exhibits which this
Agreement requires Sellers to provide. Buyer shall promptly notify Sellers of
any objections to said documents to give Sellers the opportunity to cure said
objections.
6. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement each of the Parties will take such further action (including the
execution and Delivery of such further instruments and documents) as any other
Party may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). The
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Sellers acknowledge and agree that from and after the Closing the Buyer will
be entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the Target.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding
hearing, investigation, charge, complaint claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving any of the Target, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
(c) Transition. None of the Sellers will take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target from
maintaining the same business relationships with the Target after the Closing
as it maintained with the Target prior to the Closing. Each of the Sellers
will refer all customer inquiries relating to the businesses of the Target to
the Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which
are in his or its possession. In the event that any of the Sellers is
requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 6(d). If, in the absence
of a protective order or the receipt of a waiver hereunder, any of the Sellers
is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that Seller may
disclose the Confidential Information to the tribunal,
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provided, however, that the disclosing Seller shall use his or its
best efforts to obtain, at the request of the Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to
the time of disclosure.
(e) Covenant Not to Compete. At closing, Sellers shall
execute and deliver a covenant (collectively the "Non-Competition Agreements")
not to compete directly or indirectly with the businesses that Target conduct.
Said covenant shall be in form and substance approved by Buyer's attorney.
(f) Payment of Debts or Release of Parties. Simultaneous
with Closing, Buyer will cause Target to pay in full or have Ronny D. Lankford
and Robert W. Lankford released from the following debts:
(i) NationsBank of Tennessee - Debtor: QSC, Ro-Lank;
Guarantors: Reed, Lankford & Lankford; current principal amount
$643,503 (as of October 31, 1995);
Security: machinery and equipment (Manning refinance).
(g) Indemnification of Sellers Regarding Leases and
Franchise Agreements. Buyer shall jointly and severally indemnify and hold
Sellers harmless from any loss, damage or expense as a result of a breach or
default under the Leases and Franchise Agreements for the Location which are
the result of matters occurring after Closing.
(h) Employment of Loretta Lankford. Buyer, or Buyer's
Affiliate, shall employ Loretta Lankford pursuant to the terms of the Amended
and Restated Employment Agreement (the "Lankford Agreement"), such agreement
to be in form and substance satisfactory to Buyer and Sellers.
(i) Insurance Coverage. Buyer shall maintain in force with
respect to Target and its operations the same insurance coverage in place as
of the Closing Date or shall replace such coverage with coverage which is at
least comparable with such insurance.
(j) Access to Records. Buyer shall afford Sellers access to
Target books and records in existence as of the Closing Date at such
reasonable times and places as Buyer and Sellers may agree.
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(k) S Election. Buyer and Sellers acknowledge and agree that
Target's S Corporation election will terminate pursuant to IRC 1362(d)(2) as a
result of the sale of stock under this Agreement. The termination will result
in two short taxable years: 1) the "S Short Year" and 2) the "C Short Year."
Each year shall be treated separately under normal tax accounting rules.
Prorata allocations shall not apply pursuant to IRC 1362(e)(6)(D). Sellers
shall be responsible at their expense for filing Form 1120S for the S Short
Year. Target shall provide any information necessary to assist Sellers in
filing the Form 1120S for the S Short Year. Seller shall be responsible for
any tax liability attributable to the S Short Year.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all material
respects at and as of the Closing Date and Buyer shall have received all
Schedules and Exhibits referred to in such Sections;
(ii) the Sellers shall have performed and complied
with all of their covenants hereunder in all material respects
through the Closing;
(iii) the Sellers and the Target shall have procured
all of the third party consents specified in Section 5(b) above;
(iv) the Buyer has received all of the title insurance
commitments, policies, and riders specified in Section 5(h) above,
and all of the Surveys specified in Section 5(i) above;
(v) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, (C) affect adversely the right of the
Buyer to own the Target Shares and to control the Target, or (D) affect
adversely the right of any of the Target to own its
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assets and to operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(vi) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified
above in Section 7(a)(i)-(iv) is satisfied in all respects;
(vii) the Closing shall occur contemporaneously with
the closing under a purchase agreement of even date herewith with
QSC, Inc.;
(viii) the Sellers have received a waiver of the right of
first refusal from Burger King Corporation in form and content satisfactory to
Buyer's counsel;
(ix) the Buyer shall have received from counsel to
the Sellers an opinion in form and substance satisfactory to
Buyer's counsel addressed to the Buyer, and dated as of the Closing
Date;
(x) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Target other
than those whom the Buyer shall have specified in writing at least five
business days prior to the Closing;
(xi) the Buyer shall have obtained on terms and
conditions satisfactory to it all of the financing it needs in order to
consummate the transactions contemplated hereby and fund the working capital
requirements of the Target after the Closing;
(xii) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be satisfactory in form and
substance to the Buyer;
(xiii) Target shall have paid or payment shall be made
from closing funds by the closing attorney of all Target's accounts payable
and obligations of any nature whatsoever, whether due or accrued, with the
exception of the debts set forth in Section 6(f);
(xiv) Buyer's attorney shall be satisfied that in his
opinion the pending litigation described in Section 4(i) is of such a nature
that the Sellers' indemnification and the existing insurance adequately
protects the Target and Buyer; and
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(xv) Buyer and Buyer's attorney shall be satisfied
with the documents, schedules, lists, and exhibits which Sellers and Target
provide pursuant to this Agreement.
(xvi) the parties shall have executed and delivered
the Closing Statement, the Non-Competition Agreements and the
Lankford Agreement.
(xvii) Buyer's receipt of "payoff" letters, in form and
substance suitable to Buyer, from each holder of Target's indebtedness and
receipt of UCC-3 Termination Statements from each holder of a security
interest in Target's assets;
(xviii) Buyer's receipt of such estoppel, consent,
attornment and non-disturbance agreements from Target's landlords and holders
of mortgages on each Location as Buyer may reasonably require;
(xix) Receipt of the Blue Ridge Release;
(xx) Buyer's receipt of evidence satisfactory to
Buyer that all restrictions upon transfer of Target's stock under any
shareholder agreement among the shareholders of Target have been waived or
terminated.
(xxi) Receipt of all necessary consents to the
transfer of Target stock as contemplated herein;
(xxii) Receipt of a certificate of the Secretary of
Target relating to the charter, bylaws, officers and corporate
records of Target;
(xxiv) Sellers shall have delivered to Buyer
certificates representing their shares of Target stock, properly
endorsed for transfer;
(xxv) Receipt of a copy of Target's (i) charter,
certified by the Secretary of State of Tennessee, and (ii) bylaws,
certified by Target's secretary; and
(xxvi) Receipt of Certificate of Existence relative
to Target issued by the Secretary of State of Tennessee.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation
of the Sellers to consummate the transactions to be
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performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation (and no such injunction, judgment
order, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certification to the effect that each of the conditions specified
above in Section 7(b)(i)-(iii) is satisfied in all respects;
(v) the Target, shall have received all
authorizations, consents, and approvals of governments and governmental
agencies required to consummate the transactions contemplated in this
Agreement including but not limited to those referred to in Sections 3(a)(ii),
3(b)(ii), and Section 4(c) above;
(vi) Burger King Corporation shall have waived its
right of first refusal;
(vii) the Sellers shall have received from counsel to
the Buyer an opinion in form and substance satisfactory to Sellers'
attorney, addressed to the Sellers, and dated as of the Closing
Date;
(viii) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers;
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(ix) the Closing shall occur contemporaneously with
closing under agreements of even date herewith between Buyer and
QSC, Inc., et al.,
(x) the parties shall have executed, or caused the
execution of, and delivery of the Closing Statement, the
Noncompetition Agreements and the Lankford Agreement;
(xi) Sellers' receipt of a Certificate of the
Secretary of Buyer as to the articles, bylaws and officers and
directors of Buyer;
(xii) Sellers' receipt of good standing certificates
relative to Buyer issued by the Secretaries of State of Tennessee
and Delaware;
(xiii) Receipt of the Blue Ridge Release; and
(xiv) Buyer shall have acknowledged its agreement
to the matters set forth in that certain letter dated November 21, 1995 from
Buyer to Sellers, a copy of which is attached hereto as Exhibit 7(b)(xiv).
The Sellers may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the
Parties contained in this Agreement shall survive the Closing hereunder (even
if the damaged Party knew or had reason to know of any misrepresentation or
breach of warranty at the time of Closing) and continue in full force and
effect forever thereafter (subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches (or in
the event any third party alleges facts that, if true, would mean any of the
Sellers has breached) any of their representations, warranties, and covenants
contained herein (other than the covenants in Section 2(a) above and the
representations and warranties in Section 3(a) above), and, provided that the
Buyer makes a written claim for indemnification against any of the Sellers
pursuant to Section 10(h) below within the applicable survival period, then
each of the Sellers agrees to indemnify the
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Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach).
(ii) In the event any of the Sellers breaches (or in
the event any third party alleges facts that, if true, would mean any of the
Sellers has breached) any of his or its covenants in Section 2(a) above or any
of his or its representations and warranties in Section 3(a) above, and, claim
for indemnification against the Seller pursuant to Section 10(h) below within
applicable survival period pursuant to Section 8(a) above, then the Seller
agrees to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyer may suffer after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach).
(iii) Each of the Sellers agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by any Liability of the Target for the unpaid Taxes of any Person
(other than the Target) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
(iv) Each of the Sellers agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the pending litigation described in Section 4(i) or as set forth on
the Schedule of Litigation including legal fees and expenses associated
therewith.
(c) Indemnification Provisions for Benefit of the Sellers.
In the event the Buyer breaches(or in the event any third party alleges facts
that, if true, would mean the Buyer have breached) any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section 8(a) above, provided that any of the
Sellers makes a written claim for indemnification against the Buyer pursuant
to Section 10(h) below within such survival period, then the Buyer agrees to
indemnify each of the Sellers from and against the entirety of any Adverse
Consequences the Seller may suffer through and after the date of the claim for
indemnification
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(including any Adverse Consequences the Seller may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this 8, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within (15 days) after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer regular
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with 8(d)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the
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<PAGE>
Indemnifying Party (not to be withheld unreasonably) , and (C)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim, without the prior
written consent of the Indemnified Party.
(iv) In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including attorneys' fees and expenses), and (C) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Section
8.
(v) When a Loss not arising from a Third Party Claim
is paid or is otherwise fixed or determined, then the Buyer or the Sellers, as
the case may be, claiming indemnification under this Agreement shall give the
other notice of such Loss, in reasonable detail and specifying the amount of
such Loss, and the Sections of this Agreement upon which the claim for
indemnification for such Loss is based. If the recipient of the notice desires
to dispute such claim, it shall, within 30 days after receipt of notice of the
claim of Loss against it pursuant to this clause, give counternotice, setting
forth the basis for disputing such claim to the Buyer or the Sellers. If such
counternotice is not given within such thirty-day period or if the Buyer or
the Sellers acknowledge liability for indemnification, then such Loss shall be
promptly satisfied as provided in Section 8(g) of this Agreement.
(vi) If within 30 days after the receipt of
counternotice by the Buyer or the Sellers, the Buyer and the Sellers shall not
have reached agreement as to the claim in question, then the claim for
indemnification shall be submitted to and settled by arbitration as
hereinafter provided (it being expressly understood and agreed that if such
counternotice is duly given, it is the intention of the parties to this
Agreement that any such claim shall be resolved by arbitration as provided in
this subsection). Arbitration shall be by a single arbitrator experienced in
the matters at issue and selected by the Buyer and the Sellers in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitration shall be held in such place in the metropolitan Chattanooga,
Tennessee area as
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as may be specified by the arbitrator (or any place agreed to by the Seller,
the Buyer and the arbitrator), and shall be conducted in accordance with the
Commercial Arbitration Rules existing at the date thereof of the American
Arbitration Association to the extent not inconsistent with this Agreement.
The decision of the arbitrator shall be final and binding as to any matters
submitted under this Agreement, and to the extent the decision is that a Loss
has been suffered for which either party is to be indemnified under this
Agreement, it shall be promptly paid by the other party, and in the case of
Buyer it will be paid by the Escrow Agent to the extent escrow funds are
available; provided, however, that, if necessary, such decision and
satisfaction procedure may be enforced by either the Buyer or the Sellers in
any court of record having jurisdiction over the subject matter or over any of
the parties to this Agreement. The determination of which party (or
combination thereof) bears the costs and expenses incurred in connection with
any such arbitration proceeding shall be determined by the arbitrator.
(e) Determination of Adverse Consequences. The Parties shall
take into account the time cost of money (using the Wall Street Journal Prime
Rate as the discount rate) in determining Adverse Consequences for purposes of
this Section 8. All indemnification payments under this Section 8 shall be
deemed adjustments to the Purchase Price.
(f) intentionally omitted
(g) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. Each of the Sellers hereby agrees that
he or it will not make any claim for indemnification against the Target by
reason of the fact that he or it was a director, officer, employee, or agent
of any such entity or was serving at the request of any such entity as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, compiling claim, or
demand brought by the Buyer against such Seller (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to this Agreement,
applicable law, or otherwise).
9. Termination.
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(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Buyer and Sellers may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Sellers on or before the (30th) day following the date
of this Agreement if Buyer as a result of its continuing business, legal and
accounting due diligence regarding the Target becomes aware of matters which
have a material adverse effect on the Target, the Target's assets, or the
Target's business operations;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing (A) in the
event any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the Buyer has
notified the Sellers of the breach and the breach has continued without cure
for a period of 30 days after the notice of breach or (B) if the Closing shall
not have occurred on or before November 30, 1995, by reason of the failure of
any condition precedent under Section 7(a) hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and
(iv) the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing
(A) in the event the Buyer has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, any of the
Sellers has notified the Buyer of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before November 30, 1995, by reason of
the failure of any condition precedent under Section 7(b)(i) (iv), (vii), (x)
- - (xii) and (xiv) hereof (unless the failure results primarily from any of the
Sellers themselves breaching any representation, warranty, or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 9(a) above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach). In the
event of termination pursuant to Section (a) above, the Earnest Money will be
returned to Buyer unless the termination is by Sellers pursuant to Section
39
<PAGE>
9(a)(iv)(A) in which event the Earnest Money shall be paid to Sellers,
provided that if the termination is by Buyer under Section 9(a)(ii), the
Parties shall submit the question of actual damages suffered by Sellers to
binding arbitration.
10. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in Section
2(a) above concerning the sale of his or its Shares to the Buyer and the
representations and warranties of each of the Sellers in Section 3(a) above
concerning the transaction are several obligations. This means that the
particular Seller making the representation, warranty, or covenant will be
solely responsible to the extent provided in Section 8 above for any Adverse
Consequences the Buyer may suffer as a result of any breach thereof.
(ii) The remainder of the representations,
warranties, and covenants in this Agreement are joint and several obligations.
This means that each Seller will be responsible to the extent provided in
Section 8 above for the entirety of any Adverse Consequences the Buyer may
suffer as a result of any breach thereof.
(b) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
Buyer and the Sellers.
(c) No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Sellers; provided,
however, that the Buyer may (i) assign any or all of its rights and interests
40
<PAGE>
hereunder to one or more of its Affiliates and (ii) designate one or more of
its Affiliates to perform its obligations hereunder (in any or all of which
cases the Buyer nonetheless shall remain responsible for the performance of
all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given if
it is sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to the Sellers to: Copy to:
Ronny D. Lankford W. Scott McGinness, Jr., Esquire
9408 Mountain Shadow Drive Miller & Martin
Chattanooga, TN 37421 Suite 1000 Volunteer Building
832 Georgia Avenue
Chattanooga, TN 37402
If to the Buyer: Copy to:
AmeriKing Tennessee The Jordan Company
Corporation I 9 West 57th St., 40th Floor
c/o AmeriKing New York, NY 10019
2215 Enterprise Drive Attn: A. Richard Caputo, Jr.
Suite 1502
Westchester, IL 60154
Attn: Lawrence Jaro
and to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019-5820
Attn: Martin J. Collins
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address
41
<PAGE>
set forth above using any other means (including personal Delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Tennessee
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Tennessee or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Tennessee).
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed
by the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(l) Expenses. Except as set forth herein, each of the
Parties and the Target, will bear his or its own costs and expenses,
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. The Sellers agree that the Buyer has
not borne and will not bear any of the Sellers' costs and expenses (including
any of their legal fees and expenses) in connection with this Agreement or any
of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the
42
<PAGE>
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement which Sellers and Target are to
provide to Buyer prior to Closing are incorporated herein by reference and
made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the provisions
set forth in 10(p) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits
to the jurisdiction of any state or federal court sitting in Chattanooga,
Tennessee, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to this Agreement in
any other court. Each of the Parties waives any defense of inconvenient forum
to the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
43
<PAGE>
Buyer:
AMERIKING TENNESSEE CORPORATION
I
By:____________________________
Title:________________________
Sellers:
-------------------------------
Ronny D. Lankford
------------------------------
Robert W. Lankford
RO-LANK, INC.
By:_____________________________
44
<PAGE>
(Ro-Lank)
Schedule 1
BKC Real
--- ----
Restau- Estate
- ------- ------
rant No. Location Franchise Interest
- -------- -------- --------- --------
3351 Signal Mountain Road Ronny D. Lankford L&L-Lessee
Chattanooga, TN Robert W. Lankford
("L & L")
2657 East Ridge, TN L&L L&L-Lessee
2995 Highway 58, L&L L&L-Lessee
Chattanooga, TN
45
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
Among
AMERIKING VIRGINIA CORPORATION I
(as Purchaser)
And
C&N DINING, INC. AND ITS AFFILIATES
LISTED ON THE SIGNATURE PAGES HERETO
(as Sellers)
Dated as of November 30, 1995
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
PURCHASE AND SALE; CLOSING
1.1 Assets to Be Conveyed............................................... 2
1.2 Purchase Price for Assets........................................... 3
1.3 Real Properties; Assignments of Leases;
Easements and Parking Agreements.............................. 4
1.4 Assumption of Liabilities........................................... 5
1.5 Closing; Deliveries................................................. 7
1.6 Adjustments......................................................... 7
1.7 Petty Cash.......................................................... 9
1.8 Appointment of Sellers' Agent....................................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
2.1 Organization and Corporate Power.................................... 9
2.2 Governing Instruments............................................... 10
2.3 Due Authorization................................................... 10
2.4 No Violation........................................................ 11
2.5 Consents............................................................ 11
2.6 Financial Statements................................................ 11
2.7 Assets.............................................................. 13
2.8 Inventory........................................................... 13
2.9 Real Properties; Real Property Leases............................... 13
2.10 Franchise Agreements................................................ 16
2.11 Employment Arrangements............................................. 16
2.12 Contracts and Arrangements.......................................... 17
2.13 ERISA............................................................... 17
2.14 Litigation, Compliance with Regulations and Consents................ 18
2.15 Environmental Matters............................................... 19
2.16 Insurance Policies.................................................. 20
2.17 Tax Returns......................................................... 20
2.18 Adverse Restrictions................................................ 21
2.19 Brokers............................................................. 21
2.20 Material Information................................................ 21
2.21 Continuing Representations.......................................... 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Corporate Power.................................... 22
<PAGE>
Section Page
3.2 Certificate of Incorporation and By-Laws............................ 22
3.3 Due Authorization................................................... 22
3.4 No Violation........................................................ 23
3.5 Consents............................................................ 23
3.6 Brokers............................................................. 23
3.7 Material Information................................................ 23
3.8 Continuing Representations.......................................... 24
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Access to Records and Properties Prior
to the Closing Date........................................... 24
4.2 Operation of the Business of Sellers................................ 25
4.3 [Intentionally Omitted]............................................. 27
4.4 Computer Software................................................... 27
4.5 No Other Asset Sales................................................ 27
4.6 Regulatory Filing and Consents...................................... 27
4.7 Announcements; Confidentiality...................................... 28
4.8 Limitation of Sellers' Claims After Closing......................... 29
4.9 Covenant Not to Compete............................................. 29
4.10 Employee Benefit Matters............................................ 30
4.11 Financial Statements and Reports.................................... 30
4.12 Bulk Sales.......................................................... 31
4.13 Supplements to Schedules............................................ 31
4.14 Notice of Developments.............................................. 32
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
5.1 Conditions to the Obligations of Sellers and Purchaser.............. 32
5.2 Conditions to the Obligations of Sellers............................ 33
5.3 Conditions to Obligations of Purchaser.............................. 34
ARTICLE VI
DAMAGE OR DESTRUCTION
6.1 Casualty............................................................ 38
ARTICLE VII
INDEMNIFICATION
7.1 Survival of Representations......................................... 38
7.2 Agreement to Indemnify.............................................. 39
7.3 Conditions of Indemnification....................................... 41
7.4 Indemnity Enforcement............................................... 42
<PAGE>
Section Page
ARTICLE VIII
TERMINATION
8.1 Termination......................................................... 42
8.2 Effect of Termination; Right to Proceed............................. 43
ARTICLE IX
MISCELLANEOUS
9.1 Further Assurances.................................................. 43
9.2 Waiver and Amendment................................................ 44
9.3 Remedies............................................................ 44
9.4 Expenses............................................................ 44
9.5 Entire Agreement.................................................... 45
9.6 Definitions......................................................... 45
9.7 Interpretation...................................................... 47
9.8 Notices............................................................. 47
9.9 Successors and Assigns.............................................. 49
9.10 ARBITRATION......................................................... 49
9.11 LITIGATION.......................................................... 49
9.12 Severability........................................................ 50
9.13 Purchaser's Designated Affiliate.................................... 50
9.14 Counterparts........................................................ 50
Exhibit A1 Form of Installment Notes
Exhibit A2 Form of Letter of Credit
Exhibit A Form of Assignment and Assumption of Lease
Exhibit B Form of Lease Consent and Estoppel Certificate
Exhibit B1 Form of Naparlo Development Agreement
Exhibit C Form of Assumption Agreement
Exhibit D Form of Opinion of Purchaser's Counsel
Exhibit E Form of Bill of Sale and Assignment
Exhibit F Form of Opinion of Sellers' Counsel
Exhibit G Form of Escrow Agreement
<PAGE>
SCHEDULES
A Restaurants
B Real Properties
C Real Property Loans, Amendments, Supplements
1.1(a) Restaurant Equipment
1.1(c) Franchises
1.1(e) Leased Assets
1.1(h) Miscellaneous Assets
1.2(a) Purchase Price Allocation
1.2(a)(i) Damage Credit
1.3(c) Parking and Easements Agreements
1.6(d) Real Property Lease Percentage Rent Factor
2.5 Required Consents
2.6(b) Financial Statements and Events or items not
reflected in Financial Statements
2.6(b)(iii) Liens on Real Properties and Assets
2.9(b) Defaults on Leased Real Property
2.9(c) Certificate of Occupancy, Ongoing Repairs
2.9(d) Certificates of Occupancy
2.9(f) Exceptions to Real Property
2.10 Claims with Respect to Franchise Agreements
2.11(a) Compliance with Regulations, etc.
2.11(b) Sellers' Employees and Wages
2.12 Other Contracts
2.13 Employee Pension Benefit Plans
2.14(a) Litigation
<PAGE>
2.14(c) Required Licenses
2.15 Environmental Matters
3.6 Buyer's Brokers
4.12(b) Creditors Schedule re: Bulk Sales
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of
November 30, 1995 by and between AMERIKING VIRGINIA CORPORATION I ("AVCI"), a
Delaware corporation ("Purchaser") and C&N Dining, Inc., N&C Dining, Inc.,
CNR, Inc., N&C Dining II, Inc., CCJ, Inc., NAPCHI, Inc., each a Virginia
corporation, C&N Dining, L.L.C. and CCJ Realty, L.C., each a Virginia limited
liability company, Joseph J. Naparlo, The CCJ Irrevocable Trust and Joseph J.
Naparlo (collectively, "Sellers"):
W I T N E S S E T H:
WHEREAS, the Sellers operate the Burger King restaurants respectively
identified by address and Burger King Franchise number on Schedule A annexed
hereto (each restaurant is hereinafter sometimes referred to individually as a
"Restaurant" and collectively as the "Restaurants");
WHEREAS, certain of the Sellers are the owners or lessees of certain
personal property used or held for use in or in connection with the conduct of
business at the Sellers' Restaurants and certain of the Sellers are the owners
or lessees of certain buildings, other real property and land upon and in
which Sellers' Restaurants are located (individually, the "Real Property" and
collectively, the "Real Properties"), the ownership and legal description of
which is set forth on Schedule B hereto;
WHEREAS, certain of the Sellers occupy Real Property pursuant to a
lease agreement (each, a "Real Property Lease" and, collectively, the "Real
Property Leases") (each such Real Property Lease, together with all
amendments, supplements, and schedules thereto, being listed on Schedule C
hereto) and each such Seller proposes to assign to Purchaser, and Purchaser
proposes to accept such assignment of, the Sellers' leasehold interest with
respect to the Real Property on which such Sellers' Restaurants are located
(each a "Leased Real Property" and, collectively, the "Leased Real
Properties");
WHEREAS, Purchaser proposes to assume the Assumed Contracts
(as hereinafter defined);
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties agree as follows:
-1-
<PAGE>
ARTICLE I
PURCHASE AND SALE; CLOSING
SECTION 1.1 Assets to Be Conveyed. Subject to the terms, provisions
and conditions contained in this Agreement, and on the basis of the
representations and warranties hereinafter set forth, each Seller agrees to
sell, exchange, assign, transfer, convey and deliver (or cause Sellers and
their Affiliates to sell, exchange, assign, transfer, convey and deliver) to
Purchaser at Closing (as hereinafter defined), for the specific consideration
described in Section 1.2, and Purchaser agrees to purchase and accept the
assignment, transfer, conveyance and delivery from each Seller and their
Affiliates, as applicable, at Closing of, all of the assets used or located in
or held for use in connection with the Restaurants operated by the Sellers
(collectively, the "Assets") free and clear of all Liens, including but not
limited to:
(a) Restaurant Equipment. All of the machinery, equipment,
furnishings, supplies, uniforms, spare equipment parts and all other personal
property (other than Inventory, as hereinafter defined) owned by each Seller
and its Affiliates and used or held for use in, or in connection with, the
operation of the Restaurants, including but not limited to the assets set
forth in Schedule 1.1(a) annexed hereto (collectively, the "Restaurant
Equipment");
(b) Leasehold Improvements. All trade fixtures, trade
equipment or other personal property placed in the premises by
each Seller and its Affiliates or any of the foregoing purchased
by each Seller and its Affiliates for the Restaurants, (the
"Leasehold Improvements");
(c) Franchise Agreements. Each Burger King Franchise
Agreement for its Restaurants, as more fully set forth in
Schedule 1.1(c) annexed hereto (the "Franchise Agreements", all
subject to the approval, as necessary, of Burger King Corporation
("Burger King");
(d) Inventories. All of the food, related paper products and
promotional items owned by each Seller and its Affiliates or otherwise used or
held for use in or in connection with the business being conducted at its
Restaurants (collectively, the "Inventory");
(e) Leased Assets. All of the right, title and interest of
each Seller in any item of personal property which is not owned
by it but is leased by it or otherwise is used or held for use,
in or in connection with the business being conducted at its
Restaurants, including but not limited to, the assets set forth
-2-
<PAGE>
on Schedule 1.1(e) annexed hereto (collectively, the "Leased
Assets");
(f) Real Property. All of the right, title and interest of
each Seller and its Affiliates in the Real Properties upon and in
which the Sellers' Restaurants are located;
(g) Goodwill and Other Intangible Assets. All goodwill, going concern
value, contract rights, customer relationships, and other general intangibles
held or used by each Seller in connection with its business being operated at
its Restaurants (collectively the "Intangible Assets");
(h) Miscellaneous Assets. All of the right, title and interest of
each Seller and its Affiliates in any other asset or property owned, leased,
subleased, used or held for use in, or in connection with the business being
operated at the Restaurants other than those assets set forth on Schedule
1.1(h) (collectively, the "Miscellaneous Assets"); and
SECTION 1.2 Purchase Price for Assets.
(a) The purchase price for the Assets shall be (i) FortyFour Million
One Hundred Seventy-Five Thousand Dollars ($44,175,000) plus (ii) an amount
equal to the total cost of the Sellers related to the development of the
Restaurant Nos. 9219 and 9220 as set forth and documented, to Purchaser's
reasonable satisfaction, on Schedule 1.2(a) annexed hereto, (the "Purchase
Price"). On the Closing Date (as hereinafter defined), Purchaser shall pay to
Sellers' Agent an amount to be determined by Sellers' Agent in installment
notes in substantially the form set forth in Exhibit A1 annexed hereto (the
"Installment Notes"), with the balance of the Purchase Price to be paid in
cash by wire transfer. The Installment Notes shall be supported by a Letter of
Credit in substantially the form set forth in Exhibit A2 annexed hereto (the
"Letter of Credit"). The Purchase Price paid by Purchaser shall be (x) plus or
minus net pro-rations as set forth in Section 1.6 (y) plus the amount of any
sales, transfer, or recording Taxes to be collected from the Purchaser under
Section 1.6(b) hereof, by wire transfer or by certified or bank cashier's
check payable to the order of Sellers' Agent and (z) minus the fees and
related expenses incurred in connection with the Letter of Credit. Amounts
payable with respect to Inventory shall be paid as set forth in Section 1.2(b)
which shall be in addition to the Purchase Price. The Purchase Price shall be
allocated among the Assets as set forth in Schedule 1.2(a), which shall be
mutually agreed to by Purchaser and Sellers' Agent prior to the Closing Date.
The Purchaser and the Sellers shall prepare and file all Tax returns and
reports, including without limitation Internal Revenue Service Form 8594,
consistently with such allocation and the allocation to the Inventory and the
Store
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Banks (as hereinafter defined) pursuant to Sections 1.2(b) and 1.7,
respectively.
(b) Inventory. Within 24 hours prior to the date of the Closing, an
inventory shall be taken by the Sellers (with the participation of the
Purchaser) of all merchantable food, paper, new uniforms, current promotional
items, supply inventory (including but not limited to, consumables, operating
and cleaning supplies) and other miscellaneous items (collectively, the
"Inventory") located at the Restaurants. Purchaser agrees to purchase the
Inventory from the Sellers, and each Seller agrees to sell its Inventory to
Purchaser, at such Seller's actual Inventory purchase price, with such amount
payable within 60 days of the Closing Date.
SECTION 1.3 Real Properties; Assignments of Leases; Easements and
Parking Agreements. Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of the representations and warranties
hereinafter set forth, at the Closing, each Seller shall assign to Purchaser
all of its leasehold interest in the Leased Real Properties and shall assign
or otherwise transfer to Purchaser or its designee all of its right, title and
interest in and to the Real Properties and all parking and other access
agreements or arrangements relating to the Real Properties, as follows:
(a) Assignment of Real Property Leases. At Closing, each Seller shall
assign to Purchaser all of the Seller's right, title and interest as tenant
under the applicable Real Property Lease pursuant to the form of Assignment
and Assumption of Lease (the "Lease Assignment") annexed hereto as Exhibit A.
The Lease Assignment shall be executed and delivered at Closing by the
appropriate Seller and Purchaser.
(b) Lease Assignment Consent. At Closing, each Seller shall deliver
to Purchaser a Consent to Assignment and Estoppel Certificate in the form
annexed hereto as Exhibit B (the "Lease Assignment Consent") pursuant to which
the respective landlords shall: (i) acknowledge and consent to the applicable
Lease Assignment, and (ii) confirm all of the information set forth in the
last sentence of Section 2.9(b).
(c) Parking, Easements and Related Agreements. Schedule 1.3(c)
annexed hereto, with respect to each Seller, sets forth all written or oral
parking leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements"), except for recorded
instruments, pursuant to which the Seller is granted, for use in connection with
its Restaurant, parking privileges or rights, current or prospective, and/or
rights of access of any kind or nature in and to the applicable Real Property.
At Closing each
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Seller shall deliver to Purchaser such documentation in form and substance
reasonably satisfactory to Purchaser and its counsel (hereinafter individually
referred to as an "Easement Assignment", and, collectively, as the "Easement
Assignments").
SECTION 1.4 Assumption of Liabilities.
(a) No Assumption by Purchaser. The parties hereto hereby agree and
acknowledge that no Seller is selling, transferring, assigning, delivering or
otherwise conveying, and Purchaser is not purchasing, receiving, acquiring or
otherwise assuming, any liabilities of any Seller, or any of its respective
Affiliates except as specifically set forth in Section 1.4(b) hereof.
Purchaser shall neither be liable for any liability or obligation of any
Seller, or any of its respective Affiliates nor shall it be required to
indemnify the Sellers, or any of its respective Affiliates against any
liability or obligation other than those so specifically assumed or
indemnified, as the case may be.
Without limiting the generality of the foregoing, Purchaser is not
assuming and shall not indemnify any Seller, or any of its respective
Affiliates against any liability, obligation, duty or responsibility of any
Seller, or any of its respective Affiliates:
(i) arising from, or out of, the ownership or operations or
use of, or incurred in connection with, or incurred as a result of
any claim made against any Seller, or any of its respective
Affiliates in connection with, any Restaurant, Asset, Restaurant
Equipment, Real Property, Real Property Lease or Assumed Contract (as
hereinafter defined) on or prior to, or relating to any time period
prior to 6:00 A.M. on the Closing Date;
(ii) arising from or by reason of the transactions
contemplated by this Agreement including, but not limited to,
Federal, state or local income, transfer, sales and other Taxes, if
any, arising from or by reason of the receipt of the consideration
for the Assets to be transferred pursuant hereto, except as provided
in Section 1.6(b);
(iii) with respect to any wages, vacation, compensation,
severance or sick pay or any rights under any stock option, bonus or
other incentive arrangement that have accrued as of the Closing Date;
(iv) with respect to any employment, consulting or similar
arrangement to which any Seller or its Affiliates is a party or for
which any Seller or its Affiliates is responsible;
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(v) with respect to any "employee benefit plan" as defined
in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including multi-employer plans as defined
in section 3(37) of ERISA whether arising before, on or after the
Closing Date; or
(vi) under any Regulations (as hereinafter defined) relating
to public health and safety and pollution or protection of the
environment, including, without limitation, those relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes or any materials defined or
categorized by any of the above as "Hazardous Materials", "Hazardous
Substances", or similar or related designations (collectively
referred to herein as "Environmental Laws"); or
(vii) with respect to any causes of action, judgments,
claims or demands related to any occurrence, action or omission by
any Seller, whether through negligence or otherwise, occurring before
6 A.M. on the Closing Date.
(b) Assumption of Assumed Contracts. The Sellers shall assign to, and
Purchaser shall accept assignment of and assume from and after the Closing
Date, all of the rights, obligations and liabilities of each Seller
attributable to the period after 6:00 A.M. on the Closing Date, under the
Franchise Agreements, Real Property Leases, Easements, Leased Assets and the
Other Contracts (as hereinafter defined) (collectively, the "Assumed
Contracts").
SECTION 1.5 Closing; Deliveries.
(a) Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019 (or such other location as shall be agreed
upon by the parties) on December 13, 1995; provided, however, that if, through
no fault of the parties hereto, all of the conditions to the parties'
obligations to close hereunder are not satisfied or waived on the date so
designated, the Closing shall be adjourned to a subsequent mutually agreeable
date not later than February 15, 1996, unless further extended by mutual
agreement by the parties. The "Closing Date" shall be the date Closing
actually takes place.
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(b) Delivery of Documents. At the Closing, each Seller and the
Purchaser shall deliver to their respective counterparty the respective
documents and other items set forth in Article V.
SECTION 1.6 Adjustments. (a) All customary prorations with respect to
(i) obligations under the Assumed Contracts, (ii) utility charges and (iii)
personal property Taxes, shall be adjusted between the parties as of 6:00 A.M.
on the Closing Date. Payment, if any, owed by Purchaser to the Sellers or by
the Sellers to Purchaser by reason of such adjustments shall be made at the
Closing (by adjustment of the Purchase Price, if practicable) or as soon as
reasonably practicable thereafter.
(b) The parties shall share equally in the payment of all sales,
transfer, grantor, and recording Taxes, if any, applicable to the transactions
contemplated by this Agreement at the Closing; provided that Purchaser shall
pay all Taxes incurred in connection with financing the purchase of the Assets
including, but not limited to, any recording taxes payable with respect to the
granting of a lien or mortgage on the Assets. Purchaser and the Sellers shall
share equally all franchise assignment fees to Burger King in connection with
the assignment of the Franchise Agreements to Purchaser. Purchaser and the
Sellers shall share equally all fees incurred in connection with obtaining
consent to the transaction under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, (the "HSR Act"), regardless of whether the
transaction is consummated.
(c) Purchaser shall be required to bear the cost of any Phase I
environmental reports or Phase II environmental studies it orders in
connection with its purchase of Sellers' Assets. However, if the results of
any such Phase I report or Phase II study recommends cleanup or remediation of
any of Sellers' Assets, Sellers shall contribute up to $50,000 per Restaurant
of the cost of such cleanup or remediation. In addition, if any such Phase I
report or Phase II study recommends cleanup or remediation of any of Sellers'
Assets with an estimated cost of more than $50,000 per Restaurant, Purchaser
shall have the option to (i) exclude such Assets from the Assets to be
conveyed pursuant to Section 1.1 of the Agreement or (ii) purchase such Assets
at an adjusted price to be agreed to by Purchaser and Sellers. Each Seller
shall bear the cost of any Phase I reports or Phase II reports it orders.
(d) All "minimum" or "fixed rentals" and any other monetary
obligations accruing under the Real Property Leases shall be adjusted for the
month in which the Closing occurs. In the event the period used in computing
and/or adjusting percentage rental (hereinafter referred to as the "Adjustment
Lease Year") under any of the Real Property Leases commences before the
Closing Date and ends after the Closing Date, such percentage rental shall be
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adjusted at the end of the Adjustment Lease Year for such Real Property Leases
so affected as follows:
(i) Sellers shall be required to pay to Purchaser, within 30
days after the expiration of the Adjustment Lease Year, an amount
equal to the lesser of (1) the amount of percentage rental due for
such Adjustment Lease Year or (2) the "Percentage Rent Contribution"
determined by the
following formula:
(A - B) x C x D = Percentage Rent Contribution
365
in which:
A = Total net sales or similar term as
defined in such Real Property Lease used
in determining such percentage rental
during such Adjustment
Lease Year;
B = The "sales break point" for such Real
Property Lease as indicated in
Schedule 1.5(d);
C = Number of days during the Adjustment Lease
Year prior to, but not including, the
Closing Date; and
D = Percentage rent factor for such Real
Property Lease as indicated in Schedule
1.6(d);
provided, however, that, in the event the above formula yields a
negative amount as the Percentage Rent Contribution, the Percentage
Rent Contribution shall be deemed equal to zero; and
(ii) Purchaser shall be required to pay directly to the
lessor under the Real Property Lease the percentage rental, if any,
due for the Adjustment Lease Year.
(e) All fees and expenses incurred in connection with obtaining the
Letter of Credit shall be paid by Purchaser as a reduction of the Purchase
Price as set forth in Section 1.2(a) at the Closing, and shall be the
responsibility of Seller in the event the Agreement is terminated other than
pursuant to Section 8.1(b). Purchaser shall use its best efforts to endeavor
to minimize such fees and expenses.
SECTION 1.7 Petty Cash. Upon the Closing, each Seller shall leave
$2,000.00 in cash at each of its Restaurants (the "Store Bank"). Purchaser
agrees to purchase each Store Bank
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separately from the Purchase Price at Closing on a cash for cash
basis.
SECTION 1.8 Appointment of Sellers' Agent. Each Seller and its
Affiliates irrevocably appoints and authorizes Joseph J. Naparlo ("Sellers'
Agent") to do all such acts and things as agent (and not as principal) on its
behalf and to exercise all such rights, powers and privileges in relation to
this Agreement as fully and completely as such Sellers or its Affiliates could
on its own behalf, together with all such powers as are reasonably incidental
thereto. Each Seller and its Affiliates agrees that the foregoing appointment
and powers are coupled with an interest and every party acting hereunder shall
be entitled to rely on any action taken or omitted by Sellers' Agent on behalf
of the Sellers.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller, jointly and severally, represents, warrants, covenants
and agrees to and with Purchaser as follows:
SECTION 2.1 Organization and Corporate Power. The Seller is, as
applicable, a corporation or limited liability company duly organized, validly
existing and in good standing under the Regulations of its jurisdiction of
organization (as set forth on Schedule A annexed hereto) and is duly qualified
and licensed to do business in such jurisdiction which is the only
jurisdiction wherein the character of the Real Properties and other Assets
owned or leased or the nature of the business of the Seller makes such
licensing or qualification to do business necessary. The Seller has full power
and authority (corporate or otherwise) to own its assets, to own or hold under
lease the real property it presently owns or holds under lease including,
without limitation, the Real Properties, and to carry on the business in which
it is engaged at all locations at which it is presently located including,
without limitation, operation of the Restaurants at the Real Properties and to
execute and deliver this Agreement and the other documents and instruments to
be executed and delivered by the Seller, as the case may be, pursuant hereto
or in connection herewith (this Agreement and all other agreements, documents
and instruments to be entered into pursuant to this Agreement or in connection
herewith including all exhibits and schedules annexed hereto and thereto are
collectively referred to herein as the "Transaction Documents") and to
consummate the transactions contemplated hereby and thereby.
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SECTION 2.2 Governing Instruments. The copies of the Governing
Instruments of the Seller, and all amendments thereto to date, as certified by
the Secretary or managing member of Seller has heretofore been delivered to
Purchaser by Seller, and are complete and correct as of the Closing Date. The
Seller is not in default in the performance, observance or fulfillment of any
of the provisions, terms or conditions of its Governing Instruments.
SECTION 2.3 Due Authorization. All requisite authorizations for the
execution, delivery and performance of this Agreement and the other
Transaction Documents by the Seller have been duly obtained. The execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors, the stockholders or other governing
body of the Seller, as applicable, and no other acts or proceedings on the
part of the Seller or the stockholders or members of the Seller is necessary
to authorize the execution and delivery of this Agreement or any of the other
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby. This Agreement and each of the other Transaction Documents,
upon execution and delivery by the Seller, will be the legal, valid and
binding obligation of the Seller enforceable against it in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency
and other laws affecting creditors' rights (collectively, "Bankruptcy Laws")
and subject to general principles of equity affecting the right to specific
performance and injunctive relief.
SECTION 2.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Seller and the
consummation by the Seller of the transactions contemplated hereby and
thereby, do not, and at Closing will not: (a) violate its Governing
Instruments; (b) violate or conflict with or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under any agreement, indenture, instrument or understanding to which the
Seller is a party or by which it is bound; (c) violate any judgment, decree,
law, rule or Regulation to which the Seller is a party or by which it is
bound; (d) result in the creation of, or give any party the right to create,
any encumbrance upon the property or assets of the Seller; (e) terminate or
modify, give any third party the right to terminate or modify, or require any
notice under, the provisions or terms of any agreement or commitment to which
the Seller is a party or by which the Seller is subject or bound; or (f)
result in any suspension, revocation, impairment, forfeiture or non-renewal of
any permit, license, qualification, authorization or approval applicable to
the Seller.
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SECTION 2.5 Consents. Schedule 2.5 sets forth a list of all consents,
approvals, notices or other authorizations which the Seller is required to
obtain from, and any filing which the Seller is required to make with, any
Authority or any other Person including, but not limited to, consents required
from Burger King (the "Burger King Consents") in connection with the
execution, delivery and consummation of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby or thereby (collectively, the "Required Consents").
SECTION 2.6 Financial Statements. (a) Seller's Agent has
delivered to Purchaser;
(i) the audited financial statements of C&N
Dining, Inc. prepared by Carmines, Robbins &
Company, PLC for the periods ending December
31, 1993 and December 31, 1994; and
(ii) the reviewed financial statements of CNR,
Inc. Napchi, Inc. prepared by William M.
Balavage, CPA for the periods ended December
31, 1993 and December 31, 1994; and
(iii) the internally prepared balance sheets of
CCJ, Inc. CCJ Realty, LLC, and C&N Dining,
LLC as of September 30, 1995; and
(iv) the internally prepared balance sheets of
N&C Dining, Inc. and N&C Dining II, Inc. as
of December 31, 1994; and
(v) the internally prepared statements of
operations for C&N Dining, Inc., CCJ, Inc.,
Napchi, Inc., and CNR, Inc. for the period
ending October 31, 1995.
(b) The financial statements referred to in Section 2.6(a)
collectively, the "Financial Statements") are true, correct and complete, are
based on Seller's books and records, have been prepared in accordance with
generally accepted accounting principles consistently applied and accurately
present the assets, liabilities, financial positions and results of
operations of the Seller as at the dates thereof and for the periods covered
thereby; provided, however, that monthly financial statements (i) shall not be
required to reflect standard year-end adjustments and reserves, and (ii) may be
prepared other than in accordance with generally accepted accounting principles
to the extent that such financial statements shall not be required to reflect
standard year-end adjustments, or contingent liabilities. The Financial
Statements
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of the Seller reflect or provide for all claims against, and all debts and
liabilities (of any kind or nature) of, such Seller, fixed or contingent, as
at the dates thereof and for the periods covered thereby, and the Seller does
not know of any basis for the assertion against it of any liability or
obligation of any nature whatsoever, not fully reflected or reserved against
in such Financial Statements. There has not been any Material Adverse Change
between the date of the Financial Statements and the date of this Agreement
and, except as set forth in Schedule 2.6(b), no fact or condition exists or is
contemplated or threatened which might cause any such Material Adverse Change
at any time in the future.
Without limiting the foregoing, since December 31, 1994:
(i) None of the Restaurants, Assets, Real Properties, Real
Property Leases, Assumed Contracts, financial or other condition, or
results of operations of the Seller, has been adversely affected in
any material way as a result of any fire, explosion, accident,
casualty, labor disturbance, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or public
enemy, or cessation, interruption or diminution of operations, or any
other event, whether or not covered by insurance;
(ii) The Seller has not incurred any obligation or liability
(absolute or contingent) except current liabilities incurred in the
ordinary course of conduct of business and obligations under
Contracts entered in the ordinary course of business;
(iii) Except as set forth on Schedule 2.6(b)(iii), the
Seller has not permitted nor allowed any of its Real Property, Real
Property Leases or other Assets, of or used by it to be mortgaged,
pledged or subjected to any Lien;
(iv) Except for transactions among Affiliates, the Seller
has not paid, loaned or advanced any amounts to, or sold,
transferred, leased, subleased or licensed any Real Properties or
Assets to, or entered into any agreement, or arrangements with, any
Affiliate or associate (and any of such transactions shall have been
terminated on or before the Closing Date); and
(v) The Seller has not agreed, whether in writing or
otherwise, to do any of the foregoing.
SECTION 2.7 Assets. (a) The Seller owns, and will transfer to
Purchaser at Closing, good and marketable title to all of its Assets and Assumed
Contracts free and clear of all Liens. The Assets of the Seller includes all of
the operating
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assets used or held for use in or in connection with the business being
conducted by the Seller at the Restaurants. All the Assets are, and on the
Closing Date will be, in good operating condition and repair, capable of
performing the functions for which such items are currently and normally used,
normal wear and tear and maintenance excepted. All the Assets conform, and on
the Closing Date will conform, to the standards of Burger King under the terms
and conditions set forth in the applicable Franchise Agreements. On the
Closing Date, each Restaurant, together with its related Assets and Real
Property, taken as a whole, will constitute a fully operable "turn-key" Burger
King restaurant sufficient to permit Purchaser to immediately operate the
business at such Restaurant as presently being conducted therein.
(b) The Seller will transfer and/or assign to Purchaser at Closing
all warranties, if any, with respect to its Assets.
SECTION 2.8 Inventory. The Inventory of the Seller to be purchased by
Purchaser consists, and at Closing will consist, of items of quality and
quantity usable or salable in the ordinary course of business. The present
quality and quantities of all Inventory of the Seller is, and the qualities
and quantities of all Inventory outstanding at the Closing will be, reasonably
in accordance with the current specifications of Burger King. At Closing, the
Inventory at each Restaurant shall be sufficient for the operation of such
Restaurant for at least 48 hours after the Closing Date.
SECTION 2.9 Real Properties; Real Property Leases. (a) A correct and
complete list of all interests in real property included in the Assets,
including leasehold interests, is set forth in Schedule B and Schedule C.
Seller has good record and marketable title in fee simple to the Real Property
which it purports to own.
(b) With respect to Real Properties that are owned by Persons not
affiliated with the Seller, to the knowledge of the Seller, each of such
owners has good record and marketable title in fee simple to such real
property.
(c) The Seller has delivered to Purchaser a true and complete copy of
the Real Property Leases applicable to it, together with all amendments
thereto and all such Real Property Leases with such amendments or supplements
being listed and set forth on Schedule C. The Seller does not have knowledge
or information of any facts, circumstances or conditions which do or would in
any way adversely affect the Leased Real Property or the operation thereof or
the business thereon as presently conducted or as intended to be conducted. At
or prior to Closing, the Seller shall cause to be discharged of record all
Liens against the Seller or such Seller's interest affecting its Leased Real
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Property. Each Real Property Lease is valid and binding in full force and
effect and enforceable in accordance with its terms. Except as set forth in
Schedule 2.9(c), there are not existing defaults or offsets which any of the
applicable landlords has against the enforcement of its Real Property Lease by
the Seller thereunder and neither the Seller nor to the Seller's knowledge the
landlord is in default under the applicable Real Property Lease, nor have any
events under any such Real Property Lease occurred which, with the giving of
notice or passage of time or both, would constitute a default thereunder by
either party thereto.
(d) To the knowledge of the Seller the Real Properties and all
improvements located thereon and the present use thereof comply with,
constitute a valid non-conforming use or are operating pursuant to the
provisions of a valid variance under, all zoning laws, ordinances and
regulations of governmental authorities having jurisdiction thereof and, to
Seller's knowledge, the construction, use and operation of the Real Properties
by Seller is in compliance with all Regulations. Set forth on Schedule 2.9(d)
annexed hereto is a true and complete schedule of each certificate of
occupancy for each Restaurant located on the Real Properties, copies of which
certificates of occupancy and all amendments thereto to date have heretofore
been delivered to Purchaser, and which copies are complete and correct as of
the date of this Agreement and will be complete and correct as of the Closing
Date. The Real Properties and the Restaurants located thereon are in a state
of good maintenance and repair and are in good operating condition (normal
wear and tear and maintenance excepted) and (i) there are no physical or
mechanical defects in any of the Real Properties or Restaurants, including,
without limitation, the structural portions of the Real Properties and
Restaurants and the plumbing, heating, air conditioning, electrical,
mechanical, life safety and other systems therein and all such systems are in
good operating condition and repair (normal wear and tear and maintenance
excepted); and (ii) there are no ongoing repairs to the Real Properties or
Restaurants located thereon being made by or on behalf of any Seller or being
made by or on behalf of any landlord. All necessary occupancy and other
certificates and Permits, municipal and otherwise, for the lawful use and
occupancy of the Real Properties for the purposes for which they are intended
and to which they are presently devoted including, without limitation, for the
operation of a Burger King restaurant thereon, have been issued and remain
valid. There are no pending or threatened actions or proceedings that might
prohibit, restrict or impair such use and occupancy or result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such
certificates or Permits. All notes or notices of violation of any Regulations,
against or affecting any such Real Properties have been complied with. There
are no outstanding
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correcting work orders from any Federal, State, county, municipal or local
government, or the owner of the Real Properties or any insurance company with
respect to any such Real Properties.
(e) There are no condemnation or eminent domain proceedings of any
kind whatsoever or proceedings of any other kind whatsoever for the taking of
the whole or any part of the Real Properties for public or quasi-public use
pending or, to the knowledge of the Seller, threatened against the Real
Properties.
(f) Except as set forth on Schedule 2.9(f), the Real Properties, and
all improvements thereon represent all of the locations at which the Seller
conducts Business and are, now, and at Closing will be, the only locations
where any of the Assets are or will be located.
(g) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any Regulation or by the
normal use and operation of the Real Properties and the Restaurants located
thereon are installed to the property lines of the respective Real Properties,
to the knowledge of the Seller is connected pursuant to valid Permits, are
fully operable and are adequate to service the Real Properties and the
Restaurants located thereon and to permit full compliance with all Regulations
and normal utilization of the Real Properties and the Restaurants located
thereon.
(h) To Seller's knowledge, all licenses, Permits, certificates,
including, without limitation, health department licenses, proof of
dedication, required from all Authorities having jurisdiction over the Real
Properties, and from any other Persons, for the normal use and operation of
the Real Properties and the Restaurants located thereon and to ensure
vehicular and pedestrian ingress to and egress from the Real Properties and
the Restaurants located thereon have been obtained. The Easements are valid
and binding, in full force and effect and enforceable in accordance with their
respective terms. There are no defaults or offsets which the owner of such
recorded Easements has against the enforcement of such Easements and neither
the Seller nor the owners of the Easements are in default under such
Easements, nor have any events under such Easements occurred which with notice
or the passage of time or both, would constitute a default under such
Easement.
SECTION 2.10 Franchise Agreements. The Seller has delivered to
Purchaser a true, complete and correct copy of each Franchise Agreement
relating to its Restaurants, including any and all amendments thereto. The
Seller owns, and at Closing will transfer to Purchaser, its respective right,
title and interest in its Franchise Agreements, free and clear of all Liens.
Subject to the written consent of Burger King, in form
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satisfactory to Purchaser and its counsel, which the Seller shall obtain and
deliver to Purchaser and its counsel at or prior to the Closing, the Seller
has the absolute right and authority to sell, assign, transfer and convey its
Franchise Agreements and all other assets being sold or otherwise conveyed to
Purchaser in connection with its Restaurants which it operates in accordance
with the terms and conditions hereof, and there have not been and, except as
set forth on Schedule 2.10, currently there are no claims and the Seller is
not aware of any threatened claims with Burger King pertaining to any of the
Franchise Agreements. On the Closing Date, neither Burger King nor the Seller
shall be in default under any of the Franchise Agreements and the Franchise
Agreements shall be in full force and effect, the Seller shall not have
received any notice of violation with respect to the Franchise Agreements, and
the Seller does not know or has no reason to know of any event which would
give rise to a violation or default under the Franchise Agreements.
SECTION 2.11 Employment Arrangements. Except as required by any
Regulation, the Seller does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor
agreement, any agreement containing severance or termination pay arrangements,
deferred compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract
or nonterminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other
employee or fringe benefit plan, including vacation plans or programs and sick
leave plans or programs. Except as set forth on Schedule 2.11(a) hereof,
within the last five (5) years the Seller has not experienced any labor
disputes, union organization attempts or any work stoppage due to labor
disagreements. Except as set forth on Schedule 2.11(a) hereof, (i) to the
knowledge of the Seller, the Seller is in substantial compliance with all
applicable Regulations respecting employment and employment practices, terms
and conditions of employment and wages and hours, and is not engaged in any
unfair labor practice; (ii) there is no unfair labor practice, charge or
complaint against the Seller pending or threatened before the National Labor
Relations Board; (iii) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending or threatened against or
affecting the Seller; (iv) no question concerning representation has been
raised or is threatened respecting the employees of the Seller; and (v) no
grievance which might have an adverse effect on the Seller or the conduct of
its business nor any arbitration proceeding arising out of or under collective
bargaining agreements is pending and no claims therefor exist.
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Schedule 2.11(b) sets forth a true and complete list of the names of
all persons employed by the Seller at the Restaurants as of the date hereof,
and the salary or hourly wage payable to each such person.
SECTION 2.12 Contracts and Arrangements. (a) Except for the Franchise
Agreements, Real Property Leases, Easements, Contracts with Affiliates which
will be terminated at Closing and the Contracts set forth on Schedule 2.12
hereto (the Contracts set forth on such schedule being referred to herein,
collectively, as the "Other Contracts"), neither the Seller nor any of its
Affiliates has any Contract relating to the Restaurants, Assets or Real
Properties, including, without limiting the generality of the foregoing, any
(i) Contract for the purchase or sale of Inventory; (ii) Contract for the
purchase or sale of supplies, services or other items; (iii) Contract for the
purchase, sale or lease of any Restaurant Equipment; (iv) Franchise Agreement
or license agreement; and (v) employment or consulting agreement or pension,
disability, profit sharing, bonus, incentive, insurance, retirement or other
employee benefit agreement.
(b) The Seller has delivered to Purchaser a true, complete and
correct copy of each Other Contract applicable to it, together with all
amendments (and, if oral, a written description of the terms thereof) thereto.
(c) The Seller has performed all obligations required to be performed
under each Other Contract relating to its business and is not in breach or
default or in arrears in any respect under the terms thereof. The Seller has
not received notice of the termination of any such Other Contract prior to the
expiration of the scheduled term thereof or has knowledge of the intent of a
party to any such Other Contract to do the same, nor has any event occurred
which, with notice or the passage of time or both, would constitute a default
under any such Other Contract.
SECTION 2.13 ERISA. (a) Except as set forth on Schedule 2.13, neither
the Seller nor any other companies or entities which together with Seller
constitute a "controlled group" (within the meaning of sections 4001(a)(14)
and (b) of ERISA, or sections 414(b)-(o) of the Internal Revenue Code of 1986,
as amended (the "Code")) (collectively, the "Group") presently has or at any
time during the five (5) years before the date of this Agreement had an
obligation to, or has any present or future obligation to, contribute to any
"multi-employer plan" as defined in ERISA section 3(37), or any "employee
pension benefit plan" as defined in ERISA section 3(2) or any "employee
welfare benefit plan" as defined in ERISA section 3(1) (collectively, "ERISA
Plans"). Each ERISA Plan that is an employee pension plan complies in form and
operation with all applicable requirements
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of section 401(a) and 501(a) of the Code and each ERISA Plan that is a group
health plan (as defined in ERISA section 607(1) or Code section 4980B(g)(B)
has been operated in compliance with applicable law.
(b) Schedule 2.13 contains a true and complete list of all deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance (including, without limitation, arrangements providing for benefits
in the event of a change of ownership in whole or in part, of Seller),
disability, hospitalization, medical insurance, child care, educational
assistance, or other employee benefit plan or program which does not
constitute an "employee benefit plan" as defined in ERISA section 3(3)
(collectively, "Fringe Benefit Plans") currently maintained by the Seller or
to which the Seller has an obligation to contribute. Seller has delivered or
made available to Purchaser true and complete copies of all documents, as they
may have been amended to the date hereof, embodying or relating to the ERISA
Plans or Fringe Benefits Plans.
(c) There are no actions, audits, suits, or claims pending (other
than routine claims for benefits) or, to the knowledge of the Seller,
threatened, against any ERISA Plan or Fringe Benefit Plan or any fiduciary of
any such Plan or against the assets of any such Plan.
(d) The Seller does not have any obligation to any retired or former
employee with respect to, nor made any oral or written representation or
communication to any retired or former employee regarding, the provisions of
any disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether insured or self-insured) or other employee welfare
benefit plan maintained by the Group.
SECTION 2.14 Litigation, Compliance with Regulations and Consents.
(a) Except as set forth on Schedule 2.14(a) and except for workers'
compensation or similar claims covered by insurance, there are no claims now
pending, or to the knowledge of the Seller, in prospect or threatened against,
the Seller or any of its respective officers, directors, members or partners,
at law or in equity including, without limitation, (i) any voluntary or
involuntary proceedings under Bankruptcy Laws, or (ii) any action before or by
any governmental instrumentality (domestic or foreign) or arbitrator which
involves a claim or demand for any judgment, decree, liability, action or
injunction enjoining an action, whether or not fully covered by insurance, in
connection with the Assets, Real Property Leases, Assumed Contracts, Real
Properties, Restaurants, business, affairs, properties or assets of the
Seller.
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(b) To the knowledge of the Seller, the Seller is, and at all times
during the past has been, and at Closing, will be, in compliance in all
respects with all Regulations applicable to its Business, affairs, properties,
or assets. Neither the Seller, nor any officer, director, member or authorized
agent of the Seller is in default with respect to, and has not been charged or
to its knowledge threatened with, nor is under investigation with respect to,
any violation of any Regulations relating to any aspect of its Business,
affairs, properties or assets including, but not limited to, the Restaurants,
Assets, Real Property Leases, Assumed Contracts, and the Real Properties.
(c) Set forth on Schedule 2.14(c) hereto is a list of all licenses,
permits, approvals, permissions, qualifications, consents and other
authorizations (collectively "Licenses") which are required to be obtained in
connection with the ownership, use or operation of the Restaurants, the
Assets, Real Property Leases or the Real Properties ("Required Licenses").
Except as set forth in Schedule 2.14(c), the Seller has obtained each of the
Required Licenses and each such Required License is, and on the Closing Date
will be, validly issued and in full force and effect and there are not now,
and at Closing shall not be, any claims pending, and to the Seller's
knowledge, any claims in prospect or threatened, challenging the Required
Licenses.
SECTION 2.15 Environmental Matters. Except as set forth in Schedule
2.15: (i) the Seller has obtained all Licenses which are required under any
Environmental Laws; (ii) to Seller's knowledge, the Seller is in compliance
with all terms and conditions of the Required Licenses and is also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any Environmental Laws or code, plan, order, decree or judgment relating to
public health and safety and pollution or protection of the environment or any
notice or demand letter issued, entered, promulgated or approved thereunder;
(iii) there are no claims pending, or to Seller's knowledge threatened,
against the Seller relating in any way to any Environmental Law or any
Regulation, notice or demand letter issued, entered, promulgated or approved
thereunder; and (iv) the Seller does not know or have any reason to know of,
nor has the Seller received any notice of any facts, events or conditions
which would interfere with or prevent continued compliance with, or give rise
to any common law or legal liability under any Environmental Law.
SECTION 2.16 Insurance Policies. The Seller has maintained with
financially sound and reputable insurers insurance with respect to its
properties and business against loss or damage of the kinds customarily
insured against by reputable companies in the same or similar business, of
such types and in such amounts (with such deductible amounts) as is customary
for such companies
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under similar circumstances. All of the applicable insurance policies are
valid and enforceable and in full force and effect and will be continued in
full force and effect up to and including the Closing Date.
SECTION 2.17 Tax Returns. The Seller has filed all Federal income Tax
returns and all state and local income, franchise and sales Tax returns and
all and any other Tax return which was required to be filed as of the date of
this Agreement, and will timely file or obtain extensions of time to file all
returns which were not required to be filed prior to the date hereof. Each
Seller which purports to be an S corporation has made a valid and timely
election under Section 1362 of the Code, and such election has been made with
respect to all taxable years since such Seller's date of incorporation. The
provision for Taxes (as hereinafter defined) shown on the Financial Statements
of the Seller was sufficient to satisfy all Taxes due and all assessments
received by the Seller (and all other entities included within the Financial
Statements) for all periods ended on or prior to the date of such Financial
Statements. As of the date hereof, no Taxes are past due, and no Taxes are
unpaid and all current payroll Taxes have been paid. The Seller is not aware
of any basis upon which any assessment of additional Taxes could be made, and
the Seller has not signed any extension agreement with the Internal Revenue
Service or any other governmental agency or given waiver of a statute of
limitations with respect to the payment of Taxes for periods for which the
statute of limitations has not expired. The Seller shall be liable for all Tax
liabilities in connection with the operation of the Restaurants, the Assets,
the Real Properties, the Real Property Leases, the Easements and Assumed
Contracts, which cover periods prior to the Closing Date. The Seller shall be
liable for half of all transfer, sales and similar Tax liabilities, if any, in
connection with the leasing of the Real Properties under the Real Property
Leases, the assignment of the Real Property Leases and the Assumed Contracts,
and the transfer of the Real Properties and any rights under the Easements.
All Taxes which the Seller is required by law to withhold or collect have been
duly withheld or collected and to the extent required have been paid over to
the proper governmental authorities on a timely basis or reflected as an
obligation on the current Financial Statements of the Seller.
SECTION 2.18 Adverse Restrictions. The Seller is not subject to any
charter, by-law, partnership, Lien, lease, agreement, instrument, order,
judgment or decree, or any other restriction of any kind or character, or, any
law (currently in existence or adopted on or before the Closing Date), rule or
Regulation, which now is or which could have a Material Adverse Effect on its
Restaurant or the Business conducted therein, Assets, Real Properties, Real
Property Leases, the Easements or
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Assumed Contracts, except for a right of first refusal under a shareholder
agreement between shareholders of CNR, Inc. granted in connection with Burger
King store number 7048 located at 1905 Pocahontas Trail, Williamsburg,
Virginia, which right of first refusal shall have been waived prior to the
Closing Date. The execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereunder and thereby will not result in the violation or breach of, or
default or the creation of any Lien under, any of the aforesaid.
SECTION 2.19 Brokers. No broker, finder or selling agent has had a
part in bringing about any of the transactions contemplated by this Agreement
or the other Transaction Documents (including, but not limited to, the leasing
of the Real Properties and the assignment of the Real Property Leases) and no
commission or other fee other than any fees payable to The Jordan Company
and/or its Affiliates, which fees shall be solely the responsibility of the
Purchaser, is due to any party in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 2.20 Material Information. The Financial Statements, this
Agreement, the other Transaction Documents and any exhibit, schedule,
certificate, or other information, representation, warranty or other document
furnished or to be furnished by Seller to Purchaser do not (i) contain, nor
will the same contain, any untrue statement of a material fact; or (ii) omit,
nor will the same omit, or fail to state, a material fact required to be
stated herein or therein or which is necessary to make the statements herein
or therein not misleading. There is no fact which the Seller has not disclosed
to Purchaser and its counsel in writing and of which the Seller is aware which
materially and adversely affects or could materially and adversely affect the
Business, prospects, financial condition, operations, property or affairs of
the Restaurants.
SECTION 2.21 Continuing Representations. The representations and
warranties of Seller herein contained shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of that
date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants, covenants and agrees to and with the
Sellers that:
SECTION 3.1 Organization and Corporate Power. Purchaser (and any
assignee of any of Purchaser's rights under this Assignment, including any
assignee which executes and delivers Installment Notes), is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is duly qualified and licensed to do business wherein the
character of the Real Properties and other Assets to be purchased makes such
licensing or qualification to do business necessary. Purchaser has full power
and authority (corporate and other) to own or hold under lease its properties
and assets, and execute and deliver this Agreement and the other Transaction
Documents to be executed and delivered by Purchaser pursuant hereto or in
connection herewith and to consummate the transactions contemplated hereby and
thereby.
SECTION 3.2 Certificate of Incorporation and By-Laws. The copies of
Certificate of Incorporation and By-Laws of Purchaser and all amendments
thereto to date, as certified by the Secretary of Purchaser, have heretofore
been delivered to the Sellers by Purchaser, and are complete and correct as of
the Closing Date. Purchaser is not in default in the performance, observance
or fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
SECTION 3.3 Due Authorization. All requisite authorizations for the
execution, delivery, performance and satisfaction of this Agreement and the
other Transaction Documents by Purchaser have been duly obtained. The
execution and delivery of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Board of Directors of Purchaser and no other
corporate acts or proceedings on the part of Purchaser or its stockholders are
necessary to authorize the execution and delivery of this Agreement or any of
the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement and each of the other
Transaction Documents, upon execution and delivery by Purchaser, will be the
legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforcement thereof may be
limited by Bankruptcy Laws and subject to the general principles of equity
affecting the right to specific performance and injunctive relief.
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SECTION 3.4 No Violation. The execution, delivery and performance of
this Agreement and the other Transaction Documents by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby and thereby
do not and at Closing will not (a) violate its Certificate of Incorporation or
By-Laws; (b) violate or conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
any agreement, indenture, instrument or understanding to which Purchaser is a
party or by which it is bound; (c) violate any judgement decree, law, rule, or
regulation to which Purchaser is a party or by which it is bound; (d) result
in the creation of, or give any party the right to create any encumbrance upon
the property or assets of Purchaser; (e) terminate or modify, or give any
third party the right to terminate or modify, the provisions or terms of any
agreement or commitment to which Purchaser is a party or by which Purchaser is
subject or bound; or (f) result in any suspension, revocation, impairment,
forfeiture or non-renewal of any license, qualification, authorization or
approval applicable to Purchaser.
SECTION 3.5 Consents. Except for (i) the Burger King Consents, (ii)
the consent of Purchaser's lenders and the Letter of Credit issuer and (iii)
consent as required under the HSR Act, Purchaser is not required to obtain any
consents, approvals or other authorizations or to make any filing with any
Authority or any other Person in connection with the execution, delivery and
consummation of this Agreement and other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby.
SECTION 3.6 Brokers. Other than as set forth on Schedule 3.6, no
broker, finder or selling agent has had a part in bringing about any of the
transactions contemplated by this Agreement or the other Transaction Documents
(including, but not limited to, the leasing of the Real Properties and the
assignment of the Real Property Leases) and no commission or other fee is due
to any party in connection with the transactions contemplated by this
Agreement or the other Transaction Documents, except for fees paid by
Purchaser to The Jordan Company or to other parties as set forth on Schedule
3.6, which fees shall be the sole responsibility of Purchaser.
SECTION 3.7 Material Information. This Agreement, the other
Transaction Documents and any exhibit, schedule, certificate or other
information representation, warranty or other document furnished or to be
furnished by Purchaser to Sellers do not (a) contain, nor will the same
contain, any untrue statement of a material fact; or (b) omit, nor will the
same omit or fail to state, a material fact required to be stated herein or
therein or which is necessary to make the statements herein or therein not
misleading.
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SECTION 3.8 Continuing Representations. The representations and
warranties of Purchaser herein contained shall be true and correct on and as
of the Closing Date with the same force and effect as if made on and as of
that date.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1 Access to Records and Properties Prior to the Closing
Date. (a) Between the date of this Agreement and the Closing Date, the Sellers
shall give Purchaser, its directors, officers, employees, accountants, counsel
and other representatives and agents (collectively "Representatives")
reasonable access to the premises, properties, books, financial statements,
Contracts and records of the Sellers, relating to the Business, the
Restaurants, the Assets, Real Properties, Real Property Leases, the Easements
and Assumed Contracts, and shall furnish Purchaser with such financial and
operating data and other information with respect to the business and
properties of the Sellers as Purchaser shall from time to time reasonably
request for such purposes as Purchaser shall require. Any such investigation
or examination shall be conducted as reasonable times and upon reasonable
notice to the Sellers.
(b) Without in any way limiting the provisions of Section 4.1(a)
hereof, Purchaser shall have the right between the date of this Agreement and
the Closing Date at such time or times as Purchaser reasonably may request (i)
to have the Restaurants, the Real Property and Assets inspected by a licensed
exterminating company to determine whether there is any active termite or
other wood-destroying organism present in the Real Properties or Restaurants,
or any damage from prior termites or other wooddestroying organism, and each
Seller will assign to Purchaser at Closing all rights under existing contracts
and policies, if any, with the Sellers' exterminating company; and (ii) to
have conducted any environmental audits or studies of the Restaurant, the Real
Property and the Assets, including a "Phase I" and, if the results of such
Phase I so recommends, a "Phase II" environmental study. Notwithstanding
inspections, audits or other studies undertaken by or on behalf of Purchaser
hereunder or any other due diligence investigation undertaken by or on behalf
of Purchaser, no Sellers shall be relieved in any way of responsibility for
its warranties, representations and covenants set forth in this Agreement.
SECTION 4.2 Operation of the Business of Sellers. Between the date of
this Agreement and the Closing Date, each Seller shall conduct the operation
of its Restaurants in the ordinary and usual course of business, consistent
with past practices and
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will use its best efforts to preserve intact the present business organization
with respect to its Restaurants, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
landlords, franchisors, dealers, licensors, licensees, suppliers, contractors,
distributors, customers and others having business relations with it and its
Restaurants and will maintain its Restaurants, Real Properties, and Assets in
a condition conducive to the operation of the business currently carried on
therein.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, each Seller will not:
(a) Keep and maintain its books of account and records other
that in accordance with generally accepted accounting principles
consistent with past practices;
(b) Amend or restate any Governing Instrument;
(c) (i) Increase in any manner the compensation of any of
the employees at any of the Restaurants other than in the ordinary
course of business, consistent with past practices; (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit
not required or permitted by any Welfare Plan, whether past or
present; or (iii) commit itself in relation to its Restaurants, the
employees at its Restaurant or the Real Properties, to any new or
renewed Welfare Plan with or for the benefit of any Person, or to
amend any of such Welfare Plans or any of such agreements in
existence on the date hereof;
(d) Fail promptly to notify Purchaser of any unusual
developments with respect to its Restaurants, Assets, Real
Properties, Real Property Leases, the Easements, Assumed Contracts or
otherwise in connection with its business;
(e) Permit any of its insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse,
replacement policies are in full force and effect providing coverage,
in form, substance and amount equal to or greater than the coverage
under those canceled, terminated or lapsed for substantially similar
premiums;
(f) Except as disclosed to Purchaser with respect to Burger
King Restaurant Nos. 298 and 1003, amend or terminate its Real
Property Leases, or sell, transfer, mortgage or otherwise dispose of
or encumber, or agree to sell, Real Property, transfer, mortgage or
otherwise dispose of or
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encumber, its Real Property Leases, the Easements or, except
in the ordinary course of business, any of the Assets or
Assumed Contracts;
(g) Allow to occur any default or breach, or event which
with the lapse of time or giving of notice, or both, would constitute
a default or breach under its Real Property Leases, the Easements,
its Franchise Agreement or any of the other Assumed Contracts;
(h) Enter into any other Contracts whether written or oral
which, individual or in the aggregate, would be material to its
Restaurants, Assets, Real Properties, Real Property Leases, the
Easements or the Assumed Contracts, except Contracts for the
purchase, sale or lease of goods or services in the ordinary course
of business consistent with past practice and not in excess of
current requirements, or otherwise make any material change in the
conduct of the businesses or operations of the Sellers;
(i) Incur any obligation or liability of any kind
whatsoever,absolute or contingent, which could affect the validity or
enforceability of the transactions contemplated hereby or by the
other Transaction Documents;
(j) Take any action which would result in any of the
representations or warranties contained in this Agreement or the
other Transaction Documents not being true at and as of the time
immediately after such action at and as of the Closing Date, or in
any of the covenants contained in this Agreement or other Transaction
Documents becoming unperformable or which could have a Material
Adverse Effect on the transactions contemplated hereby or thereby;
(k) Fail to take all action reasonably necessary to maintain
and keep its Restaurant, Assets and Real Properties in at least the
same condition and order as exists on the date hereof, reasonable
wear and tear excepted, and fail to perform repairs and maintenance
usual and customary in the ordinary course of business;
(l) Enter into any lease, sublease, license or any other
occupancy agreement, amend or terminate the Easements, the Real
Property Leases, or enter into, amend or terminate any Franchise
Agreement, or other Contract with respect to its Restaurants and Real
Properties;
(m) Take any action or allow to occur any event which with
the lapse of time or giving of notice, or both, would allow to lapse
any of the Licenses;
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(n) Operate its Restaurants or otherwise engage in any
practices which would materially affect sales at its
Restaurant; or
(o) Agree (in writing or otherwise) to do any of the
foregoing.
SECTION 4.3 [Intentionally Omitted]
SECTION 4.4 Computer Software. The Sellers shall provide Purchaser
with computer readable software in a form and language that Purchaser can use
and manipulate, which software shall be used to manage the Restaurants,
including (i) payroll and compensation systems and (ii) sales reports of the
Restaurants on a "restaurant by restaurant" and "day by day" basis.
SECTION 4.5 No Other Asset Sales. From the date hereof until the
Closing Date, the Sellers shall not, directly or indirectly and whether by
means of a sale of assets, sale of stock, merger or otherwise:
(a) sell, transfer, assign or dispose of, or offer to, or
enter into any Contract to sell, transfer, assign or dispose, of the
Assets or any interest therein, except for normal operations in the
ordinary course of business; or
(b) encourage, initiate or solicit any inquiries or
proposals by, or engage in any discussions or negotiations with, or
furnish any non-public information to, any Person concerning any such
transaction and the Sellers shall promptly communicate to Purchaser
the substance of any inquiry or proposal concerning any such
transaction which may be received.
SECTION 4.6 Regulatory Filing and Consents. From the date hereof
until the Closing Date, each of the parties hereto shall furnish to the other
party hereto such necessary information and reasonable assistance as such
other party may reasonably request in connection with its preparation of
necessary filings or submissions to any Authority. Sellers and Purchaser shall
timely and promptly make all filings which are required by it in connection
with the consummation of the transactions contemplated hereby under the HSR
Act and shall share equally all fees in connection with such filing. Each
Seller shall use its best efforts to obtain all Licenses and Required Consents
from third parties necessary to consummate the transactions contemplated by
this Agreement and the other Transaction Documents. Each party shall furnish
to the other copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Purchaser, Sellers or
any of their respective representatives and agents, on the one hand, and any
government
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agency or authority or third party, on the other hand, with respect to this
Agreement and the other Transaction Documents and transactions contemplated
hereby and thereby.
SECTION 4.7 Announcements; Confidentiality. (a) From the date of this
Agreement until Closing, except as required by any Regulation, no announcement
of the existence or terms of this Agreement or the other Transaction Documents
or the transactions contemplated hereby and thereby shall be made publicly or
to the employees or customers of the Sellers, by any party to this Agreement
or any of its respective Representatives without the advanced written approval
of the other parties.
(b) Purchaser, on the one hand, and the Sellers, on the other hand,
each shall hold in strict confidence, and shall use their best efforts to
cause all their respective Representatives to hold in strict confidence,
unless compelled to disclose by judicial or administrative process, or by
other requirements of law, all confidential and proprietary information
(collectively, "Confidential Information") concerning the Sellers, (in the
case of Purchaser) and Purchaser (in the case of the Sellers) which is created
or obtained prior to, on or after the date hereof in connection with the
transactions contemplated hereby, and Purchaser, and the Sellers shall not use
or disclose to others, or permit the use or disclosure of, any such
information created or obtained except to the extent that such information can
be shown to have been (i) previously known by Purchaser, and the Sellers, as
the case may be (ii) in the public domain through no fault of a party or any
of its Representatives, and will not release or disclose such information to
any other Person, except its officers, directors, employees, Representatives
and lending institutions who need to know such information in connection with
this Agreement.
(c) For purposes of this Section 4.7, Purchaser specifically
acknowledges that it and its Representatives will have an opportunity to
engage in "due diligence" with respect to this transaction and which may
include the opportunity to review corporate records, financial and otherwise,
interview certain management personnel, and see and learn of the operation of
the Sellers. The Confidential Information of the Sellers, referred to in
Section 4.7(b), includes, without limitation, all schedules, documents, work
papers or other written information, and specifically including financial
records, leases, franchise agreements, corporate minutes, corporate
organization documents, stockholder records, employment records, fringe
benefit records, lists of creditors and suppliers, contracts, loan and
security agreements, claims against any Sellers, insurance, management and
operation procedures and trade secrets (both as defined by Virginia and North
Carolina statutory law and by common law; and any other proprietary
information related to the Business
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conducted by any Sellers, whether or not such information would be legally
protectable as trade secrets.
(d) If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except (i) as required by law
or (ii) to the extent such information comes into the public domain through no
fault of a party or any of its Representatives.
(e) Each party agrees that the Confidential Information of the other
is unique and its release or misusage may not be compensable in damages and
that the non-breaching party shall be entitled to seek appropriate injunctive
relief therefor.
SECTION 4.8 Limitation of Sellers' Claims After Closing. From and
after the Closing and thereafter so long as the provisions of Section 4.9 are
still applicable, no Sellers shall, subject to the provisions of Section 4.9,
without the prior written consent of Purchaser: (i) engage in any business
which would adversely affect the value of Purchaser's business; or (ii) take
any other action or fail to take any action, or allow the occurrence of any
event, with respect to the Sellers' assets, which could be reasonably expected
to have a Material Adverse Effect on the Sellers' ability to indemnify, defend
and hold harmless Purchaser and its officers, directors and stockholders from
and against Damages (as hereunder defined) pursuant to Article VI; provided,
however, that nothing herein shall preclude the Sellers from taking any action
to distribute assets whether in the form of cash or other assets to its
stockholders or members.
SECTION 4.9 Covenant Not to Compete. Each Seller and its Affiliates
hereby jointly and severally covenants and agrees that, other than as set
forth in the Naparlo Development Agreement, it will not, directly or
indirectly, for its own account or as an employee, officer, director, partner,
joint venturer, stockholder, member, investor, consultant or otherwise for a
period of two (2) years from the Closing Date own, operate, develop or
otherwise engage in any Burger King restaurant business or operation, within
any of the Areas of Dominant Influence ("ADIs"), as set forth in the Burger
King guidelines as in effect on the date hereof, in which any of the
Restaurants purchased by Purchaser at Closing is located (the "Restricted
Area").
SECTION 4.10 Employee Benefit Matters. (a) No later than 30 days
after the Closing Date, each Seller shall discharge and satisfy in full any
liabilities it may have with respect to any wages, vacation, severance or sick
pay, or any rights under any ERISA Plan or Fringe Benefit Plan.
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(b) No later than 30 days after the Closing Date, each Seller shall
discharge and satisfy in full any employment, consulting or similar
arrangement to which the Seller is a party or for which the Seller is
responsible.
(c) Each Seller shall assume full responsibility and liability for
offering and providing "continuation coverage" to any employee of the Sellers,
and to "qualified beneficiaries" of any employee of the Sellers or to any
qualified beneficiary who incurs a multiple qualifying event after the Closing
Date. The continuation coverage shall be provided under a group health plan of
Sellers or an Affiliate of the Sellers. The type of coverage shall be that
described in section 4980B(f)(2)(A) of the Code. The continuation coverage
shall be provided for the period described in section 4980B(f)(2)(B) of the
Code. "Continuation coverage", "qualified beneficiaries", and "qualifying
event" have the meanings given such terms under section 4980B of the Code.
(d) Subject to the provisions of this Agreement, each Seller and the
stockholders and members of each Seller, as applicable, jointly and severally,
hereby agree to indemnify and hold Purchaser harmless from and against any
Damages which arise out of the failure to comply with the obligations in
Section 4.10(a), (b) or (c) hereof.
SECTION 4.11 Financial Statements and Reports. (a) Between the date
hereof and the Closing Date, Sellers' Agent shall deliver to Purchaser:
(i) within five (5) business days after the end of each
calendar month, a written statement, certified by Sellers' Agent, of
the gross sales of each Restaurant for that month; and
(ii) With respect to the Financial Statements delivered to
Purchaser by Sellers' Agent, at the request of Purchaser, the Sellers
shall (and shall cause their respective Representatives to) cooperate
with Purchaser to have such statements reviewed or audited or further
clarified in such manner as Purchaser may deem necessary or
advisable.
(b) Inasmuch as certain of the Franchise Agreements may be held in
individual names, each Seller shall cause the individual to observe and abide
by the provisions of Section 4.5 insofar as the transfer of such Franchise
Agreements to Purchaser is concerned.
SECTION 4.12 Bulk Sales. (a) Purchaser hereby waives compliance by
the Sellers with the provisions of any applicable bulk sales state or local
Tax laws in effect in the states of
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Virginia and North Carolina (the "Bulk Sales Laws"). Each Seller, jointly and
severally, hereby warrants and agrees to pay and discharge, promptly when due,
all claims of creditors which may be asserted against Purchaser by reason of
such non-compliance.
(b) Schedule 4.12(b) annexed hereto accurately sets forth, in the
form of a General Ledger, all of the creditors of the Sellers as of the date
hereof and the amounts owing to such creditors as of the date hereof.
SECTION 4.13 Supplements to Schedules. (a) From time to time prior to
the Closing Date, the Sellers will promptly supplement or amend the Schedules
hereto which they have delivered pursuant to this Agreement with respect to
any matter hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in any
such disclosure schedule or which is necessary to correct any information in
the Schedules hereto which has been rendered inaccurate thereby.
(b) In the event that, upon receiving any supplements to the
Schedules pursuant to this Section 4.13 or notices of developments pursuant to
Section 4.14, Purchaser in good faith reasonably determines that (a) the
preparation and review of such supplements or notices reveal information which
would have constituted, if known to Purchaser as of the date of this
Agreement, a material breach of this Agreement or would have required a
material change to the Schedules or Exhibits, or which otherwise would have,
in the good faith reasonable view of Purchaser, a Material Adverse Effect, or
(b) such analysis has led Purchaser to perceive or appreciate circumstances or
facts which, if fully perceived or appreciated by Purchaser at the date of
this Agreement, would have, in the good faith reasonable view of Purchaser, a
Material Adverse Effect (collectively, a "Problem"), then Purchaser will
promptly notify the Sellers of such Problem, and the parties will together use
reasonable efforts in good faith to eliminate or resolve such Problem. If,
notwithstanding such efforts, such Problem is not eliminated, resolved or
negotiated by the Closing Date to the reasonable satisfaction of Purchaser,
then Purchaser may terminate this Agreement by written notice thereof to the
Sellers pursuant to Section 8.2 hereof.
SECTION 4.14 Notice of Developments. The Sellers will give prompt
written notice to the Purchaser of any material development affecting the
assets, liabilities, Business, financial condition, operations, results of
operations, or future prospects of the Sellers. The Sellers will give prompt
written notice to Purchaser of any material development affecting the ability
of the Sellers to consummate the transactions
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contemplated by this Agreement. Purchaser will give prompt written notice to
the Sellers of any material development affecting the ability of Purchaser to
consummate the transactions contemplated by this Agreement. No disclosure by
the Sellers or Purchaser pursuant to this Section 4.14, however, shall be
deemed to amend or supplement any Schedule hereto or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant unless the
transactions contemplated hereby are consummated pursuant to this Agreement in
which event any claims with respect to any such misrepresentations or breaches
shall be deemed waived by Purchaser.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARTIES
SECTION 5.1 Conditions to the Obligations of Sellers and Purchaser.
The obligations of Purchaser and the Sellers to consummate the transactions
contemplated by the Transaction Documents are subject to the satisfaction at
or prior to the Closing of the following conditions, except to the extent that
any such condition may have been waived in writing by both Sellers' Agent and
Purchaser at or prior to the Closing:
(a) Impediments to Closing. No suit, action, investigation,
inquiry or other proceeding before any governmental or regulatory
authority or other Person shall have been instituted or shall be
pending or threatened which questions the validity or legality of
this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby and which could
reasonably be expected to damage materially the Business or assets of
the Sellers if the transactions contemplated hereby or thereby are
consummated. No injunction, decree or order shall be in effect
prohibiting consummation of the transactions contemplated by this
Agreement or the other Transaction Documents or which would make the
consummation of such transactions unlawful and no action or
proceeding shall have been instituted and remain pending before an
Authority to restrain or prohibit the transactions contemplated by
this Agreement and the other Transaction Documents.
SECTION 5.2 Conditions to the Obligations of Sellers. The obligations
of the Sellers to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following conditions, except to the extent that any such
condition may have been waived in writing by Sellers' Agent at or prior to the
Closing:
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(a) Representations, Warranties and Performance. The
representations, warranties, covenants and agreements of Purchaser
contained in this Agreement and the other Transaction Documents or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated
hereby or thereby shall be true and correct at and as of the Closing
Date, with the same force and effect as if made at and as of the
Closing Date; the Purchaser shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Sellers' Agent shall have received a
certificate dated the Closing Date in form satisfactory to him signed
by an officer of Purchaser.
(b) Governing Instruments, etc. Sellers' Agent shall have
received a certificate, dated the Closing Date, of the Secretary or
Assistant Secretary of Purchaser certifying, among other things, that
attached or appended to such certificate (i) is a true and correct
copy of its Certificate of Incorporation and all amendments if any
thereto as of the date thereof; (ii) is a true and correct copy of
its By-Laws; (iii) is a true copy of all corporate actions taken by
it, including resolutions of its board of directors authorizing the
execution and delivery of this Agreement and each other Transaction
Document to be delivered by it pursuant hereto and the consummation
of the transactions contemplated hereby and thereby; and (iv) are the
names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(c) Payment of Purchase Price. Purchaser shall have
tendered to Sellers' Agent the Purchase Price at Closing in
accordance with Section 1.2(a).
(d) Assumption of Assumed Contracts. The Sellers'
Agent shall have received from Purchaser an Assumption
Agreement substantially in the form annexed as Exhibit C
hereto.
(e) Opinion of Counsel. The Sellers' Agent shall have
received an opinion of counsel for Purchaser, as of the Closing Date,
substantially in the form annexed as Exhibit D hereto.
(f) Lender's Consent. Sellers' Agent shall have been
presented evidence that the Purchaser shall have received,
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if necessary, the written consent of its lenders, to the
transactions contemplated hereby.
(g) Expiration of Waiting Period. The waiting period
prescribed under the HSR Act shall have expired.
(h) Financing Documents. Sellers' Agent shall have
received from the Purchaser executed copies of (i) the
Installment Notes and (ii) the Letter of Credit.
SECTION 5.3 Conditions to Obligations of Purchaser. The obligations
of Purchaser to consummate the transactions contemplated hereby and by the
other Transaction Documents are subject to the satisfaction at or prior to the
Closing of the following additional conditions, except to the extent that any
such condition may have been waived in writing by Purchaser at or prior to the
Closing:
(a) Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of each Seller
contained in this Agreement and the other Transaction Documents, or
otherwise made in writing by it or on its behalf pursuant hereto or
otherwise made in connection with the transactions contemplated
hereby or thereby shall be true and correct at and as of the Closing
Date with the same force and effect as though made on and as of the
Closing Date; each Seller shall have performed or complied with all
agreements and conditions required by this Agreement and the other
Transaction Documents to be performed or complied with by it on or
prior to the Closing Date; and Purchaser shall have received
certificates dated the Closing Date in form satisfactory to Purchaser
signed by Sellers' Agent in his capacity as officer of each of the
Sellers on behalf of the Sellers, as applicable.
(b) Governing Instruments, etc. Purchaser shall have
received a certificate, dated the Closing Date, of the Secretary,
Assistant Secretary or managing member of each Seller certifying,
among other things, that attached or appended to such certificate (i)
is a true and correct copy of its Governing Instrument and all
amendments if any thereto as of the date thereof; (ii) is a true copy
of all corporate actions taken by it, including resolutions of its
board of directors and stockholders authorizing the execution and
delivery of this Agreement and each other Transaction Document to be
delivered by it pursuant hereto and the consummation of the
transactions contemplated hereby and thereby; and (iii) are the names
and signatures of its duly elected or appointed officers who are
authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
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(c) Instruments of Transfer. Each Seller shall have
delivered to Purchaser or Purchaser's designee, a bill of sale and
assignment ("Bill of Sale") substantially in the form annexed as
Exhibit E hereto, a Lease Assignment (if applicable) and any other
documents of transfer which Purchaser reasonably shall request in
order to evidence and effectuate the sale and assignment to Purchaser
or Purchaser's designee of the Assets, the Real Property, the Real
Property Leases, the Assumed Contracts, and the consummation of all
other transactions contemplated by this Agreement and the other
Transaction Documents.
(d) Consents. The Sellers shall have obtained, and delivered
to Purchaser, copies of the Required Consents applicable to it in
form and substance satisfactory to Purchaser.
(e) Opinion of Counsel. Purchaser shall have received an
opinion or opinions of counsel for the Sellers, as of the Closing
Date, substantially in the form attached hereto as Exhibit F.
(f) No Material Adverse Change. There shall have been no
Material Adverse Change, nor any events which could have a material
adverse change, in the Business, operations, prospects or financial
or other condition of any Restaurant or in the respective Assets or
Real Properties from the date hereof to the Closing Date (the
"Interim Period") nor shall have there been, for all Restaurants in
the aggregate, a decrease of five percent or more in gross sales or
gross profit during the Interim Period, as compared with the same
period during the prior calendar year. For purposes hereof, "Gross
Profit" shall mean total gross sales reduced by the sum of food,
labor and paper costs. At Closing, Purchaser shall have received a
certificate dated the Closing Date in form satisfactory to Purchaser
signed by the Sellers' Agent in his capacity as an officer of each of
the Sellers on behalf of the Sellers to the foregoing effect.
(g) Environmental Due Diligence. Purchaser shall have
completed its environmental due diligence of the Restaurants, Real
Property and Assets and have received results which are satisfactory
to Purchaser in its sole discretion.
(h) Lender's Consent. Purchaser shall have received the
written consent of its lenders to the transactions contemplated
hereby and shall have obtained any financing required in connection
with such consent.
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(i) Agreement Between Sellers Affiliates. The Sellers
shall have terminated any agreements between the Sellers and
any Affiliates of the Sellers with respect to the Assets,
including but not limited to any equipment leases.
(j) Other Documents. Sellers' Agent shall have
delivered to Purchaser:
(i) the Assignment of its Real Property Lease,
each Assumed Contract and the Lease Assignment Consent;
(ii) the Easement Assignments;
(iii) a copy of the fully executed original
counterpart of the Real Property Lease;
(iv) receipts for the Purchase Price paid to
Sellers by Purchaser;
(v) certificates dated no earlier than 30 days
prior to the Closing Date, from appropriate authorities in
the State of its jurisdiction of organization, as to the
good standing of such Sellers;
(vi) the Escrow Agreement;
(vii) an updated schedule of creditors as of the
Closing Date;
(viii) an executed copy of the Naparlo
Development Agreement;
(ix) a release in favor of the Sellers and
Purchaser executed by Gene Chismer's widow,
descendants, and any other beneficiary of his estate;
(x) all other documents, instruments and agreements
required to be delivered by such Sellers to Purchaser
pursuant to this Agreement and the other Transaction
Documents; and
(k) Review by Purchaser's Auditor. Purchaser's
auditor shall have:
(i) reviewed the financial and accounting system
of Sellers;
(ii) reviewed and confirmed the financial
statements and results set forth in such statements;
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(iii) found no objection to the financial and
accounting system of Sellers and Purchaser shall have
resolved any objection raised by the auditor and presented
to the Sellers by the Purchaser.
(l) Real Property Conditions.
(i) With respect to Real Property owned by Sellers
or its Affiliates, Purchaser shall have received, at
Purchaser's expense, from the title insurance company
insuring Purchaser's title thereto an ALTA Form B 1970
Owner's Title Insurance Policy, dated the Closing Date and
naming Purchaser as the insured, with a face amount equal to
the portion of the Purchase Price allocated to such Real
Property, showing Purchaser to be the owner in fee simple of
such Real Property, in each case subject to no exceptions
other than the Permitted Liens and other Liens as may be
consented to by Purchaser, and including such endorsements
and affirmative coverage as Purchaser shall reasonably
require, including, without limitation, an ALTA Form 3.1
zoning endorsement.
(ii) No material portion of any Real Property or
interest therein shall be subject to any condemnation
proceeding as a result of the exercise of the power of
eminent domain, and Sellers shall not have received any
notice from any governmental body having the power of
eminent domain informing Sellers or Purchaser that it
intends to take or condemn all or a material part of any
Real Property or any interest therein.
(iii) No material portion of any Real Property or
interest therein shall be subject to any material damage by
fire or other cause.
(m) Expiration of Waiting Period. The waiting period
prescribed under the HSR Act shall have expired.
(n) Deposit of Escrow Amount. Sellers' Agent shall deposit
with the escrow agent (the "Escrow Agent") under the Escrow Agreement
$2,350,000 of the Purchase Price (the "Escrow Funds"), which amounts
shall be held and subsequently distributed by the Escrow Agent
pursuant to the
provisions of the Escrow Agreement.
(o) Board Approval. The Board of Directors of National
Restaurant Enterprises, Inc. shall have approved, on or prior to the
Closing Date, the transactions contemplated by the Agreement.
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ARTICLE VI
DAMAGE OR DESTRUCTION
SECTION 6.1 Casualty. Sellers' Agent shall immediately notify
Purchaser of any destruction or damage to any of the Real Properties or
Assets. If prior to the Closing Date, one or more Restaurants (individually, a
"Damaged Restaurant" or, collectively, "Damaged Restaurants") should suffer
substantial damage or be destroyed by fire or other casualty (whether or not
such destruction is covered by insurance) Purchaser shall have the option, to
be exercised within 30 days of the date of such fire or casualty, to: (i)
require the applicable Sellers to promptly repair, rebuild, and/or replace
such Damaged Restaurant at Sellers' sole cost and expense; or (ii) terminate
this Agreement. In the event Purchaser elects to require the Sellers to
rebuild and/or replace such Restaurant, the Closing shall occur pursuant to
this Agreement except a portion of the purchase price equal to the amount
allocated to such Restaurant as set forth on Schedule 1.2(a)(i) (the "Damage
Credit") shall be held in escrow by the attorneys for Purchaser pending
completion of the repair and/or restoration of the Damaged Restaurant. In the
event such restoration or repair is not completed within 180 days after the
date Purchaser has elected to have the Sellers proceed with the repair and/or
restoration, Purchaser shall have an additional option to withdraw the Damaged
Restaurant from this transaction, exercisable within 30 days from the date
Purchaser's additional option shall arise whereupon the Damage Credit shall
immediately be paid to Purchaser.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations. All of the terms and
conditions of this Agreement, together with the warranties, representations,
agreements and covenants contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement, shall survive the
execution of this Agreement and the Closing, notwithstanding any investigation
heretofore or hereafter made by or on behalf of any party hereto; provided,
however, that (a) the agreements and covenants (other than the indemnification
provisions set forth in this Article VII, which will survive as provided
below) set forth in this Agreement shall survive and continue until all
obligations set forth therein shall have been performed and satisfied and the
applicable statute of limitations for breaches or defaults of such agreements
and covenants has expired; and (b) all representations and warranties, and the
agreements of each Seller and its Affiliates and Purchaser to indemnify each
other as set forth in
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this Article VII, shall survive and continue for, and all indemnification
claims with respect thereto shall be made prior to the last day of the
eighteenth month following the Closing Date, except for (i) representations,
warranties and related indemnities for which an indemnification Claim shall be
pending as of the end of the applicable period referred to above, in which
event such indemnities shall survive with respect to such indemnification
Claim until the final disposition thereof, and (iii) representations,
warranties and indemnities relating to title and/or ownership of the Acquired
Assets, which will survive indefinitely.
SECTION 7.2 Agreement to Indemnify. Subject to the conditions of this
Article VII:
(a) Purchaser hereby agrees to indemnify, defend and hold
harmless the Sellers from and against all demands, claims, actions or
causes of action, assessments, loses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and
reasonable attorney's fees, costs and disbursements and expenses
(collectively, "Damages"), asserted against, resulting to, imposed
upon or incurred by the Sellers directly or indirectly, arising out
of or resulting from (i) a breach of any representation, warranty,
covenant or agreement of Purchaser contained in or made pursuant to
this Agreement (including but not limited to enforcement of this
Article VII), the other Transaction Documents or the transactions
contemplated hereby or thereby or any facts or circumstances
constituting such breach; and (ii) any indebtedness, obligation or
liability expressly assumed by Purchaser pursuant to Section 1.4(b)
hereof including, without limitation, all obligations to Burger King
under the Franchise Agreements from and after 6:00 A.M. on the
Closing Date; and (iii) the operation, use or ownership of its
Restaurants, Assets, Real Property Leases, Real Properties, the
Easements and Assumed Contracts, during, or which have otherwise
accrued from or otherwise relate to, the period of time after the
Closing Date; and
(b) Each Seller agrees, jointly and severally, to indemnify,
defend and hold harmless Purchaser and its officers, directors,
stockholders and Affiliates from and against all Damages asserted
against or incurred by Purchaser or its officers, directors,
stockholders and Affiliates, directly or indirectly, arising out of
or resulting from: (i) a breach of any representation, warranty,
covenant or agreement of any Seller contained in or made pursuant to
this Agreement (including but not limited to enforcement of this
Article VII) the other Transaction Documents or any facts or
circumstances constituting such a breach; (ii) any indebtedness,
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obligations or liabilities of any Seller including, but not limited
to, any liability or obligation set forth in Section 1.4(a), and the
Tax liabilities set forth in Section 2.17 other than those expressly
assumed by Purchaser hereunder; (iii) a breach of or otherwise
arising under any Environmental Law (whether now or hereafter in
effect), to the extent the same arises out of any condition or state
of facts or otherwise relates to the period of time commencing on the
date any Seller was entitled to occupy or possess the Real Property
in question and ending on the Closing Date; (iv) the operation, use
or ownership of the Restaurants, Assets, Real Properties, Real
Property Leases, Easements and Assumed Contracts during, or which
have otherwise accrued from or otherwise relate to, the period of
time prior to the Closing Date; (v) any Seller's failure to pay and
discharge all claims of creditors which may be asserted against
Purchaser by reason of Purchaser's waiver of compliance by Seller of
the Bulk Sales Laws and (vi) all Damages arising before the Closing
and not expressly assumed in writing by the Purchaser; provided,
however, that the Sellers indemnification of Purchaser with respect
to all Indemnifiable Claims, other than Indemnifiable Claims arising
out of the breach of any covenant or agreement between the parties
hereto which by its terms contemplates performance after the Closing
Date, including but not limited to the Naparlo Development Agreement
and the provisions of Section 4.9 hereof, shall be limited in
aggregate to the amount remaining in the Escrow Agreement on the date
such claim is made; and provided, further, that no claims for
indemnification shall be made until the aggregate of such claims
exceed $150,000, in which case the indemnitee will be entitled to
make a claim only to the extent of such excess. Each Seller hereby
agrees that he or it will not make any claim for indemnification
against the Purchaser by reason of the fact that he or it was a
director, officer, employee, or agent of any of the Sellers or their
respective Affiliates or was serving at the request of any such
entity as a partner, trustee, director, officer, employee, or agent
of another entity (whether such Claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with
respect to any action, suit, proceeding, complaint, claim, or demand
brought by the Purchaser against such Seller (whether such action,
suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
SECTION 7.3 Conditions of Indemnification. The obligations and
liabilities of an indemnifying party under Section 7.2 with respect to Damages
for which it must indemnify another party
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hereunder (collectively, the "Indemnifiable Claims") shall be subject to the
following terms and conditions:
(a) The indemnified party shall give the indemnifying party
notice of any such Indemnifiable Claim which notice shall set forth
in reasonable detail the basis for and amount of the Indemnifiable
Claim, and the circumstances giving rise thereto. If the
Indemnifiable Claim is a third-party claim, the notice must contain
an copy of any papers served on the indemnified party.
(b) If the Indemnifiable Claim is not a third-party claim,
unless within 30 days of receipt by the indemnifying party of notice
of the Indemnifiable Claim the indemnifying party sends written
notice to the indemnified party disputing the facts giving rise to
the Indemnifiable Claim or the amount of Damages stated in the
notice, the Damages stated in the notice shall become due and payable
upon the expiration of such 30 day period. If, however, the
indemnifying party disputes the facts giving rise to the
Indemnifiable Claim or the amount of Damages stated in the notice
within such 30 day period and the dispute cannot be resolved within
the following 90 days, the dispute shall be submitted to arbitration
under the rules of the American Arbitration Association in New York,
New York.
(c) If the Indemnifiable Claim is a third-party Claim, the
indemnifying party may undertake the defense thereof at its own
expense by representatives of its own choosing reasonably
satisfactory to the indemnified party and will consult with the
indemnified party concerning such defense during the course thereof.
If the indemnifying party, within 30 days after receipt of notice of
any Indemnifiable Claim (or such shorter period as is necessary to
prevent prejudice to the indemnified party, if such 30 day period
would prejudice the rights of the indemnified party), fails to
defend, the indemnified party will (upon further notice to the
indemnifying party) have the right to undertake the defense,
compromise or settlement of such Indemnifiable Claim on behalf of and
for the account and risk of and at the expense of the indemnifying
party. In addition, if there is a reasonable probability that a
third-party Indemnifiable Claim may materially and adversely affect
an indemnified party, the indemnified party shall have the right, at
the indemnifying party's cost and expense, to defend, compromise or
settle such Indemnifiable Claim.
(d) Anything in this Section 7.3 to the contrary
notwithstanding, neither the indemnifying party nor the indemnified
party, as the case may be, may settle or compromise any Indemnifiable
Claim, or consent to entry of
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any judgment in respect thereof, without the written consent of the
other, which consent may not be unreasonably withheld or delayed.
SECTION 7.4 Indemnity Enforcement. Indemnification Claims shall be
reduced, by and to the extent, that an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result of, and in compensation for, the subject matter of an
Indemnification Claim by such indemnitee.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Sellers' Agent and
Purchaser;
(b) by the Sellers' Agent, if the conditions set forth in
Sections 5.1 and 5.2 hereof shall not have been complied with or
performed and such noncompliance or nonperformance shall not have
been cured or eliminated (or by its nature cannot be cured or
eliminated) by Purchaser on or before February 15, 1996; provided,
that the Sellers shall not be entitled to terminate this Agreement
pursuant to this clause if the failure of any Sellers to fulfill any
of its obligations under this Agreement shall have been the reason
that the Closing shall not have occurred on or before said date;
(c) by Purchaser, if the conditions set forth in Sections
5.1 and 5.3 hereof shall not have been complied with or performed and
such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by the
Sellers on or before February 15, 1996; provided, that Purchaser
shall not be entitled to terminate this Agreement pursuant to this
clause if the failure of Purchaser to fulfill any of its obligations
under this Agreement shall have been the reason that the Closing
shall not have occurred on or before said date;
(d) by Purchaser pursuant to Section 4.13(b); and
(e) By Sellers' Agent or by Purchaser, if there shall
be any Regulation that makes consummation of the
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transactions contemplated hereby illegal or otherwise prohibited or
if any judgment, injunction, order or decree enjoining Purchaser, or
any Sellers from consummating the transactions contemplated hereby is
entered and such judgment, injunction, order or decree shall become
final and nonappealable.
SECTION 8.2 Effect of Termination; Right to Proceed. In the event
that a party wishes to terminate this Agreement pursuant to Section 8.1, it
shall give written notice thereof whereupon all further obligations of the
parties under the Agreement shall terminate without further liability of any
party hereunder except (i) to the extent that a party has made a material
misrepresentation hereunder or committed a breach of the material covenants
and agreements imposed upon it hereunder; (ii) to the extent that any
condition to a party's obligations hereunder become incapable of fulfillment
because of the breach by a party of its obligations hereunder and (iii) the
agreements contained in Sections 4.8, 9.3 and 9.4 shall survive the
termination hereof. In the event that a condition precedent to its obligation
is not met, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the transactions contemplated hereby. Notwithstanding anything to
the contrary contained herein, no party shall have any obligation to the other
hereunder arising out of the occurrence of an event or circumstance not within
the control of such party which event or circumstance resulted in a
representation or warranty of such party ceasing to be true.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Further Assurances. Each of the parties hereto shall
without further consideration execute and deliver to any other party hereto
such other instruments of transfer and take such other action as any party may
reasonably request to carry out the transactions contemplated by this
Agreement and the other Transaction Documents.
SECTION 9.2 Waiver and Amendment. No provisions of this Agreement may
be amended, supplemented or waived at any time except by a written instrument
executed by the parties hereto, or in the case of a waiver, by the waiving
party. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
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<PAGE>
SECTION 9.3 Remedies. In the event of a default under this Agreement
or the Transaction Documents, the aggrieved party may proceed to protect and
enforce its rights by a suit for damages, suit in equity, action at law or
other appropriate proceeding, whether for specific performance, or for an
injunction against a violation of any terms hereof or thereof or in aid of the
exercise of any right, power or remedy granted thereby or by law, equity,
statute or otherwise. The foregoing shall include, but shall not be limited
to, allowance for recovery by the aggrieved party of all of its fees and
expenses and disbursements incurred by it in connection with the transactions
contemplated hereby and in the Transaction Documents, including, without
limitation, the reasonable fees and expenses of its counsel, accountants,
agents and representatives, employed by it. No course of dealing and no delay
on the part of any party in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
or remedies. No right, power or remedy conferred hereby shall be exclusive of
any other right, power or remedy referred to herein or now or hereafter
available at law, in equity, by statute, or otherwise.
SECTION 9.4 Expenses. Except as otherwise provided herein, Sellers
shall pay all of its expenses (including the fees and expenses of its
accountants, brokers, financial advisors and counsel) in connection with the
transactions contemplated hereunder. Except as otherwise provided herein,
Purchaser shall pay all of its expenses (including the fees and expenses of
its accountants, brokers, financial advisors and counsel) in connection with
the transactions contemplated hereunder. Notwithstanding the foregoing, (i)
all franchise fees and recording taxes (other than recording taxes incurred in
connection with Purchaser's financing of the transactions contemplated hereby)
to be paid in connection with the assignment of Burger King franchises from
Sellers to Purchaser shall be shared equally by Sellers and Purchaser, (ii)
all fees paid in connection with the HSR Act filing shall be shared equally by
Sellers and Purchaser, (iii) and all fees and expenses incurred in connection
with the Letter of Credit which shall be allocated as set forth in Section 1.6
(e).
SECTION 9.5 Entire Agreement. This Agreement and the other
Transaction Documents and the Exhibits and Schedules referred to herein and
therein contain the entire agreement among the parties and their Affiliates
with respect to the subject matter hereof and supersede all prior arrangements
or understandings with respect thereto.
SECTION 9.6 Definitions. For the purposes of this Agreement:
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(i) "Affiliate" shall mean with respect to any Person, any
other Person that has a relationship with the designated Person
whereby either of such Persons directly or indirectly controls or is
controlled by or is under common control with the other of such
Persons and any directors, officers, partners or 50% or more owners
of such person. For the purposes of this Agreement, (x) CCJ Trust and
the beneficiaries thereunder and [Naparlo assignee] shall be deemed
to be Affiliates of Joseph J. Naparlo; and (ii) any directors,
officers, members or shareholders of any Sellers shall be deemed to
be affiliates of such Sellers.
(ii) [Intentionally Omitted]
(iii) "Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or
judicial authority, any public, private or industry regulatory
authority, whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or
seek compliance with any Regulation.
(iv) "Business" shall mean the business and operations of
each Restaurant conducted or proposed to be conducted by the Sellers
at the date of this Agreement and/or the Closing Date, and such
business and operations relating to the Assets and Assumed Contracts.
(v) "Contract" shall mean any contract, agreement, purchase
order, sales order, guaranty, option, mortgage, promissory note,
assignment, lease, franchise, commitment, understanding or other
binding arrangement, whether written, oral, express or implied.
(vi) The term "control", with respect to any Person, shall
mean the power to direct the management and policies of such Person,
directly or indirectly, by or through stock ownership, agency or
otherwise, pursuant to or in connection with a Contract with one more
other Persons by or through stock ownership, agency or otherwise; and
the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
(vii) The term "Governing Instruments" shall mean, with
respect to any Person, the certificate of incorporation, articles of
incorporation, bylaws, code of regulations or other organizational or
governing documents howsoever denominated of such Person.
(vii) "Installment Notes" shall mean promissory notes in
substantially the form of Exhibit A1 annexed hereto.
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<PAGE>
(viii) "Knowledge" means actual knowledge, including
knowledge of books and records, after reasonable investigation.
(ix) "Lien" means any security interest, lien, charge,
mortgage, deed, assignment, pledge, hypothecation, encumbrance,
easement, restriction or interest of another Person or any kind or
nature.
(x) "material" means any claim, circumstance or state of
facts which results in, or would reasonably be expected to result in,
losses or the expenditure or commitment of $100,000 or more, or which
results in any material limitation or restriction on the ability of
any Sellers or the Purchaser to conduct the Business.
(xi) "Material Adverse Change" means any developments or
changes which would have a material adverse effect.
(xii) "Material Adverse Effect" means any circumstances,
developments, occurrences, state of facts or matters which have, or
would reasonably be expected to have, a material adverse effect in
respect of the Business, operations, properties, assets, condition
(financial or otherwise), results, plans, strategies or prospects in
respect of the Business.
(xiii) "Naparlo Development Agreement" means that agreement
in substantially the form of Exhibit B1 hereto between Joseph J.
Naparlo and AVCI regarding future development of Burger King
restaurants in Virginia and North Carolina.
(xiv) "Order" means any decree, order, injunction,
rule, judgment, consent of or by a U.S. Authority.
(xv) "Permits" means any licenses, Permits, variances,
interim permits, permit applications, approvals or other
authorizations under any Regulation applicable to the Business.
(xvi) "Person" shall mean an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative,
or a governmental entity or agency thereof.
(xvii) "Regulation" means any law, statute, regulation,
ruling, rule, Order or Permit, of, administered or enforced by or on
behalf of any Authority, and the Governing Instruments of any Sellers
and its Affiliates, as applicable.
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<PAGE>
(xviii) "Taxes" shall mean all Taxes, charges, fees, duties,
levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise,
value added, license, payroll, unemployment, environmental, customs
duties, capital stock, disability, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and employees' income
withholding and Social Security Taxes imposed by the United States or
any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country or by
any other Tax Authority, including all applicable penalties and
interest, and such term shall include any interest, penalties or
additions to Tax attributable to such Taxes.
SECTION 9.7 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the Agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
SECTION 9.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served in writing and delivered personally, sent by telecopier,
federal express or other reputable overnight courier or sent by certified or
registered mail, postage prepaid, return receipt requested, at the addresses
set forth below:
(a) if to Purchaser, to:
AmeriKing Virginia Corporation I
c/o Lawrence E. Jaro & Joel Aaseby
AmeriKing
2215 Enterprise Drive, Suite 1502
Westchester, IL 60154
with a copy to:
A. Richard Caputo, Jr.
The Jordan Company
9 West 57th Street
New York, NY 10019
Attention: A. Richard Caputo, Jr.
Fax: 212-755-5263
with a copy to:
James B. Carlson
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Mayer, Brown & Platt
1675 Broadway
New York, NY 10019-5820
Fax: 212-262-1910
(b) if to Sellers, to:
Joseph J. Naparlo
C&N Dining, Inc.
208 Packets Court
Williamsburg, VA 23185
Fax:
with a copy to:
Benjamin A. Williams, III
Patten, Wornom & Watkins, L.C.
Patrick Henry Corporate Center
Suite 360
12350 Jefferson Avenue
Newport News, VA 23602
Fax: 804-249-1627
or such other address as any party hereto may, from time to time, designate in
a written notice given in a like manner (which change of address shall only be
effective upon actual receipt of same by the other party). Notices shall be
deemed delivered: (i) three (3) days after the date the same is postmarked if
sent by registered or certified mail: (ii) on the date the same is delivered
personally: (iii) the next business day after delivery to the courier service,
if sent by Federal Express or other reputable overnight courier and (iv) upon
receipt by the sender of telecopier confirmation, if sent by telecopier.
SECTION 9.9 Successors and Assigns. Subject to the provisions of
Section 9.13, this Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the heirs, executor, personal
representatives, legal representatives, successors and assigns of the parties
hereto, and shall not be assignable by either party without the prior written
consent of the other party; provided, however, that the Purchaser may assign
at Purchaser's sole discretion any or all of its interest to a lender of
Purchaser with written notice to Sellers.
SECTION 9.10 ARBITRATION. THE PARTIES HERETO AFTER CONSULTING WITH
COUNSEL WAIVES THEIR RESPECTIVE RIGHTS, IF ANY, TO JURY TRIAL IN RESPECT TO
ANY AND ALL DISPUTES OR CLAIMS BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT
RELATING TO OR IN RESPECT OF ANY PROVISION OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF ANY PROVISION OF
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THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE SECURITIES
ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER STATE OR
FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER INFLUENCED
AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR STATE COMMON LAW, AND
ANY AND ALL SUCH DISPUTES OR CLAIMS SHALL BE SUBMITTED TO, AND RESOLVED
EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN NEW YORK, NEW YORK, AND SHALL BE SUBJECT TO THE
SUBSTANTIVE LAW OF THE STATE OF NEW YORK. DECISIONS AS TO FINDINGS OF FACT AND
CONCLUSIONS OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND
BINDING ON THE PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE
PURSUANT TO 9 U.S.C. SECTIONS 1 ET SEQ. AND THE LAW OF THE STATE OF NEW YORK.
ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF THE COURT OF RECORD.
SECTION 9.11 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, EXCEPT WITH RESPECT TO MATTERS OF TITLE TO REAL PROPERTY, WHERE THE
SUBSTANTIVE LAW OF THE COMMONWEALTH OF VIRGINIA AND NORTH CAROLINA, AS
APPLICABLE, BASED UPON THE LOCATION OF THE REAL PROPERTY AT CLOSING, SHALL
APPLY. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF
ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
THE SOUTHERN DISTRICT OF NEW YORK AND WAIVES ANY OBJECTIONS BASED UPON FORUM
NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT
A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR
CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS
OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE UNITED STATES.
THE CHOICE OF FORUM SET FORTH IN THIS SECTION 9.11 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE JURISDICTION. NOTHING IN THIS SECTION SHALL BE CONSTRUED TO LIMIT
OR OTHERWISE MODIFY THE PARTIES' OBLIGATIONS TO ARBITRATE ANY AND ALL DISPUTES
ARISING UNDER THE AGREEMENT OR PROVIDED IN SECTION 9.10.
SECTION 9.12 Severability. Whenever possible, each provision in this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited
or invalid under applicable law, such provision shall be ineffective to the
extent
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of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 9.13 Purchaser's Designee/Sellers' Affiliate. Purchaser may
designate a third party or one or more of its subsidiaries or Affiliates as
its designee to carry out all or any part of the transactions contemplated
hereby to be carried out by Purchaser, which designation shall not relieve
Purchaser of its obligations hereunder, and Sellers may designate an Affiliate
to carry out all or any part of the transactions contemplated hereby to be
carried out by Sellers, which designation shall not relieve Sellers of their
obligations hereunder.
SECTION 9.14 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Purchaser and Sellers have executed this
Agreement as of the day first above written.
AMERIKING VIRGINIA CORPORATION I
By
Name:
Title:
C&N DINING, INC.
By
Name:
Title:
C&N DINING, L.L.C.
By
Name:
Title:
N&C DINING, INC.
By
Name:
Title:
CNR, INC.
By
Name:
Title:
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N&C DINING II, INC.
By
Name:
Title:
CCJ, INC.
By
Name:
Title:
CCJ REALTY, L.C.
By
Name:
Title:
NAPCHI, INC.
By
Name:
Title:
Joseph J. Naparlo
By
Name:
Title:
THE CCJ IRREVOCABLE TRUST
By
Name:
Title:
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Exhibit A1
Form of Installment Notes
<PAGE>
Exhibit A2
Form of Letter of Credit
<PAGE>
Exhibit A
Form of Assignment and Assumption of Lease
<PAGE>
Exhibit B
Form of Lease Consent and Estoppel Certificate
<PAGE>
Exhibit B1
Form of Naparlo Development Agreement
<PAGE>
Exhibit C
Form of Assumption Agreement
<PAGE>
Exhibit D
Form of Opinion of Purchaser's Counsel
<PAGE>
Exhibit E
Form of Bill of Sale and Assignment
<PAGE>
Exhibit F
Form of Opinion of Sellers' Counsel
<PAGE>
Exhibit G
Form of Escrow Agreement
<PAGE>
ASSET PURCHASE AGREEMENT
among
THIRTY-FORTY, INC., THE SHAREHOLDERS OF THIRTY-FORTY, INC.
and
AMERIKING CINCINNATI CORPORATION I
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- PURCHASE AND SALE OF ASSETS................................... 2
1.1 PURCHASE AND SALE.................................................... 2
1.2 STORE BANK........................................................... 3
1.3 INVENTORY............................................................ 3
1.4 PURCHASE PRICE FOR ASSETS; ALLOCATIONS............................... 4
1.5 NONCOMPETITION AGREEMENT............................................. 4
1.6 LIABILITIES OF SELLER................................................ 4
1.7 PRORATIONS........................................................... 4
1.8 EXCLUSION OF ASSETS.................................................. 5
1.9 GUARANTY OF PAYMENT.................................................. 5
ARTICLE II -- CLOSING AND TERMINATION...................................... 5
2.1 TIME, DATE AND PLACE................................................. 5
2.2 TERMINATION.......................................................... 5
2.3 EFFECT OF TERMINATION................................................ 6
ARTICLE III -- REPRESENTATIONS AND WARRANTIES..............................
3.1 OWNERSHIP OF SELLER'S STOCK.......................................... 6
3.2 DUE ORGANIZATION; NAME AND ADDRESS; GOOD STANDING, AUTHORITY OF
SELLER............................................................. 6
3.3 AUTHORIZATION AND VALIDITY OF AGREEMENTS............................. 7
3.4 AGREEMENT NOT IN CONFLICT WITH OTHER INSTRUMENTS; REQUIRED APPROVALS
OBTAINED........................................................... 7
3.5 CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND CONTRACTUAL
REQUIREMENTS....................................................... 8
3.6 LEGAL PROCEEDINGS.................................................... 8
3.7 FINANCIAL INFORMATION................................................ 8
3.8 TAX MATTERS.......................................................... 8
3.9 FRANCHISE AGREEMENTS................................................. 9
3.10 TITLE TO ASSETS AND EQUIPMENT........................................ 9
3.11 RECORDS.............................................................. 9
3.12 EMPLOYMENT MATTERS................................................... 9
3.13 ABSENCE OF CERTAIN CHANGES OR EVENTS................................. 10
3.14 ADVERSE CONDITIONS................................................... 10
3.15 LEASES............................................................... 11
3.16 BONUS, PENSION OR OTHER PLANS, ETC................................... 11
3.17 FULL DISCLOSURE...................................................... 11
3.18 NO BROKERAGE......................................................... 11
3.19 SELLER'S FRANCHISE AGREEMENTS........................................ 11
3.20 OPERATION OF BUSINESS................................................ 11
<PAGE>
3.21 ENVIRONMENTAL MATTERS.................................................12
3.22 BULK SALE LAWS........................................................12
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............12
4.1 DUE ORGANIZATION; GOOD STANDING; POWER................................12
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENTS..............................12
4.3 NO BROKERAGE..........................................................13
4.4 OBLIGATIONS ASSUMED...................................................13
4.5 AGREEMENT NOT IN CONFLICT WITH OTHER INSTRUMENTS; REQUIRED APPROVALS
OBTAINED..............................................................13
4.6 LEGAL PROCEEDINGS.....................................................14
4.7 FULL DISCLOSURE.......................................................14
4.8 FINANCIAL INFORMATION.................................................14
4.9 SELLER'S ACCESS TO RECORDS AFTER THE CLOSING..........................14
4.10 BULK SALE LAWS........................................................15
ARTICLE V -- SELLER AND THE SHAREHOLDERS' COVENANTS........................15
5.1 AFFIRMATIVE COVENANTS.................................................15
ARTICLE VI -- OPINIONS OF COUNSEL..........................................17
6.1 OPINION OF SELLER'S AND THE SHAREHOLDERS' COUNSEL.....................17
6.2 OPINION OF PURCHASER'S COUNSEL........................................17
ARTICLE VII -- CONDITIONS..................................................17
7.1 SELLER'S CONDITIONS TO CLOSE..........................................17
7.2 PURCHASER'S CONDITIONS TO CLOSE.......................................19
7.3 CONTEMPORANEOUS TRANSFER..............................................22
ARTICLE VIII -- INDEMNIFICATION............................................23
8.1 INDEMNIFICATION BY SELLER AND THE SHAREHOLDERS........................23
8.2 INDEMNIFICATION BY PURCHASER..........................................23
8.3 DEFENSE OF CLAIMS.....................................................24
ARTICLE IX -- MISCELLANEOUS................................................25
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS................25
9.2 NOTICES...............................................................25
9.3 ENTIRE AGREEMENT......................................................27
9.4 ASSIGNABILITY.........................................................27
9.5 BINDING EFFECT; BENEFIT...............................................27
9.6 SEVERABILITY..........................................................27
9.7 AMENDMENT; WAIVER.....................................................27
9.8 SECTION HEADINGS......................................................27
9.9 COUNTERPARTS..........................................................27
9.10 APPLICABLE LAW; JURISDICTION AND VENUE; SERVICE OF PROCESS............27
9.11 REMEDIES..............................................................27
9.12 FURTHER ASSURANCES....................................................28
9.13 USE OF GENDERS........................................................28
9.14 RISK OF LOSS..........................................................28
9.15 NEGOTIATIONS WITH OTHER PERSONS.......................................28
9.16 EXPENSES OF TRANSACTIONS..............................................28
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (THE "AGREEMENT") IS MADE AND ENTERED INTO
THIS 6TH DAY OF NOVEMBER, 1995, AMONG THIRTY-FORTY, INC., A KENTUCKY
CORPORATION (THE "SELLER"); AND JAMES P. BORKE AND W. CURTIS SMITH (REFERRED TO
AS THE "SHAREHOLDERS"), AND AMERIKING CINCINNATI CORPORATION I, A DELAWARE
CORPORATION (THE "PURCHASER").
R E C I T A L S:
WHEREAS, the Seller operates nine Burger King restaurants (the "Business")
located at (1) 7958 U.S. 42, Florence, Kentucky and identified by Burger King
Store No. 1851; (2) 512 Ohio Pike, Cincinnati, Ohio and identified by Burger
King Store No. 2394; (3) 337 Terry Lane, Crescent Springs, Kentucky and
identified by Burger King Store No. 3330; (4) 3100 Dixie Highway, Erlanger,
Kentucky and identified by Burger King Store No. 3758; (5) 544 Clifty Drive,
Madison, Indiana and identified by Burger King Store No. 2729; (6) 812 Eastgate
South Drive, Cincinnati, Ohio and identified by Burger King Store No. 4556; (7)
316 Philadelphia Street, Covington, Kentucky and identified by Burger King
Store No. 5435; (8) 830 Green Boulevard, Aurora, Indiana and identified by
Burger King Store No. 6186; and (9) 14 Carothers Road, Newport, Kentucky and
identified by Burger King Store No. 6489 (hereinafter, collectively referred to
as the "Restaurants");
WHEREAS, the Shareholders own of record and beneficially all of the
outstanding shares of the capital stock of the Seller, and the Shareholders are
the directors and officers of the Seller;
WHEREAS, the Seller desires to sell, assign, transfer and deliver to the
Purchaser, and the Purchaser desires to purchase from the Seller, certain of
the assets of the Seller as described in ARTICLE I hereof on the terms and
subject to the conditions hereinafter contained;
WHEREAS, the Purchaser, the Seller, NRE and the Shareholders desire to
enter into certain agreements among them providing for, among other things, a
covenant not to compete with the purchaser and its parent corporation, NRE, on
the terms and subject to the conditions hereinafter contained;
WHEREAS, the Seller occupies real property (the "Premises") pursuant to
Lease Agreements (the "Real Property Leases") which the Seller proposes to
assign to the Purchaser, and the Purchaser proposes to agree to such
assignments of the Seller's leasehold interests with respect to the Real
Property Leases; and
WHEREAS, the Purchaser proposes to assume the Real Property Leases and
assume certain contracts as set forth herein.
1
<PAGE>
NOW THEREFORE, in consideration of the Recitals that shall be deemed to be
a substantive part of this Agreement and the mutual covenants, promises,
agreements, representations and warranties contained in this Agreement, the
parties hereto do hereby covenant, promise, agree, represent and warrant as
follows:
ARTICLE -- PURCHASE AND SALE OF ASSETS
0. PURCHASE AND SALE. On the terms and subject to the conditions set forth
in this Agreement, at the Closing on the Closing Date (as such terms are
defined in Section 2.1 hereof), the Seller shall sell, assign, transfer and
deliver to the Purchaser and the Purchaser shall purchase from the Seller all
of the assets used or held for use in connection with the Restaurants
(excluding the "Excluded Assets" defined in paragraph 1.8 below) including but
not limited to the following (all of which assets of the Seller, excluding the
Excluded Assets, are hereinafter collectively referred to as the "Assets"):
.0 of the Seller's equipment, furniture, materials, fixed assets and
supplies, including, but not limited to, all of the equipment, furniture,
materials and supplies described in EXHIBIT 1.1.1 attached hereto and
incorporated by reference herein (the "Equipment").
.1 of the Seller's gift certificates which have been purchased from
Burger King Corporation.
.2 All of the Seller's saleable, usable and merchantable Inventory (as
hereinafter defined) located at the Restaurants.
.3 All of the Seller's rights under the following Burger King
Franchise Agreements between Seller and Burger King Corporation, copies of
which are attached hereto as EXHIBIT 1.1.4 and incorporated by reference herein
(collectively and individually the "Franchise Agreements"): (i) Franchise
Agreement dated September 30, 1991, relating to Franchise #1851 located at 7958
U.S. 42, Florence; (2) Franchise Agreement dated , relating to Franchise #2394
located at 512 Ohio Pike, Cincinnati, Ohio; (3) Franchise Agreement dated
December , 1987, relating to Franchise 2729 located at 544 Clifty Drive,
Madison Indiana; (4) Franchise Agreement dated December 23, 1981, relating to
Franchise #3330 located at 337 Terry Lane, Crescent Springs, Kentucky; (5)
Franchise Agreement dated July 6, 1983, relating to Franchise # 3758 located at
3100 Dixie Highway, Erlanger, Kentucky; (6) Franchise Agreement dated July 2,
1985, relating to Franchise #4556 located at 812 Eastgate South Drive,
Cincinnati, Ohio; (7) Franchise Agreement dated November 9, 1988, relating to
Franchise #6186 located at 830 Green Boulevard, Aurora, Indiana; (8) Franchise
Agreement dated November 9, 1988, relating to Franchise 5435 located at 316
Philadelphia Street, Covington, Kentucky and (9) Franchise Agreement dated June
19, 1989, relating to Franchise #6489 located at 14 Carothers Road, Newport,
Kentucky.
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.4 All of the Seller's leasehold and tenant improvements (excluding
fixtures that have become part of the real property to which they are
attached).
.5 All of the Seller's customer lists and customer sales files
("Customer Lists").
.6 All of the Seller's leasehold interests in the Real Property
Leases described on EXHIBIT 1.1.7(a). At the Closing, the Seller shall assign
to the Purchaser all of the Seller's leasehold interest in the Real Property
Leases, parking and other access agreements relating to the Premises. At the
Closing, the Seller shall deliver to the Purchaser (i) Lease Assignment and
Assumption Agreements (the "Lease Assignments") , and (ii) Consents to
Assignment, Estoppel, and Releases in the form of EXHIBITS 1.1.7 (b) and (c)
attached hereto and incorporated by reference herein.
.7 Except for those assets described on EXHIBIT 1.1.8, all of the
Seller's goodwill and original copies of all of the Seller's employment and
personnel records, books and records relating or pertaining to the Seller's
Business, including all sales records and similar data (hereinafter
collectively referred to as the "Records"). The Seller reserves the right to
inspect such records at such reasonable times and places after Closing for any
legitimate business purpose including tax audits.
.1 Store Bank. Upon the Closing, the Seller shall leave cash (the "Store
Bank") in the amount of not less than $1,000 at each of the Restaurants. The
Purchaser agrees to purchase the Store Bank at each Restaurant from the Seller
and agrees to pay for the Store Bank in addition to the Purchase Price at
Closing.
.2 Inventory. Within 24 hours prior to the date of the Closing, an
inventory shall be taken by the Seller (with the participation of the
Purchaser) of all merchantable food, paper, new uniforms, current and readily
disposable promotional items, supply inventory (including but not limited to,
consumables, operating and cleaning supplies) and other miscellaneous items
(the "Inventory") located at the Restaurants. The Purchaser agrees to purchase
the Inventory from the Seller, and the Seller agrees to sell the Inventory to
the Purchaser, at the Seller's actual Inventory purchase price. On the Closing
Date, the Purchaser agrees to pay the Seller the sum of $6,000 per Restaurant
separately and not as part of the Purchase Price, as partial payment for the
Inventory. Following the taking of the Inventory as discussed above, the Seller
and the Purchaser agree to make adjustments to the Inventory purchase price for
the difference between the amount paid on the Closing Date and the Seller's
actual Inventory purchase price. In the event the total Inventory purchase
price is less than $54,000 for all Restaurants, the Seller shall within fifteen
(15) days of the Closing Date, reimburse the Purchaser for any overage in
payment. In the event the total Inventory purchase price is in excess of
$54,000, the Purchaser agrees to make payment to the Seller within fifteen (15)
days of the Closing Date of any additional monies which may be due for the
purchase of the Inventory.
3. Purchase Price for Assets; Allocations. The purchase price for the
Assets shall be Seven Million, Seventy-six Thousand dollars ($7,076,000)
adjusted pursuant to Section 1.7 (the "Purchase Price"), plus (i) the total
dollar amount in the Store Bank at the Closing
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Date; (ii) $54,000 for the estimated value of the Inventory at the Closing
Date; and (iii) the actual amount paid by the Seller for gift certificates
which will be transferred to the Purchaser at Closing. The parties agree that
the Purchase Price for the Assets shall be allocated among the Assets in the
manner set forth on EXHIBIT 1.4, which shall be mutually agreed to by the
Seller and the Purchaser prior to the Closing Date. The total purchase price
shall be paid in cash at Closing.
.4 Noncompetition Agreement. At the Closing, the Purchaser, NRE, the
Shareholders and the Seller shall enter into a Noncompetition Agreement in the
form attached hereto as EXHIBIT 1.5 (hereinafter referred to as the
"Noncompetition Agreement") pursuant to which the Seller and the Shareholders
shall agree not to compete with the business of the Purchaser and NRE for five
(5) years from and after the Closing Date.
.5 Liabilities of Seller. Except as set forth in this Section 1.6, the
Seller shall be and remain solely liable and responsible for all debts,
obligations, duties, and liabilities of the Seller and its business which are
outstanding at Closing. The Purchaser does not and shall not assume, agree to
pay or pay any debts, obligations, duties or liabilities of any nature of the
Seller or its business, including, but not limited, to any debts, obligations,
duties or liabilities relating to the Seller's employees or employee benefit
plans, regardless of whether any such debt, obligation, duties or liability
arises under any contract, agreement, practice, arrangement, statute, law,
ordinance, rule, regulation or otherwise, and nothing in this Agreement or
otherwise is intended or shall be construed to the contrary. The parties
further covenant, promise and agree that the Purchaser is not and shall not be
obligated or required to employ more than, to the extent applicable, the
requisite number of employees in order to comply with the Worker Adjustment and
Retraining Notification Act ("WARN Act"). Notwithstanding the foregoing, the
Purchaser agrees to assume from and after the Closing Date all of the rights
and obligations of the Seller attributable to the period from and after the
Closing Date under the Franchise Agreements, the Real Property Leases and the
contracts to be assumed described on EXHIBITS 1.1.4, 1.1.7(A) AND 1.6
(collectively, the "Assumed Contracts").
.6 Prorations. All customary prorations with respect to obligations under
the Assumed Contracts, utility and fuel charges, personal property taxes and
other proratable charges related to the operation of the Restaurants shall be
adjusted between the parties as of 6:00 a.m. on the Closing Date. Payment of
the amount due by reason of the foregoing prorations shall be made at the
Closing or as soon thereafter as reasonably practicable. All real estate taxes
which relate to the tax year in which the Closing occurs shall, when received,
be prorated as of the Closing Date; in the event the real estate taxes relating
to the tax year in which the Closing occurs or a subsequent year have already
been paid by the Seller, then said taxes shall be prorated as of the Closing
and the Seller shall be reimbursed for its pro rata portion thereof at Closing.
All rentals, including minimum and percentage rentals, and other monetary
obligations under the Real Property Leases shall be adjusted as described on
EXHIBIT 1.7 for the month in which the Closing occurs.
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.7 Exclusion of Assets. Notwithstanding any other provision of this
Agreement, those assets of the Seller and/or the Shareholders as set forth in
full in EXHIBIT 1.8 attached hereto and incorporated herein (the "Excluded
Assets") are not being purchased by the Purchaser.
.8 Guaranty of Payment. All obligations of the Purchaser hereunder,
including all payments of amounts due hereunder from the Purchaser (including
but not limited to the Purchase Price) as well as any amounts owed to the
Seller and to the Shareholders pursuant to the terms of the Noncompetition
Agreement and the indemnification in Article VIII are guaranteed by NRE and NRE
shall execute and deliver a Guaranty in the form of EXHIBIT 1.9 to evidence
such guaranty at Closing.
I-- CLOSING AND TERMINATION
.0 Time, Date and Place. The closing of the purchase and sale of the
Assets and the other transactions contemplated by this Agreement (referred to
throughout this Agreement as the "Closing") shall take place at the offices of
Seller's counsel, Dinsmore & Shohl, 1900 Chemed Center, 255 East Fifth Street,
Cincinnati, Ohio 45202. The time, place and date of the Closing are referred to
throughout this Agreement as the "Closing Date."
Unless this Agreement is terminated as provided for herein, the Closing
shall occur on the later of (i) January 5, 1996; or (ii) ten (10) days
following the satisfaction of all conditions precedent set forth in ARTICLE
VII. If such day is not a business day then the Closing shall occur on the next
succeeding business day.
.1 Termination.
.0 If the Closing contemplated hereunder has not occurred on or
before February 29, 1996, either the Purchaser or the Seller may terminate this
Agreement upon written notice to the other party.
.1 If any of the representations, warranties or covenants of the
Seller or the Shareholders are found to be untrue or breached in any material
respect, at or prior to Closing, and the Seller or the Shareholders shall not
have cured such breach within 30 days after the Purchaser shall have given
written notice to the Seller of the existence of such breach, the Purchaser may
terminate this Agreement upon written notice to the Seller. If any of the
representations, warranties or covenants of the Purchaser or NRE are found to
be untrue or breached in any material respect, at or prior to Closing, and the
Purchaser or NRE shall not have cured such breach within 30 days after the
Seller shall have given written notice to the Purchaser and NRE of the
existence of such breach, the Seller may terminate this Agreement upon written
notice to the Purchaser.
.2 This Agreement may be terminated by the written agreement of the
Purchaser and the Seller. This Agreement may be terminated by the Purchaser in
its sole discretion if any of the contingencies set forth in Sections 7.2.8 or
7.2.9 are not met to the
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Purchaser's satisfaction. This Agreement may be terminated by the Seller
in its sole discretion if any of the contingencies set forth in
Section 7.1.11 are not met to the Seller's satisfaction.
2.3 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 2.2, this Agreement shall be
of no further force and effect, with no liabilities or obligations to any
party under this Agreement; provided, however, that the parties shall not be
released from any liabilities, claims or actions regarding the falsity in any
material respect of a representation or warranty set forth in ARTICLE III or
ARTICLE IV or a failure to perform or comply with any material obligation
under this Agreement.
II -- REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS
The Seller and the Shareholders, jointly and severally, represent and
warrant to the Purchaser as of the date hereof and as of the Closing on the
Closing Date each of the following:
.0 Ownership of Seller's Stock. The Shareholders are the sole and
exclusive record and beneficial owner of all of the outstanding shares of the
capital stock of the Seller. The Shareholders have duly approved the Seller's
sale, assignment, transfer and delivery of the Assets to the Purchaser in
accordance with the terms of this Agreement, the consummation of all the
transactions contemplated hereby and the Seller entering into the
Noncompetition Agreement.
.1 Due Organization; Name and Address; Good Standing, Authority of Seller.
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Kentucky. The only names of the Seller
which have been used by the Seller at any time within the past three years
ending at the date of this Agreement are those listed on EXHIBIT 3.2, hereto.
The Seller has full right, power and authority to own, lease and operate its
properties and assets, and to carry on its Business. The Seller is duly
qualified, licensed and authorized to do business in each jurisdiction in which
the properties and assets owned by it or the nature of the business conducted
by it make such licensing, qualification and authorization legally necessary. A
list of all jurisdictions in which the Seller is qualified to do business and
required to be qualified to do business as set forth on EXHIBIT 3.2. Except as
described on EXHIBIT 3.2, the Seller is not in breach or violation of, and the
execution, delivery and performance of this Agreement will not result in a
breach or violation of, any of the provisions of the Seller's articles of
incorporation, as amended to the date of this Agreement (the "Articles") or
by-laws, as amended to the date of this Agreement (the "By-Laws"), or any
agreement to which it is a party.
.2 Authorization and Validity of Agreements. The Seller and the
Shareholders have the legal capacity, right, power, and authority to enter into
this Agreement and the Noncompetition Agreement. The Seller has the full right,
power and authority to execute,
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acknowledge, seal and deliver this Agreement and to perform the transactions
contemplated by this Agreement. The execution, acknowledgment, sealing and
delivery of this Agreement by the Seller and the Shareholders and the
performance by the Seller and the Shareholders of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate and
shareholder action. This Agreement has been duly executed, acknowledged, sealed
and delivered by the Seller and the Shareholders and is the legal, valid and
binding obligation of the Seller and the Shareholders enforceable against the
Seller and the Shareholders, respectively, in accordance with its terms, except
in each case as such enforceability may be limited by general principles of
equity, bankruptcy, insolvency, moratorium and similar laws relating to
creditors rights generally. The Noncompetition Agreement, when executed,
acknowledged, sealed and delivered by the Seller and the Shareholders, will be
the legal, valid and binding obligation of the Seller and the Shareholders,
respectively, enforceable against the Seller and against the Shareholders,
respectively, in accordance with its terms, except in each case as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors rights generally.
.3 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained. Except as described on EXHIBIT 3.4, to the best of the Seller's and
the Shareholder's knowledge, the execution, acknowledgment, sealing, delivery,
and performance of this Agreement and the Noncompetition Agreement by the
parties thereto, and the consummation of the transactions contemplated by this
Agreement and the Noncompetition Agreement will not (a) violate or require any
consent, approval, or filing under, (i) any material common law, law, statute,
ordinance, rule or regulation (collectively referred to throughout this
Agreement as "Laws") of any federal, state or local government (collectively
referred to throughout this Agreement as "Governments") or any agency, bureau,
commission, instrumentality or judicial body of any Governments (collectively
referred to throughout this Agreement as "Governmental Agencies"), or (ii) any
judgment, injunction, order, writ or decree of any court, arbitrator,
Government or Governmental Agency by which the Seller or any of the Assets is
bound; (b) conflict with, require any consent, approval, or filing under,
result in the breach or termination of any provision of, constitute a default
under, or result in the creation of any claim, security interest, lien, charge,
or encumbrance upon any of the Assets pursuant to (i) the Seller's Articles or
By-Laws, (ii) any indenture, mortgage, deed of trust, license, permit,
approval, consent, franchise, lease, contract, or other instrument, document or
agreement to which the Seller is a party or by which the Seller, or any of the
Assets is bound, or (iii) any judgment, injunction, order, writ or decree of
any court, arbitrator, Government or Governmental Agency by which the Seller or
any of the Assets is bound; and all permits, licenses and authorizations of any
Government or Governmental Agency required to be obtained by the Seller prior
to the Closing, shall have been obtained and shall be in full force and effect
as of the Closing Date.
.4 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. To the best of the Seller's and the Shareholders' knowledge, the
Seller has
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conducted and is conducting its business in material compliance with all
applicable material Laws of all Governments and Governmental Agencies.
.5 Legal Proceedings. Except as set forth on EXHIBIT 3.6, there is no
action, suit, proceeding, claim or arbitration, or any investigation by any
person or entity, including, but not limited to, any Government or Governmental
Agency, (i) pending, to which the Seller or the Shareholders are a party and
which relate to the Seller, the Seller's Business or the Assets, or to the
knowledge of the Seller or the Shareholders, threatened against or relating to
the Seller, the Seller's business or the Assets, or (ii) challenging the
Seller's or the Shareholders' right to execute, acknowledge, seal, deliver,
perform under or consummate the transactions contemplated by this Agreement
and, as respects the Seller and the Shareholders, the Noncompetition Agreement,
or (iii) asserting any right with respect to any of the Assets, and, in each
such case, to the best knowledge of the Seller and the Shareholders, there is
no basis for any such action, suit, proceeding, claim, arbitration or
investigation.
.6 Financial Information. Attached hereto as EXHIBIT 3.7 are copies of the
unaudited Balance Sheets of the Seller as of December 31, 1994, and December
31, 1993, and the Operating Statements of the Seller for the periods January 1,
1993, to December 31, 1993, January 1, 1994, to December 31, 1994, and an
interim income statement from January 1, 1995, to August 31, 1995, and balance
sheet as of August 31, 1995, which are being provided by the Seller and the
Shareholders to the Purchaser (the "Financial Statements"). The Financial
Statements are in accordance with the books and records of the Seller, are
true, correct and complete and accurately present the Seller's financial
position as of the dates set forth therein and the results of the Seller's
operations for the periods then ended; all such Financial Statements are in
conformity with the accounting principles historically utilized by the Seller
and applied on a consistent basis during each period and on a basis consistent
with that of prior periods. Until the Closing Date, the Seller shall deliver to
the Purchaser month end balance sheets and income statements within 30 days of
the end of each month.
.7 Tax Matters. All tax returns of the Seller as filed by the Seller with
the Internal Revenue Service (the "IRS") and all information reported on the
returns are true, accurate, and complete. The Seller is not a party to, and is
not aware of, any pending or threatened action, suit, proceeding, or assessment
against it for the collection of taxes by any Government or Governmental
Agency. The Seller has duly and timely filed with all appropriate Governments
and Governmental Agencies, all tax returns, information returns, and reports
required to be filed by the Seller. The Seller has paid in full all taxes,
interest, penalties, assessments and deficiencies owed by the Seller to all
taxing authorities. All taxes and other assessments and levies which the Seller
is required by applicable Law to withhold or to collect have been duly withheld
and collected and have been paid over to the proper Governments and
Governmental Agencies or are properly held by the Seller for such payment. All
claims by the IRS or any state taxing authorities for taxes due and payable by
the Seller have been paid by the Seller. The Seller is not a party to, and is
not aware of, any pending or threatened action, suit, proceeding, or assessment
against it for the collection of taxes by any Government or Governmental
Agency.
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.8 Franchise Agreements. The Franchise Agreements are full, complete,
unamended, true and correct Franchise Agreements between the Seller and Burger
King Corporation, which are, and shall continue to be until the Closing on the
Closing date, in full force and effect.
.9 Title to Assets and Equipment. Except as provided in EXHIBIT 3.10, the
Seller has sole and exclusive, good and marketable title to all of the Assets
and the same are free and clear of any and all pledges, claims, threats, liens,
restrictions, agreements, leases, security interests, charges and encumbrances.
As of the Closing Date, all of the Equipment will be working and operating,
reasonable wear and tear excepted, and free from any defects known to the
Seller or to the Shareholders.
.10 Records. The Records that have been delivered by the Seller to the
Purchaser or that shall be delivered by the Seller to the Purchaser are true,
complete and correct.
.11 Employment Matters.
.0 None of the Seller's employees are covered by a collective
bargaining agreement or are represented by a labor organization, and no
petition for representation concerning any of the Seller's employees has been
filed with the National Labor Relations Board; the Seller is not aware of any
union organizational activity and has no reason to believe that any such
activity is being contemplated. To the best of the Seller's and the
Shareholders' knowledge, the Seller has not engaged in any unfair labor
practice.
.1 Except as described in EXHIBIT 3.12.2, to the best of the Seller's
and the Shareholders' knowledge, (i) the Seller is not in material violation of
applicable equal employment opportunity wage and hour requirement or any other
Laws of any Government or Governmental Agency relating to employment; (ii)
there are no active, pending, or threatened administrative or judicial
proceedings under any Laws of any Government or Governmental Agency; (iii)
there are no claims, charges, and employment related suits which have occurred
within the last three years or are presently pending or threatened under any
employment related Laws of any Government or Governmental Agency; and (iv) the
Seller is not subject to any judgments, decrees, conciliation agreements and
settlement agreements concerning employment related matters.
.2 Except as described in EXHIBIT 3.12.3, the Seller has not entered
into any employment agreements with any of its employees, and all employees may
be terminated at will; there is no contractual obligation, except for the
provisions of this Agreement, or special termination or severance arrangement
in respect of any of the Seller's employees; and there is no provision of any
agreement or arrangement with any of the Seller's employees, or any other legal
or contractual requirement, which would obligate the Seller to require the
Purchaser of the Assets to employ any of the Seller's employees.
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.3 The Seller has paid or will pay on or prior to Closing all wages,
bonuses, commissions and other benefits and sums due (and all required taxes,
insurance, social security and withholding thereon), including all accrued
vacation, accrued sick leave, accrued benefits and accrued payments (and pro
rata accruals for a portion of a year) to its employees.
.4 Except as described on EXHIBIT 3.12.5, the Purchaser is under no
obligation or duty, whether under any contract, agreement, understanding or
arrangement or under any applicable and material Law of any Government or
Governmental Agency to assume or be responsible for any obligation, duty or
liability, now existing or hereafter arising, relating to or in connection with
the Seller's employees or any compensation, benefits or benefit plans in
respect of the Seller's employees, or otherwise arising out of or in connection
with the transactions contemplated by this Agreement, and the Seller has made
no commitment and is under no obligation to cause the Purchaser of the Assets
to assume or to be responsible for any such obligation, duty or liability.
.12 Absence of Certain Changes or Events. Except as described on EXHIBIT
3.13, since December 31, 1994, the Seller has not engaged in or experienced any
of the following:
.0 Sold, assigned, transferred, leased, disposed of, or agreed to
sell, assign, transfer, lease, or dispose of, any of the Assets, except
Inventory sold in the ordinary course of the Seller's business, as such
business has been operated historically;
.1 Suffered any material adverse change in the Seller's operations,
earnings, assets, liabilities, or business (financial or otherwise); or
.2 Failed to pay any indebtedness or other obligation, including any
taxes and other charges, when due.
.13 Adverse Conditions. Except as set forth in EXHIBIT 3.14, attached
hereto and incorporated by reference herein, neither Seller nor the
Shareholders have any knowledge of any past, present or future condition, facts
or circumstances which has materially and adversely affected or which might
materially and adversely affect the business of the Seller or prevent the
Purchaser from carrying on the Seller's business.
.14 Leases. Attached hereto as EXHIBIT 3.15 and incorporated by reference
herein is a list of the following, which is accurate and complete as of the
date hereof: all leases, contracts, licenses, agreements or other commitments
of Seller as obligor which are not terminable without penalty upon no more than
thirty (30) days notice and which involve a liability, obligation, contingent
liability or contingent obligation in excess of $1,000.
.15 Bonus, Pension or Other Plans, etc. Except as described on EXHIBIT
3.16, Seller is not a party to, does not maintain or make any contribution to,
and Seller has not incurred any liability or expense with respect to any
employment agreement, current or future pension, retirement, deferred
compensation, bonus, profit-sharing, insurance or
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similar plan, agreement, arrangements or formal or informal understandings for
the benefit of employees, in each case whether or not legally binding.
.16 Full Disclosure. This Agreement (including the Exhibits hereto) does
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein not misleading.
There is no fact known to the Seller or to the Shareholders which is not
disclosed in this Agreement which materially adversely affects the accuracy of
the representations and warranties contained in this Agreement or the Seller's
financial condition, the Seller's Financial Statements, operations, business,
earnings, assets, or liabilities. All information set forth in the schedules,
exhibits and all other information regarding the Seller and its business,
condition, assets, liabilities, operations, financial performance, net income
and prospects that has been furnished to the Purchaser or any of its
representatives or agents by or on behalf of the Seller or any of the Seller's
representatives or agents, is accurate and complete in all respects. The Seller
and the Shareholders have provided the Purchaser and the Purchaser's
representatives and agents with full and complete access to all of the Seller's
records and other documents and data.
.17 No Brokerage. Neither the Seller nor the Shareholders have incurred
any obligation or liability, contingent or otherwise, for brokerage fees,
finder's fees, agent's commissions, or the like in connection with this
Agreement or the transactions contemplated hereby.
.18 Seller's Franchise Agreements. Except as described on EXHIBIT 3.19,
the Seller is not in material breach of or material default under any provision
of any of the Franchise Agreements, and no condition exists which, with passage
of time or the giving of notice or both, will result in a breach or default by
the Seller of any provision of any of the Franchise Agreements.
.19 Operation of Business. Since January 1, 1995, the Seller and the
Shareholders have used, and from the date hereof until the Closing the Seller
and the Shareholders shall use, their best efforts to preserve the Business of
the Seller.
20 Environmental Matters. To the best knowledge of the Seller and the
Shareholders, neither the Shareholders, the Seller, nor to the Seller's
knowledge any other person (including without limitation, any previous owner,
lessor or sublessor of the Seller's property) have used, treated, stored or
disposed of hazardous waste or toxic substances on any of the properties owned
or leased by the Seller (whether owned, leased, subleased or used by such
person and hereinafter, the "Property") in material violation of any material
federal, state or local environmental protection, toxic substance, human health
or similar statute, regulation or ordinance (collectively, the "Environmental
Laws"), and there have been no material spills or releases of hazardous
substances on or from any Property that, in any such case, could subject the
Seller or the Shareholders to material liability. To the best knowledge of the
Seller and the Shareholders, the Property of the Seller and all operations of
the Seller conducted on such Property is in compliance with all Environmental
Laws.
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Neither the Seller nor the Shareholders have received any notice, nor are
aware of any administrative or judicial investigations, proceedings or actions
with respect to violations, alleged or proven, of any Environmental Law by the
Seller or the Shareholders, or otherwise involving the Property of the Seller
or the operations conducted on the Property of the Seller. To the best of the
Seller's and the Shareholders' knowledge, no asbestos containing material is
present in any of the improvements on any Property of the Seller or is
otherwise located on any Property of the Seller. To the best knowledge of the
Seller and the Shareholders, all operations conducted on the Seller's Property
are in material compliance with all material federal and state statutes and
regulations relating to asbestos. To the best of the Seller's and the
Shareholders' knowledge and belief, no underground storage tanks, whether in
use or closed, are on or under any Property of the Seller.
.21 Bulk Sale Laws. Both the Seller and the Shareholders have complied, or
will comply prior to the Closing, with all applicable Bulk Sale and Bulk
Transfer laws in each state where Assets are located and agree to discharge all
obligations and liabilities of the Seller's business, not assumed by Purchaser,
in a timely manner.
III -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser and NRE represent and warrant to the Seller and the
Shareholders, jointly and severally, as of the date hereof and as of the
Closing on the Closing Date each of the following:
.0 Due Organization; Good Standing; Power. Both the Purchaser and NRE are
corporations duly incorporated, validly existing, and in good standing under
the laws of the State of Delaware. Both the Purchaser and NRE have full right,
power and authority to enter into this Agreement and the Noncompetition
Agreement and to perform their respective obligations hereunder and thereunder.
.1 Authorization and Validity of Agreements. The Purchaser and NRE have
the legal capacity, right, power, and authority to enter into this Agreement
and the Noncompetition Agreement. The Purchaser and NRE have the full right,
power and authority to execute, acknowledge, seal and deliver this Agreement
and to perform the transactions contemplated by this Agreement. The execution,
acknowledgment, sealing and delivery of this Agreement by the Purchaser and NRE
and the performance by the Purchaser and NRE of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate and
shareholder action. This Agreement has been duly executed, acknowledged, sealed
and delivered by the Purchaser and NRE and is the legal, valid and binding
obligation of the Purchaser and NRE enforceable against the Purchaser and NRE
in accordance with its terms, except in each case as such enforceability may be
limited by general principles of equity, bankruptcy, insolvency, moratorium and
similar laws relating to creditors rights generally. The Noncompetition
Agreement, when executed, acknowledged, sealed and delivered by the Purchaser
and NRE, will be the legal, valid and binding obligation of the Purchaser and
NRE, enforceable against the Purchaser and NRE, in accordance with its terms,
except in each case as such enforceability may be
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limited by general principles of equity, bankruptcy, insolvency, moratorium and
similar laws relating to creditors rights generally.
.2 No Brokerage. The Purchaser has not incurred any obligation or
liability, contingent or otherwise, for brokerage fees, finder's fees, agent's
commissions, or the like in connection with this Agreement or the transactions
contemplated hereby.
.3 Obligations Assumed. The Purchaser covenants that it will pay, when
due, all obligations assumed by it under this Agreement and that it will
employ, to the extent applicable, the requisite number of employees necessary
to comply with the WARN Act.
.4 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained. Except as described on EXHIBIT 4.5, to the best of NRE's and the
Purchaser's knowledge, the execution, acknowledgment, sealing, delivery, and
performance of this Agreement and the Noncompetition Agreement by the parties
thereto, and the consummation of the transactions contemplated by this
Agreement and the Noncompetition Agreement will not (a) violate or require any
consent, approval, or filing under, (i) any material Laws of any Governments or
any Governmental Agencies, or (ii) any judgment, injunction, order, writ or
decree of any court, arbitrator, Government or Governmental Agency by which the
Purchaser or NRE is bound; (b) conflict with, require any consent, approval, or
filing under, result in the breach or termination of any provision of, or
constitute a default under (i) the Purchaser's or NRE's Articles or By-Laws,
(ii) any indenture, mortgage, deed of trust, license, permit, approval,
consent, franchise, lease, contract, or other instrument, document or agreement
to which the Purchaser or NRE is a party or by which the Purchaser or NRE is
bound, or (iii) any judgment, injunction, order, writ or decree of any court,
arbitrator, Government or Governmental Agency by which the Purchaser or NRE is
bound; and all permits, licenses and authorizations of any Government or
Governmental Agency required to be obtained by the Purchaser or NRE prior to
the Closing, shall have been obtained and shall be in full force and effect as
of the Closing Date.
.5 Legal Proceedings. Except as set forth on EXHIBIT 4.6, there is no
action, suit, proceeding, claim or arbitration, or any investigation by any
person or entity, including, but not limited to, any Government or Governmental
Agency, (i) pending, to which the Purchaser or NRE is a party and which relate
to the Purchaser or NRE, or to the knowledge of the Purchaser or NRE,
threatened against or relating to the Purchaser or NRE, or (ii) challenging the
Purchaser's or NRE's right to execute, acknowledge, seal, deliver, perform
under or consummate the transactions contemplated by this Agreement and the
Noncompetition Agreement, or (iii) asserting any right with respect to any of
the Assets, and, in each such case, to the best knowledge of the Purchaser or
NRE, there is no basis for any such action, suit, proceeding, claim,
arbitration or investigation.
.6 Full Disclosure. This Agreement (including the Exhibits hereto) does
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein not misleading.
There is no fact known to the
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Purchaser or NRE which is not disclosed in this Agreement which materially
adversely affects the accuracy of the representations and warranties contained
in this Agreement or the Purchaser's or NRE's financial condition, NRE's
Financial Statements, operations, business, earnings, assets, or liabilities.
All information set forth in the schedules, exhibits and all other information
regarding the Purchaser or NRE and its business, condition, assets,
liabilities, operations, financial performance, net income and prospects that
has been furnished to the Seller or any of its representatives or agents by or
on behalf of the Purchaser or NRE or any of the Purchaser's or NRE's
representatives or agents, is accurate and complete in all respects.
.7 Financial Information. Attached hereto as EXHIBIT 4.8 are copies of the
audited Financial Statements of NRE as of December 31, 1994, and the unaudited
interim financial statements of NRE as of August 28, 1995, which are being
provided by the NRE to the Seller (the "Financial Statements"). The Financial
Statements are in accordance with the books and records of NRE, are true,
correct and complete and accurately present NRE's financial position as of the
dates set forth therein and the results of NRE's operations for the periods
then ended; all such Financial Statements are in conformity with the accounting
principles historically utilized by NRE and applied on a consistent basis
during each period and on a basis consistent with that of prior periods.
.8 Seller's Access to Records after the Closing. After the Closing Date,
the Purchaser shall give the Seller and its authorized representatives access
to and the right to copy such books, contracts, documents and other records
previously in the Seller's possession as the Seller may reasonably request in
order to evaluate and respond to claims against the Seller related to taxes or
other matters which are asserted after the Closing Date. Such access shall be
given only after reasonable notice to the Purchaser and at such times and in
such manner as will not disrupt or interfere with the conduct of the
Purchaser's business. Further, the Purchaser shall give the Seller written
notice thirty (30) days prior to destroying any such books, contracts,
documents and other records, and grants the Seller the right to copy or remove
such books, contracts, documents and records during the thirty (30) day period
after receipt of such notice from the Purchaser.
.9 Bulk Sale Laws. Both the Purchaser and NRE have complied, or will
comply prior to the Closing, with all applicable Bulk Sale and Bulk Transfer
laws in each state where Assets are located and agree to discharge all
obligations and liabilities of the Seller's business, not assumed by Purchaser,
in a timely manner.
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IV-- SELLER AND THE SHAREHOLDERS' COVENANTS
.0 Affirmative Covenants. The Seller and the Shareholders, jointly and
severally, covenant, promise and agree that from the date hereof and until the
Closing that the Seller and the Shareholders shall cause the Seller to perform
and comply with each of the following:
.0 Continue to operate the Business of the Seller diligently, and not
take any action omit to take any action, or engage in any transaction other
than in acts or transactions in the ordinary course of business, as such
business has been operated historically.
.1 Use their best efforts to preserve the Business of the Seller and
use their best efforts to preserve the relationship of the Business with
suppliers, customers, Burger King Corporation and others.
.2 Maintain and continue normal and usual maintenance and repair of
the Equipment and all other assets being sold and transferred to the Purchaser
herein.
.3 Cooperate with the Purchaser to achieve an orderly transition of
the Business of the Seller to the Purchaser and an orderly transfer of the
Assets to the Purchaser.
.4 Pay or provide for payment of all sales, use, personal property,
social security, withholding, payroll, unemployment compensation, income and
other taxes, assessments, fees and public charges due and payable by the Seller
in respect of its Business and the Assets through the Closing Date and any
portion thereof applicable to any period prior to the Closing Date.
.5 Pay all wages, bonuses, commissions and other employment benefits
and sums (and all required taxes, insurance and withholding thereon), including
all accrued vacation, accrued sick leave, accrued benefits and accrued payments
(and pro rata accruals for a portion of a year) due to the Seller's employees
through the Closing Date.
.6 Maintain in effect all insurance policies and other employee
benefits covering any employee claims which may be incurred through the Closing
Date.
.7 Fully perform and comply with all covenants, promises and
agreements hereunder which are required to be performed or complied with by the
Seller and the Shareholders prior to or at the Closing, and exert their best
efforts to completely satisfy and fulfill all conditions precedent to the
Seller's and the Shareholders' obligations to close hereunder at the Closing on
the Closing Date.
.8 Exert their best efforts to prevent the occurrence of any event
which could result in any of the Seller's or the Shareholders' representations
and warranties
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contained in this Agreement not being true and correct at or as of the time
immediately after the occurrence of such event, and the Seller and the
Shareholders shall promptly notify the Purchaser of the occurrence of any event
or the discovery of any fact which would cause any of their covenants, promises
and agreements to be breached or violated or any of their representations and
warranties to become not true and correct or which could interfere with or
prevent the consummation of the transactions contemplated hereby.
.9 Provide the Purchaser and its representatives, subject to the
restrictions contained in Section 7.2.8, with full access during normal
business hours to all of the Seller's properties, assets and Records, provide
the Purchaser and its representatives with such financial and operating data
and other information with respect to the Seller's Business, Assets and
properties as the Purchaser shall from time to time request, and permit the
Purchaser and its representatives to consult with the Seller's representatives,
officers, employees and internal accountants up to the time of Closing.
.10 Take no action which is or would cause a material violation of
any material Laws of any Governments or Governmental Agencies.
.11 During the period prior to the Closing, the Seller and the
Shareholders shall promptly notify the Purchaser in writing of:
.0 The discovery by the Seller or any of the Shareholders of
any event, condition, fact or circumstance that occurred or existed on or prior
to the date of this Agreement and that would cause or constitute a material
breach of any representation or warranty made by the Seller or any of the
Shareholders in this Agreement;
.1 Any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement that would cause or
constitute a material breach of any representation or warranty made by the
Seller or any of the Shareholders in this Agreement if (a) such representation
or warranty had been made as if at the time of the occurrence, existence or
discovery of such event, condition, fact or circumstances, or (b) such event,
condition, fact or circumstance had occurred, arisen or existed on or prior to
the date of this Agreement;
.2 Any material breach of any covenant or obligation of the
Seller or any of the Shareholders; and
.3 Any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article 7 impossible
or unlikely.
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V -- OPINIONS OF COUNSEL
.0 Opinion of Seller's and the Shareholders' Counsel. At the Closing, the
Seller, W. Curtis Smith and James P. Borke shall deliver to the Purchaser the
opinion of their counsel, dated as of the Closing Date, which shall be in
substantially the form attached hereto as EXHIBIT 6.1.
.1 Opinion of Purchaser's Counsel. At the Closing, the Purchaser and NRE
shall deliver to the Seller and to the Shareholders the opinion of their
counsel, dated as of the Closing Date in substantially the form attached hereto
as EXHIBIT 6.2.
VI -- CONDITIONS
.0 Seller's Conditions to Close. The Seller's and the Shareholders'
obligation to close the transactions contemplated hereby at the Closing shall
be subject to the complete satisfaction and fulfillment of all of the following
conditions precedent, any or all of which may be waived in whole or in part by
the Seller (but no such waiver of any such condition precedent shall be or
constitute a waiver of any covenant, promise, agreement, representation or
warranty made by the Purchaser in this Agreement):
.0 All representations and warranties made by the Purchaser and NRE
in this Agreement shall be complete and accurate at and as of the Closing on
the Closing Date. The Seller shall have been furnished with a certificate,
signed by the Purchaser and NRE, and dated the Closing Date to the foregoing
effect.
.1 All covenants, promises and agreements made by the Purchaser in
this Agreement and all other actions required to be performed or complied with
by the Purchaser under this Agreement prior to or at the Closing shall have
been fully performed or complied with by the Purchaser. Seller shall have been
furnished with a certificate, signed by the Purchaser, and dated the Closing
Date to the foregoing effect.
.2 The Purchaser shall deliver to the Seller by wire transfer or bank
check the amount of cash set forth in Section 1.4 of this Agreement.
.3 The Purchaser shall deliver to the Seller a Guaranty signed by NRE
in the form attached hereto as EXHIBIT 1.9 and incorporated herein by
reference.
.4 The Purchaser shall have obtained, and delivered to the Seller,
copies of all consents, approvals or other authorizations which the Purchaser
is required to obtain from, and any filing which the Purchaser is required to
make with, any governmental authority or agency or any other person in
connection with the execution, delivery and consummation of this Agreement and
the other documents associated herewith and the consummation of the
transactions contemplated hereby or thereby, in form and substance satisfactory
to the Seller.
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.5 The Seller shall have received all things required to be delivered
or furnished to the Seller by the Purchaser hereunder prior to or at the
Closing.
.6 The Seller shall have received an opinion of counsel for the
Purchaser and NRE, as of the Closing Date, as required by Section 6.2 hereof.
.7 The Purchaser shall have delivered to the Seller the following
documents:
.0 the Lease Assignments of the Real Property Leases, the
Consents to Assignment, Estoppel, and Releases, and assumption agreements
relating to any other Assumed Contract, and;
.1 certificates dated no earlier than thirty (30) days prior to
the Closing Date, from the Secretary of State for the States of Delaware and
Kentucky as to the good standing of the Purchaser and a certificate dated no
earlier than thirty (30) days prior to the Closing Date, from the Secretary of
State for the State of Delaware as to the good standing of NRE;
.2 certificates from the corporate secretaries of the Purchaser
and NRE indicating that this transaction has been duly approved and/or
ratified, along with certified copies of the Board of Director minutes
approving the transaction set forth herein.
.3 certificate from the Chief Financial Officer of NRE that as
of the Closing Date there has been no material adverse change in the financial
condition of NRE.
.4 all other documents, instruments and agreements required to
be delivered by the Purchaser to the Seller pursuant to this Agreement.
.8 The Purchaser shall execute, acknowledge, seal and deliver to the
Seller a Warranty Assignment in the form mutually agreeable to the Purchaser,
the Seller and Burger King Corporation pursuant to which the Purchaser shall
accept assignment from the Seller of the Franchise Agreements.
.9 NRE and the Purchaser shall execute, acknowledge, seal and deliver
the Noncompetition Agreement attached hereto as EXHIBIT 1.5.
.10 Seller shall have obtained all consents, approvals or other
authorizations which Seller is required to obtain from NationsBank of Georgia,
N.A., Burger King Corporation and from any lessor, other than Curtis James
Investments, under any of the Leases in connection with the execution delivery
and consummation of this Agreement or the assignment of the Franchise
Agreements or Leases.
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.11 Both the Purchaser and NRE shall have complied with all
applicable Bulk Sale and Bulk Transfer laws in each state where Assets are
located.
.12 The Purchaser and NRE shall have provided all documents and
consents necessary to purchase all of the Burger King restaurants owned by
Fifth & Race, Inc. and Houston, Inc. pursuant to the terms of the Asset
Purchase Agreements signed simultaneously herewith.
.1 Purchaser's Conditions to Close. The Purchaser's obligation to close
the transactions contemplated hereby at the Closing shall be subject to the
complete satisfaction and fulfillment of all of the following conditions
precedent, any or all of which may be waived in whole or in part by the
Purchaser (but no such waiver of any such condition precedent shall be or
constitute a waiver of any covenant, promise, agreement, representation or
warranty made by the Seller and the Shareholders in this Agreement):
.0 All representations and warranties made by the Seller and the
Shareholders in this Agreement shall be materially complete and accurate in all
material respects at and as of the Closing on the Closing Date. The Purchaser
shall have been furnished with a certificate, signed by the Shareholders and
the Seller, and dated the Closing Date to the foregoing effect.
.1 All covenants, promises and agreements made by the Seller and the
Shareholders in this Agreement and all other actions required to be performed
or complied with by the Seller and the Shareholders under this Agreement prior
to or at the Closing shall have been fully performed or complied with by the
Seller and the Shareholders. The Purchaser shall have been furnished with a
certificate, signed by the Shareholders and the Seller, and dated the Closing
Date to the foregoing effect.
.2 On or before December 31, 1995, the Seller shall have obtained,
and delivered to the Purchaser, copies of all consents, approvals or other
authorizations which the Seller is required to obtain from, and any filing
which the Seller is required to make with, any governmental authority or agency
or any other person including, but not limited to, consents required from
Burger King Corporation in connection with the execution, delivery and
consummation of this Agreement and the other documents associated herewith and
the consummation of the transactions contemplated hereby or thereby, in form
and substance satisfactory to the Purchaser. Notwithstanding the foregoing, the
Purchaser shall be solely responsible for obtaining any consents or approvals
necessary for the Purchaser to purchase the Assets or operate the Business from
and after the Closing Date.
.3 The Purchaser shall have received all things required to be
delivered or furnished to the Purchaser by the Seller and the Shareholders
hereunder prior to or at the Closing.
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.4 On or before December 31, 1995, all necessary permits and licenses
required to be obtained by the Purchaser shall have been obtained and paid for
by the Purchaser and the Purchaser shall have exercised all reasonable efforts
to obtain same.
.5 There shall not have occurred any material adverse change in the
business of the Seller or in the Assets.
.6 The Purchaser shall have received an opinion of counsel for the
Seller and the Shareholders, as of the Closing Date, as required by Section 6.1
hereof.
.7 Within thirty (30) days following the execution of this Agreement,
the Purchaser and its representatives shall have completed, to their complete
satisfaction, an investigation and examination of all aspects of the
Restaurants and the Assets, including the Financial Statements (the
"Inspection"). No employee or representative of the Purchaser will perform
on-site due diligence of the Restaurants without the Seller's prior approval,
at which time such employee or representative will be accompanied by the Seller
or its designee. The Purchaser shall itemize any deficiencies noted in the
Inspection and provide such list to the Seller within thirty (30) days after
execution of this Agreement. The Seller shall correct the deficiencies prior to
the Closing Date if the total cost of such corrections does not exceed One
Thousand dollars ($1,000) per Restaurant. If the total cost does exceed this
amount, the Seller shall have the option, exercisable within ten (10) days of
receiving notice of the corrections, to pay for the corrections or terminate
this Agreement. On or prior to Closing, the Purchaser shall have the right to
complete its review of the Restaurants to confirm the Equipment in the
Restaurants is in proper working order and that the Restaurants conform in all
material respects to Burger King standards (the "Walk-Thru") that apply to the
Restaurants.
.8 On or prior to December 31, 1995, the Purchaser shall have
received all consents, approvals and other authorizations which the Purchaser
is required to obtain from, and any filing which the Purchaser is required to
make with, any governmental authority or agency or any other person including,
but not limited to, consents required from Burger King Corporation in
connection with the execution, delivery and consummation of this Agreement
and the other documents associated herewith in the consummation of the
transactions contemplated hereby or thereby, in form and substance
satisfactory to the Purchaser.
.9 The Seller shall have delivered to the Purchaser the following
documents:
.0 the Lease Assignments of its Real Property Leases, each
Assumed Contract, and the Consents to Assignment, Estoppel, and Releases;
.1 any required easement assignments;
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.2 to the extent available, a fully executed original
counterpart of each Real Property Lease in the Seller's possession;
.3 a receipt for funds paid to the Seller by the Purchaser;
.4 certificates dated no earlier than thirty (30) days prior to
the Closing Date, from the Secretaries of State for the States of Kentucky,
Ohio, and Indiana as to the good standing of the Seller;
.5 certificates from the corporate secretary of the Seller
indicating that this transaction has been duly approved and/or ratified, along
with certified copies of the Board of Director minutes approving the
transaction set forth herein.
.6 all other documents, instruments and agreements required to
be delivered by the Seller to the Purchaser pursuant to this Agreement.
.10 Between the date of this Agreement and the Closing Date, the
Seller shall conduct the operation of its Restaurants in the ordinary and usual
course of business, consistent with past practices and will use its best
efforts to preserve intact the present business organization with respect to
its Restaurants, to keep available the services of its officers and employees
and to maintain satisfactory relationships with landlords, franchisors,
dealers, licensors, licensees, suppliers, contractors, distributors, customers
and others having business relations with it and its Restaurants and will
maintain its Restaurants, real property, and Assets in a condition conducive to
the operation of the business currently carried on therein.
.11 The Seller shall have provided to the Purchaser copies of all
operating permits and licenses (collectively, the "Approvals") which are in the
Seller's possession.
.12 The Seller shall have provided to the Purchaser copies of
all documents with respect to any pending actions, suit or proceeding which has
been brought by or on behalf of the Seller with respect to the Assets or the
Business.
.13 The Seller shall execute, acknowledge, seal, and deliver to the
Purchaser a Bill of Sale and Assignment in the form attached hereto as EXHIBIT
7.2.14 and incorporated herein by reference pursuant to which the Seller shall
sell, assign, and transfer to the Purchaser the Assets and the Inventory.
.14 The Seller shall execute, acknowledge, seal and deliver to the
Purchaser a Warranty Assignment in the form mutually acceptable to the
Purchaser, the Seller and Burger King Corporation pursuant to which the Seller
shall sell, assign and transfer to the Purchaser the Franchise Agreements.
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.15 The Shareholders, the Seller, NRE and the Purchaser shall
execute, acknowledge, seal and deliver the Noncompetition Agreement attached
hereto as EXHIBIT 1.5.
.16 The Seller shall have previously delivered to the Purchaser the
Real Property Leases and the Purchaser shall have thirty days after the date of
this Agreement to review such Real Property Leases to ensure that each of them
are satisfactory to the Purchaser, in its sole discretion.
.17 Prior to December 31, 1995, the Purchaser's auditor shall have
(i) reviewed the financial and accounting system of the Seller and found them
to be satisfactory to Purchaser, in its sole discretion; (ii) reviewed and
confirmed the accuracy of the Financial Statements and results set forth in the
Financial Statements; and (iii) found no objection to the financial and
accounting system of the Seller, or the Seller and the Purchaser shall have
resolved any objection raised by the auditor and presented to the Seller by the
Purchaser.
.18 The Board of Directors of NRE shall have approved this Agreement
and the transactions contemplated herein within thirty (30) days of the date of
this Agreement.
.19 Both the Seller and the Shareholders shall have complied with all
applicable Bulk Sale and Bulk Transfer laws in each state where Assets are
located.
.20 The Shareholders shall have provided all documents and consents
necessary to sell to the Purchaser all of the Burger King restaurants owned by
Fifth & Race, Inc. and Houston, Inc. pursuant to the terms of the Asset
Purchase Agreements signed simultaneously herewith.
.2 Contemporaneous Transfer. All transfers, assignments, conveyances, and
transactions under this Agreement shall be effected contemporaneously for
present value between and among the Seller, the Shareholders and the Purchaser.
7.4 Satisfaction of Conditions. If written notice of an unsatisfied
condition is not provided by the Purchaser or the Seller to the other parties
to this Agreement (a "Notice") on or before the deadline for satisfying that
condition arises, the condition shall be deemedsatisfied or waived and shall
not serve as a basis for terminating this Agreement. Upon receipt of a Notice,
the parties agree to negotiate in good faith for an extension to the deadline
for satisfying the condition prior to the exercise of any right to terminate
this Agreement. If the parties cannot reach an Agreement regarding the
extension of a deadline to satisfy the condition within ten (10) days following
the receipt of a Notice (the "Negotiation Period"), the party who sent the
Notice shall have the option to waive the condition or terminate the Agreement
within ten (10) days following the end of the Negotiation Period.
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VII -- INDEMNIFICATION
.0 Indemnification By Seller and the Shareholders. The Seller and the
Shareholders, jointly and severally, shall defend, indemnify and hold harmless
the Purchaser and NRE, their officers, directors, stockholders, agents,
servants and employees and their respective heirs, personal and legal
representatives, guardians, successors and assigns, from and against any and
all claims, threats, liabilities, taxes, interest, fines, penalties, suits,
actions, proceedings, demands, damages, losses, costs and expenses (including
reasonable attorneys' and experts' fees and court costs) of every kind and
nature arising out of, resulting from, or in connection with the following:
.0 Any misrepresentation or breach by the Seller or the Shareholders
of any representation or warranty contained in this Agreement, except for those
specifically set forth in sections 8.1.5 and 8.1.6 below, contained in this
Agreement for a period not to exceed one (1) year following the Closing Date.
.1 Any nonperformance, failure to comply or breach by the Seller or
the Shareholders of any covenant, promise or agreement of the Seller or the
Shareholders contained in this Agreement for a period not to exceed one (1)
year following the Closing Date.
.2 Any debts, obligations, duties and liabilities of the Seller and
the Shareholders (except those assumed by the Purchaser).
.3 Any matter, act, thing or occurrence caused by or resulting from
any act or omission of the Seller or the Shareholders prior to or at the
Closing for a period not to exceed one (1) year following the Closing
Date.
.4 Any claim relating to a breach or misrepresentation of a
representation or warranty made by the Seller or the Shareholders with regard
to the Assumed Contracts or Environmental Laws.
.1 Indemnification by Purchaser. The Purchaser and NRE, jointly and
severally, shall defend, indemnify and hold harmless the Seller, the
Shareholders and their respective heirs, personal and legal representatives,
guardians, successors and assigns, from and againstany and all claims, threats,
liabilities, taxes, interest, fines, penalties, suits, actions, proceedings,
demands, damages, losses, costs and expenses (including attorneys' and experts'
fees and court costs) of every kind and nature arising out of, resulting from,
or in connection with the following:
.0 Any misrepresentation, omission or breach by the Purchaser of any
representation or warranty contained in this Agreement for a period not to
exceed one (1) year following the Closing Date.
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.1 Any nonperformance, failure to comply or breach by the Purchaser
of any covenant, promise or agreement of the Purchaser contained in this
Agreement for a period not to exceed one (1) year following the Closing Date.
.2 To the extent the same are assumed, any debts, obligations, duties
and liabilities of the Purchaser under the Assumed Contracts.
.3 To the extent a claim arises after the Closing, any matter, act,
thing or occurrence caused by or resulting from any act or omission of
Purchaser prior to or at the Closing for a period not to exceed one (1) year
following the Closing Date.
.2 Defense of Claims. In the event of any claim, threat, liability, tax,
interest, fine, penalty, suit, action, proceeding, demand, damage, loss, cost
or expense with respect to which indemnity is or may be sought hereunder (an
"Indemnity Claim"), the indemnified party shall promptly notify the
indemnifying party of such Indemnity Claim, specifying in reasonable detail the
Indemnity Claim and the circumstances under which it arose. The indemnifying
party may elect to assume the defense of such Indemnity Claim, at its own
expense, by written notice to the indemnified party given within 10 days after
the indemnifying party receives notice of the Indemnity Claim, and the
indemnifying party shall promptly engage counsel reasonably acceptable to the
indemnified party to direct and conduct such defense; provided, however, that
the indemnified party shall have the right to engage its own counsel, at its
own expense, to participate in such defense. In the event the indemnifying
party does not so elect to assume the defense of such Indemnity Claim in the
manner specified above, or if, in the reasonable opinion of counsel to the
indemnified party, there are defenses available to the indemnified party which
are different from or additional to those available to the indemnifying party
or which give rise to a material conflict between the defense of the
indemnified party and of the indemnifying party, then upon notice to the
indemnifying party, the indemnified party may elect to engage separate counsel
to conduct its defense, at the expense of the indemnifying party, and the
indemnifying party shall not have the right to direct or conduct such defense.
In the event the indemnifying party assumes the defense of any Indemnity
Claim, it may at any time notify the indemnified party of its intention to
settle, compromise or satisfy such Indemnity Claim and may make such
settlement, compromise or satisfaction (at its ownexpense) unless within 20
days after the giving of such notice the indemnified party shall give notice to
the indemnifying party of its intention to assume the defense of the Indemnity
Claim, in which event the indemnifying party shall be relieved of its duty
hereunder to indemnify the indemnified party. Unless the indemnified party
shall have given the notice referred to in the preceding sentence, (i) the
indemnified party shall not consent to or make any settlement, compromise or
satisfaction with respect to the Indemnity Claim without the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld, and (ii) any settlement, compromise or satisfaction made by the
indemnifying party with respect to such Indemnity Claim shall be deemed to have
been consented to by and shall be binding upon the indemnified party.
24
<PAGE>
.3 Setoff. In addition to any rights of setoff or other rights that any
party may have at common law or otherwise, any party shall have the right to
setoff any amount that may be owed to any other party (whether pursuant to this
Agreement or any other obligation outside of this Agreement) against any amount
otherwise payable by any party to any other party hereto.
VIII -- MISCELLANEOUS
.0 Survival of Representations, Warranties and Agreements. All of the
representations, warranties, covenants, promises and agreements of the parties
contained in this Agreement (or in any document delivered or to be delivered
pursuant to this Agreement or at or in connection with the Closing) shall
survive the execution, acknowledgment, sealing and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and shall
continue to be binding regardless of any investigation made at any time by or
on behalf of any party, for the period in which a claim may be brought as
provided in Article VIII and, with respect to a claim properly brought within
such period, shall survive until a final resolution or non-appealable
determination of such claim has been made.
.1 Notices. All notices, requests, demands, consents, and other
communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either (a)
by personal delivery with a receipted copy of such delivery, or (b) by
certified or registered United States mail, return receipt requested, postage
prepaid, to the following addresses:
(i) If to the Seller, to:
W. Curtis Smith, President
Thirty-Forty, Inc.
207 Grandview Drive, Suite 125
Ft. Mitchell, KY 41017
Telefax No.: (606) 331-9059
with a copy to:
Edward J. Buechel, Esq.
Dinsmore & Shohl
7300 Turfway Road, Suite 430
Florence, KY 41042-1355
Telefax No.: (606) 283-6017
25
<PAGE>
(ii) If to the Shareholders, to:
W. Curtis Smith
James P. Borke
207 Grandview Drive, Suite 125
Ft. Mitchell, KY 41017
Telefax No.: (606) 331-9059
(iii) If to the Purchaser:
Lawrence E. Jaro, Chief Executive Officer
AmeriKing Cincinnati Corporation I
2215 Enterprise Drive
Westchester, IL 60154
Telefax No.: (708) 947-2160
with copies to:
A. Richard Caputo
The Jordan Company
9 West 57th Street, Suite 4000
New York, New York 10019
Telefax No.: (212) 755-5263
and
Ernest J. Panasci, Esq.
FREEBORN & PETERS
950 Seventeenth Street, Suite 2600
Denver, CO 80202
Telefax No.: (303) 628-4240
or to such other address of which written notice in accordance with this
Section 9.2 shall have been provided to the other parties. Notices may only be
given in the manner hereinabove described in this Section 9.2 and shall be
deemed received three (3) days after given in such manner.
.2 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the full, entire and integrated agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
negotiations, correspondence, understandings and agreements among the parties
hereto respecting the subject matter hereof.
.3 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties hereto.
26
<PAGE>
.4 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, personal and
legal representatives, guardians, successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended to confer upon any other person
any rights, remedies, obligations, or liabilities.
.5 Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable only shall be
ineffective only to the extent of such prohibition or unenforceability, without
invalidating or rendering unenforceable the remaining provisions of this
Agreement.
.6 Amendment; Waiver. No provision of this Agreement may be amended,
waived or otherwise modified without the prior written consent of all of the
parties hereto. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement herein contained. The waiver by any party
hereto of a breach of any provision or condition contained in this Agreement
shall not operate or be construed as a waiver of any subsequent breach or of
any other conditions hereof.
.7 Section Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
.9 Applicable Law; Jurisdiction and Venue; Service of Process. This
Agreement shall be governed by, construed, interpreted and enforced in
accordance with the laws of the State of Kentucky, without giving effect to
principles of conflicts of laws.
.10 Remedies. The parties hereto acknowledge that in the event of a breach
of this Agreement, any claim for monetary damages hereunder may not constitute
an adequate remedy, and that it may therefore be necessary for the protection
of the parties to carry out the terms of this Agreement to apply for the
specific performance of the provisions hereof. It is accordingly hereby agreed
by all parties that no objection to the form of the action or the relief prayed
for in any proceeding for specific performance of this Agreement shall be
raised by any party, in order that such relief may be expeditiously obtained by
an aggrieved party. All parties may proceed to protect and enforce their rights
hereunder by a suit in equity, transaction at law or other appropriate
proceeding, whether for specific performance or for an injunction against a
violation of the terms hereof or in aid of the exercise of any right, power or
remedy granted hereunder or by law, equity or statute or otherwise. No course
of dealing and no delay on the part of any party hereto
27
<PAGE>
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice its rights, powers or remedies, and no right, power or
remedy conferred hereby shall be exclusive of any other right, power or remedy
referred to herein or now or hereafter available at law, in equity, by statute
or otherwise.
.11 Further Assurances. All parties hereto jointly and severally agree to
execute, acknowledge, seal and deliver, after the date hereof, without
additional consideration, such further assurances, instruments and documents,
and to take such further actions, as any party may reasonably request in order
to fulfill the intent of this Agreement and the transactions contemplated
hereby.
.12 Use of Genders. Whenever used in this Agreement, the singular shall
include the plural and vice versa, and the use of any gender shall include all
genders and the neuter.
.13 Risk of Loss. All risk of loss of damage to or destruction of the
Assets, in whole or in part, shall be and remain with the Seller until the
Closing and all of the transactions contemplated hereby shall have been
consummated.
.14 Negotiations with Other Persons. Until the earlier of the Closing or
the termination of this Agreement as provided herein, neither the Seller nor
the Shareholders shall initiate, encourage the initiation by others, or
participate in any discussion or negotiations with any other person or entity
relating to the sale of any or all of the Assets, the business of the Seller or
any securities of the Seller. From the date of this Agreement and until after
the Closing and the consummation of the transactions contemplated by this
Agreement or earlier termination of this Agreement, the Shareholders shall not
offer for sale, sell or otherwise transfer (with or without consideration) any
securities of the Seller owned of record or beneficially by any of them.
.15 Expenses of Transactions. All sales, transfer and use taxes incurred
in connection with the sale, assignment, transfer and delivery of the Assets
shall be paid by the Seller.
.16 Fees and Expenses. Each party to this transaction shall pay its own
professional fees and costs, including fees for attorneys, accountants and
other professional services.
.17 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or any documents associated with this Agreement or
the enforcement of any provision of any of the accompanying documents as
brought against any party hereto, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition any
other relief to which the prevailing party may be entitled).
.18 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). Each Shareholder
agrees that in the
28
<PAGE>
event of any breach or threatened breach by the Seller or any of the
Shareholders of any covenant, obligation or other provisions set forth in this
Agreement, that the Purchaser shall be entitled (in addition any other remedy
that may be available to it) to (i) a degree or order of specific performance
or mandamus to enforce the observance and performance of such covenant,
obligation or other provision, and (ii) an injunction restraining such breach
or threatened breach.
.19 Completion of Exhibits. The parties hereto acknowledge and agree that
this Agreement is being executed without the completion of all Exhibits. Any
Exhibits not attached to this Agreement as of the date of the execution of this
Agreement shall be provided to the Purchaser on or before November 8, 1995. The
Purchaser shall have until November 10, 1995, to review the Exhibits and
provide notice to the Sellers of any unsatisfactory Exhibits. The Sellers shall
then have one (1) business day to correct any deficiencies in the Exhibits or
the Agreement will terminate in the sole and absolute discretion of the
Purchaser.
.20 Covenant of Good Faith. All parties to this Agreement covenant and
agree to act in good faith to diligently complete, to the best of their
abilities, all conditions precedent to the Closing.
[REMAINDER OF PAGE IS INTENTIONALLY BLANK AS THIS
AGREEMENT CONTAINS NO ADDITIONAL SECTIONS.]
29
<PAGE>
`
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement under seal, with the intention of making it a sealed instrument, on
the date first above written.
Seller:
ATTEST: THIRTY-FORTY, INC.
________________________________ By:______________________________
W. Curtis Smith, President
WITNESS: SHAREHOLDERS:
- --------------------------------- ---------------------------------
James R. Borke
- --------------------------------- ---------------------------------
W. Curtis Smith
Purchaser:
ATTEST: AMERIKING CINCINNATI
CORPORATION I
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief Executive
Officer
ATTEST: NATIONAL RESTAURANT
ENTERPRISES, INC.
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief Executive
Officer
30
<PAGE>
EXHIBIT LIST
1.1.1 Equipment, Materials, Furniture and Supplies
1.1.4 Franchise Agreements
#1851
#2394
#3330
#3758
#2729
#4556
#5435
#6186
#6489
1.1.7 (a) List of Real Property Leases
(b) Lease Assignment and Assumption Agreement
(c) Consent to Assignment, Estoppel, and Release
1.1.8 Retained Records
1.4 Allocation of Purchase Price
1.5 Noncompetition Agreement
1.6 Contracts to be Assumed
1.7 Prorations
1.8 Excluded Assets
1.9 Guaranty
3.2 Names Previously used by Seller and Jurisdictions Seller is
Qualified to
Transact Business in
3.4 Defaults and Conflicts
3.6 Legal Proceedings
3.7 Financial Statements
3.10 Liens and Encumbrances
31
<PAGE>
3.12.2 Violations of Employment Laws
3.12.3 Employment Agreements
3.12.5 Employee Benefit Plans
3.13 Changed Events
3.14 Adverse Conditions
3.15 List of Contracts, Licenses and Agreements involving
liabilities of more than $1000
3.16 Bonus and Pension Plans
3.19 Breaches in the Franchise Agreements
4.5 Defaults and Conflicts
4.6 Legal Proceedings
4.8 Financial Information
6.1 Opinion of Seller's Counsel
6.2 Opinion of Purchaser's Counsel
7.2.14 Bill of Sale and Assignment
32
ASSET PURCHASE AGREEMENT
among
HOUSTON, INC., THE SHAREHOLDERS OF HOUSTON, INC.
and
AMERIKING CINCINNATI CORPORATION I
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I -- PURCHASE AND SALE OF ASSETS.................................................................2
1.1 Purchase and Sale...............................................................................2
1.2 Store Bank......................................................................................3
1.3 Inventory.......................................................................................3
1.4 Purchase Price for Assets; Allocations..........................................................3
1.5 Noncompetition Agreement........................................................................3
1.6 Liabilities of Seller...........................................................................4
1.7 Prorations......................................................................................4
1.8 Exclusion of Assets.............................................................................4
1.9 Guaranty of Payment.............................................................................4
ARTICLE II -- CLOSING AND TERMINATION....................................................................5
2.1 Time, Date and Place............................................................................5
2.2 Termination.....................................................................................5
2.3 Effect of Termination...........................................................................5
ARTICLE III -- REPRESENTATIONS AND WARRANTIES
3.1 Ownership of Seller's Stock.....................................................................6
3.2 Due Organization; Name and Address; Good Standing, Authority of Seller..........................6
3.3 Authorization and Validity of Agreements........................................................6
3.4 Agreement Not in Conflict with Other Instruments; Required Approvals Obtained...................7
3.5 Conduct of Business in Compliance with Regulatory and Contractual Requirement...................7
3.6 Legal Proceedings...............................................................................7
3.7 Financial Information...........................................................................8
3.8 Tax Matters.....................................................................................8
3.9 Franchise Agreements............................................................................8
3.10 Title to Assets and Equipment...................................................................9
3.11 Records.........................................................................................9
3.12 Employment Matters..............................................................................9
3.13 Absence of Certain Changes or Events...........................................................10
3.14 Adverse Conditions.............................................................................10
3.15 Leases.........................................................................................10
3.16 Bonus, Pension or Other Plans, etc.............................................................10
3.17 Full Disclosure................................................................................11
3.18 No Brokerage...................................................................................11
3.19 Seller's Franchise Agreements..................................................................11
3.20 Operation of Business..........................................................................11
3.21 Environmental Matters..........................................................................11
3.22 Bulk Sale Laws.................................................................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..............................................12
<PAGE>
4.1 Due Organization; Good Standing; Power.........................................................12
4.2 Authorization and Validity of Agreements.......................................................12
4.3 No Brokerage...................................................................................13
4.4 Obligations Assumed............................................................................13
4.5 Agreement Not in Conflict with Other Instruments; Required Approvals Obtained..................13
4.6 Legal Proceedings. ...........................................................................13
4.7 Full Disclosure................................................................................13
4.8 Financial Information..........................................................................14
4.9 Seller's Access to Records after the Closing...................................................14
4.10 Bulk Sale Laws.................................................................................14
ARTICLE V -- SELLER AND THE SHAREHOLDERS' COVENANTS.....................................................15
5.1 Affirmative Covenants..........................................................................15
ARTICLE VI -- OPINIONS OF COUNSEL.......................................................................17
6.1 Opinion of Seller's and the Shareholders' Counsel..............................................17
6.2 Opinion of Purchaser's Counsel.................................................................17
ARTICLE VII -- CONDITIONS...............................................................................17
7.1 Seller's Conditions to Close...................................................................17
7.2 Purchaser's Conditions to Close................................................................19
7.3 Contemporaneous Transfer.......................................................................22
ARTICLE VIII -- INDEMNIFICATION.........................................................................23
8.1 Indemnification By Seller and the Shareholders.................................................23
8.2 Indemnification by Purchaser...................................................................23
8.3 Defense of Claims..............................................................................24
ARTICLE IX -- MISCELLANEOUS.............................................................................25
9.1 Survival of Representations, Warranties and Agreements.........................................25
9.2 Notices........................................................................................25
9.3 Entire Agreement...............................................................................26
9.4 Assignability..................................................................................27
9.5 Binding Effect; Benefit........................................................................27
9.6 Severability...................................................................................27
9.7 Amendment; Waiver..............................................................................27
9.8 Section Headings...............................................................................27
9.9 Counterparts...................................................................................27
9.10 Applicable Law; Jurisdiction and Venue; Service of Process.....................................27
9.11 Remedies.......................................................................................27
9.12 Further Assurances.............................................................................28
9.13 Use of Genders.................................................................................28
9.14 Risk of Loss...................................................................................28
9.15 Negotiations with Other Persons................................................................28
9.16 Expenses of Transactions.......................................................................28
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 6th day of November, 1995, among HOUSTON, INC., a Kentucky
corporation (the "Seller"); and JAMES P. BORKE, W. CURTIS SMITH and WILLIAM T.
KELLER (referred to as the "Shareholders"), NATIONAL RESTAURANT ENTERPRISES,
INC. D/B/A AMERIKING CORPORATION ("NRE") and AMERIKING CINCINNATI CORPORATION
I, a Delaware corporation (the "Purchaser").
R E C I T A L S:
WHEREAS, the Seller operates two Burger King restaurants (the
"Business") located at (1) 4868 Houston Road, Florence, Kentucky 41042 and
identified by Burger King Store No. 7751; and (2) 419 Market Square,
Maysville, Kentucky 41018 and identified by Burger King Store No. 8483
(hereinafter, collectively referred to as the "Restaurants");
WHEREAS, the Shareholders own of record and beneficially all of the
outstanding shares of the capital stock of the Seller, and the Shareholders
are the directors and officers of the Seller;
WHEREAS, the Seller desires to sell, assign, transfer and deliver to
the Purchaser, and the Purchaser desires to purchase from the Seller, certain
of the assets of the Seller as described in ARTICLE I hereof on the terms and
subject to the conditions hereinafter contained;
WHEREAS, the Purchaser, the Seller, NRE and the Shareholders desire
to enter into certain agreements among them providing for, among other things,
a covenant not to compete with the Purchaser and its parent corporation, NRE,
on the terms and subject to the conditions hereinafter contained;
WHEREAS, the Seller occupies real property (the "Premises") pursuant
to Lease Agreements (the "Real Property Leases") which the Seller proposes to
assign to the Purchaser, and the Purchaser proposes to agree to such
assignments of the Seller's leasehold interests with respect to the Real
Property Leases; and
WHEREAS, the Purchaser proposes to assume the Real Property Leases
and assume certain contracts as set forth herein.
NOW THEREFORE, in consideration of the Recitals that shall be deemed
to be a substantive part of this Agreement and the mutual covenants, promises,
agreements, representations and warranties contained in this Agreement, the
parties hereto do hereby covenant, promise, agree, represent and warrant as
follows:
-- PURCHASE AND SALE OF ASSETS
1
<PAGE>
.0 Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement, at the Closing on the Closing Date (as such terms are
defined in Section 2.1 hereof), the Purchaser shall purchase from the Seller
all of the assets used or held for use in connection with the Restaurants
(excluding the "Excluded Assets" defined in paragraph 1.8 below) including but
not limited to the following (all of which assets of the Seller, excluding the
Excluded Assets, are hereinafter collectively referred to as the "Assets"):
.0 All of the Seller's equipment, furniture, materials, fixed assets
and supplies, including, but not limited to, all of the equipment, furniture,
materials and supplies described in EXHIBIT 1.1.1 attached hereto and
incorporated by reference herein (the "Equipment").
.1 All of the Seller's gift certificates which have been
purchased from Burger King Corporation.
.2 All of the Seller's saleable, usable and merchantable Inventory (as
hereinafter defined) located at the Restaurants.
.3 All of the Seller's rights under the following Burger King
Franchise Agreements between the Seller and Burger King Corporation, copies of
which are attached hereto as EXHIBIT 1.1.4 and incorporated by reference
herein (collectively and individually the "Franchise Agreements"): (i)
Franchise Agreement dated May, 1993 relating to Franchise #7751 located in
Florence, Kentucky, and (ii) Franchise Agreement dated October 10, 1994,
relating to Franchise #8483 located in Maysville, Kentucky.
.4 All of the Seller's leasehold and tenant improvements (excluding
fixtures that have become part of the real property to which they are
attached).
.5 All of the Seller's customer lists and customer sales files
("Customer Lists").
.6 All of the Seller's leasehold interests in the Real Property Leases
described on EXHIBIT 1.1.7(A). At the Closing, the Seller shall assign to the
Purchaser all of the Seller's leasehold interest in the Real Property Leases,
parking and other access agreements relating to the Premises. At the Closing,
the Seller shall deliver to the Purchaser (i) Lease Assignment and Assumption
Agreements (the "Lease Assignments") , and (ii) Consents to Assignment,
Estoppel, and Releases in the form of EXHIBITS 1.1.7 (B) and (C) attached
hereto and incorporated by reference herein.
.7 Except for those assets described on EXHIBIT 1.1.8, all of the
Seller's goodwill and original copies of all of the Seller's employment and
personnel records, books and records relating or pertaining to the Seller's
Business, including all sales records and similar data (hereinafter
collectively referred to as the "Records"). The Seller reserves the
2
<PAGE>
right to inspect such records at such reasonable times and places after
Closing for any legitimate business purpose including tax audits.
.1 Store Bank. Upon the Closing, the Seller shall leave cash (the "Store
Bank") in the amount of not less than $1,000 at each of the Restaurants. The
Purchaser agrees to purchase the Store Bank in addition to the Purchase Price
at Closing.
.2 Inventory. Within 24 hours prior to the date of the Closing, an
inventory
shall be taken by the Seller (with the participation of the Purchaser) of all
merchantable food, paper, new uniforms, current and readily disposable
promotional items, supply inventory (including but not limited to,
consumables, operating and cleaning supplies) and other miscellaneous items
(the "Inventory") located at the Restaurants. The Purchaser agrees to purchase
the Inventory from the Seller, and the Seller agrees to sell the Inventory to
the Purchaser, at the Seller's actual Inventory purchase price. On the Closing
Date, the Purchaser agrees to pay the Seller the sum of $6,000 per Restaurant
separately and not as part of the Purchase Price, as partial payment for the
Inventory. Following the taking of the Inventory as discussed above, the
Seller and the Purchaser agree to make adjustments to the Inventory purchase
price for the difference between the amount paid on the Closing Date and the
Seller's actual Inventory purchase price. In the event the total Inventory
purchase price is less than $12,000 for all Restaurants, the Seller shall
within fifteen (15) days of the Closing Date, reimburse the Purchaser for any
overage in payment. In the event the total Inventory purchase price is in
excess of $12,000, the Purchaser agrees to make payment to the Seller within
fifteen (15) days of the Closing Date of any additional monies which may be
due for the purchase of the Inventory.
.3 Purchase Price for Assets; Allocations. The purchase price for the
Assets shall be One Million, Seven Hundred Twenty-two Thousand dollars
($1,722,000) adjusted pursuant to Section 1.7 (the "Purchase Price"), plus (i)
the total dollar amount in the Store Bank at the Closing Date; (ii) $12,000 for
the estimated value of the Inventory at the Closing Date; and (iii) the actual
amount paid by the Seller for gift certificates which will be transferred to
the Purchaser at Closing. The parties agree that the Purchase Price for the
Assets shall be allocated among the Assets in the manner set forth on EXHIBIT
1.4, which shall be mutually agreed to by the Seller and the Purchaser prior
to the Closing Date. The total purchase price shall be paid in cash at
Closing.
.4 Noncompetition Agreement. At the Closing, the Purchaser, NRE, the
Shareholders and the Seller shall enter into a Noncompetition Agreement in the
form attached hereto as EXHIBIT 1.5 (hereinafter referred to as the
"Noncompetition Agreement") pursuant to which the Seller and the Shareholders
shall agree not to compete with the business of the Purchaser and NRE for five
(5) years from and after the Closing Date.
.5 Liabilities of Seller. Except as set forth in this Section 1.6, the
Seller shall be and remain solely liable and responsible for all debts,
obligations, duties, and liabilities of the Seller and its business which are
outstanding at Closing. The Purchaser does not and
3
<PAGE>
shall not assume, agree to pay or pay any debts, obligations, duties or
liabilities of any nature of the Seller or its business, including, but not
limited, to any debts, obligations, duties or liabilities relating to the
Seller's employees or employee benefit plans, regardless of whether any such
debt, obligation, duties or liability arises under any contract, agreement,
practice, arrangement, statute, law, ordinance, rule, regulation or otherwise,
and nothing in this Agreement or otherwise is intended or shall be construed
to the contrary. The parties further covenant, promise and agree that the
Purchaser is not and shall not be obligated or required to employ more than,
to the extent applicable, the requisite number of employees in order to comply
with the Worker Adjustment and Retraining Notification Act ("WARN Act").
Notwithstanding the foregoing, the Purchaser agrees to assume from and after
the Closing Date all of the rights and obligations of the Seller attributable
to the period from and after the Closing Date under the Franchise Agreements,
the Real Property Leases and the contracts to be assumed described on EXHIBITS
1.1.4, 1.1.7(A) AND 1.6 (collectively, the "Assumed Contracts").
.6 Prorations. All customary prorations with respect to obligations under
the Assumed Contracts, utility and fuel charges, personal property taxes and
other proratable charges related to the operation of the Restaurants shall be
adjusted between the parties as of 6:00 a.m. on the Closing Date. Payment of
the amount due by reason of the foregoing prorations shall be made at the
Closing or as soon thereafter as reasonably practicable. All real estate taxes
which relate to the tax year in which the Closing occurs shall, when received,
be prorated as of the Closing Date; in the event the real estate taxes
relating to the tax year in which the Closing occurs or a subsequent year have
already been paid by the Seller, then said taxes shall be prorated as of the
Closing and the Seller shall be reimbursed for its pro rata portion thereof at
Closing. All rentals, including minimum and percentage rentals, and other
monetary obligations under the Real Property Leases shall be adjusted as
described on EXHIBIT 1.7 for the month in which the Closing occurs.
.7 Exclusion of Assets. Notwithstanding any other provision of this
Agreement, those assets of the Seller and/or the Shareholders as set forth in
full in EXHIBIT 1.8 attached hereto and incorporated herein (the "Excluded
Assets") are not being purchased by the Purchaser.
.8 Guaranty of Payment. All obligations of the Purchaser hereunder,
including all payments of amounts due hereunder from the Purchaser (including
but not limited to the Purchase Price) as well as any amounts owed to the
Seller and to the Shareholders pursuant to the terms of the Noncompetition
Agreement and the indemnification in Article VIII are guaranteed by NRE and
NRE shall execute and deliver a Guaranty in the form of EXHIBIT 1.9 to
evidence such guaranty at Closing.
4
<PAGE>
I-- CLOSING AND TERMINATION
.0 Time, Date and Place. The closing of the purchase and sale of the
Assets and the other transactions contemplated by this Agreement (referred to
throughout this Agreement as the "Closing") shall take place at the offices of
Seller's counsel, Dinsmore & Shohl, 1900 Chemed Center, 255 East Fifth Street,
Cincinnati, Ohio 45202. The time, place and date of the Closing are referred
to throughout this Agreement as the "Closing Date."
Unless this Agreement is terminated as provided for herein, the Closing
shall occur on the later of (i) January 5, 1996; or (ii) ten (10) days
following the satisfaction of all conditions precedent set forth in ARTICLE
VII. If such day is not a business day then the Closing shall occur on the
next succeeding business day.
.1 Termination.
.0 If the Closing contemplated hereunder has not occurred on or before
February 29, 1996, either the Purchaser or the Seller may terminate this
Agreement upon written notice to the other party.
.1 If any of the representations, warranties or covenants of the Seller
or the Shareholders are found to be untrue or breached in any material
respect, at or prior to Closing, and the Seller or the Shareholders shall not
have cured such breach within 30 days after the Purchaser shall have given
written notice to the Seller of the existence of such breach, the Purchaser
may terminate this Agreement upon written notice to the Seller. If any of the
representations, warranties or covenants of the Purchaser or NRE are found to
be untrue or breached in any material respect, at or prior to Closing, and the
Purchaser or NRE shall not have cured such breach within 30 days after the
Seller shall have given written notice to the Purchaser and NRE of the
existence of such breach, the Seller may terminate this Agreement upon written
notice to the Purchaser.
.2 This Agreement may be terminated by the written agreement of the
Purchaser and the Seller. This Agreement may be terminated by the Purchaser in
its sole discretion if any of the contingencies set forth in Sections 7.2.8 or
7.2.9 are not met to the Purchaser's satisfaction. This Agreement may be
terminated by the Seller in its sole discretion if any of the contingencies
set forth in Section 7.1.11 are not met to the Seller's satisfaction.
2.3 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 2.2, this Agreement shall be
of no further force and effect, with no liabilities or obligations to any
party under this Agreement; provided, however, that the parties shall not be
released from any liabilities, claims or actions regarding the falsity in any
material respect of a representation or warranty set forth in ARTICLE III or
ARTICLE IV or a failure to perform or comply with any material obligation
under this Agreement.
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II-- REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS
The Seller and the Shareholders, jointly and severally, represent and
warrant to the Purchaser as of the date hereof and as of the Closing on the
Closing Date each of the following:
.0 Ownership of Seller's Stock. The Shareholders are the sole and
exclusive record and beneficial owner of all of the outstanding shares of the
capital stock of the Seller. The Shareholders have duly approved the Seller's
sale, assignment, transfer and delivery of the Assets to the Purchaser in
accordance with the terms of this Agreement, the consummation of all the
transactions contemplated hereby and the Seller entering into the
Noncompetition Agreement.
.1 Due Organization; Name and Address; Good Standing, Authority of
Seller. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Kentucky. The only names of the
Seller which have been used by the Seller at any time within the past three
years ending at the date of this Agreement are Houston, Inc. and "Burger
King." The Seller has full right, power and authority to own, lease and
operate its properties and assets, and to carry on its Business. The Seller is
duly qualified, licensed and authorized to do business in each jurisdiction in
which the properties and assets owned by it or the nature of the business
conducted by it make such licensing, qualification and authorization legally
necessary. A list of all jurisdictions in which the Seller is qualified to do
business and required to be qualified to do business as set forth on EXHIBIT
3.2. Except as described on EXHIBIT 3.2, the Seller is not in breach or
violation of, and the execution, delivery and performance of this Agreement
will not result in a breach or violation of, any of the provisions of the
Seller's articles of incorporation, as amended to the date of this Agreement
(the "Articles") or by-laws, as amended to the date of this Agreement (the
"By-Laws"), or any agreement to which it is a party.
.2 Authorization and Validity of Agreements. The Seller and the
Shareholders have the legal capacity, right, power, and authority to enter
into this Agreement and the Noncompetition Agreement. The Seller has the full
right, power and authority to execute, acknowledge, seal and deliver this
Agreement and to perform the transactions contemplated by this Agreement. The
execution, acknowledgment, sealing and delivery of this Agreement by the
Seller and the Shareholders and the performance by the Seller and the
Shareholders of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate and shareholder action. This
Agreement has been duly executed, acknowledged, sealed and delivered by the
Seller and the Shareholders and is the legal, valid and binding obligation of
the Seller and the Shareholders enforceable against the Seller and the
Shareholders, respectively, in accordance with its terms, except in each case
as such enforceability may be limited by general principles of equity,
bankruptcy, insolvency, moratorium and similar laws relating to creditors
rights generally. The Noncompetition Agreement, when executed, acknowledged,
sealed and delivered by the Seller and the Shareholders, will be the legal,
valid and binding obligation of the Seller and
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the Shareholders, respectively, enforceable against the Seller and against the
Shareholders, respectively, in accordance with its terms, except in each case
as such enforceability may be limited by general principles of equity,
bankruptcy, insolvency, moratorium and similar laws relating to creditors
rights generally.
.3 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained. Except as described on EXHIBIT 3.4, to the best of the Seller's and
the Shareholder's knowledge, the execution, acknowledgment, sealing, delivery,
and performance of this Agreement and the Noncompetition Agreement by the
parties thereto, and the consummation of the transactions contemplated by this
Agreement and the Noncompetition Agreement will not (a) violate or require any
consent, approval, or filing under, (i) any material common law, law, statute,
ordinance, rule or regulation (collectively referred to throughout this
Agreement as "Laws") of any federal, state or local government (collectively
referred to throughout this Agreement as "Governments") or any agency, bureau,
commission, instrumentality or judicial body of any Governments (collectively
referred to throughout this Agreement as "Governmental Agencies"), or (ii) any
judgment, injunction, order, writ or decree of any court, arbitrator,
Government or Governmental Agency by which the Seller or any of the Assets is
bound; (b) conflict with, require any consent, approval, or filing under,
result in the breach or termination of any provision of, constitute a default
under, or result in the creation of any claim, security interest, lien,
charge, or encumbrance upon any of the Assets pursuant to (i) the Seller's
Articles or By-Laws, (ii) any indenture, mortgage, deed of trust, license,
permit, approval, consent, franchise, lease, contract, or other instrument,
document or agreement to which the Seller is a party or by which the Seller,
or any of the Assets is bound, or (iii) any judgment, injunction, order, writ
or decree of any court, arbitrator, Government or Governmental Agency by which
the Seller or any of the Assets is bound; and all permits, licenses and
authorizations of any Government or Governmental Agency required to be
obtained by the Seller prior to the Closing, shall have been obtained and
shall be in full force and effect as of the Closing Date.
.4 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. To the best of the Seller's and the Shareholders' knowledge, the
Seller has conducted and is conducting its business in material compliance
with all applicable material Laws of all Governments and Governmental
Agencies.
.5 Legal Proceedings. Except as set forth on EXHIBIT 3.6, there is no
action, suit, proceeding, claim or arbitration, or any investigation by any
person or entity, including, but not limited to, any Government or
Governmental Agency, (i) pending, to which the Seller or the Shareholders are
a party and which relate to the Seller, the Seller's Business or the Assets,
or to the knowledge of the Seller or the Shareholders, threatened against or
relating to the Seller, the Seller's business or the Assets, or (ii)
challenging the Seller's or the Shareholders' right to execute, acknowledge,
seal, deliver, perform under or consummate the transactions contemplated by
this Agreement and, as respects the Seller and the Shareholders, the
Noncompetition Agreement, or (iii) asserting any right with respect to any of
the Assets, and, in each such case, to the best knowledge of the Seller and
the
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Shareholders, there is no basis for any such action, suit, proceeding, claim,
arbitration or investigation.
.6 Financial Information. Attached hereto as EXHIBIT 3.7 are copies of
the unaudited Balance Sheets of the Seller as of December 31, 1994, and
December 31, 1993, and the Operating Statements of the Seller for the periods
January 1, 1993, to December 31, 1993, January 1, 1994, to December 31, 1994,
and an interim income statement from January 1, 1995, to August 31, 1995, and
balance sheet as of August 31, 1995, which are being provided by the Seller
and the Shareholders to the Purchaser (the "Financial Statements"). The
Financial Statements are in accordance with the books and records of the
Seller, are true, correct and complete and accurately present the Seller's
financial position as of the dates set forth therein and the results of the
Seller's operations for the periods then ended; all such Financial Statements
are in conformity with the accounting principles historically utilized by the
Seller and applied on a consistent basis during each period and on a basis
consistent with that of prior periods. Until the Closing Date, the Seller
shall deliver to the Purchaser month end balance sheets and income statements
within 30 days of the end of each month.
.7 Tax Matters. All tax returns of the Seller as filed by the Seller with
the Internal Revenue Service (the "IRS") and all information reported on the
returns are true, accurate, and complete. The Seller is not a party to, and is
not aware of, any pending or threatened action, suit, proceeding, or
assessment against it for the collection of taxes by any Government or
Governmental Agency. The Seller has duly and timely filed with all appropriate
Governments and Governmental Agencies, all tax returns, information returns,
and reports required to be filed by the Seller. The Seller has paid in full
all taxes, interest, penalties, assessments and deficiencies owed by the
Seller to all taxing authorities. All taxes and other assessments and levies
which the Seller is required by applicable Law to withhold or to collect have
been duly withheld and collected and have been paid over to the proper
Governments and Governmental Agencies or are properly held by the Seller for
such payment. All claims by the IRS or any state taxing authorities for taxes
due and payable by the Seller have been paid by the Seller. The Seller is not
a party to, and is not aware of, any pending or threatened action, suit,
proceeding, or assessment against it for the collection of taxes by any
Government or Governmental Agency.
.8 Franchise Agreements. The Franchise Agreements are full, complete,
unamended, true and correct Franchise Agreements between the Seller and Burger
King Corporation, which are, and shall continue to be until the Closing on the
Closing date, in full force and effect.
.9 Title to Assets and Equipment. Except as provided in EXHIBIT 3.10, the
Seller has sole and exclusive, good and marketable title to all of the Assets
and the same are free and clear of any and all pledges, claims, threats,
liens, restrictions, agreements, leases, security interests, charges and
encumbrances. As of the Closing Date, all of the Equipment will be working and
operating, reasonable wear and tear excepted, and free from any defects known
to the Seller or to the Shareholders.
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.10 Records. The Records that have been delivered by the Seller to the
Purchaser or that shall be delivered by the Seller to the Purchaser are true,
complete and correct.
.11 Employment Matters.
.0 None of the Seller's employees are covered by a collective bargaining
agreement or are represented by a labor organization, and no petition for
representation concerning any of the Seller's employees has been filed with
the National Labor Relations Board; the Seller is not aware of any union
organizational activity and has no reason to believe that any such activity is
being contemplated. To the best of the Seller's and the Shareholders'
knowledge, the Seller has not engaged in any unfair labor practice.
.1 Except as described in EXHIBIT 3.12.2, to the best of the Seller's and
the Shareholders' knowledge, (i) the Seller is not in material violation of
applicable equal employment opportunity wage and hour requirement or any other
Laws of any Government or Governmental Agency relating to employment; (ii)
there are no active, pending, or threatened administrative or judicial
proceedings under any Laws of any Government or Governmental Agency; (iii)
there are no claims, charges, and employment related suits which have occurred
within the last three years or are presently pending or threatened under any
employment related Laws of any Government or Governmental Agency; and (iv) the
Seller is not subject to any judgments, decrees, conciliation agreements and
settlement agreements concerning employment related matters.
.2 Except as described in EXHIBIT 3.12.3, the Seller has not entered into
any employment agreements with any of its employees, and all employees may be
terminated at will; there is no contractual obligation, except for the
provisions of this Agreement, or special termination or severance arrangement
in respect of any of the Seller's employees; and there is no provision of any
agreement or arrangement with any of the Seller's employees, or any other
legal or contractual requirement, which would obligate the Seller to require
the Purchaser of the Assets to employ any of the Seller's employees.
.3 The Seller has paid or will pay on or prior to Closing all wages,
bonuses, commissions and other benefits and sums due (and all required taxes,
insurance, social security and withholding thereon), including all accrued
vacation, accrued sick leave, accrued benefits and accrued payments (and pro
rata accruals for a portion of a year) to its employees.
.4 Except as described on EXHIBIT 3.12.5, the Purchaser is under no
obligation or duty, whether under any contract, agreement, understanding or
arrangement or under any applicable and material Law of any Government or
Governmental Agency to assume or be responsible for any obligation, duty or
liability, now existing or hereafter arising, relating to or in connection
with the Seller's employees or any compensation, benefits or benefit plans in
respect of the Seller's employees, or otherwise arising out of or in
connection with the transactions contemplated by this Agreement, and the
Seller has made
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no commitment and is under no obligation to cause the Purchaser of the Assets
to assume or to be responsible for any such obligation, duty or liability.
.12 Absence of Certain Changes or Events. Except as described on EXHIBIT
3.13, since December 31, 1994, the Seller has not engaged in or experienced
any of the following:
.0 Sold, assigned, transferred, leased, disposed of, or agreed to sell,
assign, transfer, lease, or dispose of, any of the Assets, except Inventory
sold in the ordinary course of the Seller's business, as such business has
been operated historically;
.1 Suffered any material adverse change in the Seller's operations,
earnings, assets, liabilities, or business (financial or otherwise); or
.2 Failed to pay any indebtedness or other obligation, including any
taxes and other charges, when due.
.13 Adverse Conditions. Except as set forth in EXHIBIT 3.14, attached
hereto and incorporated by reference herein, neither Seller nor the
Shareholders have any knowledge of any past, present or future condition,
facts or circumstances which has materially and adversely affected or which
might materially and adversely affect the business of the Seller or prevent
the Purchaser from carrying on the Seller's business.
.14 Leases. Attached hereto as EXHIBIT 3.15 and incorporated by reference
herein is a list of the following, which is accurate and complete as of the
date hereof: all leases, contracts, licenses, agreements or other commitments
of Seller as obligor which are not terminable without penalty upon no more
than thirty (30) days notice and which involve a liability, obligation,
contingent liability or contingent obligation in excess of $1,000.
.15 Bonus, Pension or Other Plans, etc. Except as described on EXHIBIT
3.16, Seller is not a party to, does not maintain or make any contribution to,
and Seller has not incurred any liability or expense with respect to any
employment agreement, current or future pension, retirement, deferred
compensation, bonus, profit-sharing, insurance or similar plan, agreement,
arrangements or formal or informal understandings for the benefit of
employees, in each case whether or not legally binding.
.16 Full Disclosure. This Agreement (including the Exhibits hereto) does
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein not
misleading. There is no fact known to the Seller or to the Shareholders which
is not disclosed in this Agreement which materially adversely affects the
accuracy of the representations and warranties contained in this Agreement or
the Seller's financial condition, the Seller's Financial Statements,
operations, business, earnings, assets, or liabilities. All information set
forth in the schedules, exhibits and all other information regarding the
Seller and its business, condition, assets, liabilities, operations, financial
performance, net income and prospects that has been furnished to the Purchaser
or any of its representatives or agents by or on behalf of the Seller or any
of the
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Seller's representatives or agents, is accurate and complete in all respects.
The Seller and the Shareholders have provided the Purchaser and the
Purchaser's representatives and agents with full and complete access to all of
the Seller's records and other documents and data.
.17 No Brokerage. Neither the Seller nor the Shareholders have incurred
any obligation or liability, contingent or otherwise, for brokerage fees,
finder's fees, agent's commissions, or the like in connection with this
Agreement or the transactions contemplated hereby.
.18 Seller's Franchise Agreements. Except as described on EXHIBIT 3.19,
the Seller is not in material breach of or material default under any
provision of any of the Franchise Agreements, and no condition exists which,
with passage of time or the giving of notice or both, will result in a breach
or default by the Seller of any provision of any of the Franchise Agreements.
.19 Operation of Business. Since January 1, 1995, the Seller and the
Shareholders have used, and from the date hereof until the Closing the Seller
and the Shareholders shall use, their best efforts to preserve the Business of
the Seller.
.20 Environmental Matters. To the best knowledge of the Seller and the
Shareholders, neither the Shareholders, the Seller, nor to the Seller's
knowledge any other person (including without limitation, any previous owner,
lessor or sublessor of the Seller's property) have used, treated, stored or
disposed of hazardous waste or toxic substances on any of the properties owned
or leased by the Seller (whether owned, leased, subleased or used by such
person and hereinafter, the "Property") in material violation of any material
federal, state or local environmental protection, toxic substance, human
health or similar statute, regulation or ordinance (collectively, the
"Environmental Laws"), and there have been no material spills or releases of
hazardous substances on or from any Property that, in any such case, could
subject the Seller or the Shareholders to material liability. To the best
knowledge of the Seller and the Shareholders, the Property of the Seller and
all operations of the Seller conducted on such Property is in compliance with
all Environmental Laws. Neither the Seller nor the Shareholders have received
any notice, nor are aware of any administrative or judicial investigations,
proceedings or actions with respect to violations, alleged or proven, of any
Environmental Law by the Seller or the Shareholders, or otherwise involving
the Property of the Seller or the operations conducted on the Property of the
Seller. To the best of the Seller's and the Shareholders' knowledge, no
asbestos containing material is present in any of the improvements on any
Property of the Seller or is otherwise located on any Property of the Seller.
To the best knowledge of the Seller and the Shareholders, all operations
conducted on the Seller's Property are in material compliance with all
material federal and state statutes and regulations relating to asbestos. To
the best of the Seller's and the Shareholders' knowledge and belief, no
underground storage tanks, whether in use or closed, are on or under any
Property of the Seller.
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.21 Bulk Sale Laws. Both the Seller and the Shareholders have complied, or
will comply prior to the Closing, with all applicable Bulk Sale and Bulk
Transfer laws in each state where Assets are located and agree to discharge
all obligations and liabilities of the Seller's business, not assumed by
Purchaser, in a timely manner.
III -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser and NRE represent and warrant to the Seller and the
Shareholders, jointly and severally, as of the date hereof and as of the
Closing on the Closing Date each of the following:
.0 Due Organization; Good Standing; Power. Both the Purchaser and NRE are
corporations duly incorporated, validly existing, and in good standing under
the laws of the State of Delaware. Both the Purchaser and NRE have full right,
power and authority to enter into this Agreement and the Noncompetition
Agreement and to perform their respective obligations hereunder and
thereunder.
.1 Authorization and Validity of Agreements. The Purchaser and NRE have
the legal capacity, right, power, and authority to enter into this Agreement
and the Noncompetition Agreement. The Purchaser and NRE have the full right,
power and authority to execute, acknowledge, seal and deliver this Agreement
and to perform the transactions contemplated by this Agreement. The execution,
acknowledgment, sealing and delivery of this Agreement by the Purchaser and
NRE and the performance by the Purchaser and NRE of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate and shareholder action. This Agreement has been duly executed,
acknowledged, sealed and delivered by the Purchaser and NRE and is the legal,
valid and binding obligation of the Purchaser and NRE enforceable against the
Purchaser and NRE in accordance with its terms, except in each case as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors rights
generally. The Noncompetition Agreement, when executed, acknowledged, sealed
and delivered by the Purchaser and NRE, will be the legal, valid and binding
obligation of the Purchaser and NRE, enforceable against the Purchaser and
NRE, in accordance with its terms, except in each case as such enforceability
may be limited by general principles of equity, bankruptcy, insolvency,
moratorium and similar laws relating to creditors rights generally.
.2 No Brokerage. The Purchaser has not incurred any obligation or
liability, contingent or otherwise, for brokerage fees, finder's fees, agent's
commissions, or the like in connection with this Agreement or the transactions
contemplated hereby.
.3 Obligations Assumed. The Purchaser covenants that it will pay, when
due, all obligations assumed by it under this Agreement and that it will
employ, to the extent applicable, the requisite number of employees necessary
to comply with the WARN Act.
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.4 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained. Except as described on EXHIBIT 4.5, to the best of NRE's and the
Purchaser's knowledge, the execution, acknowledgment, sealing, delivery, and
performance of this Agreement and the Noncompetition Agreement by the parties
thereto, and the consummation of the transactions contemplated by this
Agreement and the Noncompetition Agreement will not (a) violate or require any
consent, approval, or filing under, (i) any material Laws of any Governments
or any Governmental Agencies, or (ii) any judgment, injunction, order, writ or
decree of any court, arbitrator, Government or Governmental Agency by which
the Purchaser or NRE is bound; (b) conflict with, require any consent,
approval, or filing under, result in the breach or termination of any
provision of, or constitute a default under (i) the Purchaser's or NRE's
Articles or By-Laws, (ii) any indenture, mortgage, deed of trust, license,
permit, approval, consent, franchise, lease, contract, or other instrument,
document or agreement to which the Purchaser or NRE is a party or by which the
Purchaser or NRE is bound, or (iii) any judgment, injunction, order, writ or
decree of any court, arbitrator, Government or Governmental Agency by which
the Purchaser or NRE is bound; and all permits, licenses and authorizations of
any Government or Governmental Agency required to be obtained by the Purchaser
or NRE prior to the Closing, shall have been obtained and shall be in full
force and effect as of the Closing Date.
.5 Legal Proceedings. Except as set forth on EXHIBIT 4.6, there is no
action, suit, proceeding, claim or arbitration, or any investigation by any
person or entity, including, but not limited to, any Government or
Governmental Agency, (i) pending, to which the Purchaser or NRE is a party and
which relate to the Purchaser or NRE, or to the knowledge of the Purchaser or
NRE, threatened against or relating to the Purchaser or NRE, or (ii)
challenging the Purchaser's or NRE's right to execute, acknowledge, seal,
deliver, perform under or consummate the transactions contemplated by this
Agreement and the Noncompetition Agreement, or (iii) asserting any right with
respect to any of the Assets, and, in each such case, to the best knowledge of
the Purchaser or NRE, there is no basis for any such action, suit, proceeding,
claim, arbitration or investigation.
.6 Full Disclosure. This Agreement (including the Exhibits hereto) does
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein not
misleading. There is no fact known to the Purchaser or NRE which is not
disclosed in this Agreement which materially adversely affects the accuracy of
the representations and warranties contained in this Agreement or the
Purchaser's or NRE's financial condition, NRE's Financial Statements,
operations, business, earnings, assets, or liabilities. All information set
forth in the schedules, exhibits and all other information regarding the
Purchaser or NRE and its business, condition, assets, liabilities, operations,
financial performance, net income and prospects that has been furnished to the
Seller or any of its representatives or agents by or on behalf of the
Purchaser or NRE or any of the Purchaser's or NRE's representatives or agents,
is accurate and complete in all respects.
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.7 Financial Information. Attached hereto as EXHIBIT 4.8 are copies of
the audited Financial Statements of NRE as of December 31, 1994, and the
unaudited interim financial statements of NRE as of August 28, 1995, which are
being provided by the NRE to the Seller (the "Financial Statements"). The
Financial Statements are in accordance with the books and records of NRE, are
true, correct and complete and accurately present NRE's financial position as
of the dates set forth therein and the results of NRE's operations for the
periods then ended; all such Financial Statements are in conformity with the
accounting principles historically utilized by NRE and applied on a consistent
basis during each period and on a basis consistent with that of prior periods.
.8 Seller's Access to Records after the Closing. After the Closing Date,
the Purchaser shall give the Seller and its authorized representatives access
to and the right to copy such books, contracts, documents and other records
previously in the Seller's possession as the Seller may reasonably request in
order to evaluate and respond to claims against the Seller related to taxes or
other matters which are asserted after the Closing Date. Such access shall be
given only after reasonable notice to the Purchaser and at such times and in
such manner as will not disrupt or interfere with the conduct of the
Purchaser's business. Further, the Purchaser shall give the Seller written
notice thirty (30) days prior to destroying any such books, contracts,
documents and other records, and grants the Seller the right to copy or remove
such books, contracts, documents and records during the thirty (30) day period
after receipt of such notice from the Purchaser.
.9 Bulk Sale Laws. Both the Purchaser and NRE have complied, or will
comply prior to the Closing, with all applicable Bulk Sale and Bulk Transfer
laws in each state where Assets are located and agree to discharge all
obligations and liabilities of the Seller's business, not assumed by
Purchaser, in a timely manner.
IV -- SELLER AND THE SHAREHOLDERS' COVENANTS
.0 Affirmative Covenants. The Seller and the Shareholders, jointly and
severally, covenant, promise and agree that from the date hereof and until the
Closing that the Seller and the Shareholders shall cause the Seller to perform
and comply with each of the following:
.0 Continue to operate the Business of the Seller diligently, and not
take any action omit to take any action, or engage in any transaction other
than in acts or transactions in the ordinary course of business, as such
business has been operated historically.
.1 Use their best efforts to preserve the Business of the Seller and use
their best efforts to preserve the relationship of the Business with
suppliers, customers, Burger King Corporation and others.
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.2 Maintain and continue normal and usual maintenance and repair of the
Equipment and all other assets being sold and transferred to the Purchaser
herein.
.3 Cooperate with the Purchaser to achieve an orderly transition of the
Business of the Seller to the Purchaser and an orderly transfer of the Assets
to the Purchaser.
.4 Pay or provide for payment of all sales, use, personal property,
social security, withholding, payroll, unemployment compensation, income and
other taxes, assessments, fees and public charges due and payable by the
Seller in respect of its Business and the Assets through the Closing Date and
any portion thereof applicable to any period prior to the Closing Date.
.5 Pay all wages, bonuses, commissions and other employment benefits and
sums (and all required taxes, insurance and withholding thereon), including
all accrued vacation, accrued sick leave, accrued benefits and accrued
payments (and pro rata accruals for a portion of a year) due to the Seller's
employees through the Closing Date.
.6 Maintain in effect all insurance policies and other employee benefits
covering any employee claims which may be incurred through the Closing Date.
.7 Fully perform and comply with all covenants, promises and agreements
hereunder which are required to be performed or complied with by the Seller
and the Shareholders prior to or at the Closing, and exert their best efforts
to completely satisfy and fulfill all conditions precedent to the Seller's and
the Shareholders' obligations to close hereunder at the Closing on the Closing
Date.
.8 Exert their best efforts to prevent the occurrence of any event which
could result in any of the Seller's or the Shareholders' representations and
warranties contained in this Agreement not being true and correct at or as of
the time immediately after the occurrence of such event, and the Seller and
the Shareholders shall promptly notify the Purchaser of the occurrence of any
event or the discovery of any fact which would cause any of their covenants,
promises and agreements to be breached or violated or any of their
representations and warranties to become not true and correct or which could
interfere with or prevent the consummation of the transactions contemplated
hereby.
.9 Provide the Purchaser and its representatives, subject to the
restrictions contained in Section 7.2.8, with full access during normal
business hours to all of the Seller's properties, assets and Records, provide
the Purchaser and its representatives with such financial and operating data
and other information with respect to the Seller's Business, Assets and
properties as the Purchaser shall from time to time request, and permit the
Purchaser and its representatives to consult with the Seller's
representatives, officers, employees and internal accountants up to the time
of Closing.
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.10 Take no action which is or would cause a material violation of any
material Laws of any Governments or Governmental Agencies.
.11 During the period prior to the Closing, the Seller and the
Shareholders shall promptly notify the Purchaser in writing of:
.0 The discovery by the Seller or any of the Shareholders of any event,
condition, fact or circumstance that occurred or existed on or prior to the
date of this Agreement and that would cause or constitute a material breach of
any representation or warranty made by the Seller or any of the Shareholders
in this Agreement;
.1 Any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement that would cause or constitute a
material breach of any representation or warranty made by the Seller or any of
the Shareholders in this Agreement if (a) such representation or warranty had
been made as if at the time of the occurrence, existence or discovery of such
event, condition, fact or circumstances, or (b) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
.2 Any material breach of any covenant or obligation of the Seller or any
of the Shareholders; and
.3 Any event, condition, fact or circumstance that may make the timely
satisfaction of any of the conditions set forth in Article 7 impossible or
unlikely.
V -- OPINIONS OF COUNSEL
.0 Opinion of Seller's and the Shareholders' Counsel. At the Closing, the
Seller, W. Curtis Smith and James P. Borke shall deliver to the Purchaser the
opinion of their counsel, dated as of the Closing Date, which shall be in
substantially the form attached hereto as EXHIBIT 6.1.
.1 Opinion of Purchaser's Counsel. At the Closing, the Purchaser and NRE
shall deliver to the Seller and to the Shareholders the opinion of their
counsel, dated as of the Closing Date in substantially the form attached
hereto as EXHIBIT 6.2.
VI -- CONDITIONS
.0 Seller's Conditions to Close. The Seller's and the Shareholders'
obligation to close the transactions contemplated hereby at the Closing shall
be subject to the complete satisfaction and fulfillment of all of the
following conditions precedent, any or all of which may be waived in whole or
in part by the Seller (but no such waiver of any such condition precedent
shall be or constitute a waiver of any covenant, promise, agreement,
representation or warranty made by the Purchaser in this Agreement):
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.0 All representations and warranties made by the Purchaser and NRE in
this Agreement shall be complete and accurate at and as of the Closing on the
Closing Date. The Seller shall have been furnished with a certificate, signed
by the Purchaser and NRE, and dated the Closing Date to the foregoing effect.
.1 All covenants, promises and agreements made by the Purchaser in this
Agreement and all other actions required to be performed or complied with by
the Purchaser under this Agreement prior to or at the Closing shall have been
fully performed or complied with by the Purchaser. Seller shall have been
furnished with a certificate, signed by the Purchaser, and dated the Closing
Date to the foregoing effect.
.2 The Purchaser shall deliver to the Seller by wire transfer or bank
check the amount of cash set forth in Section 1.4 of this Agreement.
.3 The Purchaser shall deliver to the Seller a Guaranty signed by NRE in
the form attached hereto as EXHIBIT 1.9 and incorporated herein by reference.
.4 The Purchaser shall have obtained, and delivered to the Seller, copies
of all consents, approvals or other authorizations which the Purchaser is
required to obtain from, and any filing which the Purchaser is required to
make with, any governmental authority or agency or any other person in
connection with the execution, delivery and consummation of this Agreement and
the other documents associated herewith and the consummation of the
transactions contemplated hereby or thereby, in form and substance
satisfactory to the Seller.
.5 The Seller shall have received all things required to be delivered or
furnished to the Seller by the Purchaser hereunder prior to or at the Closing.
.6 The Seller shall have received an opinion of counsel for the Purchaser
and NRE, as of the Closing Date, as required by Section 6.2 hereof.
.7 The Purchaser shall have delivered to the Seller the following
documents:
.0 the Lease Assignments of the Real Property Leases, the Consents to
Assignment, Estoppel, and Releases, and assumption agreements relating to any
other Assumed Contract, and;
.1 certificates dated no earlier than thirty (30) days prior to the
Closing Date, from the Secretary of State for the States of Delaware and
Kentucky as to the good standing of the Purchaser and a certificate dated no
earlier than thirty (30) days prior to the Closing Date, from the Secretary of
State for the State of Delaware as to the good standing of NRE;
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.2 certificates from the corporate secretaries of the Purchaser and NRE
indicating that this transaction has been duly approved and/or ratified, along
with certified copies of the Board of Director minutes approving the
transaction set forth herein.
.3 certificate from the Chief Financial Officer of NRE that as of the
Closing Date there has been no material adverse change in the financial
condition of NRE.
.4 all other documents, instruments and agreements required to be
delivered by the Purchaser to the Seller pursuant to this Agreement.
.8 The Purchaser shall execute, acknowledge, seal and deliver to the
Seller a Warranty Assignment in the form mutually agreeable to the Purchaser,
the Seller and Burger King Corporation pursuant to which the Purchaser shall
accept assignment from the Seller of the Franchise Agreements.
.9 NRE and the Purchaser shall execute, acknowledge, seal and deliver the
Noncompetition Agreement attached hereto as EXHIBIT 1.5.
.10 Seller shall have obtained all consents, approvals or other
authorizations which Seller is required to obtain from NationsBank of Georgia,
N.A., Burger King Corporation and from any lessor, other than Curtis James
Investments, under any of the Leases in connection with the execution delivery
and consummation of this Agreement or the assignment of the Franchise
Agreements or Leases.
.11 Both the Purchaser and NRE shall have complied with all applicable
Bulk Sale and Bulk Transfer laws in each state where Assets are located.
.12 The Purchaser and NRE shall have provided all documents and consents
necessary to purchase all of the Burger King restaurants owned by Fifth &
Race, Inc. and Thirty-Forty, Inc. pursuant to the terms of the Asset Purchase
Agreements signed simultaneously herewith.
.1 Purchaser's Conditions to Close. The Purchaser's obligation to close
the transactions contemplated hereby at the Closing shall be subject to the
complete satisfaction and fulfillment of all of the following conditions
precedent, any or all of which may be waived in whole or in part by the
Purchaser (but no such waiver of any such condition precedent shall be or
constitute a waiver of any covenant, promise, agreement, representation or
warranty made by the Seller and the Shareholders in this Agreement):
.0 All representations and warranties made by the Seller and the
Shareholders in this Agreement shall be materially complete and accurate in
all material respects at and as of the Closing on the Closing Date. The
Purchaser shall have been
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furnished with a certificate, signed by the Shareholders and the Seller, and
dated the Closing Date to the foregoing effect.
.1 All covenants, promises and agreements made by the Seller and the
Shareholders in this Agreement and all other actions required to be performed
or complied with by the Seller and the Shareholders under this Agreement prior
to or at the Closing shall have been fully performed or complied with by the
Seller and the Shareholders. The Purchaser shall have been furnished with a
certificate, signed by the Shareholders and the Seller, and dated the Closing
Date to the foregoing effect.
.2 On or before December 31, 1995, the Seller shall have obtained, and
delivered to the Purchaser, copies of all consents, approvals or other
authorizations which the Seller is required to obtain from, and any filing
which the Seller is required to make with, any governmental authority or
agency or any other person including, but not limited to, consents required
from Burger King Corporation in connection with the execution, delivery and
consummation of this Agreement and the other documents associated herewith and
the consummation of the transactions contemplated hereby or thereby, in form
and substance satisfactory to the Purchaser. Notwithstanding the foregoing,
the Purchaser shall be solely responsible for obtaining any consents or
approvals necessary for the Purchaser to purchase the Assets or operate the
Business from and after the Closing Date.
.3 The Purchaser shall have received all things required to be delivered
or furnished to the Purchaser by the Seller and the Shareholders hereunder
prior to or at the Closing.
.4 On or before December 31, 1995, all necessary permits and licenses
required to be obtained by the Purchaser shall have been obtained and paid for
by the Purchaser and the Purchaser shall have exercised all reasonable efforts
to obtain same.
.5 There shall not have occurred any material adverse change in the
business of the Seller or in the Assets.
.6 The Purchaser shall have received an opinion of counsel for the Seller
and the Shareholders, as of the Closing Date, as required by Section 6.1
hereof.
.7 Within thirty (30) days following the execution of this Agreement, the
Purchaser and its representatives shall have completed, to their complete
satisfaction, an investigation and examination of all aspects of the
Restaurants and the Assets, including the Financial Statements (the
"Inspection"). No employee or representative of the Purchaser will perform
on-site due diligence of the Restaurants without the Seller's prior approval,
at which time such employee or representative will be accompanied by the
Seller or its designee. The Purchaser shall itemize any deficiencies noted in
the Inspection and provide such list to the Seller within thirty (30) days
after execution of this Agreement. The Seller shall correct the deficiencies
prior to the Closing Date if the total cost of such corrections
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does not exceed One Thousand dollars ($1,000) per Restaurant. If the total
cost does exceed this amount, the Seller shall have the option, exercisable
within ten (10) days of receiving notice of the corrections, to pay for the
corrections or terminate this Agreement. On or prior to Closing, the Purchaser
shall have the right to complete its review of the Restaurants to confirm the
Equipment in the Restaurants is in proper working order and that the
Restaurants conform in all material respects to Burger King standards (the
"Walk-Thru") that apply to the Restaurants.
.8 On or prior to December 31, 1995, the Purchaser shall have received
all consents, approvals and other authorizations which the Purchaser is
required to obtain from, and any filing which the Purchaser is required to
make with, any governmental authority or agency or any other person including,
but not limited to, consents required from Burger King Corporation in
connection with the execution, delivery and consummation of this Agreement and
the other documents associated herewith in the consummation of the
transactions contemplated hereby or thereby, in form and substance
satisfactory to the Purchaser.
.9 The Seller shall have delivered to the Purchaser the following
documents:
.0 the Lease Assignments of its Real Property Leases, each
Assumed Contract, and the Consents to Assignment, Estoppel, and Releases;
.1 any required easement assignments;
.2 to the extent available, a fully executed original counterpart
of each Real Property Lease in the Seller's possession;
.3 a receipt for funds paid to the Seller by the Purchaser;
.4 certificates dated no earlier than thirty (30) days prior to
the Closing Date, from the Secretary of State for the State of Kentucky
as to the good standing of the Seller;
.5 certificates from the corporate secretary of the Seller
indicating that this transaction has been duly approved and/or ratified,
along with certified copies of the Board of Director minutes approving
the transaction set forth herein.
.6 all other documents, instruments and agreements required to
be delivered by the Seller to the Purchaser pursuant to this Agreement.
.10 Between the date of this Agreement and the Closing Date, the Seller
shall conduct the operation of its Restaurants in the ordinary and usual
course of business, consistent with past practices and will use its best
efforts to preserve intact the present business organization with respect to
its Restaurants, to keep available the services of its
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officers and employees and to maintain satisfactory relationships with
landlords, franchisors, dealers, licensors, licensees, suppliers, contractors,
distributors, customers and others having business relations with it and its
Restaurants and will maintain its Restaurants, real property, and Assets in a
condition conducive to the operation of the business currently carried on
therein.
.11 The Seller shall have provided to the Purchaser copies of all
operating permits and licenses (collectively, the "Approvals") which are in
the Seller's possession.
.12 The Seller shall have provided to the Purchaser copies of all
documents with respect to any pending actions, suit or proceeding which has
been brought by or on behalf of the Seller with respect to the Assets or the
Business.
.13 The Seller shall execute, acknowledge, seal, and deliver to the
Purchaser a Bill of Sale and Assignment in the form attached hereto as EXHIBIT
7.2.14 and incorporated herein by reference pursuant to which the Seller shall
sell, assign, and transfer to the Purchaser the Assets and the Inventory.
.14 The Seller shall execute, acknowledge, seal and deliver to the
Purchaser a Warranty Assignment in the form mutually acceptable to the
Purchaser, the Seller and Burger King Corporation pursuant to which the Seller
shall sell, assign and transfer to the Purchaser the Franchise Agreements.
.15 The Shareholders, the Seller, NRE and the Purchaser shall execute,
acknowledge, seal and deliver the Noncompetition Agreement attached hereto as
EXHIBIT 1.5.
.16 The Seller shall have previously delivered to the Purchaser the Real
Property Leases and the Purchaser shall have thirty days after the date of
this Agreement to review such Real Property Leases to ensure that each of them
are satisfactory to the Purchaser, in its sole discretion.
.17 Prior to December 31, 1995, the Purchaser's auditor shall have (i)
reviewed the financial and accounting system of the Seller and found them to
be satisfactory to Purchaser, in its sole discretion; (ii) reviewed and
confirmed the accuracy of the Financial Statements and results set forth in
the Financial Statements; and (iii) found no objection to the financial and
accounting system of the Seller, or the Seller and the Purchaser shall have
resolved any objection raised by the auditor and presented to the Seller by
the Purchaser.
.18 The Board of Directors of NRE shall have approved this Agreement and
the transactions contemplated herein within thirty (30) days of the date of
this Agreement.
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.19 Both the Seller and the Shareholders shall have complied with all
applicable Bulk Sale and Bulk Transfer laws in each state where Assets are
located.
.20 The Shareholders shall have provided all documents and consents
necessary to sell to the Purchaser all of the Burger King restaurants owned by
Fifth & Race, Inc. and Thirty-Forty, Inc. pursuant to the terms of the Asset
Purchase Agreements signed simultaneously herewith.
.2 Contemporaneous Transfer. All transfers, assignments, conveyances, and
transactions under this Agreement shall be effected contemporaneously for
present value between and among the Seller, the Shareholders and the
Purchaser.
7.4 Satisfaction of Conditions. If written notice of an unsatisfied
condition is not provided by the Purchaser or the Seller to the other parties
to this Agreement (a "Notice") on or before the deadline for satisfying that
condition arises, the condition shall be deemed satisfied or waived and shall
not serve as a basis for terminating this Agreement. Upon receipt of a Notice,
the parties agree to negotiate in good faith for an extension to the deadline
for satisfying the condition prior to the exercise of any right to terminate
this Agreement. If the parties cannot reach an Agreement regarding the
extension of a deadline to satisfy the condition within ten (10) days
following the receipt of a Notice (the "Negotiation Period"), the party who
sent the Notice shall have the option to waive the condition or terminate the
Agreement within ten (10) days following the end of the Negotiation Period.
VII -- INDEMNIFICATION
.0 Indemnification By Seller and the Shareholders. The Seller and the
Shareholders, jointly and severally, shall defend, indemnify and hold harmless
the Purchaser and NRE, their officers, directors, stockholders, agents,
servants and employees and their respective heirs, personal and legal
representatives, guardians, successors and assigns, from and against any and
all claims, threats, liabilities, taxes, interest, fines, penalties, suits,
actions, proceedings, demands, damages, losses, costs and expenses (including
reasonable attorneys' and experts' fees and court costs) of every kind and
nature arising out of, resulting from, or in connection with the following:
.0 Any misrepresentation or breach by the Seller or the Shareholders of
any representation or warranty contained in this Agreement, except for those
specifically set forth in sections 8.1.5 and 8.1.6 below, contained in this
Agreement for a period not to exceed one (1) year following the Closing Date.
.1 Any nonperformance, failure to comply or breach by the Seller or
the Shareholders of any covenant, promise or agreement of the Seller or the
Shareholders contained in this Agreement for a period not to exceed one (1)
year following the Closing Date.
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.2 Any debts, obligations, duties and liabilities of the Seller and
the Shareholders (except those assumed by the Purchaser).
.3 Any matter, act, thing or occurrence caused by or resulting from
any act or omission of the Seller or the Shareholders prior to or at the
Closing for a period not to exceed one (1) year following the Closing Date.
.4 Any claim relating to a breach or misrepresentation of a
representation or warranty made by the Seller or the Shareholders with regard
to the Assumed Contracts or Environmental Laws.
.1 Indemnification by Purchaser. The Purchaser and NRE, jointly and
severally, shall defend, indemnify and hold harmless the Seller, the
Shareholders and their respective heirs, personal and legal representatives,
guardians, successors and assigns, from and against any and all claims,
threats, liabilities, taxes, interest, fines, penalties, suits, actions,
proceedings, demands, damages, losses, costs and expenses (including
attorneys' and experts' fees and court costs) of every kind and nature arising
out of, resulting from, or in connection with the following:
.0 Any misrepresentation, omission or breach by the Purchaser of any
representation or warranty contained in this Agreement for a period not to
exceed one (1) year following the Closing Date.
.1 Any nonperformance, failure to comply or breach by the Purchaser
of any covenant, promise or agreement of the Purchaser contained in this
Agreement for a period not to exceed one (1) year following the Closing Date.
.2 To the extent the same are assumed, any debts, obligations,
duties and liabilities of the Purchaser under the Assumed Contracts.
.3 To the extent a claim arises after the Closing, any matter, act,
thing or occurrence caused by or resulting from any act or omission of
Purchaser prior to or at the Closing for a period not to exceed one (1) year
following the Closing Date.
.2 Defense of Claims. In the event of any claim, threat, liability, tax,
interest, fine, penalty, suit, action, proceeding, demand, damage, loss, cost
or expense with respect to which indemnity is or may be sought hereunder (an
"Indemnity Claim"), the indemnified party shall promptly notify the
indemnifying party of such Indemnity Claim, specifying in reasonable detail
the Indemnity Claim and the circumstances under which it arose. The
indemnifying party may elect to assume the defense of such Indemnity Claim, at
its own expense, by written notice to the indemnified party given within 10
days after the indemnifying party receives notice of the Indemnity Claim, and
the indemnifying party shall promptly engage counsel reasonably acceptable to
the indemnified party to direct and conduct such defense; provided, however,
that the indemnified party shall have the right to engage its own counsel, at
its own expense, to participate in such defense. In the event the
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indemnifying party does not so elect to assume the defense of such
Indemnity Claim in the manner specified above, or if, in the reasonable
opinion of counsel to the indemnified party, there are defenses available to
the indemnified party which are different from or additional to those
available to the indemnifying party or which give rise to a material conflict
between the defense of the indemnified party and of the indemnifying party,
then upon notice to the indemnifying party, the indemnified party may elect to
engage separate counsel to conduct its defense, at the expense of the
indemnifying party, and the indemnifying party shall not have the right to
direct or conduct such defense.
In the event the indemnifying party assumes the defense of any Indemnity
Claim, it may at any time notify the indemnified party of its intention to
settle, compromise or satisfy such Indemnity Claim and may make such
settlement, compromise or satisfaction (at its own expense) unless within 20
days after the giving of such notice the indemnified party shall give notice
to the indemnifying party of its intention to assume the defense of the
Indemnity Claim, in which event the indemnifying party shall be relieved of
its duty hereunder to indemnify the indemnified party. Unless the indemnified
party shall have given the notice referred to in the preceding sentence, (i)
the indemnified party shall not consent to or make any settlement, compromise
or satisfaction with respect to the Indemnity Claim without the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld, and (ii) any settlement, compromise or satisfaction made by the
indemnifying party with respect to such Indemnity Claim shall be deemed to
have been consented to by and shall be binding upon the indemnified party.
.3 Setoff. In addition to any rights of setoff or other rights that any
party may have at common law or otherwise, any party shall have the right to
setoff any amount that may be owed to any other party (whether pursuant to
this Agreement or any other obligation outside of this Agreement) against any
amount otherwise payable by any party to any other party hereto.
VIII -- MISCELLANEOUS
.0 Survival of Representations, Warranties and Agreements. All of the
representations, warranties, covenants, promises and agreements of the parties
contained in this Agreement (or in any document delivered or to be delivered
pursuant to this Agreement or at or in connection with the Closing) shall
survive the execution, acknowledgment, sealing and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and shall
continue to be binding regardless of any investigation made at any time by or
on behalf of any party, for the period in which a claim may be brought as
provided in Article VIII and, with respect to a claim properly brought within
such period, shall survive until a final resolution or non-appealable
determination of such claim has been made.
.1 Notices. All notices, requests, demands, consents, and other
communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either
(a) by personal delivery with a receipted copy of
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such delivery, or (b) by certified or registered United States mail, return
receipt requested, postage prepaid, to the following addresses:
(i) If to the Seller, to:
W. Curtis Smith, President
Houston, Inc.
207 Grandview Drive, Suite 125
Ft. Mitchell, KY 41017
Telefax No.: (606) 331-9059
with a copy to:
Edward J. Buechel, Esq.
Dinsmore & Shohl
7300 Turfway Road, Suite 430
Florence, KY 41042-1355
Telefax No.: (606) 283-6017
(ii) If to the Shareholders, to:
W. Curtis Smith
James P. Borke
William T. Keller
207 Grandview Drive, Suite 125
Ft. Mitchell, KY 41017
Telefax No.: (606) 331-9059
(iii) If to the Purchaser:
Lawrence E. Jaro, Chief Executive Officer
AmeriKing Cincinnati Corporation I
2215 Enterprise Drive
Westchester, IL 60154
Telefax No.: (708) 947-2160
with copies to:
A. Richard Caputo
The Jordan Company
9 West 57th Street, Suite 4000
New York, New York 10019
Telefax No.: (212) 755-5263
and
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Ernest J. Panasci, Esq.
FREEBORN & PETERS
950 Seventeenth Street, Suite 2600
Denver, CO 80202
Telefax No.: (303) 628-4240
or to such other address of which written notice in accordance with this
Section 9.2 shall have been provided to the other parties. Notices may only be
given in the manner hereinabove described in this Section 9.2 and shall be
deemed received three (3) days after given in such manner.
.2 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the full, entire and integrated agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
negotiations, correspondence, understandings and agreements among the parties
hereto respecting the subject matter hereof.
.3 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties hereto.
.4 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, personal
and legal representatives, guardians, successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights, remedies, obligations, or liabilities.
.5 Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable only shall be
ineffective only to the extent of such prohibition or unenforceability,
without invalidating or rendering unenforceable the remaining provisions of
this Agreement.
.6 Amendment; Waiver. No provision of this Agreement may be amended,
waived or otherwise modified without the prior written consent of all of the
parties hereto. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement herein contained. The waiver by any party
hereto of a breach of any provision or condition contained in this Agreement
shall not operate or be construed as a waiver of any subsequent breach or of
any other conditions hereof.
.7 Section Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
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.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
.9 Applicable Law; Jurisdiction and Venue; Service of Process. This
Agreement shall be governed by, construed, interpreted and enforced in
accordance with the laws of the State of Kentucky, without giving effect to
principles of conflicts of laws.
.10 Remedies. The parties hereto acknowledge that in the event of a
breach of this Agreement, any claim for monetary damages hereunder may not
constitute an adequate remedy, and that it may therefore be necessary for the
protection of the parties to carry out the terms of this Agreement to apply
for the specific performance of the provisions hereof. It is accordingly
hereby agreed by all parties that no objection to the form of the action or
the relief prayed for in any proceeding for specific performance of this
Agreement shall be raised by any party, in order that such relief may be
expeditiously obtained by an aggrieved party. All parties may proceed to
protect and enforce their rights hereunder by a suit in equity, transaction at
law or other appropriate proceeding, whether for specific performance or for
an injunction against a violation of the terms hereof or in aid of the
exercise of any right, power or remedy granted hereunder or by law, equity or
statute or otherwise. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy shall operate as a
waiver thereof or otherwise prejudice its rights, powers or remedies, and no
right, power or remedy conferred hereby shall be exclusive of any other right,
power or remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise.
.11 Further Assurances. All parties hereto jointly and severally agree to
execute, acknowledge, seal and deliver, after the date hereof, without
additional consideration, such further assurances, instruments and documents,
and to take such further actions, as any party may reasonably request in order
to fulfill the intent of this Agreement and the transactions contemplated
hereby.
.12 Use of Genders. Whenever used in this Agreement, the singular shall
include the plural and vice versa, and the use of any gender shall include all
genders and the neuter.
.13 Risk of Loss. All risk of loss of damage to or destruction of the
Assets, in whole or in part, shall be and remain with the Seller until the
Closing and all of the transactions contemplated hereby shall have been
consummated.
.14 Negotiations with Other Persons. Until the earlier of the Closing or
the termination of this Agreement as provided herein, neither the Seller nor
the Shareholders shall initiate, encourage the initiation by others, or
participate in any discussion or negotiations with any other person or entity
relating to the sale of any or all of the Assets, the business of the Seller
or any securities of the Seller. From the date of this Agreement and until
after the Closing and the consummation of the transactions contemplated by
this
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Agreement or earlier termination of this Agreement, the Shareholders shall not
offer for sale, sell or otherwise transfer (with or without consideration) any
securities of the Seller owned of record or beneficially by any of them.
.15 Expenses of Transactions. All sales, transfer and use taxes incurred
in connection with the sale, assignment, transfer and delivery of the Assets
shall be paid by the Seller.
.16 Fees and Expenses. Each party to this transaction shall pay its own
professional fees and costs, including fees for attorneys, accountants and
other professional services.
.17 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or any documents associated with this Agreement or
the enforcement of any provision of any of the accompanying documents as
brought against any party hereto, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition any
other relief to which the prevailing party may be entitled).
.18 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). Each Shareholder
agrees that in the event of any breach or threatened breach by the Seller or
any of the Shareholders of any covenant, obligation or other provisions set
forth in this Agreement, that the Purchaser shall be entitled (in addition any
other remedy that may be available to it) to (i) a degree or order of specific
performance or mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (ii) an injunction restraining
such breach or threatened breach.
.19 Completion of Exhibits. The parties hereto acknowledge and agree that
this Agreement is being executed without the completion of all Exhibits. Any
Exhibits not attached to this Agreement as of the date of the execution of
this Agreement shall be provided to the Purchaser on or before November 8,
1995. The Purchaser shall have until November 10, 1995, to review the Exhibits
and provide notice to the Sellers of any unsatisfactory Exhibits. The Sellers
shall then have one (1) business day to correct any deficiencies in the
Exhibits or the Agreement will terminate in the sole and absolute discretion
of the Purchaser.
.20 Covenant of Good Faith. All parties to this Agreement covenant and
agree to act in good faith to diligently complete, to the best of their
abilities, all conditions precedent to the Closing.
[REMAINDER OF PAGE IS INTENTIONALLY BLANK AS THIS
AGREEMENT CONTAINS NO ADDITIONAL SECTIONS.]
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement under seal, with the intention of making it a sealed
instrument, on the date first above written.
Seller:
ATTEST: HOUSTON, INC.
________________________________ By:______________________________
W. Curtis Smith, President
WITNESS: SHAREHOLDERS:
- --------------------------------- ---------------------------------
James R. Borke
- --------------------------------- ---------------------------------
W. Curtis Smith
- --------------------------------- ---------------------------------
William T. Keller
Purchaser:
ATTEST: AMERIKING CINCINNATI
CORPORATION I
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief Executive
Officer
ATTEST: NATIONAL RESTAURANT
ENTERPRISES, INC.
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief Executive
Officer
29
<PAGE>
EXHIBIT LIST
1.1.1 Equipment, Materials, Furniture and Supplies
1.1.4 Franchise Agreements
#7751
#8483
1.1.7 (a) List of Real Property Leases
(b) Lease Assignment and Assumption Agreement
(c) Consent to Assignment, Estoppel, and Release
1.1.8 Retained Records
1.4 Allocation of Purchase Price
1.5 Noncompetition Agreement
1.6 Contracts to be Assumed
1.7 Prorations
1.8 Excluded Assets
1.9 Guaranty
3.2 Jurisdictions Seller is Qualified to Transact Business in
3.4 Defaults and Conflicts
3.6 Legal Proceedings
3.7 Financial Statements
3.10 Liens and Encumbrances
3.12.2 Violations of Employment Laws
3.12.3 Employment Agreements
3.12.5 Employee Benefit Plans
3.13 Changed Events
30
<PAGE>
3.14 Adverse Consitions
3.15 List of Contracts, Licenses and Agreements involving
liabilities of more than $1000
3.16 Bonus and Pension Plans
3.19 Breaches in the Franchise Agreements
4.5 Defaults and Conflicts
4.6 Legal Proceedings
4.8 Financial Information
6.1 Opinion of Seller's Counsel
6.2 Opinion of Purchaser's Counsel
7.2.14 Bill of Sale and Assignment
31
<PAGE>
ASSET PURCHASE AGREEMENT
among
FIFTH & RACE, INC., the SHAREHOLDERS OF FIFTH & RACE, INC.
and
AMERIKING CINCINNATI CORPORATION I
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I -- PURCHASE AND SALE OF ASSETS.................................................2
1.1 Purchase and Sale...............................................................2
1.2 Store Bank......................................................................3
1.3 Inventory.......................................................................3
1.4 Purchase Price for Assets; Allocations..........................................3
1.5 Noncompetition Agreement........................................................3
1.6 Liabilities of Seller...........................................................4
1.7 Prorations......................................................................4
1.8 Exclusion of Assets.............................................................4
1.9 Guaranty of Payment.............................................................4
ARTICLE II -- CLOSING AND TERMINATION....................................................5
2.1 Time, Date and Place............................................................5
2.2 Termination.....................................................................5
2.3 Effect of Termination...........................................................5
ARTICLE III -- REPRESENTATIONS AND WARRANTIES............................................
3.1 Ownership of Seller's Stock.....................................................6
3.2 Due Organization; Name and Address; Good Standing, Authority of Seller..........6
3.3 Authorization and Validity of Agreements........................................6
3.4 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained......................................................................7
3.5 Conduct of Business in Compliance with Regulatory and Contractual
Requirements..................................................................7
3.6 Legal Proceedings...............................................................7
3.7 Financial Information...........................................................8
3.8 Tax Matters.....................................................................8
3.9 Franchise Agreement.............................................................8
3.10 Title to Assets and Equipment...................................................8
3.11 Records.........................................................................9
3.12 Employment Matters..............................................................9
3.13 Absence of Certain Changes or Events...........................................10
3.14 Adverse Conditions.............................................................10
3.15 Lease..........................................................................10
3.16 Bonus, Pension or Other Plans, etc.............................................10
3.17 Full Disclosure................................................................10
3.18 No Brokerage...................................................................11
3.19 Seller's Franchise Agreement...................................................11
3.20 Operation of Business..........................................................11
3.21 Environmental Matters..........................................................11
3.22 Bulk Sale Laws.................................................................12
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...........................12
<PAGE>
4.1 Due Organization; Good Standing; Power.........................................12
4.2 Authorization and Validity of Agreements.......................................12
4.3 No Brokerage...................................................................13
4.4 Obligations Assumed............................................................13
4.5 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained.....................................................................13
4.6 Legal Proceedings. ...........................................................13
4.7 Full Disclosure................................................................13
4.8 Financial Information..........................................................14
4.9 Seller's Access to Records after the Closing...................................14
4.10 Bulk Sale Laws.................................................................14
ARTICLE V -- SELLER AND THE SHAREHOLDERS' COVENANTS.....................................14
5.1 Affirmative Covenants..........................................................14
ARTICLE VI -- OPINIONS OF COUNSEL.......................................................16
6.1 Opinion of Seller's and the Shareholders' Counsel..............................16
6.2 Opinion of Purchaser's Counsel.................................................17
ARTICLE VII -- CONDITIONS...............................................................17
7.1 Seller's Conditions to Close...................................................17
7.2 Purchaser's Conditions to Close................................................19
7.3 Contemporaneous Transfer.......................................................22
ARTICLE VIII -- INDEMNIFICATION.........................................................22
8.1 Indemnification By Seller and the Shareholders.................................22
8.2 Indemnification by Purchaser...................................................23
8.3 Defense of Claims..............................................................24
ARTICLE IX -- MISCELLANEOUS.............................................................25
9.1 Survival of Representations, Warranties and Agreements.........................25
9.2 Notices........................................................................25
9.3 Entire Agreement...............................................................26
9.4 Assignability..................................................................26
9.5 Binding Effect; Benefit........................................................26
9.6 Severability...................................................................27
9.7 Amendment; Waiver..............................................................27
9.8 Section Headings...............................................................27
9.9 Counterparts...................................................................27
9.12 Further Assurances.............................................................28
9.13 Use of Genders.................................................................28
9.14 Risk of Loss...................................................................28
9.15 Negotiations with Other Persons................................................28
9.16 Expenses of Transactions.......................................................28
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 6th day of November, 1995, among FIFTH & RACE, INC., an Ohio
corporation (the "Seller"); and JAMES P. BORKE, W. CURTIS SMITH and WILLIAM T.
KELLER (referred to as the "Shareholders"), and AMERIKING CINCINNATI
CORPORATION I, a Delaware corporation (the "Purchaser").
R E C I T A L S:
WHEREAS, the Seller operates a Burger King restaurant (the
"Business") located at 501 Race Street, Cincinnati, Ohio and identified by
Burger King Store No. 7917 (the "Restaurant");
WHEREAS, the Shareholders own of record and beneficially all of the
outstanding shares of the capital stock of the Seller, and the Shareholders
are the directors and officers of the Seller;
WHEREAS, the Seller desires to sell, assign, transfer and deliver to
the Purchaser, and the Purchaser desires to purchase from the Seller, certain
of the assets of the Seller as described in ARTICLE I hereof on the terms and
subject to the conditions hereinafter contained;
WHEREAS, the Purchaser, the Seller, NRE and the Shareholders desire
to enter into certain agreements among them providing for, among other things,
a covenant not to compete with the Purchaser and its parent corporation, NRE,
on the terms and subject to the conditions hereinafter contained;
WHEREAS, the Seller occupies real property (the "Premises") pursuant
to a Lease Agreement (the "Real Property Lease") which the Seller proposes to
assign to the Purchaser, and the Purchaser proposes to agree to such
assignment of the Seller's leasehold interest with respect to the Real
Property Lease; and
WHEREAS, the Purchaser proposes to assume the Real Property Lease and
assume certain contracts as set forth herein.
NOW THEREFORE, in consideration of the Recitals that shall be deemed
to be a substantive part of this Agreement and the mutual covenants, promises,
agreements, representations and warranties contained in this Agreement, the
parties hereto do hereby covenant, promise, agree, represent and warrant as
follows:
1
<PAGE>
PURCHASE AND SALE OF ASSETS
.0 Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement, at the Closing on the Closing Date (as such terms are
defined in Section 2.1 hereof), the Seller shall sell, assign, transfer and
deliver to the Purchaser and the Purchaser shall purchase from the Seller all
of the assets used or held for use in connection with the Restaurant
(excluding the "Excluded Assets" defined in paragraph 1.8 below) including but
not limited to the following (all of which assets of the Seller, excluding the
Excluded Assets, are hereinafter collectively referred to as the "Assets"):
0. All of the Seller's equipment, furniture, materials, fixed
assets and supplies, including, but not limited to, all of the equipment,
furniture, materials and supplies described in Exhibit 1.1.1 attached hereto
and incorporated by reference herein (the "Equipment").
.1 All of the Seller's gift certificates which have been
purchased from Burger King Corporation.
.2 All of the Seller's saleable, usable and merchantable
Inventory (as hereinafter defined) located at the Restaurant.
.3 All of the Seller's rights under the following Burger King
Franchise Agreement between Seller and Burger King Corporation, a copy of
which is attached hereto as Exhibit 1.1.4 and incorporated by reference herein
(the "Franchise Agreement"): Franchise Agreement dated August 2, 1993,
relating to Franchise #7917 located at 120 West 5th Street, Cincinnati, Ohio.
.4 All of the Seller's leasehold and tenant improvements
(excluding fixtures that have become part of the real property to which they
are attached).
.5 All of the Seller's customer lists and customer sales files
("Customer Lists").
.6 All of the Seller's leasehold interests in the Real Property
Lease described on Exhibit 1.1.7(a). At the Closing, the Seller shall assign
to the Purchaser all of the Seller's leasehold interest in the Real Property
Lease, parking and other access agreements relating to the Premises. At the
Closing, the Seller shall deliver to the Purchaser (i) the Lease Assignment
and Assumption Agreement (the "Lease Assignment") , and (ii) a Consent to
Assignment, Estoppel, and Releases in the form of Exhibits 1.1.7 (b) and (c)
attached hereto and incorporated by reference herein.
.7 Except for those assets described on Exhibit 1.1.8, all of
the Seller's goodwill and original copies of all of the Seller's employment
and personnel records, books sales records and similar data (hereinafter
collectively referred to as the "Records"). The Seller reserves the
2
<PAGE>
right to inspect such records at such reasonable times and places after
Closing for any legitimate business purpose including tax audits.
.1 Store Bank. Upon the Closing, the Seller shall leave cash (the "Store
Bank") in the amount of not less than $1,000. The Purchaser agrees to purchase
the Store Bank at each Restaurant from the Seller and agrees to pay for the
Store Bank in addition to the Purchase Price at Closing.
.2 Inventory. Within 24 hours prior to the date of the Closing, an
inventory shall be taken by the Seller (with the participation of the
Purchaser) of all merchantable food, paper, new uniforms, current and readily
disposable promotional items, supply inventory (including but not limited to,
consumables, operating and cleaning supplies) and other miscellaneous items
(the "Inventory") located at the Restaurant. The Purchaser agrees to purchase
the Inventory from the Seller, and the Seller agrees to sell the Inventory to
the Purchaser, at the Seller's actual Inventory purchase price. On the Closing
Date, the Purchaser agrees to pay the Seller the sum of $6,000 separately and
not as part of the Purchase Price, as partial payment for the Inventory.
Following the taking of the Inventory as discussed above, the Seller and the
Purchaser agree to make adjustments to the Inventory purchase price for the
difference between the amount paid on the Closing Date and the Seller's actual
Inventory purchase price. In the event the total Inventory purchase price is
less than $6,000 for the Restaurant, the Seller shall within fifteen (15) days
of the Closing Date, reimburse the Purchaser for any overage in payment. In
the event the total Inventory purchase price is in excess of $6,000, the
Purchaser agrees to make payment to the Seller within fifteen (15) days of the
Closing Date of any additional monies which may be due for the purchase of the
Inventory.
.3 Purchase Price for Assets; Allocations. The purchase price for the
Assets shall be Five Hundred Sixty-two Thousand dollars ($562,000) adjusted
pursuant to Section 1.7 (the "Purchase Price"), plus (i) the total dollar
amount in the Store Bank at the Closing Date; (ii) $6,000 for the estimated
value of the Inventory at the Closing Date; and (iii) the actual amount paid
by the Seller for gift certificates which will be transferred to the Purchaser
at Closing. The parties agree that the Purchase Price for the Assets shall be
allocated among the Assets in the manner set forth on Exhibit 1.4, which shall
be mutually agreed to by the Seller and the Purchaser prior to the Closing
Date. The total purchase price shall be paid in cash at Closing.
.4 Noncompetition Agreement. At the Closing, the Purchaser, NRE, the
Shareholders and the Seller shall enter into a Noncompetition Agreement in the
form attached hereto as Exhibit 1.5 (hereinafter referred to as the
"Noncompetition Agreement") pursuant to which the Seller and the Shareholders
shall agree not to compete with the business of the Purchaser and NRE for five
(5) years from and after the Closing Date.
.5 Liabilities of Seller. Except as set forth in this Section 1.6, the
Seller shall be and remain solely liable and responsible for all debts,
obligations, duties, and liabilities of the Seller and its business which are
outstanding at Closing. The Purchaser does not and
3
<PAGE>
shall not assume, agree to pay or pay any debts, obligations, duties or
liabilities of any nature of the Seller or its business, including, but not
limited, to any debts, obligations, duties or liabilities relating to the
Seller's employees or employee benefit plans, regardless of whether any such
debt, obligation, duties or liability arises under any contract, agreement,
practice, arrangement, statute, law, ordinance, rule, regulation or otherwise,
and nothing in this Agreement or otherwise is intended or shall be construed
to the contrary. The parties further covenant, promise and agree that the
Purchaser is not and shall not be obligated or required to employ more than,
to the extent applicable, the requisite number of employees in order to comply
with the Worker Adjustment and Retraining Notification Act ("WARN Act").
Notwithstanding the foregoing, the Purchaser agrees to assume from and after
the Closing Date all of the rights and obligations of the Seller attributable
to the period from and after the Closing Date under the Franchise Agreement,
the Real Property Lease and the contracts to be assumed described on Exhibits
1.1.4, 1.1.7(a) and 1.6 (collectively, the "Assumed Contracts").
.6 Prorations. All customary prorations with respect to obligations under
the Assumed Contracts, utility and fuel charges, personal property taxes and
other proratable charges related to the operation of the Restaurant shall be
adjusted between the parties as of 6:00 a.m. on the Closing Date. Payment of
the amount due by reason of the foregoing prorations shall be made at the
Closing or as soon thereafter as reasonably practicable. All real estate taxes
which relate to the tax year in which the Closing occurs shall, when received,
be prorated as of the Closing Date; in the event the real estate taxes
relating to the tax year in which the Closing occurs or a subsequent year have
already been paid by the Seller, then said taxes shall be prorated as of the
Closing and the Seller shall be reimbursed for its pro rata portion thereof at
Closing. All rentals, including minimum and percentage rentals, and other
monetary obligations under the Real Property Lease shall be adjusted as
described on Exhibit 1.7 for the month in which the Closing occurs.
.7 Exclusion of Assets. Notwithstanding any other provision of this
Agreement, those assets of the Seller and/or the Shareholders as set forth in
full in Exhibit 1.8 attached hereto and incorporated herein (the "Excluded
Assets") are not being purchased by the Purchaser.
.8 Guaranty of Payment. All obligations of the Purchaser hereunder,
including all payments of amounts due hereunder from the Purchaser (including
but not limited to the Purchase Price) as well as any amounts owed to the
Seller and to the Shareholders pursuant to the terms of the Noncompetition
Agreement and the indemnification in Article VIII are guaranteed by NRE and
NRE shall execute and deliver a Guaranty in the form of Exhibit 1.9 to vidence
such guaranty at Closing.
4
<PAGE>
I -- CLOSING AND TERMINATION
.0 Time, Date and Place. The closing of the purchase and sale of the
Assets and the other transactions contemplated by this Agreement (referred to
throughout this Agreement as the "Closing") shall take place at the offices of
Seller's counsel, Dinsmore & Shohl, 1900 Chemed Center, 255 East Fifth Street,
Cincinnati, Ohio 45202. The time, place and date of the Closing are referred
to throughout this Agreement as the "Closing Date."
Unless this Agreement is terminated as provided for herein, the Closing
shall occur on the later of (i) January 5, 1996; or (ii) ten (10) days
following the satisfaction of all conditions precedent set forth in ARTICLE
VII. If such day is not a business day then the Closing shall occur on the
next succeeding business day.
.1 Termination.
.0 If the Closing contemplated hereunder has not occurred on or
before February 29, 1996, either the Purchaser or the Seller may terminate
this Agreement upon written notice to the other party.
.1 If any of the representations, warranties or covenants of
the Seller or the Shareholders are found to be untrue or breached in any
material respect, at or prior to Closing, and the Seller or the Shareholders
shall not have cured such breach within 30 days after the Purchaser shall have
given written notice to the Seller of the existence of such breach, the
Purchaser may terminate this Agreement upon written notice to the Seller. If
any of the representations, warranties or covenants of the Purchaser or NRE
are found to be untrue or breached in any material respect, at or prior to
Closing, and the Purchaser or NRE shall not have cured such breach within 30
days after the Seller shall have given written notice to the Purchaser and NRE
of the existence of such breach, the Seller may terminate this Agreement upon
written notice to the Purchaser.
.2 This Agreement may be terminated by the written agreement of
the Purchaser and the Seller. This Agreement may be terminated by the
Purchaser in its sole discretion if any of the contingencies set forth in
Sections 7.2.8 or 7.2.9 are not met to the Purchaser's satisfaction. This
Agreement may be terminated by the Seller in its sole discretion if any of the
contingencies set forth in Section 7.1.11 are not met to the Seller's
satisfaction.
2.3 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 2.2, this Agreement shall be
of no further force and effect, with no liabilities or obligations to any
party under this Agreement; provided, however, that the parties shall not be
released from any liabilities, claims or actions regarding the falsity in any
material respect of a representation or warranty set forth in ARTICLE III or
ARTICLE IV or a failure to perform or comply with any material obligation
under this Agreement.
5
<PAGE>
II -- REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS
The Seller and the Shareholders, jointly and severally, represent and
warrant to the Purchaser as of the date hereof and as of the Closing on the
Closing Date each of the following:
.0 Ownership of Seller's Stock. The Shareholders are the sole and
exclusive record and beneficial owner of all of the outstanding shares of the
capital stock of the Seller. The Shareholders have duly approved the Seller's
sale, assignment, transfer and delivery of the Assets to the Purchaser in
accordance with the terms of this Agreement, the consummation of all the
transactions contemplated hereby and the Seller entering into the
Noncompetition Agreement.
.1 Due Organization; Name and Address; Good Standing, Authority of
Seller. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio. The only names of the
Seller which have been used by the Seller at any time within the past three
years ending at the date of this Agreement are Fifth & Race, Inc. and "Burger
King." The Seller has full right, power and authority to own, lease and
operate its properties and assets, and to carry on its Business. The Seller is
duly qualified, licensed and authorized to do business in each jurisdiction in
which the properties and assets owned by it or the nature of the business
conducted by it make such licensing, qualification and authorization legally
necessary. A list of all jurisdictions in which the Seller is qualified to do
business and required to be qualified to do business as set forth on Exhibit
3.2. Except as described on Exhibit 3.2, the Seller is not in breach or
violation of, and the execution, delivery and performance of this Agreement
will not result in a breach or violation of, any of the provisions of the
Seller's articles of incorporation, as amended to the date of this Agreement
(the "Articles") or by-laws, as amended to the date of this Agreement (the
"By-Laws"), or any agreement to which it is a party.
.2 Authorization and Validity of Agreements. The Seller and the
Shareholders have the legal capacity, right, power, and authority to enter
into this Agreement and the Noncompetition Agreement. The Seller has the full
right, power and authority to execute, acknowledge, seal and deliver this
Agreement and to perform the transactions contemplated by this Agreement. The
execution, acknowledgment, sealing and delivery of this Agreement by the
Seller and the Shareholders and the performance by the Seller and the
Shareholders of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate and shareholder action. This
Agreement has been duly executed, acknowledged, sealed and delivered by the
Seller and the Shareholders and is the legal, valid and binding obligation of
the Seller and the Shareholders enforceable against the Seller and the
Shareholders, respectively, in accordance with its terms, except in each case as
such enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors rights generally.
The Noncompetition Agreement, when executed, acknowledged, sealed and delivered
by the Seller and the Shareholders, will be the legal, valid and binding
obligation of the Seller and
6
<PAGE>
the Shareholders, respectively, enforceable against the Seller and against the
Shareholders, respectively, in accordance with its terms, except in each case as
such enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors rights generally.
.3 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained. Except as described on EXHIBIT 3.4, to the best of the Seller's and
the Shareholder's knowledge, the execution, acknowledgment, sealing, delivery,
and performance of this Agreement and the Noncompetition Agreement by the
parties thereto, and the consummation of the transactions contemplated by this
Agreement and the Noncompetition Agreement will not (a) violate or require any
consent, approval, or filing under, (i) any material common law, law, statute,
ordinance, rule or regulation (collectively referred to throughout this
Agreement as "Laws") of any federal, state or local government (collectively
referred to throughout this Agreement as "Governments") or any agency, bureau,
commission, instrumentality or judicial body of any Governments (collectively
referred to throughout this Agreement as "Governmental Agencies"), or (ii) any
judgment, injunction, order, writ or decree of any court, arbitrator,
Government or Governmental Agency by which the Seller or any of the Assets is
bound; (b) conflict with, require any consent, approval, or filing under,
result in the breach or termination of any provision of, constitute a default
under, or result in the creation of any claim, security interest, lien,
charge, or encumbrance upon any of the Assets pursuant to (i) the Seller's
Articles or By-Laws, (ii) any indenture, mortgage, deed of trust, license,
permit, approval, consent, franchise, lease, contract, or other instrument,
document or agreement to which the Seller is a party or by which the Seller,
or any of the Assets is bound, or (iii) any judgment, injunction, order, writ
or decree of any court, arbitrator, Government or Governmental Agency by which
the Seller or any of the Assets is bound; and all permits, licenses and
authorizations of any Government or Governmental Agency required to be
obtained by the Seller prior to the Closing, shall have been obtained and
shall be in full force and effect as of the Closing Date.
.4 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. To the best of the Seller's and the Shareholders' knowledge, the
Seller has conducted and is conducting its business in material compliance
with all applicable material Laws of all Governments and Governmental
Agencies.
.5 Legal Proceedings. Except as set forth on EXHIBIT 3.6, there is no
action, suit, proceeding, claim or arbitration, or any investigation by any
person or entity, including, but not limited to, any Government or
Governmental Agency, (i) pending, to which the Seller or the Shareholders are
a party and which relate to the Seller, the Seller's Business or the Assets,
or to the knowledge of the Seller or the Shareholders, threatened against or
relating to the Seller, the Seller's business or the Assets, or (ii)
challenging the Seller's or the Shareholders' right to execute, acknowledge,
seal, deliver, perform under or consummate the transactions contemplated by
this Agreement and, as respects the Seller and the Shareholders, the
Noncompetition Agreement, or (iii) asserting any right with respect to any of
the Assets, and, in each such case, to the best knowledge of the Seller and
the
7
<PAGE>
Shareholders, there is no basis for any such action, suit, proceeding,
claim, arbitration or investigation.
.6 Financial Information. Attached hereto as Exhibit 3.7 are copies of
the unaudited Balance Sheets of the Seller as of December 31, 1994, and
December 31, 1993, and the Operating Statements of the Seller for the periods
January 1, 1993, to December 31, 1993, January 1, 1994, to December 31, 1994,
and an interim income statement from January 1, 1995, to August 31, 1995, and
balance sheet as of August 31, 1995, which are being provided by the Seller
and the Shareholders to the Purchaser (the "Financial Statements"). The
Financial Statements are in accordance with the books and records of the
Seller, are true, correct and complete and accurately present the Seller's
financial position as of the dates set forth therein and the results of the
Seller's operations for the periods then ended; all such Financial Statements
are in conformity with the accounting principles historically utilized by the
Seller and applied on a consistent basis during each period and on a basis
consistent with that of prior periods. Until the Closing Date, the Seller
shall deliver to the Purchaser month end balance sheets and income statements
within 30 days of the end of each month.
.7 Tax Matters. All tax returns of the Seller as filed by the Seller with
the Internal Revenue Service (the "IRS") and all information reported on the
returns are true, accurate, and complete. The Seller is not a party to, and is
not aware of, any pending or threatened action, suit, proceeding, or
assessment against it for the collection of taxes by any Government or
Governmental Agency. The Seller has duly and timely filed with all appropriate
Governments and Governmental Agencies, all tax returns, information returns,
and reports required to be filed by the Seller. The Seller has paid in full
all taxes, interest, penalties, assessments and deficiencies owed by the
Seller to all taxing authorities. All taxes and other assessments and levies
which the Seller is required by applicable Law to withhold or to collect have
been duly withheld and collected and have been paid over to the proper
Governments and Governmental Agencies or are properly held by the Seller for
such payment. All claims by the IRS or any state taxing authorities for taxes
due and payable by the Seller have been paid by the Seller. The Seller is not
a party to, and is not aware of, any pending or threatened action, suit,
proceeding, or assessment against it for the collection of taxes by any
Government or Governmental Agency.
.8 Franchise Agreement. The Franchise Agreement is full, complete,
unamended, true and correct Franchise Agreement between the Seller and Burger
King Corporation, which are, and shall continue to be until the Closing on the
Closing date, in full force and effect.
.9 Title to Assets and Equipment. Except as provided in Exhibit 3.10, the
Seller has sole and exclusive, good and marketable title to all of the Assets
and the same are free and clear of any and all pledges, claims, threats,
liens, restrictions, agreements, leases, security interests, charges and
encumbrances. As of the Closing Date, all of the Equipment will be working and
operating, reasonable wear and tear excepted, and free from any defects known
to the Seller or to the Shareholders.
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.10 Records. The Records that have been delivered by the Seller to the
Purchaser or that shall be delivered by the Seller to the Purchaser are true,
complete and correct.
.11 Employment Matters.
.0 None of the Seller's employees are covered by a collective
bargaining agreement or are represented by a labor organization, and no
petition for representation concerning any of the Seller's employees has been
filed with the National Labor Relations Board; the Seller is not aware of any
union organizational activity and has no reason to believe that any such
activity is being contemplated. To the best of the Seller's and the
Shareholders' knowledge, the Seller has not engaged in any unfair labor
practice.
.1 Except as described in EXHIBIT 3.12.2, to the best of the
Seller's and the Shareholders' knowledge, (i) the Seller is not in material
violation of applicable equal employment opportunity wage and hour requirement
or any other Laws of any Government or Governmental Agency relating to
employment; (ii) there are no active, pending, or threatened administrative or
judicial proceedings under any Laws of any Government or Governmental Agency;
(iii) there are no claims, charges, and employment related suits which have
occurred within the last three years or are presently pending or threatened
under any employment related Laws of any Government or Governmental Agency;
and (iv) the Seller is not subject to any judgments, decrees, conciliation
agreements and settlement agreements concerning employment related matters.
.2 Except as described in EXHIBIT 3.12.3, the Seller has not
entered into any employment agreements with any of its employees, and all
employees may be terminated at will; there is no contractual obligation,
except for the provisions of this Agreement, or special termination or
severance arrangement in respect of any of the Seller's employees; and there
is no provision of any agreement or arrangement with any of the Seller's
employees, or any other legal or contractual requirement, which would obligate
the Seller to require the Purchaser of the Assets to employ any of the
Seller's employees.
.3 The Seller has paid or will pay on or prior to Closing all
wages, bonuses, commissions and other benefits and sums due (and all required
taxes, insurance, social security and withholding thereon), including all
accrued vacation, accrued sick leave, accrued benefits and accrued payments
(and pro rata accruals for a portion of a year) to its employees.
.4 Except as described on Exhibit 3.12.5, the Purchaser is
under no obligation or duty, whether under any contract, agreement,
understanding or arrangement or under any applicable and material Law of any
Government or Governmental Agency to assume or be responsible for any
obligation, duty or liability, now existing or hereafter arising, relating to
or in connection with the Seller's employees or any compensation, benefits or
benefit plans in respect of the Seller's employees, or otherwise arising out
of or in connection with the transactions contemplated by this Agreement, and
the Seller has made
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no commitment and is under no obligation to cause the Purchaser of the Assets
to assume or to be responsible for any such obligation, duty or liability.
.12 Absence of Certain Changes or Events. Except as described
on EXHIBIT 3.13, since December 31, 1994, the Seller has not engaged in or
experienced any of the following:
.0 Sold, assigned, transferred, leased, disposed of, or agreed
to sell, assign, transfer, lease, or dispose of, any of the Assets, except
Inventory sold in the ordinary course of the Seller's business, as such
business has been operated historically;
.1 Suffered any material adverse change in the Seller's
operations, earnings, assets, liabilities, or business (financial or
otherwise); or
.2 Failed to pay any indebtedness or other obligation,
including any taxes and other charges, when due.
.13 Adverse Conditions. Except as set forth in EXHIBIT 3.14, attached
hereto and incorporated by reference herein, neither Seller nor the
Shareholders have any knowledge of any past, present or future condition,
facts or circumstances which has materially and adversely affected or which
might materially and adversely affect the business of the Seller or prevent
the Purchaser from carrying on the Seller's business.
.14 Lease. Attached hereto as Exhibit 3.15 and incorporated by reference
herein is a list of the following, which is accurate and complete as of the
date hereof: all leases, contracts, licenses, agreements or other commitments
of Seller as obligor which are not terminable without penalty upon no more
than thirty (30) days notice and which involve a liability, obligation,
contingent liability or contingent obligation in excess of $1,000.
.15 Bonus, Pension or Other Plans, etc. Except as described on Exhibit
3.16, Seller is not a party to, does not maintain or make any contribution to,
and Seller has not incurred any liability or expense with respect to any
employment agreement, current or future pension, retirement, deferred
compensation, bonus, profit-sharing, insurance or similar plan, agreement,
arrangements or formal or informal understandings for the benefit of
employees, in each case whether or not legally binding.
.16 Full Disclosure. This Agreement (including the Exhibits hereto) does
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein not
misleading. There is no fact known to the Seller or to the Shareholders which
is not disclosed in this Agreement which materially adversely affects the
accuracy of the representations and warranties contained in this Agreement or
the Seller's financial condition, the Seller's Financial Statements,
operations, business, earnings, assets, or liabilities. All information set
forth in the schedules, exhibits and all other information regarding the
Seller and its business, condition, assets, liabilities, operations, financial
performance, net income and prospects that has been furnished to the Purchaser
or any of its representatives or agents by or on behalf of the Seller or any
of the
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Seller's representatives or agents, is accurate and complete in all respects.
The Seller and the Shareholders have provided the Purchaser and the
Purchaser's representatives and agents with full and complete access to all of
the Seller's records and other documents and data.
.17 No Brokerage. Neither the Seller nor the Shareholders have incurred
any obligation or liability, contingent or otherwise, for brokerage fees,
finder's fees, agent's commissions, or the like in connection with this
Agreement or the transactions contemplated hereby.
.18 Seller's Franchise Agreement. Except as described on Exhibit 3.19,
the Seller is not in material breach of or material default under any
provision of the Franchise Agreement, and no condition exists which, with
passage of time or the giving of notice or both, will result in a breach or
default by the Seller of any provision of any of the Franchise Agreement.
.19 Operation of Business. Since January 1, 1995, the Seller and the
Shareholders have used, and from the date hereof until the Closing the Seller
and the Shareholders shall use, their best efforts to preserve the Business of
the Seller.
.20 Environmental Matters. To the best knowledge of the Seller and the
Shareholders, neither the Shareholders, the Seller, nor to the Seller's
knowledge any other person (including without limitation, any previous owner,
lessor or sublessor of the Seller's property) have used, treated, stored or
disposed of hazardous waste or toxic substances on any of the properties owned
or leased by the Seller (whether owned, leased, subleased or used by such
person and hereinafter, the "Property") in material violation of any material
federal, state or local environmental protection, toxic substance, human
health or similar statute, regulation or ordinance (collectively, the
"Environmental Laws"), and there have been no material spills or releases of
hazardous substances on or from any Property that, in any such case, could
subject the Seller or the Shareholders to material liability. To the best
knowledge of the Seller and the Shareholders, the Property of the Seller and
all operations of the Seller conducted on such Property is in compliance with
all Environmental Laws. Neither the Seller nor the Shareholders have received
any notice, nor are aware of any administrative or judicial investigations,
proceedings or actions with respect to violations, alleged or proven, of any
Environmental Law by the Seller or the Shareholders, or otherwise involving
the Property of the Seller or the operations conducted on the Property of the
Seller. To the best of the Seller's and the Shareholders' knowledge, no
asbestos containing material is present in any of the improvements on any
Property of the Seller or is otherwise located on any Property of the Seller.
To the best knowledge of the Seller and the Shareholders, all operations
conducted on the Seller's Property are in material compliance with all
material federal and state statutes and regulations relating to asbestos. To
the best of the Seller's and the Shareholders' knowledge and belief, no
underground storage tanks, whether in use or closed, are on or under any
Property of the Seller.
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.21 Bulk Sale Laws. Both the Seller and the Shareholders have complied,
or will comply prior to the Closing, with all applicable Bulk Sale and Bulk
Transfer laws in each state where Assets are located and agree to discharge
all obligations and liabilities of the Seller's business, not assumed by
Purchaser, in a timely manner.
III -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser and NRE represent and warrant to the Seller and the
Shareholders, jointly and severally, as of the date hereof and as of the
Closing on the Closing Date each of the following:
.0 Due Organization; Good Standing; Power. Both the Purchaser and NRE are
corporations duly incorporated, validly existing, and in good standing under
the laws of the State of Delaware. Both the Purchaser and NRE have full right,
power and authority to enter into this Agreement and the Noncompetition
Agreement and to perform their respective obligations hereunder and
thereunder.
.1 Authorization and Validity of Agreements. The Purchaser and NRE have
the legal capacity, right, power, and authority to enter into this Agreement
and the Noncompetition Agreement. The Purchaser and NRE have the full right,
power and authority to execute, acknowledge, seal and deliver this Agreement
and to perform the transactions contemplated by this Agreement. The execution,
acknowledgment, sealing and delivery of this Agreement by the Purchaser and
NRE and the performance by the Purchaser and NRE of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate and shareholder action. This Agreement has been duly executed,
acknowledged, sealed and delivered by the Purchaser and NRE and is the legal,
valid and binding obligation of the Purchaser and NRE enforceable against the
Purchaser and NRE in accordance with its terms, except in each case as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors rights
generally. The Noncompetition Agreement, when executed, acknowledged, sealed
and delivered by the Purchaser and NRE, will be the legal, valid and binding
obligation of the Purchaser and NRE, enforceable against the Purchaser and
NRE, in accordance with its terms, except in each case as such enforceability
may be limited by general principles of equity, bankruptcy, insolvency,
moratorium and similar laws relating to creditors rights generally.
.2 No Brokerage. The Purchaser has not incurred any obligation or
liability, contingent or otherwise, for brokerage fees, finder's fees, agent's
commissions, or the like in connection with this Agreement or the transactions
contemplated hereby.
.3 Obligations Assumed. The Purchaser covenants that it will pay, when
due, all obligations assumed by it under this Agreement and that it will
employ, to the extent applicable, the requisite number of employees necessary
to comply with the WARN Act.
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.4 Agreement Not in Conflict with Other Instruments; Required Approvals
Obtained. Except as described on Exhibit 4.5, to the best of NRE's and the
Purchaser's knowledge, the execution, acknowledgment, sealing, delivery, and
performance of this Agreement and the Noncompetition Agreement by the parties
thereto, and the consummation of the transactions contemplated by this
Agreement and the Noncompetition Agreement will not (a) violate or require any
consent, approval, or filing under, (i) any material Laws of any Governments
or any Governmental Agencies, or (ii) any judgment, injunction, order, writ or
decree of any court, arbitrator, Government or Governmental Agency by which
the Purchaser or NRE is bound; (b) conflict with, require any consent,
approval, or filing under, result in the breach or termination of any
provision of, or constitute a default under (i) the Purchaser's or NRE's
Articles or By-Laws, (ii) any indenture, mortgage, deed of trust, license,
permit, approval, consent, franchise, lease, contract, or other instrument,
document or agreement to which the Purchaser or NRE is a party or by which the
Purchaser or NRE is bound, or (iii) any judgment, injunction, order, writ or
decree of any court, arbitrator, Government or Governmental Agency by which
the Purchaser or NRE is bound; and all permits, licenses and authorizations of
any Government or Governmental Agency required to be obtained by the Purchaser
or NRE prior to the Closing, shall have been obtained and shall be in full
force and effect as of the Closing Date.
.5 Legal Proceedings. Except as set forth on Exhibit 4.6, there is no
action, suit, proceeding, claim or arbitration, or any investigation by any
person or entity, including, but not limited to, any Government or
Governmental Agency, (i) pending, to which the Purchaser or NRE is a party and
which relate to the Purchaser or NRE, or to the knowledge of the Purchaser or
NRE, threatened against or relating to the Purchaser or NRE, or (ii)
challenging the Purchaser's or NRE's right to execute, acknowledge, seal,
deliver, perform under or consummate the transactions contemplated by this
Agreement and the Noncompetition Agreement, or (iii) asserting any right with
respect to any of the Assets, and, in each such case, to the best knowledge of
the Purchaser or NRE, there is no basis for any such action, suit, proceeding,
claim, arbitration or investigation.
.6 Full Disclosure. This Agreement (including the Exhibits hereto) does
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein not
misleading. There is no fact known to the Purchaser or NRE which is not
disclosed in this Agreement which materially adversely affects the accuracy of
the representations and warranties contained in this Agreement or the
Purchaser's or NRE's financial condition, NRE's Financial Statements,
operations, business, earnings, assets, or liabilities. All information set
forth in the schedules, exhibits and all other information regarding the
Purchaser or NRE and its business, condition, assets, liabilities, operations,
financial performance, net income and prospects that has been furnished to the
Seller or any of its representatives or agents by or on behalf of the
Purchaser or NRE or any of the Purchaser's or NRE's representatives or agents,
is accurate and complete in all respects.
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.7 Financial Information. Attached hereto as Exhibit 4.8 are copies of
the audited Financial Statements of NRE as of December 31, 1994, and the
unaudited interim financial statements of NRE as of August 28, 1995, which are
being provided by the NRE to the Seller (the "Financial Statements"). The
Financial Statements are in accordance with the books and records of NRE, are
true, correct and complete and accurately present NRE's financial position as
of the dates set forth therein and the results of NRE's operations for the
periods then ended; all such Financial Statements are in conformity with the
accounting principles historically utilized by NRE and applied on a consistent
basis during each period and on a basis consistent with that of prior periods.
.8 Seller's Access to Records after the Closing. After the Closing Date,
the Purchaser shall give the Seller and its authorized representatives access
to and the right to copy such books, contracts, documents and other records
previously in the Seller's possession as the Seller may reasonably request in
order to evaluate and respond to claims against the Seller related to taxes or
other matters which are asserted after the Closing Date. Such access shall be
given only after reasonable notice to the Purchaser and at such times and in
such manner as will not disrupt or interfere with the conduct of the
Purchaser's business. Further, the Purchaser shall give the Seller written
notice thirty (30) days prior to destroying any such books, contracts,
documents and other records, and grants the Seller the right to copy or remove
such books, contracts, documents and records during the thirty (30) day period
after receipt of such notice from the Purchaser.
.9 Bulk Sale Laws. Both the Purchaser and NRE have complied, or will
comply prior to the Closing, with all applicable Bulk Sale and Bulk Transfer
laws in each state where Assets are located and agree to discharge all
obligations and liabilities of the Seller's business, not assumed by
Purchaser, in a timely manner.
IV -- SELLER AND THE SHAREHOLDERS' COVENANTS
.0 Affirmative Covenants. The Seller and the Shareholders, jointly and
severally, covenant, promise and agree that from the date hereof and until the
Closing that the Seller and the Shareholders shall cause the Seller to perform
and comply with each of the following:
.0 Continue to operate the Business of the Seller diligently,
and not take any action omit to take any action, or engage in any transaction
other than in acts or transactions in the ordinary course of business, as such
business has been operated historically.
.1 Use their best efforts to preserve the Business of the
Seller and use their best efforts to preserve the relationship of the Business
with suppliers, customers, Burger King Corporation and others.
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.2 Maintain and continue normal and usual maintenance and repair of the
Equipment and all other assets being sold and transferred to the Purchaser
herein.
.3 Cooperate with the Purchaser to achieve an orderly transition of the
Business of the Seller to the Purchaser and an orderly transfer of the Assets
to the Purchaser.
.4 Pay or provide for payment of all sales, use, personal property,
social security, withholding, payroll, unemployment compensation, income and
other taxes, assessments, fees and public charges due and payable by the
Seller in respect of its Business and the Assets through the Closing Date and
any portion thereof applicable to any period prior to the Closing Date.
.5 Pay all wages, bonuses, commissions and other employment benefits and
sums (and all required taxes, insurance and withholding thereon), including
all accrued vacation, accrued sick leave, accrued benefits and accrued
payments (and pro rata accruals for a portion of a year) due to the Seller's
employees through the Closing Date.
.6 Maintain in effect all insurance policies and other employee benefits
covering any employee claims which may be incurred through the Closing Date.
.7 Fully perform and comply with all covenants, promises and agreements
hereunder which are required to be performed or complied with by the Seller
and the Shareholders prior to or at the Closing, and exert their best efforts
to completely satisfy and fulfill all conditions precedent to the Seller's and
the Shareholders' obligations to close hereunder at the Closing on the Closing
Date.
.8 Exert their best efforts to prevent the occurrence of any event which
could result in any of the Seller's or the Shareholders' representations and
warranties contained in this Agreement not being true and correct at or as of
the time immediately after the occurrence of such event, and the Seller and
the Shareholders shall promptly notify the Purchaser of the occurrence of any
event or the discovery of any fact which would cause any of their covenants,
promises and agreements to be breached or violated or any of their
representations and warranties to become not true and correct or which could
interfere with or prevent the consummation of the transactions contemplated
hereby.
.9 Provide the Purchaser and its representatives, subject to the
restrictions contained in Section 7.2.8, with full access during normal
business hours to all of the Seller's properties, assets and Records, provide
the Purchaser and its representatives with such financial and operating data
and other information with respect to the Seller's Business, Assets and
properties as the Purchaser shall from time to time request, and permit the
Purchaser and its representatives to consult with the Seller's
representatives, officers, employees and internal accountants up to the time
of Closing.
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.10 Take no action which is or would cause a material violation of any
material Laws of any Governments or Governmental Agencies.
.11 During the period prior to the Closing, the Seller and the
Shareholders shall promptly notify the Purchaser in writing of:
.0 The discovery by the Seller or any of the Shareholders of
any event, condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that would cause or constitute a
material breach of any representation or warranty made by the Seller or any of
the Shareholders in this Agreement;
.1 Any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement that would cause or
constitute a material breach of any representation or warranty made by the
Seller or any of the Shareholders in this Agreement if (a) such representation
or warranty had been made as if at the time of the occurrence, existence or
discovery of such event, condition, fact or circumstances, or (b) such event,
condition, fact or circumstance had occurred, arisen or existed on or prior to
the date of this Agreement;
.2 Any material breach of any covenant or obligation of the
Seller or any of the Shareholders; and
.3 Any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article 7 impossible
or unlikely.
V -- OPINIONS OF COUNSEL
.0 Opinion of Seller's and the Shareholders' Counsel. At the Closing, the
Seller, W. Curtis Smith and James P. Borke shall deliver to the Purchaser the
opinion of their counsel, dated as of the Closing Date, which shall be in
substantially the form attached hereto as EXHIBIT 6.1.
.1 Opinion of Purchaser's Counsel. At the Closing, the Purchaser and NRE
shall deliver to the Seller and to the Shareholders the opinion of their
counsel, dated as of the Closing Date in substantially the form attached
hereto as Exhibit 6.2.
VI -- CONDITIONS
.0 Seller's Conditions to Close. The Seller's and the Shareholders'
obligation to close the transactions contemplated hereby at the Closing shall
be subject to the complete satisfaction and fulfillment of all of the
following conditions precedent, any or all of which may be waived in whole or
in part by the Seller (but no such waiver of any such condition precedent
shall be or constitute a waiver of any covenant, promise, agreement,
representation or warranty made by the Purchaser in this Agreement):
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.0 All representations and warranties made by the Purchaser and NRE in
this Agreement shall be complete and accurate at and as of the Closing on the
Closing Date. The Seller shall have been furnished with a certificate, signed
by the Purchaser and NRE, and dated the Closing Date to the foregoing effect.
.1 All covenants, promises and agreements made by the Purchaser in this
Agreement and all other actions required to be performed or complied with by
the Purchaser under this Agreement prior to or at the Closing shall have been
fully performed or complied with by the Purchaser. Seller shall have been
furnished with a certificate, signed by the Purchaser, and dated the Closing
Date to the foregoing effect.
.2 The Purchaser shall deliver to the Seller by wire transfer or bank
check the amount of cash set forth in Section 1.4 of this Agreement.
.3 The Purchaser shall deliver to the Seller a Guaranty signed by NRE in
the form attached hereto as EXHIBIT 1.9 and incorporated herein by reference.
.4 The Purchaser shall have obtained, and delivered to the Seller, copies
of all consents, approvals or other authorizations which the Purchaser is
required to obtain from, and any filing which the Purchaser is required to
make with, any governmental authority or agency or any other person in
connection with the execution, delivery and consummation of this Agreement and
the other documents associated herewith and the consummation of the
transactions contemplated hereby or thereby, in form and substance
satisfactory to the Seller.
.5 The Seller shall have received all things required to be delivered or
furnished to the Seller by the Purchaser hereunder prior to or at the Closing.
.6 The Seller shall have received an opinion of counsel for the Purchaser
and NRE, as of the Closing Date, as required by Section 6.2 hereof.
.7 The Purchaser shall have delivered to the Seller the following
documents:
.0 the Lease Assignment of the Real Property Lease, the Consent
to Assignment, Estoppel, and Releases, and assumption agreements relating to
any other Assumed Contract, and;
.1 certificates dated no earlier than thirty (30) days prior to
the Closing Date, from the Secretary of State for the States of Delaware and
Kentucky as to the good standing of the Purchaser and a certificate dated no
earlier than thirty (30) days prior to the Closing Date, from the Secretary of
State for the State of Delaware as to the good standing of NRE;
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.2 certificates from the corporate secretaries of the Purchaser
and NRE indicating that this transaction has been duly approved and/or
ratified, along with certified copies of the Board of Director minutes
approving the transaction set forth herein.
.3 certificate from the Chief Financial Officer of NRE that as
of the Closing Date there has been no material adverse change in the financial
condition of NRE.
.4 all other documents, instruments and agreements required to
be delivered by the Purchaser to the Seller pursuant to this Agreement.
.8 The Purchaser shall execute, acknowledge, seal and deliver to the
Seller a Warranty Assignment in the form mutually agreeable to the Purchaser,
the Seller and Burger King Corporation pursuant to which the Purchaser shall
accept assignment from the Seller of the Franchise Agreement.
.9 NRE and the Purchaser shall execute, acknowledge, seal and
deliver the Noncompetition Agreement attached hereto as Exhibit 1.5.
.10 Seller shall have obtained all consents, approvals or other
authorizations which Seller is required to obtain from NationsBank of Georgia,
N.A., Burger King Corporation and from any lessor, other than Curtis James
Investments, under the Lease in connection with the execution delivery and
consummation of this Agreement or the assignment of the Franchise Agreement or
Lease.
.11 Both the Purchaser and NRE shall have complied with all
applicable Bulk Sale and Bulk Transfer laws in each state where Assets are
located.
.12 The Purchaser and NRE shall have provided all documents and
consents necessary to purchase all of the Burger King restaurants owned by
Houston, Inc. and Thirty- Forty, Inc. pursuant to the terms of the Asset
Purchase Agreements signed simultaneously herewith.
.1 Purchaser's Conditions to Close. The Purchaser's obligation to close
the transactions contemplated hereby at the Closing shall be subject to the
complete satisfaction and fulfillment of all of the following conditions
precedent, any or all of which may be waived in whole or in part by the
Purchaser (but no such waiver of any such condition precedent shall be or
constitute a waiver of any covenant, promise, agreement, representation or
warranty made by the Seller and the Shareholders in this Agreement):
.0 All representations and warranties made by the Seller and the
Shareholders in this Agreement shall be materially complete and accurate in
all material respects at and as of the Closing on the Closing Date. The
Purchaser shall have been
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furnished with a certificate, signed by the Shareholders and the Seller, and
dated the Closing Date to the foregoing effect.
.1 All covenants, promises and agreements made by the Seller and the
Shareholders in this Agreement and all other actions required to be performed
or complied with by the Seller and the Shareholders under this Agreement prior
to or at the Closing shall have been fully performed or complied with by the
Seller and the Shareholders. The Purchaser shall have been furnished with a
certificate, signed by the Shareholders and the Seller, and dated the Closing
Date to the foregoing effect.
.2 On or before December 31, 1995, the Seller shall have obtained,
and delivered to the Purchaser, copies of all consents, approvals or other
authorizations which the Seller is required to obtain from, and any filing
which the Seller is required to make with, any governmental authority or
agency or any other person including, but not limited to, consents required
from Burger King Corporation in connection with the execution, delivery and
consummation of this Agreement and the other documents associated herewith and
the consummation of the transactions contemplated hereby or thereby, in form
and substance satisfactory to the Purchaser. Notwithstanding the foregoing,
the Purchaser shall be solely responsible for obtaining any consents or
approvals necessary for the Purchaser to purchase the Assets or operate the
Business from and after the Closing Date.
.3 The Purchaser shall have received all things required to be
delivered or furnished to the Purchaser by the Seller and the Shareholders
hereunder prior to or at the Closing.
.4 On or before December 31, 1995, all necessary permits and
licenses required to be obtained by the Purchaser shall have been obtained and
paid for by the Purchaser and the Purchaser shall have exercised all
reasonable efforts to obtain same.
.5 There shall not have occurred any material adverse change in the
business of the Seller or in the Assets.
.6 The Purchaser shall have received an opinion of counsel for the
Seller and the Shareholders, as of the Closing Date, as required by Section
6.1 hereof.
.7 Within thirty (30) days following the execution of this
Agreement, the Purchaser and its representatives shall have completed, to
their complete satisfaction, an investigation and examination of all aspects
of the Restaurant and the Assets, including the Financial Statements (the
"Inspection"). No employee or representative of the Purchaser will perform
on-site due diligence of the Restaurant without the Seller's prior approval,
at which time such employee or representative will be accompanied by the
Seller or its designee. The Purchaser shall itemize any deficiencies noted in
the Inspection and provide such list to the Seller within thirty (30) days
after execution of this Agreement. The Seller shall correct the deficiencies
prior to the Closing Date if the total cost of such corrections
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does not exceed One Thousand dollars ($1,000) per Restaurant. If the total
cost does exceed this amount, the Seller shall have the option, exercisable
within ten (10) days of receiving notice of the corrections, to pay for the
corrections or terminate this Agreement. On or prior to Closing, the Purchaser
shall have the right to complete its review of the Restaurant to confirm the
Equipment in the Restaurant is in proper working order and that the Restaurant
conform in all material respects to Burger King standards (the "Walk-Thru")
that apply to the Restaurant.
.8 On or prior to December 31, 1995, the Purchaser shall have
received all consents, approvals and other authorizations which the Purchaser
is required to obtain from, and any filing which the Purchaser is required to
make with, any governmental authority or agency or any other person including,
but not limited to, consents required from Burger King Corporation in
connection with the execution, delivery and consummation of this Agreement and
the other documents associated herewith in the consummation of the
transactions contemplated hereby or thereby, in form and substance
satisfactory to the Purchaser.
.9 The Seller shall have delivered to the Purchaser the following
documents:
.0 the Lease Assignment of its Real Property Lease, each
Assumed Contract, and the Consent to Assignment, Estoppel, and Releases;
.1 any required easement assignments;
.2 to the extent available, a fully executed original
counterpart of each Real Property Lease in the Seller's possession;
.3 a receipt for funds paid to the Seller by the Purchaser;
.4 certificates dated no earlier than thirty (30) days prior to
the Closing Date, from the Secretary of State for the State of Ohio as to the
good standing of the Seller;
.5 certificates from the corporate secretary of the Seller
indicating that this transaction has been duly approved and/or ratified, along
with certified copies of the Board of Director minutes approving the
transaction set forth herein.
.6 all other documents, instruments and agreements required to
be delivered by the Seller to the Purchaser pursuant to this Agreement.
.10 Between the date of this Agreement and the Closing Date, the
Seller shall conduct the operation of its Restaurant in the ordinary and usual
course of business, consistent with past practices and will use its best
efforts to preserve intact the present business organization with respect to
its Restaurant, to keep available the services of its
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<PAGE>
officers and employees and to maintain satisfactory relationships with
landlords, franchisors, dealers, licensors, licensees, suppliers, contractors,
distributors, customers and others having business relations with it and its
Restaurant and will maintain its Restaurant, real property, and Assets in a
condition conducive to the operation of the business currently carried on
therein.
.11 The Seller shall have provided to the Purchaser copies of all
operating permits and licenses (collectively, the "Approvals") which are in
the Seller's possession.
.12 The Seller shall have provided to the Purchaser copies of all
documents with respect to any pending actions, suit or proceeding which has
been brought by or on behalf of the Seller with respect to the Assets or the
Business.
.13 The Seller shall execute, acknowledge, seal, and deliver to the
Purchaser a Bill of Sale and Assignment in the form attached hereto as EXHIBIT
7.2.14 and incorporated herein by reference pursuant to which the Seller shall
sell, assign, and transfer to the Purchaser the Assets and the Inventory.
.14 The Seller shall execute, acknowledge, seal and deliver to the
Purchaser a Warranty Assignment in the form mutually acceptable to the
Purchaser, the Seller and Burger King Corporation pursuant to which the Seller
shall sell, assign and transfer to the Purchaser the Franchise Agreement.
.15 The Shareholders, the Seller, NRE and the Purchaser shall
execute, acknowledge, seal and deliver the Noncompetition Agreement attached
hereto as EXHIBIT 1.5.
.16 The Seller shall have previously delivered to the Purchaser the
Real Property Lease and the Purchaser shall have thirty (30) days from the
date of this Agreement Purchaser, in its sole discretion.
.17 Prior to December 31, 1995, the Purchaser's auditor shall have
(i) reviewed the financial and accounting system of the Seller and found them
to be satisfactory to Purchaser, in its sole discretion; (ii) reviewed and
confirmed the accuracy of the Financial Statements and results set forth in
the Financial Statements; and (iii) found no objection to the financial and
accounting system of the Seller, or the Seller and the Purchaser shall have
resolved any objection raised by the auditor and presented to the Seller by
the Purchaser.
.18 The Board of Directors of NRE shall have approved this Agreement
and the transactions contemplated herein within thirty (30) days of the date
of this Agreement.
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.19 Both the Seller and the Shareholders shall have complied with
all applicable Bulk Sale and Bulk Transfer laws in each state where Assets are
located.
.20 The Shareholders shall have provided all documents and consents
necessary to sell to the Purchaser all of the Burger King restaurants owned by
Houston, Inc. and Thirty-Forty, Inc. pursuant to the terms of the Asset
Purchase Agreements signed simultaneously herewith.
.2 Contemporaneous Transfer. All transfers, assignments, conveyances, and
transactions under this Agreement shall be effected contemporaneously for
present value between and among the Seller, the Shareholders and the
Purchaser.
7.4 Satisfaction of Conditions. If written notice of an unsatisfied
condition is not provided by the Purchaser or the Seller to the other parties
to this Agreement (a "Notice") on or before the deadline for satisfying that
condition arises, the condition shall be deemed satisfied or waived and shall
not serve as a basis for terminating this Agreement. Upon receipt of a Notice,
the parties agree to negotiate in good faith for an extension to the deadline
for satisfying the condition prior to the exercise of any right to terminate
this Agreement. If the parties cannot reach an Agreement regarding the
extension of a deadline to satisfy the condition within ten (10) days
following the receipt of a Notice (the "Negotiation Period"), the party who
sent the Notice shall have the option to waive the condition or terminate the
Agreement within ten (10) days following the end of the Negotiation Period.
VII -- INDEMNIFICATION
.0 Indemnification By Seller and the Shareholders. The Seller and the
Shareholders, jointly and severally, shall defend, indemnify and hold harmless
the Purchaser and NRE, their officers, directors, stockholders, agents,
servants and employees and their respective heirs, personal and legal
representatives, guardians, successors and assigns, from and against any and
all claims, threats, liabilities, taxes, interest, fines, penalties, suits,
eactions, proceedings, demands, damages, losses, costs and expenses (including
reasonable attorneys' and experts' fees and court costs) of every kind and
nature arising out of, resulting from, or in connection with the following:
.0 Any misrepresentation or breach by the Seller or the Shareholders
of any representation or warranty contained in this Agreement, except for
those specifically set forth in sections 8.1.5 and 8.1.6 below, contained in
this Agreement for a period not to exceed one (1) year following the Closing
Date.
.1 Any nonperformance, failure to comply or breach by the Seller or
the Shareholders of any covenant, promise or agreement of the Seller or the
Shareholders contained in this Agreement for a period not to exceed one (1)
year following the Closing Date.
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<PAGE>
.2 Any debts, obligations, duties and liabilities of the Seller and
the Shareholders (except those assumed by the Purchaser).
.3 Any matter, act, thing or occurrence caused by or resulting from
any act or omission of the Seller or the Shareholders prior to or at the
Closing for a period not to exceed one (1) year following the Closing Date.
.4 Any claim relating to a breach or misrepresentation of a
representation or warranty made by the Seller or the Shareholders with regard
to the Assumed Contracts or Environmental Laws.
.1 Indemnification by Purchaser. The Purchaser and NRE, jointly and
severally, shall defend, indemnify and hold harmless the Seller, the
Shareholders and their respective heirs, personal and legal representatives,
guardians, successors and assigns, from and against any and all claims,
threats, liabilities, taxes, interest, fines, penalties, suits, actions,
proceedings, demands, damages, losses, costs and expenses (including
attorneys' and experts' fees and court costs) of every kind and nature arising
out of, resulting from, or in connection with the following:
.0 Any misrepresentation, omission or breach by the Purchaser of any
representation or warranty contained in this Agreement for a period not to
exceed one (1) year following the Closing Date.
.1 Any nonperformance, failure to comply or breach by the Purchaser
of any covenant, promise or agreement of the Purchaser contained in this
Agreement for a period not to exceed one (1) year following the Closing Date.
.2 To the extent the same are assumed, any debts, obligations,
duties and liabilities of the Purchaser under the Assumed Contracts.
.3 To the extent a claim arises after the Closing, any matter, act,
thing or occurrence caused by or resulting from any act or omission of
Purchaser prior to or at the Closing for a period not to exceed one (1) year
following the Closing Date.
.2 Defense of Claims. In the event of any claim, threat, liability, tax,
interest, fine, penalty, suit, action, proceeding, demand, damage, loss, cost
or expense with respect to which indemnity is or may be sought hereunder (an
"Indemnity Claim"), the indemnified party shall promptly notify the
indemnifying party of such Indemnity Claim, specifying in reasonable detail
the Indemnity Claim and the circumstances under which it arose. The
indemnifying party may elect to assume the defense of such Indemnity Claim, at
its own expense, by written notice to the indemnified party given within 10
days after the indemnifying party receives notice of the Indemnity Claim, and
the indemnifying party shall promptly engage counsel reasonably acceptable to
the indemnified party to direct and conduct such defense; provided, however,
that the indemnified party shall have the right to engage its own counsel, at
its own expense, to participate in such defense. In the event the
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<PAGE>
indemnifying party does not so elect to assume the defense of such
Indemnity Claim in the manner specified above, or if, in the reasonable
opinion of counsel to the indemnified party, there are defenses available to
the indemnified party which are different from or additional to those
available to the indemnifying party or which give rise to a material conflict
between the defense of the indemnified party and of the indemnifying party,
then upon notice to the indemnifying party, the indemnified party may elect to
engage separate counsel to conduct its defense, at the expense of the
indemnifying party, and the indemnifying party shall not have the right to
direct or conduct such defense.
In the event the indemnifying party assumes the defense of any Indemnity
Claim, it may at any time notify the indemnified party of its intention to
settle, compromise or satisfy such Indemnity Claim and may make such
settlement, compromise or satisfaction (at its own expense) unless within 20
days after the giving of such notice the indemnified party shall give notice
to the indemnifying party of its intention to assume the defense of the
Indemnity Claim, in which event the indemnifying party shall be relieved of
its duty hereunder to indemnify the indemnified party. Unless the indemnified
party shall have given the notice referred to in the preceding sentence, (i)
the indemnified party shall not consent to or make any settlement, compromise
or satisfaction with respect to the Indemnity Claim without the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld, and (ii) any settlement, compromise or satisfaction made by the
indemnifying party with respect to such Indemnity Claim shall be deemed to
have been consented to by and shall be binding upon the indemnified party.
.3 Setoff. In addition to any rights of setoff or other rights that any
party may have at common law or otherwise, any party shall have the right to
setoff any amount that may be owed to any other party (whether pursuant to
this Agreement or any other obligation outside of this Agreement) against any
amount otherwise payable by any party to any other party hereto.
VIII -- MISCELLANEOUS
.0 Survival of Representations, Warranties and Agreements. All of the
representations, warranties, covenants, promises and agreements of the parties
contained in this Agreement (or in any document delivered or to be delivered
pursuant to this Agreement or at or in connection with the Closing) shall
survive the execution, acknowledgment, sealing and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and shall
continue to be binding regardless of any investigation made at any time by or
on behalf of any party, for the period in which a claim may be brought as
provided in Article VIII and, with respect to a claim properly brought within
such period, shall survive until a final resolution or non-appealable
determination of such claim has been made.
.1 Notices. All notices, requests, demands, consents, and other
communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either
(a) by personal delivery with a receipted copy of
24
<PAGE>
such delivery, or (b) by certified or registered United States mail, return
receipt requested, postage prepaid, to the following addresses:
(i) If to the Seller, to:
W. Curtis Smith, President
Fifth & Race, Inc.
207 Grandview Drive, Suite 125
Ft. Mitchell, KY 41017
Telefax No.: (606) 331-9059
with a copy to:
Edward J. Buechel, Esq.
Dinsmore & Shohl
7300 Turfway Road, Suite 430
Florence, KY 41042-1355
Telefax No.: (606) 283-6017
(ii) If to the Shareholders, to:
W. Curtis Smith
James P. Borke
William T. Keller
207 Grandview Drive, Suite 125
Ft. Mitchell, KY 41017
Telefax No.: (606) 331-9059
(iii) If to the Purchaser:
Lawrence E. Jaro, Chief Executive Officer
AmeriKing Cincinnati Corporation I
2215 Enterprise Drive
Westchester, IL 60154
Telefax No.: (708) 947-2160
with copies to:
A. Richard Caputo
The Jordan Company
9 West 57th Street, Suite 4000
New York, New York 10019
Telefax No.: (212) 755-5263
and
25
<PAGE>
Ernest J. Panasci, Esq.
FREEBORN & PETERS
950 Seventeenth Street, Suite 2600
Denver, CO 80202
Telefax No.: (303) 628-4240
or to such other address of which written notice in accordance with this
Section 9.2 shall have been provided to the other parties. Notices may only be
given in the manner hereinabove described in this Section 9.2 and shall be
deemed received three (3) days after given in such manner.
.2 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the full, entire and integrated agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
negotiations, correspondence, understandings and agreements among the parties
hereto respecting the subject matter hereof.
.3 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties hereto.
.4 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, personal
and legal representatives, guardians, successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights, remedies, obligations, or liabilities.
.5 Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable only shall be
ineffective only to the extent of such prohibition or unenforceability,
without invalidating or rendering unenforceable the remaining provisions of
this Agreement.
.6 Amendment; Waiver. No provision of this Agreement may be amended,
waived or otherwise modified without the prior written consent of all of the
parties hereto. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement herein contained. The waiver by any party
hereto of a breach of any provision or condition contained in this Agreement
shall not operate or be construed as a waiver of any subsequent breach or of
any other conditions hereof.
.7 Section Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
26
<PAGE>
.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
.9 Applicable Law; Jurisdiction and Venue; Service of Process. This
Agreement shall be governed by, construed, interpreted and enforced in
accordance with the laws of the State of Kentucky, without giving effect to
principles of conflicts of laws.
.10 Remedies. The parties hereto acknowledge that in the event of a
breach of this Agreement, any claim for monetary damages hereunder may not
constitute an adequate remedy, and that it may therefore be necessary for the
protection of the parties to carry out the terms of this Agreement to apply
for the specific performance of the provisions hereof. It is accordingly
hereby agreed by all parties that no objection to the form of the action or
the relief prayed for in any proceeding for specific performance of this
Agreement shall be raised by any party, in order that such relief may be
expeditiously obtained by an aggrieved party. All parties may proceed to
protect and enforce their rights hereunder by a suit in equity, transaction at
law or other appropriate proceeding, whether for specific performance or for
an injunction against a violation of the terms hereof or in aid of the
exercise of any right, power or remedy granted hereunder or by law, equity or
statute or otherwise. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy shall operate as a
waiver thereof or otherwise prejudice its rights, powers or remedies, and no
right, power or remedy conferred hereby shall be exclusive of any other right,
power or remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise.
.11 Further Assurances. All parties hereto jointly and severally agree to
execute, acknowledge, seal and deliver, after the date hereof, without
additional consideration, such further assurances, instruments and documents,
and to take such further actions, as any party may reasonably request in order
to fulfill the intent of this Agreement and the transactions contemplated
hereby.
.12 Use of Genders. Whenever used in this Agreement, the singular shall
include the plural and vice versa, and the use of any gender shall include all
genders and the neuter.
.13 Risk of Loss. All risk of loss of damage to or destruction of the
Assets, in whole or in part, shall be and remain with the Seller until the
Closing and all of the transactions contemplated hereby shall have been
consummated.
.14 Negotiations with Other Persons. Until the earlier of the Closing or
the termination of this Agreement as provided herein, neither the Seller nor
the Shareholders shall initiate, encourage the initiation by others, or
participate in any discussion or negotiations with any other person or entity
relating to the sale of any or all of the Assets, the business of the Seller
or any securities of the Seller. From the date of this Agreement and until
after the Closing and the consummation of the transactions contemplated by
this
27
<PAGE>
Agreement or earlier termination of this Agreement, the Shareholders shall not
offer for sale, sell or otherwise transfer (with or without consideration) any
securities of the Seller owned of record or beneficially by any of them.
.15 Expenses of Transactions. All sales, transfer and use taxes incurred
in connection with the sale, assignment, transfer and delivery of the Assets
shall be paid by the Seller.
.16 Fees and Expenses. Each party to this transaction shall pay its own
professional fees and costs, including fees for attorneys, accountants and
other professional services.
.17 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or any documents associated with this Agreement or
the enforcement of any provision of any of the accompanying documents as
brought against any party hereto, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition any
other relief to which the prevailing party may be entitled).
.18 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). Each Shareholder
agrees that in the event of any breach or threatened breach by the Seller or
any of the Shareholders of any covenant, obligation or other provisions set
forth in this Agreement, that the Purchaser shall be entitled (in addition any
other remedy that may be available to it) to (i) a degree or order of specific
performance or mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (ii) an injunction restraining
such breach or threatened breach.
.19 Completion of Exhibits. The parties hereto acknowledge and agree that
this Agreement is being executed without the completion of all Exhibits. Any
Exhibits not attached to this Agreement as of the date of the execution of
this Agreement shall be provided to the Purchaser on or before November 8,
1995. The Purchaser shall have until November 10, 1995, to review the Exhibits
and provide notice to the Sellers of any unsatisfactory Exhibits. The Sellers
shall then have one (1) business day to correct any deficiencies in the
Exhibits or the Agreement will terminate in the sole and absolute discretion
of the Purchaser.
.20 Covenant of Good Faith. All parties to this Agreement covenant and
agree to act in good faith to diligently complete, to the best of their
abilities, all conditions precedent to the Closing.
[REMAINDER OF PAGE IS INTENTIONALLY BLANK AS THIS
AGREEMENT CONTAINS NO ADDITIONAL SECTIONS.]
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement under seal, with the intention of making it a sealed
instrument, on the date first above written.
Seller:
ATTEST: FIFTH & RACE, INC.
________________________________ By:______________________________
W. Curtis Smith, President
WITNESS: SHAREHOLDERS:
- --------------------------------- ---------------------------------
James R. Borke
- --------------------------------- ---------------------------------
W. Curtis Smith
- --------------------------------- ---------------------------------
William T. Keller
Purchaser:
ATTEST: AMERIKING CINCINNATI
CORPORATION I
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief Executive
Officer
ATTEST: NATIONAL RESTAURANT
ENTERPRISES, INC.
_________________________________ By:________________________________
Secretary Lawrence E. Jaro, Chief Executive
Officer
29
<PAGE>
EXHIBIT LIST
1.1.1 Equipment, Materials, Furniture and Supplies
1.1.4 Franchise Agreement
# 7917
1.1.7 (a) List of Real Property Leases
(b) Lease Assignment and Assumption Agreement
(c) Consent to Assignment, Estoppel, and Release
1.1.8 Retained Records
1.4 Allocation of Purchase Price
1.5 Noncompetition Agreement
1.6 Contracts to be Assumed
1.7 Prorations
1.8 Excluded Assets
1.9 Guaranty
3.2 Jurisdictions Seller is Qualified to Transact Business in
3.4 Defaults and Conflicts
3.6 Legal Proceedings
3.7 Financial Statements
3.10 Liens and Encumbrances
3.12.2 Violations of Employment Laws
3.12.3 Employment Agreements
3.12.5 Employee Benefit Plans
3.13 Changed Events
30
<PAGE>
3.14 Adverse Conditions
3.15 List of Contracts, Licenses and Agreements
involving liabilities of more than $1000
3.16 Bonus and Pension Plans
3.19 Breaches in the Franchise Agreement
4.5 Defaults and Conflicts
4.6 Legal Proceedings
4.8 Financial Information
6.1 Opinion of Seller's Counsel
6.2 Opinion of Purchaser's Counsel
7.2.14 Bill of Sale and Assignment
31
NRE HOLDINGS, INC.
STOCKHOLDERS AGREEMENT
Dated as of September 1, 1994
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
RECITALS.................................................................... 1
ARTICLE I
Certain Definitions
Affiliate................................................................... 3
Agreement................................................................... 3
Bank of Boston.............................................................. 3
Board of Directors.......................................................... 3
Burger King................................................................. 3
Burger King Regulations..................................................... 3
By-Laws .................................................................... 4
Certificate of Incorporation................................................ 4
Class A Common Stock........................................................ 4
Class B Common Stock ....................................................... 4
Class C Common Stock ....................................................... 4
Class D Common Stock ....................................................... 4
Class A Preferred Stock .................................................... 4
Class B Preferred Stock .................................................... 4
Closing Date ............................................................... 4
Commission ................................................................. 4
Common Stock ............................................................... 4
Consolidated Total Capitalization .......................................... 4
Exchange Act ............................................................... 5
Executive and Advisors Subscription Agreement............................... 5
First Offer Price .......................................................... 5
i
<PAGE>
Franchise Agreement......................................................... 5
GAAP ....................................................................... 5
Indebtedness ............................................................... 5
Initial Public Offering .................................................... 5
Intercompany Agreements .................................................... 5
Jaro Investors.............................................................. 6
Jaro Proxy Agreement........................................................ 6
Jaro Purchase Agreement..................................................... 6
JII Partners................................................................ 6
Jordan Investors............................................................ 6
Jordan Investors Subscription Agreement .................................... 6
Jordan Party................................................................ 6
JZCC........................................................................ 6
Letter Agreement............................................................ 6
Management Agreement ....................................................... 6
Management Investors ....................................................... 6
Management Stockholders..................................................... 7
Management Subscription Agreement .......................................... 7
Managing Underwriter........................................................ 7
ii
<PAGE>
Page
MCIT ....................................................................... 7
MCIT Purchase Agreement..................................................... 7
Notice of Exercise ......................................................... 7
Notice of Intention ........................................................ 7
Offered Shares ............................................................. 7
Osborn Investors............................................................ 7
Osborn Proxy Agreement...................................................... 7
Osborn Purchase Agreement................................................... 7
Permitted Transferee........................................................ 7
Person...................................................................... 7
Preferred Stock............................................................. 8
Public Distribution ........................................................ 8
Public Offering............................................................. 8
Purchase and Sale Agreement................................................. 8
Registrable Securities ..................................................... 8
Registration Expenses ...................................................... 10
Requesting Holder .......................................................... 10
Revolving Credit and Term Loan Agreement.................................... 10
Securities.................................................................. 10
Securities Act ............................................................. 10
Selling Investors .......................................................... 10
Selling Stockholder ........................................................ 10
Senior Director............................................................. 11
Special Voting Preferred Stock.............................................. 11
Stock ...................................................................... 11
Stockholder ................................................................ 11
Stock Option Agreement...................................................... 11
Subsidiary ................................................................. 11
Transaction Documents....................................................... 11
Underwritten Offering ...................................................... 11
Voting Stock ............................................................... 11
Voting Stockholder ......................................................... 12
Warrant Stock............................................................... 12
Warrants.................................................................... 12
ARTICLE II
Management
2.1 Conduct of Business.......................................... 12
2.2 Registration of Common Stock................................. 13
2.3 Certificate of Incorporation; No Conflict with Agreement..... 13
iii
<PAGE>
Page
ARTICLE III
Corporate Governance
3.1 Board of Directors........................................... 13
3.2 Vacancies.................................................... 14
3.3 Covenant to Vote............................................. 15
ARTICLE IV
Transfers of Stock
4.1 Restrictions on Transfer..................................... 15
4.2 Exceptions to Restrictions................................... 15
4.3 Burger King Authorization.................................... 17
4.4 Endorsement of Certificates.................................. 17
4.5 Improper Transfer............................................ 18
ARTICLE V
Rights of First Offer;
New Securities; Tag Along Sales
5.1 Transfers by a Stockholder................................... 18
5.2 Transfer of Offered Shares to Third Parties.................. 21
5.3 Purchase of Offered Shares................................... 21
5.4 Waiting Period with Respect to Subsequent Transfers.......... 22
5.5 Right of First Refusal for New Securities.................... 22
5.6 Legally Binding Obligation; Power of Attorney; Personal Right
............................................................ 23
5.7 Right to Join in Sale........................................ 24
5.8 Retention and Sale of Control................................ 25
5.9 Take Along................................................... 25
ARTICLE VI
Registration Rights
6.1 Demand Registrations......................................... 26
6.2 Piggyback Registrations...................................... 29
6.3 Registration Procedures...................................... 31
6.4 Indemnification.............................................. 35
6.5 Contribution................................................. 38
6.6 Rule 144..................................................... 39
iv
<PAGE>
Page
ARTICLE VII
Termination
7.1 Certain Terminations......................................... 40
ARTICLE VIII
Miscellaneous
8.1 Other Covenants.............................................. 40
8.2 Financial Information; List of Stockholders.................. 41
8.3 Covenants of the Jaro and Osborn Investors................... 43
8.4 RIGHT OF SETOFF.............................................. 44
8.5 Successors and Assigns....................................... 44
8.6 Amendment and Modification; Waiver of
Compliance; Conflicts........................................ 45
8.7 Notices...................................................... 46
8.8 Entire Agreement............................................. 46
8.9 Injunctive Relief............................................ 47
8.10 Inspection................................................... 47
8.11 Headings..................................................... 47
8.12 Recapitalizations, Exchanges, Etc., Affecting the Common
Stock; New Issuances......................................... 47
8.13 Ratification of Prior Acts of Board of Directors
of Company; Right to Negotiate............................... 47
8.14 LITIGATION................................................... 48
8.15 ARBITRATION.................................................. 48
8.16 No Strict Construction....................................... 49
8.17 Counterparts................................................. 49
8.18 Obligations Under the MCIT Purchase Agreement................ 49
v
<PAGE>
SCHEDULES AND EXHIBITS
Jordan Investors
Schedules
Stockholder Schedule
Exhibit A By-Laws of Company
Exhibit B Certificate of Incorporation of Company
Exhibit C TJC Management Consulting Agreement
Exhibit D Management Subscription Agreement
Exhibit E Jordan Investors Subscription Agreement
Exhibit F Warrant for First National Bank of Boston
Exhibit G Stock Option Agreement
Exhibit H Directors Indemnification Agreement
Exhibit I-1 Intercompany Tax Sharing Agreement
Exhibit I-2 Intercompany Consulting Agreement
Exhibit J-1 Osborn Proxy Agreement
Exhibit J-2 Jaro Proxy Agreement
Exhibit K Executive and Advisors Subscription Agreement
<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of September 1, 1994, among NRE
HOLDINGS, INC., a Delaware corporation (the "Company"), NATIONAL RESTAURANT
ENTERPRISES, INC., a Delaware corporation ("Enterprises"), THE FIRST NATIONAL
BANK OF BOSTON, a national banking association ("Bank of Boston"), MEZZANINE
CAPITAL & INCOME TRUST 2001 PLC, a corporation organized under the laws of the
United Kingdom ("MCIT"), the Jordan Investors (as hereinafter defined) that
are signatories hereto, the management investors in the Company referred to in
the signature pages hereto ("Management Stockholders").
W I T N E S S E T H:
WHEREAS, on the date hereof, the Company is authorized by its
Certificate of Incorporation to issue capital stock consisting of (i) 2,000
shares of Class A Common Stock, par value $0.01 per share ("Class A Common
Stock"); (ii) 100 shares of Class B Common Stock, par value $0.01 per share
("Class B Common Stock"); (iii) 700 shares of Class C Common Stock par value
$0.01 per share ("Class C Common Stock"); (iv) 500 shares of Class D Common
Stock, par value $0.01 per share ("Class D Common Stock") (the Class A Common
Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock
being hereinafter sometimes referred to as "Common Stock"); (v) 7,500 shares
of Class A Preferred Stock, par value $0.01 per share (the "Class A Preferred
Stock"), consisting of two tranches, the Class A1 Preferred Stock and the
Class A2 Preferred Stock, ranking pari passu with each other; (vi) 3,000
shares of Class B Preferred Stock, par value $0.01 per share (the "Class B
Preferred Stock"); and (vii) one share of Special Voting Preferred Stock, par
value $0.01 per share (the "Special Voting Preferred Stock") (the Class A
Preferred Stock, the Class B Preferred Stock and the Special Voting Preferred
Stock being hereinafter sometimes referred to as the "Preferred Stock") (the
Common Stock and the Preferred Stock are sometimes hereinafter collectively
referred to as the "Stock"); and each of the classes of Stock has the
respective voting powers, designations, preferences and relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions set forth with respect thereto in such
Certificate of Incorporation; and
WHEREAS, as of the date hereof and after giving effect to the
transactions contemplated hereby, the Stockholders will beneficially own the
shares of Stock as set forth in the Stockholder Schedule ("Stockholder
Schedule") attached hereto and the Bank of Boston or its designee will own
Warrants initially exercisable to purchase the number of shares of Class B
Common Stock set forth on the Stockholders Schedule; and
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WHEREAS, the Company and Enterprises have entered into the Purchase
and Sale Agreement, dated as of September 1, 1994, (the "Purchase and Sale
Agreement"), and the Franchise Agreement, dated September 1, 1994 (the
"Franchise Agreement"), pursuant to which, among other things, on the date
hereof Enterprises is purchasing 68 Burger King restaurants located in the
Chicago metropolitan area and becoming a franchisee of Burger King; and
WHEREAS, the Company has entered into the Purchase and Sale
Agreements, dated as of September 1, 1994, between the Company and Lawrence
Jaro and the Jaro Investors ("Jaro Purchase Agreement"), relating to the
Company's purchase of 11 Burger King restaurants from him and the other
parties, and pursuant to which the Selling entities, in consideration of
selling the Burger King restaurants, will be issued in the aggregate Notes, as
well as 915 shares of Class A2 Preferred Stock, 305 shares of Class B
Preferred Stock and 227.1 shares of Class D Common Stock, all of which Stock
will be subject to this Agreement; and
WHEREAS, the Company has entered into the Purchase and Sale
Agreements, dated as of September 1, 1994, between the Company and William
Osborn and the Osborn Investors ("Osborn Purchase Agreement"), relating to the
Company's purchase of 3 Burger King restaurants from him and the other
parties, and pursuant to which the Selling entities, in consideration of
selling the Burger King restaurants, will be issued in the aggregate Notes, as
well as 285 shares of Class A2 Preferred Stock, 95 shares of Class B Preferred
Stock and 93.95 shares of Class D Common Stock, all of which Stock will be
subject to this Agreement.
WHEREAS, the parties hereto deem it in their best interests and in
the best interests of the Company and Enterprises to provide consistent and
uniform management for the Company and Enterprises and desire to enter into
this Agreement in order to effectuate that purpose and to set forth their
respective rights and obligations in connection with their investment in the
Company and Enterprises; and
WHEREAS, the parties hereto also desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the shares of
capital stock of the Company, including issued and outstanding shares of
Common Stock and Preferred Stock that may be issued hereafter, and to provide
for certain rights and obligations in respect thereto as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
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ARTICLE I
Certain Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Affiliate shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a)
above, or with respect to any Stockholder, the Company; provided, that any
Affiliate of a corporation shall be deemed an Affiliate of such corporation's
stockholders. For purposes of this definition, "control" of a Person shall
mean the power, direct or indirect, (i) to vote or direct the voting of more
than 5% of the outstanding shares of Voting Stock of such Person, or (ii) to
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
Agreement shall mean this Agreement as in effect on the date hereof
and as hereafter from time to time amended, modified or supplemented in
accordance with the terms hereof.
Bank of Boston shall mean The First National Bank of Boston, a
national banking association and any Permitted Transferee.
Board of Directors shall mean the Board of Directors of the Company,
as duly constituted in accordance with this Agreement, or any committee
thereof duly constituted in accordance with this Agreement, the By-laws and
applicable law and duly authorized to make the relevant determination or take
the relevant action. To the extent that the Board of Directors is required
under this Agreement to authorize or approve, or make a determination in
respect of a transaction between the Company, on the one hand, and a
Stockholder, and/or a Stockholder's Affiliates, on the other hand, the Board
of Directors shall be deemed to exclude such Stockholder, any of its
Affiliates, and any of the directors, officers, employees, agents or
representatives of such Stockholder and/or its Affiliates, who are members of
the Board of Directors.
"Burger King" means The Burger King Corporation, a Florida
corporation.
"Burger King Regulations" means the rules, regulations and
requirements, from time to time in effect, relating to the Company and its
subsidiaries, under the Franchise Agreement, The Burger King Franchise
Offering Circular (December 1993) or other
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agreements between the Company and/or its subsidiaries, on the one hand, and
Burger King, on the other hand.
By-Laws shall mean the By-Laws of the Company as amended and in
effect on the date hereof, substantially in the form of Exhibit A hereto, and
as hereafter further amended or restated in accordance with the terms hereof
and pursuant to applicable law.
Certificate of Incorporation shall mean the Certificate of
Incorporation of the Company as in effect on the date hereof, substantially in
the form of Exhibit B hereto, and as hereafter from time to time amended,
restated, modified or supplemented in accordance with the terms hereof and
pursuant to applicable law.
Class A Common Stock shall mean the Class A Common Stock, par value
$0.01 per share, of the Company.
Class B Common Stock shall mean the Class B Common Stock, par value
$0.01 per share, of the Company.
Class C Common Stock shall mean the Class C Common Stock, par value
$0.01 per share, of the Company.
Class D Common Stock shall mean the Class D Common Stock, par value
$0.01 per share, of the Company.
Class A Preferred Stock shall mean the Class A Preferred Stock, par
value $0.01 per share, consisting of two tranches, the Class A1 Preferred
Stock and the Class A2 Preferred Stock, ranking pari passu with each other, of
the Company.
Class B Preferred Stock shall mean the Class B Preferred Stock par
value $0.01 per share, of the Company.
Closing Date shall mean the date on which the transactions
contemplated by the Purchase and Sale Agreement, Jaro Purchase Agreement and
Osborn Purchase Agreement shall be consummated.
Commission shall mean the Securities and Exchange Commission and any
successor commission or agency having similar powers.
Common Stock shall mean the Class A Common Stock, the Class B Common
Stock, the Class C Common Stock and the Class D Common Stock and shall include
unless otherwise noted, the Warrant Stock.
Consolidated Total Capitalization shall mean consolidated total
stockholders' equity plus consolidated total long-term debt of the Company and
its Subsidiaries.
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Exchange Act shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of such similar Federal statute.
Executive and Advisors Subscription Agreement shall mean the
Executive and Advisors Subscription Agreement, dated as of September 1, 1994,
by and among the investors listed on the signature pages thereto and the
Company, substantially in the form attached as Exhibit K.
First Offer Price shall have the meaning specified in Section 5.1(a).
Franchise Agreement shall mean the Franchise Agreement, dated as of
September 1, 1994, by and among the Company, Enterprises and Burger King.
GAAP shall mean generally accepted accounting principles in the
United States of America in effect from time to time, applied on a consistent
basis both as to classification of items and amounts.
Indebtedness shall mean with respect to any Person any obligation of
such Person for borrowed money, but in any event shall include (i) any
obligation incurred for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary
course of business, (ii) the face amount of all letters of credit issued for
the account of such Person and all drafts drawn thereunder, without
duplication (iii) obligations (whether or not such Person has assumed or
become liable for the payment of such obligation) secured by liens, (iv)
Capitalized Leases, and (v) all guarantees of such Person; provided, that the
terms liens, Capitalized Lease as used herein are as defined in the Revolving
Credit and Term Loan Agreement as in effect on the date hereof.
Initial Public Offering shall mean the public offer and sale of
Common Stock of the Company, pursuant to the initial registration thereof
under the Securities Act.
Intercompany Agreements shall mean the Intercompany Consulting
Agreement dated September 1, 1994 between the Company and Enterprises; and the
Tax Allocation Agreement dated September 1, 1994 between the Company and
Enterprises all in substantially the forms attached hereto as Exhibit I.
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Jaro Investors shall mean Lawrence Jaro, the Persons so listed on the
Stockholder Schedule and any Permitted Transferee of any of them who becomes a
Stockholder in accordance with the terms hereof.
Jaro Proxy Agreement shall mean the Jaro Proxy Agreement between
Lawrence Jaro and the signatories listed therein, substantially in the form
attached hereto as Exhibit J-2.
Jaro Purchase Agreement shall have the meaning specified in the
Recitals.
JII Partners means JII Partners, an Illinois partnership.
Jordan Investors shall mean JZCC, MCIT and the Persons listed on the
Schedule of Jordan Investors including the signatories to the Jordan Investor
Subscription Agreement, the Executive and Advisors Subscription Agreement and
any Permitted Transferee of any of them who becomes a Stockholder in
accordance with the terms hereof.
Jordan Investors Subscription Agreement shall mean the Jordan
Investors Subscription Agreement between certain Jordan Investors and the
Company, substantially in the form attached
hereto as Exhibit E.
Jordan Party shall have the meaning given to it in the MCIT Purchase
Agreement.
JZCC shall mean the Jordan/Zalaznick Capital Company, a New York
general partnership.
Letter Agreement shall mean the letter agreement dated September 1,
1994 by and among MCIT and the Jordan Investors and attached as Exhibit I to
the MCIT Purchase Agreement.
Management Agreement shall mean the Management Consulting Agreement
dated as of the date hereof between TJC Management Corporation and the
Company, substantially in the form of Exhibit C hereto, as such agreement may
from time to time hereafter be amended, modified or supplemented in accordance
with the terms hereof and thereof.
Management Investors shall mean any officer or managerial employee of
the Company or any of its Subsidiaries who hereafter acquires any shares of
Class D Common Stock from the Company in accordance with the Management
Subscription Agreement and this Agreement, and any Permitted Transferee of any
of such Persons who becomes a Stockholder in accordance with the terms hereof.
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<PAGE>
Management Stockholders shall mean Lawrence Jaro, William Osborn,
Gary Hubert and Joel Aaseby.
Management Subscription Agreement shall mean the Management
Subscription Agreement hereafter entered into between the Company
and each Management Investor, Jaro Investor and Osborn Investor,as
the case may be, substantially in the form attached hereto as Exhibit D, as
such Agreement may from time to time hereafter be amended, modified or
supplemented in accordance with the terms hereof and thereof.
Managing Underwriter shall have the meaning specified in Section
6.1(f).
MCIT shall mean Mezzanine Capital & Income Trust 2001 plc, a
corporation organized under the laws of the United Kingdom.
MCIT Purchase Agreement shall mean the Purchase Agreement, dated as
of September 1, 1994, between the Company and MCIT.
Notice of Exercise shall have the meaning specified in Section
5.1(b).
Notice of Intention shall have the meaning specified in Section
5.1(a).
Offered Shares shall have the meaning specified in Section 5.1.
Osborn Investors shall mean William Osborn, the Persons so listed on
the Stockholder Schedule and any Permitted Transferee of any of them who
becomes a Stockholder in accordance with the terms hereof.
Osborn Proxy Agreement shall mean the Osborn Proxy Agreement between
William Osborn and the signatories listed therein, substantially in the form
attached hereto as Exhibit J-1.
Osborn Purchase Agreement shall have the meaning specified in the
Recitals.
Permitted Transferee shall mean, (i) Jordan Investor, the Bank of
Boston, or any Management Investor and (ii) those Persons to whom Transfers of
Common Stock and Preferred Stock are permitted to be made by them pursuant to
Section 4.2 and Article V hereof.
Person shall mean an individual or a corporation, association,
partnership, joint venture, organization, business, trust, or any other entity
or organization, including a government or any subdivision or agency thereof.
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Preferred Stock shall have the meaning specified in the Recitals.
Public Distribution shall mean a Public Offering of Common Stock, at
the conclusion of which the aggregate number of shares of Common Stock that
have been sold to the public pursuant to one or more effective registration
statements under the Securities Act equals at least 25% of the shares of Common
Stock then outstanding (on a fully diluted basis), including without limitation
the Warrant Stock, after giving effect to such sale.
Public Offering shall mean a public offering and sale of equity
securities of the Company pursuant to an effective registration statement
under the Securities Act.
Purchase and Sale Agreement shall mean the Purchase and Sale
Agreement, dated September 1, 1994 by and among the Company, Enterprises and
Burger King.
Registrable Securities shall mean the following:
(a) all shares of Class A Common Stock outstanding on the
date hereof and now or hereafter owned of record by the Jordan
Investors; and
(b) all shares of Class B Common Stock outstanding on the date
hereof, and all shares of Class A Common Stock issued or issuable upon (x) the
conversion or exchange of outstanding shares of Class B Common Stock in
accordance with the applicable provisions of the Certificate of Incorporation
or this Agreement, or (y) the conversion or exchange of the Warrant Stock;
provided, however, that no holder of shares of Class B Common Stock shall have
any registration rights hereunder with respect to any shares of Class B Common
Stock, but only with respect to shares of Class A Common Stock into which such
shares of Class B Common Stock shall be so exchanged or converted in
connection with an effective registration and sale under the Securities Act of
such shares of Class A Common Stock; and, solely for purposes of Article VI of
this Agreement, each holder of shares of Class B Common Stock and each holder
of Warrants to purchase shares of Class B Common Stock which are to be
converted into shares of Class A Common Stock to be sold in connection with
such a registration shall be deemed to be the holder of the shares of Class A
Common Stock into which such shares of Class B Common Stock shall be
convertible; and
(c) all shares of Class C Common Stock outstanding on the date hereof
and now or hereafter owned of record and beneficially by the Jordan Investors,
and all shares of Class A Common Stock issued or issuable upon the conversion
of outstanding shares of Class C Common Stock in accordance with the
applicable provisions
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<PAGE>
of the Certificate of Incorporation; provided, however, that no holder of shares
of Class C Common Stock shall have any registration rights hereunder with
respect to any shares of Class C Common Stock, but only with respect to shares
of Class A Common Stock into which such shares of Class C Common Stock shall be
so exchanged or converted in connection with an effective registration and sale
under the Securities Act of such shares of Class A Common Stock; and, solely for
purposes of Article VI of this Agreement, each holder of shares of Class C
Common Stock which are to be converted into shares of Class A Common Stock to be
sold in connection with such a registration shall be deemed to be the holder of
the shares of Class A Common Stock into which such shares of Class C Common
Stock shall be convertible; and
(d) all shares of Class D Common Stock acquired by the Management
Investors, the Jaro Investors and the Osborn Investors, and all shares of
Class A Common Stock issued or issuable upon the conversion of outstanding
shares of Class D Common Stock in accordance with the applicable provisions of
the Certificate of Incorporation; provided, however, that no holder of shares
of Class D Common Stock shall have any registration rights hereunder with
respect to any shares of Class D Common Stock, but only with respect to shares
of Class A Common Stock into which such shares of Class D Common Stock shall
be so exchanged or converted in connection with an effective registration and
sale under the Securities Act of such shares of Class A Common Stock; and,
solely for purposes of Article VI of this Agreement, each holder of shares of
Class D Common Stock which are to be converted into shares of Class A Common
Stock to be sold in connection with such a registration shall be deemed to be
the holder of the shares of Class A Common Stock into which such shares of
Class D Common Stock shall be convertible; and
(e) any shares of capital stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing clause (a),
(b), (c) or (d) by way of a stock dividend or stock split or in connection
with a combination or subdivision of shares, reclassification,
recapitalization, merger, consolidation or other reorganization of the
Company.
As to any particular Registrable Securities that have been issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of under such registration statement, (ii) they shall have been
distributed to the public pursuant to Rule 144, (iii) they shall have been
otherwise transferred or disposed of, and new certificates therefor not
bearing a legend restricting further transfer shall have been delivered by the
Company, and subsequent transfer or disposition of them shall not require
their registration or
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qualification under the Securities Act or any similar state law then in force,
or (iv) they shall have ceased to be outstanding.
Registration Expenses shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article VI hereof,
including, without limitation, all Commission, stock exchange or National
Association of Securities Dealers, Inc. ("NASD") registration and filing fees,
all fees and expenses of complying with securities and blue sky laws (including
the reasonable fees and disbursements of underwriters' counsel in connection
with blue sky qualifications and NASD filings), all fees and expenses of the
transfer agent and registrar for the Registrable Securities, all printing
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, and one firm of counsel (other than house counsel) retained by the
Bank of Boston if holding Registrable Securities being registered and one firm
of counsel (other than house counsel) retained by the Jordan Investors holding
Registrable Securities being registered, but excluding underwriting discounts
and commissions and applicable transfer and documentary stamp taxes, if any,
which shall be borne by the seller of the securities in all cases.
Requesting Holder shall have the meaning specified in Section 6.5.
Revolving Credit and Term Loan Agreement shall mean the Revolving
Credit and Term Loan Agreement, dated as of September 1, 1994, as amended or
supplemented from time to time, by and among the Company, Enterprises and the
Bank of Boston and such other Banks as may become party to the Agreement.
Securities shall mean (i) any capital stock of the Company and (ii)
any instrument evidencing indebtedness of the Company or Enterprises to the
Jaro Investors or the Osborn Investors.
Securities Act shall mean, as of any date, the Securities Act of
1933, as amended, or any similar Federal statute then in effect, and in
reference to a particular section thereof shall include a reference to the
comparable section, if any, of any such similar Federal statute and the rules
and regulations thereunder.
Selling Investors shall have the meaning specified in Section 5.9.
Selling Stockholder shall have the meaning specified in Section
5.1(a).
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Senior Director shall mean one of the directors of the Company
designated by the Jordan Investors. The Senior Director shall have limited
director voting rights as set forth in Section 3.1
Special Voting Preferred Stock shall have the meaning specified in
the Recitals.
Stock shall mean the Common Stock and the Preferred Stock.
Stockholder shall mean any of the Jordan Investors, MCIT, the Bank of
Boston, the Management Investors, the Jaro Investors, the Osborn Investors,
holders of the Company's capital stock issued pursuant to any Stock Option
Agreement and any Permitted Transferee of any such Person who becomes a party
to or bound by the provisions of this Agreement in accordance with the terms
hereof.
Stock Option Agreement shall mean the Stock Option Agreement in
substantially the form attached as Exhibit G hereto.
Subsidiary shall mean as to any Person a corporation of which
outstanding shares of stock having ordinary voting power (other than stock
having such power only by reason of the happening of a contingency) to elect a
majority of the Board of Directors of such corporation are at the time owned,
directly or indirectly through one or more intermediaries, or both, by such
Person.
Transaction Documents shall mean this Agreement, the Purchase and
Sale Agreement, the Jaro Purchase Agreement, Osborn Purchase Agreement, the
Franchise Agreement, the Management Consulting Agreement, the MCIT Purchase
Agreement, the Revolving Credit and Term Loan Agreement, the Executive and
Advisors Subscription Agreement, the Jordan Investors Subscription Agreement,
the Management Subscription Agreement, each of the agreements that are
exhibits hereto and thereto, and all agreements, instruments and documents
contemplated thereby.
Underwritten Offering shall have the meaning given to it in Section
6.1(b).
Voting Stock shall mean capital stock of the Company of any class or
classes, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of corporate directors (or Persons
performing similar functions), including without limitation, the Class A
Common Stock, the Class D Common Stock and the Special Voting Preferred Stock.
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Voting Stockholder shall mean a Stockholder who holds Voting Stock or
retains, by proxy or otherwise, the power to vote Voting Stock.
Warrant Stock shall mean and include all shares of common stock
issued or issuable pursuant to the Warrants and all references in this
Agreement to outstanding Common Stock shall be deemed to include all Warrant
Stock whether or not issued and outstanding.
Warrants shall mean the Warrant, initially exercisable to purchase
shares of Class B Common Stock as set forth in the Stockholder Schedule
hereto, issued to the Bank of Boston or its designee pursuant to the Revolving
Credit and Term Loan Agreement, substantially in the form of Exhibit F hereto,
as such Warrants may from time to time be amended, modified or supplemented in
accordance with the terms hereof and thereof.
ARTICLE II
Management
Section 2.1 Conduct of Business.
(a) The parties hereto confirm that it is their intention that the
business and affairs of the Company shall be managed by its Board of Directors
in the best interests of the Company and its Subsidiaries taken as a whole.
The parties acknowledge that the Company shall enter into the Intercompany
Agreements attached hereto as Exhibit I. In furtherance of the foregoing, the
parties hereto agree that, after the date hereof, except in the case of the
transactions expressly contemplated by the Transaction Documents, neither
they, any of their Affiliates nor any Affiliates of the Company will enter
into any written or oral contract, agreement or other arrangement to engage in
business or enter into any transaction, or will engage in business or enter
into any transaction, with the Company or any of its Subsidiaries unless the
terms and provisions of such contract, agreement or other arrangement or the
terms on which such business or transaction is conducted, as the case may be,
are fair to the Company or such Subsidiary and are substantially equivalent to
terms that would have been obtained in an arm's-length relationship other than
as required in connection with the execution, performance and delivery of the
Transaction Documents. Notwithstanding any of the above, (i) the Company may
pay quarterly in arrears to (1) TJC Management Corporation or another
Affiliate of JZCC, management consulting fees not to exceed in the aggregate
an amount per year of the higher of (x) $300,000, or (y) .35% of the Company's
sales in accordance with and subject to the terms of the Management Agreement,
and (2) directors of
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the Company, directors fees not to exceed in the
aggregate an amount per year equal to $50,000 per year, (ii) the Company may
declare and pay regular dividends on the Preferred Stock in accordance with
the terms thereof and (iii) the Company may purchase shares of Common Stock
from the Management Investors in accordance with the provisions of the
Management Subscription Agreement unless prohibited under the terms of other
agreements or instruments pursuant to which Indebtedness of the Company or any
of its Subsidiaries shall have been created, assumed, incurred or guaranteed.
(b) Unless otherwise authorized by a vote of at least 60% of the
whole Board of Directors, whether or not there shall be any vacancies on the
Board of Directors, the parties hereto shall cause the Company to conduct its
business substantially as that business is conducted on the date hereof and
shall not conduct any other business.
(c) The parties hereto shall cause the Company to conduct its
business and affairs in all material respects in compliance with all Burger
King Regulations.
Section 2.2 Registration of Common Stock. In the event of Public
Offering of the Company's Common Stock, each Voting Stockholder shall, at a
meeting convened for the purpose of amending the Certificate of Incorporation,
vote to increase the number of authorized shares of Class A Common Stock and,
if necessary, increase the number of issued and outstanding shares of Class A
Common Stock, whether by stock split, stock dividend or otherwise, or change
in its par value, as recommended by a majority of the members of the Board of
Directors in order to facilitate such Public Offering.
Section 2.3 Certificate of Incorporation; No Conflict with Agreement.
Attached hereto as Exhibit B is a copy of the Certificate of Incorporation as
in effect on the date hereof. Each Voting Stockholder shall vote his shares of
Voting Stock, and shall take all actions necessary, to ensure that the
Certificate of Incorporation and By-Laws do not, at any time, conflict with
the provisions of this Agreement.
ARTICLE III
Corporate Governance
Section 3.1 Board of Directors.
(a) The Stockholders hereby agree that at all times after the Closing
Date, the Board of Directors of the Company shall consist of not less than
seven members, including the individuals
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described in this Section 3.1(a). Promptly after the Closing Date, the Voting
Stockholders shall take all actions necessary to elect, or to cause the Board of
Directors to approve and appoint, the designees described below to be members of
the Board of Directors, and such other members as may be selected by the holders
of Voting Stock from time to time outstanding:
(i) four individuals, including a director designated as the
Senior Director, designated by the beneficial owners of the majority
of the shares of Class A Common Stock beneficially owned by the
Jordan Investors ("Jordan Directors"); and
(ii) three individuals designated by the holders of a
majority of the shares of Class D Common Stock; provided,
that such individuals have executed employment agreements with the
Company, and that such employment agreements remain in full force and
effect ("Management Directors").
(b) Each Voting Stockholder hereby agrees to vote all shares of
Voting Stock owned or held of record by such Stockholder at each annual or
special meeting of Stockholders of the Company at which directors of the
Company are to be elected, in favor of, or to take all actions by written
consent in lieu of any such meeting as are necessary to cause, the election as
members of the Board of Directors of those individuals described in Section
3.1(a) in accordance with, and to otherwise effect the intent of, the
provisions of Section 3.1(a).
(c) The Company and each member of the Board of Directors shall
execute a Directors Indemnification Agreement substantially in the form of
Exhibit H hereto.
Section 3.2 Vacancies. In the event that a vacancy is created on the
Board of Directors at any time by the death, disability, retirement,
resignation or removal of any member of the Board of Directors, or for any
other reason there shall exist or occur any vacancy on the Board of Directors,
each Voting Stockholder hereby agrees to take such actions as will result in
the election or appointment as a director of an individual designated or
elected to fill such vacancy and serve as a director by the Stockholders that
had designated or elected (pursuant to Section 3.1) the director whose death,
disability, retirement, resignation or removal resulted in such vacancy on the
Board of Directors (in the manner set forth in Section 3.1). In the interim
from the time the vacancy is created until a new director is elected, if the
vacancy is for a Jordan Director, the remaining Jordan Directors may appoint a
replacement to act as a director until a new director is duly elected, and if
the vacancy is for a Management Director, the remaining Management Directors
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may appoint a replacement to act as a director until a new director is duly
elected.
Section 3.3 Covenant to Vote. Each Voting Stockholder hereby agrees
to take all actions necessary to call, or cause the Company and the
appropriate officers and directors of the Company to call, an annual meeting
(and when circumstances so require, a special meeting) of Stockholders of the
Company and to vote all shares of Voting Stock owned or held of record by such
Voting Stockholder at any such meeting and at any other annual or special
meeting of stockholders in favor of, or take all actions by written consent in
lieu of any such meeting as may be necessary to cause, the election as members
of the Board of Directors of those individuals so designated in accordance
with, and to otherwise effect the intent of, this Article III. In addition,
each Voting Stockholder agrees to vote the shares of Voting Stock owned by
such Stockholder upon any other matter arising under this Agreement submitted to
a vote of the Stockholders in such a manner as to implement the terms of this
Agreement. In addition, each Voting Stockholder is aware of the terms of the
Letter Agreement.
ARTICLE IV
Transfers of Stock
Section 4.1 Restrictions on Transfer. Each Stockholder agrees that
such Stockholder will not, directly or indirectly, offer, sell, transfer,
assign or otherwise dispose of (or make any exchange, gift, assignment or
pledge of) (collectively, for purposes of Articles IV and V hereof only, a
"transfer") any Securities or Warrants, as the case may be, except (a) as
provided in Section 4.2; (b) in accordance with Article V; (c) an exchange of
Common Stock of one class for Common Stock of another class in accordance with
Section 8.1(b); (d) a conversion of Common Stock of one class into Common
Stock of another class pursuant to the Certificate of Incorporation; (e) the
exercise of Warrants; or (f) pursuant to the Management Subscription
Agreement. In addition to the other restrictions noted in this Article IV,
each Stockholder agrees that it will not, directly or indirectly, transfer any
of its Securities or Warrants except as permitted under the Securities Act and
other applicable securities laws.
Section 4.2 Exceptions to Restrictions. The provisions of Section 4.1
and Article V (other than Section 5.8) shall not apply to any of the following
transfers:
(a) (i) From JZCC to the Jordan Investors or any Jordan Party, (ii)
from any of the Jordan Investors or any Jordan Party to any of the other
Jordan Investors, (iii) from any Jordan Investor or any Jordan Party
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to any Trust solely for such Jordan Investor's or such Jordan Party's benefit or
the benefit of such Jordan Investor's or such Jordan Party's spouse or children
(as the case may be); provided, that such Jordan Investor or such Jordan Party
acts as trustee and retains the sole power to direct the voting and
disposition of such shares; and provided, further, that in the case referred
to in clause (iii), each such Person including any such trust (each a
"Permitted Transferee", shall execute a counterpart of and become a party to
this Agreement and shall agree in a writing in form and substance satisfactory
to the Company to be bound and becomes bound by the terms of this Agreement.
(b) (i) From any Management Investor to such Management Investor's
spouse or children, (ii) from any Management Investor to any trust solely for
such Management Investor's benefit or the benefit of such Management
Investor's spouse or children, (iii) from any Jaro Investor to such Jaro
Investor's spouse or children, (iv) from any Jaro Investor to any trust solely
for the benefit of such Jaro Investor's spouse or children, (v) from any Osborn
Investor to such Osborn Investor's spouse or children or (vi) from any Osborn
Investor to any trust solely for the benefit of such Osborn Investor's spouse or
children; provided, that, in each case referred to above, such Management
Investor, Jaro Investor or Osborn Investor, as the case may be, acts as trustee
and retains the sole power to direct the voting and disposition of such
Securities; and provided, further that each such Person including any such trust
(each a "Permitted Transferee") shall execute a counterpart of and become a
party to this Agreement and shall agree in a writing in form and substance
satisfactory to the Company to be bound and becomes bound by the terms of this
Agreement as a Stockholder.
(c) From the Bank of Boston to any of its Affiliates or the
Jordan Investors.
(d) From any Stockholder to any Affiliate of the Company, or pursuant
to a merger or consolidation involving the Company or a sale of all or
substantially all of the outstanding shares of Common Stock.
(e) Pursuant to the provisions of the Revolving Credit and Term Loan
Agreement, including any pledge of stock or foreclosure on that pledge.
(f) Pursuant to a Public Offering or an open market sale following a
Public Offering in accordance with Rule 144 of the Commission.
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(g) Transfers by the Jordan Investors or the Jordan Parties of
Preferred Stock, including donations to charitable organizations.
Section 4.3 Burger King Authorization. Other than (i) as set forth in
Section 4.1(c), (d), (e) or (f), (ii) as set forth in Section 4.2(a), (b),
(c), (d) or (g); provided, that, with respect to Section 4.2(b), the transfer
of Stock by either Lawrence Jaro or William Osborn do not result in either Mr.
Jaro or Mr. Osborn holding less than 5% of the Company's Voting Stock, (iii)
transfers of Securities other than Voting Stock, and (iv) transfers that would
not result in a "Change of Control" (as defined in the MCIT Purchase
Agreement), the Company and each Stockholder agree and acknowledge that any
issuance or transfer of Stock must be authorized by Burger King in accordance
with the terms and conditions set forth in the Franchise Agreement and the
Burger King Regulations.
Section 4.4 Endorsement of Certificates.
(a) Upon the execution of this Agreement, in addition to any other
legend which the Company may deem advisable under the Securities Act and
certain state securities laws, all Warrants and certificates representing
shares of issued and outstanding Common Stock shall be endorsed at all times
prior to any Public Distribution as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE
ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS
AGREEMENT, DATED SEPTEMBER 1, 1994, AMONG THE COMPANY AND
ITS STOCKHOLDERS, SUBSCRIPTION AGREEMENTS, DATED SEPTEMBER
1, 1994, AMONG THE COMPANY AND CERTAIN INVESTORS THEREIN AND
THE TERMS AND CONDITIONS OF A FRANCHISE AGREEMENT WITH
BURGER KING CORPORATION. REFERENCE IS MADE TO SUCH FRANCHISE
AGREEMENT AND THE RESTRICTIVE PROVISIONS OF THE CERTIFICATE
OF INCORPORATION AND BY-LAWS OF THE CORPORATION. A COPY OF
THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE OFFICE OF
THE COMPANY AT THE JORDAN COMPANY, 9 WEST 57TH STREET, NEW
YORK, NEW YORK 10019.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION,
UNDER SAID ACT.
(b) Except as otherwise expressly provided in this Agreement, all
Warrants and certificates representing shares of Stock hereafter issued to or
acquired by any of the Stockholders or their successors hereto (including,
without limitation, all
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certificates representing shares of Class A Common Stock hereafter issued upon
conversion of shares of Class B, C or D Common Stock) shall bear the legends set
forth above, and the Warrants and shares of Stock represented by such
certificates shall be subject to the applicable provisions of this Agreement.
The obligations of each party hereto shall be binding upon each transferee to
whom Securities or Warrants are transferred by any party hereto, whether or not
such transfer is permitted under the terms of this Agreement, except for
transfers pursuant to a Public Offering. Prior to consummation of any transfer,
except for transfers pursuant to a Public Offering, such party shall cause the
transferee to execute an agreement in form and substance reasonably satisfactory
to the other parties hereto, providing that such transferee shall fully comply
with the terms of this Agreement. Prompt notice shall be given to the Company
and each Stockholder by the transferor of any transfer (whether or not to a
Permitted Transferee) of any Securities or Warrants.
Section 4.5 Improper Transfer. Any attempt to transfer or encumber
any shares of Securities or Warrants not in accordance with this Agreement
shall be null and void and neither the Company nor any transfer agent of such
securities shall give any effect to such attempted transfer or encumbrance in
its stock records.
ARTICLE V
Rights of First Offer;
New Securities; Tag Along Sales
Section 5.1 Transfers by a Stockholder.
(a) Except for sales of securities contemplated by Article VI hereof,
transfers permitted by Sections 4.1, 4.2 and 4.3, transfers of Preferred Stock
and transactions subject to Section 5.9, if at any time any Stockholder shall
desire to sell any Stock or Warrants owned by him or it (such Stockholder
desiring to sell shares of such Stock or Warrants being referred to herein as
a "Selling Stockholder"), then such Selling Stockholder shall deliver written
notice of its desire to sell such Stock or Warrants (a "Notice of Intention"),
accompanied by a copy of a proposal relating to such sale (the "Sale
Proposal"), to each of the other Stockholders and to the Company, setting
forth such Selling Stockholder's desire to make such sale (which shall be for
cash only), the number and class of shares of Stock or Warrants proposed to be
transferred (the "Offered Securities") and the price at which such Selling
Stockholder proposes to sell the Offered Securities (the "First Offer Price")
and other terms applicable thereto.
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(b) Upon receipt of the Notice of Intention, the Company and the
other Stockholders shall then have the right to purchase at the First Offer
Price and on the other terms specified in the Sale Proposal all or, subject to
Section 5.1(d), any portion of the Offered Securities in the following order
of priority: (i) if the Selling Stockholder is a Management Investor, the
other Management Investors shall have the first right to purchase the Offered
Securities pro rata among those Management Investors so electing on the basis
of the respective number of shares of Common Stock or Warrants owned or held
as trustee by such Management Investors (or in such other proportions as such
Management Investors may agree), then the Company shall have the second right
to purchase the Offered Securities, and thereafter, the Jordan Investors shall
have the right to purchase the Offered Securities pro rata among those of the
Jordan Investors so electing on the basis of the respective numbers of shares
of Common Stock or Warrants owned by such Jordan Investors (or in such other
proportion as such Jordan Investors may agree) and thereafter, the other
Stockholders (excluding the Management Investors) shall have the right to
purchase the Offered Securities pro rata among the Stockholders (excluding the
Management Investors) so electing on the basis of the respective numbers of
shares of Common Stock or Warrants owned by such Stockholders (or in such other
proportion as such other Stockholders may agree); (ii) if the Selling
Stockholder is a Jordan Investor, the other Jordan Investors shall have the
first right to purchase the Offered Securities pro rata among those of the
Jordan Investors so electing on the basis of the respective numbers of shares of
Common Stock or Warrants owned by such Jordan Investors (or in such other
proportion as such Jordan Investors may agree), and thereafter, the Company
shall have the right to purchase the Offered Securities and thereafter, all
other Stockholders shall have the right to purchase the Offered Securities pro
rata among the Stockholders so electing to purchase on the basis of the
respective numbers of shares of Common Stock (including Warrant Stock) owned by
such Stockholders (or in such other proportion as such other stockholders may
agree); and (iii) if the Selling Stockholder is the Bank of Boston or MCIT, the
Jordan Investors shall have the first right to purchase the Offered Securities
pro rata among those of the Jordan Investors so electing on the basis of the
respective numbers of shares of Common Stock (including Warrant Stock) owned by
such Jordan Investors' (or in such other proportion as such Jordan Investors may
agree), and thereafter, the Company shall have the right to purchase the Offered
Securities and thereafter, all other Stockholders shall have the right to
purchase the Offered Securities pro rata among the Stockholders so electing on
the basis of the respective numbers of shares of Common Stock (including Warrant
Stock) owned by such Stockholders (or in such other proportion as such other
Stockholders may agree). The rights of the Stockholders and the Company
pursuant to this
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Section 5.1(b) shall be exercisable by the delivery of notice
to the Selling Stockholder (the "Notice of Exercise"), within 30 calendar days
from the date of delivery of the Notice of Intention. The Notice of Exercise
shall state the total number of shares of the Offered Securities such
Stockholder (or the Company) is willing to purchase without regard to whether
or not other Stockholders purchase any shares of the Offered Securities. A
copy of such Notice of Exercise shall also be delivered by each Stockholder to
the Company and each other Stockholder. The rights of the Stockholders and the
Company pursuant to this Section 5.1(b) shall terminate if unexercised 30
calendar days after the date of delivery of the Notice of Intention.
In the event that a Management Investor exercises the Management Investors'
right to purchase any or all Offered Securities, such purchase will be deemed
to be of Class D Common Stock or Warrants to purchase Class D Common Stock,
notwithstanding that the Offered Securities are of a different class of Common
Stock. Upon a purchase of Common Stock or Warrants other than Class D Common
Stock or Warrants to purchase Class D Common Stock, the Management Investor will
present the certificates of the Common Stock or Warrants to the Company and the
Company will promptly exchange such certificates for Class D Common Stock or
Warrants to purchase Class D Common Stock, all in order to confirm the
foregoing.
Notwithstanding the foregoing, no Management Investor, other than
Lawrence Jaro, William Osborn, Gary Hubert or Joel Aaseby shall be entitled to
purchase any shares of Common Stock or Warrants hereunder unless such shares
shall concurrently be duly assigned, transferred and delivered to the trustee
of the Jaro Voting Trust or Osborn Voting Trust and such shares shall
thereafter be subject to the Jaro or Osborn Voting Trust Agreement.
(c) In the event that the Stockholders or the Company exercise their
rights to purchase any or all of the Offered Securities in accordance with
Section 5.1(b), then the Selling Stockholder must sell the Offered Securities
to such Stockholders (or, as the case may be, the Company) within 30 calendar
days from the date of delivery of the Notice of Exercise received by the
Selling Stockholder.
(d) Notwithstanding the foregoing provisions of this Section 5.1,
unless the Selling Stockholder shall have consented to the purchase of less
than all of the Offered Securities, no Stockholder or Stockholders nor the
Company may purchase any Offered Securities hereunder unless all of the
Offered Securities are to be so purchased.
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(e) For purposes of this Article V, any Person who has failed to give
notice of the election of an option hereunder within the specified time period
will be deemed to have waived its rights on the day after the last day of such
period.
(f) Each Stockholder agrees and acknowledges that the Company may
purchase or acquire Common Stock pursuant to Section 5.1(b) hereof, and
approves such purchases and acquisitions, and waives any objection or claim
relating thereto, whether against the Company, the Board of Directors or
otherwise.
Section 5.2 Transfer of Offered Shares to Third Parties. If all
notices required to be given pursuant to Section 5.1 have been duly given and
the Stockholders and the Company do not exercise their respective options to
purchase all of the Offered Securities at the First Offer Price and the
Selling Stockholder does not desire to sell less than all the Offered
Securities or if with the consent of the Selling Stockholder the other
Stockholders and the Company purchase less than all of the Offered Securities
pursuant to the provisions hereof, then in either such event the Selling
Stockholder shall have the right, subject to compliance by the Selling
Stockholder with the provisions of Section 4.3 and Section 4.4(b) hereof, for a
period of 120 calendar days from the earlier of (i) the expiration of the option
period pursuant to Section 5.1 with respect to such Sale Proposal or (ii) the
date on which such Selling Stockholder receives notice from the other
Stockholders and the Company that they will not exercise in whole or in part the
options granted pursuant to Section 5.1, to sell to any third party which is not
an Affiliate of, or related by consanguinity or marriage to, the Selling
Stockholder the Offered Securities remaining unsold at a price of not less
than 95% of the First Offer Price, and on the other terms specified in the
Sale Proposal.
Section 5.3 Purchase of Offered Shares. The consummation of any
purchase and sale pursuant to Section 5.1 shall take place on such date, not
later than 30 calendar days after the expiration of the option period pursuant
to Section 5.1 with respect to such option, as the Selling Stockholder shall
select. Prior to the consummation of any sale pursuant to Section 5.1, the
Selling Stockholder shall comply with Section 4.3 and Section 4.4(b) hereof.
Upon the consummation of any such purchase and sale, the Selling Stockholder
shall deliver certificates evidencing the Offered Securities sold duly
endorsed, or accompanied by written instruments of transfer in form
satisfactory to the purchaser duly executed by the Selling Stockholder free
and clear of any liens, against delivery of the First Offer Price, payable in
the manner specified in Section 5.1(a).
Section 5.4 Waiting Period with Respect to Subsequent Transfers. In
the event that the Stockholders and the Company do not exercise their options
to purchase all of the Offered Securities, and the Selling Stockholder shall
not have sold the remaining Offered Securities to a third party for any reason
before the expiration, as applicable, of the 120-day period described in
Section 5.2, then such Selling Stockholder shall not give another Notice of
Intention pursuant to Section 5.1 for a period of 90 calendar days after the
last day of such 120-day period.
Section 5.5 Right of First Refusal for New Securities.
(a) The Company hereby grants to each of the Stockholders a right of
first refusal to purchase shares of any New Securities (as defined below)
which the Company may, from time to time, propose to issue and sell. Such
right of first refusal shall allow each Stockholder to purchase a pro rata
portion of the shares of Common Stock, Preferred Stock or Warrants as may be
included in the New Securities proposed to be issued, determined with
reference to the aggregate number of outstanding shares of Common Stock
(including all Warrant Stock) or Preferred Stock (as the case may be) held by
such Stockholder before the proposed issuance of New Securities. In the event
a Stockholder does not
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purchase any or all of its pro rata portion of New Securities, the remaining
Stockholders shall have the right to purchase such unpurchased New Securities
or respective pro rata portion until all of the New Securities are purchased
or until no other Stockholder desires to purchase any more New Securities. The
right of first refusal granted hereunder shall terminate if unexercised within
30 calendar days after receipt of the notice described in Section 5.5(c)
below.
(b) "New Securities" shall mean any authorized but unissued shares,
and any treasury shares, of capital stock of the Company and all rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock; provided,
however, that the term "New Securities" does not include (i) securities issued
upon conversion of shares of Class B Common Stock, Class C Common Stock or
Class D Common Stock into Class A Common Stock, in accordance with the
Certificate of Incorporation and this Agreement; (ii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of all or substantially all of the assets or other reorganization
whereby the Company shall become the owner of more than 50% of the voting
power of such corporation; (iii) shares of Common Stock issued in connection
with any stock split or stock dividend of the Company; (iv) any borrowings,
direct or indirect, from financial institutions or other Persons by the
Company, whether or not presently authorized, including any type of loan or
payment
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evidenced by any type of debt instrument, provided such borrowings do
not have equity features, including warrants, options or other rights to
purchase capital stock, and are not convertible into or exchangeable for
capital stock of the Company; (v) shares of Class A Common Stock issued
pursuant to any Public Offering; (vi) shares of Class A Common Stock issued in
connection with an exchange for Class B Common Stock in accordance with
Section 8.1(b) of this Agreement; (vii) Warrant Stock; or (viii) shares of
Preferred Stock issued and paid as dividends on outstanding Preferred Stock.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Stockholder written notice of its intention,
describing the class and number of shares of Common Stock or Preferred Stock
(as the case may be) it intends to issue as New Securities, the purchase price
therefor (which shall be payable solely in cash) and the terms upon which the
Company proposes to issue the same. Each Stockholder shall have 30 calendar
days from the date such notice is given to determine whether to purchase all
or any portion of the Stockholder's pro rata share of such New Securities for
the purchase price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New
Securities to be purchased. Notwithstanding the provisions of this Section 5.5,
no Jaro Investor or Osborn Investor, other than Lawrence Jaro or William Osborn
shall be entitled to purchase any shares of Common Stock hereunder unless such
shares shall concurrently be made subject to the provisions of Section 8.3, as
the case may be.
Section 5.6 Legally Binding Obligation; Power of Attorney;
Personal Rights.
(a) Subject to Section 5.1(a), making a written offer, giving or
failing to give written notice within the stated period, accepting an offer or
making a decision or election, in each case as provided in Section 5.1 or 5.2,
shall create a legally binding obligation to buy or sell, or an obligation not
to buy or sell, as the case may be, the subject Common Stock as provided in
such Section 5.1 or 5.2.
(b) Subject to Section 5.1(a), each holder of Common Stock hereby
appoints JZCC as an attorney-in-fact for such holder with the power to execute
such documents and take such other actions to provide for the transfer of
Common Stock owned by such holder in accordance with this Article V. JZCC is
hereby authorized (i) to transfer such Common Stock on the books of the
Company at the direction and without regard to the surrender of certificates
or instruments representing such Common Stock held by such holder, and (ii) to
place on all certificates or instruments representing
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Common Stock a legend reflecting this authority to transfer such Common Stock.
Section 5.7 Right to Join in Sale.
(a) Anything in this Agreement to the contrary notwithstanding, if
any Stockholder or group of Stockholders proposes, in a single transaction or
a series of transactions during any six-month period (other than transfers to
a Permitted Transferee pursuant to Section 4.2 and transactions subject to
Section 5.9 and transactions pursuant to Section 8 of the Management
Subscription Agreement) to sell, dispose of or otherwise transfer 5% or more
of the outstanding Common Stock Warrant Stock or, if less than such amount, in
the case of any Stockholder which owns Common Stock or Warrant Stock on the
date hereof, 50% or more of its initial holdings of such interests in Common
Stock or Warrant Stock, as the case may be (each a "Disposing Stockholder"),
such person or group shall refrain from effecting such transaction unless,
prior to the consummation thereof, each other Stockholder, including a Warrant
Stock holder, shall have been afforded the opportunity to join in such sale of
Common Stock or Warrant Stock on a pro rata basis, as hereinafter provided.
(b) Prior to consummation of any proposed sale, disposition
or transfer of shares of Common Stock or Warrant Stock described
in Section 5.7(a), the Disposing Stockholder shall cause the person or group
that proposes to acquire such shares (the "Proposed Purchaser") to offer (the
"Purchase Offer") in writing to each other Stockholder to purchase shares of
Common Stock or Warrant Stock owned by such Stockholder (regardless of whether
the shares of Common Stock or Warrant Stock proposed to be sold by the
Disposing Stockholders are the same class as the shares of Common Stock or
Warrant Stock owned by such Stockholders), such that the number of shares of
such Common Stock or Warrant Stock so offered to be purchased from such
Stockholder shall be equal to the product obtained by multiplying the total
number of shares of such Common Stock or Warrant Stock then owned by such
Stockholder by a fraction, the numerator of which is the aggregate number of
shares of Common Stock and Warrant Stock proposed to be purchased by the
Proposed Purchaser from all Stockholders (including the Disposing Stockholder
or Stockholders) and the denominator of which is the aggregate number of
shares of Common Stock and Warrant Stock or shares of Common Stock underlying
the Warrants then outstanding. Such purchase shall be made at the highest
price per share and on such other terms and conditions as the Proposed
Purchaser has offered to purchase shares of Common Stock or Warrant Stock to
be sold by the Disposing Stockholder or Stockholders. Each Stockholder shall
have 20 calendar days from the date of receipt of the Purchase Offer in which
to accept such Purchase Offer, and the
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closing of such purchase shall occur within 30 calendar days after such
acceptance or at such other time as such Stockholder and the Proposed Purchaser
may agree. The number of shares of Common Stock or Warrants to be sold to the
Proposed Purchaser by the Disposing Stockholder or Stockholders shall be reduced
by the aggregate number of shares of Common Stock or Warrant Stock purchased by
the Proposed Purchaser from the other Stockholders pursuant to the acceptance by
them of Purchase Offers in accordance with the provisions of this Section
5.7(b). In the event of any sale of Warrant Stock pursuant to this Section 5.7,
to the extent that Warrant Stock consists of unexercised Warrants, such sale may
be made either by sale of all or a part of the relevant Warrant, or by exercise
of the Warrant and sale of the applicable Warrant Stock. In the event that a
sale or other transfer subject to this Section 5.7 is to be made to a Proposed
Purchaser who is not a Stockholder, the Disposing Stockholder shall notify the
Proposed Purchaser that the sale or other transfer is subject to this Section
5.7 and shall ensure that no sale or other transfer is consummated without the
Proposed Purchaser first complying with this Section 5.7. It shall be the
responsibility of each Disposing Stockholder to determine whether any
transaction to which it is a party is subject to this Section 5.7.
Section 5.8 Retention and Sale of Control.
Notwithstanding any other provisions of this Agreement to the
contrary, but subject to the last sentence of this Section 5.8, prior to the
completion of a Public Distribution, except with the specific prior written
consent of the Bank of Boston and MCIT, the Jordan Investors shall not effect
or permit any sale or other disposition of Common Stock or Warrants, or cause
or permit any merger, consolidation or other transaction involving the Company
to take place or enter into or permit the Company to enter into any agreement,
arrangement, commitment or understanding with respect to the foregoing, if
immediately after giving effect to such sale, disposition, merger,
consolidation or other transaction, a "Change of Control" (as defined in the
MCIT Purchase Agreement) would occur. For purposes of this Section 5.8, the
term "Jordan Investors" shall not include any Permitted Transferee of any such
Persons other than Permitted Transferees referred to in Section 4.2(b) hereof.
Section 5.9 Take Along.
If at any time both (i) Jordan Investors owning interests
representing a majority of the shares of Common Stock or Warrants beneficially
owned by the Jordan Investors and (ii) the Bank of Boston (such Jordan
Investors and the Bank of Boston being referred to in this Section 5.9 as the
"Selling Investors") shall determine to sell or exchange (in a business
combination or
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otherwise) two-thirds or more of their aggregate shares of
Common Stock or Warrants in a bona fide arm's-length transaction to a third
party in which the same price per share shall be payable in respect of all
shares of any class of the Common Stock or Warrants, then, upon the written
request of such Selling Investors, each other Jordan Investor, each Management
Investor, each Jaro Investor and each Osborn Investor shall be obligated to,
and shall, if so requested by such third party, (a) sell, transfer and deliver
or cause to be sold, transferred and delivered to such third party, all shares
of Common Stock or Warrants owned by them at the same price per share
(irrespective of class) and on the same terms as are applicable to the Selling
Investors, and (b) if stockholder approval of the transaction is required,
vote his, her or its shares of Voting Stock in favor thereof. The provisions
of Sections 5.1 through 5.4, inclusive, and Section 5.7 shall not apply to any
transactions to which this Section 5.9 applies.
ARTICLE VI
Registration Rights
Section 6.1 Demand Registrations.
(a) At any time and from time to time after the earlier of the fourth
anniversary of the Closing Date or the effectuation of an Initial Public
Offering by the Company, holders of a majority of the shares of Stock held by
the Jordan Investors (other than MCIT) and Bank of Boston may request in
writing that the Company effect the registration under the Securities Act of
all or part of such holders' Registrable Securities, specifying in the request
the number and type of Registrable Securities to be registered by each such
holder and the intended method of disposition thereof (such notice is
hereinafter referred to as a "Holder Request"). Upon receipt of such Holder
Request, the Company will promptly give written notice of such requested
registration to all other holders of Registrable Securities, which other
holders shall have the right to include the Registrable Securities held by
them in such registration and thereupon the Company will, as expeditiously as
possible, use its best efforts to effect the registration under the Securities
Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such requesting
Stockholders; and
(ii) all other Registrable Securities which the Company has
been requested to register by any other holder thereof by written
request given to the Company within 30
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calendar days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of such
Registrable Securities), all to the extent necessary to permit the
disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered;
provided, however, that the Company shall not be obligated to file a
registration statement relating to any Holder Request under this Section
6.1(a):
(x) unless the Company shall have received requests for such
registration with respect to at least 15% of the shares of Common
Stock then outstanding (including all Warrant Stock) with respect to
the first Holder Request, and unless the Company shall have received
requests for such registration with respect to 10% of the shares of
Common Stock then outstanding with respect to each Holder Request
under this Section 6 thereafter;
(y) other than a registration statement on Form S-3 or a
similar short form registration statement, within a period of 12
months after the effective date of any other registration statement
relating to any registration request under this Section 6.1(a) that
was not effected on From S-3 (or any similar short form); or
(z) within a nine-month period immediately following
the effective date of a registration previously effected by
the Company pursuant to this Section 6.1;
provided, further, however, that the Company may postpone for not more than 90
calendar days, on one occasion only with respect to each request for
registration made under this Section 6.1(a), the filing or effectiveness of a
registration statement under this Section 6.1(a) if the Company and a majority
of the Jordan Investors agree that such registration might reasonably be
expected to have an adverse effect on any proposal or plan by the Company to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer of similar transaction;
provided, that in such event, the holders of Registrable Securities initiating
the request for such registration will be entitled to withdraw such request,
and if such request is withdrawn such registration will not count as one of
the permitted registrations under this Section 6.1. In any event, the Company
will pay all Registration Expenses in connection with any registration
initiated under this Section 6.1.
(b) Notwithstanding the foregoing provisions of Section 6.1(a), the
Company shall not be obligated to effect more than
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one registration pursuant to this Section 6.1 at the request of a majority of
the Jordan Investors, in any twelve month period, in each case through a firm
commitment underwriting through a nationally recognized underwriter (an
"Underwritten Offering").
(c) If the Company proposes to effect a registration requested
pursuant to this Section 6.1. by the filing of a registration statement on
Form S-3 (or any similar short-form registration statement), the Company will
comply with any request by the Managing Underwriter (as defined in Subsection
(f), below) to effect such registration on another permitted form if such
Managing Underwriter advises the Company that, in its opinion, the use of
another form of registration statement is of material importance of such
proposed offering.
(d) A registration requested pursuant to Section 6.1.(a) will not be
deemed to have been effected unless it has become effective; provided, that if
after it has become effective, the offering of Registrable Securities pursuant
to such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court,
such registration will be deemed not to have been effected.
(e) The Company will pay all Registration Expenses in connection with
each of the registrations of Registrable Securities effected by it pursuant to
this Section 6.1.
(f) The Company shall have the right, with the approval of the Jordan
Investors to select the investment banker (or investment bankers) that shall
manage the offering (collectively, the "Managing Underwriter").
(g) In connection with any offering pursuant to this Section 6.1, the
only shares that may be included in such offering are (i) Registrable
Securities, and (ii) shares of authorized but unissued Class A Common Stock
that the Company elects to include in such offering ("Company Securities").
(h) If in connection with any Underwritten Offering pursuant to this
Section 6.1. the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company will promptly so advise
each holder of Registrable Securities that has requested registration, and
shares shall be excluded from such offering in the following order until such
limitation has been met: Company Securities, if any, shall be excluded until
all of the Company Securities shall have been so excluded, and, thereafter,
the Registrable Securities requested to be included in such offering pursuant
to Section 6.1(a)(i) or (ii) shall be excluded pro rata, based on
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the respective number of Registrable Securities as to which registration has
been so requested by such Persons.
(i) If any shares of Class A Common Stock requested to be included in
a sale pursuant to this Section 6.1. shall not be outstanding but shall be
issuable upon conversion of shares of Class B Common Stock which are
outstanding, then the Bank of Boston and the Company shall take all actions
necessary in order to convert such shares of Class B Common Stock into shares
of Class A Common Stock in order to effect such sale. If any shares of Class A
Common Stock requested to be included in a sale pursuant to this Section 6.1.
shall not be outstanding but shall be issuable upon conversion of shares of
Class C Common Stock which are outstanding, then the Jordan Investors shall
take all actions necessary in order to convert such shares of Class C Common
Stock into shares of Class A Common Stock in order to effect such sale. If any
shares of Class A Common Stock requested to be included in a sale pursuant to
this Section 6.1 shall not be outstanding but shall be issuable upon
conversion of shares of Class D Common Stock which are outstanding, then the
Management Investors and the Company shall take all actions necessary in order
to convert such shares of Class D Common Stock into shares of Class A Common
Stock in order to effect such sale.
Section 6.2 Piggyback Registrations.
(a) If the Company at any time proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or
S-8 or any successor or similar forms thereto and other than pursuant to a
registration under Section 6.1.), whether or not for sale for its own account,
on a form and in a manner that would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will give
written notice to all the holders of Registrable Securities promptly of its
intention to do so, describing such securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such registration will be
in connection with an underwritten offering of Registrable Securities and, if
so, the identity of the Managing Underwriter and whether such offering will be
pursuant to a "best efforts" or "firm commitment" underwriting and (y) the
price (net of any underwriting commissions, discounts and the like) at which
the Registrable Securities are reasonably expected to be sold). Upon the
written request of any such holder delivered to the Company within 30 calendar
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use best efforts to
effect the registration under the Securities Act of all of the
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Registrable Securities that the Company has been so requested to register;
provided, however, that:
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date
of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities who made a request as hereinabove provided and thereupon
the Company shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights, of the Jordan
Investors and the Bank of Boston to request that such registration be
effected as a registration under Section 6.1.
(ii) If such registration involves an Underwritten Offering,
all holders of Registrable Securities requesting to be included in
the Company's registration must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and
conditions as apply to the Company.
No registration effected under this Section 6.2 shall relieve the Company of
its obligation to effect registration upon request under Section 6.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 6.2 incidental to the registration
of any of its securities in connection with mergers, acquisitions, exchange
offers, dividend reinvestment plans of stock option or other employee benefit
plans.
(c) The Registration Expenses incurred in connection with
each registration of Registrable Securities requested pursuant to
this Section 6.2. shall be paid by the Company.
(d) If a registration pursuant to this Section 6.2. involves an
Underwritten Offering and the Managing Underwriter advises the issuer that, in
its opinion, the number of securities proposed to be included in such
registration should be limited due to market conditions, then the Company will
include in such registration (i) first, the securities the Company proposes to
sell and (ii) second, the number of Registrable Securities requested by
holders thereof to be included in such registration that, in the opinion of
such Managing Underwriter, can be sold, such amount to be allocated among all
such holders of Registrable
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Securities pro rata on the basis of the respective number of Registrable
Securities each such holder has requested to be included in such registration.
(e) In connection with any Underwritten Offering with respect to
which holders of Registrable Securities shall have requested registration
pursuant to this Section 6.2, the Company shall have the right to select the
Managing Underwriter with respect to the offering; provided, that such
Managing Underwriter is reasonably acceptable to the holders of a majority of
the Registrable Securities requested to be sold in such Underwritten Offering.
(f) If any shares of Class A Common Stock requested to be included in
a sale pursuant to this Section 6.2. shall not be outstanding but shall be
issuable upon conversion of shares of Class B Common Stock which are
outstanding, then the Bank of Boston and the Company shall take all actions
necessary in order to convert such shares of Class B Common Stock into shares
of Class A Common Stock in order to effect such sale. If any shares of Class A
Common Stock requested to be included in a sale pursuant to this Section 6.2
shall not be outstanding but shall be issuable upon conversion of shares of
Class C Common Stock which are outstanding, then the Jordan Investors shall
take all actions necessary in order to convert such shares of Class C Common
Stock into shares of Class A Common Stock in order to effect such sale. If any
shares of Class A Common Stock requested to be included in a sale pursuant to
this Section 6.2 shall not be outstanding but shall be issuable upon conversion
of shares of Class D Common Stock which are outstanding, then the Management
Investors and the trustees for the Jaro and Osborn Voting Trusts and the
Company shall take all actions necessary in order to convert such shares of
Class D Common Stock into shares of Class A Common Stock in order to effect
such sale.
Section 6.3 Registration Procedures.
(a) If and whenever the Company is required to use its best efforts
to effect or cause the registration of any Registrable Securities under the
Securities Act as provided in Section 6.1 or 6.2, the Company will, as
expeditiously as possible:
(i) Prepare and, in any event within 90 calendar days after
the end of the period within which requests for registration may be
given to the Company, file with the Commission a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statements to become and
remain effective; provided, that in the case of a registration
provided for in Section 6.1. or 6.2, before filing a registration
statement or prospectus or any amendments or supplements thereof, the
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Company will furnish to the counsel selected by the Jordan Investors
copies of all such documents proposed to be filed, which documents
will be subject to the review of such counsel; and, provided,
further, that the Company may discontinue any registration of its
securities that is being effected pursuant to Section 6.2 at any time
prior to the effective date of the registration statement relating
thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period as may be requested by the Jordan Investors
not exceeding nine months and to comply with the provisions of the
Securities Act with respect to the disposition of all Common Stock
covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement.
(iii) Furnish to each holder of Registrable Securities
covered by the registration statement and to each underwriter, if
any, of such Registrable Securities, such
number of copies of a prospectus and preliminary prospectus for
delivery in conformity with the requirements of the Securities Act,
and such other documents, as such Person may reasonably request, in
order to facilitate the public sale or other disposition of the
Registrable Securities.
(iv) Use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition of the Registrable Securities
owned by such seller, in such jurisdictions, except that the Company
shall not for any such purpose be required (A) to qualify to do
business as a foreign corporation in any jurisdiction where, but for
the requirements of this Section 6.3(a)(iv), it is not then so
qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction
where it is then so subject.
(v) Use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental
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agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Securities.
(vi) Immediately notify each seller of Registrable
Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the appropriate period mentioned in Section
6.3(a)(ii), if the Company becomes aware that the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and, at the request of any such seller, deliver a
reasonable number of copies of an amended or supplemental prospectus
as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing.
(vii) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission and
make generally available to its security holders, in each case as
soon as practicable, but not later than 45 calendar days after the
close of the period covered thereby (90 calendar days in case the
period covered corresponds to a fiscal year of the Company), an
earnings statement of the Company which will satisfy the provisions
of Section 11(a) of the Securities Act.
(viii) Use its best efforts in cooperation with the
underwriters to list such Registrable Securities on each securities
exchange as they may reasonably designate.
(ix) In the event the offering is an Underwritten Offering,
use its best efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters of the type customarily covered by such letters
as (i) the Jordan Investors or (ii) the sellers of a majority of any
class of such Registrable Securities (excluding shares being sold by
the Jordan Investors) reasonably request.
(x) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and obtain such
certificates and opinions as (i) the Jordan
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Investors or (ii) sellers of a majority of any class of such
Registrable Securities (excluding shares being sold by the Jordan
Investors) reasonably request in order to effect an underwritten public
offering of such Registrable Securities.
(b) Each holder of Registrable Securities will, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 6.3(a)(vi), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by
Section 6.3(a)(vi).
(c) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, each holder of Registrable Securities agrees, whether
or not such holder's Registrable Securities are included in such registration,
not to effect any public sale or distribution, including any sale pursuant to
Rule 144 under the Securities Act, of any Registrable Securities, or of any
security convertible into or exchangeable or exercisable for any Registrable
Securities (other than as part of such Underwritten Offering), without the
consent of the Managing Underwriter, during a period commencing seven calendar
days before and ending 90 calendar days (or such lesser number as the Managing
Underwriter shall designate) after the effective date of such registration.
(d) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, the Company agrees, if so required by the Managing
Underwriter, not to effect any public sale or distribution of any of its
equity or debt securities, as the case may be, or securities convertible into
or exchangeable or exercisable for any of such equity or debt securities, as
the case may be, during a period commencing seven calendar days before and
ending 90 calendar days after the effective date of such registration, except
for such Underwritten Offering or except in connection with a stock option
plan, stock purchase plan, savings or similar plan, or an acquisition, merger
or exchange offer.
(e) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, prior to the effective
date of the registration statement filed in connection with such registration,
not to register such securities in connection with such registration, unless
such holder has agreed with the Company or the Managing Underwriter to limit
its rights under this Section 6.3.
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(f) It is understood that in any Underwritten Offering in addition to
any shares of Common Stock (the "initial shares") the underwriters have
committed to purchase, the underwriting agreement may grant the underwriters
an option to purchase up to a number of additional shares of authorized but
unissued shares of Common Stock (the "option shares") equal to 15% of the
initial shares (or such other maximum amount as the NASD may then permit),
solely to cover over-allotments. Shares of Common Stock proposed to be sold by
the Company and the other sellers shall be allocated between initial shares
and option securities as agreed or, in the absence of agreement, pursuant to
Section 6.1(h) or 6.2(d), as the case may be. The number of initial shares and
option shares to be sold by requesting holders shall be allocated pro rata
among all such holders on the basis of the relative number of shares of
Registrable Securities each such holder has requested to be included in such
registration.
(g) Notwithstanding anything in this Article VI to the contrary, in
lieu of converting any share of Class B Common Stock into Class A Common Stock
prior to or simultaneously with the filing or the effectiveness of any
registration statement filed pursuant to this Article VI, the holder of such
Class B Common Stock may sell such Class B Common Stock to the underwriter of
the offering being registered upon the undertaking of such underwriter to
convert such Class B Common Stock before making any distribution pursuant to
such registration statement and to include the Class A Common Stock issued
upon such conversion among the securities being offered pursuant to such
registration statement. Notwithstanding anything in this Article VI to the
contrary, in lieu of converting any share of Class D Common Stock into Class A
Common Stock prior to or simultaneously with the filing or the effectiveness
of any registration statement filed pursuant to this Article VI, the holder of
such Class D Common Stock may sell such Class D Common Stock to the
underwriter of the offering being registered upon the undertaking of such
underwriter to convert such Class D Common Stock before making any
distribution pursuant to such registration statement and to include the Class
A Common Stock issued upon such conversion among the securities being offered
pursuant to such registration statement. Notwithstanding anything in this
Article VI to the contrary, in lieu of converting any share of Class C Common
Stock into Class A Common Stock prior to or simultaneously with the filing or
the effectiveness of any registration statement filed pursuant to this Article
VI, the holder of such Class C Common Stock may sell such Class C Common Stock
to the underwriter of the offering being registered upon the undertaking of
such underwriter to convert such Class C Common Stock before making any
distribution pursuant to such registration statement and to include the Class
A Common Stock issued upon such conversion among the securities being offered
pursuant to such registration statement. The Company agrees to cause such
Class A Common Stock
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to be included among the securities being offered
pursuant to such registration statement to be issued within such time as will
permit the underwriter to make and complete the distribution contemplated by
the underwriting.
Section 6.4 Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to Section 6.1 or 6.2, the Company will, and
it hereby agrees to, indemnify and hold harmless, to the extent permitted by
law, each seller of any Registrable Securities covered by such registration
statement, its directors and officers or general and limited partners, each
other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such seller or any
such underwriter within the meaning of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or
expense whatsoever arising out of or based upon an untrue statement
or alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
or prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary
in order to make the statements therein not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by
them in connection with investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is
not paid under subparagraph (i) or (ii) above;
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provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter expressly for use in the preparation
of any registration statement (or any amendment thereto) or any preliminary
prospectus or prospectus (or any amendment or supplement thereto); and
provided, further, that the Company will not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, under the indemnity agreement in this
Section 6.4(a) with respect to any preliminary prospectus or final prospectus
or final prospectus as amended or supplemented, as the case may be, to the
extent that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold
Registrable Securities to a Person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus
or of the final prospectus as then amended or supplemented, whichever is most
recent, if the Company has previously furnished copies thereof to such
underwriter. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such seller or any such director,
officer, general or limited partner, investment advisor or agent, underwriter
or controlling Person and shall survive the transfer of such securities by
such seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 6.1 or 6.2, that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 6.4(a)) the Company with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller or underwriter specifically stating
that it is for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such
securities by such seller. In that event, the obligations of the
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Company and such sellers pursuant to this Section 6.4 are to be several and not
joint; provided, however, that with respect to each claim pursuant to this
Section, the Company shall be liable for the full amount of such claim, and each
such seller's liability under this Section 6.4 shall be limited to an amount
equal to the net proceeds (after deducting the underwriting discount and
expenses) received by such seller from the sale of Registrable Securities held
by such seller pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 6.4, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party, give written
notice to such indemnifying party of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Section 6.4, except to the extent (not including any such notice of
an underwriter) that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim (in which case the indemnifying party shall not
be liable for the fees and expenses of more than one firm of counsel for a
majority of the sellers of Registrable Securities and one firm of counsel
selected by the Jordan Investors, or more than one firm of counsel for the
underwriters in connection with any one action or separate but similar or
related actions), the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party similar
notified, to the extent that it may wish with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by such indemnifying party in connection
with the defense thereof.
(d) The Company and each seller of Registrable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority.
Section 6.5 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by
Section 6.4 is for any reason not available, the
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parties required to indemnify by the terms thereof shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company, any seller of
Registrable Securities and one or more of the underwriters, except to the extent
that contribution is not permitted under Section 11(f) of the Securities Act. In
determining the amounts which the respective parties shall contribute, there
shall be considered the relative benefits received by each party from the
offering of the Registrable Securities (taking into account the portion of the
proceeds of the offering realized by each), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission and
any other equitable considerations appropriate under the circumstances. The
Company and each Person selling securities agree with each other that no
seller of Registrable Securities shall be required to contribute any amount in
excess of the amount such seller would have been required to pay to an
indemnified party if the indemnity under Section 6.4(b) were available. The
Company and each such seller agree with each other and the underwriters of the
Registrable Securities, if requested by such underwriters, that it would not
be equitable if the amount of such contribution were determined by pro rata or
per capita allocation (even if the underwriters were treated as one entity for
such purpose) or for the underwriters' portion of such contribution to exceed
the percentage that the underwriting discount bears to the initial public
offering price of the Registrable Securities. For purposes of this Section
6.5, each Person, if any, who controls an underwriter within the meaning of
Section 15 of the Securities Act shall have the same rights to contribution as
such underwriter, and each director and each officer of the Company who signed
the registration statement, and each Person, if any, who controls the Company or
a seller of Registrable Securities within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as the Company or a
seller of Registrable Securities, as the case may be.
Section 6.6 Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information), and it will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
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shares of Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
ARTICLE VII
Termination
Section 7.1 Certain Terminations.
(a) The provisions of Articles III, IV and V shall terminate on the
date on which any of the following events first occurs: (i) a Public
Distribution, (ii) a merger or consolidation of the Company with or into
another Person that is not an Affiliate of the Company, as a result of which
the Stockholders own less than 65% of the outstanding shares of Voting Stock
of the surviving or resulting corporation, (iii) the sale or other disposition
in compliance with Section 2.1 of all or substantially all the assets of the
Company to a Person that is not an Affiliate of the Company, or (iv) ten years
from the date of this Agreement.
(b) The provisions of Section 8.3 shall terminate ten years
from the date of this Agreement.
(c) Notwithstanding the foregoing, this Agreement shall in any event
terminate with respect to any Stockholder when such Stockholder no longer owns
any Securities or Warrants.
ARTICLE VIII
Miscellaneous
Section 8.1 Other Covenants.
(a) For so long as any Stockholder or Stockholders holds individually
or in the aggregate 5% or more of the Common Stock then outstanding, such
Stockholder or Stockholders may upon reasonable prior notice visit and inspect
the properties of the Company and each Subsidiary of the Company and examine
and copy (at their own expense) their books of record and account, and discuss
their affairs, finances and accounts with their officers and their current and
prior independent public accountants all at such reasonable times as such
Stockholder or Stockholders may
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desire. All materials and information obtained pursuant to this Section 8.1(a)
shall be kept confidential by the Stockholders and shall not be disclosed to any
third party (other than to their Affiliates) unless expressly agreed to by the
Company or as required pursuant to applicable law, in connection with judicial
or arbitral proceedings or upon request of any governmental or regulatory
authority.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Bank of Boston may, at any time and from time to time, exchange
any number of shares of Class B Common Stock held by them for an equal number
of shares of Class A Common Stock; provided, however, that immediately after
giving effect to any such exchange, the aggregate number of shares of Class A
Common Stock held by the Bank of Boston shall not exceed 4.99% of the
aggregate number of shares of Class A Common Stock then outstanding. Such
exchange shall be effected in each case by the delivery by the Bank of Boston
of certificates representing such shares, duly endorsed or accompanied by duly
executed stock powers, to the Company at its principal office, together with
written notice stating the number of such shares to be so exchanged, whereupon
the Company shall issue to the Bank of Boston new certificates representing a
number of shares of Class A Common Stock equal to the number of shares of
Class B Common Stock so exchanged, which shares of Class A Common Stock when
so issued shall be duly and validly issued, fully paid and non-assessable. The
Company shall at all times reserve a sufficient number of shares of its
authorized but unissued Class A Common Stock to permit compliance with the
provisions of this Section 8.1(b). Any shares of Class B Common Stock acquired
by the Company in exchange for shares of Class A Common Stock pursuant to this
Section 8.1(b) shall be cancelled and retired.
Section 8.2 Financial Information; List of Stockholders.
(a) The Company agrees to furnish to each Stockholder, for so long as
such Stockholder holds any Common Stock, Preferred Stock or Warrant as soon as
available the following financial statements and other information:
(i) copies of the consolidated and consolidating balance
sheets of the Company and its Subsidiaries as of the end of the
first, second and third quarterly accounting periods, and of the
related consolidated and consolidating statements of income and
retained earnings and cash flows for such accounting period and for
the portion of the fiscal year ended with the last day of such
accounting period, all in reasonable detail and stating in
comparative form the consolidated and consolidating figures as of the
end of and for the corresponding date and period in the previous
fiscal year, all certified by its chief financial officer as
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complete and correct and as presenting fairly the information contained
therein in accordance with the same accounting practices used in
preparing the audited financial statements for the fiscal year most
recently ended required to be delivered by paragraph (ii) below,
subject to recurring non-material changes resulting from year-end
audit adjustments, absence of the notes required by GAAP and year end
accruals; and
(ii) copies of the consolidated and consolidating balance
sheets of the Company and its Subsidiaries as of the end of each
fiscal year, and of the related consolidated and consolidating
statements of income and retained earnings and cash flows for such
fiscal year, all in reasonable detail and stating in comparative form
the respective consolidated and consolidating figures as of the end
of and for the previous fiscal year, and, in the case of such
consolidated statements, accompanied by a report thereon of
independent certified public accountants of recognized national
standing selected by the Company and acceptable to Stockholders (the
"Accountants"), which report shall be unqualified as to going concern
and scope of audit and shall state that such consolidated financial
statements present fairly the consolidated financial position of the
Company and its Subsidiaries as at the dates indicated and their
consolidated income and retained earnings and cash flows for the
periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except for such changes with which the
Accountants shall concur) and that the examination by such
Accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing
standards; and
(iii) copies of any proxy statements, financial statements
and reports as the Company or its Subsidiaries shall send or make
available generally to any of their security holders, and copies of
all regular and periodic reports and of all registration statements
(other than on Form S-8 or Form 701 or a similar form) which the
Company or its Subsidiaries may file with the Securities and Exchange
Commission or with any securities exchange.
(b) The Company agrees to furnish to any Stockholder or Stockholders
holding individually or in the aggregate 5% or more of the Common Stock then
outstanding, any other information, including without limitation financial
statements and computations relating to the performance of this Agreement
and/or the affairs of the Company or its Subsidiaries that any such
Stockholder or Stockholders may from time to time reasonably request and which
is capable of being obtained, produced or generated without undue effort or
expense by the Company or such
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Subsidiary or of which any of them has knowledge (including, without limitation,
a brief statement containing a management discussion and analysis of the
financial condition of the Company and its Subsidiaries and describing the
results of operations and significant events relating to the Company and
Subsidiaries for any fiscal period; copies of all minutes of meetings of Board
of Directors; copies of all information furnished to stockholders at or in
connection with all meetings of stockholders of the Company, a copy of all
information furnished to members of the Board of Directors of the Company, and a
copy of a list of shareholders of the Company).
(c) Not less than 30 calendar days after the end of each fiscal year
of the Company, and from time to time upon the request of any Jordan Investor,
the Company shall provide to such Jordan Investor a list of all stockholders
of the Company indicating the respective numbers of shares owned of Common
Stock or Preferred Stock, as the case may be, by them.
(d) The Company agrees to provide all information and make any
filings reasonably requested by any Stockholder that are required by Section
1202 of the Internal Revenue Code of 1986, as amended, so long as such
information and filings do not have an adverse effect in respect of the
Company's business, operations, results, tax positions, conditions or
prospects.
Section 8.3 Covenants of the Jaro and Osborn Investors.
(a) Each of the Osborn Investors hereby appoints William Osborn as
their proxy pursuant to the Osborn Proxy Agreement, with full power of
substitution, to represent and vote, in his sole discretion, all Securities
which they would be entitled to vote at any annual or special meeting of the
Company's stockholders and to execute and deliver, in his sole discretion,
any written consent by the holders of the Company's Securities in which they
would be entitled to join. Each of the Osborn Investors acknowledges and
agrees that such proxy is coupled with an interest and cannot be terminated or
revoked until the termination of this Agreement. Any transfer of Securities by
the foregoing persons to a Permitted Transferee will be subject to this proxy
and conditioned upon the Company's receipt of a proxy, in form and substance
identical to this proxy, from such Permitted Transferee. In the event that
William Osborn is no longer employed by Enterprises, the Osborn Investors
hereby agree that this proxy may be exercised by a majority of the Management
Directors. Each of the Osborn Investors agrees to execute and deliver to the
Company any instruments or documents which they may reasonably request in
order to effectuate this proxy.
(b) Each of the Jaro Investors hereby appoints Lawrence Jaro as their
proxy pursuant to the Jaro Proxy Agreement,
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with full power of substitution, to represent and vote, in his sole discretion,
all Securities which they would be entitled to vote at any annual or special
meeting of the Company's stockholders and to execute and deliver, in his sole
discretion, any written consent by the holders of the Company's Securities in
which they would be entitled to join. Each of the Jaro Investors acknowledges
and agrees that such proxy is coupled with an interest and cannot be terminated
or revoked until the termination of this Agreement. Any transfer of Securities
by the foregoing persons to a Permitted Transferee will be subject to this proxy
and conditioned upon the Company's receipt of a proxy, in form and substance
identical to this proxy, from such Permitted Transferee. In the event that
Lawrence Jaro is no longer employed by Enterprises, the Jaro Investors hereby
agree that this proxy may be exercised by a majority of the Management
Directors. Each of the Jaro Investors agrees to execute and deliver to the
Company any instruments or documents which they may reasonably request in
order to effectuate this proxy.
Section 8.4 RIGHT OF SETOFF. EACH OF THE JARO INVESTORS AND THE
OSBORN INVESTORS (EACH A "SETOFFEE") ACKNOWLEDGES AND AGREES THAT THE COMPANY
MAY, IN ADDITION TO ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO IT UNDER THE
JARO PURCHASE AGREEMENT AND THE OSBORN PURCHASE AGREEMENT, RESPECTIVELY, AND
IN ITS SOLE DISCRETION, SET OFF ITS INDEMNIFICATION RIGHTS AGAINST PAYMENTS OR
AMOUNTS OWED BY THE COMPANY TO A JARO INVESTOR OR AN OSBORN INVESTOR,
RESPECTIVELY, IN RESPECT OF THEIR SECURITIES RECEIVED PURSUANT TO THE JARO
PURCHASE AGREEMENT OR OSBORN PURCHASE AGREEMENT, PROVIDED THAT INDEMNIFICATION
CLAIMS IN THE AGGREGATE SHALL BE LIMITED TO THE CONSIDERATION RECEIVED BY A
JARO INVESTOR OR AN OSBORN INVESTOR AND THAT THE COMPANY'S RIGHT TO SETOFF
SHALL BE APPLIED TO THE FOLLOWING PAYMENTS IN ORDER: (I) ANY PRINCIPAL AND
THEN INTEREST PAYMENTS THE COMPANY MAY OWE A SETOFFEE PURSUANT TO ANY OF ITS
NOTES, AS DEFINED IN THE MANAGEMENT SUBSCRIPTION AGREEMENT; (II) ANY PREFERRED
STOCK DIVIDEND, LIQUIDATION OR REDEMPTION PAYMENT THE COMPANY MAY OWE A
SETOFFEE; (III) ANY COMMON STOCK DIVIDEND, LIQUIDATION OR REDEMPTION PAYMENT THE
COMPANY MAY OWE A SETOFFEE AND THEN (IV) CASH TO THE EXTENT THE CASH RECEIVED
PURSUANT TO SUCH ASSET PURCHASE AGREEMENT HAS NOT BEEN DISTRIBUTED BY THE JARO
INVESTOR TO ITS SHAREHOLDERS AND LIMITED BY THE AMOUNT, IF ANY, THAT THE JARO
INVESTOR OR OSBORN INVESTOR HAS PAID FEDERAL OR STATE TAXES THEREIN OR HAS
RECEIVED A NOTICE OR CLAIM ASSESSING ADDITIONAL TAX LIABILITIES UPON THE JARO
INVESTOR OR OSBORN INVESTOR AS A RESULT OF NON-COMPLIANCE WITH SECTION 351 AND
THE RULES REGARDING THE INSTALLMENT NOTE REGULATIONS UNDER THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. ANY PERSONAL LIABILITY OF AN INDIVIDUAL JARO INVESTOR
OR OSBORN INVESTOR SHALL BE LIMITED TO THE EXTENT THE JARO INVESTOR OR OSBORN
INVESTOR PERSONALLY RECEIVED STOCK OR CASH PURSUANT TO THE JARO PURCHASE
AGREEMENT OR THE OSBORN PURCHASE AGREEMENT, OR ACQUIRED SUCH STOCK OR CASH IN
A
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<PAGE>
DISTRIBUTION OR DIVIDEND, NET OF FEDERAL AND STATE INCOME TAXES AS PROVIDED
IN THE PRECEDING SENTENCE. THE COMMON STOCK SHALL BE VALUED AT FAIR MARKET
VALUE (AS DEFINED IN THE MANAGEMENT SUBSCRIPTION AGREEMENT) FOR PURPOSE OF
DETERMINING THE REDEMPTION VALUE OF THE COMMON STOCK.
Section 8.5 Successors and Assigns. Except as otherwise provided
herein, all of the terms and provisions of this Agreement shall be binding
upon, shall inure to the benefit of and shall be enforceable by the respective
successors and assigns of the parties hereto. No Stockholder may assign any of
its rights hereunder to any Person other than a transferee that has complied
with the requirements of Sections 4.2 and 5.3 (if applicable) as provided
therein in all respects. The Company may not assign any of its rights
hereunder to any Person other than an Affiliate of the Company. If any
transferee of any Stockholder shall acquire any Securities or Warrants, in any
manner, whether by operation of law or otherwise, such shares shall be held
subject to all of the terms of this Agreement, and by taking and holding such
shares such Person shall be entitled to receive the benefits of and be
conclusively deemed to have agreed to be bound by and to comply with all of
the terms and provisions of this Agreement.
Section 8.6 Amendment and Modification; Waiver of
Compliance; Conflicts.
(a) This Agreement may be amended only by a written instrument duly
executed by (i) a Majority of the Jordan Investors, (ii) to the extent
required under Section 10.8 under the Credit Agreement that such proposed
amendment would materially adversely affect the rights of the Bank of Boston
under this Agreement, the Bank of Boston and (iii) to the extent that such
proposed amendment would materially adversely affect the rights of the
Management Investors under this Agreement as a group, the holders of a
majority of the shares of Voting Stock owned by the Management Investors or
which may be voted, pursuant to the provisions of Section 8.3, by either
Lawrence Jaro, William Osborn or a majority of the Management Directors. In the
event of the amendment or modification of this Agreement in accordance with its
terms, the Stockholders shall cause the Board of Directors of the Company to
meet within 30 calendar days following such amendment or modification or as soon
thereafter as is practicable for the purpose of adopting any amendment to the
Certificate of Incorporation and By-Laws of the Company that may be required as
a result of such amendment or modification to this Agreement, and, if required,
proposing such amendments to the Stockholders entitled to vote thereon, and the
Stockholders agree to vote in favor of such amendments.
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<PAGE>
(b) Except as otherwise provided in this Agreement, any failure of
any of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this
Agreement and the provisions of any other agreement, the provisions of this
Agreement shall govern and prevail.
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<PAGE>
Section 8.7 Notices. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent
by telex or telecopy (with such telex or telecopy confirmed promptly in
writing sent by first class mail), or first class mail, or other similar means
of communication, as follows:
(i) If to the Company or any Jordan Investor,
addressed to the Company or to such Jordan Investor c/o The
Jordan Company, 9 West 57th Street, New York, New York
10019, Attention: Richard Caputo; or
(ii) If to a Stockholder other than the Jordan Investors, to
the address of such Stockholder set forth in the stock records of the
Company.
or, in each case, to such other address or telex or telecopy number as such
party may designate in writing to each Stockholder and the Company by written
notice given in the manner specified herein.
All such communications shall be deemed to have been given, delivered
or made when so delivered by hand or sent by telex (answer back received) or
telecopy, or five business days after being so mailed.
Section 8.8 Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire agreement among the parties hereto with respect to the
subject transactions contemplated hereby and supersede all prior oral and
written agreements and memoranda and undertakings among the parties hereto
with regard to this subject matter. The Company represents to the Stockholders
that the rights granted to the holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted or obligations accepted
under any other agreement
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<PAGE>
(including the Certificate of Incorporation) to which the Company is a party.
Neither the Company nor any Subsidiary of the Company will hereafter enter into
any agreement with respect to its equity or debt securities which is
inconsistent with the rights granted to the holders of Registrable Securities or
any Stockholder under this Agreement without obtaining the prior written consent
of the Stockholder or holder of Registrable Securities whose rights would be
thereby affected.
Section 8.9 Injunctive Relief. The Stockholders acknowledge and agree
that a violation of any of the terms of this Agreement will cause the
Stockholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Stockholders agree that each Stockholder shall be
entitled to an injunction, restraining order or other equitable relief from
any court of competent jurisdiction, restraining any Stockholder from
committing any violations of the provisions of this Agreement.
Section 8.10 Inspection. For so long as this Agreement shall be in
effect, this Agreement shall be made available for inspection by any
Stockholder at the principal executive offices of the Company.
Section 8.11 Headings. The section and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 8.12 Recapitalizations, Exchanges, Etc., Affecting
the Common Stock; New Issuances.
(a) The provisions of this Agreement shall apply, to the full extent
set forth herein with respect to the Common Stock and the Preferred Stock and
to any and all equity or debt securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of, such equity or debt securities and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
reclassifications, recapitalizations, reorganizations and the like occurring
after the date hereof.
(b) In the event that the Company enters into an agreement providing
for the merger or consolidation of the Company with another entity or for an
exchange of the equity securities of such entities pursuant to which
Stockholders of the Company would be entitled to receive equity securities of
the surviving or any other corporation, the Company shall cause such agreement
to provide that any holder of shares of Class B Common Stock shall be entitled
to receive non-voting equity securities of such
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<PAGE>
surviving or other corporation convertible into voting equity securities in the
same manner as the Class B Common Stock.
Section 8.13 Ratification of Prior Acts of Board of Directors of
Company; Right to Negotiate. Each of the Stockholders hereby adopts, ratifies
and confirms all of the actions heretofore taken by the Board of Directors in
all respects, including, without limitation, in respect of the Purchase and
Sale Agreement and the transactions contemplated thereby. Nothing in this
Agreement (apart from Section 2.1(c) and Article V hereof) shall be deemed to
restrict or prohibit the Company from purchasing Stock from any Stockholder at
any time upon such terms and conditions and at such price as may be mutually
agreed upon between the Company and such Stockholder, whether or not at the
time of such purchase circumstances exist which specifically grant the Company
the right to purchase, or such Stockholder the right to sell, Stock pursuant
to the terms of this Agreement.
Section 8.14 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT
OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY
HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE
PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.
EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND
SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE
OF FORUM SET FORTH IN THIS SECTION 11(G) SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
Section 8.15 ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY
PURSUANT TO,
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<PAGE>
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO, ILLINOIS,
AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF ILLINOIS. DECISIONS
AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO SUCH ARBITRATION SHALL
BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT TO CONFIRMATION,
MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. ss.ss. 1 ET SEQ. ANY FINAL AWARD
SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
Section 8.16 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be
applied against any person.
Section 8.17 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.18 Obligations Under the MCIT Purchase Agreement.
(a) The Company, the Jordan Investors and each Jordan Party hereby
agree to use their best efforts to refrain from exercising their voting rights
as required by the Abstention Letter (as defined in the MCIT Purchase
Agreement) for so long as such letter is in full force and effect.
(b) The Company will use its best efforts to fulfill the terms and
conditions of the Preemption Letter (as defined in the MCIT Purchase
Agreement) for so long as such letter is in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
NRE HOLDINGS, INC.
By:______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
JORDAN INVESTORS:
Jordan/Zalaznick Capital Company
By:______________________________
Name:
General Partner
Leucadia Investors, Inc.
By:______________________________
Name:
Title:
John W. Jordan, II Revocable Trust
---------------------------------
John W. Jordan, II
Trustee
---------------------------------
David W. Zalaznick
---------------------------------
Jonathan F. Boucher
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---------------------------------
John R. Lowden
---------------------------------
Adam E. Max
John M. Camp Profit Sharing Plan
By:______________________________
John M. Camp
Trustee
---------------------------------
John M. Camp
---------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing
Plan and Trust
By:______________________________
James E. Jordan, Jr.
Trustee
Paul Rodzevik Profit Sharing Plan and
Trust
By:______________________________
Paul Rodzevik
Trustee
MANAGEMENT STOCKHOLDERS:
---------------------------------
Lawrence Jaro
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---------------------------------
William Osborn
---------------------------------
Gary Hubert
---------------------------------
Joel Aaseby
---------------------------------
Dan Stahursky
---------------------------------
Scott Vasatka
JARO INVESTORS:
Tabor Restaurants Associates, Inc.
By:______________________________
Lawrence Jaro
President
Jaro Enterprises, Inc.
By:______________________________
Lawrence Jaro
President
Jaro Restaurants Associates, Inc.
By:______________________________
Lawrence Jaro
President
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JB Restaurants, Inc.
By:______________________________
Lawrence Jaro
President
OSBORN INVESTORS:
Osburger, Inc.
By:______________________________
William Osborn
President
Castleking, Inc.
By:______________________________
William Osborn
President
White-Osborn Restaurants, Inc.
By:______________________________
William Osborn
President
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<PAGE>
EXHIBIT A
By-Laws of the Company
<PAGE>
EXHIBIT B
Certificate of Incorporation
<PAGE>
EXHIBIT C
TJC Management Consulting Agreement
<PAGE>
EXHIBIT D
Management Subscription Agreement
<PAGE>
EXHIBIT E
Jordan Investors Subscription Agreement
<PAGE>
EXHIBIT F
The Bank of Boston Warrant
<PAGE>
EXHIBIT G
Form of Stock Option Agreement
<PAGE>
EXHIBIT H
Directors Indemnification Agreement
<PAGE>
EXHIBIT I
Intercompany Agreements
<PAGE>
EXHIBIT J-1
Osborn Proxy Agreement
<PAGE>
EXHIBIT J-1
Jaro Proxy Agreement
<PAGE>
EXHIBIT K
Executive and Advisors Subscription Agreement
<PAGE>
SCHEDULE OF JORDAN INVESTORS
Jordan Zalaznick Capital Company
Leucadia Investors, Inc.
John W. Jordan, II Revocable Trust
David W. Zalaznick
Jonathan F. Boucher
John R. Lowden
Adam E. Max
John M. Camp
A. Richard Caputo
James E. Jordan
Paul Rodzevik
Thomas H. Quinn
JII Partners
Jerry Dunn
Dennis Hogerty
Total
2
CONSENT AND AMENDMENT NO. 1
TO
STOCKHOLDERS AGREEMENT
This CONSENT AND AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT
("Amendment No. 1"), dated as of November 30, 1994, is by and among NRE
Holdings, Inc., a Delaware corporation (the "Company"), National Restaurant
Enterprises, Inc., a Delaware corporation ("Enterprises"), The First National
Bank of Boston, a national banking association ("Bank of Boston"), BancBoston
Investments Inc. ("FNBB Affiliate"), Mezzanine Capital & Income Trust 2001
PLC, a corporation organized under the laws of England ("MCIT") and the Jordan
Investors, the Management Stockholders, the Jaro Investors and the Osborn
Investors (each as defined in the Stockholders Agreement dated as of September
1, 1994 (the "Original Stockholders Agreement") between the Company and
certain of the parties hereto).
W I T N E S S E T H:
WHEREAS, the Company and certain of the parties hereto executed the
Original Stockholders Agreement to promote their mutual interest and the
interest of the Company by imposing certain restrictions on the transfer of
shares of capital stock of the Company owned or thereafter acquired by the
Company's Stockholders and to set forth their respective agreements with
respect to certain other matters, all upon the terms and conditions therein
set forth;
WHEREAS, the parties to the Original Stockholders Agreement desire
(i) to consent to certain amendments being made to the Revolving Credit and
Term Loan Agreement and the MCIT Purchase Agreement on date hereof and (ii) to
make certain amendments to the Original Stockholders Agreement, as set forth
below.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency which are hereby acknowledged, the parties agree as
follows:
(i) Defined Terms.
(a) except as otherwise expressly provided herein,
capitalized terms used herein which are defined in the
Original Stockholder Agreement, as amended hereby, should
have the meanings specified for such terms in the Original
Stockholders Agreement, as so amended.
<PAGE>
(ii) Representations and Warranties.
(a) each Stockholder that is a party
hereto represents on behalf of itself that it is
the record and beneficial owner of the number of
shares of the Company's capital stock set forth
opposite such Stockholder's name on Schedule 1
attached hereto.
(b) the Company represents and warrants
that the Stockholders which are parties hereto
constitute all the holders of record of the
Company's capital stock and that their respective
record ownership of shares of the Company's capital
stock is set forth on Schedule 1 attached hereto.
(iii) Amendments to Original Stockholders Agreement.
The parties hereto agree that the Original Stockholders
Agreement is hereby amended as follows:
(a) Article I of the Original Stockholders
Agreement is amended by:
(i) Deleting the definition of "Bank
of Boston" in its entirety and inserting the
following in lieu thereof:
"Bank of Boston shall
mean The First National Bank of
Boston, a national banking
association, FNBB Affiliate, and
any of their respective Permitted
Transferees";
(ii) Adding the following definitions
in appropriate alphabetical sequence:
"FNBB Affiliate shall mean
BancBoston Investments Inc."
"Securities Purchase
Agreement shall mean the
Securities Purchase Agreement
dated as of November 30, 1994,
between the Company and FNBB
Affiliate."
(iii) Deleting the definition of
"Stockholder" in its entirety and inserting
the following in lieu thereof:
"Stockholder shall mean any of the
Jordan Investors, MCIT, The Bank of Boston,
2
<PAGE>
FNBB Affiliate, the Management Investors,
the Jaro Investors, the Osborn Investors,
holders of the Company's capital stock
issued pursuant to the Stock Option
Agreement to any Permitted Transferee of
any such Person who becomes a party to or
bound by the provisions of this Agreement
in accordance with the terms hereof."
(iv) Deleting the definition of
"Transaction Documents in its entirety and
inserting the following in lieu thereof:
Transaction Documents shall mean
this Agreement, the Securities Purchase
Agreement, the Purchase and Sale
Agreement, the Jaro Purchase Agreement,
the Osborn Purchase Agreement, the
Franchise Agreement, the Management
Consulting Agreement, the MCIT Purchase
Agreement, the Revolving Credit and Term
Loan Agreement, the Executive and Advisors
Subscription Agreement, the Jordan
Investors Subscription Agreement, the
Management Subscription Agreement, each of
the agreements that are exhibits hereto
and thereto, and all agreements,
instruments and documents contemplated
thereby.
(v) deleting the definition of "Warrants" in
its entirety and inserting the following in
lieu thereof:
Warrants shall mean (i) the
Warrant, initially exercisable to purchase
31.2801 shares of Class B Common Stock,
issued to The First National Bank of
Boston or its designee pursuant to the
Revolving Credit and Term Loan Agreement,
substantially in the form of Exhibit F
hereto, and (ii) the Warrant, initially
exercisable to purchase 81.0799 shares of
Class B Common Stock, issued to FNBB
Affiliate, as such Warrants may from time
to time be amended, modified or
supplemented in accordance with the terms
hereof and thereof.
(b) Section 4.2(c) of the Original
Stockholders Agreement is amended in its entirety
to read as follows:
3
<PAGE>
"(c) from The First National Bank of Boston
or FNBB Affiliate to any of their respective
affiliates, or the Jordan Investors."
(c) Section 8.6(a)(ii) of the Original
Stockholders Agreement is amended in its entirety
to read as follows:
"(ii) to the extent required under Section 10.8
under the Credit Agreement, or if such proposed
amendment would materially adversely affect the
rights of the Bank of Boston under this Agreement,
the Bank of Boston and"
4. Waiver of First Refusal. Each of the parties hereto hereby waives
any right of first refusal it may have pursuant to Section 5.5 of the Original
Stockholders Agreement arising from the issuance and sale of Preferred Stock
and Warrants pursuant to the Securities Purchase Agreement.
5. Waiver of Anti-Dilution Rights. Each of the parties
hereto hereby waives any right it may have to anti-dilution
adjustment of its capital stock arising from the issuance of
capital stock and warrants pursuant to the Securities Purchase
Agreement.
6. Consent to Amendments to Financing Agreements. Each of the parties
hereto hereby consents to (a) the execution, delivery and performance by the
Company and Enterprises, as applicable, of (i) the Amended and Restated Credit
Agreement by and among The First National Bank of Boston, the Company and
Enterprises, dated the date hereof, (ii) the Securities Purchase Agreement and
(iii) the Amended Purchase Agreement between the Company and MCIT, as modified
on the date hereof, and (b) all transactions contemplated thereby.
7. Effect of Amendment No. 1. The consents and amendments granted
hereunder shall be limited precisely as written and shall not otherwise
constitute a waiver or modification of any other covenants, terms or
provisions of the Original Stockholders Agreement, which shall remain in full
force and effect. Without limiting the foregoing, this Amendment No. 1 shall
not prejudice any right or rights which of the Stockholders may otherwise have
(now or in the future) under or in connection with the Original Stockholders
Agreement or otherwise.
8. Counterparts. This Amendment No. 1 may be executed in
any number of counterparts, each of which shall be deemed to be
an original and all of which together shall be deemed to be one
and the same instrument, and all signatures need not appear on
any one counterpart.
4
<PAGE>
9. Governing Law. This Amendment No. 1 shall be governed
by, and construed in accordance with, the laws of the State of
Illinois (other than any conflict of laws rule which might result
in the application of the laws of any other jurisdiction).
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
NRE HOLDINGS, INC.
By:______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
MEZZANINE CAPITAL &
INCOME TRUST 2001 PLC
By:______________________________
Name:
Title:
JORDAN INVESTORS:
Jordan/Zalaznick Capital Company
By:______________________________
Name:
General Partner
Leucadia Investors, Inc.
By:______________________________
Name:
Title:
John W. Jordan, II Revocable Trust
---------------------------------
John W. Jordan, II
Trustee
6
<PAGE>
---------------------------------
David W. Zalaznick
---------------------------------
Jonathan F. Boucher
---------------------------------
John R. Lowden
---------------------------------
Adam E. Max
John M. Camp Profit Sharing Plan
By:______________________________
John M. Camp
Trustee
---------------------------------
John M. Camp
---------------------------------
A. Richard Caputo, Jr.
James E. Jordan, Jr. Profit Sharing Plan
and Trust
By:______________________________
James E. Jordan, Jr.
Trustee
Paul Rodzevik Profit Sharing Plan and
Trust
By:______________________________
Paul Rodzevik
Trustee
7
<PAGE>
MANAGEMENT STOCKHOLDERS:
---------------------------------
Lawrence Jaro
---------------------------------
William Osborn
---------------------------------
Gary Hubert
---------------------------------
Joel Aaseby
---------------------------------
Don Stahursky
---------------------------------
Scott Vasatka
JARO INVESTORS:
Tabor Restaurants Associates, Inc.
By:______________________________
Lawrence Jaro
President
Jaro Enterprises, Inc.
By:______________________________
Lawrence Jaro
President
8
<PAGE>
Jaro Restaurants Associates, Inc.
By:______________________________
Lawrence Jaro
President
JB Restaurants, Inc.
By:______________________________
Lawrence Jaro
President
OSBORN INVESTORS:
Osburger, Inc.
By:______________________________
William Osborn
President
Castleking, Inc.
By:______________________________
William Osborn
President
White-Osborn Restaurants, Inc.
By:______________________________
William Osborn
President
----------------------------
Thomas H. Quinn
9
WAIVER AND AMENDMENT NO. 2
TO
STOCKHOLDERS AGREEMENT
THIS WAIVER AND AMENDMENT NO. 2 TO STOCKHOLDERS AGREEMENT (this
"Amendment No. 2"), dated as of February 7, 1996, is made by and among NRE
Holdings, Inc., a Delaware corporation, National Restaurant Enterprises, Inc.,
a Delaware corporation, The First National Bank of Boston, a national banking
association, BancBoston Investments Inc., MCIT PLC, a corporation organized
under the laws of England, PMI Mezzanine Fund, L.P., a Delaware limited
partnership ("PMI"), the Jordan Investors, the Management Stockholders, the
Jaro Investors and the Osborn Investors (each as defined in the Stockholders
Agreement, dated as of September 1, 1994, as amended by the Consent and
Amendment No. 1 to Stockholders Agreement, dated as of November 30, 1994 (as
so amended, the "Original Stockholders Agreement"), between the Company and
certain of the parties hereto.
Except as otherwise expressly provided herein, capitalized terms used
herein which are defined in the Original Stockholders Agreement shall have the
same meaning herein as specified for such terms in the Original Stockholders
Agreement, as so amended.
W I T N E S S E T H:
WHEREAS, the Company and certain of the parties hereto executed the
Original Stockholders Agreement to promote their mutual interest and the
interest of the Company by imposing certain restrictions on the transfer of
shares of capital stock of the Company owned or thereafter acquired by the
Stockholders and to set forth their respective agreements with respect to
certain other matters, all upon the terms and conditions therein set forth;
WHEREAS, concurrent with the date hereof, the Company, Enterprises, and
PMI are entering into a note purchase agreement whereby PMI will purchase from
Enterprises senior subordinated notes and from the Company warrants
convertible into shares of Class B Common Stock (as amended or modified from
time to time, the "PMI Note Purchase Agreement");
WHEREAS, the parties to the Original Stockholders Agreement desire (i) to
waive certain rights granted to them under the original Stockholders Agreement
and (ii) to make certain amendments to the Original Stockholders Agreement, as
set forth below.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt
and sufficiency which are hereby acknowledged, the parties agree as follows:
SECTION 1. Representations and Warranties.
(a) each Stockholder that is a party hereto represents on behalf of
itself that it is the record and beneficial owner of the number of shares of
the Company's capital stock set forth opposite such Stockholder's name on
Schedule 1 attached hereto.
(b) the Company represents and warrants that the Stockholders which are
parties hereto constitute all the holders of record of the Company's capital
stock and that their respective record ownership of shares of the Company's
capital stock is set forth on Schedule 1 attached hereto.
SECTION 2. Amendments to Original Stockholders Agreement. The parties hereto
agree that the Original Stockholders Agreement is hereby amended as follows:
(a) Article I is amended by:
(i) Adding the following definitions in appropriate
alphabetical sequence:
"Institutional Lender shall mean any bank, savings and
loan association, insurance company, or other institutional
lender."
"MCIT Purchase Agreement shall mean the Amended and
Restated Purchase Agreement, dated as of February 7, 1996,
between the Company and MCIT, as amended or supplemented from
time to time."
"PMI shall have the meaning set forth in the preamble to
this Amendment No. 2."
"PMI Note Purchase Agreement shall have the meaning set
forth in the second recital to this Amendment No. 2."
"PMI Subordinated Notes shall mean those 12.5%
subordinated notes of Enterprises in the original aggregate
principal amount of $15 million with a maturity of January 31,
2005.
(ii) Deleting the definition of "Stockholder" in its entirety
and inserting the following in lieu thereof:
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<PAGE>
"Stockholder shall mean any of the Jordan Investors, MCIT,
The Bank of Boston, FNBB Affiliate, PMI, the Management
Investors, the Jaro Investors, the Osborn Investors, holders of
the Company's capital stock issued pursuant to the Stock Option
Agreement to any Permitted Transferee of any such Person who
becomes a party to or bound by the provisions of this Agreement
in accordance with the terms hereof."
(iii) Deleting the definition of "Transaction Documents in its
entirety and inserting the following in lieu thereof:
"Transaction Documents shall mean this Agreement, the
Securities Purchase Agreement, the PMI Note Purchase Agreement,
the Purchase and Sale Agreement, the Jaro Purchase Agreement,
the Osborn Purchase Agreement, the Franchise Agreement, the
Management Consulting Agreement, the MCIT Purchase Agreement,
the Revolving Credit and Term Loan Agreement, the Executive and
Advisors Subscription Agreement, the Jordan Investors
Subscription Agreement, the Management Subscription Agreement,
each of the agreements that are exhibits hereto and thereto,
and all agreements, instruments and documents contemplated
thereby."
(iv) Deleting the definition of "Warrants" in its entirety and
inserting the following in lieu thereof:
"Warrants shall mean (i) the Warrant, initially
exercisable to purchase 31.2801 shares of Class B Common Stock,
issued to The First National Bank of Boston or its designee
pursuant to the Revolving Credit and Term Loan Agreement,
substantially in the form of Exhibit F hereto, (ii) the
Warrant, initially exercisable to purchase 81.0799 shares of
Class B Common Stock, issued to FNBB Affiliate, substantially
in the form of Exhibit G hereto, and (iii) the Warrants,
initially exercisable to purchase 71.72 shares of Class C
Common Stock, issued to PMI pursuant to the PMI Note Purchase
Agreement, substantially in the form of Exhibit H hereto, as
such Warrants may from time to time be amended, modified or
supplemented in accordance with the terms hereof and thereof."
(v) Deleting the definition of "Registrable Securities" in its
entirety and inserting the following definitions in lieu thereof:
"Registrable Securities shall mean the following:
(a) all shares of Class A Common Stock outstanding on the date
hereof and now or hereafter owned of record by the Jordan Investors; and
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<PAGE>
(b) all shares of Class B Common Stock outstanding on the date
hereof, and all shares of Class A Common Stock issued or issuable upon
(x) the conversion or exchange of outstanding shares of Class B Common
Stock in accordance with the applicable provisions of the Certificate of
Incorporation or this Agreement, or (y) the conversion or exchange of the
Warrant Stock; provided, however, that no holder of shares of Class B
Common Stock shall have any registration rights hereunder with respect to
any shares of Class B Common Stock, but only with respect to shares of
Class A Common Stock into which such shares of Class B Common Stock shall
be so exchanged or converted in connection with an effective registration
and sale under the Securities Act of such shares of Class A Common Stock;
and, solely for purposes of Article VI of this Agreement, each holder of
shares of Class B Common Stock and each holder of Warrants to purchase
shares of Class B Common Stock which are to be converted into shares of
Class A Common Stock to be sold in connection with such a registration
shall be deemed to be the holder of the shares of Class A Common Stock
into which such shares of Class B Common Stock shall be convertible; and
(c) all shares of Class C Common Stock outstanding on the date
hereof and all shares of Class A Common Stock issued or issuable upon (x)
the conversion of outstanding shares of Class C Common Stock in
accordance with the applicable provisions of the Certificate of
Incorporation or this Agreement, or (y) the conversion or exchange of the
Warrant Stock; provided, however, that no holder of shares of Class C
Common Stock shall have any registration rights hereunder with respect to
any shares of Class C Common Stock, but only with respect to shares of
Class A Common Stock into which such shares of Class C Common Stock shall
be so exchanged or converted in connection with an effective registration
and sale under the Securities Act of such shares of Class A Common Stock;
and, solely for purposes of Article VI of this Agreement, each holder of
shares of Class C Common Stock which are to be converted into shares of
Class A Common Stock to be sold in connection with such a registration
shall be deemed to be the holder of the shares of Class A Common Stock
into which such shares of Class C Common Stock shall be convertible; and
(d) all shares of Class D Common Stock acquired by the Management
Investors, the Jaro Investors and the Osborn Investors, and all shares of
Class A Common Stock issued or issuable upon the conversion of
outstanding shares of Class D Common Stock in accordance with the
applicable provisions of the Certificate of Incorporation; provided,
however, that no holder of shares of Class D Common Stock shall have any
registration rights hereunder with respect to any shares of Class D
Common Stock, but only with respect to shares of Class A Common Stock
into which such shares of Class D Common Stock shall be so exchanged or
converted in connection with an effective registration and sale under the
Securities Act of such shares of Class A Common Stock; and, solely for
purposes of Article VI of this Agreement, each holder of shares of Class
D Common Stock which are to be converted into shares of Class A Common
Stock to be sold in connection with such a registration shall be deemed
to be the holder of the shares of Class A Common Stock into which such
shares of Class D Common Stock shall be convertible; and
-4-
<PAGE>
(e) any shares of capital stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing clause
(a), (b), (c) or (d) by way of a stock dividend or stock split or in
connection with a combination or subdivision of shares, reclassification,
recapitalization, merger, consolidation or other reorganization of the
Company.
As to any particular Registrable Securities that have been issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall
have been disposed of under such registration statement, (ii) they shall
have been distributed to the public pursuant to Rule 144, (iii) they
shall have been otherwise transferred or disposed of, and new
certificates therefor not bearing a legend restricting further transfer
shall have been delivered by the Company, and subsequent transfer or
disposition of them shall not require their registration or qualification
under the Securities Act or any similar state law then in force, or (iv)
they shall have ceased to be outstanding."
(b) Deleting from Section 2.1(a)(i) the phrase "not to exceed in the
aggregate an amount per year of the higher of (x) $300,000, or (y) .35%
of the Company's sales".
(c) Amending Section 2.1(a)(i)(2) by replacing "$50,000" with
"$75,000."
(d) Amending Section 4.1 by inserting an additional subclause to
read as follows:
"or (g) with regard to any pledge, hypothecation or charge by
MCIT."
(e) Amending Section 4.2(c) in its entirety to read as follows:
"(c) from The First National Bank of Boston, FNBB Affiliate, or
PMI to any of their respective affiliates, or the Jordan Investors
or, in the case of The First National Bank of Boston, FNBB Affiliate
or PMI, any Institutional Lender."
(f) Inserting "PMI" after "Bank of Boston" in Section 5.1(b)(iii).
(g) Deleting the Section 5.5(b) in its entirety and inserting the
following in lieu thereof:
"(b) "New Securities" shall mean any authorized but unissued shares,
and any treasury shares, of capital stock of the Company and all rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock;
provided, however, that the term "New Securities" does not include (i)
securities issued upon conversion of shares of Class B Common Stock,
Class C Common Stock or Class D Common Stock into Class A Common Stock,
in accordance with the Certificate of Incorporation and this Agreement;
(ii) securities issued pursuant to the acquisition of another corporation
by the Company by merger, purchase of all or
-5-
<PAGE>
substantially all of the assets or other reorganization whereby the
Company shall become the owner of more than 50% of the voting power of
such corporation; (iii) shares of Common Stock issued in connection with
any stock split or stock dividend of the Company; (iv) any borrowings,
direct or indirect, from financial institutions or other Persons by the
Company, whether or not presently authorized, including any type of loan
or payment evidenced by any type of debt instrument, and any capital
stock issued in connection with such borrowings (other than a borrowing
from a Jordan Party), including warrants, options or other rights to
purchase capital stock, provided that such borrowings are not convertible
into or exchangeable for capital stock of the Company; (v) shares of
Class A Common Stock issued pursuant to any Public Offering; (vi) shares
of Class A Common Stock issued in connection with an exchange for Class B
Common Stock in accordance with Section 8.1(b) of this Agreement; (vii)
Warrant Stock; (viii) shares of Preferred Stock issued and paid as
dividends on outstanding Preferred Stock or (ix) shares of capital stock
or rights, options or warrants to purchase capital stock to be issued to
employees of the Company or its Subsidiaries, provided, that no more than
two percent (2%) of the outstanding capital stock on February 7, 1995
shall be available for issuances after such date."
(h) Inserting "PMI" after "Bank of Boston" in Section 5.8
(i) Inserting "PMI" after "each Jaro Investor" in Section 5.9.
(j) Deleting Section 6.1 in its entirety and inserting the following
in lieu thereof:
"Section 6.1 Demand Registrations.
(a) At any time and from time to time after the earlier of the
fourth anniversary of the Closing Date or the effectuation of an
Initial Public Offering by the Company, holders of a majority of the
shares of Stock held by the Jordan Investors (other than MCIT) and
Bank of Boston may request in writing that the Company effect the
registration under the Securities Act of all or part of such
holders' Registrable Securities, specifying in the request the
number and type of Registrable Securities to be registered by each
such holder and the intended method of disposition thereof (such
notice is hereinafter referred to as a "Holder Request"). Upon
receipt of such Holder Request, the Company will promptly give
written notice of such requested registration to all other holders
of Registrable Securities, which other holders shall have the right
to include the Registrable Securities held by them in such
registration and thereupon the Company will, as expeditiously as
possible, use its best efforts to effect the registration under the
Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by such requesting Stockholders; and
-6-
<PAGE>
(ii) all other Registrable Securities which the Company
has been requested to register by any other holder thereof by
written request given to the Company within 30 calendar days
after the giving of such written notice by the Company (which
request shall specify the intended method of disposition of
such Registrable Securities), all to the extent necessary to
permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be
registered;
provided, however, that the Company shall not be obligated to file a
registration statement relating to any Holder Request under this Section
6.1(a):
(x) unless the Company shall have received requests for
such registration with respect to at least 15% of the shares of
Common Stock then outstanding (including all Warrant Stock)
with respect to the first Holder Request, and unless the
Company shall have received requests for such registration with
respect to 10% of the shares of Common Stock then outstanding
with respect to each Holder Request under this Section 6
thereafter;
(y) other than a registration statement on Form S-3 or a
similar short form registration statement, within a period of
12 months after the effective date of any other registration
statement relating to any registration request under this
Section 6.1(a) that was not effected on Form S-3 (or any
similar short form); or
(z) within a nine-month period immediately following the
effective date of a registration previously effected by the
Company pursuant to this Section 6.1;
provided, further, however, that the Company may postpone for not more
than 90 calendar days, on one occasion only with respect to each request
for registration made under this Section 6.1(a), the filing or
effectiveness of a registration statement under this Section 6.1(a) if
the Company and a majority of the Jordan Investors agree that such
registration might reasonably be expected to have an adverse effect on
any proposal or plan by the Company to engage in any acquisition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or similar transaction; provided, that in
such event, the holders of Registrable Securities initiating the request
for such registration will be entitled to withdraw such request, and if
such request is withdrawn such registration will not count as one of the
permitted registrations under this Section 6.1. In any event, the Company
will pay all Registration Expenses in connection with any registration
initiated under this Section 6.1.
(b) At any time and from time to time after September 1, 1999,
holders of a majority of the shares of Stock held by PMI as of the date
of Amendment No. 2 to this Agreement may request in writing that the
Company effect the registration under the
-7-
<PAGE>
Securities Act of all or part of such holders' Registrable Securities,
specifying in the request the number and type of Registrable Securities
to be registered by each such holder and the intended method of
disposition thereof (such notice is hereinafter referred to as a "PMI
Holder Request"). Upon receipt of such PMI Holder Request, the Company
will promptly give written notice of such requested registration to all
other holders of Registrable Securities, which other holders shall have
the right to include the Registrable Securities held by them in such
registration and thereupon the Company will, as expeditiously as
possible, use its best efforts to effect the registration under the
Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such requesting Stockholders; and
(ii) all other Registrable Securities which the Company has
been requested to register by any other holder thereof by written
request given to the Company within 30 calendar days after the
giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities), all to the extent necessary to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered;
provided, however, that the Company shall not be obligated to file a
registration statement relating to any PMI Holder Request under this
Section 6.1(b):
(x) other than a registration statement on Form S-3 or a
similar short form registration statement, within a period of 12
months after the effective date of any other registration statement
relating to any registration request under this Section 6.1(b) that
was not effected on Form S-3 (or any similar short form); or
(y) within a nine-month period immediately following the
effective date of a registration previously effected by the Company
pursuant to this Section 6.1;
provided, further, however, that the Company may postpone for not more
than 90 calendar days, on one occasion only with respect to each request
for registration made under this Section 6.1(b), the filing or
effectiveness of a registration statement under this Section 6.1(b) if
the Company believes that such registration might reasonably be expected
to have an adverse effect on any proposal or plan by the Company to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar
transaction; provided, that in such event, the holders of Registrable
Securities initiating the request for such registration will be entitled
to withdraw such request, and if such request is withdrawn such
registration will not count as one of the permitted registrations under
this Section 6.1. In any event, the Company will
-8-
<PAGE>
pay all Registration Expenses in connection with any registration
initiated under this Section 6.1.
(c) Notwithstanding the foregoing provisions of Section 6.1 (a) and
(b), (i) the Company shall not be obligated to effect more than one
registration pursuant to this Section 6.1 at the request of a majority of
the Jordan Investors, in any twelve month period, in each case through a
firm commitment underwriting through a nationally recognized underwriter
(an "Underwritten Offering") and (ii) the Company shall not be obligated
to effect more than two registrations pursuant to Section 6.1(b), in each
case, through an Underwritten Offering.
(d) If the Company proposes to effect a registration requested
pursuant to this Section 6.1 by the filing of a registration statement on
Form S-3 (or any similar short-form registration statement), the Company
will comply with any request by the Managing Underwriter (as defined in
Subsection (g), below) to effect such registration on another permitted
form if such Managing Underwriter advises the Company that, in its
opinion, the use of another form of registration statement is of material
importance of such proposed offering.
(e) A registration requested pursuant to Section 6.1.(a) or (b) will
not be deemed to have been effected unless it has become effective;
provided, that if after it has become effective, the offering of
Registrable Securities pursuant to such registration is interfered with
by any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court, such registration will
be deemed not to have been effected.
(f) The Company will pay all Registration Expenses in connection
with each of the registrations of Registrable Securities effected by it
pursuant to this Section 6.1.
(g) The Company shall have the right, with the approval of the
Jordan Investors or, in the case of a PMI Holder Request, PMI, to select
the investment banker (or investment bankers) that shall manage the
offering (collectively, the "Managing Underwriter").
(h) In connection with any offering pursuant to this Section 6.1,
the only shares that may be included in such offering are (i) Registrable
Securities, and (ii) shares of authorized but unissued Class A Common
Stock that the Company elects to include in such offering ("Company
Securities").
(i) If in connection with any Underwritten Offering pursuant to this
Section 6.1. the Managing Underwriter shall advise the Company that, in
its judgment, the number of shares proposed to be included in such
offering should be limited due to market
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<PAGE>
conditions, then the Company will promptly so advise each holder of
Registrable Securities that has requested registration, and shares shall
be excluded from such offering in the following order until such
limitation has been met:
(A) in the case of an offering requested under Section 6.1(a),
(1) Company Securities, if any, shall be excluded until all of
the Company Securities shall have been so excluded, and,
thereafter,
(2) until the Jordan Investors shall have included in such
offering the lesser of (i) 25% of the aggregate amount of
Securities held by the Jordan Investors as of February 7,
1996 (such amount as adjusted for stock splits,
recapitalizations and similar events and reduced by the
amount of Securities previously sold by the Jordan
Investors pursuant to Section 6.1 or 6.2 ) and (ii) the
total amount of Registrable Securities requested by the
Jordan Investors to be included in such offering, the
Registrable Securities requested to be included in such
offering pursuant to Section 6.1(a) by Persons shall be
excluded pro rata, based on the respective number of
Registrable Securities as to which registration has been
so requested by such Persons, and, thereafter
(3) the Registrable Securities requested to be included in
such offering pursuant to Section 6.1(a) by Persons other
than PMI or the Bank of Boston shall be excluded pro rata,
based on the respective number of Registrable Securities
as to which registration has been so requested by such
Persons, and
(B) in the case of an offering requested under Section 6.1(b),
(1) Company Securities, if any, shall be excluded until all of
the Company Securities shall have been so excluded, and,
thereafter,
(2) the Registrable Securities requested to be included by
Persons other than the Bank of Boston in such offering
pursuant to Section 6.1(b)(ii) shall be excluded pro rata,
based on the respective number of Registrable Securities
as to which registration has been so requested by such
Persons, and, thereafter,
(3) the Registrable Securities requested to be included in
such offering by PMI pursuant to Section 6.1(b)(i) or by
the Bank of Boston pursuant to Section 6.1(b)(ii) shall be
excluded pro rata, based on
-10-
<PAGE>
the respective number of Registrable Securities as to
which registration has been so requested by such Persons.
(j) If any shares of Class A Common Stock requested to be included
in a sale pursuant to this Section 6.1. shall not be outstanding but
shall be issuable upon conversion of shares of Class B Common Stock which
are outstanding, then the Bank of Boston and the Company shall take all
actions necessary in order to convert such shares of Class B Common Stock
into shares of Class A Common Stock in order to effect such sale. If any
shares of Class A Common Stock requested to be included in a sale
pursuant to this Section 6.1. shall not be outstanding but shall be
issuable upon conversion of shares of Class C Common Stock which are
outstanding, then the Jordan Investors, PMI and the Company shall take
all actions necessary in order to convert such shares of Class C Common
Stock into shares of Class A Common Stock in order to effect such sale.
If any shares of Class A Common Stock requested to be included in a sale
pursuant to this Section 6.1 shall not be outstanding but shall be
issuable upon conversion of shares of Class D Common Stock which are
outstanding, then the Management Investors and the Company shall take all
actions necessary in order to convert such shares of Class D Common Stock
into shares of Class A Common Stock in order to effect such sale."
(k) Inserting "or PMI, as the case may be," after "Bank of Boston"
in Section 6.2(a)(i).
(l) Inserting ", PMI and the Company" after "Jordan Investors" in
Section 6.2(f).
(m) Deleting Section 6.2(d) in its entirety and inserting the
following in lieu thereof:
"(d) If in connection with any Underwritten Offering pursuant to
this Section 6.2. the Managing Underwriter shall advise the Company that,
in its judgment, the number of shares proposed to be included in such
offering should be limited due to market conditions, then the Company
shall exclude shares from such offering in the following order until such
limitation has been met:
(1) until the Jordan Investors shall have included in such
offering the lesser of (i) 25% of the aggregate amount of
Securities held by the Jordan Investors as of February 7,
1996 (such amount as adjusted for stock splits,
recapitalizations and similar events and reduced by the
amount of Securities previously sold by the Jordan
Investors pursuant to Section 6.1 or 6.2 ) and (ii) the
total amount of Registrable Securities requested by the
Jordan Investors to be included in such offering, the
Registrable Securities requested to be included in such
offering shall be excluded pro rata, based
-11-
<PAGE>
on the respective number of Registrable Securities as to
which registration has been so requested by such Persons,
and, thereafter
(2) the Registrable Securities requested to be included in
such offering by Persons other than PMI or the Bank of
Boston shall be excluded pro rata, based on the respective
number of Registrable Securities as to which registration
has been so requested by such Persons."
(n) Inserting "or, in the case of a PMI Holder Request, PMI" after
"Jordan Investors" in Section 6.3(a)(ii).
(o) Replacing the reference to "Section 6.1(h)" with "Section
6.1(i)" in Section 6.3(f).
(p) Deleting Section 8.6(a)(i) in its entirety and inserting the
following in lieu thereof:
"(i) the holders of a majority of the shares of capital stock
held by the Jordan Investors,"
(q) Amending Section 8.6(a) by adding a new subclause (iv) at the
end of the first sentence thereof to read as follows:
"and (iv) to the extent such proposed amendment would
materially adversely affect the rights of PMI under this Agreement,
PMI."
SECTION 3. Waiver of First Refusal. Each of the parties hereto hereby waives
any right of first refusal it may have pursuant to Section 5.5 of the Original
Stockholders Agreement arising from the issuance and sale of the PMI
Subordinated Notes and Warrants pursuant to the PMI Note Purchase Agreement,
including, but not limited to, any prior notice or response periods specified
in the Original Stockholders Agreement.
SECTION 4. Waiver of Anti-Dilution Rights. Each of the parties hereto hereby
waives any right it may have to anti-dilution adjustment of its capital stock
arising from the issuance of the PMI Subordinated Notes and the Warrants
pursuant to the PMI Note Purchase Agreement.
SECTION 5. Effect of Amendment No. 2. The waivers and amendments granted
hereunder shall be limited precisely as written and shall not otherwise
constitute a waiver or modification of any other covenants, terms or
provisions of the Original Stockholders Agreement, which shall remain in full
force and effect. Without limiting the foregoing, this Amendment No. 2 shall
not prejudice any right or rights which the Stockholders may otherwise have
(now or in the future) under or in connection with the Original Stockholders
Agreement or otherwise.
-12-
<PAGE>
SECTION 6. Governing Law. This Amendment No. 2 shall be governed by, and
construed in accordance with, the laws of the State of Illinois (other than
any conflict of laws rule which might result in the application of the laws of
any other jurisdiction).
SECTION 7. Counterparts. This Amendment No. 2 may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument, and all signatures
need not appear on any one counterpart.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
NRE HOLDINGS, INC.
By:______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
MCIT PLC
By:______________________________
Name:
Title:
BANCBOSTON INVESTMENTS INC.
By:______________________________
Name:
Title:
PMI MEZZANINE FUND, L.P.
By: Pacific Mezzanine Investors, LLC,
its General Partner
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<PAGE>
By:______________________________
Name:
Title:
JORDAN INVESTORS:
JORDAN/ZALAZNICK CAPITAL COMPANY
By:______________________________
Name:
Title:
LEUCADIA INVESTORS, INC.
By:______________________________
Name:
Title:
JOHN W. JORDAN, II REVOCABLE TRUST
---------------------------------
Name: John W. Jordan, II
Title: Trustee
---------------------------------
David W. Zalaznick
---------------------------------
Jonathan F. Boucher
---------------------------------
John R. Lowden
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<PAGE>
---------------------------------
Adam E. Max
JOHN M. CAMP PROFIT SHARING PLAN
By:______________________________
Name: John M. Camp
Title: Trustee
---------------------------------
John M. Camp
---------------------------------
A. Richard Caputo, Jr.
JAMES E. JORDAN, JR. PROFIT SHARING PLAN AND
TRUST
By:______________________________
Name: James E. Jordan, Jr.
Title: Trustee
PAUL RODZEVIK PROFIT SHARING PLAN AND TRUST
By:______________________________
Name: Paul Rodzevik
Title: Trustee
MANAGEMENT STOCKHOLDERS:
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<PAGE>
---------------------------------
Lawrence Jaro
---------------------------------
William Osborn
---------------------------------
Gary Hubert
---------------------------------
Joel Aaseby
---------------------------------
Don Stahursky
---------------------------------
Scott Vasatka
JARO INVESTORS:
TABOR RESTAURANTS ASSOCIATES, INC.
By:______________________________
Name: Lawrence Jaro
Title: President
JARO ENTERPRISES, INC.
By:______________________________
Name: Lawrence Jaro
Title: President
JARO RESTAURANTS ASSOCIATES, INC.
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<PAGE>
By:______________________________
Name: Lawrence Jaro
Title: President
JB RESTAURANTS, INC.
By:______________________________
Name: Lawrence Jaro
Title: President
OSBORN INVESTORS:
OSBURGER, INC.
By:______________________________
Name: William Osborn
Title: President
CASTLEKING, INC.
By:______________________________
Name: William Osborn
Title: President
WHITE-OSBORN RESTAURANTS, INC.
By:______________________________
Name: William Osborn
Title: President
----------------------------
Thomas H. Quinn
-18-
NRE HOLDINGS, INC.
MANAGEMENT SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of September 1, 1994
(this "Agreement"), is made by and among NRE HOLDINGS, INC., a Delaware
corporation (the "Company"), whose address is c/o The Jordan Company, 9 West
57 Street, New York, New York 10019, and the persons and entities whose names
are set forth at the end of this Agreement (collectively the "Stockholders").
1. Stock Subscriptions.
(a) Each Stockholder herewith subscribes for the number of
shares set forth opposite Stockholder's name in Exhibit 1 hereto of (i) the
Company's Class D Common Stock, $0.01 par value per share (the "Class D Common
Stock"), which is convertible, under certain circumstances, into the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common Stock"),
(ii) the Company's Class A2 Preferred Stock, $0.01 par value per share ("Class
A2 Preferred Stock"), (iii) the Company's Class B Preferred Stock, $0.01 par
value per share ("Class B Preferred Stock"), (iv) the Company's 12.75% Notes
due 2004 (the "Notes"), and (v) stock options, substantially in the form of
Exhibit 2 hereto ("Options") to purchase shares of Class D Common Stock, all
as more specifically described in Exhibit 1. The purchase price for the Class
D Common Stock is $100 per share, the purchase price for the Preferred Stock
is $1,000 per share, and the purchase price for the Notes is the initial
principal amount thereof. The Options are being allocated to the persons
listed in Exhibit 1 without initial consideration. For purposes of this
Agreement, the Class D Common Stock (and the Class A Common Stock, if any,
issued upon conversion thereof), the Class A2 Preferred Stock, Class B
Preferred Stock, Notes, Options (and the Class D Common Stock issuable upon
exercise thereof, and the Class A Common Stock, if any, issued upon conversion
thereof), are collectively referred to as the "Securities". For purposes of
this Agreement and as specifically set forth on Exhibit 1, the Class D Common
Stock of certain Stockholders shall be allocated into two sets. Set 1
Securities shall consist of certain shares of Class D Common Stock ("Set 1
Securities"). Set 2 Securities shall consist of the Notes, Class A2 Preferred
Stock and remaining Class D Common Stock acquired by such Stockholders ("Set 2
Securities"), all as set forth in detail in Exhibit 1. Notwithstanding the
foregoing, the Company acknowledges and accepts that Lawrence Jaro, William
Osborn, Gary Hubert and Joel Aaseby shall purchase the Securities designated
Set 1 Securities opposite their names on Exhibit 1 for cash, in the amount set
forth on Exhibit 1. The Company also acknowledges
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<PAGE>
and accepts that the Stockholders acquiring Set 2 Securities shall receive the
Set 2 Securities in exchange for the assets acquired by the Company pursuant
to the Purchase and Sale Agreements, dated as of September 1, 1994, between
the Company and each of the Stockholders listed on Exhibit 1 that are
receiving Set 2 Securities. The Securities are denoted Set 1 Securities and
Set 2 Securities solely for purposes of this Section and the repurchase
provisions in Section 8. The Options are neither Set 1 Securities, nor Set 2
Securities, and the repurchase provisions of Section 8 shall not apply to the
Options.
(b) Each Stockholder acknowledges to the Company and
the other Stockholders that he understands and agrees, as
follows:
THE STOCK HAS NOT BEEN REGISTERED UNDER FEDERAL OR STATE
SECURITIES LAWS. THE STOCK IS VERY SPECULATIVE AND RISKY. THERE IS NO
PUBLIC OR OTHER MARKET FOR THE STOCK NOR IS ANY LIKELY TO DEVELOP.
THE COMPANY HAS NO PREVIOUS FINANCIAL HISTORY AND THE COMPANY AND ITS
SUBSIDIARY HAVE BORROWED SUBSTANTIALLY ALL OF THE FUNDS AVAILABLE TO
IT TO COMMENCE ITS BUSINESS. EACH STOCKHOLDER ACKNOWLEDGES THAT
STOCKHOLDER MAY AND CAN AFFORD TO LOSE STOCKHOLDER'S ENTIRE
INVESTMENT AND THAT STOCKHOLDER UNDERSTANDS STOCKHOLDER MAY HAVE TO
HOLD THIS INVESTMENT INDEFINITELY.
(c) Each certificate evidencing the Securities being issued
pursuant to this Agreement shall bear legends reflecting (i) this Agreement's
existence, (ii) the fact that the Securities have not been registered under
Federal or state securities laws and are subject to limitations on transfer
set forth herein and set forth in a Stockholder's Agreement, dated as of
September 1, 1994, among the Company and its Stockholders (the "Stockholders
Agreement") and (iii) the fact that the transfer of the Securities is subject
to the terms and conditions of the Franchise Agreements ("Franchise
Agreement") dated September 1, 1994, by and among the Company, National
Restaurant Enterprises, Inc. ("Subsidiary"), and Burger King Corporation, and
the rules, regulations and requirements of The Burger King Corporation,
including those described in the Burger King Corporation Uniform Offering
Circular (December 31, 1993) (collectively, the "Burger King Regulations").
Each Stockholder acknowledges that the effect of these legends, among other
things, is or may be to limit or destroy the value of the certificate for
purposes of sale or for use as loan collateral. Each Stockholder consents that
"stop transfer" instructions may be noted against the Securities sold to
Stockholder hereunder. Each Stockholder acknowledges that he is required to
become a party to the Stockholders Agreement as a condition to acquiring the
Securities hereunder.
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<PAGE>
2. Proposed Transaction.
(a) This Agreement summarizes certain pertinent documents as
well as applicable laws and regulations. While the Company believes that these
summaries fairly reflect and summarize such matters, each Stockholder
acknowledges that such summaries are not complete and are qualified by
reference to the complete texts thereof of the documents, laws and regulations
so summarized.
(b) Each Stockholder acknowledges that he has received and
has had ample opportunity to review and understand the current form of each of
the following documents:
A. The Certificate of Incorporation of the Company.
B. The Bylaws of the Company.
C. The Purchase and Sale Agreement (the "Purchase
Agreement"), dated September 1, 1994, between
Subsidiary, a wholly owned subsidiary of the Company
("Subsidiary"), the Company and The Burger King Corporation,
including all exhibits and schedules thereto.
D. The Burger King Uniform Franchise Offering Circular
(December 31, 1993) (the "UFOC"), including all
exhibits and schedules thereto.
E. The Revolving Credit and Term Loan Agreement (the
"Credit Agreement"), dated as of September 1, 1994,
among the Company, the Subsidiary, and The First
National Bank of Boston.
F. The Purchase Agreement, (the "MCIT Purchase Agreement")
dated September 1, 1994 between the Company and
Mezzanine Capital & Income Trust 2001 PLC, a United
Kingdom corporation ("MCIT").
G. Stockholders Agreement, dated as of September 1, 1994,
among the Company and the stockholders named therein,
including all exhibits and schedules thereto.
H. The Asset Purchase and Sale Agreements, dated as of
September 1, 1994 ("Asset Purchase Agreements"), among the
Company, the Subsidiary and certain corporations owned by
Lawrence Jaro and William Osborn, including all exhibits and
schedules thereto.
I. Financial projections, dated September 1, 1994,
prepared by management of the Company.
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<PAGE>
The documents referred to in A through I are
hereinafter collectively referred to as the "Operative
Documents".
The Company has afforded such Stockholder and such
Stockholder's advisors, if any, the opportunity to discuss an investment in
the Securities and to ask questions of representatives of the Company
concerning the terms and conditions of the offering of the Securities and the
Operative Documents, and such representatives have provided answers to all
such questions concerning the offering of the Securities and the Operative
Documents. Such Stockholder has consulted its own financial, tax, accounting
and legal advisors, if any, as to such Stockholder's investment in the
Securities and the consequences thereof and risks associated therewith and the
Operative Documents. Such Stockholder and such Stockholder's advisors, if any,
have examined or have had the opportunity to examine before the date hereof
the Operative Documents and all information that he, she or it deems to be
material to an understanding of the Company, the proposed business of the
Company, and the offering of the Securities. Such Stockholder also
acknowledges that to Stockholder's knowledge there have been no general or
public solicitations or advertisements or other broadly disseminated
disclosures (including, without limitation, any advertisement, article, notice
or other communication published in any newspaper, magazine or similar media
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or advertising) by or
on behalf of the Company regarding an investment in the Securities.
3. Stockholder Representations and Warranties.
(a) Each Stockholder that is not a corporation or a
partnership represents and warrants that said Stockholder: (i) (A) has
previously worked as an employee or franchisee of the Burger King Corporation,
and will be employed in a managerial or executive position with the Company
and is familiar with the Company's operations, financial condition and
business prospects, or (B) is a family member of a person described in clause
(A), and is relying upon such person in acquiring the Securities hereunder;
and (ii) has had an opportunity to select and consult with such attorneys,
business consultants and any other person(s) he has wished to confer with
since the time when the proposed transaction and Stockholder's participation
was first discussed with Stockholder. Each Stockholder, including those that
are corporations or partnerships, acknowledges that the Company has made
available to Stockholder prior to the signing of this Agreement and sale of
any Securities, the opportunity to ask questions of any person authorized to
act on behalf of the Company concerning any aspect of the investment and to
obtain any additional information, to the extent the Company possesses such
-4-
<PAGE>
information or can acquire it without unreasonable effort or expense,
necessary to verify the accuracy of the information.
(b) Each Stockholder agrees that he will not transfer any
Securities if such transfer would result in a default by the Company under the
provisions of the Operative Documents as finally agreed upon.
(c) Each Stockholder who is an officer or employee of the
Company agrees that he will complete, execute and file a Form 83(b) within
thirty (30) days of the execution of this Agreement and purchase of Common
Stock.
4. Risk Factors.
(a) Each Stockholder acknowledges to the Company and the
other Stockholders that he knows and understands that the Subsidiary is the
Company's only material asset, and that the Subsidiary borrowed a substantial
portion of the funds used to effect the purchase of assets of the Subsidiary.
It is unlikely that dividends will be paid on the Common Stock. It is expected
that dividends will accrue and not be paid currently, on the Preferred Stock.
There is no legal requirement or promise made by the Company to declare or pay
such dividends and such dividends may not in any event be paid if such payment
would violate any term of the Operative Documents. Certain of the Operative
Documents severely restrict the ability of the Company to make any dividend or
redemption payments in any case and such payment may be restricted by future
agreements or instruments binding on the Company. Each Stockholder
acknowledges to the Company and the other Stockholders that in relative
priority for payment of interest on the Notes, the Notes rank second to the
notes issued to MCIT under the MCIT Purchase Agreement. Furthermore, if a
Stockholder ceases to be an employee of the Company such Stockholder's
Securities may be subject to certain rights of the Company to repurchase such
Securities under this Agreement. Under the repurchase payment terms, such
Stockholders may not receive full cash payment in return for Stockholder's
Securities for several years. Also, dividend and redemption payments may be
made only from funds available for such use as provided by applicable law.
Each Stockholder acknowledges to the Company and the other Stockholders that
he knows and understands that an investment in the Securities of the Company
is a speculative investment which involves a high risk of loss and that on and
after the date hereof, there will be no public market for the Securities and
the Company does not contemplate that a public market will develop.
(b) Each Stockholder acknowledges to the Company and
the other Stockholders that he knows and, understands that the
control, ownership and transfers of the Subsidiary, and in
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<PAGE>
certain circumstances, the Securities, is restricted by Burger King
Regulations.
5. Securities Law Matters.
(a) Each Stockholder represents and warrants to the Company
and the other Stockholders that he used no "purchaser's representative" (as
that term is used in Regulation D as promulgated by the Securities and
Exchange Commission) in connection with this transaction. Each Stockholder
represents and warrants to the Company and the other Stockholders that neither
The Jordan Company ("Jordan") nor any of its employees or affiliates has acted
as a representative of said Stockholder in purchasing the Securities. Each
Stockholder represents that such Stockholder has substantial knowledge and
experience in financial, investment and business matters, and specifically in
the business of the Company, and has the requisite knowledge and experience to
evaluate the risks and merits of this investment. Each Stockholder represents
and warrants that the decision of such Stockholder to purchase the Securities
hereunder has been made by such Stockholder independent of any other
Stockholder and independent of any statements, disclosures or judgments as to
the properties, business, prospects or condition (financial or otherwise) of
the Company which may have been made or given by any Stockholder or other
person. Each Stockholder represents and warrants to the Company and the
Company's other stockholders that Stockholder can and will bear the economic
risks of Stockholder's investment in the Company and acknowledges that he is
able to hold the Company's unregistered Stock indefinitely and is able to
sustain a complete loss if the securities become worthless.
(b) Each Stockholder acknowledges to the Company and the
Company's other Stockholders that the Securities being purchased hereunder has
not been registered under the Securities Act of 1933, as amended, (the
"Securities Act") on the ground that the sales of Securities pursuant to this
Agreement are exempt under Section 4(2) of the Securities Act as not
constituting a distribution, and that the Company's reliance on such exemption
is predicated in part on each Stockholder's representation which Stockholder
herewith makes that the Securities have been acquired solely by and for the
account of such Stockholder for investment purposes only, and is not being
purchased for subdivision, fractionalization, resale or distribution. Such
Stockholder has no contract, undertaking, agreement or arrangement with any
other Stockholder to sell, transfer or pledge to such other Stockholder or
anyone else the Securities (or any part thereof) which such Stockholder has
purchased hereunder. Such Stockholder has no present plans or intentions to
enter into any such contract, undertaking, agreement or arrangement. The
Securities have not been registered or qualified for resale under applicable
securities
-6-
<PAGE>
laws, and may not be sold except pursuant to such registration or
qualification thereunder or an exemption therefrom. Such Stockholder has
adequate means of providing for Stockholder's current needs and possible
contingencies. Each Stockholder further acknowledges to the Company that the
Securities being sold to said Stockholder must be held indefinitely unless it
is subsequently registered under the Securities Act or a transfer is made
pursuant to an exemption from such registration, for example, pursuant to Rule
144. Each Stockholder further represents and warrants to the Company and the
Company's other stockholders that such Stockholder's financial condition is
such that Stockholder is not under any present necessity or constraint, and
does not foresee in the future any necessity or constraint, to dispose of
these shares to satisfy any existing or contemplated debt or undertaking.
(c) In the event that in the future the Company engages in
any negotiation or transaction (including a merger or consolidation or other
reorganization by or of the Company) in which Regulation D promulgated by the
SEC may or will be available to the Company, each of the Stockholders who is
not then a professional investor agrees irrevocably (and with the knowledge
and intention that the other holders of the Company's stock of all classes
will rely thereon in making their respective present investment decisions)
that Stockholder will, within 5 business days of notice from the Company,
which may be given in the sole discretion of the Company, appoint a
purchaser's representative or representatives who shall be qualified and
acceptable to the Company and any other person(s) who is (are) involved in the
proposed transaction so that the maximum benefits of Regulation D shall be
available to the Company and all of its Stockholders. Any Stockholder who does
not perform this covenant shall be liable to the Company and all of the
Company's other stockholders for any damage or loss that may or might be
incurred thereby.
6. Registration Rights. The Securities have not been registered under
Federal or state securities laws and, in consequence thereof, all of the
Securities must be held indefinitely unless (a) subsequently registered under
applicable Federal and state securities laws or (b) exemptions from such
registration are available at the time of a proposed sale or transfer thereof.
Except as set forth in the Stockholders Agreement, the Company has no
agreements in respect of a registration statement under either Federal or
state law.
7. Legend. All certificates representing shares of
Securities shall be endorsed as follows:
"THIS CERTIFICATE IS SUBJECT TO, AND IS
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS
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<PAGE>
OF A STOCKHOLDERS AGREEMENT, DATED September 1, 1994,
AMONG THE COMPANY AND ITS STOCKHOLDERS, SUBSCRIPTION
AGREEMENTS, DATED September 1, 1994, AMONG THE COMPANY AND
CERTAIN INVESTORS THEREIN AND THE TERMS AND CONDITIONS OF A
FRANCHISE AGREEMENT WITH BURGER KING CORPORATION. REFERENCE
IS MADE TO SUCH FRANCHISE AGREEMENT AND THE RESTRICTIVE
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE CORPORATION. A COPY OF THE ABOVE REFERENCED
AGREEMENTS ARE ON FILE AT THE OFFICE OF THE COMPANY AT THE
JORDAN COMPANY, 9 WEST 57TH STREET, NEW YORK, NEW YORK
10019.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION,
UNDER SAID ACT."
8. Repurchase Provisions.
(a) Company Termination. With respect to Stockholders
that are not corporations or partnerships, if the employment by
the Company of any Stockholder is terminated at any time by the
Company:
(i) upon the death of the Stockholder;
(ii) in the event that because of physical or
mental disability the Stockholder is unable to perform and
does not perform, in the view of the Company, and in the
certified view of a competent physician could not perform,
Stockholder's duties under Stockholder's employment
agreement for a continuous period of 180 days;
(iii) for Cause (as defined in Section 10); or
(iv) for any reason not referred to in clauses
(i) through (iii),
then, the Set 1 Securities, (x) owned directly by such Stockholder and by all
Stockholder's Permitted Transferees under the Stockholders Agreement or (y)
"owned indirectly" (as defined below) by a Stockholder through a corporate or
partnership entity, including such an entity that is a Stockholder, may be
repurchased by the Company at the "call" price for the Common Stock comprising
the Set 1 Securities, which shall be:
(i) if the termination is for Cause, for shares of
Common Stock that are Set 1 Securities, the call price shall
be Cost (as defined in Section 10), payable in cash within
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<PAGE>
six months of the call of such Common Stock. If the call option is not
exercised within six months of such termination, it will expire.
(ii) if the termination is for reasons described in clause
(i), (ii) and (iv) above, as described above or for shares of Common
Stock that are shares of Set 1 Securities, the call price shall be
Fair Market Value payable, at the option of the Company, in cash or
Three Year Junior Notes (as defined in Section 10) within six months
of such termination. If the call option is not exercised within six
months of such termination, it will expire.
(b) Stockholder Termination. With respect to
Stockholders that are not corporations or partnerships, if the
employment by the Company of any Stockholder is terminated by the
Stockholder at any time:
(i) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and in the certified view of a competent
physician, Stockholder's duties under Stockholder's employment
agreement for a continuous period of 180 days;
(ii) as a result of a material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior Executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under the Stockholder's
employment agreement, in each case, after 30 days prior written
notice to the Company and its Board of Directors and the Company's
failure thereafter to cure such reduction or violation; or
(iii) voluntarily or for any reason not referred to in
clauses (i) through (iii) or no reason,
then the Set 1 Securities (x) owned directly by such Stockholder and by all
Stockholder's Permitted Transferees under the Stockholders Agreement or (y)
"owned indirectly" (as defined below) by a Stockholder through a corporate or
partnership entity, including such an entity that is a Stockholder, may be
repurchased by the Company, at the "call" price for the Common Stock
comprising the Set 1 Securities which shall be:
(x) if the termination is for reasons described in clauses
(i) or (ii) above for shares of Common Stock that are shares of Set 1
Securities, the call price shall be Fair Market Value, payable, at the
option of the Company, in cash
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<PAGE>
or Three Year Junior Notes within six months of termination. If the
call option is not exercised within six months of such termination, it
will expire.
(y) if the termination is for reasons described in clause
(iii) above for shares of Common Stock that are shares of Set 1
Securities:
(a) if the termination is before the first
anniversary of this Agreement, the call
price shall be Cost payable in cash within
six months of the call of such Common
Stock; or
(b) if the termination is after the first
anniversary of this Agreement, the call
price shall be Fair Market Value payable,
at the option of the Company, in cash or
Three Year Junior Notes.
(c) For the purposes of Section 8 Securities "owned
indirectly" shall mean Securities owned by a corporation or partnership
("Ownership Entity") in which the Stockholder has an ownership interest,
provided that the Stockholder will be deemed to have indirect ownership of the
Securities owned by the Ownership Entity in proportion to the Stockholder's
percentage interest in the Ownership Entity as set forth in the footnotes to
Exhibit 1.
(d) The Set 2 Securities will not be subject to the call and
repurchase options of the Company set forth in this Section 8. The Company, at
its sole option, may purchase any or all of the Set 1 Securities the Company
has the right to repurchase under this Section 8.
(e) This Section 8 shall terminate upon the earlier of (a)
the third anniversary of the date hereof or (b) an initial public offering of
any shares of Stock.
(f) Restrictions on Payments by Company. Notwithstanding
anything to the contrary contained in this Agreement, all repurchases pursuant
to this Section 8, including payments by the Company on the Three Year Junior
Notes, shall be subject to (i) applicable restrictions contained in any
applicable law, (ii) restrictions contained in the Company's and its
subsidiaries' debt and equity financing agreements, and (iii) the availability
of cash to make any lump sum cash payments. If any such restrictions or
unavailability prohibit the repurchase of stock hereunder which the Company is
otherwise entitled or required to make, the Company may make such repurchases
as soon as it is permitted to do so under such restrictions.
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<PAGE>
9. Non-Competition/Non-Disclosure Provisions.
(a) Non-Competition. In consideration of this Agreement,
each Stockholder who is not a party to an Employment and Non-Competition
Agreement with the Company covenants and agrees that during the period he is
not an officer, director, or employed by the Company, and he or members of
Stockholder's "immediate family" own any Common Stock of the Company, and for
one year thereafter (the "Restricted Period"), each Stockholder shall not
without the express written approval of the Board of Directors of the Company:
(i) directly or indirectly, in one or a series of
transactions, own, manage, operate, control, invest or acquire an
interest in, or otherwise engage or participate in, whether as a
proprietor, partner, stockholder, lender, director, officer,
employee, joint venturer, investor, lessor, supplier, agent,
representative or other participant, in any business which competes,
directly or indirectly, with the Business in the Market ("Competitive
Business") without regard to (A) whether the Competitive Business has
its office, manufacturing or other business facilities within or
without the Market, (B) whether any of the activities of the
Stockholder referred to above occur or are performed within or
without the Market or (C) whether the Stockholder resides, or reports
to an office, within or without the Market; provided, however, that
(x) the Stockholder may, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, invest or
acquire an interest in up to five percent (5%) of the capital stock
of a corporation whose capital stock is traded publicly, or that (y)
Stockholder may accept employment with a successor company to the
Company.
(ii) (A) directly or indirectly, in one or a series of
transactions, recruit, solicit or otherwise induce or influence any
proprietor, partner, stockholder, lender, director, officer,
employee, sales agent, joint venturer, investor, lessor, supplier,
agent, representative or any other person which has a business
relationship with the Company or had a business relationship with the
Company within the twenty-four (24) month period preceding the date
of the incident in question, to discontinue, reduce or modify such
employment, agency or business relationship with the Company, or (B)
employ or seek to employ or cause any Competitive Business to employ
or seek to employ any person or agent who is then (or was at any time
within six (6) months prior to the date the Stockholder or the
Competitive Business employs or seeks to employ such person) employed
or retained by the Company. Notwithstanding the foregoing, nothing
herein shall prevent the Stockholder from providing
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<PAGE>
a letter of recommendation to an employee with respect to a future
employment opportunity.
(b) Non-Disclosure. Each Stockholder who is not a party to
an Employment and Non-Competition Agreement with the Company further agrees
that he will not, directly or indirectly in or more series of transactions
disclose to any person or use or otherwise exploit for the Stockholder's own
benefit or for the benefit of anyone other than the Company any Confidential
Information (as defined below) whether prepared by the Stockholder or not
provided, however, that any Confidential Information may be disclosed to
officers, representatives, employees and agents of the Company who need to
know such Confidential Information in order to perform the services or conduct
the operations required or expected of them in the Business. The Stockholder
shall use Stockholder's best efforts to cause all persons or entities to whom
Confidential Information shall be disclosed by Stockholder hereunder to
observe the terms and conditions set forth herein as though each such person
or entity was bound hereby. The Stockholder shall have no obligation hereunder
to keep confidential any Confidential Information if and to the extent
disclosure of any thereof is specifically required by law; provided, however,
that in the event disclosure is required by applicable law, the Stockholder
shall provide the Company with prompt notice of such requirement, prior to
making any disclosure, so that the Company may seek an appropriate protective
order. At the request of the Company, the Stockholder agrees to deliver to the
Company all Confidential Information which he may possess or control. As used
herein, the term "Confidential Information" means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, "know-how",
trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulae, improvements or other proprietary or intellectual property of the
Company, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that
becomes generally available to the public other than as a result of a
disclosure by the Stockholder not permissible hereunder.
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<PAGE>
(c) Specific Performance. All the parties hereto agree that
their rights under this Section 9 are special and unique and that violation
thereof would not be adequately compensated by money damages and each grants
the others the right to specifically enforce (including injunctive relief
where appropriate) the terms of this Agreement.
(d) Employment Agreement. If any Stockholder is party
to an Employment and Noncompetition Agreement with a Company as
of the date of this Agreement, this Section 9 will not be
applicable to such Stockholder.
10. Definitions.
(a) "Cause" shall mean any of the following:
(i) Stockholder's conviction of a serious felony or a crime
involving embezzlement, conversion of property or moral turpitude;
(ii) a final, non-appealable finding of Stockholder's fraud,
embezzlement or conversion of property; (iii) a final non-appealable
finding of Stockholder's breach of any of Stockholder's fiduciary
duties to the Company or its stockholders or making of a willful
misrepresentation or omission which breach, misrepresentation or
omission might reasonably be expected to materially adversely affect
the business, properties, assets, condition (financial or other) or
prospects of the Company, provided, that, the Stockholder has been
given notice and 30 days from such notice fails to cure the breach,
misrepresentation or omission; (iv) Stockholder's willful and
continual neglect or failure to discharge Stockholder's duties,
responsibilities or obligations prescribed by this Agreement or any
other agreement between the Stockholder and the Company, provided,
that, the Stockholder has been given notice and 30 days from such
notice fails to cure the neglect or failure; (v) Stockholder's
habitual drunkenness or substance abuse, which materially interferes
with Stockholder's ability to discharge Stockholder's duties,
responsibilities and obligations prescribed by this Agreement,
provided that Stockholder has been given notice and 30 days from such
notice fails to cure such drunkenness or abuse; (vi) Stockholder's
material and knowing violation of any obligations imposed upon
Stockholder, personally, as opposed to upon the Company, whether as a
stockholder or otherwise, under this Agreement, the Purchase and Sale
Agreement, dated September 1, 1994, by and among the Company, the
Parent and Burger King Corporation, the Franchise Agreement, dated
September 1, 1994, by and among the Company, Parent and Burger King
Corporation, the Stockholders Agreement, dated as of September 1,
1994, by and among the Company and the stockholders named therein,
the Certificate of Incorporation
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<PAGE>
or By-Laws of the Company, provided, that the Stockholder has been
given notice and 90 days from such notice fails to cure the violation;
or (vii) Stockholder's personal (as opposed to the Company's) material
and knowing failure, to observe or comply with Burger King
Regulations whether as an officer, stockholder or otherwise, in any
material respect or in any manner which might reasonably have a
material adverse effect in respect of the Company's ongoing business,
operations, conditions, franchises, other business relationships or
properties; provided, that the Stockholder has been given notice and
90 days from such notice fails to cure the failure.
(b) "Fair Market Value" shall mean, for any Determination
Period, an amount equal to (i) 5.0 multiplied by EBITDA for the Determination
Period less (ii) the aggregate amount of indebtedness or capitalized leases of
the Company (including, without limitation, the Credit Agreement and the
Subordinated Notes (as defined in the MCIT Purchase Agreement) as of the end
of the Determination Period (including, without limitation, interest accrued
but unpaid as of the end of the Determination Period) less (iii) the aggregate
amount of preferred stock of the Company as of the end of the Determination
Period including accrued dividends; provided, however, that Fair Market Value
shall in no event be less than Cost.
(c) "Cost" shall mean for Common Stock, $100 per
share.
(d) "Face Value" shall mean the purchase price paid for such
stock or note by Stockholder, plus any accrued and unpaid dividends or
interest payments thereon.
(e) "Three Year Junior Notes" shall mean a promissory note
of the Company in the form attached hereto as Exhibit 2.
(f) "Disability" shall mean, as to any Stockholder, the
inability of such Stockholder to substantially perform Stockholder's duties
and responsibilities to the Company by reason of a physical or mental
disability or infirmity (a) for a continuous period of six months or (b) at
such earlier time as such Stockholder submits satisfactory medical evidence
that he has a physical or mental disability or infirmity which will likely
prevent Stockholder from returning to the performance of Stockholder's work
duties for six months or longer. The date of such Disability shall be on the
last day of such six-month period or the day on which such Stockholder submits
such satisfactory medical evidence, as the case may be. Determination of
Disability shall be made by the Board of Directors, whose decision will be
final, binding and non-appealable.
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<PAGE>
(g) "Business" shall mean (a) the construction, development,
operations, ownership and promotion of Burger King restaurants or (b) any
similar or incidental business conducted by, or engaged in, or proposed to be
conducted by or engaged in, by the Company prior to the date hereof or at any
time while the Stockholder is a Stockholder.
(h) "Market" means any county in the United States of
America and each similar jurisdiction in any other country in which the
Business was conducted by or engaged in by the Company prior to the date
hereof or is conducted or engaged in, or for which a restaurant site is in
development or preparation, by the Company at any time during the Term of
Employment.
(i) "Sale", "sell", "transfer" and the like shall include
any disposition by way of transfer, with or without consideration, to any
person for any purpose and shall include, but shall not be limited in any way
to, redemption by the issuer, private or public sale or exchanges of
securities or any other similar transaction involving stock.
(j) "EBITDA" shall mean for any period, the consolidated net
income (or net deficit) of the Company (after eliminating all extraordinary or
non-recurring items of income or loss), as reflected in the Company's
financial statements for such period, plus (A) interest and other expense in
respect of indebtedness for borrowed money and similar expense in respect of
capitalized leases, charged, accrued or otherwise allocated against such net
income, plus (B) expenses for income taxes (whether paid, accrued or deferred)
charged or otherwise allocated against such net income, plus (C) depreciation
and amortization of any assets or other non-cash charges (including, without
limitation, any depreciation, amortization and other non-cash charges relating
to purchase accounting adjustments, and any amortization or write-off or
intangible assets, transaction costs or goodwill) charged, allocated or
otherwise accrued against such net income, plus, without duplication, (D)
transaction costs and expenses incurred in connection with the acquisition by
the Company and Subsidiary of the assets from Burger King Corporation under
the Purchase Agreement, and related financing and transactions (including,
without limitation, sponsorship, advisory, consulting, merchant banking,
commitment, placement, financing and refinancing fees) charged, accrued or
otherwise allocated against such net income, plus, without duplication, (E)
non-cash expenses attributable to the issuance of stock, options or warrants
by the Company to any of its directors, officers, employees, dealers or others
or the exercise thereof, charged, accrued or allocated against such net
income, plus (F) expenses attributable to investment banking and consulting
fees payable to TJC Management Corporation and/or its affiliates,
pursuant to the Management Consulting Agreement, dated September
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<PAGE>
1, 1994, between the Company and TJC Management Corporation, charged, accrued or
otherwise allocated against such net income, in each case, excluding any such
interest, depreciation, amortization, costs and expenses previously taken into
account in determining EBITDA during a period preceding such period, all as
determined in accordance with generally accepted accounting principles,
consistently applied. All restaurant leases whether capitalized leases or
operating leases for tax purposes, shall be accounted for as operating leases
for the purposes of this Agreement and this definition.
(k) "Determination Period" shall mean the four full fiscal
quarters of the Company immediately preceding the "call" exercised pursuant to
Section 8 for which Fair Market Value shall be used to determine the "call"
price.
(l) "Retirement" shall mean the retirement by Stockholder
from employment with the Company after the Stockholder has reached the age of
65.
11. Miscellaneous.
(a) Subject to the conditions of transfer of Securities
hereunder and in the Stockholders Agreement, this Agreement shall be binding
upon and shall inure to the benefit of each individual Stockholder and
Stockholder's respective heirs, executors, administrators, assigns and legal
representatives and to the Company and its respective successors and assigns,
by way of merger, consolidation or operation of law or otherwise. Once a
Stockholder of the Company is no longer a Stockholder of the Company all
rights and benefits previously enjoyed by such party pursuant to the terms of
this Agreement shall automatically terminate with respect to such party.
(b) Prior to consummation of any transfer of Securities held
by a Stockholder permitted under the Stockholders Agreement, except for
transfers pursuant to a public offering, such party shall cause the transferee
to execute an agreement in which the transferee agrees to be bound by the
terms of this Agreement and the Stockholders Agreement.
(c) Each Stockholder acknowledges that the Company may
purchase, at its sole expense, a life insurance policy, the proceeds of which
will be used to purchase Stockholder's or her Stock in the event of
Stockholder's or her death and each Stockholder hereby agrees to cooperate
with the Company in obtaining such insurance.
(d) Nothing in this Agreement shall constitute an
agreement by, or shall impose any obligation upon, the Company to
employ, or to continue to employ, any Stockholder or shall
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<PAGE>
constitute an agreement by, or shall impose any obligation upon, the Company
with respect to the terms and conditions of employment of any Stockholder, and
will not limit or restrict, in any manner, the Company's right or ability to
terminate any Stockholder.
(e) The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and
no rule of strict construction will be applied against any person.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE
PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT
BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY
TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE
ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH
PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS
AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF
THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN
THIS SECTION 11(G) SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
(g) ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS
AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS
AMENDED, OR FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED
EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS
OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON
THE PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9
U.S.C. SECTIONS 1 ET SEQ. ANY
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FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF RECORD.
(h) Each of the Stockholders agrees and acknowledges that
the Operative Documents and any other agreement or instrument that may
restrict the ability of the Company to make any dividend or redemption
payments may be created, amended, modified or supplemented, from time to time,
and may be refinanced, extended or substituted, from time to time, without
notice to, or the consent or approval of, the Stockholders.
(i) All personal pronouns used in this Agreement, whether
used in masculine, feminine or neuter gender, shall include all other genders
if the context so requires; the singular shall include the plural, and vice
versa.
(j) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(k) In case any one or more of the provisions or parts of a
provision contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement or any other jurisdiction,
but this Agreement shall be reformed and construed in any such jurisdiction as
if such invalid or illegal or unenforceable provision or part of a provision
had never been contained herein and such provision or part shall be reformed
so that it would be valid, legal and enforceable to the maximum extent
permitted in such jurisdiction.
(l) This Agreement constitutes the entire agreement by and
among the parties with respect to the subject matter hereof and may not be
modified orally, but only by a writing subscribed by the party charged
therewith.
(m) Each of the parties hereto agrees to execute all such
further instruments and documents and to take all such further action
necessary to effectuate the terms and purposes of this Agreement.
(n) Whenever notice is required to be given by any party
hereunder, such notice shall be deemed sufficient when delivered to the
Company at its address above and to each of the other Stockholders at
Stockholder's address below or to such other address as the Stockholder shall
have furnished.
(o) Each party shall be entitled to rely conclusively
upon any notice received, or the failure to receive any notice,
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<PAGE>
from any other party with respect to rights and obligations under this
Agreement.
12. Receipt of Stock Certificates.
Each Stockholder herewith acknowledges receipt of the
certificate(s) evidencing the Securities purchased by Stockholder.
13. Burger King Rider.
Neither Burger King Corporation ("BKC") nor any of its
subsidiaries, affiliates, officers, directors, agents, employees, accountants
or attorneys are in any way participating in, approving or endorsing this
offering of securities, any of the underwriting or accounting procedures used
in the offering, or any representations made in connection with the offering.
The grant by BKC of any franchise or other rights to the offeror is not
intended as, and should not be interpreted as, an express or implied approval,
endorsement or adoption of any statement regarding actual or projected
financial or other performance which may be contained in the offeror's
offering materials. All financial and other projections have been prepared by,
and are the sole responsibility of, the offeror.
Any review by Burger King Corporation of the offering materials or the
information included therein has been conducted solely for the benefit of BKC
determine conformance with BKC's internal policies, and not to benefit or
protect any other person. No investor should interpret such review by BKC as
an approval, endorsement, acceptance or adoption of any representation,
warranty, covenant or projection contained in the materials reviewed.
The enforcement or waiver of any obligation of the offeror under any agreement
between the offeror and BKC or BKC's affiliates is a matter of BKC's or BKC's
affiliates' sole discretion. No investor should rely on any representation,
assumption or belief that BKC or BKC's affiliates will enforce or waive
particular obligations of the offeror under such agreements.
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed this
Agreement:
NRE HOLDINGS, INC.
By_______________________________
Name::
Title:
STOCKHOLDERS:
Tabor Restaurants Associates,
Inc.
By_______________________________
Name:
Title:
Jaro Enterprises, Inc.
By_______________________________
Name:
Title:
Jaro Restaurants, Inc.
By_______________________________
Name:
Title:
JB Restaurants, Inc.
By_______________________________
Name:
Title:
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Castleking, Inc.
By_______________________________
Name:
Title:
White-Osborn Restaurants, Inc.
By_______________________________
Name:
Title:
Osburger, Inc.
By_______________________________
Name:
Title:
---------------------------------
Lawrence Jaro
---------------------------------
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William Osborn
---------------------------------
Gary Hubert
---------------------------------
Joel Aaseby
---------------------------------
Donald Stahurski
--------------------------------
Scott Vasatka
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No. of Shares No. of Shares
of Class D of Class A2
Name Common Stock Preferred Stock
- ---- ------------ -----------------
Set 1 Set 2 Set 1 Set 2
Securities Securities Securities Securities
Tabor Restaurants
Associates, Inc.(1) - 8.1313 - 87.00
Jaro Restaurants
Associates, Inc.(2) - 17.1284 - 187.50
Jaro Enterprises, Inc.(3) - 44.3669 - 90.00
JB Restaurants, Inc.(4) - 123.7634 - 550.50
Castleking, Inc.(5) - 26.8763 - 187.50
White-Osborn Restaurants,
Inc.(6) - 33.3637 - 97.50
Lawrence Jaro 33.71 - - -
William Osborn 33.71 - - -
Gary Hubert 33.71 - - -
Joel Aaseby 11.24 - - -
Total 112.37 253.6300 0 1200
Subordinated
Notes
No. of Shares of Class B (All Restaurant
Name Preferred Stock Securities)
- ---- --------------------------------- -------------
Set 1 Set 2
Securities Securities
Tabor Restaurants
Associates, Inc.(1) - 29.00 -
Jaro Restaurants
Associates, Inc.(2) - 62.50 $ 112,000
Jaro Enterprises, Inc.(3) - 30.00 $1,224,000
JB Restaurants, Inc.(4) - 183.50 $2,019,000
Castleking, Inc.(5) - 62.50 $ 385,769
White-Osborn Restaurants,
Inc.(6) - 32.50 $ 659,231
Lawrence Jaro - - -
William Osborn - - -
Gary Hubert - - -
Joel Aaseby - - -
Total 0 400 $4,400,000
Value
of
Name Consideration
- ---- -------------
Tabor Restaurants
Associates, Inc.(1) $ 116,813.13
Jaro Restaurants $ 363,712.84
Associates, Inc.(2)
Jaro Enterprises, Inc.(3) $1,348,436.69
JB Restaurants, Inc.(4) $2,765,376.34
Castleking, Inc.(5) $ 638,456.63
White-Osborn Restaurants,
Inc.(6) $ 792,567.37
Lawrence Jaro $ 3,371.00
William Osborn $ 3,371.00
Gary Hubert $ 3,371.00
Joel Aaseby $ 1,124.00
-------------
Total $6,036,600.00
OPTIONS
Options
Don Stahursky Options to purchase 5.62 shares of Class D Common Stock
Scott Vasatka Options to purchase 5.62 shares of Class D Common Stock
The Company is authorized to issue 2,000 shares of Class A Common
Stock, 100 shares of Class B Common Stock, 700 shares of Class C Common Stock,
700 shares of Class D Common Stock, 5,000 shares of Class A1 Preferred Stock,
2,500 shares of Class A2 Preferred Stock, 3,000 shares of Class B Preferred
Stock and one share of Special Voting Preferred Stock.
1. Lawrence Jaro owns 100% of the common stock of Tabor Restaurants
Associates, Inc. All of the Set 2 Securities received by Tabor
Restaurants Associates, Inc. will be subject to the repurchase provisions
of Section 8.
2. Lawrence Jaro owns 100% of the common stock of Jaro Restaurants
Associates, Inc. All of the Set 2 Securities received by Jaro Restaurants
Associates, Inc. will be subject to the repurchase provisions of Section 8.
3. Lawrence Jaro owns 100% of the common stock of Jaro Enterprises, Inc. All
of the Set 2 Securities received by Jaro Enterprises, Inc. shall be
subject to the repurchase provisions of Section 8.
4. Lawrence Jaro owns 75% of the common stock of JB Restaurants, Inc.
Seventh-five percent (75%) of the Set 2 Securities received by JB
Restaurants, Inc. shall be subject to the repurchase provisions of
Section 8.
5. William Osborn owns 75% of the common stock of Castleking, Inc.
Seventy-five percent (75%) of the Set 2 Securities received Castleking,
Inc. will be subject to the repurchase provisions of Section 8.
6. William Osborn owns 65% of the common stock of White-Osborn Restaurants,
Inc. Sixty-five percent (65%) of the Set 2 Securities received
White-Osborn, Inc. will be subject to the repurchase provisions of
Section 8.
NRE HOLDINGS, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of September 1, 1994 by and
between Scott Vasatka (the "Grantee") and NRE Holdings, Inc (the "Company"),
WITNESSETH THAT:
WHEREAS, the Grantee has and expects to perform valuable
services for the Company; and
WHEREAS, the Company desires to provide the Grantee with an
opportunity to share in the growth of the Company;
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
and other good and valuable consideration, IT IS HEREBY AGREED by and between
the Grantee and the Company as follows:
A. Award of Options. The Company hereby awards to the Grantee an option
(the "Option") to purchase a total of 5.62 shares of Class D Common Stock, par
value $.01 per share, of the Company (the "Common Stock"). The price at which
a share of Common Stock may be purchased pursuant to the exercise of the
Option (the "Option Price") shall be $100 per share.
B. Exercise of Options. The Option may be exercised by the
Grantee in respect of the "vested" part of the Option and shares
of Common Stock in accordance with the following:
1. The Grantee may not elect to exercise any portion
of the Option after the earlier of:
(i) 180 days after the Grantee's Separation Date (as
defined below); provided, however that in the
event the Separation Date occurs as a result of
the Grantee's death, the Grantee's estate or
decedents, as the case may be, may elect to
exercise that portion of the Grantee's option
which was vested at the Separation Date within
180 days of the Separation Date; or
(ii) December 31, 2004.
2. The Grantee may exercise the Option in whole or in
part by filing a written notice with the Secretary of
the Company (the "Secretary") at the Company's
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<PAGE>
corporate headquarters prior to the date as of which the
exercise is to occur. Such notice shall specify the date as
of which the exercise is to occur and the number of shares
of Common Stock which the Grantee elects to purchase and
shall be in such form and shall contain such other
information as the Secretary may reasonably require. Payment
of the Option Price (and the amount of any required taxes)
shall be made by cash or check.
3. Vesting. Subject to the terms of this Agreement, 50% of this
Option and the shares of Common Stock issuable upon exercise of this
Option shall vest on September 1, 1995 and the remaining 50% shall
vest on September 1, 1996. This Option may only be exercised as to
the vested portion of this Option.
C. Forfeitures. Other than set forth in the proviso to
Section B(1)(i), the Grantee shall immediately forfeit any
unvested Options on his Separation Date. For purposes of this
Agreement, the Grantee's "Separation Date" is the date on which
the Grantee's employment with the Company terminates for any
reason or no reason, irrespective of the circumstances thereof.
D. Repurchase of Common Stock. This Option and any Common Stock issued
upon exercise thereof will be subject to the Stockholders Agreement, dated as
of September 1, 1994, by and among the Company and the parties listed on the
signature pages thereto. At any time following the Grantee's Separation Date,
the Company, by written election filed with the Grantee or, in the event of
his death, his estate, may require the Grantee or his estate or heirs to sell
and transfer to the Company all shares of Common Stock acquired by the Grantee
prior to the Separation Date pursuant to his exercise of the Option and held
by the Grantee, at the greater of (a) the Fair Market Value (as defined in the
Company's Management Subscription Agreement, dated September 1, 1994, among
the Company and certain investors therein ("Subscription Agreement") of the
Common Stock as of the date the election is delivered to the Grantee (or his
estate or heirs), or (b) the Option Price, adjusted, if applicable. Such
repurchase may be paid with cash and/or Three Year Junior Notes, consistent
with this Agreement and Section 8 of the Management Subscription Agreement, as
if a repurchase pursuant to such Section 8.
E. Not Incentive Stock Option. The Option is not intended,
and will not be treated, as an incentive stock option (as that
term is used in section 422A of the Internal Revenue Code of
1986, as amended).
-2-
<PAGE>
F. Compliance with Applicable Law. The Company shall issue any shares of
Common Stock under this Agreement in compliance with all applicable laws and
the applicable requirements of any securities exchange or similar entity.
Prior to the issuance of any shares of Common Stock under this Agreement, the
Company may require a written statement that the recipient is acquiring the
shares for investment purposes only and not for the purpose or with the
intention of distributing the shares.
G. Nontransferability of Award. The Option is personal and rights granted
hereunder shall not be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process and the Option shall be
exercisable, during the lifetime of the Grantee, only by the Grantee. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the
Option or of such rights contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon the Option or such rights, the
Option and such rights shall, at the election of the Company, become null and
void. Any transfer of shares of Common Stock issued upon exercise of the
Option shall be subject to the restrictions contained in the Management
Subscription Agreement and the Company's Stockholders Agreement, dated
September 1, 1994, among the Company and its stockholders (the "Stockholders
Agreement").
H. Investment Representations. The Company may require
the Grantee, as a condition of exercising the Option, (i) to give
written assurance in form and substance satisfactory to the
Company to the effect that the Grantee is acquiring the shares
subject to the Option for his or her own account, for investment
and not with any present intention of selling or otherwise
distributing the same and (ii) to execute or join the
Stockholders Agreement.
I. Changes in Common Shares. The aggregate number of shares for which
stock options may be granted or exercised, the maximum number of Shares which
at any time may be subject to but not delivered under outstanding stock
options granted to any option holder and the number of Shares subject to each
outstanding option, stock option prices per share which may be granted to or
exercised by any option holder, shall be subject to appropriate adjustment by
the Board, in its sole discretion, for any changes in the number of
outstanding Shares resulting from recapitalization, stock splits, stock
dividends, changes in the Preferred Stock of the Company or other change in
the corporate structure of the Company.
J. Successors. This Agreement shall be binding upon and
shall inure to the benefit of any assignee or successor in the
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<PAGE>
interest of the Company, and shall be binding upon and inure to the benefit of
any estate, legal representative, beneficiary or heir of the Grantee.
K. No Rights as Shareholder. This Agreement does not
confer on the Grantee any rights as a shareholder of the Company
prior to the date on which he fulfills all conditions for receipt
of the shares of Common Stock.
L. Agreement Not Contract of Employment. This Agreement
does not constitute a contract of employment, and does not give
the Grantee the right to be employed by the Company.
M. Applicable Law. The provisions of this Agreement shall
be construed in accordance with the laws of the state of
Delaware.
N. Amendment. This Agreement may be amended at any time by
the mutual written agreement of the Company and the Grantee
without the consent of any other person and no person, other than
the parties hereto, shall have any rights under or interest in
this Agreement or the subject matter hereof.
O. LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED,
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY
BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED
AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY
OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES
SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.
EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND
SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE
OF FORUM SET FORTH IN THIS SECTION O SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
P. ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES
TO THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT,
ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY
COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE
SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
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<PAGE>
ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE
RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR
STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO,
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. SECTIONS
1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD.
1. Counterparts. This Agreement may be executed in
counterparts.
-5-
<PAGE>
IN WITNESS WHEREOF, the Grantee has hereunto set his hand and the Company
has caused these presents to be executed in its name and on its behalf, and
its corporate seal to be hereunto affixed and attested by its Secretary, all
as of the 1st day of September, 1994.
NRE HOLDINGS, INC.
By:______________________
Name:____________________
Title:___________________
Grantee:
-------------------------
Scott Vasatka
-6-
NRE HOLDINGS, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of September 1, 1994 by and
between Donald Stahursky (the "Grantee") and NRE Holdings, Inc (the
"Company"),
WITNESSETH THAT:
WHEREAS, the Grantee has and expects to perform valuable
services for the Company; and
WHEREAS, the Company desires to provide the Grantee with an
opportunity to share in the growth of the Company;
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
and other good and valuable consideration, IT IS HEREBY AGREED by and between
the Grantee and the Company as follows:
A. Award of Options. The Company hereby awards to the Grantee an option
(the "Option") to purchase a total of __________ shares of Class D Common
Stock, par value $.01 per share, of the Company (the "Common Stock"). The
price at which a share of Common Stock may be purchased pursuant to the
exercise of the Option (the "Option Price") shall be $100 per share.
B. Exercise of Options. The Option may be exercised by the
Grantee in respect of the "vested" part of the Option and shares
of Common Stock in accordance with the following:
1. The Grantee may not elect to exercise any portion of the
Option after the earlier of:
(i) 90 days after the Grantee's Separation Date (as
defined below); or
(ii) December 31, 2004.
2. The Grantee may exercise the Option in whole or in part by
filing a written notice with the Secretary of the Company (the
"Secretary") at the Company's corporate headquarters prior to
the date as of which the exercise is to occur. Such notice
shall specify the date as of which the exercise is to occur and
the number of shares of Common Stock which the Grantee elects
to purchase and shall be in such form and shall
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<PAGE>
contain such other information as the Secretary may reasonably
require. Payment of the Option Price (and the amount of any
required taxes) shall be made by cash or check.
3. Vesting. Subject to the terms of this Agreement, 50% of this
Option and the shares of Common Stock issuable upon exercise of
this Option shall vest on September 1, 1995 and the remaining
50% shall vest on September 1, 1996. This Option may only be
exercised as to the vested portion of this Option.
C. Forfeitures. Notwithstanding any other provision of this Agreement,
the Grantee shall immediately forfeit any unexercised portion of the Option on
his Separation Date. For purposes of this Agreement, the Grantee's "Separation
Date" is the date on which the Grantee's employment with the Company
terminates for any reason or no reason, irrespective of the circumstances
thereof. Upon the Separation Date, any unvested Options will automatically
terminate and expire.
D. Repurchase of Common Stock. This Option and any Common Stock issued
upon exercise thereof will be subject to the Stockholders Agreement, dated as
of September 1, 1994, by and among the Company and the parties listed on the
signature pages thereto. At any time following the Grantee's Separation Date,
the Company, by written election filed with the Grantee or, in the event of
his death, his estate, may require the Grantee or his estate or heirs to sell
and transfer to the Company all shares of Common Stock acquired by the Grantee
prior to the Separation Date pursuant to his exercise of the Option and held
by the Grantee, at the greater of (a) the Fair Market Value (as defined in the
Company's Management Subscription Agreement, dated September 1, 1994, among
the Company and certain investors therein ("Subscription Agreement") of the
Common Stock as of the date the election is delivered to the Grantee (or his
estate or heirs), or (b) the Option Price, adjusted, if applicable. Such
repurchase may be paid with cash and/or Three Year Junior Notes, consistent
with this Agreement and Section 8 of the Management Subscription Agreement, as
if a repurchase pursuant to such Section 8.
E. Not Incentive Stock Option. The Option is not intended,and will not be
treated, as an incentive stock option (as that term is used in section 422A of
the Internal Revenue Code of 1986, as amended).
F. Compliance with Applicable Law. The Company shall issue any shares of
Common Stock under this Agreement in compliance with all applicable laws and
the applicable requirements of any securities exchange or similar entity.
Prior to the issuance of
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<PAGE>
any shares of Common Stock under this Agreement, the Company may require a
written statement that the recipient is acquiring the shares for investment
purposes only and not for the purpose or with the intention of distributing
the shares.
G. Nontransferability of Award. The Option is personal and rights granted
hereunder shall not be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process and the Option shall be
exercisable, during the lifetime of the Grantee, only by the Grantee. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the
Option or of such rights contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon the Option or such rights, the
Option and such rights shall, at the election of the Company, become null and
void. Any transfer of shares of Common Stock issued upon exercise of the
Option shall be subject to the restrictions contained in the Management
Subscription Agreement and the Company's Stockholders Agreement, dated
September 1, 1994, among the Company and its stockholders (the "Stockholders
Agreement").
H. Investment Representations. The Company may require the
Grantee, as a condition of exercising the Option, (i) to give written
assurance in form and substance satisfactory to the Company to the effect that
the Grantee is acquiring the shares subject to the Option for his or her own
account, for investment and not with any present intention of selling or
otherwise distributing the same and (ii) to execute or join the Stockholders
Agreement.
I. Changes in Common Shares. The aggregate number of shares for which
stock options may be granted or exercised, the maximum number of Shares
which at any time may be subject to but not delivered under outstanding
stock options granted to any option holder and the number of Shares
subject to each outstanding option, stock option prices per share which
may be granted to or exercised by any option holder, shall be subject to
appropriate adjustment by the Board, in its sole discretion, for any
changes in the number of outstanding Shares resulting from
recapitalization, stock splits, stock dividends, changes in the Preferred
Stock of the Company or other change in the corporate structure of the
Company.
J. Successors. This Agreement shall be binding upon and shall inure to
the benefit of any assignee or successor in the interest of the Company, and
shall be binding upon and inure to the benefit of any estate, legal
representative, beneficiary or heir of the Grantee.
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<PAGE>
K. No Rights as Shareholder. This Agreement does not
confer on the Grantee any rights as a shareholder of the Company prior to the
date on which he fulfills all conditions for receipt of the shares of Common
Stock.
L. Agreement Not Contract of Employment. This Agreement
does not constitute a contract of employment, and does not give
the Grantee the right to be employed by the Company.
M. Applicable Law. The provisions of this Agreement shall
be construed in accordance with the laws of the state of
Delaware.
N. Amendment. This Agreement may be amended at any time by
the mutual written agreement of the Company and the Grantee
without the consent of any other person and, subject to the
provisions of Section 11, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject matter hereof.
O. LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED,
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY
BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED
AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY
OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES
SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN
CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.
EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND
COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND
SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE
PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE
OF FORUM SET FORTH IN THIS SECTION 11(G) SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
P. ARBITRATION. ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS
AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION
ANY CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR
BOTH, THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR
FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO,
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<PAGE>
AND RESOLVED EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH
ARBITRATION SHALL TAKE PLACE IN CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE
SUBSTANTIVE LAW OF THE STATE OF ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND
CONCLUSIONS OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND
BINDING ON THE PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE
PURSUANT TO 9 U.S.C. SECTIONS 1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS
A JUDGMENT OF A COURT OF RECORD.
1. Counterparts. This Agreement may be executed in
counterparts.
-5-
<PAGE>
IN WITNESS WHEREOF, the Grantee has hereunto set his hand and the Company
has caused these presents to be executed in its name and on its behalf, and
its corporate seal to be hereunto affixed and attested by its Secretary, all
as of the 1st day of September, 1994.
NRE HOLDINGS, INC.
By:______________________
Name:____________________
Title:___________________
-------------------------
Grantee:
Donald Stahursky
-6-
WARRANT AGREEMENT
made as of September 1, 1994
by and between
NRE HOLDINGS, INC.,
and
THE FIRST NATIONAL BANK OF BOSTON
Bingham, Dana & Gould
Boston, Massachusetts 02110
<PAGE>
-1-
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement") is made as of September 1, 1994
by and between NRE HOLDINGS, INC., a Delaware corporation (the "Company") and
THE FIRST NATIONAL BANK OF BOSTON ("FNBB").
1. DEFINITIONS.
For all purposes of this Agreement the following terms shall have the
meanings set forth herein or elsewhere in the provisions hereof:
Affiliated Equity Holders. FNBB and its Permitted Transferees for so
long as any of them hold Warrant Stock.
Bank Affiliate. See Section 9.
Bank Holding Company Act. See Section 9.
Base Rate. The rate of interest announced by FNBB from time to time
at its head office in Boston, Massachusetts as its "base rate".
BB Holders. FNBB and any of their Permitted Transferees for so long
as any of them are Benefitted Holders.
Benefitted Holders. The Affiliated Equity Holders and the Original
Warrant Holders.
Capitalization Documents. Capitalization Documents shall have the
meaning given to such term in the Loan Agreement.
Class A Common Stock. The Company's Class A Common Stock, $.01 par
value per share.
Class B Common Stock. The Company's Class B Common Stock, $.01 par
value per share.
Class C Common Stock. The Company's Class C Common Stock, $.01 par
value per share.
Class D Common Stock. The Company's Class D Common Stock, $.01 par
value per share.
Closing. See Section 2.2.
Closing Date. See Section 2.2.
<PAGE>
-2-
Commission. The Securities and Exchange Commission.
Common Stock. Collectively, the Class A Common Stock, the Class B
Common Stock, the Class C Common Stock and the Class D Common Stock,
having the rights and privileges set forth in the Company's Certificate of
Incorporation.
Company. See preamble.
Consolidated or consolidated. With reference to any term defined
herein, that term as applied to the accounts of the Company and all of its
Subsidiaries, if any, consolidated in accordance with generally accepted
accounting principles.
Exchange Act. The Securities Exchange Act of 1934, or any successor
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at any time.
FNBB. The First National Bank of Boston, a national banking
association.
generally accepted accounting principles. In general, accounting
principles which are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors,
in effect from time to time, and (ii) such that a certified public
accountant would, insofar as the use of accounting principles is
pertinent, be in a position to deliver an unqualified opinion as to
financial statements in which such principles have been properly applied.
Holder. Holder shall mean FNBB or any Permitted Transferee to whom
FNBB transfers any Securities.
Indebtedness. Indebtedness of any Person shall mean (without
duplication): (i) all obligations of such Person for borrowed money and
for the deferred purchase price of property or services, and obligations
evidenced by bonds, debentures, notes or other similar instruments; (ii)
all rental obligations of such Person under leases required to be
capitalized under generally accepted accounting principles; (iii) all
guarantees (direct or indirect), all contingent reimbursement obligations
under undrawn letters of credit and other contingent obligations of such
Person in respect of, or obligations to purchase or otherwise acquire or
to assure payment of, indebtedness of others including Bankers'
Acceptances; and (iv) Indebtedness of others secured by any lien upon
property owned by such Person, whether or not assumed.
Jordan Investors. As defined in the Stockholders Agreement.
Loan Agreement. Loan Agreement shall mean the Revolving Credit and
Term Loan Agreement of even date herewith among The First National Bank of
Boston as Agent, FNBB and the other Banks who are or may become party to
such agreement, the Company and National Restaurant Enterprises, Inc..
Loan Documents. Loan Documents shall have the meaning given to such
term in the Loan Agreement.
<PAGE>
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Major Holder. The holder or holders at the relevant time (excluding
the Company) of at least 10% of the number of shares of Warrant Stock then
issuable upon exercise of the outstanding Warrants and the then
outstanding shares of Warrant Stock.
Majority Holders. The holder or holders at the relevant time
(excluding the Company) of 51% or more of the aggregate number of (a)
shares of Warrant Stock then issuable upon exercise of the outstanding
Warrants and (b) the then outstanding shares of Warrant Stock.
Original Warrant Holder. FNBB and any of its Permitted Transferees
for so long as any of them hold Securities.
Permitted Transferee. With respect to any Benefitted Holder, another
Person controlled by, controlling or under common control with such
Benefitted Holder, or any other transferree as to which the Company has
given its written consent.
Person. An individual, partnership, corporation, association, trust,
joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
Preemptive Notice. See Section 4.
Purchasing Party. See Section 4.
Rights to Purchase. See Section 4.
Securities. The Warrants and the shares of Warrant Stock.
Securities Act. The Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Stockholders Agreement. The Stockholders Agreement dated as of
September 1, 1994 by and among the Company, National Restaurant
Enterprises, Inc., FNBB and the Stockholders (as defined therein).
Subsidiary. Any Person of which the Company or other specified Person
now or hereafter shall at the time own directly or indirectly through a
Subsidiary at least a majority of the outstanding capital stock (or other
shares of beneficial interest) entitled to vote generally.
Warrant. The Common Stock Purchase Warrant of the Company issued to
FNBB pursuant to Section 2.1 hereof and any other Warrants issued upon the
transfer or exchange thereof.
Warrant Stock. Common Stock which is issuable upon exercise of the
Warrants in accordance with their terms and any capital stock or other
securities into which or for which such
<PAGE>
-4-
Common Stock shall have been converted or exchanged pursuant to any
recapitalization, reorganization or merger of the Company.
2. ISSUANCE OF WARRANTS.
2.1. ISSUANCE OF WARRANTS. For valuable consideration, including the
execution and delivery by FNBB of the Loan Agreement and the making by the
Banks of the loans contemplated thereunder to the Company's subsidiary,
National Restaurant Enterprises, Inc., the receipt and sufficiency of which is
hereby acknowledged, the Company agrees to issue to FNBB, a Common Stock
Purchase Warrant for the purchase of 31.2801 shares (subject to adjustment as
provided therein) of the Company's Common Stock, in the form of Exhibit A
hereto.
2.2. CLOSING. The closing of the issuance the Warrants (the "Closing")
will take place at the offices of Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603-3441 on September 1, 1994 or such other date as
the parties hereto may agree upon (the "Closing Date"). At the Closing, the
Company will deliver to FNBB its Warrant.
3. REPRESENTATIONS AND WARRANTIES.
In order to induce FNBB to enter into this Agreement the Company hereby
represents and warrants that:
3.1. REPRESENTATIONS AND WARRANTIES IN LOAN AGREEMENT. The representations
and warranties made by the Company in the Loan Agreement were true and correct
in all material respects when made and are true and correct in all material
respects on and as of the date of this Agreement.
3.2. RESERVATION, ETC. Sufficient shares of authorized but unissued Class
B Common Stock of the Company have been reserved by appropriate corporate
action in connection with the prospective exercise of the Warrants, and the
conversion of shares of Class B Common Stock into shares of the Class A Common
Stock as provided in the Certificate of Incorporation of the Company. Neither
the issuance of the Warrants or the shares of Warrant Stock or conversion of
shares of Common Stock of one class into shares of the other class will require
any further corporate action by the stockholders or directors of the Company,
will be subject to pre-emptive rights in any present or future stockholders of
the Company or will conflict with any provision of any agreement to which the
Company is a party or by which it is bound, and such Common Stock, when issued
upon exercise of the Warrants in accordance with their terms or upon such
conversion, will be duly authorized, fully paid and non-assessable.
3.3. DISCLOSURE. No representation, warranty or statement made in this
Agreement contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
4. DELIVERY OF FINANCIAL INFORMATION. The Company shall deliver to the
Holder of the Warrants all financial information that the Company and NRE are
required to deliver to the Banks pursuant to Section 9.4 of the Credit
Agreement, in the time and manner provided therein, and, for the purposes of
this Section 4, the provisions of Section 9.4 of the Credit Agreement shall
survive the termination of the Credit Agreement.
<PAGE>
-5-
5. SUBSEQUENT HOLDERS OF SECURITIES. The provisions of this Agreement and
the Loan Documents that are stated to be for the Benefitted Holders' benefit as
the holder of any Securities are also for the benefit of, and enforceable by,
all subsequent holders of Securities, except any holder of Securities which
have been sold pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144 (or similar successor rule) under such
Act, and except as otherwise expressly provided herein provided that, nothing
contained in this Section 5 shall be interpreted to grant any Holder, other
than the Benefitted Holders, the rights contained in Section 4 of this
Agreement.
6. REGISTRATION RIGHTS; ISSUANCE OF CAPITAL STOCK; PREEMPTIVE RIGHTS.
(a) Registration. The Holder of the Warrant has the right to cause the
Company to register shares of Warrant Stock, and any shares issued upon
exercise of the Warrant under the Securities Act and any blue sky or securities
laws of any jurisdiction within the United States at the time and in the manner
specified in Article VI of the Stockholders Agreement.
(b) Issuance of Capital Stock. Any sale or issuance of shares of capital
stock of the Company, or other securities containing any rights to acquire
shares of capital stock of the Company shall be in accordance with Articles IV
and V of the Stockholders Agreement.
7. RIGHT OF CO-SALE. The rights and restrictions of the Jordan Investors
to sell or agree to sell all or any portion of his or its Common Stock to any
Person which is not another member of the Jordan Investors shall as specified
in Article 5.7 of the Stockholders Agreement.
8. REGISTRATION AND TRANSFER OF SECURITIES.
8.1. EXCHANGE OF WARRANTS. On surrender for exchange of the Warrants,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new warrant or warrants of
like tenor, in the name of such holder or, upon payment by such holder of any
applicable transfer taxes, as such holder may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called
for on the face or faces of the Warrants so surrendered. Such new Warrant shall
be exercisable for Class A Common Stock or Class B Common Stock as the holder
may direct, except that no Warrant may be registered in the name of a Person to
the extent that such Person would not be permitted under Section 9 hereof to
own or receive upon exercise or conversion shares of the class of Common Stock
receivable upon exercise of such Warrant.
8.2. TRANSFER AND EXCHANGE OF COMMON STOCK. The Company shall keep at its
principal office or at the office of its registration and transfer agent a
register in which shall be entered the names and addresses of the holders of
the Common Stock and the particulars (including without limitation the class
thereof) of the respective Common Stock held by them and of all transfers of
shares of Common Stock or conversions of shares of Common Stock from Class B
Common Stock to Class A Common Stock. Upon surrender at such office of any
certificate representing shares of Common Stock for registration of exchange or
(subject to compliance with the applicable provisions of this Agreement)
transfer or, in the case of Common Stock, conversion, the Company shall issue,
at its expense, one or more new certificates, in such denomination or
denominations as may be requested, for shares of such class or series of Common
Stock and registered as such holder may request. Any certificate representing
shares of
<PAGE>
-6-
Common Stock surrendered for registration of transfer shall be duly endorsed,
or accompanied by a written instrument of transfer duly executed by the holder
of such certificate or his attorney duly authorized in writing. The Company
will pay shipping charges, from and to each holder's principal office, upon any
transfer, exchange or conversion provided for in this Section 8.2.
8.3. REPLACEMENT OF SECURITIES. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Security and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Security held by a Benefitted Holder, of an
unsecured indemnity agreement from such Benefitted Holder reasonably
satisfactory to the Company), or, in the case of any such mutilation, upon the
surrender of such Security for cancellation to the Company at its principal
office, the Company, at its own expense, will execute and deliver, in lieu
thereof, a new Security of like tenor. Any Security in lieu of which any such
new Security has been so executed and delivered by the Company shall not be
deemed to be outstanding for any purpose of this Agreement.
8.4. TRANSFER TAXES. The Company will not bear the cost nor pay for any
stock transfer taxes imposed in respect of the transfer of any Securities
contemplated by this Section 8 and such taxes shall be borne by the transferor.
9. LIMITATIONS ON CONVERSION. No Person which is a bank holding company or
a subsidiary of a bank holding company (a "Bank Affiliate") as defined in the
Bank Holding Company Act of 1956, as amended, or other applicable banking laws
of the United States and the rules and regulations promulgated thereunder (the
"Bank Holding Company Act") shall exercise its rights as a holder of Class B
Common Stock to convert shares of Class B Common Stock into shares of Class A
Common Stock, or acquire Class A Common Stock by exercise of a Warrant or
otherwise, if, after giving effect to such exercise, the Bank Affiliate would
own more than 5% of the outstanding voting securities of the Company, or, if
such exercise or conversion would otherwise violate the Bank Holding Company
Act. Notwithstanding the foregoing, to the extent not inconsistent with the
Bank Holding Company Act, such conversion rights may be exercised or shares of
Class A Common Stock may otherwise be acquired in the event that:
(a) the Company shall vote to merge or consolidate with or into any
other Person and after giving effect to such merger or consolidation the
Bank Affiliate would not own more than 5% of the outstanding voting
securities of the surviving corporation;
(b) said holder desires to sell shares of Class A Common Stock into
which all or part of its shares of Class B Common Stock are to be
converted in connection with any proposed purchase of Class A Common Stock
by another Person (other than a Bank Affiliate); or
(c) said holder exercises registration rights pursuant to this
Agreement and the registration statement resulting therefrom relating to
such exercise.
10. NOTICES.
Any notice or other communication in connection with this Agreement or the
Securities shall be deemed to be delivered if in writing (or in the form of a
telex or telecopy) addressed as provided below and if either (a) actually
delivered, telexed or telecopied to said address or (b) in the case of a
letter, three business days shall have elapsed after the same shall have been
deposited in the United States mails,
<PAGE>
-7-
postage prepaid and registered or certified:
If to the Company, at NRE Holdings, Inc., ArborLake Centre, Suite
550, 1751 Lake Cook Road, Deerfield, Illinois 60015, to the attention of
the President or at such other address as such person shall have specified
by notice actually received by the addressor.
If to FNBB, at The First National Bank of Boston, 100 Federal Street,
Boston, Massachusetts 02110, Attn: Gordon L. Nelson, Jr., Director or at
such other address as FNBB shall have specified by notice actually
received by the addressor.
If to any other Holder of any Security, to it at its address set
forth in the applicable register referred to in Section 8 hereof.
11. SURVIVAL AND TERMINATION OF COVENANTS. All covenants, agreements,
representations and warranties made to the Benefitted Holders herein shall be
deemed to have been relied on by the Benefitted Holders, notwithstanding any
investigation made by any of the Benefitted Holders or on the Benefitted
Holders' behalf, and shall survive the execution and delivery to the Benefitted
Holders of this Agreement and the Securities.
12. AMENDMENTS AND WAIVERS. Any term of this Agreement or of the Warrants
may be amended and the observance of any term of this Agreement or of the
Warrants may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company
and the Majority Holders of the Warrants and the Warrant Stock taken as a
whole; provided, however, that without the written consent of the Majority
Holders reduce the aforesaid percentage of Securities the Holders of which are
required to consent to any such amendment or waiver or amend either the
definition of "Majority Holders" or this Section 12. Any amendment or waiver
effected in accordance with this Section 12 shall be binding upon each Holder
of any Security sold pursuant to this Agreement and the Company. Any Holder may
agree with the Company to amend or waive any provision of the Warrant held by
such Holder.
<PAGE>
-8-
13. MISCELLANEOUS. This Agreement, the Capitalization Documents and the
other Loan Documents set forth the entire understanding of the parties hereto
with respect to the transactions contemplated hereby and supersede any prior
written or oral understandings with respect thereto. The invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of any other term or provision hereof. The headings in this
Agreement are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof. This Agreement is intended to take effect
as a sealed instrument and may be executed in any number of counterparts which
together shall constitute one instrument and shall be governed by and construed
and enforced in accordance with the domestic substantive laws of the
Commonwealth of Massachusetts without giving effect to any choice or conflict
of law provision or rule that would cause the application of the domestic
substantive laws of any other state, and shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns.
NRE HOLDINGS, INC.
By:___________________________________
Title:________________________________
THE FIRST NATIONAL BANK
OF BOSTON
By:___________________________________
Title:________________________________
<PAGE>
-9-
Accepted and Agreed for purposes of Section 7 hereof.
JORDAN/ZALAZNICK CAPITAL COMPANY
By:_____________________________________
Title:__________________________________
MEZZANINE CAPITAL & INCOME TRUST 2001 PLC
By:_____________________________________
Title:__________________________________
-1-
FIRST AMENDMENT TO COMMON STOCK PURCHASE WARRANT
FIRST AMENDMENT TO COMMON STOCK PURCHASE WARRANT, dated as of November 30,
1994 (the "Amendment"), between NRE HOLDINGS, INC., a Delaware corporation
("Holdings") and THE FIRST NATIONAL BANK OF BOSTON, a national banking
association ("FNBB").
WHEREAS, Holdings, National Restaurant Enterprises, Inc. (the "Borrower"),
FNBB and certain other lending institutions (the "Banks") and The First
National Bank of Boston, as agent for the Banks (the "Agent") entered into a
Revolving Credit and Term Loan Agreement dated as of September 1, 1994 (the
"Original Credit Agreement") pursuant to which the Banks financed, among other
things, the acquisition of certain Burger King restaurants, and pursuant to
which Holdings, in order to induce FNBB to participate in such financing,
issued a Common Stock Purchase Warrant to FNBB (the "Warrant"); and
WHEREAS, Holdings, the Borrower, the Banks and the Agent have agreed to
amend and restate the Original Credit Agreement pursuant to an Amended and
Restated Revolving Credit and Term Loan Agreement dated as of the date hereof
(as further amended and in effect from time to time, the "Credit Agreement")
pursuant to which the Banks will finance, among other things, the acquisition
of additional Burger King restaurants on the terms and conditions contained
therein and pursuant to which Holdings, in order to induce FNBB to participate
in such additional financing, has agreed to amend the Warrant; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement that Holdings and FNBB enter into this Amendment amending the terms
of the Warrant;
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. AMENDMENT TO WARRANT. Section 2.4 of the Warrant is hereby amended by
deleting the date "August 31, 2002" from the first sentence thereof and
inserting in place thereof the date "November 30, 2002".
2. REPRESENTATIONS AND WARRANTIES. Holdings represents and warrants that
all the representations and warranties as set forth in the Warrant are true
and correct in all material respects on and as of the date hereof. All such
representations and warranties are hereby ratified, affirmed and incorporated
herein by reference, with the same force and effect as though set forth herein
in their entirety.
3. DEFINITIONS. Each capitalized term used herein without specific
definition shall have the same meaning herein as in the Warrant.
<PAGE>
-2-
4. NO WAIVER. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any obligation or any of the rights of Holdings or
FNBB.
5. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT
REFERENCE TO CONFLICT OF LAWS).
7. EFFECTIVENESS OF AMENDMENT. This Amendment shall become effective as of
the date hereof upon receipt by FNBB of counterparts of this Amendment duly
executed by each of Holdings and FNBB.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Common Stock Purchase Warrant to be executed by their duly authorized officers
as a document under seal as of the date first set forth above.
NRE HOLDINGS, INC.
By:_________________________________
Title:______________________________
THE FIRST NATIONAL BANK OF
BOSTON
By:_________________________________
Title:______________________________
Exhibit 4.11
1
SECOND AMENDMENT TO COMMON STOCK PURCHASE WARRANTS
SECOND AMENDMENT TO COMMON STOCK PURCHASE WARRANTS, dated as of February
7, 1996 (the "Amendment"), between NRE HOLDINGS, INC., a Delaware corporation
("Holdings") and BANCBOSTON INVESTMENTS, INC., a Massachusetts corporation
("BBI").
WHEREAS, Holdings, National Restaurant Enterprises, Inc. (the
"Borrower"), The First National Bank of Boston ("FNBB") and certain other
lending institutions (the "Banks) and The First National Bank of Boston, as
agent for the Banks (the "Agent") entered into a Revolving Credit and
Term Loan Agreement dated as of September 1, 1994 (the "Original Credit
Agreement") pursuant to which the Banks financed, among other things, the
acquisition of certain Burger King restaurants, and pursuant to which Holdings,
in order to induce FNBB to participate in such financing, issued a Common Stock
Purchase Warrant to FNBB (the "First Warrant"), which First Warrant was
subsequently assigned to BBI; and
WHEREAS, Holdings, the Borrower, the Banks and the Agent agreed to amend
and restate the Original Credit Agreement pursuant to an Amended and Restated
Revolving Credit and Term Loan Agreement dated as of November 30, 1994 (as
further amended and in effect from time to time, the "Second Credit Agreement")
pursuant to which the Banks financed, among other things, the acquisition of
additional Burger King restaurants and pursuant to which Holdings, in order to
induce FNBB to participate in such additional financing, agreed to amend the
First Warrant pursuant to the First Amendment to Common Stock Purchase Warrant
dated as of November 30, 1994 (the "First Amendment"), and agreed to issued
another Common Stock Purchase Warrant to BBI (the "Second Warrant, and,
collectively with the First Warrant, the "Warrants"); and
WHEREAS, Holdings, the Borrower, the Banks and the Agent have agreed to
amend and restate the Second Credit Agreement pursuant to a Second Amended and
Restated Revolving Credit and Term Loan Agreement dated as of the date hereof
(as further amended and in effect from time to time, the "Credit Agreement")
pursuant to which the Banks will finance, among other things, the acquisition of
additional Burger King restaurants and pursuant to which Holdings, in order to
induce FNBB to participate in such additional financing, has agreed to amend the
Warrants; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement that Holdings and BBI enter into this Amendment amending the terms of
Warrants;
2
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. Amendments to Warrants. The first paragraphs of each of the Warrants
is hereby amended by deleting the amount "$.01" from the first sentence thereof
and inserting in place thereof the amount "$1.00".
2. Amendment to Section 2 of the Warrants. Section 2.4 of each of the
Warrants is hereby amended by deleting the date "November 30, 2002" from the
first sentence thereof and inserting in place thereof the date "February _,
2006".
3. Amendment to Section 8 of the Warrants. Section 8 of each of the
Warrants is hereby amended by deleting Section 8 in its entirety and restating
it as follows:
8. Adjustment of Exercise Price and Number of Shares Purchasable
or Number of Warrants. The Exercise Price and the number of Class B Common
Stock purchasable upon the exercise of the Warrant are subject to adjustment
from time to time upon the occurrence of the events enumerated in this Section
8.
8.1. General. In the event that the Company shall at any
time after February 7, 1996 (a) declare a dividend or make a distribution on the
Common Stock payable in shares of Common Stock, (b) subdivide the outstanding
Common Stock into a greater number of shares, (c) combine the outstanding Common
Stock into a smaller number of shares, or (d) issue any shares of its capital
stock in a reclassification or reorganization of Common Stock, the Exercise
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such event, and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
8.2. Other Issuance of Common Stock to Existing Holders.
In the event that the Company shall issue rights, options or warrants to any
person or persons who are at the time of such issuance the holder of equity
securities of the Company, entitling them to subscribe for or purchase shares of
Common Stock (or securities convertible or exchangeable into Common Stock) at a
price per share of Common Stock (or having a conversion or exchange price per
share of Common Stock if a security convertible or exchangeable into Common
3
Stock) less than the Current Market Price (as defined in Section 8.5)
per share of Common Stock on the record date for such issuance (or the date of
issuance, if there is no record date), the Exercise Price to be in effect on and
after such record date (or issuance date, as the case may be) shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date (or issuance date, as the case may be) by a fraction, of which the
numerator shall be the number of share of Common Stock outstanding on such
record date (or issuance date, as the case may be) plus the number of share of
Common Stock which the aggregate offering price of the total number of shares of
such Common Stock so to be offered (or the aggregate initial exchange or
conversion price of the exchangeable or convertible securities so to be offered)
would purchase at such Current Market Price on such record date (or issuance
date, as the case may be) and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date (or issuance date, as the
case may be) plus the number of additional shares of Common Stock to be offered
for subscription or purchase (or into which the convertible securities to be
offered are initially exchangeable or convertible). In case such subscription
price may be paid in part or in whole in a form other than cash, the value of
such consideration shall be determined by the Board of Directors of the Company
in good faith as set forth in a duly adopted board resolution certified by the
Company's Secretary or Assistant Secretary. In case the Company shall issue
rights, options, or warrants containing the right to subscribe for or purchase
shares of Common Stock (or securities convertible or exchangeable into Common
Stock) as an integral part of the issuance of debt or the obtaining of other
financing by the Company, then in determining the price per share of Common
Stock and the consideration received by the Company for purposes of the first
sentence of this Section 8.2, the Board of Directors of the Company shall
determine, in good faith, which determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, the fair value of the rights, options, or warrants issued in
connection with such debt or financing taking into account the interest rate,
fees, premiums, dividends and other amounts payable in connection with such debt
or financing and a good faith estimate of the expected return with respect to
such transaction taken as a whole. Such adjustment shall be made successively
whenever such an issuance occurs; and in the event that such rights, options,
warrants, or convertible or exchangeable securities are not so issued or expire
or cease to be convertible or exchangeable before they are exercised, converted,
or exchanged (as the case may be), then the Exercise Price shall again be
adjusted to be Exercise Price that would then be in effect if such issuance had
not occurred, but such subsequent adjustment shall not affect the number of
Shares issued upon any exercise of Warrants prior to the date such subsequent
adjustment is made. Notwithstanding the foregoing, no adjustment of the
Exercise Price shall be required under this Section 8.2 with regard to: (a) the
issuance of rights, options,
4
or warrants to employees of the Company or any of its
subsidiaries to the extent that the aggregate number of shares of Common Stock
to which such rights, options, or warrants relate, when added to the aggregate
number of shares of Common stock and shares of Common Stock relating to rights,
options, warrants, or convertible or exchangeable securities issued to employees
of the Company or any of its subsidiaries in transactions described in Section
8.4 do not exceed two percent (2%) of the outstanding shares of Common Stock, on
a fully-diluted basis, as of February 7, 1996; and (b) the issuance of rights,
options, or warrants with respect to which the Holder was entitled to exercise a
right of first refusal under Section 5.5 of the Stock holders Agreement.
8.3. Distributions. In the event that the Company shall fix a
record date for the making of a distribution to all holders of shares of Common
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing corporation) of evidences of
indebtedness or assets (other than dividends and distributions referred to in
Section 8.1 above and other than cash dividends) or of subscription rights,
options, warrants, exchangeable or convertible securities containing the right
to subscribe for or purchase shares of any class of equity securities of the
Company (excluding those referred to in Section 8.2), the Exercise Price to be
in effect on and after such record date shall be adjusted by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction, of
which the numerator shall be the Correct Market Price per share of Common Stock
on such record date, less the fair market value (as determined by the Board of
Directors of the Company in good faith as set forth in a duly adopted board
resolution certified by the Company's Secretary or Assistant Secretary) of the
portion of the assets or evidences of indebtedness so to be distributed or of
such subscription rights, options, warrants, or exchangeable or convertible
securities applicable to one share of the Common Stock outstanding as of such
record date, and of which the denominator shall be such Current Market Price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed; and in the event that such distribution is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such record date had not been fixed, but such subsequent
adjustment shall not affect the number of Shares issued upon any exercise of
Warrants prior to the date such subsequent adjustment was made.
8.4. Other Issuances. In the event that the Company
shall issue shares of Common Stock, or rights, options, warrants or convertible
or exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock (excluding (A) shares, rights, options, warrants, or
convertible or exchangeable securities outstanding or issued on the date of the
original issuance of Warrants hereunder or issued in any of the transactions
described in Section 8.1, Section 8.2 or
5
Section 8.3 above, (B) shares issued upon the exercise of such
rights, options or warrants or upon conversion or exchange of such convertible
or exchangeable securities, and (C) the Warrants and any shares issued upon
exercise thereof), at a price per share of Common Stock (determined in the case
of such rights, options, warrants, or convertible or exchangeable securities by
dividing (X) the total amount receivable by the Company in consideration of the
sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration payable to the
Company upon exercise, conversion, or exchange thereof by (Y) the total maximum
number of shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) lower than the Current Market Price on
the date the Company fixes the offering price of such shares, rights, options,
warrants or convertible or exchangeable securities, then the Exercise Price
shall be adjusted so that it shall equal the price determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, (i) the
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such sale and issuance plus (B) the number of
shares of Common Stock which the aggregate consideration received (determined as
provided below) for such sale or issuance would purchase at such Current Market
Price per share, and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such sale and issuance.
Such adjustment shall be made successively whenever such an issuance is made.
For the purposes of such adjustment, the maximum number of shares of Common
Stock which the holder of any such rights, options, warrants, or convertible or
exchangeable securities shall be entitled to subscribe for or purchase shall be
deemed to be issued and outstanding as of the date of such sale and issuance and
the consideration or premium stated in such rights, options, warrants, or
convertible or exchangeable securities, plus the minimum consideration or
premium stated in such rights, options, warrants, or convertible or exchangeable
securities to the paid for the shares of Common Stock covered hereby. In case
the Company shall sell and issue shares of Common Stock, or rights, options,
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock for a consideration consisting,
in whole or in part, of property other than cash or its equivalent, then in
determining the price per share of Common Stock and the consideration received
by the Company for purposes of the first sentence of this Section 8.4, the Board
of Directors of the Company shall determine, in good faith, the fair value of
said property, and such determination shall be described in a duly adopted board
resolution certified by the Company's Secretary or Assistant Secretary. In case
the Company shall sell and issue rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock together with one or more other securities as a part of a
6
unit at a price per unit, then in determining the price per
share of Common Stock and the consideration received by the Company for purposes
of the first sentence of this Section 8.4, the Board of Directors of the Company
shall determine, in good faith, which determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, the fair value of the rights, options, warrants, or convertible or
exchangeable securities then being sold as part of such unit. In case the
Company shall sell and issue shares of Common Stock, or rights, options,
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock as an integral part of the
issuance of debt or the obtaining of other financing by the Company, then in
determining the price per share of Common Stock and the consideration received
by the Company for purposes of the first sentence of this Section 8.4, the Board
of Directors of the Company shall determine, in good faith, which determination
shall be described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary , the fair value of the shares of Common Stock,
rights, options, warrants, or convertible or exchangeable securities issued in
connection with such debt or financing taking into account the interest rate,
fees, premiums, dividends and other amounts payable in connection with such debt
or financing and a good faith estimate of the expected return with respect to
such transaction taken as a whole. Such adjustment shall be made successively
whenever such an issuance occurs, and in the event that such rights, options,
warrants, or convertible or exchangeable securities expire or cease to be
convertible or exchangeable before they are exercised, converted, or exchanged
(as the case may be), then the Exercise Price shall again be adjusted to the
Exercise Price that would then be in effect if such sale and issuance had not
occurred, but such subsequent adjustment shall not affect the number of Shares
issued upon any exercise of Warrants prior to the date such subsequent
adjustment is made. Notwithstanding the foregoing, no adjustment of the
Exercise Price shall be required under this Section 8.4 with regard to: (a) the
issuance of shares of Common Stock, rights, options, warrants, or convertible or
exchangeable securities to employees of the Company or any of its subsidiaries
to the extent that the aggregate number of such shares of Common Stock and
shares of Common Stock to which such rights, options, warrants, or convertible
or exchangeable securities relate, when added to the aggregate number of shares
of employees of the Company or any of its subsidiaries in transactions described
in Section 8.2, do not exceed two percent (2%) of the outstanding shares of
Common Stock, on a fully-diluted basis, as of February 7, 1996; and (b) the
issuance of shares of Common Stock, rights, options, warrants, or convertible or
exchangeable securities to any person or persons who are at the time of such
issuance the holders of equity securities of the Company with respect to which
the Holder was
7
entitled to exercise a right of first refusal under Section 5.5
of the Stockholders Agreement.
8.5. Private Placements. (a) In the event that the
Company effects a private placement of Common Stock, by and through (x) an
investment banking firm of national reputation which is a member of the national
Association of Securities Dealers, Inc., or any officer of the Company, or (y)
The Jordan Company, a New York general partnership, in an arms-length
transaction with an investor that is not affiliated with the Company or any
officer of the Company, then the Current Market Price per share of Common Stock
for the purpose of any computation under Section 8.4 in connection with such
placement shall be deemed to be equal to the price per share paid by such
investor in such placement. Except as set forth in the preceding sentence, for
the purpose of any computation under Section 8.2, Section 8.3 or Section 8.4,
the "Current Market Price" per share of the Common Stock on any date (the
"Computation Date") shall be deemed to be the average of the daily closing
prices of the Common Stock (or, if applicable, any class of Common Stock then
publicly traded) for the twenty (20) consecutive trading days ending the tenth
(10th) trading day before such Computation Date; provided, however, that if
there shall have occurred prior to the Computation Date a combination or
reclassification of the outstanding shares of Common Stock (or, if applicable,
any class of Common Stock then publicly traded) into a smaller number of shares
and such action or transaction shall have become effective with respect to
market transactions at any time (the "Market-Effect Date") on or after the
beginning of such period of twenty (20) consecutive trading days, then the
closing price for each trading day preceding the Market-Effect Date shall be
adjusted, for purposes of calculating the Current Market Price, by multiplying
such closing price by a fraction, the numerator of which is the Exercise Price
in effect immediately prior to the Computation Date and the denominator of which
is the Exercise Price in effect immediately prior to the Market-Effect Date.
The closing price for each day shall be (1) if the security is traded on a
national securities exchange (i) its last sale price or, (ii) if there was no
sale on day, the last sale price on the next preceding business day on which
there was a sale on such exchange, or (2) if the security is not traded on a
national securities exchange but trades solely in the over-the-counter market
and the security is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") (i) the last price reported on NASDAQ or
(ii) if the security is an issue for which last sale prices are not reported on
NASDAQ, the average of the closing bid and ask quotations on such day, but, in
each of the next preceding two cases, if the relevant NASDAQ price or quotation
did not exist on such day, then the price or quotation on the next preceding
business day on which there was such a price or quotation or, (iii) if the
security is not reported or quoted on NASDAQ, the highest average bid and ask
quotations as quoted in any of The Wall Street Journal, the National Quotation
8
Bureau, Inc. pink sheets, the Salomon Brothers quotation sheets,
quotation sheets of registered market makers and, if necessary, dealers'
telephone quotations, or, (3) if no price can be determined on the basis of the
above methods of valuation, then the judgment of valuation shall be made in good
faith by the Board of Directors. If the Board of Directors is unable to
determine any valuation (as defined below), or if the Holders of at least fifty-
one percent (51%) of the Warrants then outstanding (collectively, the
"Requesting Holders") disagree with the Board's determination of any Valuation
by written notice delivered to the Company within five (5) business days after
the Board's determination thereof is communicated to Holders of the Warrants
affected thereby, which notice specifies a majority-in-interest of the
Requesting Holders' determination of such Valuation, then the Company and a
majority-in-interest of the Requesting Holders' shall select a mutually
acceptable investment banking firm of national reputation which has not had a
material relationship with the Company or any officer of the Company within the
preceding two years, which shall determine such Valuation. Such investment
banking firm's determination of such Valuation shall be final, binding and
conclusive on the Company and the Holders. If the Board of Directors is unable
to determine such Valuation, all costs and fees of such investment banking firm
shall be borne by the Company. If the Holders disagreed with the Board's
determination of such Valuation, the party whose determination of such Valuation
differed from the Valuation determined by such investment banking firm by the
greatest amounts shall bear all costs and fees of such investment banking firm.
For purposes of this Section 8.5, the term "Valuation" shall mean the
determination, to be made initially by the Board of Directors of the Company, of
(i) the value in non-cash consideration in a subscription price, as set forth in
the second sentence of Section 8.2, (ii) the fair value of rights, options, or
warrants being issued on as an integral part of the issuance of debt or the
obtaining of other financing by the Company, as set forth in the third sentence
of Section 8.2, (iii) the fair market value of assets or evidences of
indebtedness, as set forth in the first sentence of Section 8.4, (iv) the fair
value of property other than cash or its equivalent received as consideration,
as set forth in the fourth sentence of Section 8.4, (v) the fair value of
rights, options, warrants, or convertible or exchangeable securities being sold
as part of a unit, as set forth in the fifth sentence of Section 8.4, (vi) the
fair value of shares of Common Stock, rights, options, warrants, or convertible
or exchangeable securities being sold or issued as an integral part of the
issuance of debt or the obtaining of other financing by the Company, as set
forth in the sixth sentence of Section 8.4, (vii) the Current Market Price per
share of Common Stock pursuant to clause (3) above, or (viii) the fair market
value of shares of stock or other securities, property or cash to which a holder
of Common Stock would be entitled upon a merger, consolidation, or
recapitalization for purposes of Section 8.9.
9
(b) For the purpose of any calculation under this
Section 8 shares of Common Sock owned by or held for the account of the Company
or any majority-owned subsidiary of the Company on any date shall not be deemed
to be outstanding on such date, and the sale or other disposition of any shares
of Common Stock or other securities issued by the Company and owned by or held
for the account of the Company or any majority-owned subsidiary of the Company
shall be deemed an issuance thereof. For the purposes of adjusting the Exercise
Price pursuant to this Section 8. Common Stock shall be deemed to be outstanding
at a particular time if it is outstanding at such time or if it can be acquired
upon the conversion of any then outstanding shares of convertible or
exchangeable securities or can be purchased upon the exercise of any outstanding
rights, warrants, or options or acquired upon the conversion of any convertible
securities which can be purchased upon the exercise of any outstanding rights,
warrants or options.
8.6. Adjustments to Exercise Price. (a) No adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in such price; provided, however, that any
adjustments which by reason of this Section 8.6 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 8 shall be made to the nearest $.0005.
(b) No adjustment shall be made in connection
with the issuance of any shares of Common Stock or other securities in a bona
fide public offering pursuant to a firm commitment underwriting managed by a
firm which is a member of the National Association of Securities Dealers, Inc.
8.7 Other Securities. In the event that at any
time, as a result of an adjustment made pursuant to Section 8.1, the Holder of
any Warrant thereafter exercised shall become entitled to receive any share of
capital stock or securities of the Company other then shares of Class B Common
Stock, thereafter the number of such other shares or securities so receivable
upon exercise of any Warrant and the exercise price for such shares or
securities shall be subject to adjustment form time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Class B Common Stock contained in Section 8.1, through Section 8.4, inclusive,
and the provisions of this Warrant with respect to the Class B Common Stock
shall apply on like terms to any such other shares or securities.
8.8 Adjustment to Warrants. Upon each adjustment of the
Exercise Price as a result of the calculations in Section 8.1, Section 8.2,
Section 8.3 or Section 8.4. each Warrant outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Exercise Price, that number of Class B
10
Common Stock (calculated to the nearest hundredth) obtained by
(i) multiplying the number of shares of Common Stock purchasable upon exercise
of the Warrant immediately prior to adjustment by the Exercise Price in effect
immediately prior to adjustment of the Exercise Price and (ii) dividing the
product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price. However, in the event that the Company is
unable or fails to take an action, or obtain an authorization, exception or
consent, necessary in order that the Company may validly and legally issue fully
paid and nonassessable Class B Common Stock at the Exercise Price as so
adjusted, then the adjustment to the number of Class B Common stock evidenced by
each Warrant provided for in the immediately preceding sentence shall
nevertheless take effect immediately at the time provided in Section 8.1,
Section 8.2, Section 8.3 or Section 8.4 for such adjustment of the Exercise
Price; provided, however, that nothing in this sentence shall relieve the
Company of its obligation to comply with Section 9 and with Section 12.
8.9. Reorganization, Reclassification, etc. In the event
of (a) any capital reorganization of the Company, or any reclassification of the
Class B Common Stock (other than a change in par value, or form par value to no
par value, or from no par value to par value, and other than a distribution
referred to in Section 8.3), (b) any consolidation of the Company with or the
merger of the Company with or into any other corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding shares of Class B Common Stock) or (c) any sale of the
properties and assets of the Company as, or substantially as, an entirety to any
other corporation or entity, (each such event in clauses (a), (b) or (c) being
an "Exchange Event") each Warrant shall after such Exchange Event be
exercisable, upon the terms and conditions specified in this Warrant, for the
number of shares of stock or other securities, property, or cash to which a
holder of the number of Class B Common Stock purchasable (at the time of such
Exchange Event) upon exercise of such Warrant would have been entitled upon such
Exchange Event; and in any such case, if necessary, the provisions set forth in
this Section 8 with respect to the rights and interests thereafter of the
Holders of the Warrants shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any shares of stock or other securities,
property, or cash thereafter deliverable on the exercise of the Warrants. At
the option of the Company, the Holders shall exercise the Warrants, subject to
the provisions of this Section 8.9, upon any Exchange Event described in clause
(b) above which is entered into by the Company with an unrelated third party on
an arm's length basis. The subdivision or combination of shares of Common Stock
at any time outstanding into a greater or lesser number of shares shall not be
deemed to be an Exchange Event for the purposes of this Section 8.9. The Company
shall not effect any such Exchange Event, unless prior to or simultaneously
11
with the consummation thereof the successor corporation (if
other than the Company) or entity resulting from such Exchange Event shall
assume, by written instrument, the obligation to deliver to the Holder of each
Warrant such shares of stock, securities, assets, or cash as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase and all the
other obligations under this Warrant. In the event of a sale or conveyance or
other transfer of all or substantially all of the assets of the Company as a
part of a plan for liquidation of the Company, all rights to exercise any
Warrant shall terminate thirty (30) days after the Company gives written notice
to the registered Holder of such Warrant that such sale or conveyance or other
transfer has been consummated.
4. Amendment to Section 11 or the Warrants. Section 11 of each
of the Warrants is hereby amended by (a) deleting the word "and" after the
phrase "deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding up" and
inserting in place thereof a comma and (b) inserting immediately after the words
"issue or grant is to be offered or made" a comma, and the words "and (d) for
any issuance pursuant to Sections 8.1, 8.2, 8.3, 8.4, 8.5, a determination by
the Company of the Current Market Price of such Common Stock.
5. Representations and Warranties. Holdings represents and
warrants that all the representations and warranties as set forth in the
Warrants are true and correct in all material respects on and as of the date
hereof. All such representations and warranties are hereby ratified, affirmed
and incorporated herein by reference, with the same force and effect as though
set forth herein in their entirety.
6. Definitions. Each capitalized term used herein without
specific definition shall have the same meaning herein as in the Warrants.
7. No Waiver. Nothing contained herein shall constitute a waiver
of, impair or otherwise affect any obligation or any of the rights of Holdings
or BBI.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
9. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
10. Effectiveness of Amendment. This Amendment shall become
effective as of the date hereof upon receipt by BBI of counterparts of this
Amendment duly executed by each of Holdings and BBI.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Common Stock Purchase Warrants to be executed by their duly
authorized officers as a document under seal as of the date first set forth
above.
NRE HOLDINGS, INC.
By: /S Joel A
Title:Chief Financial Officer
BANCBOSTON INVESTMENTS, INC.
By: /S M
Title:Vice-President
<PAGE>
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON SEPTEMBER
1, 1994 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE TRANSFER OF SUCH SECURITY IS SUBJECT TO THE CONDITIONS SPECIFIED
IN THE PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 1, 1994 AS AMENDED, BETWEEN
THE ISSUER HEREOF (THE "COMPANY") AND THE INITIAL HOLDER HEREOF, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE.
NRE HOLDINGS, INC.
12.75% NOTE
DUE AUGUST 31, 2005
No. R-001b New York, New York
$11,000,000 October 31, 1995
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to the order of MCIT (EXISTING POOL) LIMITED,
or registered assigns, on August 31, 2005, the principal amount of ELEVEN
MILLION DOLLARS ($11,000,000), with interest (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid balance of such principal
amount at the rate of 12.75% per annum, payable semi-annually on each April 30
and October 31 (each, an "Interest Payment Date") after the date hereof,
commencing April 30, 1996, until such unpaid principal shall become due and
payable (whether at maturity or at a date fixed for prepayment or by
declaration or otherwise), and with interest on any overdue principal and
premium, if any, and (to the extent permitted by applicable law) on any
overdue interest at the rate of 14.75% per annum, payable semi-annually as
aforesaid or, at the option of the registered holder hereof, on demand.
Payments of principal and interest on this Note shall be made in
lawful money of the United States of America at the principal office of
Republic National Bank of New York at 452 Fifth Avenue, New York, New York or
at such other office or agency in New York, New York as the Company shall have
designated by written notice to the registered holder of this Note as provided
in the Purchase Agreement referred to below. The Company may treat the person
in whose name this Note is registered on the register kept by the Company as
provided in
<PAGE>
such Purchase Agreement as the owner of this Note for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
This Note is one of the Company's 12.75% Notes due August 31, 2005
(the "Notes"), issued in the aggregate principal amount of $11,000,000
pursuant to a Purchase Agreement, dated as of September 1, 1994, and modified
as of November 30, 1994 and October 13, 1995, and amended and restated as of
February 7, 1996 (as thereafter amended, supplemented, restated or otherwise
modified from time to time, the "Purchase Agreement"), between the Company and
MCIT PLC f/k/a Mezzanine Capital & Income Trust 2001 PLC. The registered
holder of this Note is entitled to the benefits of the Purchase Agreement and
may enforce the agreements of the Company contained therein and exercise the
remedies provided for thereby or otherwise available in respect thereof.
The Notes are subject to optional prepayment, in whole or in part,
and are entitled to mandatory redemption, all as specified in the Purchase
Agreement.
Concurrently with the issuance of the Notes, the Company is issuing a
series of 12.75% promissory notes due August 31, 2005 in the aggregate
original principal amount of $4,400,000 (the "Seller Notes"). By their
acceptance of the Seller Notes, the holders thereof have agreed that, under
certain circumstances, payments of interest accrued thereon shall be junior
and subordinate to certain payment of interest on the Notes, subject, however,
to the agreement by the holders of the Notes (the "Holders") made by their
acceptance of the Notes that under no circumstances shall the Holders accept
(and retain) any payment of interest due on the Notes, including a payment of
a Benefitted MCIT Payment (as defined in the Seller Notes), at a time when
there shall have occurred and be continuing a default in the payment of
interest on the Seller Notes which is not a Blocked Seller Payment (as defined
in the Seller Notes) unless, concurrently with such payment of interest on the
Notes, the Company shall make a payment with respect to such defaulted payment
of interest on the Seller Notes which is not a Blocked Payment in an aggregate
amount which is proportionate to such payment of interest on the Notes
according to the then respective outstanding principal amounts of the Seller
Notes and the Notes. The holders of Seller Notes are entitled pursuant thereto
to ratable prepayments thereof concurrent with any voluntary prepayment being
made of principal of the Notes, and the Seller Notes are secured equally and
ratably with the Notes pursuant to a pledge agreement, dated as of September
1, 1994.
This Note is a registered Note and, as provided in the Purchase
Agreement, is transferable only upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied
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<PAGE>
by a written instrument of transfer duly executed, by the registered holder
hereof or his attorney duly authorized in writing.
In case an Event of Default, as defined in the Purchase Agreement,
shall occur and be continuing, the unpaid balance of the principal of this
Note may be declared and become due and payable in the manner and with the
effect provided in the Purchase Agreement.
This Note is made and delivered in New York, New York and shall be
governed by the internal laws of the State of New York.
NRE HOLDINGS, INC.
By /s/
__________________________
A. Richard Caputo, Jr.
Vice President
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AMENDED AND RESTATED SUBORDINATED DEFERRED LIMITED INTEREST
GUARANTY
THIS AMENDED AND RESTATED SUBORDINATED GUARANTY AGREEMENT, dated as
of February 7, 1996 (as amended, supplemented or otherwise modified from time
to time, this "Guaranty"), by NATIONAL RESTAURANT ENTERPRISES, INC., a
Delaware corporation ("NRE"), AMERIKING CINCINNATI CORPORATION I, a Delaware
corporation ("AmeriKing Cincinnati") and AMERIKING VIRGINIA CORPORATION I, a
Delaware corporation ("AmeriKing Virginia" and, collectively with NRE and
AmeriKing Cincinnati, the "Guarantors"), to MCIT PLC ("MCIT"), for the benefit
of MCIT and all other holders of Notes (such and all other capitalized terms
being used herein with the meanings set forth in Article I) issued pursuant to
the Purchase Agreement referred to below, amending and restating in its
entirety the Guaranty Agreement dated as of September 1, 1994, (as amended as
of November 30, 1994, the "Original Guaranty") by NRE in favor of MCIT.
W I T N E S S E T H:
WHEREAS, NRE was organized and capitalized by, and is a direct
wholly-owned Subsidiary of, NRE Holdings, Inc., a Delaware corporation (the
"Company"); and
WHEREAS, the Company has
(a) pursuant to the purchase agreement dated as of September
1, 1994 (as modified as of November 30, 1994 and October 13, 1995,
the "Original Purchase Agreement"), obtained $14,528,531 in cash
representing the proceeds from the sale by the Company to the
Purchaser of the Notes for a purchase price of $11,000,000, Preferred
Shares for a purchase price of $3,500,000 and Common Shares for a
purchase price of $28,531, and
(b) advanced all of such $14,528,531 of proceeds (less
certain expenses incurred in connection with the Acquisition) to NRE
as a contribution to the capital of NRE; and
WHEREAS, as a condition to the Purchaser's making such purchases
under the Original Purchase Agreement and in consideration of, among other
things, receiving such contribution to capital, NRE executed and delivered the
Original Guaranty; and
WHEREAS, the Company desires that MCIT and the Company amend and
restate the Original Purchase Agreement in its entirety
<PAGE>
pursuant to an amended and restated purchase agreement to be dated as of the
date hereof (as so amended and restated, and together with all other
amendments and other modifications, if any, from time to time hereafter made
thereto, the "Purchase Agreement"), pursuant to which, among other things, NRE
will be permitted to incur additional indebtedness under the Senior Credit
Agreement (as defined below);
WHEREAS, as a condition to the Purchaser's entering into the Purchase
Agreement, the Company is required to cause NRE, AmeriKing Cincinnati and
AmeriKing Virginia to execute and deliver this Guaranty in favor of MCIT, for
the benefit of MCIT and all other holders of Notes; and
WHEREAS, AmeriKing Cincinnati and AmeriKing Virginia were organized
and are being capitalized by, and are direct wholly-owned Subsidiaries of,
NRE; and
WHEREAS, NRE, AmeriKing Cincinnati and AmeriKing Virginia have
authorized the execution, delivery and performance of this Guaranty and will
derive substantial direct and indirect benefits from the transactions
contemplated to occur on the Restatement Effective Date (as defined in the
Purchase Agreement);
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, each Guarantor hereby agrees as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. Except as otherwise provided herein or as
the context otherwise requires, the following terms (whether or not
underscored) when used in this Guaranty shall have the following meanings
(such definitions to be equally applicable to the singular and plural forms
thereof):
"Agent" means FNBB (or any other financial institution succeeding to
its responsibilities) as the agent for the Senior Lenders pursuant to the
Senior Credit Agreement.
"AmeriKing Cincinnati" is defined in the preamble hereto.
"AmeriKing Virginia" is defined in the preamble hereto.
"Company" is defined in the first recital hereto.
"Guarantors" is defined in the preamble hereto.
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<PAGE>
"Interest Obligations" means all obligations of the Company to make
payment of interest accrued from time to time on the Notes in accordance with
the terms of the Purchase Agreement.
"Note" shall mean each Note executed and delivered pursuant to the
Purchase Agreement and each other promissory note of the Company accepted from
time to time in substitution or replacement therefor.
"NRE" is defined in the preamble hereto.
"Original Guaranty" is defined in the preamble hereto.
"Original Purchase Agreement" is defined in clause (a) of
the second recital hereto.
"Payment Default" is defined in of Section 2.2.1.
"Performance Default" is defined in Section 2.2.2.
"Performance Default Notice" is defined in Section 2.2.2.
"PMI" means PMI Mezzanine Fund, L.P., a Delaware limited partnership,
together with its successors and assigns.
"PMI Agreement" means the note purchase agreement, dated as of
February 7, 1996, among the NRE, the Company and PMI as so originally
executed. At all times after the date hereof, "PMI Agreement" also means the
PMI Agreement as originally executed and delivered, together with
(a) each successor Instrument pursuant to which NRE obtains
from other financial institutions loans to refinance indebtedness
outstanding under the PMI Agreement in effect on the date of such
refinancing and up to $1,500,000 of additional indebtedness; and
(b) all amendments, supplements, modifications,
extensions and renewals hereafter made to the PMI Agreement
or such successor Instrument;
provided, however, that without the consent of the Purchaser (and other
Noteholders comprising, together with the Purchaser, "Required Noteholders"),
no such amendment or modification shall be made which
(c) increases the maximum principal amount of Indebtedness
permitted to be incurred pursuant thereto above the sum of the
maximum principal amount of Indebtedness permitted by clause (d) of
Section 6.2.2 of the Purchase Agreement to be outstanding pursuant
thereto; or
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<PAGE>
(d) amends Section 9.3 or 9.4 of the PMI Agreement as in
effect on the date hereof or adds any Section thereto of a
substantially duplicative nature.
"Purchase Agreement" is defined in the fifth recital hereto.
"Purchaser" is defined in the preamble hereto.
"Senior Credit Agreement" means the revolving credit and term loan
agreement, dated as of September 1, 1994, as amended and restated as of
November 30, 1994 and as of February 7, 1996, among NRE, the Company and the
lenders party thereto, as so originally executed and amended and restated. At
all times after the date hereof, "Senior Credit Agreement" also means the
Senior Credit Agreement as in effect on February 7, 1996, together with
(a) each successor Instrument pursuant to which NRE obtains
from other financial institutions loans to refinance indebtedness
outstanding and existing commitments to lend under the Senior Credit
Agreement in effect on the date of such refinancing and up to
$10,000,000 of additional indebtedness; and
(b) all amendments, supplements, modifications,
extensions and renewals hereafter made to the Credit
Agreement or such successor Instrument;
provided, however, that without the consent of the Purchaser (and other
Noteholders comprising, together with the Purchaser, "Required Noteholders"),
no such amendment or modification shall be made which
(c) increases the maximum principal amount of Indebtedness
permitted to be incurred pursuant thereto above the sum of the
maximum principal amount of Indebtedness permitted by clause (c) of
Section 6.2.2 of the Purchase Agreement to be outstanding pursuant
thereto; or
(d) amends Section 10.3 or 10.4 of the Senior Credit
Agreement as in effect on the date hereof or adds any Section thereto
of a substantially duplicative nature.
"Senior Credit Lender" means each lender as is or may from time to
time become party to the Senior Credit Agreement.
"Senior Debt" means all indebtedness, obligations and liabilities of
NRE to the Senior Lenders, whether now existing or hereafter created arising
out of or under the Senior Credit Agreement or the PMI Agreement,
respectively, including all principal, interest (including interest accruing
after the commencement of bankruptcy, insolvency or similar proceedings
-4-
<PAGE>
with respect to NRE, whether or not the claim therefor shall be enforceable)
and other amounts payable under any letter of credit reimbursement agreement,
bankers acceptance, note or instrument issued thereunder; provided, however,
that the aggregate principal amount of Senior Debt under or in respect of (a)
the Senior Credit Agreement shall not at any time exceed the maximum principal
amount of Indebtedness permitted by clause (b) of Section 6.2.2 of the
Purchase Agreement to be outstanding pursuant thereto and (b) the PMI
Agreement shall not at any time exceed the maximum principal amount of
Indebtedness permitted by clause (c) of Section 6.2.2 of the Purchase
Agreement to be outstanding pursuant thereto.
"Senior Lenders" means collectively (i) each lender as is or may from
time to time become party to the Senior Credit Agreement and (ii) PMI.
SECTION 1.2. Purchase Agreement Terms. Except as otherwise provided
herein or as the context otherwise requires, terms for which meanings are
provided in the Purchase Agreement shall have the same meanings when used in
this Guaranty.
ARTICLE II
GUARANTY
SECTION 2.1. Guaranty of Payment. Each Guarantor hereby absolutely,
unconditionally and irrevocably guarantees the full and prompt payment and
performance on demand and all times thereafter of all Interest Obligations.
Each Guarantor also agrees to reimburse the Purchaser for all costs
and expenses, including reasonable attorneys' fees and disbursements, which
the Purchaser expends or incurs in collecting, compromising or enforcing this
Guaranty, whether or not suit is filed, expressly including all costs,
expenses, reasonable attorneys' fees and other charges incurred in connection
with any insolvency, bankruptcy, reorganization, liquidation, dissolution,
arrangement or other similar proceedings involving such Guarantor which in any
way affect the exercise of rights, powers, remedies and privileges with
respect to this Guaranty or the interest accrued and unpaid on the outstanding
principal amount of the Notes.
SECTION 2.2. Subordination. All indebtedness and liability of each
Guarantor pursuant to this Guaranty shall be subordinate and junior in right
of payment to Senior Debt in the manner and with the effect provided in
Section 2.2.1 through 2.2.11, and each holder of a Note, by its acceptance
thereof, agrees to be bound by such terms of subordination.
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<PAGE>
SECTION 2.2.1. Payment Block Upon Payment Defaults. Upon a default (a
"Payment Default") in the payment of principal of, interest on, premium of or
any other amount due under or in respect of any Senior Debt when the same
becomes due and payable, whether at maturity or at a date fixed for prepayment
or otherwise, then no direct or indirect payment in cash, property or
securities by set-off or otherwise, shall be made or agreed to be made by any
Guarantor on account of the Interest Obligations; provided, however, that if
the maturity of the Senior Debt under the Senior Credit Agreement or the
Senior Debt under the PMI Agreement has not been accelerated prior to the
expiration of the 180 day period referred to in clause (a) below (or if any
such acceleration has been rescinded or annulled), such payments may be made
on account of the Interest Obligations on or after
(a) a date which is 180 consecutive days following the date
on which such Payment Default shall have occurred, or
(b) if earlier, such Payment Default shall have been cured
or waived or shall have ceased to exist.
SECTION 2.2.2. Payment Block Upon Performance Defaults. Upon a
default (a "Performance Default") by any Obligor in the performance of any
obligation (other than a Payment Default) with respect to any Senior Debt
pursuant to which the Senior Debt is entitled to accelerate the maturity
thereof, then, if written notice of such event of default is given in the
manner provided in the Senior Credit Agreement to NRE (a "Performance Default
Notice"), no direct or indirect payment in cash, property or securities, by
set-off or otherwise, shall be made or agreed to be made by any Guarantor on
account of any Interest Obligation unless and until
(a) a date which is 180 consecutive days following the date
on which such Performance Default shall have occurred, or
(b) if earlier, such Performance Default shall have been
cured or waived or shall have ceased to exist.
SECTION 2.2.3. Standstill. Upon the occurrence and during the
continuation of any Performance Default with respect to any Senior Debt as to
which a Performance Default Notice shall have been given in accordance with
Section 2.2.2 or of any Payment Default, neither the Purchaser nor any
Noteholder shall be entitled to
(a) demand immediate payment of any Interest
Obligation under this Guaranty, or
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<PAGE>
(b) commence, pursue or participate in any judicial
proceeding or take any other action to enforce any obligations of any
Guarantor under or in respect of this Guaranty
unless and until
(c) a date which is 180 consecutive days following the date
on which such Performance Default shall have occurred or 180
consecutive days following the date on which such Payment Default
shall have occurred, or
(d) if earlier, such Performance Default or Payment Default
shall have been cured or waived or shall have ceased to exist, or
(e) if earlier, the maturity of all or any part of the
principal amount of any Senior Debt shall have been accelerated in
accordance with its terms.
SECTION 2.2.4. Payment Over Upon Dissolution, etc. In the event of
any distribution, division or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the
property, assets or business of any Guarantor, or the proceeds thereof, to any
creditor or creditors of such Guarantor or upon any indebtedness of any
Guarantor, by reason of any liquidation, dissolution or other winding up of
such Guarantor or its business or by reason of any sale, receivership,
insolvency or bankruptcy proceedings or assignment for the benefit of
creditors or any proceeding by or against any Guarantor for any relief under
any bankruptcy, reorganization or insolvency law or laws, federal or state, or
any law, federal or state, relating to the relief of debtors, readjustment of
indebtedness, reorganization, composition or extension, then and in any such
event, any payment or distribution of any kind or character, whether in cash,
property or securities which, but for the subordination provisions of this
Guaranty, would otherwise be payable or deliverable upon or in respect of this
Guaranty, shall instead be paid over or delivered to the Agent for application
to the Senior Debt under the Senior Credit Agreement, and, upon the repayment
in full in cash of such Senior Debt, such amounts shall be paid over or
delivered to PMI for application to the Senior Debt under the PMI Agreement,
and, until all Senior Debt has been repaid in full, the Purchaser shall not
receive any such payment or distribution or benefit therefrom. The Agent or
PMI, as appropriate, may in the name of the Noteholders or otherwise file,
prove and vote in any such proceedings with respect to any and all claims of
the Noteholders relating to the Interest Obligations.
-7-
<PAGE>
SECTION 2.2.5. Turnover. In the event that, notwithstanding the
provisions of Section 2.2.1, 2.2.2 or 2.2.4, any such direct or indirect
payment or distribution shall be received by the Purchaser or any Noteholder
in contravention of the provisions of any such Section, such payments and
distributions shall be held in trust for the benefit of, and upon receipt by
such holder of written notice that such payment or distribution has been made
in violation of such Section, shall be immediately paid over to, the holders
of all Senior Debt at the time outstanding or their representative for
application to the pro rata payment of all such Senior Debt until all such
Senior Debt shall have been paid in full, after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt.
SECTION 2.2.6. Unconditional Obligation, etc. Nothing contained in
this Section 2.2 or elsewhere in this Guaranty is intended to or shall impair,
as between any Guarantor, its creditors (other than the holders of Senior
Debt) and the Purchaser and the Noteholders, the obligation of such Guarantor,
which is absolute and unconditional, to pay to the Purchaser and the
Noteholders all amounts owing under this Guaranty as and when such amounts
become due and payable in accordance with the terms hereof, or to in any way
affect the relative rights of the Purchaser or the Noteholders and creditors
of any Guarantor other than the Senior Lenders. Subject to the payment in full
of all Senior Debt, the Purchaser and the Noteholders shall be subrogated to
the rights of the Senior Lenders to receive payments or distributions of
assets of the Guarantors made on the Senior Debt until all Interest
Obligations shall be paid in full; and, for the purposes of such subrogation,
no payments or distributions to any Senior Lender of any cash, property or
securities to which the Purchaser and the Noteholders would be entitled except
for these provisions shall, as between any Guarantor, its creditors (other
than such Senior Lender and the Purchaser and the Noteholders), be deemed to
be a payment by such Guarantor to or on account of Senior Debt, it being
understood that these provisions are and are intended solely for the purpose
of defining the relative rights of the Purchaser and the Noteholders, on the
one hand, and such Senior Lender on the other hand.
SECTION 2.2.7. Waivers, etc. The Purchaser hereby waives any and all
notice of renewal, extension or accrual of any of Senior Debt, present or
future, and agrees and consents that without notice to or assent by the
Purchaser and the Noteholders:
-8-
<PAGE>
(a) subject to the provisions of Section 6.2.7 of the
Purchase Agreement, the obligations and liabilities of any Guarantor
or any other party or parties for or upon the Senior Debt (and/or any
promissory note(s), security document or guaranty evidencing or
securing the same) may, from time to time, in whole or in part, be
renewed, extended, modified, amended, accelerated, compromised,
supplemented, terminated, sold, exchanged, waived or released;
(b) subject to the provisions of the FNBB Intercreditor
Letter, the Senior Lenders may exercise or refrain from exercising
any right, remedy or power granted by the applicable Senior Debt
Instrument or any other document creating, evidencing or otherwise
related to Senior Debt or at law, in equity or otherwise, with
respect to Senior Debt or any collateral security or lien (legal or
equitable) held, given or intended to be given therefor (including
the right to perfect any lien or security interest created in
connection therewith);
(c) subject to the provisions of Section 6.2.7 of the
Purchase Agreement, any and all collateral security and/or liens
(legal or equitable) at any time, present or future, held, given or
intended to be given for Senior Debt, and any rights or remedies of
the Senior Lenders in respect thereof, may, from time to time, in
whole or in part, be exchanged, sold, surrendered, released,
modified, waived or extended by the Senior Lenders; and
(d) any balance or balances of funds with the Senior Lenders
at any time standing to the credit of any Guarantor or any guarantor
of any Senior Debt may, from time to time, in whole or in part, be
surrendered or released;
all as the Senior Lenders may deem advisable and all without impairing,
abridging, diminishing, releasing or affecting the subordination to Senior
Debt provided for herein. The Senior Lenders shall not be prejudiced in their
right to enforce the subordination contained herein in accordance with the
terms hereof by any act or failure to act on the part of any Guarantor.
SECTION 2.2.8. Amendment of Subordination Provisions. The
subordination provisions contained herein are for the benefit of the holders
of Senior Debt and may not be rescinded, cancelled, amended or modified in any
way without the prior written consent thereto of PMI and the Agent.
-9-
<PAGE>
SECTION 2.2.9. Notice to the Noteholders. Each Guarantor shall give
prompt written notice to the Purchaser and any Noteholder of any fact known to
such Guarantor which would prohibit the making of any payment to the Purchaser
or any Noteholder under this Guaranty. Notwithstanding the provisions of this
Section 2.2 or any other provision of this Guaranty, the Purchaser
(a) shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to the
Purchaser or any Noteholder under this Guaranty in respect of this
Guaranty, unless and until the Purchaser shall have received written
notice thereof from the applicable Guarantor, the Agent, PMI or any
other holder of Senior Debt or from any trustee therefor (and, prior
to the receipt of any such written notice, the Purchaser shall be
entitled in all respects to assume that no such facts exist); and
(b) shall be entitled to receive and retain all payments
made by or on behalf of any Guarantor prior to receipt by the
Purchaser under this Guaranty of any such written notice.
All notices and other communications provided to the Purchaser under this
Guaranty shall be in writing or by telecopy and addressed or delivered to it
c/o Jordan/Zalaznick Advisers, Inc., at 9 West 57th Street, New York, New
York, 10019, Attn: James E. Jordan, or at such other address as may be
designated by the Purchaser. Any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given when received; any notice, if
transmitted by telecopy, shall be deemed given when transmitted.
SECTION 2.2.10. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of any Guarantor
referred to in this Section 2.2, the Purchaser and any other Noteholder shall
be entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other
Person making such payment or distribution, delivered to the Purchaser and any
other Noteholder, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Debt and
other Indebtedness of the Guarantors, the amount thereof or payable therein,
the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 2.2.
-10-
<PAGE>
SECTION 2.3. Obligations Absolute, Unconditional, etc. Each Guarantor
agrees that its obligations hereunder shall be absolute, unconditional and
irrevocable, irrespective of the genuineness, validity, legality or
enforceability of the Interest Obligations, the Notes, the Purchase Agreement
or any other Instrument executed or to be executed pursuant to the Purchase
Agreement, or any other Instrument or collateral relating to or securing the
payment, performance or observance thereof or any other circumstance which
could otherwise constitute a legal or equitable discharge of a surety or
guarantor, and the Purchaser may, in its discretion or at the direction of the
Required Noteholders, proceed to enforce this Guaranty in respect of any
Interest Obligations as and to the extent provided in Section 2.1. Neither the
Purchaser nor any Noteholder shall have any obligation to protect, secure,
perfect or insure any collateral security document or property subject thereto
at any time held as security for the Interest Obligations or this Guaranty.
Except as herein otherwise expressly provided, each Guarantor hereby
absolutely, unconditionally and irrevocably waives and agrees not to assert or
take advantage of:
(a) any right to require the Purchaser or any Noteholder to
proceed against the Company or any other Person, or to proceed
against or exhaust any other security or collateral for the payment,
performance or observance of the Interest Obligations, or to pursue
any other remedy whatsoever before proceeding against such Guarantor
hereunder;
(b) any defense that may arise by reason of the incapacity,
lack of authority, death or disability of any Person, or the failure
of the Purchaser or any Noteholder to file or enforce a claim against
any estate (in administration, bankruptcy or any other proceedings)
of any Person;
(c) any defense based upon an election of remedies by the
Purchaser or any Noteholder, including an election to proceed by
non-judicial rather than judicial foreclosure, which destroys or
impairs any right of subrogation of such Guarantor or the right of
such Guarantor to proceed against the Company or any other Person for
reimbursement or both;
(d) any other defense of the Company, or the cessation
of the liability of the Company for any cause whatsoever,
with respect to any Interest Obligations;
-11-
<PAGE>
(e) any other defense of any kind, whether now existing or
arising hereafter, of such Guarantor to any action, suit or judicial
or legal proceeding that may be instituted with respect to this
Guaranty;
(f) presentment, demand, protest and notice of any kind,
including notice of the creation or non-payment or non-performance of
all or any Interest Obligations, notice of dishonor or protest,
notice of acceptance by the Purchaser or any Noteholder of this
Guaranty, notice of the existence, creation or incurrence of any new
or additional indebtedness, obligation or other liability, and notice
of action or non-action on the part of the Purchaser or any
Noteholder, the Company or such Guarantor or any other Person in
connection with the Interest Obligations or otherwise; and
(g) any duty on the part of the Purchaser or any Noteholder
or other Person to disclose to such Guarantor any facts or
information any such Person may now or hereafter know or possess
regarding the Company, the Interest Obligations or any other matter
whatsoever, regardless of whether such Person has reason to believe
that such facts or other information may materially increase the risk
which such Guarantor intends to assume or has reason to believe that
such facts or other information are unknown to such Guarantor or has
a reasonable opportunity to communicate such facts or other
information, it being understood and agreed that such Guarantor is
fully and solely responsible for being and keeping informed of the
financial condition of the Company and of all other circumstances
bearing on the risk of non-payment of any Interest Obligations.
This Guaranty shall in all respects be a continuing, absolute,
unconditional and irrevocable Guaranty of payment, and shall remain in full
force and effect until all Interest Obligations have been fully paid, and may
not be amended, modified or supplemented except in accordance with Section 8.1
of the Purchase Agreement and Section 2.2.8. This Guaranty shall continue to
be effective, or to be reinstated, as the case may be, if at any time any
payment, in whole or in part, of any Interest Obligations is rescinded or must
otherwise be restored or returned by the Purchaser or any Noteholder upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Guarantor or the Company, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to any Guarantor or the Company or any part of either of its property, or
otherwise, all as though such payments had never been made.
-12-
<PAGE>
SECTION 2.4. Waiver of All Defenses. Except as otherwise specified
herein, the Purchaser and each Noteholder may, from time to time, in their
sole discretion and without notice to any Guarantor, take any or all of the
following actions, all without in any way diminishing, impairing, releasing or
affecting the liability or obligations of the Guarantors under or with respect
to this Guaranty, and each Guarantor hereby irrevocably consents to any or all
of the following actions by the Purchaser or any Noteholder or any holder of
any Note:
(a) retain or obtain a security interest in any
property to secure any Interest Obligation or any obligation
hereunder;
(b) retain or obtain the primary or secondary
obligations with respect to any Interest Obligation;
(c) extend or renew for one or more periods (whether or not
longer than the original period), or alter or exchange, any Interest
Obligation, or release or compromise any obligation of such Guarantor
hereunder or any obligation of any nature of any other Person with
respect to any Interest Obligation or amend or modify in any respect
the Purchase Agreement or any Purchase Document;
(d) waive, modify, subordinate, compromise or release its
security interest in, or surrender, release or permit any
substitution or exchange for, all or any part of any property
securing any Interest Obligation or any obligation hereunder, or
extend or renew for one or more periods (whether or not longer than
the original period) or waive, release, subordinate, compromise,
modify, alter or exchange any guaranty or other obligations of any
nature of any obligor with respect to any such property; and
(e) resort to such Guarantor for payment of any Interest
Obligation, whether or not the Purchaser or any Noteholder shall have
resorted to or exhausted any other remedy or any other security or
collateral for any obligation hereunder or shall have proceeded
against the Company or any other Person primarily or secondarily
obligated with respect to any Interest Obligation.
Each Guarantor absolutely, unconditionally and irrevocably agrees
that, as long as any Interest Obligation has not been paid in full, such
Guarantor shall not have and shall not enforce any right of subrogation, and
such Guarantor waives any right to enforce any remedy which the Purchaser or
any Noteholder now has or may hereafter have against the Company or any other
Person hereunder or pursuant hereto or under or pursuant to the Purchase
Agreement, the Notes or any other Purchase Document, and any
-13-
<PAGE>
benefit of, and any right to participate in, any security for any Interest
Obligation now or hereafter held by the Purchaser or any Noteholder or the
holder of any Note.
Each Guarantor absolutely, unconditionally and irrevocably agrees
that the liability of such Guarantor hereunder, and the remedies for the
enforcement of such liability, shall in no way be diminished or affected by:
(f) the release or discharge of the Company or any other
Person responsible for the payment, performance or observance of any
Interest Obligation in any creditors', receivership, bankruptcy,
reorganization, insolvency or other proceeding;
(g) the rejection or disaffirmance in any such
proceeding of any Instrument evidencing, securing, or
executed in connection with, any Interest Obligation; or
(h) the impairment, limitation or modification of any
Interest Obligation resulting from the operation of any present or
future provision of the federal bankruptcy code or any other statute
or law of any kind or from the decision or order of any court.
Each Guarantor absolutely, unconditionally and irrevocably further
agrees that the creation from time to time of any Interest Obligation and the
application or allocation of amounts received by the Purchaser or any
Noteholder or any other Person to the payment of such Interest Obligation, and
the creation, existence or enforcement from time to time of any security for
the Interest Obligation, and the application and allocation of the proceeds of
such security, shall in no way affect or impair the rights, remedies, powers
and privileges of the Purchaser or any Noteholder or the holder of any Note or
the obligation of such Guarantor under this Guaranty.
Each Guarantor hereby expressly waives notice of the creation of all
Interest Obligations and all diligence in collection or protection of or
realization upon the Interest Obligations or any thereof, any obligation
hereunder, or any security for or guaranty of any of the foregoing.
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Purchase Document. This Guaranty is a Purchase Document
and shall (unless otherwise expressly indicated herein) be construed,
administered and applied in accordance with
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<PAGE>
the terms and provisions of the Purchase Agreement, including Article IX
thereof.
SECTION 3.2. Successors and Assigns; Assignment. This Guaranty shall
be binding upon each Guarantor and its successors and assigns and shall inure
to the benefit of the Purchaser and each Noteholder and their respective
successors and assigns, including any assignee of any Note and be enforceable
by the Purchaser at the direction of the Required Noteholders; provided,
however, that no Guarantor may assign any of its obligations hereunder without
the prior written consent of all Noteholders. Each Noteholder may, subject to
the provisions of Section 4.7 of the Purchase Agreement, from time to time,
without notice to any Guarantor assign or transfer any Note or any interest
therein, and, notwithstanding any such transfer or assignment or any
subsequent transfer or assignment thereof, such Note shall be and remain a
Note for purposes of this Guaranty, and each and every immediate and
successive transferee or assignee of any Note or any interest therein shall,
to the extent of the interest of such transferee or assignee in the Note, be
entitled to the benefits of this Guaranty.
-15-
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered by its authorized officer as of the date first above
written.
NATIONAL RESTAURANT ENTERPRISES, INC.
By
----------------------------------------
Name: Lawrence Jaro
Title: Chief Executive Officer
AMERIKING CINCINNATI CORPORATION I
By
----------------------------------------
Name: Lawrence Jaro
Title: Chief Executive Officer
AMERIKING VIRGINIA CORPORATION I
By
----------------------------------------
Name: Lawrence Jaro
Title: Chief Executive Officer
The foregoing amendment and restatement is hereby acknowledged and consented
to as of this ____ day of February, 1996:
MCIT PLC, as Noteholder
By
----------------------------------------
Name:
Title:
-16-
<PAGE>
CERTIFICATE AS TO
SELLER NOTES, BBI JUNIOR NOTES AND WARRANT AMENDMENT
Furnished pursuant to Section 3.7 of the Purchase Agreement,
dated as of September 1, 1994 and modified as of November
30, 1994 and October 13, 1995 and amended and restated as of
February 7, 1996 (the "Purchase Agreement"), between NRE
HOLDINGS, INC., a Delaware corporation (the "Company"), and
MCIT PLC.
The undersigned hereby certifies that he is Chief Financial Officer
of the Company and that, as such, he is authorized to execute this certificate
on behalf of the Company and further certifies that
(a) attached hereto as Attachment 1 is a true and
correct specimen of the Seller Notes;
(b) each Person identified in Item 3.7 ("Seller Notes") of
the Disclosure Schedule has exchanged his Original Seller Note,
without further compensation, for a Seller Note in the amount shown
opposite his name in such item;
(c) BBI and the Company have executed the BBI Amendment, and
attached hereto as Attachment 2 is a true and correct specimen
thereof, as in full force and effect on the date hereof without
modification or waiver, together with a true and correct specimen of
the BBI Agreement and the BBI Existing Junior Note; and
(d) BBI, as assignee of FNBB, has entered into with the
Company the Warrant Amendment, and attached hereto as Attachment 3 is
a true and correct specimen thereof, as in full force and effect on
the date hereof without modification or waiver.
Terms for which meanings are provided in the Purchase Agreement are, unless
otherwise defined herein, used herein with such meanings.
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Chief Financial Officer
-2-
<PAGE>
CERTIFICATE AS TO
AFFILIATE AGREEMENTS
Furnished pursuant to Section 3.8 of the Purchase Agreement,
dated as of September 1, 1994 and modified as of November
30, 1994 and October 13, 1995 and amended and restated as of
February 7, 1996 (the "Purchase Agreement"), between NRE
HOLDINGS, INC., a Delaware corporation (the "Company"), and
MCIT PLC.
The undersigned hereby certifies that he is the Secretary of the
Company and that, as such, he is authorized to execute this certificate on
behalf of the Company and further certifies that:
(a) attached hereto as Attachment 1 is a true and
correct specimen of the Tax Sharing Agreement,
(b) attached hereto as Attachment 2 is a true and
correct copy of Amendment No. 1 to the Management Consulting
Agreement, and
(c) attached hereto as Attachment 3 is a true and
correct copy of the Intercompany Consulting Agreement,
in each case as in full force and effect on the date hereof without amendment,
waiver or other modification.
Terms for which meanings are provided in the Purchase Agreement are
used herein with such meanings.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company on this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Secretary
<PAGE>
CERTIFICATE AS TO
1995/1996 ACQUISITIONS
Furnished pursuant to Section 3.9 of the Purchase Agreement,
dated as of September 1, 1994 and modified as of November
30, 1994 and October 13, 1995 and amended and restated as of
February 7, 1996 (the "Purchase Agreement"), between NRE
HOLDINGS, INC., a Delaware corporation (the "Company"), and
MCIT PLC.
The undersigned hereby certifies that he is Chief Financial Officer
of the Company and that, as such, he is authorized to execute this certificate
on behalf of the Company and further certifies that
(a) attached hereto as Attachments 1, 2, 3 and 4 are true
and correct specimens of the Cincinnati Acquisition Agreement, the
Virginia Acquisition Agreement, the Colorado Acquisition Agreement
and the Tennessee Stock Purchase Agreement, respectively, each of
which is in full force and effect on the date hereof in the forms of
attached hereto;
(b) each of the Cincinnati Acquisition and Virginia
Acquisition has been consummated in accordance with the terms of the
respective Acquisition Agreement on the date hereof without the
waiver or forbearance to exercise any right or condition thereunder
by the Company or any Subsidiary;
(c) the series of transactions comprising the closings under
each of the Cincinnati Acquisition Agreement and Virginia Acquisition
Agreement shall be consummated concurrently with the Closing; and
(d) attached hereto as Attachments 5 and 6 are true and
correct copies of the Colorado Acquisition Agreement and the
Tennessee Acquisition Agreement, each of which was in full force and
effect without modification or waiver on July 5, 1995 and November
21, 1995, respectively, when each of the Colorado Acquisition and
Tennessee Acquisition was consummated in accordance with the terms of
such Acquisition Agreement, in each case without the waiver of
forbearance to exercise any right or condition thereunder by the
Company or any Subsidiary.
<PAGE>
Terms for which meanings are provided in the Purchase Agreement are used
herein with such meanings.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Chief Financial Officer
-2-
<PAGE>
CERTIFICATE AS TO
SENIOR CREDIT AGREEMENT
Furnished pursuant to Section 3.10 of the Purchase
Agreement, dated as of September 1, 1994 and modified as of
November 30, 1994 and October 13, 1995 and amended and
restated as of February 7, 1996 (the "Purchase Agreement"),
between NRE HOLDINGS, INC., a Delaware corporation (the
"Company"), and MCIT PLC.
The undersigned hereby certifies that he is Chief Financial Officer
of the Company and that, as such, he is authorized to execute this certificate
on behalf of the Company and further certifies that:
(a) attached hereto as Attachment 1 is a true and correct
specimen of the Senior Credit Agreement which is in full force and
effect on the date hereof without modification or waiver;
(b) the "Closing Date" under, and as defined in, the Senior
Credit Agreement has occurred without the waiver by the Senior
Lenders or the Senior Agent of any condition, obligation, covenant or
other requirement;
(c) prior to or concurrently with the Closing, NRE has
obtained proceeds of at least $45,000,000 in immediately available
funds from the making of the Term Loan A under, and as defined in,
the Senior Credit Agreement and at least $40,000,000 in immediately
available funds from the making of the Term Loan B under, and as
defined in, the Senior Credit Agreement;
(d) all of the representations and warranties contained in
Section 8 of the Senior Credit Agreement are true and correct as if
now made, and, by delivering to the Purchaser this certificate, the
Company hereby represents and warrants to the Purchaser as to each of
the matters set forth in such Section as if they were set forth in
this certificate in their entirety;
(e) attached hereto as Attachment 2 is a true and correct
specimen of an amendment to the Senior Pledge Agreement executed and
delivered by the Company, and accepted by the Senior Agent, on the
date hereof (the "Pledge Amendment");
<PAGE>
(f) attached hereto as Attachments 3 and 4 are true
and correct specimens of the Senior Security Amendment No. 1
and Senior Security Amendment No. 2 as each is in effect on
the date hereof without waiver or modification;
(g) the Senior Pledge Agreement is in full force and
effect in the form executed and delivered by the Company on
the Original Closing Date, except as amended by the Pledge
Amendment, Senior Security Amendment No. 1 and Senior
Security Amendment No. 2;
(h) the Senior Recovery Guaranty is in full force and
effect in the form executed and delivered by NRE on the
Original Closing Date, except as amended by the Senior
Security Amendment No. 1 and Senior Security Amendment
No. 2;
(i) no Default has occurred and is continuing (including
pursuant to Section 6.2.8 of the Purchase Agreement) as the result of
the execution and delivery by the Company and NRE of the Senior
Credit Agreement and the taking of all actions required to be taken
by the terms thereof in connection with the closing thereunder.
Terms for which meanings are provided in the Purchase Agreement are used
herein with such meanings.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company on this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Chief Financial Officer
-3-
<PAGE>
CERTIFICATE AS TO
PMI AGREEMENT
Furnished pursuant to Section 3.11 of the Purchase
Agreement, dated as of September 1, 1994 and modified as of
November 30, 1994 and October 13, 1995 and amended and
restated as of February 7, 1996 (the "Purchase Agreement"),
between NRE HOLDINGS, INC., a Delaware corporation (the
"Company"), and MCIT PLC.
The undersigned hereby certifies that he is Chief Financial Officer
of the Company and that, as such, he is authorized to execute this certificate
on behalf of the Company and further certifies that:
(a) attached hereto as Attachment 1 is a true and correct
specimen of the PMI Agreement which is in full force and effect on
the date hereof without modification or waiver; and
(b) attached hereto as Attachment 2 is a true and correct
specimen of the PMI Warrant which was issued on the date hereof to
PMI or its nominee, without amendment or other modification;
(c) all of the conditions contained in Sections 7.1 through
7.35 of the PMI Agreement to the occurrence of the "Closing Date"
under, and as defined in, the PMI Purchase Agreement, have been
satisfied without the waiver by the PMI of any condition, obligation,
covenant or other requirement;
(d) all of the representations and warranties contained in
Sections 4.1 through 4.24 of the PMI Agreement are true and correct
as if now made and, by delivering to the Purchaser this certificate,
the Company hereby represents and warrants to the Purchaser as to
each of the matters set forth in such Section as if they were set
forth in this certificate in their entirety; and
(e) prior to or concurrently with the Closing, NRE has
obtained proceeds of at least $14,775,000 in immediately available
funds from the issuance of the PMI Notes in an aggregate principal
amount of at least $15,000,000; and
(f) attached hereto as Attachment 3 is a true and
correct speciman of the BKC/PMI Intercreditor Letter which
<PAGE>
is in full force and effect on the date hereof without
modification or waiver.
Terms for which meanings are provided in the Purchase Agreement are used
herein with such meanings.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company on this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Chief Financial Officer
-2-
<PAGE>
CERTIFICATE AS TO
FFCA ARRANGEMENTS
Furnished pursuant to Section 3.12 of the Purchase
Agreement, dated as of September 1, 1994 and modified as of
November 30, 1994 and October 13, 1995 and amended and
restated as of February 7, 1996 (the "Purchase Agreement"),
between NRE HOLDINGS, INC., a Delaware corporation (the
"Company"), and MCIT PLC.
The undersigned hereby certifies that he is Chief Financial Officer
of National Restaurant Enterprises, Inc., a Delaware corporation ("NRE") and
that, as such, he is authorized to execute this certificate on behalf of NRE
and further certifies
that:
(a) attached hereto as Attachment 1 is a true and correct
specimen of the FFCA Sale/Leaseback Agreement which is in full force
and effect on the date hereof without modification, amendment or
waiver; and
(b) attached hereto as Attachments 2 and 3 are true and
correct specimens of the FFCA Leases entered into by AmeriKing
Tennessee and AmeriKing Virginia, respectively, which are in full
force and effect on the date hereof without modification, amendment
or waiver;
(c) attached hereto as Attachments 4 and 5 are true and
correct specimens of the FFCA Guaranties entered into by NRE with
respect to the obligations of AmeriKing Tennessee and AmeriKing
Virginia, respectively, under the FFCA Leases, which are in full
force and effect on the date hereof without modification, amendment
or waiver;
(d) attached hereto as Attachment 6 is a true and correct
specimen of the FAC Note executed and delivered by AmeriKing
Colorado, which is in full force and effect on the date hereof
without modification or amendment;
(e) prior to or concurrently with the Closing, (i) AmeriKing
Tennessee and AmeriKing Virginia have received net proceeds of at
least $821,000.00 in immediately available funds from the FFCA
Sale/Leaseback Agreement.
Terms for which meanings are provided in the Purchase Agreement are used
herein with such meanings.
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company on this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Chief Financial Officer
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<PAGE>
CERTIFICATE AS TO
COMPLIANCE
Furnished pursuant to Section 3.15 of the Purchase
Agreement, dated as of September 1, 1994 and modified as of
November 30, 1994 and October 13, 1995 and amended and
restated as of February 7, 1996 (the "Purchase Agreement"),
between NRE HOLDINGS, INC., a Delaware corporation (the
"Company"), and MCIT PLC.
The undersigned hereby certifies that he is a Vice President of the
Company and that, as such, he is authorized to execute this certificate on
behalf of the Company and further certifies that:
(a) the representations and warranties of the Company
contained in the Purchase Agreement and those made in writing by or
on behalf of the Company in any other Purchase Document were correct
when made and are correct on the date hereof;
(b) the Company has performed and complied with all
agreements and conditions contained in the Purchase Agreement
required to be performed or complied with by it prior to or at the
Closing;
(c) as of the time of the Closing (and after giving
effect to all of the Pro Forma Transactions) no Default has
occurred and is continuing;
(d) no litigation, arbitration or governmental investigation
or proceeding is pending or, to the knowledge of the Company,
threatened against NRE, the Company, any Subsidiary or any
Restaurant;
(i) which affects any of their respective
properties, business prospects, operation, earnings, assets,
liabilities or condition (financial or otherwise) which is
reasonably likely, singly or in the aggregate, to have a
Materially Adverse Effect on the Company and Subsidiaries,
or
(ii) which relates to any Acquisition Agreement,
any Acquisition, the Purchase Agreement or the Subject
Securities; and
<PAGE>
(e) no development has occurred in any such litigation,
arbitration or governmental investigation or proceeding so disclosed
which might have a Materially Adverse Effect on the Company and
Subsidiaries;
Terms for which meanings are provided in the Purchase Agreement are used
herein with such meanings.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Vice President
-2-
<PAGE>
CERTIFICATE AS TO
SOLVENCY
Furnished pursuant to Section 3.16 of the Purchase
Agreement, dated as of September 1, 1994 and modified as of
November 30, 1994 and October 13, 1995 and amended and
restated as of February 7, 1996 (the "Purchase Agreement"),
between NRE HOLDINGS, INC., a Delaware corporation (the
"Company"), and MCIT PLC.
The undersigned hereby certifies that he is a Vice President of the
Company and that, as such, he is authorized to execute this certificate on
behalf of the Company and further certifies that, on the date hereof and based
on the financial information referred to in Section 5.4 of the Purchase
Agreement and on the earnings projections set forth in the Financing
Memorandum:
(a) the fair salable value of the assets of the Company and
NRE, on a consolidated and going concern basis, is greater than the
total amount of their liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, whether or not
includable on its balance sheet in accordance with generally accepted
accounting principles) on a consolidated basis;
(b) the fair salable value of the assets of the Company and
NRE, on a consolidated and going concern basis, is greater than the
amount that will be required to pay their probable liabilities on a
consolidated basis as they become absolute and matured;
(c) the Company and NRE, on a consolidated basis, will be
able to realize upon their assets, or will have sufficient cash flow,
to enable them to pay their debts, other liabilities, contingent
obligations and other commitments on a consolidated basis as they
mature in the ordinary course of business; and
(d) the Company and NRE, on a consolidated basis, do not
have an unreasonably small capital with which to engage in their
anticipated businesses.
For purposes of the foregoing the "fair salable value" of any asset or
investment was determined on the basis of the amount which may be realized
within a reasonable time, either through collection or sale of such asset or
investment at the regular
<PAGE>
market value, conceiving the latter as the amount which could be obtained
therefor within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling conditions.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on
behalf of the Company on this 7th day of February, 1996.
------------------------------
Name: Joel Aaseby
Title: Vice President
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<PAGE>
NRE HOLDINGS, INC.
c/o The Jordan Company
9 West 57th Street
New York, New York 10019
February 7, 1996
MCIT PLC
c/o Jordan/Zalaznick Advisers, Inc.
9 West 57th Street
New York, New York 10019
Re: Purchase Agreement, dated as of September 1, 1994,
as modified as of November 30, 1994 and October
13, 1995 and amended and restated in its entirety
as of February 7, 1996 (as so modified and amended
and restated, and as further amended, supplemented
or otherwise modified in accordance with the terms
thereof, the "Purchase Agreement"), between NRE
HOLDINGS, INC., a Delaware corporation (the
"Company), and MCIT PLC.
Gentlemen:
Pursuant to Section 3.17 of the Purchase Agreement, the Company
hereby undertakes to the Purchaser that the Company will not issue to any
Jordan Party other than the Purchaser any Common Shares (or any other
securities exchangeable for or convertible into Common Shares) unless at the
time the Company issues any Common Shares (or any securities convertible into
or exchangeable for Common Shares) to such Jordan Party, the Company shall
offer to sell to the Purchaser at the same price on the same terms offered to
such Jordan Party (provided that the Purchaser shall not be required to buy
any other securities in order to buy such Common Shares or convertible
securities unless such other securities are also being purchased by such other
Jordan Party) a portion of such Common Shares or convertible securities such
that, after giving effect to such purchases by such Jordan Party and MCIT, the
fully-diluted interests of all Jordan Parties and MCIT, respectively, will not
have been altered relative to one another by any such purchase. The Purchaser
may elect to buy all or any portion of the Common Shares or convertible
securities offered or may decline to purchase any.
<PAGE>
Terms which are defined in the Purchase Agreement are used herein
with such meanings.
NRE HOLDINGS, INC.
By
----------------------------
Name: Joel Aaseby
Title: Vice President
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<PAGE>
EXHIBIT Q
[Mayer, Brown & Platt Letterhead]
CLOS DATE
MCIT PLC
c/o Jordan/Zalaznick Advisers, Inc.
9 West 57th Street
New York, New York 10019
Re: NRE HOLDINGS, INC.
Gentlemen/Ladies:
This letter is furnished to you pursuant to Section 3.17 of the
Purchase Agreement, dated as of September 1, 1994, as modified as of November
30, 1994 and October 13, 1995 and as amended and restated in its entirety as
of February 7, 1996 (as so modified and amended and restated, the "Purchase
Agreement"), between NRE Holdings, Inc., a Delaware corporation (the
"Company"), and MCIT PLC (the "Purchaser"), amending and restating in its
entirety the Purchase Agreement. Unless otherwise defined, terms used herein
have the meanings provided in the Purchase Agreement.
We have acted as special counsel for the Company, National Restaurant
Enterprises, Inc., a Delaware corporation ("NRE" and, collectively, with the
Company, the "Company Parties") in connection with the consummation of the
Acquisitions and the negotiation of the Purchase Agreement, the Notes and
other Subject Securities, the Deferred Limited Interest Guaranty, the Pledge
Agreement and each other Purchase Document and the Stockholders Agreement, and
we have participated in the Closing on the date hereof held in connection with
the consummation of the Tennessee Acquisition, the Cincinnati Acquisition and
the Virginia Acquisition.
In that regard, we have examined originals, or copies identified to
our satisfaction as being true copies, of such records, documents and other
instruments as we have deemed necessary for the purposes of this opinion. We
have been furnished with, and with the consent of the Purchaser have relied
upon, certificates of the Company Parties with respect to certain
-1-
<PAGE>
factual matters. In addition, we have relied upon (a) the representations of
the Company Parties set forth in the Purchase Agreement and each Purchase
Document and other agreements and instruments furnished to you on the date
hereof in connection with the financing and transactions contemplated by the
Purchase Agreement, as to factual matters, and (b) certificates and assurances
from public officials as we have deemed necessary for purposes of expressing
the opinions expressed herein.
In our examination, we have assumed, with your permission, and
without independent investigation, that:
(a) the signatures of persons (other than any person signing on
behalf of any Company Party) signing all documents in connection with
which this opinion is rendered are genuine and authorized;
(b) all documents submitted to us as copies, whether
certified or not, conform to authentic original documents;
(c) all parties (other than any Company Party) to the documents
reviewed by us have full power and authority to execute, deliver and
perform thereunder and under the documents required or permitted to
be delivered and performed thereunder, and all such documents have
been duly authorized by all necessary corporate or other actions on
the part of such parties and others, have been duly executed by such
parties and have been duly delivered by such parties; and
(d) no consent, approval, authorization, declaration or filing
by or with any governmental commission, board or agency is required
for the valid execution and delivery by you of the Purchase Agreement
and the Purchase Documents.
Based on the foregoing, and subject to the limitations,
qualifications, and exceptions set forth in lettered paragraphs below, we are
of the opinion that:
1. Organization, etc. Each Company Party is a corporation duly
incorporated, validly existing and in good standing under the laws of
the state of its incorporation and has full power and authority to
own and hold its property and conduct its business substantially as
presently conducted by it. The Company has full power and authority
to enter into and perform its obligations under the Purchase
Agreement, the Pledge Agreement, each other Purchase Document and the
Stockholders' Agreement and to issue and sell and carry out the terms
of the Notes, the Preferred Stock and the Common Stock. NRE has full
power and
-2-
<PAGE>
authority to enter into and perform the {Deferred Limited
Interest Guaranty}{Intercompany Note}.
2. Due Authorization. The execution and delivery by each
Company Party of the Purchase Agreement, the Notes, each other
Purchase Document, the Stockholders Agreement, the Pledge Agreement,
the Deferred Limited Interest Guaranty, the Senior Credit Agreement
and the Acquisition Agreement (collectively, the "Transaction
Documents") to which it is a party and the performance by each
Company Party of its obligations thereunder
(a) have been duly authorized by all necessary corporate
action,
(b) [to the best of our knowledge,] do not require any
Approval which has not been obtained,
(c) do not and will not conflict with, result in any violation
of, or constitute any default under, (i) any provision of any Organic
Document, (ii) Regulation G, T, U, or X of the F.R.S. Board or to the
best of our knowledge, any present law or governmental regulation
(including [, other than (y) ______________________,] or (z) as would
not have a material adverse affect on the properties, business,
results, operations or conditions of either of the Company or NRE, or
(iii) under any county, city, municipal or other local ordinances or
regulations, as to which we express no opinion, or (iv) to the best
of our knowledge, of any Contractual Obligation or court decree or
order applicable to any Company Party, and
(d) except for Liens created under and pursuant to the Senior
Credit Agreement, the Senior Pledge Agreement and the Purchase
Documents, will not, to the best of our knowledge, result in or
require the creation or imposition of any Lien on any of any Company
Party's properties pursuant to the provisions of any other
Contractual Obligations other than as contemplated or permitted by
the Senior Credit Agreement.
3. Validity, etc. Each of the Purchase Agreement, the Pledge
Agreement, each other Purchase Document and the Stockholders'
Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The
Deferred Limited Interest Guaranty has been duly executed and
delivered by NRE and constitutes the legal, valid and binding
obligation of NRE, enforceable against NRE in accordance with its
terms.
-3-
<PAGE>
4. Collateral. The security interest created in favor of the
Mezzanine Agent under the Pledge Agreement constitutes a valid
security interest for the benefit of the Mezzanine Agent and the
other Noteholders to secure the Obligations in all right, title and
interest of the Company in and to the Collateral (as defined in the
Pledge Agreement) which will be perfected upon the delivery by the
Senior Agent of the Collateral (as so defined) to the Mezzanine Agent
in accordance with the FNBB Intercreditor Letter.
5. Litigation. Except as disclosed in Item 5.7 ("Litigation")
of the Disclosure Schedule, to the best of our knowledge, there is no
pending or threatened litigation, arbitration, or governmental
investigation or proceeding against any Company Party or to which any
of its properties is subject which purports to affect the legality,
validity, binding effect or enforceability of the Purchase Agreement,
any other Purchase Document or any Acquisition Agreement or the
Merger.
6. Government Regulation. The Company is neither an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, nor a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7. Capital Stock. The authorized Capital Stock of the
Company is ______ shares, consisting of ______ Preferred
Shares and _____ Common Shares of which
(a) ________ {Class A}{Series} Preferred Shares,
(b) ________ {Class __}{Series} Preferred Shares,
(c) Class __ Common Shares, and
(d) Class __ Common Shares
are issued and outstanding in accordance with Item 3.5
("Stockholders") of the Disclosure Schedule, and the shares of the
________ authorized Preferred Shares and ________ Common Shares which
are unissued,
(e) ________ {Class __}{Series} Preferred Shares are
reserved for issuance from time to time in satisfaction
of payment-in-kind obligations,
-4-
<PAGE>
(f) ________ {Class __}{Series} Common Shares are
reserved for issuance upon conversion of the Class __
Common Shares,
(g) ________ Class A Common Shares are reserved for
issuance upon exercise of the FNBB Warrant,
(h) ________ Class A Common Shares and ________ Class __
Common Shares will be unissued and unreserved and subject to
the Preemption Letter.
All outstanding Preferred Shares and Common Shares have been duly
authorized and are validly issued, fully paid and nonassessable, and,
except for the Preemption Letter, there are no preemptive rights of
any Stockholders with respect to the issuance of any of the unissued
Common Shares.
8. Securities Act and Trust Indenture Act. Based, in part, upon
the Company's representations in the Purchase Agreement, and the
representations of the Purchaser and other investors in the
Stockholders' Agreement (and the Subscription Agreements referred to
therein) it is not necessary in connection with the offer, issue,
sale and delivery of the Notes, the Preferred Shares, the Class A
Common Shares or the Class __ Common Shares issuable in accordance
with the terms thereof upon the offer, issue, sale and delivery of
the shares of Preferred Shares or the Class A Common Shares, Class __
Common Shares being purchased concurrently with the Closing, to
register the Notes, the Preferred Shares, Class A Common Shares,
Class __ Common Shares under the Securities Act or to qualify an
indenture with respect to such Notes under the Trust Indenture Act of
1939, as now in effect and no registration of any class of debt or
equity securities of the Company under the Securities Exchange Act of
1934, as now in effect, is required. The above opinions are based
upon the offer, issue, sale and delivery of the foregoing securities
of the Company being exempt from the registration requirements of the
Securities Act, the availability of which exemption requires that
certain information be provided by the Company to purchasers of the
Company's securities referred to above. For purposes of such
opinions, we have assumed without independent inquiry that such
information was when provided by the Company and is on the date
hereof accurate and complete and nothing has come to our attention
which leads us to believe that such information was not accurate and
complete.
9. Company Certificate of Incorporation. The Company
Certificate of Incorporation has been duly executed,
acknowledged and filed with the Secretary of State of the
-5-
<PAGE>
State of Delaware. The terms of Article ________ of such
Certificate of Incorporation are valid under the laws of
Delaware.
The opinions set forth above are subject to the following
qualifications:
(A) Our opinions expressed herein are limited to the laws of
the State of New York, the Federal law of the United States and the
General Corporation Law of the State of Delaware and we do not
express any opinion concerning any other law.
(B) Our opinions above are subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' rights generally.
(C) Our opinions above are further subject to the effect of
general principles of equity, including, without limitation, concepts
of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at
law).
(D) Certain of the remedial provisions contained in certain
Transaction Documents may be unenforceable in whole or in part, but
the inclusion of such provisions does not render such Transaction
Documents invalid, and each such Transaction Document contains, in
our opinion, adequate remedial provisions for the practical
realization of the rights and benefits purported to be afforded by
such Transaction Documents; provided, however, that rights to
indemnification and contribution may be limited by federal or state
securities laws or regulations or the public policy underlying such
laws or regulations.
(E) We have not been requested to render, and with your
permission we do not express, any opinion as to (i) the applicability
of Section 548 of the Bankruptcy Code, Article 10 of the New York
Debtor & Creditor Law or other law relating to fraudulent
conveyances, transfers and obligations, or to fraudulent transfers
and conveyances generally or (ii) the applicability or effect of any
preference or similar law on any Collateral security provided under
any of the Purchase Documents.
Very truly yours,
MAYER, BROWN & PLATT
-6-
<PAGE>
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON SEPTEMBER
1, 1994 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. INTEREST IN RESPECT OF THIS SECURITY IS SUBORDINATED TO THE PAYMENT
IN FULL OF ALL ACCRUED INTEREST ON THE MCIT NOTES (AS DEFINED BELOW) AND THE
PRINCIPAL AMOUNT OF THIS SECURITY AND INTEREST IN RESPECT HEREOF IS SUBJECT TO
SET-OFF, IN EACH CASE AS DESCRIBED IN THIS NOTE. THE TRANSFER OF THIS SECURITY
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE MANAGEMENT SUBSCRIPTION
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND CERTAIN
MANAGEMENT AND RELATED INVESTORS THEREIN, AND THE COMPANY'S STOCKHOLDERS'
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS
STOCKHOLDERS, AND AS AMENDED, SUPPLEMENTED, OR MODIFIED FROM TIME TO TIME. THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS SECURITY UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE.
NRE HOLDINGS, INC.
12.75% Note
due August 31, 2005
New York, New York
$1,224,000 November 30, 1995
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to Jaro Enterprises, Inc. (the "Holder"), on
August 31, 2005, the principal amount of $1,224,000, with interest (computed
on the basis of a 365-day year) on the unpaid balance of such principal amount
at the rate of 12.75% per annum, payable semi-annually on each May 31 and
November 30 (each, an "Interest Payment Date") after the date hereof,
commencing on May 31, 1996, until such unpaid principal shall become due and
payable (whether at maturity or at a date fixed for prepayment or by
declaration or otherwise), and with interest on any
<PAGE>
overdue principal and premium, if any, and (to the extent permitted by
applicable law) on any overdue interest at the rate of 14.75% per annum,
payable semi-annually as aforesaid or, at the option of the registered holder
hereof, on demand.
Payments of principal and interest on this Note shall be made in
lawful money of the United States of America by wire transfer to the account
of Freeborn & Peters, account number 065123, at the Mega Bank of Arapahoe, ABA
Transit Number 107005319, or at such other office or agency in New York, New
York as the Company shall have designated by written notice to the Holder.
This Note is one of the Company's 12.75% Notes due August 31, 2005
(the "Seller Notes"), originally issued in the aggregate principal amount of
$4,400,000 pursuant to the Purchase and Sale Agreement (as defined below) and
a Management Subscription Agreement, dated as of September 1, 1994 (the
"Management Subscription Agreement"), among the Company, Lawrence Jaro,
William Osborn, Gary Hubert and Joel Aaseby. The Company may offset and apply
any amounts becoming due hereunder from time to time against all determined
claims which the Company has against the Holder pursuant to Section 6.5(c) of
the Purchase and Sale Agreement, dated as of September 1, 1994 (the "Purchase
and Sale Agreement"), among the Company and the parties listed on the
signature pages thereof or Section 8.4 of the Stockholders Agreement, dated as
of September 1, 1994 (as amended and modified in accordance with its terms,
the "Stockholders Agreement"), among the Company and the parties listed on the
signature pages thereof.
The Company may from time to time voluntarily prepay all or any part
(in an integral multiple of $1,000) of the outstanding principal amount of
this Note and all other Seller Notes, pro rata according to the outstanding
principal amounts thereof; provided, that (a) voluntary prepayments shall be
accompanied by payment in full of interest accrued on such principal amount
and not yet paid, (b) the Company shall have given the Holder and each other
holder of a Seller Note written notice of each voluntary prepayment not less
than 10 days and not more than five days prior to the date fixed for such
prepayment (and such notice shall specify such date, the aggregate principal
amount of the Seller Notes to be prepaid on such date, the principal amount of
each Seller Note to be prepaid on such date, and the interest accrued and not
paid on such principal amount to be prepaid) and such notice shall be
accompanied by an officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of such
fulfillment, (c) the Company shall have received the prior written consent to
such prepayment from holders of the MCIT Notes (as defined below) owning 51%
or more of the then outstanding principal amount of the MCIT Notes and (d) the
Company shall have received the prior written consent to such prepayment from
holders of the Senior Debt (as such term is defined in the Amended and
Restated Deferred Limited Interest Guaranty dated as of February 7, 1996, from
National Restaurant Enterprises, Inc. to MCIT PLC ("MCIT")).
The Company hereby agrees that, in the event that the Company
voluntarily prepays (as opposed to a mandatory pre-payment) all or any part of
the outstanding principal amount of the
-2-
<PAGE>
$11,000,000 aggregate principal amount of 12.75% notes due August 31, 2005
(together with all amendments thereto and all substitutions, replacements and
renewals thereof, the "MCIT Notes") issued by the Company to MCIT pursuant to
that certain Purchase Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "MCIT Purchase
Agreement"), between the Company and MCIT, the Company shall, concurrently
with such prepayment, make a prepayment of all Seller Notes (including this
Note) in an aggregate amount equal to that percentage of the then outstanding
principal amount of all Seller Notes which the amount of such voluntary
prepayment of the MCIT Notes is of the then aggregate outstanding principal
amount of all outstanding MCIT Notes.
If one or more of the following events (each an "Event of Default")
shall have occurred and be continuing:
(a) the Company shall default in the payment or prepayment
when due of any principal of this Note;
(b) the Company or any Restricted Subsidiary (as such term
is defined in the Second Amended and Restated Credit Agreement, dated
February 7, 1996, among National Restaurant Enterprises, Inc., the
Company, and The First National Bank of Boston, as Agent) shall (i)
become insolvent or generally fail to pay, or admit in writing its
inability to pay, debts as they become due; or (ii) apply for,
consent to or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Restricted
Subsidiary or any property of any thereof or make a general
assignment for the benefit of creditors; or (iii) in the absence of
such application, consent or acquiescence, permit or suffer to exist
the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any Restricted Subsidiary or for a
substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged
within 60 days; or (iv) permit or suffer to exist the commencement of
any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Company or any Restricted Subsidiary, and, if such case or proceeding
is not commenced by the Company or such Restricted Subsidiary, such
case or proceeding shall be consented to or acquiesced in by the
Company or such Restricted Subsidiary or shall result in the entry of
any order for relief or shall remain for 60 days undismissed;
(c) any Change of Control (as defined in the MCIT Purchase
Agreement referred to below); or
(d) all or any portion of the outstanding principal amount
of the MCIT Notes shall have become immediately due and payable prior
to the stated maturity thereof (in which event, the Company shall
immediately provide written notice to the Holder);
-3-
<PAGE>
then, and in every such event, the Holder may, by notice to the Company and to
the holders of the MCIT Notes and the Senior Debt, declare all or any portion
of the unpaid principal amount of this Note together with accrued interest
thereon to be due and payable, whereupon such portions of this Note (and
accrued interest thereon) shall be and become due and payable immediately
following delivery of such notice to the Company and to the holders of the
MCIT Notes and the Senior Debt without further notice, demand or presentment,
all of which are hereby waived by the Company; provided, that in the case of
any of the Events of Default specified in clause (b) of this paragraph, such
portions of this Note (together with accrued interest thereon) shall
immediately (and without notice) become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company.
This Note is one of the "Seller Notes" referred to in, and is secured
by, the Mezzanine Pledge Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Mezzanine Pledge
Agreement"), between the Company and MCIT, individually and as agent (in such
capacity, the "Mezzanine Agent") for itself and the other Noteholders (as
defined in the Pledge Agreement), and the Holder, by acceptance of this Note,
authorizes the Mezzanine Agent to take all actions from time to time under the
Pledge Agreement as shall be directed by all or any holders of the MCIT Notes.
Each holder of this Seller Note, by acceptance hereof, agrees to be bound by
the representations made and obligations undertaken by each "Noteholder" under
Article IV of the Mezzanine Pledge Agreement.
Notwithstanding any provision of this Note to the contrary, the
Company covenants and agrees, and the Holder by acceptance of this Note
likewise covenants and agrees, that each payment of interest to become due on
the Seller Notes shall be subordinated (i.e., no such payment shall be
permitted to be made by or on behalf of the Company or from any source
whatsoever, including from any distribution of its assets in connection with
any proceeding of the nature referred to in Section 7.1.3 of the MCIT Purchase
Agreement, and if notwithstanding the foregoing, any such payment is made, it
shall not be received and retained by the Holder hereof) to the prior payment
in full in cash of all payments of interest accrued on the MCIT Notes, if any,
which payments of interest on the MCIT Notes (the "Benefitted Payment") shall
have become due thereunder either prior to or not more than 160 days after the
date on which such payment of interest on this Note shall have become due (the
"Blocked Seller Payment"); provided, however, that, at any time when any
Blocked Seller Payment shall be subordinated by the foregoing provision only
to Benefitted Payments which became due after the date on which such Blocked
Seller Payment became due, the Company may, at any time when making a partial
payment of such Benefitted Payment on all MCIT Notes, also make a partial
payment of such Blocked Seller Payment on all Seller Notes in an aggregate
amount which is proportionate to such partial payment of the Benefitted
Payment according to the then respective aggregate outstanding principal
amounts of the MCIT Notes and the Seller Notes. This paragraph shall
constitute a continuing offer to and covenant with all persons who become
holders of, or continue to hold, MCIT Notes (irrespective of whether such MCIT
Notes were issued or acquired before or after the issuance of this Note). The
provisions of this paragraph are made for the benefit of all present and
future holders of MCIT Notes and their successors and assigns, and shall be
enforceable by
-4-
<PAGE>
them directly against the Holder. If there has occurred and is continuing a
default in the payment of all or any portion of the interest on any MCIT
Notes, no payment shall be made by or on behalf of the Company with respect to
any interest due in respect of this Note, and by virtue of accepting this Note
and the benefits hereof, the Holder shall not be entitled, and will not take
any action, including any judicial process, to accelerate, demand payment or
enforce any indebtedness in respect of interest payable on this Note or any
other claim with regard to interest payable on this Note. If, notwithstanding
the foregoing sentence, the Holder shall have received, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment of, or on account of, interest in respect of this Note that was
prohibited by this paragraph, before all interest accrued on the MCIT Notes
has been paid in full in cash, then and in such event such payments or
distributions shall be received and held in trust for the holders of the MCIT
Notes and promptly paid over or delivered to the holders of the MCIT Notes
remaining unpaid to the extent necessary to pay in full in cash such accrued
interest on the MCIT Notes in accordance with their terms after giving effect
to any concurrent payment or distribution to the holders of the MCIT Notes,
provided that any such payment which is, for any reason, not so paid over or
delivered shall be held in trust by the Holder for the holders of the MCIT
Notes.
In addition to the subordination provisions of the preceding
paragraph in favor of the holders of the MCIT Notes, this Note is also hereby
expressly subordinated to the limited guaranty, dated September 1, 1994 (the
"Senior Recovery Guaranty"), executed and delivered by the Company in favor of
the Senior Lenders (as defined in the MCIT Purchase Agreement) and Article
VIII of the MCIT Purchase Agreement (and all related definitions) shall apply
to this Note mutatis mutandis and the obligations of the Company under this
Note shall be deemed "Obligations" as used in such Article VIII of the MCIT
Purchase Agreement.
No present or future holder of the MCIT Notes shall be prejudiced in
any way in the rights of such holder to enforce subordination of the Seller
Notes by any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder of the MCIT Notes,
regardless of any knowledge thereof any such holder of the MCIT Notes may have
or be otherwise charged with. Without limiting the foregoing, no right of any
present or future holder of the MCIT Notes to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by (a) any
refunding, refinancing, extension or renewal of the MCIT Purchase Agreement or
any amendment, modification or supplement thereof, (b) any sale, exchange,
release or other similar transaction with respect to any property by
whomsoever at any time pledged or mortgaged to secure the MCIT Notes, (c) any
release of any Person (as defined in the MCIT Purchase Agreement) liable in
any manner for the payment or collection of amounts payable in respect of the
MCIT Notes, (d) any exercise or refraining from exercising of any rights
against the Company and others or (e) any application of any sums by
whomsoever paid or however realized to the payment of amounts payable in
respect of the MCIT Notes; provided, however, that the Company undertakes to
the Holder that the Company will not (x) foreshorten the final or scheduled
maturities of or interest on the MCIT Notes or increase the rate of interest
thereon or (y) release the lien of the Mezzanine Pledge Agreement or provide
for the application of proceeds of the Collateral (as defined therein) on a
non-pro rata basis with holders of MCIT
-5-
<PAGE>
Notes, in each case without the prior written consent of holders of Seller
Notes evidencing, in the aggregate, 51% or more of the aggregate outstanding
principal amount of the Seller Notes.
The Company agrees to reimburse the Holder upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal
expenses) incurred by the Holder in enforcing the obligations of the Company
under this Note.
-6-
<PAGE>
This Note is made and delivered in New York, New York and shall be
governed by the internal laws of the State of New York.
NRE HOLDINGS, INC.
By:
-----------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
-7-
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON SEPTEMBER
1, 1994 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. INTEREST IN RESPECT OF THIS SECURITY IS SUBORDINATED TO THE PAYMENT
IN FULL OF ALL ACCRUED INTEREST ON THE MCIT NOTES (AS DEFINED BELOW) AND THE
PRINCIPAL AMOUNT OF THIS SECURITY AND INTEREST IN RESPECT HEREOF IS SUBJECT TO
SET-OFF, IN EACH CASE AS DESCRIBED IN THIS NOTE. THE TRANSFER OF THIS SECURITY
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE MANAGEMENT SUBSCRIPTION
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND CERTAIN
MANAGEMENT AND RELATED INVESTORS THEREIN, AND THE COMPANY'S STOCKHOLDERS'
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS
STOCKHOLDERS, AND AS AMENDED, SUPPLEMENTED, OR MODIFIED FROM TIME TO TIME. THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS SECURITY UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE.
NRE HOLDINGS, INC.
12.75% Note
due August 31, 2005
New York, New York
$1,224,000 November 30, 1995
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to Jaro Enterprises, Inc. (the "Holder"), on
August 31, 2005, the principal amount of $1,224,000, with interest (computed
on the basis of a 365-day year) on the unpaid balance of such principal amount
at the rate of 12.75% per annum, payable semi-annually on each May 31 and
November 30 (each, an "Interest Payment Date") after the date hereof,
commencing on May 31, 1996, until such unpaid principal shall become due and
payable (whether at maturity or at a date fixed for prepayment or by
declaration or otherwise), and with interest on any
36160144
<PAGE>
overdue principal and premium, if any, and (to the extent permitted by
applicable law) on any overdue interest at the rate of 14.75% per annum,
payable semi-annually as aforesaid or, at the option of the registered holder
hereof, on demand.
Payments of principal and interest on this Note shall be made in
lawful money of the United States of America by wire transfer to the account
of Freeborn & Peters, account number 065123, at the Mega Bank of Arapahoe, ABA
Transit Number 107005319, or at such other office or agency in New York, New
York as the Company shall have designated by written notice to the Holder.
This Note is one of the Company's 12.75% Notes due August 31, 2005
(the "Seller Notes"), originally issued in the aggregate principal amount of
$4,400,000 pursuant to the Purchase and Sale Agreement (as defined below) and
a Management Subscription Agreement, dated as of September 1, 1994 (the
"Management Subscription Agreement"), among the Company, Lawrence Jaro,
William Osborn, Gary Hubert and Joel Aaseby. The Company may offset and apply
any amounts becoming due hereunder from time to time against all determined
claims which the Company has against the Holder pursuant to Section 6.5(c) of
the Purchase and Sale Agreement, dated as of September 1, 1994 (the "Purchase
and Sale Agreement"), among the Company and the parties listed on the
signature pages thereof or Section 8.4 of the Stockholders Agreement, dated as
of September 1, 1994 (as amended and modified in accordance with its terms,
the "Stockholders Agreement"), among the Company and the parties listed on the
signature pages thereof.
The Company may from time to time voluntarily prepay all or any part
(in an integral multiple of $1,000) of the outstanding principal amount of
this Note and all other Seller Notes, pro rata according to the outstanding
principal amounts thereof; provided, that (a) voluntary prepayments shall be
accompanied by payment in full of interest accrued on such principal amount
and not yet paid, (b) the Company shall have given the Holder and each other
holder of a Seller Note written notice of each voluntary prepayment not less
than 10 days and not more than five days prior to the date fixed for such
prepayment (and such notice shall specify such date, the aggregate principal
amount of the Seller Notes to be prepaid on such date, the principal amount of
each Seller Note to be prepaid on such date, and the interest accrued and not
paid on such principal amount to be prepaid) and such notice shall be
accompanied by an officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of such
fulfillment, (c) the Company shall have received the prior written consent to
such prepayment from holders of the MCIT Notes (as defined below) owning 51%
or more of the then outstanding principal amount of the MCIT Notes and (d) the
Company shall have received the prior written consent to such prepayment from
holders of the Senior Debt (as such term is defined in the Amended and
Restated Deferred Limited Interest Guaranty dated as of February 7, 1996, from
National Restaurant Enterprises, Inc. to MCIT PLC ("MCIT")).
The Company hereby agrees that, in the event that the Company
voluntarily prepays (as opposed to a mandatory pre-payment) all or any part of
the outstanding principal amount of the
-2-
36160144
<PAGE>
$11,000,000 aggregate principal amount of 12.75% notes due August 31, 2005
(together with all amendments thereto and all substitutions, replacements and
renewals thereof, the "MCIT Notes") issued by the Company to MCIT pursuant to
that certain Purchase Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "MCIT Purchase
Agreement"), between the Company and MCIT, the Company shall, concurrently
with such prepayment, make a prepayment of all Seller Notes (including this
Note) in an aggregate amount equal to that percentage of the then outstanding
principal amount of all Seller Notes which the amount of such voluntary
prepayment of the MCIT Notes is of the then aggregate outstanding principal
amount of all outstanding MCIT Notes.
If one or more of the following events (each an "Event of Default")
shall have occurred and be continuing:
(a) the Company shall default in the payment or prepayment
when due of any principal of this Note;
(b) the Company or any Restricted Subsidiary (as such term
is defined in the Second Amended and Restated Credit Agreement, dated
February 7, 1996, among National Restaurant Enterprises, Inc., the
Company, and The First National Bank of Boston, as Agent) shall (i)
become insolvent or generally fail to pay, or admit in writing its
inability to pay, debts as they become due; or (ii) apply for,
consent to or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Restricted
Subsidiary or any property of any thereof or make a general
assignment for the benefit of creditors; or (iii) in the absence of
such application, consent or acquiescence, permit or suffer to exist
the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any Restricted Subsidiary or for a
substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged
within 60 days; or (iv) permit or suffer to exist the commencement of
any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Company or any Restricted Subsidiary, and, if such case or proceeding
is not commenced by the Company or such Restricted Subsidiary, such
case or proceeding shall be consented to or acquiesced in by the
Company or such Restricted Subsidiary or shall result in the entry of
any order for relief or shall remain for 60 days undismissed;
(c) any Change of Control (as defined in the MCIT Purchase
Agreement referred to below); or
(d) all or any portion of the outstanding principal amount
of the MCIT Notes shall have become immediately due and payable prior
to the stated maturity thereof (in which event, the Company shall
immediately provide written notice to the Holder);
-3-
36160144
<PAGE>
then, and in every such event, the Holder may, by notice to the Company and to
the holders of the MCIT Notes and the Senior Debt, declare all or any portion
of the unpaid principal amount of this Note together with accrued interest
thereon to be due and payable, whereupon such portions of this Note (and
accrued interest thereon) shall be and become due and payable immediately
following delivery of such notice to the Company and to the holders of the
MCIT Notes and the Senior Debt without further notice, demand or presentment,
all of which are hereby waived by the Company; provided, that in the case of
any of the Events of Default specified in clause (b) of this paragraph, such
portions of this Note (together with accrued interest thereon) shall
immediately (and without notice) become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company.
This Note is one of the "Seller Notes" referred to in, and is secured
by, the Mezzanine Pledge Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Mezzanine Pledge
Agreement"), between the Company and MCIT, individually and as agent (in such
capacity, the "Mezzanine Agent") for itself and the other Noteholders (as
defined in the Pledge Agreement), and the Holder, by acceptance of this Note,
authorizes the Mezzanine Agent to take all actions from time to time under the
Pledge Agreement as shall be directed by all or any holders of the MCIT Notes.
Each holder of this Seller Note, by acceptance hereof, agrees to be bound by
the representations made and obligations undertaken by each "Noteholder" under
Article IV of the Mezzanine Pledge Agreement.
Notwithstanding any provision of this Note to the contrary, the
Company covenants and agrees, and the Holder by acceptance of this Note
likewise covenants and agrees, that each payment of interest to become due on
the Seller Notes shall be subordinated (i.e., no such payment shall be
permitted to be made by or on behalf of the Company or from any source
whatsoever, including from any distribution of its assets in connection with
any proceeding of the nature referred to in Section 7.1.3 of the MCIT Purchase
Agreement, and if notwithstanding the foregoing, any such payment is made, it
shall not be received and retained by the Holder hereof) to the prior payment
in full in cash of all payments of interest accrued on the MCIT Notes, if any,
which payments of interest on the MCIT Notes (the "Benefitted Payment") shall
have become due thereunder either prior to or not more than 160 days after the
date on which such payment of interest on this Note shall have become due (the
"Blocked Seller Payment"); provided, however, that, at any time when any
Blocked Seller Payment shall be subordinated by the foregoing provision only
to Benefitted Payments which became due after the date on which such Blocked
Seller Payment became due, the Company may, at any time when making a partial
payment of such Benefitted Payment on all MCIT Notes, also make a partial
payment of such Blocked Seller Payment on all Seller Notes in an aggregate
amount which is proportionate to such partial payment of the Benefitted
Payment according to the then respective aggregate outstanding principal
amounts of the MCIT Notes and the Seller Notes. This paragraph shall
constitute a continuing offer to and covenant with all persons who become
holders of, or continue to hold, MCIT Notes (irrespective of whether such MCIT
Notes were issued or acquired before or after the issuance of this Note). The
provisions of this paragraph are made for the benefit of all present and
future holders of MCIT Notes and their successors and assigns, and shall be
enforceable by
-4-
36160144
<PAGE>
them directly against the Holder. If there has occurred and is continuing a
default in the payment of all or any portion of the interest on any MCIT
Notes, no payment shall be made by or on behalf of the Company with respect to
any interest due in respect of this Note, and by virtue of accepting this Note
and the benefits hereof, the Holder shall not be entitled, and will not take
any action, including any judicial process, to accelerate, demand payment or
enforce any indebtedness in respect of interest payable on this Note or any
other claim with regard to interest payable on this Note. If, notwithstanding
the foregoing sentence, the Holder shall have received, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment of, or on account of, interest in respect of this Note that was
prohibited by this paragraph, before all interest accrued on the MCIT Notes
has been paid in full in cash, then and in such event such payments or
distributions shall be received and held in trust for the holders of the MCIT
Notes and promptly paid over or delivered to the holders of the MCIT Notes
remaining unpaid to the extent necessary to pay in full in cash such accrued
interest on the MCIT Notes in accordance with their terms after giving effect
to any concurrent payment or distribution to the holders of the MCIT Notes,
provided that any such payment which is, for any reason, not so paid over or
delivered shall be held in trust by the Holder for the holders of the MCIT
Notes.
In addition to the subordination provisions of the preceding
paragraph in favor of the holders of the MCIT Notes, this Note is also hereby
expressly subordinated to the limited guaranty, dated September 1, 1994 (the
"Senior Recovery Guaranty"), executed and delivered by the Company in favor of
the Senior Lenders (as defined in the MCIT Purchase Agreement) and Article
VIII of the MCIT Purchase Agreement (and all related definitions) shall apply
to this Note mutatis mutandis and the obligations of the Company under this
Note shall be deemed "Obligations" as used in such Article VIII of the MCIT
Purchase Agreement.
No present or future holder of the MCIT Notes shall be prejudiced in
any way in the rights of such holder to enforce subordination of the Seller
Notes by any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder of the MCIT Notes,
regardless of any knowledge thereof any such holder of the MCIT Notes may have
or be otherwise charged with. Without limiting the foregoing, no right of any
present or future holder of the MCIT Notes to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by (a) any
refunding, refinancing, extension or renewal of the MCIT Purchase Agreement or
any amendment, modification or supplement thereof, (b) any sale, exchange,
release or other similar transaction with respect to any property by
whomsoever at any time pledged or mortgaged to secure the MCIT Notes, (c) any
release of any Person (as defined in the MCIT Purchase Agreement) liable in
any manner for the payment or collection of amounts payable in respect of the
MCIT Notes, (d) any exercise or refraining from exercising of any rights
against the Company and others or (e) any application of any sums by
whomsoever paid or however realized to the payment of amounts payable in
respect of the MCIT Notes; provided, however, that the Company undertakes to
the Holder that the Company will not (x) foreshorten the final or scheduled
maturities of or interest on the MCIT Notes or increase the rate of interest
thereon or (y) release the lien of the Mezzanine Pledge Agreement or provide
for the application of proceeds of the Collateral (as defined therein) on a
non-pro rata basis with holders of MCIT
-5-
36160144
<PAGE>
Notes, in each case without the prior written consent of holders of Seller
Notes evidencing, in the aggregate, 51% or more of the aggregate outstanding
principal amount of the Seller Notes.
The Company agrees to reimburse the Holder upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal
expenses) incurred by the Holder in enforcing the obligations of the Company
under this Note.
-6-
36160144
<PAGE>
This Note is made and delivered in New York, New York and shall be
governed by the internal laws of the State of New York.
NRE HOLDINGS, INC.
By: _____________________________
Name: A. Richard Caputo, Jr.
Title: Vice President
-7-
36160144
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON SEPTEMBER
1, 1994 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. INTEREST IN RESPECT OF THIS SECURITY IS SUBORDINATED TO THE PAYMENT
IN FULL OF ALL ACCRUED INTEREST ON THE MCIT NOTES (AS DEFINED BELOW) AND THE
PRINCIPAL AMOUNT OF THIS SECURITY AND INTEREST IN RESPECT HEREOF IS SUBJECT TO
SET-OFF, IN EACH CASE AS DESCRIBED IN THIS NOTE. THE TRANSFER OF THIS SECURITY
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE MANAGEMENT SUBSCRIPTION
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND CERTAIN
MANAGEMENT AND RELATED INVESTORS THEREIN, AND THE COMPANY'S STOCKHOLDERS'
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS
STOCKHOLDERS, AND AS AMENDED, SUPPLEMENTED, OR MODIFIED FROM TIME TO TIME. THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS SECURITY UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE.
NRE HOLDINGS, INC.
12.75% Note
due August 31, 2005
New York, New York
$112,000 November 30, 1995
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to Jaro Restaurants, Inc. (the "Holder"), on
August 31, 2005, the principal amount of $112,000, with interest (computed on
the basis of a 365-day year) on the unpaid balance of such principal amount at
the rate of 12.75% per annum, payable semi-annually on each May 31 and
November 30 (each, an "Interest Payment Date") after the date hereof,
commencing on May 31, 1996, until such unpaid principal shall become due and
payable (whether at maturity or at a date fixed for prepayment or by
declaration or otherwise), and with interest on any
<PAGE>
overdue principal and premium, if any, and (to the extent permitted by
applicable law) on any overdue interest at the rate of 14.75% per annum,
payable semi-annually as aforesaid or, at the option of the registered holder
hereof, on demand.
Payments of principal and interest on this Note shall be made in lawful
money of the United States of America by wire transfer to the account of
Freeborn & Peters, account number 065123, at the Mega Bank of Arapahoe, ABA
Transit Number 107005319, or at such other office or agency in New York, New
York as the Company shall have designated by written notice to the Holder.
This Note is one of the Company's 12.75% Notes due August 31, 2005 (the
"Seller Notes"), originally issued in the aggregate principal amount of
$4,400,000 pursuant to the Purchase and Sale Agreement (as defined below) and
a Management Subscription Agreement, dated as of September 1, 1994 (the
"Management Subscription Agreement"), among the Company, Lawrence Jaro,
William Osborn, Gary Hubert and Joel Aaseby. The Company may offset and apply
any amounts becoming due hereunder from time to time against all determined
claims which the Company has against the Holder pursuant to Section 6.5(c) of
the Purchase and Sale Agreement, dated as of September 1, 1994 (the "Purchase
and Sale Agreement"), among the Company and the parties listed on the
signature pages thereof or Section 8.4 of the Stockholders Agreement, dated as
of September 1, 1994 (as amended and modified in accordance with its terms,
the "Stockholders Agreement"), among the Company and the parties listed on the
signature pages thereof.
The Company may from time to time voluntarily prepay all or any part (in
an integral multiple of $1,000) of the outstanding principal amount of this
Note and all other Seller Notes, pro rata according to the outstanding
principal amounts thereof; provided, that (a) voluntary prepayments shall be
accompanied by payment in full of interest accrued on such principal amount
and not yet paid, (b) the Company shall have given the Holder and each other
holder of a Seller Note written notice of each voluntary prepayment not less
than 10 days and not more than five days prior to the date fixed for such
prepayment (and such notice shall specify such date, the aggregate principal
amount of the Seller Notes to be prepaid on such date, the principal amount of
each Seller Note to be prepaid on such date, and the interest accrued and not
paid on such principal amount to be prepaid) and such notice shall be
accompanied by an officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of such
fulfillment, (c) the Company shall have received the prior written consent to
such prepayment from holders of the MCIT Notes (as defined below) owning 51%
or more of the then outstanding principal amount of the MCIT Notes and (d) the
Company shall have received the prior written consent to such prepayment from
holders of the Senior Debt (as such term is defined in the Amended and
Restated Deferred Limited Interest Guaranty dated as of February 7, 1996, from
National Restaurant Enterprises, Inc. to MCIT PLC ("MCIT")).
The Company hereby agrees that, in the event that the Company voluntarily
prepays (as opposed to a mandatory pre-payment) all or any part of the
outstanding principal amount of the
-2-
<PAGE>
$11,000,000 aggregate principal amount of 12.75% notes due August 31, 2005
(together with all amendments thereto and all substitutions, replacements and
renewals thereof, the "MCIT Notes") issued by the Company to MCIT pursuant to
that certain Purchase Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "MCIT Purchase
Agreement"), between the Company and MCIT, the Company shall, concurrently
with such prepayment, make a prepayment of all Seller Notes (including this
Note) in an aggregate amount equal to that percentage of the then outstanding
principal amount of all Seller Notes which the amount of such voluntary
prepayment of the MCIT Notes is of the then aggregate outstanding principal
amount of all outstanding MCIT Notes.
If one or more of the following events (each an "Event of Default") shall
have occurred and be continuing:
(a) the Company shall default in the payment or prepayment when due
of any principal of this Note;
(b) the Company or any Restricted Subsidiary (as such term is
defined in the Second Amended and Restated Credit Agreement, dated
February 7, 1996, among National Restaurant Enterprises, Inc., the
Company, and The First National Bank of Boston, as Agent) shall (i)
become insolvent or generally fail to pay, or admit in writing its
inability to pay, debts as they become due; or (ii) apply for, consent to
or acquiesce in, the appointment of a trustee, receiver, sequestrator or
other custodian for the Company or any Restricted Subsidiary or any
property of any thereof or make a general assignment for the benefit of
creditors; or (iii) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any
Restricted Subsidiary or for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days; or (iv) permit or suffer to exist
the commencement of any bankruptcy, reorganization, debt arrangement or
other case or proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Company or any Restricted Subsidiary, and, if such case or proceeding is
not commenced by the Company or such Restricted Subsidiary, such case or
proceeding shall be consented to or acquiesced in by the Company or such
Restricted Subsidiary or shall result in the entry of any order for
relief or shall remain for 60 days undismissed;
(c) any Change of Control (as defined in the MCIT Purchase Agreement
referred to below); or
(d) all or any portion of the outstanding principal amount of the
MCIT Notes shall have become immediately due and payable prior to the
stated maturity thereof (in which event, the Company shall immediately
provide written notice to the Holder);
-3-
<PAGE>
then, and in every such event, the Holder may, by notice to the Company and to
the holders of the MCIT Notes and the Senior Debt, declare all or any portion
of the unpaid principal amount of this Note together with accrued interest
thereon to be due and payable, whereupon such portions of this Note (and
accrued interest thereon) shall be and become due and payable immediately
following delivery of such notice to the Company and to the holders of the
MCIT Notes and the Senior Debt without further notice, demand or presentment,
all of which are hereby waived by the Company; provided, that in the case of
any of the Events of Default specified in clause (b) of this paragraph, such
portions of this Note (together with accrued interest thereon) shall
immediately (and without notice) become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company.
This Note is one of the "Seller Notes" referred to in, and is secured by,
the Mezzanine Pledge Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Mezzanine Pledge
Agreement"), between the Company and MCIT, individually and as agent (in such
capacity, the "Mezzanine Agent") for itself and the other Noteholders (as
defined in the Pledge Agreement), and the Holder, by acceptance of this Note,
authorizes the Mezzanine Agent to take all actions from time to time under the
Pledge Agreement as shall be directed by all or any holders of the MCIT Notes.
Each holder of this Seller Note, by acceptance hereof, agrees to be bound by
the representations made and obligations undertaken by each "Noteholder" under
Article IV of the Mezzanine Pledge Agreement.
Notwithstanding any provision of this Note to the contrary, the
Company covenants and agrees, and the Holder by acceptance of this Note
likewise covenants and agrees, that each payment of interest to become due on
the Seller Notes shall be subordinated (i.e., no such payment shall be
permitted to be made by or on behalf of the Company or from any source
whatsoever, including from any distribution of its assets in connection with
any proceeding of the nature referred to in Section 7.1.3 of the MCIT Purchase
Agreement, and if notwithstanding the foregoing, any such payment is made, it
shall not be received and retained by the Holder hereof) to the prior payment
in full in cash of all payments of interest accrued on the MCIT Notes, if any,
which payments of interest on the MCIT Notes (the "Benefitted Payment") shall
have become due thereunder either prior to or not more than 160 days after the
date on which such payment of interest on this Note shall have become due (the
"Blocked Seller Payment"); provided, however, that, at any time when any
Blocked Seller Payment shall be subordinated by the foregoing provision only
to Benefitted Payments which became due after the date on which such Blocked
Seller Payment became due, the Company may, at any time when making a partial
payment of such Benefitted Payment on all MCIT Notes, also make a partial
payment of such Blocked Seller Payment on all Seller Notes in an aggregate
amount which is proportionate to such partial payment of the Benefitted Payment
according to the then respective aggregate outstanding principal amounts of the
MCIT Notes and the Seller Notes. This paragraph shall constitute a continuing
offer to and covenant with all persons who become holders of, or continue to
hold, MCIT Notes (irrespective of whether such MCIT Notes were issued or
acquired before or after the issuance of this Note). The provisions of this
paragraph are made for the benefit of all present and future holders of MCIT
Notes and their successors and assigns, and shall be enforceable by
-4-
<PAGE>
them directly against the Holder. If there has occurred and is continuing a
default in the payment of all or any portion of the interest on any MCIT
Notes, no payment shall be made by or on behalf of the Company with respect to
any interest due in respect of this Note, and by virtue of accepting this Note
and the benefits hereof, the Holder shall not be entitled, and will not take
any action, including any judicial process, to accelerate, demand payment or
enforce any indebtedness in respect of interest payable on this Note or any
other claim with regard to interest payable on this Note. If, notwithstanding
the foregoing sentence, the Holder shall have received, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment of, or on account of, interest in respect of this Note that was
prohibited by this paragraph, before all interest accrued on the MCIT Notes
has been paid in full in cash, then and in such event such payments or
distributions shall be received and held in trust for the holders of the MCIT
Notes and promptly paid over or delivered to the holders of the MCIT Notes
remaining unpaid to the extent necessary to pay in full in cash such accrued
interest on the MCIT Notes in accordance with their terms after giving effect
to any concurrent payment or distribution to the holders of the MCIT Notes,
provided that any such payment which is, for any reason, not so paid over or
delivered shall be held in trust by the Holder for the holders of the MCIT
Notes.
In addition to the subordination provisions of the preceding paragraph in
favor of the holders of the MCIT Notes, this Note is also hereby expressly
subordinated to the limited guaranty, dated September 1, 1994 (the "Senior
Recovery Guaranty"), executed and delivered by the Company in favor of the
Senior Lenders (as defined in the MCIT Purchase Agreement) and Article VIII of
the MCIT Purchase Agreement (and all related definitions) shall apply to this
Note mutatis mutandis and the obligations of the Company under this Note shall
be deemed "Obligations" as used in such Article VIII of the MCIT Purchase
Agreement.
No present or future holder of the MCIT Notes shall be prejudiced in
any way in the rights of such holder to enforce subordination of the Seller
Notes by any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder of the MCIT Notes,
regardless of any knowledge thereof any such holder of the MCIT Notes may have
or be otherwise charged with. Without limiting the foregoing, no right of any
present or future holder of the MCIT Notes to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by (a) any
refunding, refinancing, extension or renewal of the MCIT Purchase Agreement or
any amendment, modification or supplement thereof, (b) any sale, exchange,
release or other similar transaction with respect to any property by whomsoever
at any time pledged or mortgaged to secure the MCIT Notes, (c) any release of
any Person (as defined in the MCIT Purchase Agreement) liable in any manner for
the payment or collection of amounts payable in respect of the MCIT Notes, (d)
any exercise or refraining from exercising of any rights against the Company
and others or (e) any application of any sums by whomsoever paid or however
realized to the payment of amounts payable in respect of the MCIT Notes;
provided, however, that the Company undertakes to the Holder that the Company
will not (x) foreshorten the final or scheduled maturities of or interest on
the MCIT Notes or increase the rate of interest thereon or (y) release the
lien of the Mezzanine Pledge Agreement or provide for the application of
proceeds of the Collateral (as defined therein) on a non-pro rata basis with
holders of MCIT
-5-
<PAGE>
Notes, in each case without the prior written consent of holders of Seller
Notes evidencing, in the aggregate, 51% or more of the aggregate outstanding
principal amount of the Seller Notes.
The Company agrees to reimburse the Holder upon demand for all reasonable
out-of-pocket expenses (including attorneys' fees and legal expenses) incurred
by the Holder in enforcing the obligations of the Company under this Note.
-6-
<PAGE>
This Note is made and delivered in New York, New York and shall be
governed by the internal laws of the State of New York.
NRE HOLDINGS, INC.
By: _____________________________
Name: A. Richard Caputo, Jr.
Title: Vice President
-7-
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON SEPTEMBER
1, 1994 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. INTEREST IN RESPECT OF THIS SECURITY IS SUBORDINATED TO THE PAYMENT
IN FULL OF ALL ACCRUED INTEREST ON THE MCIT NOTES (AS DEFINED BELOW) AND THE
PRINCIPAL AMOUNT OF THIS SECURITY AND INTEREST IN RESPECT HEREOF IS SUBJECT TO
SET-OFF, IN EACH CASE AS DESCRIBED IN THIS NOTE. THE TRANSFER OF THIS SECURITY
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE MANAGEMENT SUBSCRIPTION
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND CERTAIN
MANAGEMENT AND RELATED INVESTORS THEREIN, AND THE COMPANY'S STOCKHOLDERS'
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS
STOCKHOLDERS, AND AS AMENDED, SUPPLEMENTED, OR MODIFIED FROM TIME TO TIME. THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS SECURITY UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE.
NRE HOLDINGS, INC.
12.75% Note
due August 31, 2005
New York, New York
$2,019,000 November 30, 1995
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to JB Restaurants, Inc. (the "Holder"), on
August 31, 2005, the principal amount of $2,019,000, with interest (computed
on the basis of a 365-day year) on the unpaid balance of such principal amount
at the rate of 12.75% per annum, payable semi-annually on each May 31 and
November 30 (each, an "Interest Payment Date") after the date hereof,
commencing on May 31, 1996, until such unpaid principal shall become due and
payable (whether at maturity or at a date fixed for prepayment or by
declaration or otherwise), and with interest on any
<PAGE>
overdue principal and premium, if any, and (to the extent permitted by
applicable law) on any overdue interest at the rate of 14.75% per annum,
payable semi-annually as aforesaid or, at the option of the registered holder
hereof, on demand.
Payments of principal and interest on this Note shall be made in
lawful money of the United States of America by wire transfer to the account
of Freeborn & Peters, account number 065123, at the Mega Bank of Arapahoe, ABA
Transit Number 107005319, or at such other office or agency in New York, New
York as the Company shall have designated by written notice to the Holder.
This Note is one of the Company's 12.75% Notes due August 31, 2005
(the "Seller Notes"), originally issued in the aggregate principal amount of
$4,400,000 pursuant to the Purchase and Sale Agreement (as defined below) and
a Management Subscription Agreement, dated as of September 1, 1994 (the
"Management Subscription Agreement"), among the Company, Lawrence Jaro,
William Osborn, Gary Hubert and Joel Aaseby. The Company may offset and apply
any amounts becoming due hereunder from time to time against all determined
claims which the Company has against the Holder pursuant to Section 6.5(c) of
the Purchase and Sale Agreement, dated as of September 1, 1994 (the "Purchase
and Sale Agreement"), among the Company and the parties listed on the
signature pages thereof or Section 8.4 of the Stockholders Agreement, dated as
of September 1, 1994 (as amended and modified in accordance with its terms,
the "Stockholders Agreement"), among the Company and the parties listed on the
signature pages thereof.
The Company may from time to time voluntarily prepay all or any part
(in an integral multiple of $1,000) of the outstanding principal amount of
this Note and all other Seller Notes, pro rata according to the outstanding
principal amounts thereof; provided, that (a) voluntary prepayments shall be
accompanied by payment in full of interest accrued on such principal amount
and not yet paid, (b) the Company shall have given the Holder and each other
holder of a Seller Note written notice of each voluntary prepayment not less
than 10 days and not more than five days prior to the date fixed for such
prepayment (and such notice shall specify such date, the aggregate principal
amount of the Seller Notes to be prepaid on such date, the principal amount of
each Seller Note to be prepaid on such date, and the interest accrued and not
paid on such principal amount to be prepaid) and such notice shall be
accompanied by an officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of such
fulfillment, (c) the Company shall have received the prior written consent to
such prepayment from holders of the MCIT Notes (as defined below) owning 51%
or more of the then outstanding principal amount of the MCIT Notes and (d) the
Company shall have received the prior written consent to such prepayment from
holders of the Senior Debt (as such term is defined in the Amended and
Restated Deferred Limited Interest Guaranty dated as of February 7, 1996, from
National Restaurant Enterprises, Inc. to MCIT PLC ("MCIT")).
The Company hereby agrees that, in the event that the Company
voluntarily prepays (as opposed to a mandatory pre-payment) all or any part of
the outstanding principal amount of the
-2-
<PAGE>
$11,000,000 aggregate principal amount of 12.75% notes due August 31, 2005
(together with all amendments thereto and all substitutions, replacements and
renewals thereof, the "MCIT Notes") issued by the Company to MCIT pursuant to
that certain Purchase Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "MCIT Purchase
Agreement"), between the Company and MCIT, the Company shall, concurrently
with such prepayment, make a prepayment of all Seller Notes (including this
Note) in an aggregate amount equal to that percentage of the then outstanding
principal amount of all Seller Notes which the amount of such voluntary
prepayment of the MCIT Notes is of the then aggregate outstanding principal
amount of all outstanding MCIT Notes.
If one or more of the following events (each an "Event of Default")
shall have occurred and be continuing:
(a) the Company shall default in the payment or prepayment
when due of any principal of this Note;
(b) the Company or any Restricted Subsidiary (as such term
is defined in the Second Amended and Restated Credit Agreement, dated
February 7, 1996, among National Restaurant Enterprises, Inc., the
Company, and The First National Bank of Boston, as Agent) shall (i)
become insolvent or generally fail to pay, or admit in writing its
inability to pay, debts as they become due; or (ii) apply for,
consent to or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Restricted
Subsidiary or any property of any thereof or make a general
assignment for the benefit of creditors; or (iii) in the absence of
such application, consent or acquiescence, permit or suffer to exist
the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any Restricted Subsidiary or for a
substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged
within 60 days; or (iv) permit or suffer to exist the commencement of
any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Company or any Restricted Subsidiary, and, if such case or proceeding
is not commenced by the Company or such Restricted Subsidiary, such
case or proceeding shall be consented to or acquiesced in by the
Company or such Restricted Subsidiary or shall result in the entry of
any order for relief or shall remain for 60 days undismissed;
(c) any Change of Control (as defined in the MCIT Purchase
Agreement referred to below); or
(d) all or any portion of the outstanding principal amount
of the MCIT Notes shall have become immediately due and payable prior
to the stated maturity thereof (in which event, the Company shall
immediately provide written notice to the Holder);
-3-
<PAGE>
then, and in every such event, the Holder may, by notice to the Company and to
the holders of the MCIT Notes and the Senior Debt, declare all or any portion
of the unpaid principal amount of this Note together with accrued interest
thereon to be due and payable, whereupon such portions of this Note (and
accrued interest thereon) shall be and become due and payable immediately
following delivery of such notice to the Company and to the holders of the
MCIT Notes and the Senior Debt without further notice, demand or presentment,
all of which are hereby waived by the Company; provided, that in the case of
any of the Events of Default specified in clause (b) of this paragraph, such
portions of this Note (together with accrued interest thereon) shall
immediately (and without notice) become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company.
This Note is one of the "Seller Notes" referred to in, and is secured
by, the Mezzanine Pledge Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Mezzanine Pledge
Agreement"), between the Company and MCIT, individually and as agent (in such
capacity, the "Mezzanine Agent") for itself and the other Noteholders (as
defined in the Pledge Agreement), and the Holder, by acceptance of this Note,
authorizes the Mezzanine Agent to take all actions from time to time under the
Pledge Agreement as shall be directed by all or any holders of the MCIT Notes.
Each holder of this Seller Note, by acceptance hereof, agrees to be bound by
the representations made and obligations undertaken by each "Noteholder" under
Article IV of the Mezzanine Pledge Agreement.
Notwithstanding any provision of this Note to the contrary, the
Company covenants and agrees, and the Holder by acceptance of this Note
likewise covenants and agrees, that each payment of interest to become due on
the Seller Notes shall be subordinated (i.e., no such payment shall be
permitted to be made by or on behalf of the Company or from any source
whatsoever, including from any distribution of its assets in connection with
any proceeding of the nature referred to in Section 7.1.3 of the MCIT Purchase
Agreement, and if notwithstanding the foregoing, any such payment is made, it
shall not be received and retained by the Holder hereof) to the prior payment
in full in cash of all payments of interest accrued on the MCIT Notes, if any,
which payments of interest on the MCIT Notes (the "Benefitted Payment") shall
have become due thereunder either prior to or not more than 160 days after the
date on which such payment of interest on this Note shall have become due (the
"Blocked Seller Payment"); provided, however, that, at any time when any
Blocked Seller Payment shall be subordinated by the foregoing provision only
to Benefitted Payments which became due after the date on which such Blocked
Seller Payment became due, the Company may, at any time when making a partial
payment of such Benefitted Payment on all MCIT Notes, also make a partial
payment of such Blocked Seller Payment on all Seller Notes in an aggregate
amount which is proportionate to such partial payment of the Benefitted
Payment according to the then respective aggregate outstanding principal
amounts of the MCIT Notes and the Seller Notes. This paragraph shall
constitute a continuing offer to and covenant with all persons who become
holders of, or continue to hold, MCIT Notes (irrespective of whether such MCIT
Notes were issued or acquired before or after the issuance of this Note). The
provisions of this paragraph are made for the benefit of all present and
future holders of MCIT Notes and their successors and assigns, and shall be
enforceable by
-4-
<PAGE>
them directly against the Holder. If there has occurred and is continuing a
default in the payment of all or any portion of the interest on any MCIT
Notes, no payment shall be made by or on behalf of the Company with respect to
any interest due in respect of this Note, and by virtue of accepting this Note
and the benefits hereof, the Holder shall not be entitled, and will not take
any action, including any judicial process, to accelerate, demand payment or
enforce any indebtedness in respect of interest payable on this Note or any
other claim with regard to interest payable on this Note. If, notwithstanding
the foregoing sentence, the Holder shall have received, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment of, or on account of, interest in respect of this Note that was
prohibited by this paragraph, before all interest accrued on the MCIT Notes
has been paid in full in cash, then and in such event such payments or
distributions shall be received and held in trust for the holders of the MCIT
Notes and promptly paid over or delivered to the holders of the MCIT Notes
remaining unpaid to the extent necessary to pay in full in cash such accrued
interest on the MCIT Notes in accordance with their terms after giving effect
to any concurrent payment or distribution to the holders of the MCIT Notes,
provided that any such payment which is, for any reason, not so paid over or
delivered shall be held in trust by the Holder for the holders of the MCIT
Notes.
In addition to the subordination provisions of the preceding
paragraph in favor of the holders of the MCIT Notes, this Note is also hereby
expressly subordinated to the limited guaranty, dated September 1, 1994 (the
"Senior Recovery Guaranty"), executed and delivered by the Company in favor of
the Senior Lenders (as defined in the MCIT Purchase Agreement) and Article
VIII of the MCIT Purchase Agreement (and all related definitions) shall apply
to this Note mutatis mutandis and the obligations of the Company under this
Note shall be deemed "Obligations" as used in such Article VIII of the MCIT
Purchase Agreement.
No present or future holder of the MCIT Notes shall be prejudiced in
any way in the rights of such holder to enforce subordination of the Seller
Notes by any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder of the MCIT Notes,
regardless of any knowledge thereof any such holder of the MCIT Notes may have
or be otherwise charged with. Without limiting the foregoing, no right of any
present or future holder of the MCIT Notes to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by (a) any
refunding, refinancing, extension or renewal of the MCIT Purchase Agreement or
any amendment, modification or supplement thereof, (b) any sale, exchange,
release or other similar transaction with respect to any property by
whomsoever at any time pledged or mortgaged to secure the MCIT Notes, (c) any
release of any Person (as defined in the MCIT Purchase Agreement) liable in
any manner for the payment or collection of amounts payable in respect of the
MCIT Notes, (d) any exercise or refraining from exercising of any rights
against the Company and others or (e) any application of any sums by
whomsoever paid or however realized to the payment of amounts payable in
respect of the MCIT Notes; provided, however, that the Company undertakes to
the Holder that the Company will not (x) foreshorten the final or scheduled
maturities of or interest on the MCIT Notes or increase the rate of interest
thereon or (y) release the lien of the Mezzanine Pledge Agreement or provide
for the application of proceeds of the Collateral (as defined therein) on a
non-pro rata basis with holders of MCIT
-5-
<PAGE>
Notes, in each case without the prior written consent of holders of Seller
Notes evidencing, in the aggregate, 51% or more of the aggregate outstanding
principal amount of the Seller Notes.
The Company agrees to reimburse the Holder upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal
expenses) incurred by the Holder in enforcing the obligations of the Company
under this Note.
-6-
<PAGE>
This Note is made and delivered in New York, New York and shall be
governed by the internal laws of the State of New York.
NRE HOLDINGS, INC.
By:
---------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
-7-
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON SEPTEMBER
1, 1994 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. INTEREST IN RESPECT OF THIS SECURITY IS SUBORDINATED TO THE PAYMENT
IN FULL OF ALL ACCRUED INTEREST ON THE MCIT NOTES (AS DEFINED BELOW) AND THE
PRINCIPAL AMOUNT OF THIS SECURITY AND INTEREST IN RESPECT HEREOF IS SUBJECT TO
SET-OFF, IN EACH CASE AS DESCRIBED IN THIS NOTE. THE TRANSFER OF THIS SECURITY
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE MANAGEMENT SUBSCRIPTION
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND CERTAIN
MANAGEMENT AND RELATED INVESTORS THEREIN, AND THE COMPANY'S STOCKHOLDERS'
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS
STOCKHOLDERS, AND AS AMENDED, SUPPLEMENTED, OR MODIFIED FROM TIME TO TIME. THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS SECURITY UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE.
NRE HOLDINGS, INC.
12.75% Note
due August 31, 2005
New York, New York
$385,769 November 30, 1995
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to Castleking, Inc. (the "Holder"), on August
31, 2005, the principal amount of $385,769, with interest (computed on the
basis of a 365-day year) on the unpaid balance of such principal amount at the
rate of 12.75% per annum, payable semi-annually on each May 31 and November 30
(each, an "Interest Payment Date") after the date hereof, commencing on May
31, 1996, until such unpaid principal shall become due and payable (whether at
maturity or at a date fixed for prepayment or by declaration or otherwise),
and with interest on any
<PAGE>
overdue principal and premium, if any, and (to the extent permitted by
applicable law) on any overdue interest at the rate of 14.75% per annum,
payable semi-annually as aforesaid or, at the option of the registered holder
hereof, on demand.
Payments of principal and interest on this Note shall be made in
lawful money of the United States of America by wire transfer to the account
of Freeborn & Peters, account number 065123, at the Mega Bank of Arapahoe, ABA
Transit Number 107005319, or at such other office or agency in New York, New
York as the Company shall have designated by written notice to the Holder.
This Note is one of the Company's 12.75% Notes due August 31, 2005
(the "Seller Notes"), originally issued in the aggregate principal amount of
$4,400,000 pursuant to the Purchase and Sale Agreement (as defined below) and
a Management Subscription Agreement, dated as of September 1, 1994 (the
"Management Subscription Agreement"), among the Company, Lawrence Jaro,
William Osborn, Gary Hubert and Joel Aaseby. The Company may offset and apply
any amounts becoming due hereunder from time to time against all determined
claims which the Company has against the Holder pursuant to Section 6.5(c) of
the Purchase and Sale Agreement, dated as of September 1, 1994 (the "Purchase
and Sale Agreement"), among the Company and the parties listed on the
signature pages thereof or Section 8.4 of the Stockholders Agreement, dated as
of September 1, 1994 (as amended and modified in accordance with its terms,
the "Stockholders Agreement"), among the Company and the parties listed on the
signature pages thereof.
The Company may from time to time voluntarily prepay all or any part
(in an integral multiple of $1,000) of the outstanding principal amount of
this Note and all other Seller Notes, pro rata according to the outstanding
principal amounts thereof; provided, that (a) voluntary prepayments shall be
accompanied by payment in full of interest accrued on such principal amount
and not yet paid, (b) the Company shall have given the Holder and each other
holder of a Seller Note written notice of each voluntary prepayment not less
than 10 days and not more than five days prior to the date fixed for such
prepayment (and such notice shall specify such date, the aggregate principal
amount of the Seller Notes to be prepaid on such date, the principal amount of
each Seller Note to be prepaid on such date, and the interest accrued and not
paid on such principal amount to be prepaid) and such notice shall be
accompanied by an officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of such
fulfillment, (c) the Company shall have received the prior written consent to
such prepayment from holders of the MCIT Notes (as defined below) owning 51%
or more of the then outstanding principal amount of the MCIT Notes and (d) the
Company shall have received the prior written consent to such prepayment from
holders of the Senior Debt (as such term is defined in the Amended and
Restated Deferred Limited Interest Guaranty dated as of February 7, 1996, from
National Restaurant Enterprises, Inc. to MCIT PLC ("MCIT")).
The Company hereby agrees that, in the event that the Company
voluntarily prepays (as opposed to a mandatory pre-payment) all or any part of
the outstanding principal amount of the
-2-
<PAGE>
$11,000,000 aggregate principal amount of 12.75% notes due August 31, 2005
(together with all amendments thereto and all substitutions, replacements and
renewals thereof, the "MCIT Notes") issued by the Company to MCIT pursuant to
that certain Purchase Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "MCIT Purchase
Agreement"), between the Company and MCIT, the Company shall, concurrently
with such prepayment, make a prepayment of all Seller Notes (including this
Note) in an aggregate amount equal to that percentage of the then outstanding
principal amount of all Seller Notes which the amount of such voluntary
prepayment of the MCIT Notes is of the then aggregate outstanding principal
amount of all outstanding MCIT Notes.
If one or more of the following events (each an "Event of Default")
shall have occurred and be continuing:
(a) the Company shall default in the payment or prepayment
when due of any principal of this Note;
(b) the Company or any Restricted Subsidiary (as such term
is defined in the Second Amended and Restated Credit Agreement, dated
February 7, 1996, among National Restaurant Enterprises, Inc., the
Company, and The First National Bank of Boston, as Agent) shall (i)
become insolvent or generally fail to pay, or admit in writing its
inability to pay, debts as they become due; or (ii) apply for,
consent to or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Restricted
Subsidiary or any property of any thereof or make a general
assignment for the benefit of creditors; or (iii) in the absence of
such application, consent or acquiescence, permit or suffer to exist
the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any Restricted Subsidiary or for a
substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged
within 60 days; or (iv) permit or suffer to exist the commencement of
any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Company or any Restricted Subsidiary, and, if such case or proceeding
is not commenced by the Company or such Restricted Subsidiary, such
case or proceeding shall be consented to or acquiesced in by the
Company or such Restricted Subsidiary or shall result in the entry of
any order for relief or shall remain for 60 days undismissed;
(c) any Change of Control (as defined in the MCIT Purchase
Agreement referred to below); or
(d) all or any portion of the outstanding principal amount
of the MCIT Notes shall have become immediately due and payable prior
to the stated maturity thereof (in which event, the Company shall
immediately provide written notice to the Holder);
-3-
<PAGE>
then, and in every such event, the Holder may, by notice to the Company and to
the holders of the MCIT Notes and the Senior Debt, declare all or any portion
of the unpaid principal amount of this Note together with accrued interest
thereon to be due and payable, whereupon such portions of this Note (and
accrued interest thereon) shall be and become due and payable immediately
following delivery of such notice to the Company and to the holders of the
MCIT Notes and the Senior Debt without further notice, demand or presentment,
all of which are hereby waived by the Company; provided, that in the case of
any of the Events of Default specified in clause (b) of this paragraph, such
portions of this Note (together with accrued interest thereon) shall
immediately (and without notice) become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company.
This Note is one of the "Seller Notes" referred to in, and is secured
by, the Mezzanine Pledge Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Mezzanine Pledge
Agreement"), between the Company and MCIT, individually and as agent (in such
capacity, the "Mezzanine Agent") for itself and the other Noteholders (as
defined in the Pledge Agreement), and the Holder, by acceptance of this Note,
authorizes the Mezzanine Agent to take all actions from time to time under the
Pledge Agreement as shall be directed by all or any holders of the MCIT Notes.
Each holder of this Seller Note, by acceptance hereof, agrees to be bound by
the representations made and obligations undertaken by each "Noteholder" under
Article IV of the Mezzanine Pledge Agreement.
Notwithstanding any provision of this Note to the contrary, the
Company covenants and agrees, and the Holder by acceptance of this Note
likewise covenants and agrees, that each payment of interest to become due on
the Seller Notes shall be subordinated (i.e., no such payment shall be
permitted to be made by or on behalf of the Company or from any source
whatsoever, including from any distribution of its assets in connection with
any proceeding of the nature referred to in Section 7.1.3 of the MCIT Purchase
Agreement, and if notwithstanding the foregoing, any such payment is made, it
shall not be received and retained by the Holder hereof) to the prior payment
in full in cash of all payments of interest accrued on the MCIT Notes, if any,
which payments of interest on the MCIT Notes (the "Benefitted Payment") shall
have become due thereunder either prior to or not more than 160 days after the
date on which such payment of interest on this Note shall have become due (the
"Blocked Seller Payment"); provided, however, that, at any time when any
Blocked Seller Payment shall be subordinated by the foregoing provision only
to Benefitted Payments which became due after the date on which such Blocked
Seller Payment became due, the Company may, at any time when making a partial
payment of such Benefitted Payment on all MCIT Notes, also make a partial
payment of such Blocked Seller Payment on all Seller Notes in an aggregate
amount which is proportionate to such partial payment of the Benefitted
Payment according to the then respective aggregate outstanding principal
amounts of the MCIT Notes and the Seller Notes. This paragraph shall
constitute a continuing offer to and covenant with all persons who become
holders of, or continue to hold, MCIT Notes (irrespective of whether such MCIT
Notes were issued or acquired before or after the issuance of this Note). The
provisions of this paragraph are made for the benefit of all present and
future holders of MCIT Notes and their successors and assigns, and shall be
enforceable by
-4-
<PAGE>
them directly against the Holder. If there has occurred and is continuing a
default in the payment of all or any portion of the interest on any MCIT
Notes, no payment shall be made by or on behalf of the Company with respect to
any interest due in respect of this Note, and by virtue of accepting this Note
and the benefits hereof, the Holder shall not be entitled, and will not take
any action, including any judicial process, to accelerate, demand payment or
enforce any indebtedness in respect of interest payable on this Note or any
other claim with regard to interest payable on this Note. If, notwithstanding
the foregoing sentence, the Holder shall have received, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment of, or on account of, interest in respect of this Note that was
prohibited by this paragraph, before all interest accrued on the MCIT Notes
has been paid in full in cash, then and in such event such payments or
distributions shall be received and held in trust for the holders of the MCIT
Notes and promptly paid over or delivered to the holders of the MCIT Notes
remaining unpaid to the extent necessary to pay in full in cash such accrued
interest on the MCIT Notes in accordance with their terms after giving effect
to any concurrent payment or distribution to the holders of the MCIT Notes,
provided that any such payment which is, for any reason, not so paid over or
delivered shall be held in trust by the Holder for the holders of the MCIT
Notes.
In addition to the subordination provisions of the preceding
paragraph in favor of the holders of the MCIT Notes, this Note is also hereby
expressly subordinated to the limited guaranty, dated September 1, 1994 (the
"Senior Recovery Guaranty"), executed and delivered by the Company in favor of
the Senior Lenders (as defined in the MCIT Purchase Agreement) and Article
VIII of the MCIT Purchase Agreement (and all related definitions) shall apply
to this Note mutatis mutandis and the obligations of the Company under this
Note shall be deemed "Obligations" as used in such Article VIII of the MCIT
Purchase Agreement.
No present or future holder of the MCIT Notes shall be prejudiced in
any way in the rights of such holder to enforce subordination of the Seller
Notes by any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder of the MCIT Notes,
regardless of any knowledge thereof any such holder of the MCIT Notes may have
or be otherwise charged with. Without limiting the foregoing, no right of any
present or future holder of the MCIT Notes to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by (a) any
refunding, refinancing, extension or renewal of the MCIT Purchase Agreement or
any amendment, modification or supplement thereof, (b) any sale, exchange,
release or other similar transaction with respect to any property by
whomsoever at any time pledged or mortgaged to secure the MCIT Notes, (c) any
release of any Person (as defined in the MCIT Purchase Agreement) liable in
any manner for the payment or collection of amounts payable in respect of the
MCIT Notes, (d) any exercise or refraining from exercising of any rights
against the Company and others or (e) any application of any sums by
whomsoever paid or however realized to the payment of amounts payable in
respect of the MCIT Notes; provided, however, that the Company undertakes to
the Holder that the Company will not (x) foreshorten the final or scheduled
maturities of or interest on the MCIT Notes or increase the rate of interest
thereon or (y) release the lien of the Mezzanine Pledge Agreement or provide
for the application of proceeds of the Collateral (as defined therein) on a
non-pro rata basis with holders of MCIT
-5-
<PAGE>
Notes, in each case without the prior written consent of holders of Seller
Notes evidencing, in the aggregate, 51% or more of the aggregate outstanding
principal amount of the Seller Notes.
The Company agrees to reimburse the Holder upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal
expenses) incurred by the Holder in enforcing the obligations of the Company
under this Note.
-6-
<PAGE>
This Note is made and delivered in New York, New York and shall be
governed by the internal laws of the State of New York.
NRE HOLDINGS, INC.
By:
-------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
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THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON SEPTEMBER
1, 1994 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. INTEREST IN RESPECT OF THIS SECURITY IS SUBORDINATED TO THE PAYMENT
IN FULL OF ALL ACCRUED INTEREST ON THE MCIT NOTES (AS DEFINED BELOW) AND THE
PRINCIPAL AMOUNT OF THIS SECURITY AND INTEREST IN RESPECT HEREOF IS SUBJECT TO
SET-OFF, IN EACH CASE AS DESCRIBED IN THIS NOTE. THE TRANSFER OF THIS SECURITY
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE MANAGEMENT SUBSCRIPTION
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND CERTAIN
MANAGEMENT AND RELATED INVESTORS THEREIN, AND THE COMPANY'S STOCKHOLDERS'
AGREEMENT, DATED AS OF SEPTEMBER 1, 1994, AMONG THE COMPANY AND ITS
STOCKHOLDERS, AND AS AMENDED, SUPPLEMENTED, OR MODIFIED FROM TIME TO TIME. THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS SECURITY UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE.
NRE HOLDINGS, INC.
12.75% Note
due August 31, 2005
New York, New York
$659,231 November 30, 1995
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to White-Osborn Restaurants, Inc. (the
"Holder"), on August 31, 2005, the principal amount of $659,231, with interest
(computed on the basis of a 365-day year) on the unpaid balance of such
principal amount at the rate of 12.75% per annum, payable semi-annually on
each May 31 and November 30 (each, an "Interest Payment Date") after the date
hereof, commencing on May 31, 1996, until such unpaid principal shall become
due and payable (whether at maturity or at a date fixed for prepayment or by
declaration or otherwise), and with interest on
<PAGE>
any overdue principal and premium, if any, and (to the extent permitted by
applicable law) on any overdue interest at the rate of 14.75% per annum,
payable semi-annually as aforesaid or, at the option of the registered holder
hereof, on demand.
Payments of principal and interest on this Note shall be made in
lawful money of the United States of America by wire transfer to the account
of Freeborn & Peters, account number 065123, at the Mega Bank of Arapahoe, ABA
Transit Number 107005319, or at such other office or agency in New York, New
York as the Company shall have designated by written notice to the Holder.
This Note is one of the Company's 12.75% Notes due August 31, 2005
(the "Seller Notes"), originally issued in the aggregate principal amount of
$4,400,000 pursuant to the Purchase and Sale Agreement (as defined below) and
a Management Subscription Agreement, dated as of September 1, 1994 (the
"Management Subscription Agreement"), among the Company, Lawrence Jaro,
William Osborn, Gary Hubert and Joel Aaseby. The Company may offset and apply
any amounts becoming due hereunder from time to time against all determined
claims which the Company has against the Holder pursuant to Section 6.5(c) of
the Purchase and Sale Agreement, dated as of September 1, 1994 (the "Purchase
and Sale Agreement"), among the Company and the parties listed on the
signature pages thereof or Section 8.4 of the Stockholders Agreement, dated as
of September 1, 1994 (as amended and modified in accordance with its terms,
the "Stockholders Agreement"), among the Company and the parties listed on the
signature pages thereof.
The Company may from time to time voluntarily prepay all or any part
(in an integral multiple of $1,000) of the outstanding principal amount of
this Note and all other Seller Notes, pro rata according to the outstanding
principal amounts thereof; provided, that (a) voluntary prepayments shall be
accompanied by payment in full of interest accrued on such principal amount
and not yet paid, (b) the Company shall have given the Holder and each other
holder of a Seller Note written notice of each voluntary prepayment not less
than 10 days and not more than five days prior to the date fixed for such
prepayment (and such notice shall specify such date, the aggregate principal
amount of the Seller Notes to be prepaid on such date, the principal amount of
each Seller Note to be prepaid on such date, and the interest accrued and not
paid on such principal amount to be prepaid) and such notice shall be
accompanied by an officers' certificate certifying that the conditions to such
prepayment have been fulfilled and specifying the particulars of such
fulfillment, (c) the Company shall have received the prior written consent to
such prepayment from holders of the MCIT Notes (as defined below) owning 51%
or more of the then outstanding principal amount of the MCIT Notes and (d) the
Company shall have received the prior written consent to such prepayment from
holders of the Senior Debt (as such term is defined in the Amended and
Restated Deferred Limited Interest Guaranty dated as of February 7, 1996, from
National Restaurant Enterprises, Inc. to MCIT PLC ("MCIT")).
The Company hereby agrees that, in the event that the Company
voluntarily prepays (as opposed to a mandatory pre-payment) all or any part of
the outstanding principal amount of the
-2-
<PAGE>
$11,000,000 aggregate principal amount of 12.75% notes due August 31, 2005
(together with all amendments thereto and all substitutions, replacements and
renewals thereof, the "MCIT Notes") issued by the Company to MCIT pursuant to
that certain Purchase Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "MCIT Purchase
Agreement"), between the Company and MCIT, the Company shall, concurrently
with such prepayment, make a prepayment of all Seller Notes (including this
Note) in an aggregate amount equal to that percentage of the then outstanding
principal amount of all Seller Notes which the amount of such voluntary
prepayment of the MCIT Notes is of the then aggregate outstanding principal
amount of all outstanding MCIT Notes.
If one or more of the following events (each an "Event of Default")
shall have occurred and be continuing:
(a) the Company shall default in the payment or prepayment
when due of any principal of this Note;
(b) the Company or any Restricted Subsidiary (as such term
is defined in the Second Amended and Restated Credit Agreement, dated
February 7, 1996, among National Restaurant Enterprises, Inc., the
Company, and The First National Bank of Boston, as Agent) shall (i)
become insolvent or generally fail to pay, or admit in writing its
inability to pay, debts as they become due; or (ii) apply for,
consent to or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Restricted
Subsidiary or any property of any thereof or make a general
assignment for the benefit of creditors; or (iii) in the absence of
such application, consent or acquiescence, permit or suffer to exist
the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any Restricted Subsidiary or for a
substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged
within 60 days; or (iv) permit or suffer to exist the commencement of
any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Company or any Restricted Subsidiary, and, if such case or proceeding
is not commenced by the Company or such Restricted Subsidiary, such
case or proceeding shall be consented to or acquiesced in by the
Company or such Restricted Subsidiary or shall result in the entry of
any order for relief or shall remain for 60 days undismissed;
(c) any Change of Control (as defined in the MCIT Purchase
Agreement referred to below); or
(d) all or any portion of the outstanding principal amount
of the MCIT Notes shall have become immediately due and payable prior
to the stated maturity thereof (in which event, the Company shall
immediately provide written notice to the Holder);
-3-
<PAGE>
then, and in every such event, the Holder may, by notice to the Company and to
the holders of the MCIT Notes and the Senior Debt, declare all or any portion
of the unpaid principal amount of this Note together with accrued interest
thereon to be due and payable, whereupon such portions of this Note (and
accrued interest thereon) shall be and become due and payable immediately
following delivery of such notice to the Company and to the holders of the
MCIT Notes and the Senior Debt without further notice, demand or presentment,
all of which are hereby waived by the Company; provided, that in the case of
any of the Events of Default specified in clause (b) of this paragraph, such
portions of this Note (together with accrued interest thereon) shall
immediately (and without notice) become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company.
This Note is one of the "Seller Notes" referred to in, and is secured
by, the Mezzanine Pledge Agreement, dated as of September 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Mezzanine Pledge
Agreement"), between the Company and MCIT, individually and as agent (in such
capacity, the "Mezzanine Agent") for itself and the other Noteholders (as
defined in the Pledge Agreement), and the Holder, by acceptance of this Note,
authorizes the Mezzanine Agent to take all actions from time to time under the
Pledge Agreement as shall be directed by all or any holders of the MCIT Notes.
Each holder of this Seller Note, by acceptance hereof, agrees to be bound by
the representations made and obligations undertaken by each "Noteholder" under
Article IV of the Mezzanine Pledge Agreement.
Notwithstanding any provision of this Note to the contrary, the
Company covenants and agrees, and the Holder by acceptance of this Note
likewise covenants and agrees, that each payment of interest to become due on
the Seller Notes shall be subordinated (i.e., no such payment shall be
permitted to be made by or on behalf of the Company or from any source
whatsoever, including from any distribution of its assets in connection with
any proceeding of the nature referred to in Section 7.1.3 of the MCIT Purchase
Agreement, and if notwithstanding the foregoing, any such payment is made, it
shall not be received and retained by the Holder hereof) to the prior payment
in full in cash of all payments of interest accrued on the MCIT Notes, if any,
which payments of interest on the MCIT Notes (the "Benefitted Payment") shall
have become due thereunder either prior to or not more than 160 days after the
date on which such payment of interest on this Note shall have become due (the
"Blocked Seller Payment"); provided, however, that, at any time when any
Blocked Seller Payment shall be subordinated by the foregoing provision only
to Benefitted Payments which became due after the date on which such Blocked
Seller Payment became due, the Company may, at any time when making a partial
payment of such Benefitted Payment on all MCIT Notes, also make a partial
payment of such Blocked Seller Payment on all Seller Notes in an aggregate
amount which is proportionate to such partial payment of the Benefitted
Payment according to the then respective aggregate outstanding principal
amounts of the MCIT Notes and the Seller Notes. This paragraph shall
constitute a continuing offer to and covenant with all persons who become
holders of, or continue to hold, MCIT Notes (irrespective of whether such MCIT
Notes were issued or acquired before or after the issuance of this Note). The
provisions of this paragraph are made for the benefit of all present and
future holders of MCIT Notes and their successors and assigns, and shall be
enforceable by
-4-
<PAGE>
them directly against the Holder. If there has occurred and is continuing a
default in the payment of all or any portion of the interest on any MCIT
Notes, no payment shall be made by or on behalf of the Company with respect to
any interest due in respect of this Note, and by virtue of accepting this Note
and the benefits hereof, the Holder shall not be entitled, and will not take
any action, including any judicial process, to accelerate, demand payment or
enforce any indebtedness in respect of interest payable on this Note or any
other claim with regard to interest payable on this Note. If, notwithstanding
the foregoing sentence, the Holder shall have received, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment of, or on account of, interest in respect of this Note that was
prohibited by this paragraph, before all interest accrued on the MCIT Notes
has been paid in full in cash, then and in such event such payments or
distributions shall be received and held in trust for the holders of the MCIT
Notes and promptly paid over or delivered to the holders of the MCIT Notes
remaining unpaid to the extent necessary to pay in full in cash such accrued
interest on the MCIT Notes in accordance with their terms after giving effect
to any concurrent payment or distribution to the holders of the MCIT Notes,
provided that any such payment which is, for any reason, not so paid over or
delivered shall be held in trust by the Holder for the holders of the MCIT
Notes.
In addition to the subordination provisions of the preceding
paragraph in favor of the holders of the MCIT Notes, this Note is also hereby
expressly subordinated to the limited guaranty, dated September 1, 1994 (the
"Senior Recovery Guaranty"), executed and delivered by the Company in favor of
the Senior Lenders (as defined in the MCIT Purchase Agreement) and Article
VIII of the MCIT Purchase Agreement (and all related definitions) shall apply
to this Note mutatis mutandis and the obligations of the Company under this
Note shall be deemed "Obligations" as used in such Article VIII of the MCIT
Purchase Agreement.
No present or future holder of the MCIT Notes shall be prejudiced in
any way in the rights of such holder to enforce subordination of the Seller
Notes by any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder of the MCIT Notes,
regardless of any knowledge thereof any such holder of the MCIT Notes may have
or be otherwise charged with. Without limiting the foregoing, no right of any
present or future holder of the MCIT Notes to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by (a) any
refunding, refinancing, extension or renewal of the MCIT Purchase Agreement or
any amendment, modification or supplement thereof, (b) any sale, exchange,
release or other similar transaction with respect to any property by
whomsoever at any time pledged or mortgaged to secure the MCIT Notes, (c) any
release of any Person (as defined in the MCIT Purchase Agreement) liable in
any manner for the payment or collection of amounts payable in respect of the
MCIT Notes, (d) any exercise or refraining from exercising of any rights
against the Company and others or (e) any application of any sums by
whomsoever paid or however realized to the payment of amounts payable in
respect of the MCIT Notes; provided, however, that the Company undertakes to
the Holder that the Company will not (x) foreshorten the final or scheduled
maturities of or interest on the MCIT Notes or increase the rate of interest
thereon or (y) release the lien of the Mezzanine Pledge Agreement or provide
for the application of proceeds of the Collateral (as defined therein) on a
non-pro rata basis with holders of MCIT
-5-
<PAGE>
Notes, in each case without the prior written consent of holders of Seller
Notes evidencing, in the aggregate, 51% or more of the aggregate outstanding
principal amount of the Seller Notes.
The Company agrees to reimburse the Holder upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal
expenses) incurred by the Holder in enforcing the obligations of the Company
under this Note.
-6-
<PAGE>
This Note is made and delivered in New York, New York and shall be
governed by the internal laws of the State of New York.
NRE HOLDINGS, INC.
By:
------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
-7-
SECURITIES PURCHASE AGREEMENT
NRE HOLDINGS, INC.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
as of November 30, 1994
<PAGE>
SECURITIES PURCHASE AGREEMENT
NRE HOLDINGS, INC.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
as of November 30, 1994
BancBoston Investments Inc.
100 Federal Street
Boston, Massachusetts 02110
Ladies and Gentlemen:
The undersigned, NRE Holdings, Inc., a Delaware corporation (the
Company), hereby agrees with you as follows:
1.DEFINITIONS.
For all purposes of this Agreement the following terms shall have the
meanings set forth herein or elsewhere in the provisions hereof:
Acquisition. Acquisition shall mean the transaction in which NRE shall
have purchased certain of the assets and business of BNB Land Venture, Inc.
and/or its affiliates consisting of thirty-nine (39) restaurants, pursuant to
the Asset Purchase Agreement.
Asset Purchase Agreement. Asset Purchase Agreement shall mean the Asset
Purchase Agreement dated as of the date hereof by and between BNB Land
Venture, Inc. and/or its affiliates and NRE in the form delivered to you on or
prior to the date hereof.
Bank Affiliate. See Section 15.1 hereof.
Bank Holding Company Act. See Section 15.1 hereof.
<PAGE>
BBI. BBI shall mean BancBoston Investments Inc., a Massachusetts
corporation.
Charter. Charter shall include the articles or certificate of
incorporation, statute, constitution, joint venture or partnership agreement
or articles or other organizational document of any Person other than an
individual, each as from time to time amended or modified.
Class A Common Stock. See Section 4.5(a).
Class A Preferred Stock. See Section 4.5(a).
Class A-1 Preferred Stock. See Section 4.5(a).
Class A-2 Preferred Stock. See Section 4.5(a).
Class B Common Stock. See Section 4.5(a).
Class B Preferred Stock. See Section 4.5(a).
Class C Common Stock. See Section 4.5(a).
Class D Common Stock. See Section 4.5(a).
Closing. See Section 2.3.
Closing Date. See Section 2.3.
Code. Code shall mean the Internal Revenue Code of 1986, any successor
statute of similar import, and the rules and regulations thereunder,
collectively and as from time to time amended and in effect.
Commission. Commission shall mean the Securities and Exchange Commission.
Common Stock. Common Stock shall mean, collectively, the Class A Common
Stock, the Class B Common Stock, the Class C Common Stock and the Class D
Common Stock, each having the rights and privileges set forth in Exhibit D
hereto and in addition, any capital stock or other securities into which or
for which Class A Common Stock, Class B Common Stock, Class C Common Stock or
Class D Common Stock shall have been converted or exchanged pursuant to any
recapitalization, reorganization or merger of the Company.
Company. See preamble.
Consolidated or consolidated. Consolidated or consolidated shall mean,
with reference to any term defined herein, that term as applied to the
accounts of the Company and all of its Subsidiaries, consolidated in
accordance with generally accepted accounting principles.
Credit Agreement. Credit Agreement shall mean the Amended and Restated
Revolving Credit and Term Loan Agreement dated as of November 30, 1994, among
the Company, NRE, the Senior Lenders and the Senior Lenders' Agent, as such
Credit Agreement may be amended, extended or renewed from time to time.
Default. Default shall mean an event or condition which with the passage
of time or giving of notice, or both, would become an Event of Default.
<PAGE>
Events of Default. See Section 10.1.
Family Members. Family Members shall mean, as applied to any individual,
any parent, spouse, child, spouse of a child, brother or sister of the
individual, each estate of such Persons and each trust created for the benefit
of one or more of such Persons and each custodian of a property of one or more
such Persons.
Financing Agreements. Financing Agreements shall include this Agreement,
the Securities, the Stockholders Agreement, and any and every other present or
future instrument or agreement from time to time entered into between the
Company and you or any other holder of the Securities which relates to this
Agreement or is stated to be a Financing Agreement, as from time to time
amended or modified.
generally accepted accounting principles. Generally accepted accounting
principles shall mean accounting principles which are (a) consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board
and its predecessors, in effect for the fiscal year of the Company ended
including September 1, 1994, (b) applied on a basis consistent with prior
periods, and (c) such that a certified public accountant would, insofar as the
use of accounting principles is pertinent, be in a position to deliver an
unqualified opinion as to financial statements in which such principles have
been properly applied.
Guaranty. The Limited Guaranty, dated as of September 1, 1994 made by the
Company in favor of the Senior Lenders and the Senior Lenders' Agent pursuant
to which the Company guaranties to the Senior Lenders and the Senior Lenders'
Agent the payment and performance of certain of the Obligations (as defined in
the Credit Agreement), as the same may be amended, restated, supplemented or
modified from time to time.
Indebtedness. Indebtedness shall include all obligations, contingent and
otherwise, which in accordance with generally accepted accounting principles
should be classified upon the obligor's balance sheet as liabilities, or to
which reference should be made by footnotes thereto, including without
limitation, in any event and whether or not so classified: (a) all debt and
similar monetary obligations, whether direct or indirect; (b) all liabilities
secured by any mortgage, pledge, security interest, lien, charge, or other
encumbrance existing on property owned or acquired subject thereto, whether or
not the liability secured thereby shall have been assumed; (c) all guaranties,
endorsements and other contingent obligations whether direct or indirect in
respect of Indebtedness of others, including any obligation to supply funds to
or in any manner to invest in, directly or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner or
otherwise, and (d) obligations to reimburse issuers of any letters of credit.
Indebtedness for Borrowed Money. Indebtedness for Borrowed Money shall
mean (a) all Indebtedness of the Company and its Subsidiaries for borrowed
money, whether current or funded, or secured or unsecured, (b) all
Indebtedness of the Company and its Subsidiaries for the deferred purchase
price of property or services represented by a note or other security, (c) all
Indebtedness of the Company and its Subsidiaries created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by the Company or its Subsidiaries (even if the rights and remedies
of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (d) all Indebtedness of the
Company and its Subsidiaries secured by a purchase money mortgage or other
lien to secure all or part of the purchase price of property subject to such
mortgage or lien, (e) all obligations under leases which shall have been or
should be, in accordance with generally accepted accounting principles,
recorded as capital leases in respect of which the Company and its
Subsidiaries are liable as lessee, except that all real estate leases of
Burger King
<PAGE>
restaurants shall be considered operating leases (f) any liability of the
Company and its Subsidiaries in respect of banker's acceptances or letters of
credit, and (g) all Indebtedness referred to in clause (a), (b), (c), (d), (e)
or (f) above which is directly or indirectly guaranteed by the Company or any
of its Subsidiaries or which the Company or any of its Subsidiaries has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which it has otherwise assured a creditor against loss.
Jordan Investors. Jordan Investors shall have the same meaning herein as
in the Stockholders Agreement.
Lien. Lien shall mean (a) any encumbrance, mortgage, pledge, lien, charge
or other security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom; or (b) any acquisition of
or agreement to have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or arrangement
(including a capitalized lease); or (c) any sale, assignment, pledge or other
transfer for security of any accounts, general intangibles, or chattel paper,
with or without recourse.
Major Holder. Major Holder shall mean the holder or holders at the
relevant time (excluding the Company) of (a) in the case of the Notes, at
least 50% of the then outstanding principal amount of the Notes, (b) in the
case of the Warrants and Warrant Stock, of at least 50% of the total number of
(i) shares of Warrant Stock then issuable upon exercise of the outstanding
Warrants and (ii) then outstanding shares of Warrant Stock and (c) in the case
of Preferred Shares, at least 50% of the then outstanding number of Preferred
Shares.
Majority Holders. Majority Holders shall mean the holder or holders at
the relevant time (excluding the Company) of (a) in the case of the Notes, 51%
or more in outstanding principal amount of the Notes, (b) in the case of the
Warrants and Warrant Stock, 51% or more of the number of shares of (i) Warrant
Stock then issuable upon exercise of the outstanding Warrants and (ii) the
then outstanding shares of Warrant Stock and (c) in the case of Preferred
Shares, at least 51% of the then outstanding number of Preferred Shares.
MCIT. MCIT shall mean Mezzanine Capital and Income Trust 2001 PLC.
MCIT Purchase Agreement. MCIT Purchase Agreement shall mean the Purchase
Agreement dated as of September 1, 1994 between the Company and MCIT, as the
same may be amended, restated, supplemented or modified from time to time.
Notes. Notes shall mean the Company's $600,000 Junior Subordinated Note,
issued pursuant to Section 2.1 hereof and any other Notes transferred to any
other holders pursuant to Section 16 hereof.
NRE. NRE shall mean National Restaurant Enterprises, Inc., a Delaware
corporation and wholly-owned Subsidiary of the Company.
Person. Person shall mean an individual, partnership, corporation,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision
thereof.
Preferred Shares. Preferred Shares shall mean (a) the Class A Preferred
Stock and the Class B Preferred Stock issued to BBI pursuant to this
Agreement, (b) any shares of Preferred Stock issued as a dividend with respect
to shares of Class A Preferred Stock or Class B Preferred Stock that are
Preferred Shares at the time of such dividend and (c) any capital stock or
other securities into which or for which any such shares of Class A Preferred
Stock or Class B Preferred Stock shall have been converted or exchanged
pursuant to any recapitalization, reorganization or merger of the Company;
provided that the foregoing capital stock shall be Preferred Shares only so
long as such capital stock has not been sold pursuant to a Public Sale.
<PAGE>
Preferred Stock. Preferred Stock shall mean collectively, the Special
Preferred Stock, the Class A Preferred Stock and the Class B Preferred Stock,
each having the rights and privileges set forth in Exhibit A-1 hereto, and in
addition, any capital stock or other securities into which or for which the
Special Preferred Stock, the Class A Preferred Stock or the Class B Preferred
Stock shall have been converted or exchanged pursuant to any recapitalization,
reorganization or merger of the Company.
Property. Property means the properties owned, leased or operated by the
Company and its Subsidiaries.
Public Sale. Public Sale shall mean any sale of Common Stock to the
public pursuant to a public offering registered under the Securities Act or to
the public through a broker or market-maker pursuant to the provisions of Rule
144 (or any successor rule) adopted under the Securities Act or any other
public offering not required to be registered under the Securities Act.
Purchase Price. See Section 2.2.
Purchased Securities. See Section 2.1.
Related Agreements. See Section 4.6.
Securities. Securities shall mean the Notes, the Warrants, the shares of
Warrant Stock and the Preferred Shares.
Securities Act. Securities Act shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Senior Indebtedness. See Section 3.7(b).
Senior Lenders. Senior Lenders shall mean those lending institutions set
forth on Schedule 1 to the Credit Agreement, as the same may be amended and in
effect from time to time.
Senior Lenders' Agent. Senior Lenders' Agent shall mean The First
National Bank of Boston, in its capacity as agent for the Senior Lenders or
any successor agent under the Credit Agreement.
Special Preferred Stock. See Section 4.5(a).
Standstill Period. See Section 3.7(b).
Stockholders Agreement. Stockholders Agreement shall mean the
Stockholders Agreement dated as of September 1, 1994 among the Company and the
stockholders of the Company, as the same may be amended, restated,
supplemented or modified from time to time.
Subordinated Indebtedness. See Section 3.7(b).
Subordinated Instrument. See Section 3.7(b).
Subsidiary. Subsidiary shall mean any Person of which the Company or
other specified Person now or
<PAGE>
hereafter shall at the time own directly or indirectly through a Subsidiary at
least a majority of the outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally.
Transfer Notice. See Section 16.2.
Warrant(s). Warrants shall mean the Common Stock Warrant of the Company
issued to BBI pursuant to Section 2.1 hereof and any other Warrants
transferred to any other holders pursuant to Section 14 hereof; provided that
no Warrants which have been sold pursuant to a Public Sale shall be considered
to be outstanding Warrants or Securities hereunder.
Warrant Stock. Warrant Stock shall mean Common Stock issued or issuable
upon exercise of the Warrants in accordance with their terms and any capital
stock or other securities into which or for which such Common Stock shall have
been converted or exchanged pursuant to any recapitalization, reorganization
or merger of the Company; provided that no shares of Warrant Stock which have
been sold pursuant to a Public Sale shall be considered to be outstanding
Warrant Stock or Securities hereunder.
2.SALE AND PURCHASE OF PURCHASED SECURITIES.
2.1. SALE AND PURCHASE OF PURCHASED SECURITIES. The Company agrees to
issue and sell to you and you agree to purchase the Securities listed below
(the Purchased Securities):
(a) 1,425 shares of Class A Preferred Stock;
(b) 475 shares of Class B Preferred Stock;
(c) the Company's Junior Subordinated Note, in the principal
amount of $600,000, in the form of Exhibit A hereto; and
(d) Common Stock Purchase Warrant No. W-2 for the purchase
of 81.0799 shares of Common Stock in the form of Exhibit B hereto.
2.2. PURCHASE PRICE. The aggregate purchase price for the Purchased
Securities is $2,500,000 (the Purchase Price). The parties hereto agree that
(a) the purchase price for the Preferred Shares is $1,900,000, (b) the
purchase price for the Note is $600,000 and (c) the purchase price for the
Warrant is $10, and will be reported as such by both parties for federal,
state and local tax purposes.
2.3. CLOSING. The closing of the purchase and sale of the Purchased
Securities (the Closing) will take place at the offices of Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, Illinois, at 10:00 a.m. on November
30, 1994, or at such other time, date and place as the parties hereto may
agree upon (the Closing Date). At the Closing, the Company will deliver to you
the Purchased Securities against payment by you of the Purchase Price in
immediately available funds. Each of the Purchased Securities will be issued
to you or any nominee specified by you on or before the Closing Date and
registered in your name or the name of such specified nominee in the Company's
records.
2.4. USE OF PROCEEDS. The Company agrees that it will contribute the
proceeds from the sale of the Purchase Securities to the capital of NRE, and
will cause NRE to use the amount so contributed to finance a portion of the
Acquisition. The Company further agrees that it will not use any part of the
proceeds from the sale of the Purchased Securities to purchase or carry any
"margin security" or "margin stock", as such terms
<PAGE>
are defined in any regulation, rule or interpretation of the Board of
Governors of the Federal Reserve System.
<PAGE>
3. PRINCIPAL AND INTEREST PAYMENTS ON NOTES
3.1. MANDATORY PRINCIPAL REPAYMENT. The Company shall repay the unpaid
principal amount of the Note on March 31, 2005, together with all accrued and
unpaid interest thereon.
3.2. OPTIONAL PREPAYMENTS. The Company, upon not less than fifteen (15)
nor more than thirty (30) days' prior written notice to the holders of any of
the Notes of the date and amount of optional prepayment, may prepay from time
to time all or any portion (in integral multiples of $1,000) of the principal
amount of the Notes. The principal amount of any Notes designated for
prepayment in any notice of optional prepayment permitted by this Section 3.2
shall become due and payable on the date fixed for prepayment in such notice,
together with all accrued and unpaid interest thereon. If any Note is prepaid
pursuant to this Section 3.2, the Company shall indemnify you, on demand made
by you at any time and as often as the occasion therefor may arise, against
any loss, cost or expense incurred as a result of such prepayment, including
without limitation, any funding losses or lost profits resulting from
reemployment of such prepaid amount. The amount of such indemnification shall
be specified by you in your written demand therefor, which shall be
accompanied by your calculation of such amount.
3.3. APPLICATION OF PAYMENTS AND PREPAYMENTS. Each repayment or
prepayment of less than the entire unpaid principal amount of all outstanding
Notes shall be applied pro rata to all outstanding Notes, according to the
respective unpaid principal amounts thereof and any such prepayment shall be
applied to the remaining installment payments on each of the Notes in the
inverse order of their maturity.
3.4. PRESENTATION OR SURRENDER OF NOTES. The Company may, as a condition
to making any prepayment of a Note, require the holder thereof to present such
Note at the place specified in the Note for payment of the principal thereof,
for notation thereon of the amount and date of such prepayment, or, if such
Note is prepaid in full, to surrender the same to the Company.
3.5. NO REBORROWING OR OTHER PREPAYMENTS. Except as expressly permitted
by Section 3.2, none of the principal of the Notes may be prepaid. No amount
repaid or prepaid pursuant to Section 3.1 or 3.2 may be reborrowed under the
Notes.
3.6. INTEREST PAYMENTS. The unpaid principal amount of the Notes
outstanding from time to time shall bear interest from the date hereof until
and including the maturity of the Notes, at a rate equal to 6% per annum.
Interest on the Notes shall be calculated on the basis of the actual number of
days elapsed and a 360 day year, and shall be payable quarterly in arrears on
the last day of each calendar quarter, commencing on the first such date to
occur after the Closing Date, and at the maturity of the Notes. Such interest
payments shall be payable in cash, provided, however, if at the time such
payment becomes due the Company is prohibited from making such payment
pursuant to the provisions of the Credit Agreement or the MCIT Purchase
Agreement, the amount of the accrued but unpaid interest shall be capitalized
and added to the unpaid principal amount of the Note, and from such date shall
bear interest as provided for principal in this Section 3.6.
3.7. SUBORDINATION.
(a) Subordination to Senior Indebtedness. Notwithstanding any other
provision of this Agreement, the Subordinated Indebtedness is and shall be
junior and subordinated in right of payment, to the extent and in the manner
set forth in this Section 3.7, to the prior payment in full of all amounts due
and owing upon all Senior Indebtedness at any time outstanding.
<PAGE>
(b) Definitions. As used herein, (i) the term Senior Indebtedness shall
mean (1) all of the Indebtedness (including, to the extent applicable, any
post-petition interest, whether or not allowed by the applicable bankruptcy
court) to the Senior Lenders and the Senior Lenders' Agent under the Guaranty
as in effect on the date hereof; (2) all of the Indebtedness (including, to
the extent applicable, any post-petition interest, whether or not allowed by
the applicable bankruptcy court) to MCIT under the MCIT Purchase Agreement and
related notes as in effect on the date hereof; (3) all of the Indebtedness of
the Company evidenced by the notes issued by the Company pursuant to the
Management Subscription Agreement (as defined in the Credit Agreement) in the
aggregate original principal amount of $4,400,000 and any NonNegotiable Three
Year Junior Subordinated Notes (as defined in the Management Subscription
Agreement) issued pursuant to the Management Subscription Agreement and (4)
all Indebtedness for Borrowed Money of the Company other than Indebtedness (A)
to any Subsidiary of the Company; (B) to any trade creditors of the Company,
or trade creditors of any Subsidiary of the Company which is guaranteed by the
Company; and (C) Indebtedness of the Company incurred by the Company but not
permitted by the terms of the Credit Agreement or the MCIT Purchase Agreement;
(ii) the term Subordinated Indebtedness shall mean the Indebtedness of the
Company under the Notes, including unpaid principal of and interest accrued on
the Notes and all other claims or obligations relating the Notes which arise
under or in respect of this Agreement, (iii) the term Standstill Period shall
mean with respect to any Subordinated Indebtedness, the period commencing on
the date on which the holder thereof shall have received written notice from
the holder of any Senior Indebtedness of the occurrence of a default or event
of default under the Senior Indebtedness and ending on the earlier of (A) the
date on which all such defaults or events of default under the Senior
Indebtedness have been cured or waived, and (B) the holders of such Senior
Indebtedness have accelerated payment on such Indebtedness; (iv) the term
Payment Blockage Period shall mean with respect to any Subordinated
Indebtedness, the period commencing on the date on which the holder thereof
shall have received written notice from the holder of any Senior Indebtedness
of the occurrence of a default or event of default under the Senior
Indebtedness and ending on the earlier of (A) the date on which all such
defaults or events of default under the Senior Indebtedness have been cured or
waived, and (B) all obligations owing to the holders of such Senior
Indebtedness have been repaid in full in cash; and (v) the term Subordinated
Instrument shall mean any instrument or agreement evidencing Subordinated
Indebtedness.
(c) Prior Payment of Senior Indebtedness in Bankruptcy, etc. In the event
of any insolvency, bankruptcy, receivership, liquidation, reorganization or
other similar proceedings relating to the Company or its debts or assets, and,
in the event of any proceedings for voluntary liquidation, dissolution or
other winding up of the Company or distribution or marshalling of its assets
or any composition with creditors of the Company, whether or not involving
insolvency or bankruptcy, if all Senior Indebtedness has not been paid in full
in cash at such time, (i) the holders of Subordinated Indebtedness shall
demand, but only the holders of Senior Indebtedness may collect, payment of
all Subordinated Indebtedness due from the Company, and (ii) the holders of
the Senior Indebtedness are hereby irrevocably authorized at any such meeting
or in any such proceeding to collect any assets of the Company distributed,
divided or applied by way of dividend or payment or any such securities issued
on account of Subordinated Indebtedness and apply the same, or the proceeds of
any realization upon the same that the holders of the Senior Indebtedness in
their discretion elect to effect, to Senior Indebtedness until all Senior
Indebtedness shall have been paid in full, rendering any surplus then
remaining to the holders of Notes. The holders of the Subordinated
Indebtedness shall retain the right to vote and otherwise act in any such
proceeding (including, without limitation, the right to vote to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension). In addition, the holders of the
Subordinated Indebtedness shall not be prohibited from retaining any notes or
other securities issued to such holders in any reorganization of the Company
provided the terms of such notes or other securities are subordinated to the
Senior Indebtedness to at least the same extent as the Notes.
<PAGE>
(d) No Payment on Notes Under Certain Conditions.
(i) During any Payment Blockage Period with respect to any
Subordinated Indebtedness, no payment shall be made by the Company or accepted
by any holder of such Subordinated Indebtedness thereunder; and during any
Standstill Period with respect to any Subordinated Indebtedness, unless the
holders of Senior Indebtedness shall have accelerated such Senior Indebtedness
or shall have commenced an action or proceeding against the Company to enforce
any of their rights in respect of the Senior Indebtedness, no acceleration of
Subordinated Indebtedness or action or proceeding shall be commenced by any
holder of such Subordinated Indebtedness to collect payment thereof. The
acceleration of any Subordinated Indebtedness by the holder thereof during any
Standstill Period applicable thereto shall be deemed to be automatically
rescinded upon the expiration of such Standstill Period if upon such
expiration no Default or Event of Default (other than failure by the Company
to pay the principal amount so accelerated) exists under this Agreement.
(ii) Notwithstanding anything herein to the contrary, no
Standstill Period shall commence as a result of a default or event of default
which gave rise to the initial Standstill Period unless such default or event
of default has been cured or waived for at least 90 consecutive days from the
commencement of such Standstill Period.
(e) Payments Held in Trust. If, in violation of the terms of this Section
3.7, any holder of Subordinated Indebtedness receives payment thereof or any
distribution with respect thereto before all Senior Indebtedness is paid in
full in cash, such payment or distribution shall be held in trust for and paid
ratably to the holders of Senior Indebtedness or their representatives until
all Senior Indebtedness shall have been paid in full. No such payments or
distributions paid to the holders of Senior Indebtedness or their
representatives by any holder of Subordinated Indebtedness shall be deemed to
discharge any of such Subordinated Indebtedness.
(f) Subrogation. Upon the payment of any Senior Indebtedness, the holders
of the unpaid Subordinated Indebtedness shall be subrogated to the rights of
the holders of Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to such Senior Indebtedness. For purposes of
such subrogation, no payments or distributions made to the holders of Senior
Indebtedness of any cash, property or securities to which the holders of
Subordinated Indebtedness would be entitled except for the subordination
provisions of this Section 3.7 and no payment to the holders of Senior
Indebtedness by the holders of Subordinated Indebtedness, as between the
Company, its creditors (other than the holders of Senior Indebtedness) and the
holders of Subordinated Indebtedness shall be deemed to discharge any of the
Senior Indebtedness.
(g) Scope of Subordination. The subordination provisions of this Section
3.7 are intended solely to define the relative rights of the holders of
Subordinated Indebtedness and the holders of Senior Indebtedness. Nothing in
this Section 3.7 or any Subordinated Instrument shall impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness) and the
holders of Subordinated Indebtedness, the unconditional and absolute
obligation of the Company to timely pay the principal, interest, and other
amounts and obligations owing under the terms of such Subordinated Instrument
or affect the relative rights of the holders of such Subordinated Instrument
and creditors of the Company (other than the holders of Senior Indebtedness),
nor shall anything prevent any holder of Subordinated Indebtedness from
accepting any payment with respect to such Subordinated Indebtedness or
exercising all remedies otherwise permitted by applicable law upon default
with respect to such Subordinated Indebtedness or this Agreement, subject to
any rights under this Section 3.7 of the holders of Senior Indebtedness in
respect of such payment.
(h) Notices. The holders of Senior Indebtedness will promptly notify the
holders of Subordinated Indebtedness in writing of the occurrence of any Event
of Default (as defined in the Credit Agreement), and
<PAGE>
the holders of Subordinated Indebtedness will promptly notify the holders of
Senior Indebtedness in writing of the occurrence of any Event of Default
hereunder. The failure to give such notice shall not, however, deprive either
the holders of Senior Indebtedness or the holders of Subordinated Indebtedness
of any rights or remedies to which they are entitled hereunder.
3.8. MANDATORY REDEMPTION OF NOTES. Upon the earliest to occur of (a) any
Change of Control (as defined in the MCIT Agreement), (b) the Company entering
into any written or other arrangement which will give rise to a Change of
Control, or (c) the Company having notice that any other Person has entered
into a written or other arrangement which will give rise to a Change of
Control, the Company will immediately give written notice of such transaction
or event to each holder of the Notes, which notice shall describe such
transaction or event in reasonable detail. Immediately upon (and concurrently
with) the occurrence of any Change of Control, the Company will purchase from
each such holder all of the outstanding Notes held by it at a purchase price
equal to the unpaid principal amount thereof together with accrued interest
thereon to the date of such purchase in full with immediately available funds
in the amount of the applicable purchase price specified herein.
4.REPRESENTATIONS AND WARRANTIES.
In order to induce you to enter into this Agreement and to purchase the
Purchased Securities, the Company hereby represents and warrants that, both
before and after giving effect to the Closing:
4.1. REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The
representations and warranties by each of the Company and its Subsidiaries in
the Credit Agreement were true and correct in all material respects when made
and are true and correct in all material respects on the date of this
Agreement.
4.2. AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement and by each of the Company and its Subsidiaries of
each Related Agreement to which such Person is a party, and the issuance and
sale by the Company of the Securities hereunder, (a) are within such Person's
corporate power and authority, (b) have been duly authorized by all necessary
corporate proceedings, and (c) do not conflict with or result in any breach of
any provision of or the creation of any Lien upon any of the property of the
Company or any of its Subsidiaries pursuant to the Charter or bylaws of the
Company of any of its Subsidiaries or any law, regulation, order, judgment,
writ, injunction, license, permit, agreement or instrument, or require any
consent or approval pursuant to the Charter or bylaws of the Company or any of
its Subsidiaries or any law, regulation, order, judgment, writ, injunction,
license, permit, agreement or instrument.
4.3. ENFORCEABILITY. The execution and delivery by the Company of this
Agreement and by each of the Company and its Subsidiaries of each of the
Related Agreements to which such Person is a party, and the issuance and sale
by the Company of the Securities hereunder, will result in legally binding
obligations of such Person enforceable against such Person in accordance with
the respective terms and provisions hereof and thereof, except to the extent
that (a) such enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights, (b) the availability of the remedy of
specific performance or injunctive or other equitable relief is subject to the
discretion of the court before which any proceeding therefor may be brought
and (c) the enforceability of the indemnities and contribution provisions
contained in Section 13 hereof may be limited under federal securities laws.
<PAGE>
4.4. GOVERNMENTAL APPROVALS. Except as set forth in Schedule 4.4 hereto,
the execution, delivery and performance by the Company of this Agreement and
by each of the Company and its Subsidiaries of each Related Agreement to which
such Person is a party, and, the issuance and sale of the Securities
hereunder, do not require the approval or consent of, or any filing with, any
governmental authority or agency.
4.5. CAPITALIZATION. (a) Capital Stock. At Closing, the authorized
capital stock of the Company will consist solely of (i) 7500 shares of Class A
Preferred Stock, $.01 par value per share (the Class A Preferred Stock),
consisting of two tranches, the Class A-1 Preferred Stock (the Class A-1
Preferred Stock) and the Class A-2 Preferred Stock (the Class A-2 Preferred
Stock), of which 4,500 shares of the Class A-1 Preferred Stock are outstanding
at Closing and 1,200 shares of the Class A-2 Preferred Stock are outstanding
at Closing, (ii) 3000 shares of Class B Preferred Stock, $.01 par value per
share (the Class B Preferred Stock), of which 1,900 shares are outstanding at
Closing, (iii) 1 share of Special Voting Preferred Stock, $.01 par value per
share (the Special Preferred Stock, of which 1 share is outstanding at
Closing, (iv) 2000 shares of Class A Common Stock, $.01 par value per share
(the Class A Common Stock), of which 348.71 shares are outstanding at Closing,
(v) 100 shares of Class B Common Stock, $.01 par value per share (the Class B
Common Stock), of which no shares are outstanding at Closing, (vi) 700 shares
of Class C Common Stock, $.01 par value per share (the Class C Common Stock)
of which 285.31 shares are outstanding at Closing, and (vii) 700 shares of
Class D Common Stock, $.01 par value per share (the Class D Common Stock) of
which 366 shares are outstanding at Closing. After giving effect to the
transactions contemplated hereby, all of the Company's outstanding shares of
capital stock will be owned as set forth in Schedule 4.5(a) hereto and will be
duly authorized, validly issued, fully paid and non-assessable.
(b) Options, Etc. Except for the Warrants and other than as created
pursuant to this Agreement or as disclosed on Schedule 4.5(b) hereto, the
Company has no outstanding rights (either pre-emptive or other) or options to
subscribe for or purchase from the Company and no warrants or other agreements
providing for or requiring the issuance by the Company of, any capital stock
or any securities convertible into or exchangeable for its capital stock.
(c) Reservation, Etc. Sufficient shares of authorized but unissued Common
Stock have been reserved by appropriate corporate action in connection with
the prospective exercise of the Warrants and any other agreements disclosed on
Schedule 4.5(b) and the conversion of shares of Common Stock of one class into
shares of another class as provided in the Company's Charter. The issuance of
the Warrants or the shares of Warrant Stock and the conversion of shares of
Common Stock of one class into shares of another class as provided in the
Company's Charter will not require any further corporate action by the
stockholders or directors of the Company, will not be subject to pre-emptive
rights in any present or future stockholders of the Company and will not
conflict with any provision of any agreement to which the Company is a party
or by which it is bound, and such Common Stock, when issued upon exercise of
the Warrants in accordance with their terms or upon such conversion, will be
duly authorized, validly issued, fully paid and non-assessable.
4.6. RELATED AGREEMENTS. You have heretofore or simultaneously herewith
been furnished with complete and correct copies of the agreements set forth on
Schedule 4.6 and all appendices, schedules and exhibits thereto (collectively,
together with all Financing Agreements other than this Agreement, the Related
Agreements). This Agreement and the Related Agreements are the only material
agreements relating to the Acquisition or the transactions contemplated hereby
to which the Company or any of its Subsidiaries is a party. Neither the
Company nor any of its Subsidiaries is in default on any of its obligations
under this Agreement or any Related Agreement to which such Person is a party
and, to the best of the Company's knowledge, no other party to any Related
Agreement is in default thereunder.
4.7. REPRESENTATIONS AND WARRANTIES UNDER RELATED AGREEMENTS. All
representations and warranties made by the Company or any of its Subsidiaries
in any of the Related Agreements or in the certificates
<PAGE>
delivered in connection therewith are true and correct as of the date hereof
with the same force and effect as though made on and as of the date hereof,
and such representations and warranties are hereby confirmed to you and made
representations and warranties of the Company hereunder as fully as if set
forth herein. To the best of the Company's knowledge, all representations and
warranties made in the Related Agreements by or on behalf of any party thereto
other than the Company or any of its Subsidiaries are true and correct in all
material respects.
4.8. DISCLOSURE. No representation, warranty or statement made in this
Agreement, any Related Agreement, or any agreement, certificate, statement or
document furnished by or on behalf of the Company or any of its Subsidiaries
in connection herewith or therewith contains any untrue statement of material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
5.INVESTMENT REPRESENTATION.
You represent and warrant to the Company that you are (i) an "accredited
investor" as such term is defined in Rule 501 promulgated under the Securities
Act, and (ii) acquiring the Purchased Securities for investment and not with a
view to selling or otherwise distributing the Purchased Securities; provided,
however, that the disposition of your property shall at all times be and
remain in your control, subject to the provisions of Section 16 hereof.
6.CONDITIONS TO PURCHASE.
Your obligation to purchase the Purchased Securities pursuant to this
Agreement is subject to compliance by the Company with its agreements herein
contained, and to the satisfaction, on or prior to the Closing Date, of the
following conditions:
6.1. RELATED AGREEMENTS. Each of the Related Agreements or the amendments
thereto, as the case may be, shall have been executed and delivered in a form
satisfactory to you, and each of the Related Agreements shall be in full force
and effect and no term or condition thereof shall have been amended, modified
or waived except with your prior written consent. All covenants, agreements
and conditions contained in the Related Agreements which are to be performed
or complied with on or prior to the Closing Date shall have been performed or
complied with (or waived with your prior written consent) in all material
respects.
6.2. CHARTER DOCUMENTS; GOOD STANDING CERTIFICATE. You shall have
received from each of the Company and its Subsidiaries a copy, certified by a
duly authorized officer of the Company to be true and complete as of the
Closing Date, of the Charter and the by-laws of each of the Company and its
Subsidiaries; and a certificate, dated not more than ten (10) days prior to
the Closing Date, of the Secretary of State or other appropriate official of
each state in which each of the Company and its Subsidiaries is incorporated
or qualified to do business, as to such Person's corporate good standing or
qualification to do business in such state, as the case may be.
6.3. PROOF OF CORPORATE ACTION. You shall have received from each of the
Company and its Subsidiaries
<PAGE>
copies, certified by a duly authorized officer thereof to be true and complete
as of the Closing Date, of the records of all corporate action taken to
authorize the execution, delivery and performance of this Agreement and each
of the Related Agreements to which the Company or such Subsidiary is or is to
become a party.
6.4. INCUMBENCY CERTIFICATE. You shall have received from the Company and
each of its Subsidiaries an incumbency certificate, dated the Closing Date,
signed by a duly authorized officer thereof and giving the name and bearing a
specimen signature of each individual who shall be authorized to sign, in the
name and on behalf of such Person, this Agreement and each of the Related
Agreements to which such Person is or is to become a party, and to give
notices and to take other action on behalf of such Person under each of such
documents.
6.5. LEGAL OPINION. You shall have received from counsel to the Company
their favorable opinion, substantially in the form of Exhibit C hereto, and
covering such other matters with respect to the transactions contemplated by
this Agreement and the Related Agreements as you may reasonably request.
6.6. REPRESENTATIONS AND WARRANTIES; OFFICERS' CERTIFICATES. The
representations and warranties contained or incorporated by reference herein
shall be true and correct on and as of the Closing Date; no event or condition
shall have occurred or would result from the issuance of any of the Securities
which would be a Default or an Event of Default on and as of the Closing Date,
and the Company and each of its Subsidiaries shall have performed and complied
with all conditions and agreements required to be performed or complied with
by them prior to the Closing; and you shall have received on the Closing Date
a certificate to these effects signed by an authorized officer of the Company.
6.7. LEGALITY; GOVERNMENTAL AUTHORIZATION. The purchase of the Purchased
Securities shall not be prohibited by any law or governmental order or
regulation, and shall not subject you to any penalty, special tax, or other
onerous condition. All necessary consents, approvals, licenses, permits,
orders and authorizations of, or registrations, declarations and filings with,
any governmental or administrative agency or of or with any other Person, with
respect to any of the transactions contemplated by this Agreement or any of
the Related Agreements shall have been duly obtained or made and shall be in
full force and effect.
6.8. CONTRIBUTION OF COMPANY. On the Closing Date, simultaneously with
the purchase and sale of the Purchased Securities hereunder, the Company shall
contribute to the capital of NRE an amount of not less than $2,500,000.
6.9. COMPLETION OF ACQUISITION. On the Closing Date, simultaneously with
the purchase and sale of the Purchased Securities hereunder, the Company shall
cause NRE to complete the Acquisition at a purchase price of not more than
$38,000,000.
6.10. SENIOR DEBT FINANCING. Simultaneously with the purchase and sale of
the Purchased Securities hereunder, the Company shall have caused NRE to
obtain financing, on terms and conditions satisfactory to you, from the Senior
Lenders pursuant to the Credit Agreement providing total credit of not more
than $74,500,000.
6.11. PAYMENT OF CERTAIN FEES AND DISBURSEMENTS. Bingham, Dana & Gould,
your special counsel shall have received payment in full for all legal fees
charged, and all costs and expenses incurred by such counsel, respectively,
through the Closing Date in connection with the transactions contemplated by
this Agreement.
6.12. NO MATERIAL CHANGE. There shall not have been, or threatened to be
after giving effect to the Acquisition, any material damage to or loss or
destruction of any properties owned or leased by the Company or any of its
Subsidiaries (whether or not covered by insurance) or any material adverse
change in the business,
<PAGE>
assets or financial condition of the Company and its Subsidiaries or
imposition of any laws, rules or regulations which would materially adversely
affect the business, assets or financial condition of the Company and any of
its Subsidiaries.
6.13. NO LITIGATION. No restraining order or injunction shall prevent the
transactions contemplated by this Agreement and no action, suit or proceeding
shall be pending or threatened before any court or administrative body in
which it will be, or is, sought to restrain or prohibit or to obtain damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
6.14. GENERAL. All instruments and legal, governmental, administrative
and corporate proceedings in connection with the transactions contemplated by
this Agreement and the Related Agreements shall be satisfactory in form and
substance to you, and you shall have received copies of all documents,
including, without limitation, records of corporate or other proceedings,
opinions of counsel, consents, licenses, approvals, permits and orders which
you may have requested in connection therewith.
7. COVENANTS APPLICABLE TO THE COMPANY WHILE NOTES ARE OUTSTANDING.
The Company covenants that, until all of the Indebtedness of the
Company with respect to the Notes has been indefeasibly paid in full, in cash,
the Company will comply and will cause each of its Subsidiaries to comply with
the following provisions unless otherwise consented to in writing by the
Majority Holders of the Notes.
7.1. PUNCTUAL PAYMENT. The Company will duly and punctually pay or
cause to be paid all principal and interest payable with respect to the Notes
in accordance with the terms thereof.
7.2. RECORDS AND ACCOUNTS. Each of the Company and its Subsidiaries
will keep true and accurate records and books of account in which full, true
and correct entries will be made in accordance with generally accepted
accounting principles and maintain adequate accounts and reserves for all
taxes (including income taxes), all depreciation, depletion, obsolescence and
amortization of its properties and all other contingencies.
7.3. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Each of the
Company and its Subsidiaries will preserve and keep in full force and effect
its corporate existence, rights and franchises, except for the dissolution of
any Subsidiary of the Company other than NRE whose operation has been
discontinued if such dissolution is, in the judgment of the Company, desirable
to the conduct of its business and does not materially adversely affect the
business of the Company and its Subsidiaries on a consolidated basis.
7.4. INSPECTION OF PROPERTIES AND BOOKS. Each of the Company and its
Subsidiaries shall permit you or any of your designated representatives (a) to
visit and inspect any of the properties of the Company and its Subsidiaries,
(b) to examine the books of account of the Company and its Subsidiaries (and
to make copies thereof and extracts therefrom), and (c) to discuss the
affairs, finances and accounts of each of the Company and its Subsidiaries
with, and to be advised as to the same by, officers of such Persons, all at
such reasonable times during normal business hours and intervals as you may
reasonably request.
<PAGE>
7.5. FURTHER ASSURANCES. Each of the Company and its Subsidiaries
will cooperate with you and execute such further instruments and documents as
you shall reasonably request to carry out to your satisfaction the
transactions contemplated by this Agreement and the Related Agreements.
7.6. NOTICES. The Company will promptly notify you in writing of the
occurrence of any Default or Event of Default or if any Person shall give any
notice or take any other action in respect of a claimed default (whether or
not constituting a Default or an Event of Default) under the Related
Agreements. The Company will immediately upon becoming aware thereof, notify
you in writing of any setoff, claims, withholdings or other defenses to which
any collateral under the Security Documents, or such rights with respect to
such collateral, are subject.
8.COVENANTS APPLICABLE WHILE THE WARRANTS OR SHARES
OF WARRANT STOCK ARE OUTSTANDING.
The Company covenants that, as long as any of the Warrants or any
shares of Warrant Stock remain outstanding, the Company will comply and will
cause each of its Subsidiaries to comply, with the following provisions:
8.1. GENERAL. The Company will comply with and will cause each of its
Subsidiaries to comply with the provisions of Sections 7.3, 7.4, 7.5 and 7.6
hereof.
8.2. DILUTION PROTECTION. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger or dissolution, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement or the
Warrant. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock receivable on the
exercise of the Warrant above the amount payable therefor on such exercise,
(b) will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares
on the exercise of the Warrant from time to time outstanding, (c) will not
issue any capital stock of any class which is preferred as to dividends or as
to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding up, unless the rights of the holders hereof shall be
limited to a fixed sum or percentage of par value in respect of participation
in dividends and in any such distribution of assets, (d) will comply in all
respects with the provisions of Article VIII of the Stockholders Agreement,
and (e) will not transfer all or substantially all of its properties and
assets to any other entity (corporate or otherwise), or consolidate with or
merge into any other entity or permit any such entity to consolidate with or
merge into the Company (if the Company is not the surviving entity), unless
such other entity shall expressly assume in writing and will be bound by all
the terms of this Agreement and the Stockholders Agreement.
9.COVENANTS APPLICABLE WHILE THE SECURITIES
ARE OUTSTANDING.
The Company hereby agrees that so long as any Securities are
outstanding that it will comply with
<PAGE>
and it will cause its Subsidiaries to comply with the following provisions:
9.1. GENERAL. The Company will comply with and will cause each of its
Subsidiaries to comply with the provisions of Sections 7.3, 7.4, 7.5 and 7.6
hereof.
9.2. NOTICES. The Company will promptly give notice to each Major
Holder of any litigation or any administrative proceeding to which the Company
or any of its Subsidiaries may hereafter become a party which the Company
reasonably believes may result in any material adverse change in the business,
assets, or financial condition of the Company and its Subsidiaries. Forthwith
upon any executive officer of the Company obtaining knowledge of any Default
or Event of Default hereunder, any default or event of default under any
Related Agreement, or any agreement relating to any Indebtedness for Borrowed
Money, the Company will furnish a notice specifying the nature and period of
existence thereof and in the case of a Default or Event of Default hereunder,
what action the Company or any of its Subsidiaries has taken, is taking or
proposes to take with respect thereto. Promptly after the receipt thereof, the
Company will provide copies of any reports as to inadequacies in accounting
controls submitted by independent accountants with respect to the Company and
its Subsidiaries.
9.3. RIGHTS TO ATTEND MEETINGS.
(a) Board Meetings. The Company will call and hold a meeting of its
board of directors at least annually. The Company will give one representative
designated by the Majority Holders of the Notes and one representative
designated by the Majority Holders of the Warrants and Warrant Stock at least
five business days' prior written notice of the time, place and subject matter
of any proposed meeting (or action by written consent) of the board of
directors of the Company (except written consents executed solely in
connection with the establishment of bank accounts or other purely
administrative matters), such notice in all cases to include true and complete
copies of all documents furnished to any director in connection with such
meeting or consent. Such representatives, or their respective officers and
authorized representatives, will be entitled to attend as an observer at any
such meeting or, if a meeting is held by telephone conference, to participate
therein for the purpose of listening thereto.
(b) Annual Meetings. Within ninety (90) days after the financial
statements required by Section 9.1 hereof are furnished and on not less than
thirty (30) days' prior written notice, the Company will hold an annual
meeting of its stockholders at which the principal executive, financial and
operations officers of the Company will present a review of, and will discuss
with those in attendance, in reasonable detail, the general affairs,
management, financial condition, results of operations and business prospects
of the Company. The Company will give each Major Holder at least thirty (30)
days' advance written notice of such meeting and will allow each Major Holder
to attend such meeting.
9.4. OTHER INFORMATION. The Company will deliver to each Person
entitled to receive notice pursuant to Section 9.3(a) of annual board meetings
copies of all papers which may be distributed from time to time to the
directors and stockholders of the Company at such time as such papers are so
distributed to them. In addition, from time to time upon your request or upon
the request of any representative designated by the Majority Holders of the
Notes, or by the Majority Holders of Warrants and Warrant Stock, the Company
will furnish to any authorized officer or representative of such Person such
information regarding the business, affairs, prospects and financial condition
of the Company and its Subsidiaries as such officer or representative may
reasonably request. Each such officer or representative shall have the right
during normal business hours to examine the books and records of the Company
and its Subsidiaries to make copies, notes and abstracts
<PAGE>
therefrom, and to make an independent examination of the books and records of
the Company and its Subsidiaries.
9.5. CONFIDENTIALITY. Each holder will hold in confidence all
proprietary information of the Company and its Subsidiaries provided or made
available to such holder pursuant to this Section 9 until such time as such
information has become publicly available other than as a consequence of any
breach by a holder of its confidentiality obligations hereunder.
<PAGE>
10. DEFAULTS.
10.1. EVENTS OF DEFAULT. Holders of the Securities will be entitled
to exercise the remedies provided by Section 10.2 hereof in accordance with
the terms thereof if any one or more of the following events (Events of
Default) shall occur:
(a) the Company shall fail to make any payment of interest
or principal on any of the Notes as the same shall become due,
whether at maturity or by acceleration or otherwise, or shall fail to
redeem the Notes as required by ss.3.8 hereof; or
(b) any default shall occur under the terms applicable to
any Senior Indebtedness or Indebtedness for Borrowed Money
outstanding in a principal amount exceeding $1,000,000 of the Company
or $5,000,000 of any Subsidiary representing any borrowing or
financing or arising under any other material agreement, and such
default shall have resulted in any or all of such Senior Indebtedness
or Indebtedness for Borrowed Money having become due and payable in
accordance with its terms prior to its stated maturity, whether by
acceleration or otherwise; or
(c) the Company or any of its Subsidiaries shall:
(i) commence a voluntary case under Title 11 of the
United States Code as from time to time in effect, or
authorize, by appropriate proceedings of its board of
directors or other governing body, the commencement of such
a voluntary case;
(ii) have filed against it a petition commencing an
involuntary case under said Title 11 and such petition shall
not have been dismissed or stayed within sixty (60) days;
(iii) seek relief as a debtor under any applicable
law, other than said Title 11, of any jurisdiction relating
to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or
consent to or acquiesce in such relief;
(iv) have entered against it an order by a court of
competent jurisdiction (x) finding it to be bankrupt or
insolvent, (y) ordering or approving its liquidation,
reorganization or any modification or alteration of the
rights of its creditors, or (z) assuming custody of, or
appointing a receiver or other custodian for, all or a
substantial part of its property;
(v) make an assignment for the benefit of, or enter
into a composition with, its creditors, or appoint or
consent to the appointment of a receiver or other custodian
for all or a substantial part of its property.
10.2. REMEDIES. Upon the occurrence and continuance of any of the Events
of Default under Section 10.1 hereof, in each and every such case,
(a) the Majority Holders of the Preferred Shares, the
Majority Holders of the Warrant Shares and the Majority Holders of
the Notes may proceed to protect and enforce its or their rights by
suit in equity, action at law and/or other appropriate proceedings
either for specific performance of any covenant, provision or
condition contained or incorporated by reference in this Agreement,
<PAGE>
in any Related Agreement or in the Company's Charter or in the Notes,
or in aid of the exercise of any power granted in this Agreement, in
any Related Agreement or in the Company's Charter or in the Notes,
and (unless there shall have occurred an Event of Default under
Section 10.1(e) hereof, in which case the unpaid balance of the Notes
shall automatically become due and payable) may by notice to the
Company, declare all or any part of the unpaid principal amount of
the Notes then outstanding to be forthwith due and payable, and
thereupon such unpaid principal amount or part thereof, together with
interest accrued thereon and all other sums, if any, payable under
this Agreement or the Notes shall become so due and payable without
presentation, presentment, protest or further demand or notice of any
kind, all of which are hereby expressly waived, and such holder or
holders may proceed to enforce payment of such amount or part thereof
in such manner as it or they may elect;
(b) the Majority Holders of the Warrants and the Warrant
Stock may proceed to protect and enforce its or their rights by suit
in equity, action at law and/or other appropriate proceeding for
specific performance of any covenant, provision or condition
contained or incorporated by reference in this Agreement or in any
Related Agreement, or in aid of the exercise of any power granted in
this Agreement or any Related Agreement; and
(c) the Majority Holders of Preferred Shares may elect, by
delivery of a written notice to the Company, to have all or any part
of the outstanding Preferred Shares redeemed by the Company.
10.3. WAIVERS. Each of the Company and its Subsidiaries hereby
waives, to the extent not prohibited by applicable law, (a) all presentments,
demands for performance and notices of nonperformance (except to the extent
specifically required by the provisions hereof), (b) any requirement of
diligence or promptness on the part of any holder of Securities in the
enforcement of its rights under the provisions of this Agreement, the
Company's Charter, or any Financing Agreement, and (c) any and all notices of
every kind and description which may be required to be given by any statute or
rule of law.
10.4. COURSE OF DEALING. No course of dealing between the Company or
any of its Subsidiaries on the one hand, and you or any holder of Securities,
on the other hand, shall operate as a waiver of any of your or its rights
under this Agreement, the Company's Charter, or any Financing Agreement. No
delay or omission in exercising any right under this Agreement, the Company's
Charter, or any Financing Agreement shall operate as a waiver of such right or
any other right. A waiver on any one occasion shall not be construed as a bar
to or waiver of any right or remedy on any other occasion.
11. RIGHT OF CO-SALE.
The holders shall have rights of co-sale as specified in Article V of
the Stockholders Agreement.
12. SUBSEQUENT HOLDERS OF SECURITIES.
Whether or not any express assignment has been made in this
Agreement, the provisions of this Agreement and the Financing Agreements that
are for your benefit as the holder of any Securities are also for the benefit
of, and enforceable by, all subsequent holders of Securities any subsequent
holders of Securities shall be bound by the provisions of this Agreement and
the Stockholders Agreement.
<PAGE>
13. SALE OR TRANSFER OF SECURITIES;
REGISTRATION RIGHTS.
You shall have certain rights and restrictions with respect to the
transfer and/or sale of the Preferred Shares, Warrant Shares and Warrants as
set forth in the Stockholders Agreement. You shall also have certain
registration rights with respect to certain of the Securities in accordance
with the terms of the Stockholders Agreement.
14. REGISTRATION AND TRANSFER OF SECURITIES.
14.1. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES.
(a) The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the registered holders of
the Notes issued by it and particulars of the respective Notes held by them
and of all transfers of such Notes. References to the "holder" or "holder of
record" of any Note shall mean the payee thereof unless the payee shall have
presented such Note to the Company for transfer and the transferee shall have
been entered in said register as a subsequent holder, in which case the terms
shall mean such subsequent holder. The ownership of any of the Notes shall be
proven by such register and the Company may conclusively rely upon such
register.
(b) The holder of any of the Notes may at any time and from time to
time prior to maturity or redemption thereof surrender any Note held by it for
exchange or (subject to compliance with the applicable provisions of Sections
11 and 16 hereof) transfer at said office of the Company. Within a reasonable
time thereafter and without expense (other than transfer taxes, if any) to
such holder, the Company shall issue, at its expense, in exchange therefor
another Note or Notes, dated the date to which interest has been paid on the
surrendered Note, for the same aggregate principal amount as the unpaid
principal amount of the Note or Notes so surrendered, having the same maturity
and rate of interest, containing the same provisions and subject to the same
terms and conditions as the Note or Notes so surrendered. Each such new Note
shall be in the denominations and registered in the name of such person or
persons as the holder of such surrendered Note or Notes may designate in
writing, and such exchange shall be made in a manner such that no additional
or lesser amount of principal or interest shall result. The Company will pay
shipping and insurance charges, from and to each holder's principal office,
involved in the exchange or transfer of any Note.
(c) Each Note issued hereunder, whether originally or in substitution
for, or upon transfer or exchange of, any Note shall be registered on the date
of execution thereof by the Company. The registered holder of record shall be
deemed to be the owner of the Note for all purposes of this Agreement. All
notices given hereunder to the holder of record shall be deemed validly given
if given in the manner specified in Section 18 hereof.
14.2. REGISTRATION, TRANSFER AND EXCHANGE OF WARRANTS.
(a) The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the holders of Warrants
issued by it and particulars of the respective Warrants held by them
<PAGE>
and of all transfers of such Warrants. References to the "holder" or "holder
of record" of any Warrant shall mean the holder thereof unless the holder
shall have presented such Warrant to the Company for transfer and the
transferee shall have been entered in said register as a subsequent holder, in
which case the terms shall mean such subsequent holder. The ownership of any
of the Warrants shall be proven by such register and the Company may
conclusively rely upon such register.
(b) The holder of any of the Warrants may at any time and from time
to time prior to exercise, repurchase or redemption thereof surrender any
Warrant held by it for exchange or (subject to compliance with Section 16
hereof) transfer at said office of the Company. On surrender for exchange of
the Warrants, properly endorsed, to the Company, the Company at its expense
will issue and deliver to or on the order of the holder thereof a new warrant
or warrants of like tenor, in the name of such holder or, upon payment by such
holder of any applicable transfer taxes, as such holder may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Warrant
Stock called for on the face or faces of the Warrants so surrendered. The
Company will pay shipping and insurance charges, from and to each holder's
principal office, involved in the exchange or transfer of any Warrant.
(c) Each Warrant issued hereunder, whether originally or in
substitution for, or upon transfer or exchange of, any Warrant shall be
registered on the date of execution thereof by the Company. The registered
holder of record shall be deemed to be the owner of the Warrant for all
purposes of this Agreement. All notices given hereunder to the holder of
record shall be deemed validly given if given in the manner specified in
Section 17 hereof.
<PAGE>
14.3. TRANSFER AND EXCHANGE OF COMMON STOCK AND PREFERRED STOCK.
(a) The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the holders of the Common
Stock and the Preferred Stock and the particulars (including without
limitation the class thereof) of the respective Common Stock and the Preferred
Stock held by them and of all transfers of shares of Common Stock and the
Preferred Stock or conversions of shares of Common Stock and the Preferred
Stock from one class to another. References to the "holder" or "holder of
record" of any Common Stock and the Preferred Stock shall mean the holder
thereof unless the holder shall have presented the stock certificates
evidencing same to the Company for transfer and the transferee shall have been
entered in said register as a subsequent holder, in which case the terms shall
mean such subsequent holder. The ownership of any of the Common Stock and the
Preferred Stock shall be proven by such register and the Company may
conclusively rely upon such register.
(b) Upon surrender at such office of any certificate representing
shares of Common Stock or Preferred Stock, as the case may be, for
registration of exchange or (subject to compliance with the applicable
provisions of this Agreement, including without limitation the conditions set
forth in Section 16 hereof) transfer or conversion, the Company shall issue,
at its expense, one or more new certificates, in such denomination or
denominations as may be requested, for shares of such class of Common Stock or
Preferred Stock, as the case may be, as may be requested, and registered as
such holder may request. Any certificate representing shares of Common Stock
or Preferred Stock, as the case may be, surrendered for registration of
transfer shall be duly endorsed, or accompanied by a written instrument of
transfer duly executed by the holder of such certificate or his attorney duly
authorized in writing. The Company will pay shipping and insurance charges,
from and to each holder's principal office, upon any transfer, exchange or
conversion provided for in this Section 14.3.
(c) Each stock certificate evidencing Common Stock or Preferred
Stock, as the case may be, whether originally or in substitution for, or upon
transfer, conversion or exchange of, any Common Stock or Preferred Stock, as
the case may be, or upon the exercise of any Warrant shall be registered on
the date of execution thereof by the Company. The registered holder of record
shall be deemed to be the owner of the Common Stock or Preferred Stock, as the
case may be, for all purposes of this Agreement. All notices given hereunder
to the holder of record shall be deemed validly given if given in the manner
specified in Section 18 hereof.
14.4. REPLACEMENT OF SECURITIES. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Security and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Security held by you or another
institutional holder, an unsecured indemnity agreement from you or such other
holder reasonably satisfactory to the Company) or, in the case of any such
mutilation, upon the surrender of such Security for cancellation to the
Company at its principal office, the Company, at its own expense, will execute
and deliver, in lieu thereof, a new Security of like tenor, dated in the case
of a Note so that there will be no loss of interest. Any Security in lieu of
which any such new Security has been so executed and delivered by the Company
shall not be deemed to be outstanding for any purpose of this Agreement.
15. REGULATORY RESTRICTIONS.
<PAGE>
15.1 BANK HOLDING COMPANY ACT. No Person which is a bank holding
company or a subsidiary of a bank holding company (a Bank Affiliate) as
defined in the Bank Holding Company Act of 1956, as amended, or other
applicable banking laws of the United States of America and the rules and
regulations promulgated thereunder (the Bank Holding Company Act) shall
exercise its rights to convert shares of Class B Common Stock into shares of
Class A Common Stock, or otherwise acquire Class A Common Stock, if, after
giving effect to such conversion, the Bank Affiliate, together with its
affiliates, would own more than five percent (5%) of the outstanding voting
securities of the Company. Notwithstanding the foregoing, to the extent not
inconsistent with the Bank Holding Company Act, such conversion rights may be
exercised or shares of Class A Common Stock may otherwise be acquired in the
event that:
(a) the Company shall vote to merge or consolidate with or
into any other Person and after giving effect to such merger or
consolidation the Bank Affiliate would not own more than five percent
(5%) of the outstanding voting securities of the surviving
corporation;
(b) said holder desires to sell shares of Class A Common
Stock to be obtained by the conversion of all or part of its shares
of Class B Common Stock in connection with any proposed purchase of
Class A Common Stock by another Person (other than a Bank Affiliate);
or
(c) said holder exercises its registration rights pursuant
to Section 13 hereof and the registration statement resulting
therefrom is effective.
15.2. STATEMENT OF COMPLIANCE. For purposes of this Agreement, a
written statement of BBI or any of its affiliates converting such shares of
Class B Common Stock into Class A Common Stock or otherwise acquiring Class A
Common Stock, delivered to the Company upon surrender of any shares of Common
Stock for conversion, acquisition of any shares of Class A Common Stock, to
the effect that BBI or its affiliate, as the case may be, is legally entitled
to exercise its rights to purchase securities of the Company and that such
exercise will not violate or contravene any law or regulation or any judgment,
decree or order of any governmental authority then applicable to BBI or such
affiliate, as the case may be, shall be conclusive and binding upon the
Company and shall absolutely obligate and bind the Company to deliver, in
accordance with the other terms and provisions hereof, certificates or other
appropriate instruments representing the securities so purchased.
<PAGE>
16. RESTRICTIONS ON TRANSFER.
16.1. GENERAL RESTRICTION. The Securities shall be transferable only
upon the satisfaction of the conditions set forth below in this Section 16.
16.2 NOTICE OF TRANSFER. Prior to any transfer of any Securities, the
holder thereof shall be required to give written notice to the Company
describing in reasonable detail the manner and terms of the proposed transfer
and the identity of the proposed transferee (the Transfer Notice), accompanied
by (a) an opinion of Bingham, Dana & Gould addressed to the Company, or other
counsel reasonably acceptable to the Company, that such transfer may be
effected without registration of such Securities under the Securities Act, and
(b) the written agreement of the proposed transferee to be bound by all of the
provisions hereof and of the Financing Agreements, applicable to holders of
such Securities hereunder or thereunder.
16.3. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 16, each Security shall bear the legend specified for such Security in
Schedule 16.3 hereto.
16.4. TERMINATION OF RESTRICTIONS. The restrictions imposed by this
Section 16 upon the transferability of Securities shall terminate as to any
particular Securities when such Securities shall have been effectively
registered under the Securities Act or sold pursuant to a Public Sale.
Whenever any of such restrictions shall terminate as to any Securities, the
holder thereof shall be entitled to receive from the Company, at the Company's
expense, new Securities without such legends.
17. EXPENSES; INDEMNITY.
(a) Whether or not the transactions contemplated hereby shall be
consummated, the Company promises to pay (i) the reasonable costs of (A)
producing and reproducing this Agreement, each other Financing Agreement and
Related Agreements and the Securities and (B) any taxes (including any
interest and penalties in respect thereto), filing fees or recording fees or
taxes payable by any holder of Securities (other than taxes based upon such
holder's net income) on or with respect to the transactions contemplated by
this Agreement, each other Financing Agreement and Related Agreements and the
Securities (the Company hereby agreeing to indemnify each holder with respect
thereto), (ii) the documented fees, expenses and disbursements of BBI's
special counsel or any local counsel to the Agent incurred in connection with
the preparation of this Agreement, each other Financing Agreement and Related
Agreements and the Securities and other instruments mentioned herein, each
closing hereunder, amendments, modifications, approvals, consents or waivers
hereto or hereunder and any transfer of the Securities and the termination
hereof, (iii) all out-of-pocket expenses (including reasonable attorneys' fees
and costs), incurred by any holder of the Securities in connection with (A)
the enforcement of or preservation of rights under this Agreement, each other
Financing Agreement and Related Agreements and the Securities against the
Company or any of its Subsidiaries or the administration thereof after the
occurrence of a default or Event of Default and (B) in connection with any
litigation, proceeding or dispute whether arising hereunder or under each
other Financing Agreement and Related Agreements and the Securities or arising
out of the transactions contemplated hereby or thereby. The covenants of this
ss.17 shall survive payment or satisfaction of all other Obligations.
(b) The Company further agrees to indemnify and hold harmless BBI's and
any subsequent holder
<PAGE>
of Securities as well as each such Person's shareholders, directors, agents,
officers, Subsidiaries and affiliates, from and against all damages, losses,
settlement payments, obligations, liabilities, claims, actions or causes of
action, and costs and expenses incurred, suffered, sustained or required to be
paid by an indemnified party by reason of or resulting from the transactions
contemplated hereby, except any of the foregoing which result from the gross
negligence or willful misconduct of the indemnified party. In any
investigation, proceeding or litigation, or the preparation therefor, each
holder shall be entitled to select its own counsel and, in addition to the
foregoing indemnity, the Company agrees to pay promptly the fees and expenses
of such counsel. If, and to the extent that the obligations of the Company
under this ss.17 are unenforceable for any reason, the Company hereby agrees
to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants contained
in this ss.17 shall survive payment or satisfaction in full of all other
Obligations.
18. NOTICES.
Any notice or other communication in connection with this Agreement,
any other Financing Agreement or the Securities shall be deemed to be
delivered if in writing (or in the form of a telex or telecopy) addressed as
provided below (a) when actually delivered, telexed or telecopied to said
address or (b) in the case of a letter, three business days shall have elapsed
after the same shall have been deposited in the United States mails, postage
prepaid and registered or certified:
If to the Company, then to its address set forth on page 1
hereof, to the attention of the President or at such other address as
such person shall have specified by notice actually received by the
addressor.
If to BBI, then to its address set forth on page 1 hereof,
to the attention of Ms. Mary Josephs Reilly, with a copy to Gordon L.
Nelson, Jr., Director or at such other address as BBI shall have
specified by notice actually received by the addressor.
If to any other holder of record of any Security, to it at
its address set forth in the applicable register referred to in
Section 14 hereof.
<PAGE>
19. SURVIVAL AND TERMINATION OF COVENANTS.
All covenants, agreements, representations and warranties made herein
or in any other document referred to herein or delivered to you pursuant
hereto shall be deemed to have been relied on by you, notwithstanding any
investigation made by you or on your behalf, and shall survive the execution
and delivery to you hereof and of the Securities.
20. AMENDMENTS AND WAIVERS.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and the Majority Holders of the Notes, the Majority
Holders of the Preferred Shares and the Majority Holders of the Warrants and
Warrant Stock, respectively, with respect to any provision of this Agreement
which by its terms operates for the benefit of such respective holders, and,
to the extent that such proposed amendment would materially adversely affect
the rights of the Senior Lenders under the Credit Agreement or MCIT under the
MCIT Purchase Agreement, the Senior Lenders or MCIT, as the case may be. Any
term of the Notes may be amended and the observance of any term of the Notes
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company
and the Majority Holders of the Notes with respect to whom such amendment or
waiver is made. Notwithstanding the foregoing, (a) without the prior written
consent of each holder of Preferred Shares, Warrants and Warrant Stock with
respect to whom such amendment or waiver is made, no such amendment or waiver
shall extend the scheduled date of any required repurchase or redemption of
such respective Securities held by such holder or reduce the repurchase or
redemption price payable thereon, (b) without the prior written consent of
each holder of Notes with respect to whom such amendment or waiver is made, no
such amendment or waiver shall extend the fixed maturity or reduce the
principal amount of, or reduce the rate or extend the time of payment of
interest on, or reduce the amount or extend the time of payment of any
principal or premium payable on any prepayment of, any Note with respect to
whom such amendment or waiver is made, (c) without the written consent of the
aforesaid percentage of Securities reduce the aforesaid percentage of
Securities the holders of which are required to consent to any such amendment
or waiver, or (d) without the written consent of the percentage of the holders
of each Security required to exercise the remedies provided in Section 10.2
hereof, increase such required percentage. Any amendment or waiver effected in
accordance with this Section 20 shall be binding upon each holder of any
Security sold pursuant to this Agreement and the Company.
21. CONSENT TO JURISDICTION.
THE COMPANY HEREBY AGREES TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION
OF THE COURTS IN AND OF THE COMMONWEALTH OF MASSACHUSETTS, AND CONSENTS THAT
SERVICE OF PROCESS WITH RESPECT TO ALL COURTS IN AND OF THE COMMONWEALTH OF
MASSACHUSETTS MAY BE MADE BY REGISTERED MAIL TO IT AT THE COMPANY'S ADDRESS
SET FORTH ON PAGE 1 HEREOF.
<PAGE>
22.RIGHT TO PUBLICIZE
The Company hereby acknowledge that BBI will have the right to
publicize its investment in the Company as contemplated hereby by means of a
tombstone advertisement or other customary advertisement in newspapers and
other periodicals.
23. WAIVER OF JURY TRIAL.
THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY
TRIAL IN ANY SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO THIS
AGREEMENT, THE SECURITIES OR ANY OF THE OTHER FINANCING AGREEMENTS.
24. MISCELLANEOUS.
This Agreement and the other Financing Agreements set forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede any prior written or oral understandings
with respect thereto. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any other
term or provision hereof. The headings in this Agreement are for convenience
of reference only and shall not alter or otherwise affect the meaning hereof.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND MAY BE
EXECUTED IN ANY NUMBER OF COUNTERPARTS WHICH TOGETHER SHALL CONSTITUTE ONE
INSTRUMENT AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE
APPLICATION OF THE DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER STATE, AND SHALL
BIND AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
<PAGE>
If the foregoing corresponds with your understanding of our
agreement, kindly sign this letter and the accompanying copies thereof in the
appropriate space below and return one counterpart of the same to the Company,
at the address first listed above.
Very truly yours,
NRE HOLDINGS, INC.
By:
-----------------------------------------------
Title:
-------------------------------------------
Accepted and agreed to:
BANCBOSTON INVESTMENTS INC.
By:
-------------------------------------
Title:
---------------------------------
<PAGE>
LIST OF SCHEDULES
4.4 GOVERNMENTAL APPROVALS
4.5(A) STOCK OWNERSHIP AFTER RECAPITALIZATION
4.5(B) STOCK RIGHTS, OPTIONS, WARRANTS, ETC.
4.6 RELATED AGREEMENTS
16.3 RESTRICTIVE LEGENDS
LIST OF EXHIBITS
A FORM OF NOTE
B FORM OF WARRANT
C FORM OF LEGAL OPINION OF COUNSEL TO THE COMPANY
D FORM OF CHARTER AMENDMENT
Exhibit 4.20
NO. W-2
NRE HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT
RIGHT TO PURCHASE 81.0799 SHARES OF THE CLASS B
COMMON STOCK OF NRE HOLDINGS, INC.
Bingham, Dana & Gould
Boston, Massachusetts 02110
RIGHT TO PURCHASE 81.0799 SHARES OF THE CLASS B
COMMON STOCK OF NRE HOLDINGS, INC.
This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended, and may
not be sold or transferred in the absence of such registration or an exemption
therefrom under such Act or any applicable state securities laws. Furthermore,
this Warrant may be sold or otherwise transferred only in compliance with the
conditions specified in Articles IV and V of the Stockholders Agreement dated as
of September 1, 1994 among NRE Holdings, Inc., National Restaurant Enterprises,
Inc., The First National Bank of Boston and the Stockholders (as defined
therein) (the "Agreement") and Section 14.2 of the Securities Purchase Agreement
dated as of November 30, 1994 between NRE Holdings, Inc. and BancBoston
Investments Inc. (the "Purchase Agreement"), a complete and correct copy of each
which is available for inspection at the principal office of NRE Holdings, Inc.
and will be furnished without charge to the holder of this Warrant upon written
request.
No. W-2
NRE Holdings, Inc.
Common Stock Purchase Warrant
NRE Holdings, Inc. a Delaware corporation (together with any corporation
which shall succeed or to assume the obligations of NRE Holdings, Inc. hereunder
(the "Company"), hereby certifies that, for value received, BancBoston
Investments, Inc. ("BBI") or its assigns, is entitled, subject to the terms set
forth below, to purchase from the Company at any time or from time to time after
the date hereof, subject to the provisions of Section 2.4 hereof, 81.0799 shares
of the outstanding fully paid and non-assessable shares of its Class B Common
Stock, .01 par value per share (the "Class B Common Stock"), when exercised
pursuant to Section 2.1 hereof, at an initial purchase price per share of $.01
(such price per share as adjusted form time to time as provided herein is
referred to herein as the "Exercise Price"). The number and character of such
shares of Class B Common Stock and the Exercise Price are subject to adjustment
as provided herein.
This Warrant is issued (a) in connection with an Amended and Restated
Revolving Credit and Term Loan Agreement (the "Credit Agreement") dated as of
November 30, 1994 among the Company, National Restaurant Enterprises, Inc.
("NRE"), The First National Bank of Boston, the other banks which are or may
become parties thereto (collectively, the "Banks"), and The First National Bank
of Boston, as Agent, (b) in connection with the Purchase Agreement, and (c)
pursuant to the Agreement. The holder of this Warrant shall be entitled to all
of the benefits and shall be subject to all of the obligations of the Agreement
as provided therein.
- 2 -
1. DEFINITIONS. Terms defined in the Agreement and not otherwise
defined herein are used herein with the meanings so defined. Certain terms are
used in this Warrant as specifically defined in Section 12 hereof.
2. EXERCISE OF WARRANT.
2.1. Exercise. This Warrant may be exercised, subject to the
provisions of Section 2.4 hereof, in full or in part, at any time and from time
to time by the holder hereof. In any case, exercise of this Warrant shall be by
surrender of this Warrant, with the form of subscription at the end hereof duly
executed by such holder, to the Company at its principal office, accompanied by
payment, by certified or official bank check payable to the order of the company
or by wire transfer to its account, in an amount equal to the product of the
number of shares of Class B Common Stock for which this Warrant is then being
exercised times the Exercise Price then in effect. In the event of any partial
exercise of this Warrant, the Company, at its expense, will forthwith upon each
such partial exercise, issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Class B Common Stock equal (without giving effect to any
adjustment therein) to the number of such shares called for on the face of this
Warrant minus the number of such shares (without giving effect to any adjustment
therein) for which this Warrant shall have been exercised. Upon any exercise of
this Warrant, in whole or in part, the holder hereof may pay the aggregate
Exercise Price with respect to the shares of Class B Common Stock for which this
Warrant is then being exercised (collectively, the "Exercise Shares") by
surrendering its rights to a number of Exercise Shares having a fair market
value equal to or greater than the required Exercise Price, in which case the
holder hereof would receive the number of Exercise Shares to which it would
otherwise be entitled upon such exercise, less the surrendered shares.
2.2. Conflict With Other Laws. Any other provisions of this Warrant
to the contrary notwithstanding, neither BBI nor any of its affiliates shall be
entitled to exercise the rights under this Warrant to purchase securities of the
Company if, as a result of such purchase, BBI and all affiliates of BBI, taken
together would own, control or have power to vote securities of the Company in
violation or contravention of any law or regulation or any judgment, decree or
order of any governmental authority then applicable to BBI and its affiliates.
For the purposes of this paragraph, a written statement of BBI or of any of its
affiliates exercising this Warrant, delivered to the Company upon surrender of
this Warrant, to the effect that BBI or its affiliate, as the case may be, is
legally entitled to exercise its rights under this Warrant to purchase
securities of the Company and that such purchase will not violate or contravene
any law or regulation or any judgment, decree or order of any governmental
authority then applicable to BBI and its affiliates, shall be conclusive and
binding upon the Company and shall absolutely obligate and bind the Company to
deliver, in accordance with the other terms and
- 3 -
provisions hereof, certificates or other appropriate instruments representing
the securities so purchased.
2.3. Warrant Agent. In the event that a bank or trust company shall
have been appointed as trustee for the holder of the Warrant pursuant to Section
6.2 hereof, such bank or trust company shall have all the powers and duties of a
warrant agent appointed pursuant to Section 13 hereof and shall accept, in its
own name for the account of the Company or such successor entity as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 2.
2.4. Termination. This Warrant shall terminate upon the earlier to
occur of (a) exercise in full or (b) November 30, 2002.
3. REGISTRATION RIGHTS. The holder of this Warrant has the right
to cause the Company to register shares of Warrant Stock, and any shares issued
upon exercise hereof, under the Securities Act and any blue sky or securities
laws of any jurisdictions within the United States at the time and in the manner
specified in Section 6 of the Agreement.
4. FINANCIAL INFORMATION. The Company shall deliver to the holder
of this Warrant all financial information that the Company and NRE are required
to deliver to the Banks pursuant to Section 9.4 of the Credit Agreement, in the
time and manner provided therein, and, for the purposes of this Section 4, the
provisions of Section 9.4 of the Credit Agreement shall survive the termination
of the Credit Agreement.
5. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
5.1. Delivery of Certificates. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within ten (10)
days thereafter, the Company, at its expense (including the payment by it of any
applicable issue taxes), will cause to be issued in the name of and delivered to
the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Class B Common Stock (or
Other Securities) to which such holder shall be entitled on such exercise,
together with any other stock or Other Securities and property (including cash,
where applicable) to which such holder is entitled upon such exercise.
5.2. Fractional Shares. In the event that the exercise of this
Warrant, in full or in part, results in the issuance of any fractional share of
Class B Common Stock, then in such event the holder of this Warrant shall be
entitled to cash equal to the fair market value of such fractional share on the
date of exercise, as determined in good faith by the Company's Board of
Directors.
- 4 -
6. ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS AND RECLASSIFICATIONS.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor:
(a) other or additional stock or Other Securities or property (other
than cash) by way of dividend; or
(b) other or additional stock or Other Securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate restructuring;
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 8
hereof), then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 2 hereof, shall be entitled to receive the amount
of stock and Other Securities and property (including cash in the case referred
to in subsection (b) of this Section 6) which such holder would have received
prior to or would have held on the date of such exercise if on the date hereof
he had been the holder of record of the number of shares of Class B Common Stock
called for on the face of this Warrant and had thereafter, during the period
from the date hereof to and including the date of such exercise, retained such
shares and all such other or additional stock and Other Securities and property
(including cash in the case referred to in subsection (b) of this Section 6)
receivable by such holder as aforesaid during such period, giving effect to all
further adjustments called for during such period by Sections 7 and 8 hereof.
7. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
7.1. Certain Adjustments. In case at any time or from time to time,
the Company shall (a) effect a capital reorganization, reclassification or
recapitalization, (b) consolidate with or merge into any other person, or (c)
transfer all of substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 2 hereof at any time after the consummation of
such reorganization, recapitalization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Class B Common Stock (or Other Securities) issuable on such exercise prior to
such consummation or effective date, the stock and Other Securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant immediately prior thereto, all subject to
further adjustment thereafter as provided in Sections 6 and 8 hereof.
- 5 -
7.2. Appointment of Trustee For Warrant Holders Upon Dissolution. In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company , prior to such
dissolution, shall, at its expense, deliver or cause to be delivered the stock
and Other Securities and property (including cash, where applicable) receivable
by the holders of the Warrant after the effective date of such dissolution
pursuant to this Section 7 to a bank or trust company having its principal
office in Boston, Massachusetts, as trustee for the holder or holders of the
Warrant.
7.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 7, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and Other Securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or Other Securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 9 hereof.
8. ADJUSTMENTS FOR ISSUANCE OF COMMON STOCK AND AMOUNT OF
OUTSTANDING COMMON STOCK.
8.1. General. If at any time there shall occur any stock split,
stock dividend, reverse stock split or other subdivision or combination of the
Company Common Stock ("Stock Event"), then the number of shares of Class B
Common Stock to be received by the holder of this Warrant shall be appropriately
adjusted such that the proportion of the number of shares issuable hereunder to
the total number of shares of the Company (on a fully diluted basis) prior to
such Stock Event is equal to the proportion of the number of shares issuable
hereunder after such Stock Event to the total number of shares of the Company
(on a fully diluted basis) after the Stock Event. No adjustment to the Exercise
Price shall be made in connection with any adjustment of the number of shares of
Class B Common Stock receivable upon exercise of this Warrant, except that the
Exercise Price shall be proportionately decreased upon the occurrence of any
stock split or other subdivision of the Common Stock.
8.2. Other Issuances of Common Stock. Unless the holder of this
Warrant shall otherwise agree, if at any time there shall be any increase in the
number of shares of Common Stock outstanding or which the Company is obligated
to issue, or covered by any option, warrant or convertible security which is
outstanding or which the Company is obligated to issue, then the number of
shares of Class B Common Stock to be received by the holder of this Warrant
shall be adjusted to that number determined by multiplying the number of shares
of Class B Common Stock purchasable hereunder prior thereto by a fraction (a)
the numerator of which shall be the number of shares of Common Stock outstanding
or which the
- 6 -
Company is obligated to issue, or covered by options, warrants or convertible
securities which are outstanding or which the Company is obligated to issue,
immediately after such increase, and (b) the denominator of which shall be the
number of shares of Common Stock outstanding or which the Company is obligated
to issue, or covered by options, warrants or convertible securities which are
outstanding or which the Company is obligated to issue, immediately prior to
such increase. Thereupon, the Exercise Price shall be correspondingly reduced
so that the aggregate Exercise Price for all shares of Class B Common Stock
covered hereby shall remain unchanged. The provisions of this Section 8.2 shall
not apply to any issuance of additional Common Stock for which an adjustment is
provided under Section 8.1 hereof.
8.3. Other Securities. In case any Other Securities shall have been
issued, or shall then be subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer of Other
Securities or any other entity referred to in Section 6 hereof) or to
subscription, purchase or other acquisition pursuant to any rights or options
granted by the Company (or such other issuer or entity), the holder hereof shall
be entitled to receive upon exercise hereof such amount of Other Securities (in
lieu of or in addition to Common Stock) as is determined in accordance with the
terms hereof, treating all references to Common Stock herein as references to
Other Securities to the extent applicable, and the computations, adjustments and
readjustments provided for in this Section 8 with respect to the number of
shares of Class B Common Stock issuable upon exercise of this Warrant shall be
made as nearly as possible in the manner so provided and applied to determine
the amount of Other Securities from time to time receivable on the exercise of
the Warrant, so as to provide the holder of the Warrant with the benefits
intended by this Section 8 and the other provisions of this Warrant.
9. NO DILUTION. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger or dissolution, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrant above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of stock on the exercise of the Warrant from time to
time outstanding, (c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage or par value in
respect of participation in dividends and in any such distribution of assets,
(d) will comply in all respects with the provisions of Section VIII of the
Agreement except to the extent such compliance may be waived by Section VIII of
the Agreement, and (e) will not transfer all or substantially all of its
properties and assets to any other entity (corporate otherwise), or consolidate
with or merge into any other entity or permit any such entity to consolidate
with or merge into the Company (if the Company is not the surviving entity),
unless such
- 7 -
other entity shall expressly assume in writing and will be bound by all the
terms of this Warrant and the Agreement.
10. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In the case of each
event that may require any adjustment or readjustment in the shares of Class B
Common Stock issuable on the exercise of this Warrant, the Company at its
expense will promptly prepare a certificate setting forth such adjustment or
readjustment, or stating the reasons why no adjustment or readjustment is being
made, and showing, in detail, the facts upon which any such adjustment or
readjustment is based, including a statement of (a) the number of shares of the
Company Common Stock then outstanding on a fully diluted basis, and (b) the
number of shares of Class B Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted and readjusted (if required by Section 8) on account thereof. The
Company will forthwith mail a copy of each such certificate to each holder of a
Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the
calculations used to determine such adjustment or readjustment. At its option,
the holder of a Warrant may confirm the adjustment noted on the certificate by
causing such adjustment to be computed by an independent certified public
accountant at the expense of the Company.
11. NOTICES OF RECORD DATE. In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any Other Securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or any
consolidation or merger of the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
(d) any proposed issue or grant by the Company of any shares
of stock of any class or any Other Securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any Other Securities (other than the issue of Class B Common Stock on the
exercise of this Warrant),
then, and in each such event, the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (a) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the
- 8 -
amount and character of such divdidend, distribution or right, (b) the date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is anticipated to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up and (c)
the amount and character of any stock or Other Securities, or rights or options
with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed
at least thirty (30) days prior to the date specified in such notice on which
any such action is to be taken.
12. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT.
sufficient shares of authorized but unissued Class B Common Stock of the Company
have been reserved by appropriate corporate action in connection with the
prospective exercise of the Warrant, and the conversion of shares of Class B
Common Stock into shares of the Class A Common Stock as provided in the
Certificate of Incorporation of the Company. Neither the issuance of the
Warrant or the shares of Warrant Stock or conversion of shares of Common Stock
of one class into shares of the other class will require any further corporate
action by the stockholders or directors of the Company, will be subject to pre-
emptive rights in any present or future stockholders of the Company or will
conflict with any provision of any agreement to which the Company is a party or
by which it is bound, and such Common Stock, when issued upon exercise of the
Warrant in accordance with their terms or upon such conversion, will be duly
authorized, fully paid and non-assessable.
13. DEFINITIONS. As used herein the following terms, unless the
context otherwise requires, hae the following respective meanings:
The term Common Stock includes (a) the Company's Class A Common
Stock, $.01 par value per share (the "Class A Common Stock"), (b) the Class B
Common Stock, (c) the Class C Common Stock, $.01 par value per share (the "Class
C Common Stock"), (d) the Class D Common Stock, $.01 par value per share (the
"Class D Common Stock"), (e) any other capital stock of any class or classes
(however designated) of the Company, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and (f) any Other Securities
into which or for which any of the securities described in clauses (a), (b),
(c), (d) or (e) above have been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
- 9 -
The term the Company shall include NRE Holdings, Inc. and any
corporation which shall succeed to or assume the obligations of the Company
hereunder.
The term Other Securities refers to any stock (other than Common
Stock) and Other Securities of the Company or any other entity (corporate or
otherwise) which (a) the holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of this Warrant, in lieu of or
in addition to Common Stock, or (b) at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities, in each case pursuant to Section 6 or 7 hereof.
14. WARRANT AGENT. The Company may, by written notice to the holder
of this Warrant, appoint an agent having an office in Boston, Massachusetts for
the purpose of issuing Class B Common Stock on the exercise of this Warrant
pursuant to Section 2 hereof, and exchanging or replacing this Warrant pursuant
to the Agreement, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.
15. REMEDIES. The Company stipulates tht the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
16. NOTICES. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, or sent by overnight courier at such address as
may have been furnished to the Company in writing by such holder or, until any
such holder furnishes to the Company an address, then to, and at the address of,
the last holder of this Warrant who has so furnished an address to the Company.
17. MISCELLANEOUS. In case any provision of this Warrant shall be
invalid, illegal or unenforceable, or partially invalid, illegal or
unenforceable, the provision shall be enforced to the extent, if any, that it
may legally be enforced and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby. This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by a statement in writing signed by the party against which enforcement of
such change, waiver, discharge or termination is sought. This Warrant shall be
governed by and construed in accordance with the domestic substantive laws (and
not the conflict of law rules) of the Commonwealth of Massachusetts. The
headings in this Warrant are for purposes of reference only, and shall not limit
or othewise affect any of the terms hereof. This Warrant shall take effect as
an instrument under seal.
- 10 -
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer and its corporate seal to be impressed hereon and
attested by its Secretary.
Dated as of November 30, 1994
NRE HOLDINGS, INC.
(Corporate Seal)
By:_________________________
Title:
Attest:
_________________________
Secretary
FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: NRE HOLDINGS, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder ____ shares of
Class B Common Stock of NRE HOLDINGS, INC. and herewith makes payment of $
therefore, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________, whose address is _____________.
Dated: _______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
_______________________________
(Address)
-1-
No. 1
Junior Subordinated Note
This Note has not been registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise transferred in the absence
of such registration or an exemption therefrom under such Act.
Furthermore, this Note may be sold or otherwise transferred only in
compliance with the conditions specified in the Securities Purchase
Agreement (as hereinafter defined), a complete and correct copy of
which is available for inspection at the principal office of the
Company (as hereinafter defined) and will be furnished without charge
to the holder of this Note upon written request.
$600,000 as of November 30, 1994
NRE HOLDINGS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to BANCBOSTON INVESTMENTS INC., a
Massachusetts corporation ("BBI"), or its registered assigns, the entire
principal amount of SIX HUNDRED THOUSAND DOLLARS ($600,000), payable at the
times specified in Section 3 of the Securities Purchase Agreement (as
hereinafter defined) and with a final maturity on March 31, 2005 (the "Maturity
Date"), and to pay interest on the unpaid principal amount hereof from the date
hereof until and including the payment in full of the unpaid principal amount
hereof at a rate equal to 6% per annum (computed on the basis of actual number
of days elapsed and a 360-day year). The Company hereby promises to pay such
interest quarterly in arrears on the first day of each calendar quarter (each,
an "Interest Payment Date"), and on the date of the payment in full of the
unpaid principal amount hereof. All payments of principal and interest hereof
shall be made in lawful money of the United States of America to the account of
the holder hereof upon presentation hereof at the principal office of
Affilliate at l00 Federal Street, Boston, Massachusetts or at such other place
as the holder hereof shall have designated to the Company in writing.
This Note is one of the Notes of the Company aggregating $600,000 in
original authorized principal amount issued pursuant to the Securities Purchase
Agreement, dated as of November 30, 1994 (the "Securities Purchase Agreement"),
between the Company and BBI. The holder of this Note is entitled to enforce the
provisions of the Securities Purchase Agreement and to enjoy the benefits
thereof and is
<PAGE>
-2-
subject to the obligations thereunder as a holder of a Note.
The Company may from time to time at its election prepay this Note, in
whole or in part, and the maturity hereof may be accelerated by the Majority
Holders (as defined in the Securities Purchase Agreement) of the Notes
outstanding following an Event of Default (as defined in the Securities
Purchase Agreement), all as provided in the Securities Purchase Agreement, to
which reference is made for the terms and conditions of such provisions as to
prepayment and acceleration.
Any permitted transfer of this Note is registrable on the note
register of the Company upon presentation at the principal office of the
Company accompanied by a written instrument of transfer in form satisfactory to
the Company duly executed by, or on behalf of, the holder hereof. This Note may
also be exchanged at such office for one or more Notes in any authorized
denominations, as requested by the holder, of a like aggregate unpaid principal
amount.
Prior to due presentment for registration of transfer, the Company and
any agent of the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment of
principal and interest as herein provided and for all other purposes.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE HEREOF, AGREES WITH THE COMPANY
THAT THIS NOTE SHALL BE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL
SENIOR INDEBTEDNESS (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT) TO THE
EXTENT AND IN THE MANNER PROVIDED IN THE SECURITIES PURCHASE AGREEMENT.
<PAGE>
-3-
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws.
NRE HOLDINGS, INC.
By:
--------------------------------
Title:
--------------------------------
SECURED PROMISSORY NOTE
$6,920,700.00 November 21, 1995
FOR VALUE RECEIVED, the undersigned, AMERIKING TENNESSEE CORPORATION
I, a corporation duly organized and existing under the laws of the State of
Delaware (the "Company"), promises to pay to the order of BURGER KING
CORPORATION, a Florida corporation, 17777 Old Cutler Road, Miami, Florida
33157, or its assigns ("BKC"), the principal amount of SIX MILLION NINE
HUNDRED TWENTY THOUSAND SEVEN HUNDRED AND NO/ 100 DOLLARS ($6,920,700.00) on
the Due Date (as defined below).
This Note shall be for a term beginning on the date hereof and ending
on the earlier to occur of (i) the closing date of the sale of certain Burger
King(R) Restaurants located in Chicago, Illinois and owned by National
Restaurant Enterprises, Inc., d/b/a AmeriKing, a Delaware corporation and the
holder of all of the outstanding capital stock of the Company ("NRE"), to
Bruce Taylor or to any of his affiliates (the "Taylor Transaction"); or (ii)
February 21, 1996, which date shall automatically be extended to May 21, 1996
unless BKC has determined, in its sole discretion, that NRE has failed to use
its best efforts to consummate the Taylor Transaction (the "Due Date"). The
Note shall bear interest at the rate of nine and three-quarters percent (9
3/4%) per annum on the unpaid principal balance from time to time outstanding
until paid in full, and interest on the unpaid principal balance shall be paid
monthly, subject only to the provisions hereinafter stated as to default and
acceleration.
Interest only on the outstanding principal balance of this Note shall
be payable monthly, in arrears, on the first business day of each month, with
the first such payment commencing on January 1, 1996 and ending with a final
payment of interest on the Due Date.
The principal amount of this Note, together with all accrued but
unpaid interest, shall be due and payable in one (1) BALLOON payment of SIX
MILLION NINE HUNDRED TWENTY THOUSAND SEVEN HUNDRED AND NO/ 100 DOLLARS
($6,920,700.00) on the Due Date.
Payments shall be credited first to the payment of accrued interest,
and the balance of any payment in excess of such interest shall be applied and
credited to the principal balance then outstanding. All payments of principal,
interest, or other sums hereunder shall be deemed made when received by BKC.
This Note is payable by mail or in person at the office of BKC or
such other place as BKC may designate.
1. Security. Payment of this Note is secured by a pledge of all of
the outstanding capital stock of the Company, which owns all of the issued and
outstanding capital stock of QSC, Inc. and Ro-Lank, Inc., each a Tennessee
corporation (collectively, the "Acquired Corporations"), pursuant to a Stock
Pledge Agreement of even date herewith between NRE and BKC (the "Stock Pledge
Agreement").
<PAGE>
2. Representations and Warranties.
(a) Corporate Power and Authority. The company has the corporate power
and authority to execute, deliver and carry out the terms and provisions of
this Note and the Stock Pledge Agreement, and the Company has taken or caused
to be taken all necessary requisite corporate action to authorize the making
and delivery of this Note. This Note constitutes the legal, valid and binding
obligation of the Company and is enforceable in accordance with their
respective terms.
(b) No Violations. Neither the execution and delivery of this Note or the
Stock Pledge Agreement nor the consummation of the transactions herein and
therein contemplated, nor compliance with the provisions hereof or thereof
will violate any law, statute or regulation, or any order or decree of any
court or governmental instrumentality, or will conflict with, or result in the
breach of, or constitute a default under, any material indenture, mortgage,
deed of trust, agreement or other instrument to which the Company or NRE is a
party or by which the Company or NRE or any of their respective properties may
be bound, or, except as contemplated under the Stock Pledge Agreement, result
in the creation or imposition of any lien upon any property of the Company
thereunder.
(c) No Litigation; Compliance with Laws. There are no actions, suits or
proceedings which have been served upon the Company or NRE, or to the
Company's knowledge, threatened, against or affecting the Company or NRE
before any court, arbitrator or governmental or administrative body or agency
which challenge the validity or propriety of the transactions contemplated
under this Note or the Stock Pledge Agreement.
(d) Governmental Action. No action of, or filing with, any governmental
or public body or authority is required to authorize, or is otherwise required
in connection with the execution, delivery and performance of this Note or the
Stock Pledge Agreement.
(e) Solvency. After giving effect to the loan evidenced by this Note, (i)
the assets of the Company, at fair valuation, exceed its liabilities; (ii) the
capital of the Company is not unreasonably small to conduct its business; and
(iii) the Company has not incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature.
3. Affirmative Covenants. The Company covenants and agrees that until
payment in full of the principal and interest on this Note, the Company will:
(a) Corporate Existence. Do or cause to be done all things necessary to
maintain, preserve and keep in full force and effect, its existence and the
existence of each of the Acquired Corporations in the jurisdiction of their
incorporation, and qualify and remain qualified in each jurisdiction where
qualification is necessary or desirable in view of the respective business
operations of the Company and each of the Acquired Corporations.
2
<PAGE>
(b) Notice of Default. Upon the occurrence of any Event of Default,
promptly furnish written notice thereof to BKC specifying the nature and period
of existence thereof and the action which the Company is taking or proposes to
take with respect thereto.
(c) Compliance with Laws. Duly observe, conform and comply with all laws,
decisions, judgments, rules, regulations and orders of all governmental
authorities relative to the conduct of the business of the Company and each of
the Acquired Corporations, and their respective assets and properties.
4. Negative Covenants. Without the prior written consent of BKC, the
Company will not, nor will it permit either of the Acquired Corporations to:
(a) Limitation on Liens. Create, incur, assume or suffer to exist any
mortgage, pledge, security interest, encumbrance or lien on any of the assets,
property or stock of the Company or either of the Acquired Corporations other
than (i) a secondary pledge of the Company's non-voting stock in favor of The
First National Bank of Boston, as agent (the "Agent"); or (ii) liens to secure
indebtedness otherwise permitted pursuant to Section 4(b). Notwithstanding
anything to the contrary in the Amended and Restated Revolving Credit and Term
Loan Agreement dated as of November 30, 1994, as amended, among NRE, NRE
Holdings, Inc., the Agent and the lending institutions set forth on Schedule I
thereto, the Company shall not grant to the Agent a perfected security
interest in the non-voting capital stock of the Acquired Corporations unless
the Company has granted to BKC a prior perfected security interest of all of
the outstanding capital stock of the Company and has delivered to BKC
certificates representing all of the outstanding shares of capital stock of
the Acquired Corporations.
(b) Limitation on Indebtedness. Incur, create or permit to exist any
indebtedness, obligations or liabilities, except (i) current accounts payable
of the Acquired Corporations arising in the ordinary course of business or any
other indebtedness approved in writing by BKC, (ii) purchase money
indebtedness, (iii) equipment financing or (iv) capital leases, in each case
solely for the purpose of financing capital upgrades for the Burger King(R)
Restaurants described in Section 5(a)(v) hereof.
(c) Guaranties. Be or become liable in respect of any guaranty or surety
obligation.
(d) Mergers, Sales, Dissolution. Merge into or with or consolidate with,
or cause either of the Acquired Corporations to merge into or with or
consolidate with, any other person, other than the Company, or assign,
transfer, sell, lease or otherwise dispose of, or cause either of the Acquired
Corporations to assign, transfer, sell or otherwise dispose of all or any part
of the assets, property or stock of the Company or either of the Acquired
Corporations to any other person, except (i) inventory in the ordinary course
of business, or (ii) the sale of the real estate underlying BK #5873 held by
the Acquired Corporations, in which case the net proceeds of such sale shall
be applied to repay indebtedness evidenced by this Note, or wind up, liquidate
or dissolve, or agree to do any of the foregoing, or cause either of the
Acquired Corporations to do so.
3
<PAGE>
(e) Capital Stock. Make any change or cause either of the Acquired
Corporations to make any change in authorized or issued capital stock, or
issue any corporate securities of any nature or options for any of the
foregoing, or enter into any contract of any nature respecting shares of
capital stock, other than in connection with the merger of the Acquired
Corporations with and into the Company.
(f) Articles of Incorporation; Bylaws. Amend or cause either of the
Acquired Corporations to amend or authorize any amendment to or modification
of its Articles of Incorporation or Bylaws other than in connection with the
merger of the Acquired Corporations with and into the Company.
(g) Contracts. Except as otherwise permitted pursuant to Sections 4(a),
(b), (e), (f), and (h) , enter into or cause either of the Acquired
Corporations to enter into any lease, contract or agreement of any type which
would (i) obligate the Company or either of the Acquired Corporations to pay a
total amount in excess of $50,000, or (ii) cause the Company or either of the
Acquired Corporations to breach any material contract or commitment to which
it is a party.
(h) Transactions with Affiliates. Enter into or cause either of the
Acquired Corporations to enter into or be a party to any transaction or
arrangement with any affiliate (as defined below) except in the ordinary
course of business and pursuant to the reasonable requirements of the Acquired
Corporations and upon fair and reasonable terms. "Affiliate" means a person
which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, the Company.
5. Events of Default.
(a) If any of one or more of the following events (herein called "Events
of Default") shall occur for any reason whatsoever:
(i) if default shall be made in the due and punctual payment of the
principal of or interest on this Note (whether at maturity, by acceleration or
otherwise); or
(ii) if the Company or either of the Acquired Corporations shall default
in the due observance or performance of any convenant, condition or agreement
on the part of the Company or either of the Acquired Corporations to be
observed or performed hereunder; or
(iii) if the Company, NRE or either of the Acquired Corporations shall be
unable to pay its debts generally as they become due; file a petition to take
advantage of any insolvency act; make an assignment for the benefit of their
respective creditors; commence a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself; file a petition or answer
seeking reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United States of
America; or
4
<PAGE>
(iv) if a court of competent jurisdiction shall enter an order, judgment
or decree appointing a custodian, receiver, trustee, liquidator or conservator
of the Company, NRE or either of the Acquired Corporations, or approve a
petition filed against the Company, NRE or either of the Acquired Corporations
seeking reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United States of
America; or if, under the provisions of any other law for the relief or aid of
debtors, a court of competent jurisdiction shall assume custody or control of
the Company, NRE or either of the Acquired Corporations; or if there is
commenced against the Company or NRE any proceeding for any of the foregoing
relief and such proceeding or petition remains undismissed for a period of 60
days; or if the Company or NRE by an act indicates its consent to or approval
of any such proceedings or petition; or
(v) the occurrence of an event of default under any of the franchise
agreements or lease/subleases (collectively, the "BKC Agreements") with
respect to Burger King(R) Restaurants #2585, #2657, #2995, #3351, #3964,
#4195, #4445, #4959, #5355 and #5873 (collectively, the "Restaurants"), other
than due to (x) the failure of the Company or either of the Acquired
Corporations to operate the Restaurants in accordance with BKC's operating
standards or (y) a default existing prior to the date hereof.
(A) BKC may declare the Note to be due and payable, and all interest
accrued thereon and all other obligations of the Company, NRE and the Acquired
Corporations to BKC hereunder and under the Stock Pledge Agreement and the BKC
Agreements, shall forthwith become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, anything contained herein or in any instrument evidencing the Note to
the contrary notwithstanding; and
(B) BKC may determine which rights, security or remedies at any time
shall be pursued, relinquished, subordinated, modified or what other action
shall be taken with respect thereto, without in any way modifying or affecting
any of them or any of BKC's rights hereunder.
(b) Rights and Remedies Cumulative. No right or remedy
herein conferred upon BKC is intended to be exclusive of any other right or
remedy contained herein or in the Stock Pledge Agreement or any of the BKC
Agreements or in any instrument or document delivered in connection with or
pursuant to this Note, and every such right or remedy shall be cumulative and
shall be in addition to every other such right or remedy contained herein and
therein or now or hereafter existing at law or in equity or by statute, or
otherwise.
(c) Rights and Remedies Not Waived. No course of dealing
between the Company and BKC or any failure or delay on the part of any holder
of this Note in exercising any rights or remedies hereunder shall operate as a
waiver of any rights or remedies of such holder and no single or partial
exercise of any rights or remedies hereunder shall operate as a waiver or
preclude the exercise of any other rights or remedies hereunder or of the same
right or remedy on a future occasion.
5
<PAGE>
6. Late Fee. Every amount overdue under this Note shall bear interest
from and after the date on which such amount first became overdue at an annual
rate of two percent (2%) above the interest rate specified in this Note. Such
interest on overdue amounts under this Note shall be payable on demand and
shall accrue and be compounded monthly until the obligation of the Company
with respect to the payment of such interest has been discharged (whether
before or after judgment).
7. No Set-Off or Counterclaims. All payments by the Company under
this Note shall be made without set-off or counterclaim and be free and clear
and without any deduction or withholding for any taxes or fees of any nature
whatever, unless the obligation to make such deduction or withholding is
imposed by law. The Company shall pay and save the holder of this Note
harmless from all liabilities with respect to or resulting from any delay or
omission to make any such deduction or withholding required by law.
8. No Usury. It is hereby expressly agreed that if from any
circumstances whatsoever fulfillment of any provision of this Note at the time
performance of such provision shall be due, shall involve transcending the
limit validly prescribed by applicable usury statutes or any other laws, with
regard to obligations of the like character and amount, then ipso facto the
obligations to be fulfilled shall be reduced to the limit of such statutes or
laws, so that in no event shall any exaction be possible under this Note that
is in excess of the limit, but such obligation shall be fulfilled to the
maximum limit. All agreements therein are expressly limited so that in no
contingency or event whatsoever, whether by reason of advancement of the
proceeds hereof, acceleration of maturity of the unpaid principal amount
hereof, or otherwise shall the amount paid or agreed to be paid to BKC for the
use, forbearance or detention of the money to be advanced hereunder exceed the
highest lawful rate. In the event the maximum rate permitted to be paid on
promissory notes and agreements of the type contemplated hereunder is ever
increased, the maximum rate of interest hereunder shall be adjusted
simultaneously with the effective date of such increase to coincide with the
rate established by such law. In the event such maximum rate is eliminated,
the maximum rate of eliminating the maximum usuary rate which, however, shall
never exceed any criminal usuary rate then in effect. In the event the total
liability for payments of interest and payments in the nature of interest
including, without limitation, all charges, fees, exactions or other sums
which may at any time be deemed to be interest shall, for any reason
whatsoever, result in an effective rate of interest, which for any month or
other interest payment period exceeds the limit imposed by any applicable
usury laws, all sums in excess of those lawfully collectible as interest for
the period in question shall, without further agreement or notice by, between
or to any party hereto, be applied to reduce the accrued interest hereunder,
if any, and then to a reduction of the outstanding principal amount,
immediately upon receipt of such sums by the holder hereof, or shall be
refunded to the Company, with the same force and effect as though the
undersigned had specifically designated such excess sums to be so applied;
provided, however, that BKC may, at any time and from time to time, elect, by
notice in writing to the undersigned, to waive, reduce or limit the collection
of any sums in excess of those lawfully collectible as interest rather than
accept such sums and apply them as set forth above. It is the intention of the
parties that the Company does not intend or expect to pay nor does BKC intend
or expect to charge, accept or collect any interest under this Note greater
than the highest rate of interest which may be charged under applicable law.
6
<PAGE>
9. Waivers. No delay or omission on the part of the holder hereof in
exercising any right under this Note or the Stock Pledge Agreement shall
operate as a waiver of such right or of any other right of such holder, nor
shall any delay, omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion. The Company and
every indorser or guarantor of this Note regardless of the time, order or
place of signing hereby waive presentment, demand, protest and notices of
every kind and assent to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange or release of
collateral, and to the addition or release of any other party or person
primarily or secondarily liable.
10. Prepayment. This Note may be prepaid in whole or in part at any time
or from time to time without premium or penalty.
11. Successors and Assigns. This Note shall be binding upon the Company
and its successors and shall inure to the benefit of BKC and its successors
and assigns.
12. Governing Law/Consent to Jurisdiction. This Note shall be governed by
and construed in accordance with the laws of the State of Florida applicable
to agreements made to be performed in Florida and shall be enforced in Federal
or state Courts located in the City of Miami, Metropolitan Dade County, State
of Florida. The Company hereby irrevocably submits to the jurisdiction of any
Florida State or Federal court sitting in the City of Miami, Florida and any
appellate court thereof in any action or proceeding arising out of or relating
to this Note. The Company hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding and any right to jurisdiction on account of the
place of residence or domicile of the Company.
13. WAIVER OF TRIAL BY JURY. THE COMPANY AND BKC DO HEREBY KNOWINGLY,
VOLUNTARILY, IRREVOCABLY, UNCONDITIONALLY AND INTENTIONALLY WAIVE THE RIGHT TO
TRAIL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE OR THE AGREEMENTS. THIS IRREVOCABLE
WAIVER OF THE RIGHT TO A JURY TRIAL IS A MATERIAL INDUCEMENT FOR BKC TO ACCEPT
THIS NOTE.
14. Notice. Any notice required, desired or permitted to be given to the
Company or BKC hereunder shall be in writing delivered personally, receipt
acknowledged, or mailed, certified or registered mail, return receipt
requested addressed to:
If to the Company: AmeriKing Tennessee Corporation I
c/o The Jordan Company
9 West 57th Street, 40th Floor
New York, New York 10019
Attention: A. Richard Caputo, Jr.
7
<PAGE>
With a copy to: James B. Carlson, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
If to BKC: Burger King Corporation
17777 Old Cutler Road
Miami, Florida 33157
Attention: General Counsel
and Lisa Giles-Klein, Senior Attorney
or such other address as shall be furnished in writing by the Company or BKC
to the other prior to the giving of the applicable notice or communication.
Such notices shall be deemed given (i) if delivered personally, upon delivery,
receipt acknowledged (ii) if mailed as aforesaid, five (5) days after deposit
in the United States mail.
15. Collection. The Company hereby agrees to pay in lawful money of the
United States of America, all of BKC's costs and expenses of enforcement and
collection of this Note, including attorneys' and paralegals' fees and
disbursements in the event and to the extent that BKC seeks to enforce any of
the terms or covenants of this Note, including without limitation, the
Company's obligations to pay the principal hereof and interest thereon
pursuant to the terms hereof. All amounts payable by the Company under this
paragraph 15 shall be due on demand.
16. Severability. All of the provisions of this Note are severable. In
the event that any provisions of this Note are held to be void, illegal or
otherwise unenforceable, the remainder of this Note shall be unaffected
thereby and shall remain in full force and effect without such void, illegal
or unenforceable provision.
17. Amendments. None of the terms or provisions of this Note may be
excluded, modified, or amended except by a written instrument duly executed on
behalf of the holder expressly referring to this Note and setting forth the
provision so excluded, modified or amended.
18. Cross Default. The Company acknowledges that a default under the
terms of this Note shall constitute a default under the terms of the BKC
Agreements. Should the Company fail to cure said default within ten (10) days
of receipt of written notice, BKC shall have the right to terminate the BKC
Agreements and all post-termination obligations of said agreements shall
apply.
This Note is executed as an instrument under seal.
ATTEST: AMERIKING TENNESSEE CORPORATION I
[SPELLING IN SIGNATURE] [SPELLING IN SIGNATURE]
- -------------------------- --------------------------------------
Asst. Secretary Chief Financial Officer
8
<PAGE>
STATE OF TENNESSEE )
) SS:
COUNTY OF HAMILTON )
AFFIDAVIT OF OUT-OF-STATE DELIVERY
I, the undersigned affiant, being first duly sworn upon my oath, depose
and say:
1. That I am an employee of Burger King Corporation.
2. That on the 21st day of November, 1995, I witnessed the execution of
that certain promissory note dated November 21, 1995, in the principal amount
of SIX MILLION NINE HUNDRED TWENTY THOUSAND SEVEN HUNDRED AND 00/100 DOLLARS
($6,920,700.00) payable by AMERIKING TENNESSEE CORPORATION I, as maker, to
BURGER KING CORPORATION, as payee.
3. That the execution of the promissory note took place in the City of
Chattanooga, in the State of Tennessee.
4. That I accepted delivery of the promissory note on behalf of the payee
in said City and State.
FURTHER AFFIANT SAYETH NOT.
AFFIANT: /s/ Donald R. Gleason
________________________________
Print name: Donald R. Gleason
Title: Franchise Manager
Sworn to and subscribed before me this 21st day of November, 1995, by
Donald R. Gleason, who personally appeared before me, is
personally known to me or produced _______________________________ as
identification.
[NOTARIAL SEAL]
Notary: /s/ Suetta M. Morgan
____________________________
Print Name: Suetta M. Morgan
Notary Public, State of Tennessee
My commission expires: 3/8/98
<PAGE>
STATE OF TENNESSEE )
) SS:
COUNTY OF HAMILTON )
I hereby certify that the foregoing promissory note was executed and
acknowledged before me, the undersigned authority , this 21st day of November,
1995, in the State and County aforesaid, by Donald R. Gleason, who
personally appeared before me, is personaly known to me or produced
__________________ as identification, and did not take an oath.
[NOTARIAL SEAL]
Notary: /s/ Suetta M. Morgan
____________________________
Print Name: Suetta M. Morgan
Notary Public, State of Tenessee
My commission expires: 3/8/98
GUARANTY
In consideration of and as inducement to the making of a loan in the
principal sum of SIX MILLION NINE HUNDRED TWENTY THOUSAND SEVEN HUNDRED AND
NO/100 DOLLARS ($6,920,700.00) (hereinafter referred to as the "Loan"), by
BURGER KING CORPORATION, a Florida corporation, with a place of business at
17777 Old Cutler Road, Miami, Florida 33157 (hereinafter referred to as
"BKC"), to AMERIKING TENNESSEE CORPORATION I, a Delaware corporation, with a
place of business at c/o The Jordan Company, 9 West 57th Street, 40th Floor,
New York, New York 10019 (hereinafter referred to as the "Obligor"), the
undersigned, LAWRENCE JARO and WILLIAM OSBORNE (hereinafter collectively
referred to as the "Guarantors"), jointly and severally unconditionally
guarantee to BKC prompt payment and performance of all "Obligations" (as
hereinafter defined) to BKC of the Obligor.
1. The term "Obligations" as used in this Guaranty shall mean the
payment of all principal, interest and charges due under that certain Secured
Promissory Note of even date herewith evidencing the Loan and the prompt and
reasonable performance and observance of all of the covenants, agreements and
conditions of the Stock Pledge Agreement referred to therein.
<PAGE>
2. This Guaranty shall operate as a continuing guaranty of all the
Obligations. The liability of the Guarantors shall be unlimited and such
liability shall continue regardless of any reduction (except by payment
hereunder) or increase of the Obligations until all of the Obligations have
been paid or otherwise discharged.
3. Upon the occurrence of any of the hereafter described "events of
default," the liability of the Guarantors hereunder shall be effective
immediately; and each of the Guarantors waives demand, presentment, notice of
default under any of the Obligations, protest, notice of acceptance of this
Guaranty, notice of any loan made, extension granted or other action taken in
reliance hereon and all demands and notices of every kind in connection with
this Guaranty or the Obligations; assents to any renewal, extension or
postponement of the time of payment of any of the Obligations or any other
indulgence with respect thereto, regardless of the length and number of such
renewals, extensions, postponements or indulgences, to any substitution,
exchange or release of collateral therefor and to the addition or release of
any other person primarily or secondarily liable thereon; and agrees to the
provisions of any instrument, security or other writing now or hereafter
evidencing any of the Obligations. Failure of BKC in any one instance to make
any demand or otherwise to proceed against any of the Guarantors shall not
constitute a vaiver of BKS's right toproceed against the Guarantors in respect
to any or all Other defaults by the Obligor. The Guarantors shall not assert
any right
2
<PAGE>
arising from payment or other performance hereunder until the Guarantors'
liability hereunder shall have been discharged in full and all of the
Obligations existing at the time of such discharge shall have been fulfilled.
4. Each Guarantor agrees that this Guaranty shall be directly
enforceable against the Guarantor without first resorting to the Obligor or
exhausting remedies against it or against any securities or liens available to
BKC and that suit may be commenced against the Guarantor without commencing
suit against the Obligor and without joining the Obligor as a defendant, in
which event, upon payment in full of the Obligations, BKC shall assign to the
Guarantors its rights against Obligor. The Guarantors agree that in the event
a settlement is made with the Obligor for less than the amount of the
Obligations actually due BKC, the Guarantors shall in no way be released from
liability for the balance still due to BKC even though the Obligor shall have
been released from said Obligations. The Guarantors waive any right to require
that an action be brought against the Obligor or any other person or to
require that resort be had to any security or any balance of any deposit
account or credit on the books of BKC in favor of Obligor or any other person.
The Guarantors waive the benefit of any statute of limitations affecting the
Obligor's liability hereunder or the enforcement thereof and waive any and all
defenses available to a surety or a guarantor except payment and performance
in full.
3
<PAGE>
5. The Guarantors guarantee to BKC the payment of any and all
expenses paid or incurred by BKC (including reasonable attorneys' fees) in
connection with the collection of all sums and obligations guaranteed
hereunder, whether such collection be from the Obligor or from the Guarantors.
6. In the event that, pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief law, or any judgment,
order or decision thereunder, BKC must rescind or restore any payment, or any
part thereof, received by BKC in satisfaction of the Obligations, as set forth
therein, any prior release or discharge from the terms of this Guaranty given
to Guarantors by BKC shall be without effect, and this Guaranty shall remain
in full force and effect.
7. Each Guarantor represents and warrants that:
7.1 Guarantor is not now in default of any of its
obligations and agreements and no condition exists, which, if continued, would
constitute such default, and there are no known suits or proceedings pending
or threatened against the Guarantor; and
7.2 The pro-forma financial statements of National
Restaurant Enterprises, Inc., a Delaware corporation, the holder of all of the
outstanding capital stock of Obligor ("NRE") dated the 8th day of November,
1995, given to BKC in connection with the making of the Loan, are true and
accurate as of the date
4
<PAGE>
thereof, and there has been no adverse change since such date in the financial
condition and operations of NRE or any other matters contained or referred to
therein and no additional material liabilities have arisen or been incurred
since such date.
8. Without limiting the generality of the foregoing, the liability of
the Guarantors shall not be affected by any action which BKC may take or fail
to take with respect to any other guaranty or endorsement of or security for
the Obligations hereby guaranteed, or any alteration or modification in any
such obligation to which BKC may agree, or because of any fraud, illegal or
improper acts of the Obligor, of if, by operation of law, the Obligor's
Obligations to BKC are invalid.
9. Upon the occurrence of any of the following events of default:
(a) a default by Obligor in the payment or performance of any of the
Obligations beyond the expiration of any applicable grace or notice
period or the occurrence of any event of default under any of the
documents evidencing the Obligations; or
(b) (i) the death of any Guarantor or the appointment of a permanent receiver
for or for any of the property of or an assignment for the benefit of
creditors by, or the filing of a petition under any bankruptcy,
receivership, insolvency or debtor relief law by, or a petition for any
readjustment of indebtedness, reorganization, composition or extension
by, or the making or entering into of a trust mortgage or deed or other
instrument of similar import for the benefit of creditors by, the
Guarantor; or (ii) the pendency of any such petition against the
5
<PAGE>
Guarantor, such petition remaining undismissed for a period of thirty (30)
days; or
(c) the attachment of the goods or credits of any Guarantor, or the
institution of any foreclosure proceedings against any Guarantor; said
attachment remaining undismissed for a period of thirty (30) days, or
said foreclosure proceeding remaining undismissed for a period of fifteen
(15) days; or
(d) if any Guarantor becomes insolvent and unable to pay its debts as they
mature or if an order for relief under the Bankruptcy Code is entered
against any Guarantor; or
(e) any breach of any of the covenants and agreements herein contained or if
any representation contained herein is or should prove to be false or
misleading in any material respect;
for purposes of this Guaranty, all Obligations of the Obligor, regardless of
the terms thereof and all obligations of the Guarantors hereunder, at BKC's
election, shall be deemed to have become immediately due and payable and BKC
may take any action it deems necessary or advisable to enforce this Guaranty.
10. This Guaranty is intended to take effect as a sealed instrument,
shall inure to the benefit of BKC and its successors and assigns, and shall be
binding upon the Guarantors and their heirs, executors, administrators, other
legal representatives, successors and assigns.
11. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Florida applicable to agreements
made to be performed in
6
<PAGE>
Florida and shall be enforced in Federal or state courts located in the City
of Miami, Metropolitan Dade County, State of Florida. The Guarantors hereby
irrevocably submit to the jurisdiction of any Florida State or Federal court
sitting in the City of Miami, Florida and any appellate court thereof in any
action or proceeding arising out of or relating to this Guaranty. The
Guarantors hereby irrevocably waive, to the fullest extent they may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding and any right to jurisdiction on account of the
place of residence or domicile of the Guarantors.
12. THE GUARANTORS AND BKC BY ACCEPTANCE OF THIS GUARANTY DO HEREBY
KNOWINGLY, VOLUNTARILY, IRREVOCABLY, UNCONDITIONALLY AND INTENTIONALLY WAIVE
THE RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. THIS IRREVOCABLE
WAIVER OF THE RIGHT TO A JURY TRIAL IS A MATERIAL INDUCEMENT FOR BKC TO ACCEPT
THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been executed and delivered to
BKC by the Guarantors on this 21st day of November, 1995.
---------------------------------------
LAWRENCE JARO
---------------------------------------
WILLIAM OSBORN
7
PROMISSORY NOTE
$1,865,000.00 Date: November 29, 1995
FOR VALUE RECEIVED, the undersigned, AMERIKING COLORADO CORPORATION
I, a Delaware corporation (hereinafter referred to as "Borrower"), HEREBY
PROMISES TO PAY to the order of FRANCHISE ACCEPTANCE CORPORATION LIMITED
("Lender") in lawful money of the United States of America, the principal
amount of One Million Eight Hundred Sixty Five Thousand and No/100ths United
States dollars (U.S. $1,865,000.00), together with interest on the unpaid
principal balance outstanding from time to time at a rate equal to the Program
Rate (as defined in the Loan and Security Agreement dated November 29, 1995
between Lender and Borrower (as amended or supplemented from time to time, the
"Loan Agreement")) as in effect from time to time, plus two and three-fourths
(2.75)% (such percentage being referred to herein as the "Applicable Margin").
Accrued interest shall be payable in arrears on the unpaid principal balance
of this Note on the fifteenth (15th) day of each month (each, a "Payment
Date") commencing on 1/25, 1996 and continuing until this Note is
fully paid, and principal on this Note shall be payable in one hundred twenty
(120) consecutive monthly installments on each Payment Date, commencing on
1/25, 1996 until this Note is fully paid; provided, however, that the final
payment under this Note shall be in the amount of the balance of principal,
interest and all other charges remaining unpaid. The amount of each monthly
installment of principal is set forth in ANNEX A attached hereto and made a
part hereof. All advances, if any, shall be set forth on ANNEX B attached
hereto an made a part hereof. Capitalized terms used but not defined in this
Note are defined in the Loan Agreement.
Interest shall be calculated on the basis of a three hundred and
sixty (360) day year and charged on the actual number of days elapsed in each
calendar year by multiplying the actual number of days the debt is outstanding
in each calendar year by the rate of Interest, and dividing the product
thereof by three hundred and sixty (360).
In the event of the acceleration of this Note, and the mortgage by
which it is secured, by reason of any default thereunder, any prepaid and
unearned interest in excess of the highest rate allowable by law to date of
enforcement of payment, shall thereupon be refunded to the maker automatically
by crediting of same against the sums then due, but such credit shall not cure
or waive the occasioning default and acceleration. Under no circumstances
shall the total liability for payment in the nature of interest under this
Note and the mortgage by which it is secured exceed the highest rate allowed
by law.
Borrower shall make each payment hereunder not later than 11 a.m.
(New York time) on the day when due in U.S. dollars through the Disbursing
Account as provided in the Loan Agreement for the account of the Lender.
1
<PAGE>
In the event of a partial prepayment of principal due and payable
hereunder, no such partial prepayment shall postpone or interrupt payments of
principal and interest, all of which shall continue to be due and payable at
the time and the manner set forth above.
If any payment of principal or interest on this Note shall become due
on a day which is not a business day, such payment shall be made on the next
succeeding business day.
Upon the maturity of any portion of this Note, whether by
acceleration or otherwise, Borrower further promises to pay interest at the
rate per annum equal to the sum of (x) 2.0%, plus (y) the Applicable Margin,
plus (z) the Program Rate in effect from time to time, on the then outstanding
past-due amount of principal, until such amount is paid in full. Such interest
shall be payable upon demand of the Lender.
In the event that any amounts due hereunder have not been paid to the
Lender within five (5) days after the date due, Borrower shall pay on demand
as a late charge, to the extent legally permitted, an amount equal to the
lesser of five percent (5%) of such overdue amounts or the maximum amount
allowed by law.
This Note is one of the Notes referred to in the Loan Agreement and
evidences indebtedness incurred under the Loan Agreement. The Loan Agreement,
among other things, contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events.
Not more than once a year, Borrower may prepay all or a portion of
the principal hereof, interest accrued but unpaid hereon and any other amounts
as may be due and payable hereunder at any time; provided that Borrower shall
give at least 45 days prior written notice to Lender of the intended date of
prepayment, which date shall be a Payment Date and provided further that any
partial prepayment of principal shall be in an amount of at least $25,000 and
shall be applied to the installments due on this Note in the inverse order of
maturity.
Borrower hereby waives presentment, demand for payment (except for
such notice as contemplated under Section 12(a) of the Loan Agreement) and
notice of protest or dishonor in connection with the delivery, acceptance,
performance, default, acceleration or enforcement of this Note and hereby
consents to any extensions of time, renewals, releases of any party to this
Note, waivers or modifications that may be granted or consented to by the
holder of this Note in respect of the time of payment or any other provision
of this Note.
Each Borrower, endorser, and/or guarantor jointly and severally
agrees to pay all costs, reasonable attorneys' fees if Lender is the
prevailing party ("prevailing party" shall include a party who receives
substially the relief desired whether by dismissal, summary judgment, judgment
or otherwise), paralegal fees, and expenses incurred in the event it becomes
necessary for Lender to protect its security and in the event of collection,
whether or not Lender brings suit; and if suit is brought said parties agree
to pay the Lender's costs and reasonable attorneys' fees, paralegal fees and
expenses incurred therein including costs and reasonable attorneys' fees,
2
<PAGE>
paralegal fees and expenses incurred therein including costs and reasonable
attorneys' fees, paralegal fees, and costs incurred on appeal, if any.
BORROWER CONSENTS TO THE ASSIGNMENT BY LENDER OF ALL OR ANY PORTION
OF ITS RIGHTS UNDER THIS NOTE AND THE OTHER LOAN DOCUMENTS, INCLUDING, BUT NOT
LIMITED TO, ASSIGNMENT(S) TO PURCHASERS AND CREDIT ENHANCERS MADE IN
CONNECTION WITH THE FRANCHISEE LOAN PROGRAM. BORROWER ACKNOWLEDGES AND AGREES
THAT ANY AND ALL RIGHTS OF LENDER UNDER THIS NOTE AND THE OTHER LOAN DOCUMENTS
MAY BE EXERCISED FROM TIME TO TIME BY ANY ASSIGNEE OR SUCCESSOR OF LENDER,
INCLUDING, BUT NOT LIMITED TO, ANY PURCHASER, ANY PURCHASER AGENT, ANY CREDIT
ENHANCER OR ANY AGENT, TRUSTEE OR OTHER REPRESENTATIVE THEREFOR, INCLUDING
CITICORP NORTH AMERICA, INC., AS SERVICING AGENT. BORROWER AGREES THAT ANY
ASSIGNEE'S RIGHTS SHALL BE FREE OF ALL DEFENSES, SET-OFFS OR COUNTERCLAIMS
WHICH BORROWER MAY HAVE AGAINST LENDER.
Notwithstanding any other provision set forth in this Note, any
holder of this Note may at any time create a security interest in all or any
portion of its rights under this Note in favor of any Federal Reserve Bank in
connection with Regulation A of the Board of Governors of the Federal Reserve
System.
This Note shall be binding upon Borrower and its successors and
assigns.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, United States.
Except as may be prohibited by law, Lender and Borrower hereby
knowingly, voluntarily, intentionally and unconditionally waive the right
either may have to a jury trial in respect to any litigation based hereon, or
arising out of, under or in connection with this Note, or any agreement or
instrument contemplated to be executed in conjunction herewith, or any course
of conduct, course of dealing, statements (whether oral or written) or actions
of either party. If the subject matter of any such litigation is one in which
the waiver of a jury trial is prohibited, neither the Borrower nor the Lender
shall present a non-compulsory counterclaim in such litigation or any claim
arising out of this Note. Furthermore, neither the Lender nor Borrower shall
seek to consolidate any such action in which a jury trial has not been waived.
This provision is a material inducement for the Lender's extension of credit
to the Borrower.
If Lender chooses to waive any provision of this Note, of if any
provision of this Note is construed by a court of competent jurisdiction to be
invalid or unenforceable, it shall not affect the applicability, validity, or
enforceablitity of the remaining provisions of this Note.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
BORROWER: WITNESSES:
AMERIKING COLORADO CORPORATION I,
a Delaware Corporation
By: ___________________________/SEAL/ By:___________________________/SEAL/
Name:______________________________ Name: _______________________________
Title:_______________________________
By:__________________________/SEAL/ By:__________________________/SEAL/
Name:______________________________ Name:______________________________
Title:_______________________________
</TABLE>
Address:
AmeriKing Colorado Corporation I
2215 Enterprise Drive
Westchester, Illinois 60154
Attention: Joel Aaseby
ENDORSEMENT
PAYABLE TO THE ORDER OF CITICORP NORTH AMERICA, INC., AS INVESTOR AGENT,
WITHOUT RECOURSE, EXCEPT AS PROVIDED IN THE FRANCHISE LOAN PURCHASE AND SALE
AGREEMENT BETWEEN LENDER, THE INVESTOR AGENT AND CERTAIN OTHER PARTIES.
FRANCHISE ACCEPTANCE CORPORATION LIMITED
By:___________________________________/SEAL/
Name:______________________________________
Title:_______________________________________
By:___________________________________/SEAL/
Name:_______________________________________
Title:________________________________________
4
<PAGE>
ANNEX A
TO THE PROMISSORY NOTE
AMORTIZATION SCHEDULE
A-1
<PAGE>
ANNEX B
TO THE PROMISSORY NOTE
ADVANCES OF PRINCIPAL
<TABLE>
<CAPTION>
Date Amount of Advance Balance Notation by
<S> <C> <C> <C>
12-15-95 $1,865,000.00 0 /s/
</TABLE>
A-4
LETTER AMENDMENT TO NOTE
December 14, 1995
Mr. Joel Aaseby
AmeriKing Colorado Corporation I, a Delaware corporation
2215 Enterprise Drive
Westchester, IL 60154
Dear Mr. Aaseby:
Reference is hereby made to that certain Loan and Security
Agreement dated as of November 29, 1995 (the "Loan Agreement") between you and
Franchise Acceptance Corporation Limited ("FACL") and the promissory note
issued pursuant thereto (the "Note"). FACL has assigned all of its interest in
the Loan Agreement and the Note to Citicorp North America, Inc. as Investor
Agent ("Citicorp"). Any capitalized terms used in this Letter Amendment and
not defined herein shall have the same meanings as designated in the Loan
Agreement.
It is hereby agreed by you and Citicorp as follows:
Effective as of the date of this Letter Amendment (the
"Effective Date"), the Note is hereby amended to provide that the Payment Date
is the 25th day of each month.
On and after the Effective Date, each reference in each Note
to "this Note", "hereunder", "hereof" or words of like import referring to the
Note, shall mean and be a reference to the Note as amended by this Letter
Agreement. Each Note, as amended by this Letter Amendment, is and shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed.
Please indicate your agreement to the terms and provisions
hereof by executing and returning at least one counterpart of this Letter
Amendment to Citicorp North America, Inc., Attention of CSOF Program Manager
in the envelope provided.
This Letter Amendment shall become effective as of the Effective Date upon
execution by you, and Citicorp.
<PAGE>
This Letter Amendment may be executed in any number of
counterparts and by any combination of the parties hereto in separate
counterparts, each of which counterpart shall be an original and all of which
when taken together shall constitute one and the same Letter Amendment.
Very truly yours,
CITICORP NORTH AMERICA, INC.,
as Investor Agent
By: /s/Bryan B. Sievert
____________________
Bryan B. Sievert
Vice President
Agreed as of the date
first above written:
AmeriKing Colorado Corporation I,
a Delaware corporation
By: /s/
______________________
Print Name: /s/
______________________
Title: /s/
______________________
THESE WARRANTS AND THE SHARES OF CLASS C COMMON STOCK
PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS AND MUST BE HELD INDEFINITELY UNLESS
SUBSEQUENTLY REGISTERED UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR TRANSFERRED, SOLD, OR OTHERWISE
DISPOSED OF PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS. THESE WARRANTS AND THE SHARES OF COMMON STOCK
PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AS SET FORTH HEREIN AND THAT CERTAIN STOCKHOLDERS
AGREEMENT AMONG THE ISSUER AND CERTAIN OF ITS STOCKHOLDERS.
A COPY OF THE ABOVE REFERENCED AGREEMENT IS ON FILE AT THE
OFFICES OF NRE HOLDINGS, INC.
NRE HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANTS
Dated as of February 7, 1996
Security No. NRE-W-1 71.72 Warrants
NRE Holdings, Inc., a Delaware corporation (the "Company"), by this
certificate (a "Warrant Certificate") certifies that, for value received,
ATWELL & CO., as nominee for PMI Mezzanine Fund, L.P., or registered permitted
assigns (sometimes hereinafter referred to as the "Warrantholders") is the
registered holder of warrants (said warrants and any warrants issued in
exchange therefor or transfer or replacement thereof being hereinafter
collectively referred to as the "Warrants") to purchase from the Company
Seventy-One and 72/100 (71.72) fully paid and nonassessable shares (together
with shares issued upon exchange, transfer or replacement thereof and as such
number may be adjusted, the "Shares") of the Class C Common Stock of the
Company (the "Class C Stock" and, together with the Class A, B, and D Common
Stock of the Company, the "Common Stock"), subject to the provisions of
Section 18, at any time or from time to time until 5:00 p.m. New York time on
February 7, 2006, at an exercise price of Ten Dollars ($10.00) per share,
subject to adjustment as provided herein (as such price may be adjusted, the
"Exercise Price"), upon surrender of an equal number of Warrants and payment
of the Exercise Price therefor but only subject to the terms and conditions
set forth herein. The Exercise Price and the number of Shares purchasable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth herein.
<PAGE>
1. Exercise of Warrants.
1.1 No Warrant may be exercised after 5:00 p.m., New York time, on
February 7, 2006 (the "Termination Date"). All Warrants evidenced hereby shall
thereafter become void. Warrants may be exercised to purchase Shares from the
Company on or after the date hereof and on or before 5:00 p.m., New York time,
on the Termination Date, at the Exercise Price, subject to adjustment, as
hereinafter referred to. The registered holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon properly
completed and executed, together with payment of the Exercise Price (a) in
cash or by wire transfer of federal funds or other delivery of immediately
available funds or (if the exercise is by the person to whom the Warrants are
initially issued) by check reasonably acceptable to the Company, (b) to the
extent permitted by law, by delivery of Senior Subordinated Notes due 2005 of
the Company, duly endorsed or accompanied by appropriate instruments of
transfer duly executed by the registered holder thereof, which Notes shall be
applied to the payment of the Exercise Price at 100% of their original
principal amount plus accrued interest to the date of delivery, or (c) by a
combination of the methods specified in clauses (a) and (b); provided,
however, that if the Warrant so exercised has been duly assigned in accordance
with the provisions of Section 12, such assignee may exercise such Warrant
prior to, or in the absence of, the registration of such assignment as though
such assignee were the registered holder of such Warrant. In the event that
upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the registered holder hereof or its permitted
assignee a new Warrant Certificate of like tenor and series for the remaining
Shares for which this Warrant Certificate is exercisable at the time of and
giving effect to such exercise and surrender; provided, however, that in
accordance with Section 11, the Company shall not be required to issue
fractions of Shares or to distribute certificates that evidence fractions of
Shares. The rights, privileges, obligations and restrictions created or
conveyed by this Warrant Certificate in the Shares or to the holders thereof
shall survive the transfer of the Shares or the remaining Warrants to another
person and/or the exercise, expiration or other termination of the Warrants,
and shall inhere in the Shares and inure to the benefit of and be binding upon
the holders thereof until, and shall expire upon, the termination of such
rights, privileges, obligations, and restrictions as provided herein or in the
Stockholders Agreement referred to in Section 2, below, notwithstanding the
retirement and/or cancellation of this Warrant Certificate. To evidence such
surviving rights, privileges, obligations, and restrictions, upon the request
of the Company or any such holder of Shares, the Company and such holder shall
execute an instrument or agreement confirming such rights, privileges,
obligations and restrictions.
1.2 Any other provisions of this Warrant Certificate to the contrary
notwithstanding, no person shall be entitled to exercise the rights under this
Warrant Certificate to purchase securities of the Company if, as a result of
such purchase, such person would own, control or have power to vote securities
of the Company in violation or contravention of any law or regulation or any
judgment, decree or order of any governmental authority then applicable to
such person. For the purposes of this Section 1.2, a written statement
exercising the Warrants, delivered to the Company upon surrender of this
Warrant, to the effect that such person is legally entitled to exercise its
right under this Warrant to purchase securities of the Company
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and that such purchase will not violate or contravene any law or regulation or
any judgment, decree or order of any governmental authority then applicable to
such person, shall be conclusive and binding upon the Company and shall
absolutely obligate and bind the Company to deliver, in accordance with the
other terms and provisions hereof, certificates or other appropriate
instruments representing the securities so purchased.
2. Related Agreements. The Warrants evidenced by this Warrant
Certificate are a portion of a series of like common stock purchase warrants
(collectively, the "Series Warrants") that are evidenced by certificates of
like tenor (the "Series Warrant Certificates") that have been issued pursuant
to that certain Note Purchase Agreement dated as of February 7, 1996 (the
"Purchase Agreement"), among the Company, National Restaurant Enterprises,
Inc., and the initial Warrantholder. Pursuant to the Purchase Agreement, the
Company has entered into that certain Waiver and Amendment No. 2 to
Stockholders Agreement dated as of February 7, 1996, which amends that certain
Stockholders Agreement dated as of September 1, 1994, among the Company and
certain of its stockholders, as amended by that certain Consent and Amendment
No. 1 to Stockholders Agreement dated as of November 30, 1994 (such
Stockholders Agreement as amended from time to time, the "Stockholders
Agreement"), the terms and provisions of which shall be binding upon and inure
to the benefit of the holders of the Warrants and the Shares. The Company
shall maintain a copy of the Stockholders Agreement at the Company's principal
offices, and shall make such copy available for review by any holder of the
Warrants and/or the Shares upon request of such holder.
3. Execution of Warrant Certificates.
3.1 This Warrant Certificate and all Warrant Certificates issued upon
exchange, transfer or replacement hereof have been or shall be executed by
manual or facsimile signature on behalf of the Company by a duly authorized
officer of the Company (an "Officer").
3.2 In case any Officer of the Company who shall have signed this
Warrant Certificate or any Warrant Certificates issued upon exchange, transfer
or replacement hereof shall cease to be such an Officer either before or after
delivery thereof by the Company, the signature of such person on such Warrant
Certificates, nevertheless, shall be valid and such Warrant Certificates may
be issued and delivered to those persons entitled to receive the Warrants
represented thereby with the same force and effect as though such person had
not ceased to be such an Officer of the Company. This Warrant Certificate and
all Warrant Certificates issued upon exchange, transfer or replacement hereof
may be signed on behalf of the Company by any person who, at the actual date
of the execution of such Warrant Certificate, shall be a proper Officer of the
Company to sign such Warrant Certificate, although at the date of the
execution of this Warrant Certificate any such person was not such an Officer.
Each Warrant Certificate shall be dated the date of its execution by the
Company.
4. Registration.
4.1 The Series Warrant Certificates shall be numbered and
registered as they are issued in a Warrant register (the "Warrant Register")
in the names of the record holders of the Series Warrant Certificates to whom
they are to be distributed. Series Warrant Certificates shall
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be numbered "NRE-W-1" and following. Any Holder (as defined below) may change
such Holder's address and facsimile number as shown on the Warrant Register by
written notice to the Company requesting such change. Any notice or written
communication required or permitted to be given to the Holder may be delivered
or given to such Holder at the address or the facsimile number shown on the
Warrant Register.
4.2 For the purpose of any exercise thereof and any distribution to
the holder thereof and for all other purposes, the Company shall (a) be
entitled to treat the registered holder of a Series Warrant Certificate on the
Warrant Register (such registered holder, the "Holder") as the absolute owner
in fact of the Series Warrants evidenced by such Series Warrant Certificate,
(b) not be bound to recognize any equitable or other claim to or interest in
such Series Warrants on the part of any person other than the Holder and (c)
not be liable for any registration of transfer of Series Warrants that are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with actual knowledge of such facts that its participation therein amounts to
bad faith (notwithstanding any notation of ownership or other writing thereon
made by anyone), and the Company shall not be affected by any notice to the
contrary or have any duty to make inquiry into any such matter. Upon execution
and delivery by the Company, each Series Warrant Certificate shall be valid
and binding on the Company and each Holder thereof shall be entitled to all
the benefits set forth therein.
5. Registration of Transfers and Exchanges.
5.1 The Company shall from time to time register the transfer to
permitted transferees of any outstanding Series Warrant Certificates on the
Warrant Register, upon surrender thereof accompanied by a written instrument
or instruments of transfer in form reasonably satisfactory to the Company,
duly executed by the Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or an
official copy thereof, duly certified, shall be deposited and remain with the
Company. In case of transfer by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any such registration of transfer, a new Series Warrant
Certificate or Certificates of like tenor and series and exercisable for the
same aggregate number of Shares shall be issued to the permitted transferee
and the surrendered Series Warrant Certificate shall be cancelled and disposed
of by the Company.
5.2 This Warrant Certificate and all Warrant Certificates issued upon
exchange, transfer or replacement hereof, when surrendered to the Company by
the registered holder hereof or thereof in person or by legal representative
or by attorney duly authorized in writing, may be exchanged, without payment
of any service charge, for another Warrant Certificate or Warrant Certificates
of like tenor and series exercisable for the same aggregate number of Shares
and the surrendered Warrant Certificate shall be cancelled and disposed of by
the Company.
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5.3 Subject to Section 7, the Company shall pay all expenses,
transfer taxes and related charges in connection with the preparation,
issuance and delivery of the Series Warrant Certificates.
5.4 Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrant Certificates to be transferred on its Warrant
Register to any person, unless (a) the Holder of such Warrant Certificates
shall furnish to the Company evidence of compliance with the Securities Act of
1933, as amended (the "Securities Act"), in accordance with the provisions of
Section 12 hereof, and (b) the proposed transferee is an Institutional Lender
(as defined in the Purchase Agreement) or such transfer is otherwise permitted
under the Stockholders Agreement.
6. Term and Exercise of Warrants.
6.1 Subject to the terms of this Warrant Certificate, each Holder
shall have the right, which may be exercised on or after the date hereof and
until 5:00 p.m., New York time, on the Termination Date, to purchase from the
Company (and the Company shall issue and sell to such Holder) the number of
fully paid and nonassessable Shares which the Holder may at the time be
entitled to purchase on exercise of such Warrants as provided under this
Section 6 and Section 10.
6.2 The Warrants evidenced by this Warrant Certificate shall be
exercisable, at the election of the Holder hereof, either as an entirety or
from time to time for part of the number of Warrants specified in this Warrant
Certificate.
6.3 Subject to Section 7 hereof, upon surrender of this Warrant
Certificate and payment of the Exercise Price (or, in the event of an exercise
of the Conversion Right pursuant to Section 15 hereof, upon surrender of this
Warrant Certificate), the Company shall cause to be issued and delivered to or
upon the written order of the Holder of this Warrant Certificate and in such
name or names as such Holder may designate (subject to Section 12), a
certificate for the Share or Shares issuable upon the exercise of the Warrant
or Warrants evidenced by this Warrant Certificate. Subject to Section 12, such
certificate shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become the holder of record of
such Share or Shares for all purposes as of the date of the surrender of this
Warrant Certificate and payment of the Exercise Price.
7. Payment of Taxes. The Company shall pay all transfer taxes, if
any, attributable to the initial issuance of Shares upon the exercise of the
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue of any Series Warrant Certificates or any certificates for Shares in a
name other than that of the Holder of this Warrant Certificate surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the reasonable satisfaction of the Company that such
tax has been paid or that no tax is payable.
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8. Mutilated or Missing Warrant Certificates. In case this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company shall
upon cancellation of this Warrant Certificate, if mutilated, or in lieu of and
substitution for this Warrant Certificate, if lost, stolen or destroyed, issue
a new Warrant Certificate or Certificates of like tenor and series and
exercisable for the same aggregate number of Shares, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction of this Warrant Certificate and indemnity or bond, if requested,
also reasonably satisfactory to the Company; provided, however, that if the
Holder of this Warrant Certificate is the original Holder of the Warrants or
is any other Institutional Lender, the written undertaking of such Holder
indemnifying the Company against losses, damages, costs and expenses
(including reasonable attorneys' fees) arising from such loss, theft or
destruction shall be sufficient security and indemnity. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may
prescribe.
9. Reservation of Shares.
9.1 (a) There have been reserved, and the Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Class C Stock, for the purpose of enabling it to satisfy any
obligation to issue Shares upon exercise of the Warrants, the maximum number
of shares of Class C Stock deliverable upon the exercise of all outstanding
Series Warrants. If, at any time, there is a transfer agent for the Shares
("Transfer Agent"), the Transfer Agent is hereby irrevocably authorized and
directed at all times to reserve such number of authorized and unissued shares
of Class C Stock as shall be required for such purpose. The Company shall keep
a copy of the form of the Series Warrant Certificate on file with the Transfer
Agent. All Series Warrant Certificates surrendered upon the exercise of the
rights thereby evidenced shall be cancelled.
(b) Before taking any action that would cause an adjustment
pursuant to Section 10, the Company shall take any corporate action that may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Shares at the Exercise
Price as so adjusted. Before making an adjustment pursuant to Section 10, the
Company shall obtain all such authorizations or exceptions therefor or
consents thereto as may be necessary from any applicable public regulatory
body or bodies having jurisdiction over the Company.
(c) The Company represents and warrants that all Shares
issued upon exercise of the Warrants shall, upon issuance in accordance with
the terms of this Warrant Certificate, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens, charges and
security interests created by the Company.
10. Adjustment of Exercise Price and Number of Shares Purchasable or
Number of Warrants. The Exercise Price and the number of Shares purchasable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 10.
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10.1 In the event that the Company shall at any time after February
7, 1996, (i) declare a dividend or make a distribution on the Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock
into a greater number of shares, (iii) combine the outstanding Common Stock
into a smaller number of shares, or (iv) issue any shares of its capital stock
in a reclassification or reorganization of Common Stock, the Exercise Price in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, shall be adjusted
so that it shall equal the price determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding immediately before such
event, and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
10.2 In the event that the Company shall issue rights, options or
warrants to any person or persons who are at the time of such issuance the
holders of equity securities of the Company, entitling them to subscribe for
or purchase shares of Common Stock (or securities convertible or exchangeable
into Common Stock) at a price per share of Common Stock (or having a
conversion or exchange price per share of Common Stock if a security
convertible or exchangeable into Common Stock) less than the Current Market
Price (as defined in Section 10.5) per share of Common Stock on the record
date for such issuance (or the date of issuance, if there is no record date),
the Exercise Price to be in effect on and after such record date (or issuance
date, as the case may be) shall be determined by multiplying the Exercise
Price in effect immediately prior to such record date (or issuance date, as
the case may be) by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on such record date (or issuance date, as
the case may be) plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of such Common Stock so to be
offered (or the aggregate initial exchange or conversion price of the
exchangeable or convertible securities so to be offered) would purchase at
such Current Market Price on such record date (or issuance date, as the case
may be) and of which the denominator shall be the number of shares of Common
Stock outstanding on such record date (or issuance date, as the case may be)
plus the number of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible securities to be
offered are initially exchangeable or convertible). In case such subscription
price may be paid in part or in whole in a form other than cash, the value of
such consideration shall be determined by the Board of Directors of the
Company in good faith as set forth in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary. In case the
Company shall issue rights, options, or warrants containing the right to
subscribe for or purchase shares of Common Stock (or securities convertible or
exchangeable into Common Stock) as an integral part of the issuance of debt or
the obtaining of other financing by the Company, then in determining the price
per share of Common Stock and the consideration received by the Company for
purposes of the first sentence of this Section 10.2, the Board of Directors of
the Company shall determine, in good faith, which determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, the fair value of the rights, options, or
warrants issued in connection with such debt or financing taking into account
the interest rate, fees, premiums, dividends and other amounts payable in
connection with such debt or financing and
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a good faith estimate of the expected return with respect to such transaction
taken as a whole. Such adjustment shall be made successively whenever such an
issuance occurs; and in the event that such rights, options, warrants, or
convertible or exchangeable securities are not so issued or expire or cease to
be convertible or exchangeable before they are exercised, converted, or
exchanged (as the case may be), then the Exercise Price shall again be
adjusted to be the Exercise Price that would then be in effect if such
issuance had not occurred, but such subsequent adjustment shall not affect the
number of Shares issued upon any exercise of Warrants prior to the date such
subsequent adjustment is made. Notwithstanding the foregoing, no adjustment of
the Exercise Price shall be required under this Section 10.2 with regard to:
(a) the issuance of rights, options, or warrants to employees of the Company
or any of its subsidiaries to the extent that the aggregate number of shares
of Common Stock to which such rights, options, or warrants relate, when added
to the aggregate number of shares of Common Stock and shares of Common Stock
relating to rights, options, warrants, or convertible or exchangeable
securities issued to employees of the Company or any of its subsidiaries in
transactions described in Section 10.4, do not exceed two percent (2%) of the
outstanding shares of Common Stock, on a fully-diluted basis, as of February
7, 1996; and (b) the issuance of rights, options, or warrants with respect to
which the Holder was entitled to exercise a right of first refusal under
Section 5.5 of the Stockholders Agreement.
10.3 In the event that the Company shall fix a record date for the
making of a distribution to all holders of shares of Common Stock (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of indebtedness
or assets (other than dividends and distributions referred to in Section 10.1
above and other than cash dividends) or of subscription rights, options,
warrants, or exchangeable or convertible securities containing the right to
subscribe for or purchase shares of any class of equity securities of the
Company (excluding those referred to in Section 10.2), the Exercise Price to
be in effect on and after such record date shall be adjusted by multiplying
the Exercise Price in effect immediately prior to such record date by a
fraction, of which the numerator shall be the Current Market Price per share
of Common Stock on such record date, less the fair market value (as determined
by the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights, options, warrants, or exchangeable
or convertible securities applicable to one share of the Common Stock
outstanding as of such record date, and of which the denominator shall be such
Current Market Price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Exercise Price shall again be adjusted to be
the Exercise Price which would then be in effect if such record date had not
been fixed, but such subsequent adjustment shall not affect the number of
Shares issued upon any exercise of Warrants prior to the date such subsequent
adjustment was made.
10.4 In the event that the Company shall issue shares of Common
Stock, or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock
(excluding (A) shares, rights, options, warrants, or convertible or
exchangeable securities outstanding or issued on the date of the original
issuance of Warrants hereunder or issued in any of the transactions described
in Section 10.1,
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<PAGE>
Section 10.2, or Section 10.3 above, (B) shares issued upon the exercise of
such rights, options or warrants or upon conversion or exchange of such
convertible or exchangeable securities, and (C) the Series Warrants and any
shares issued upon exercise thereof), at a price per share of Common Stock
(determined in the case of such rights, options, warrants, or convertible or
exchangeable securities by dividing (X) the total amount receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total minimum
consideration payable to the Company upon exercise, conversion, or exchange
thereof by (Y) the total maximum number of shares of Common Stock covered by
such rights, options, warrants, or convertible or exchangeable securities)
lower than the Current Market Price on the date the Company fixes the offering
price of such shares, rights, options, warrants, or convertible or
exchangeable securities, then the Exercise Price shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, (i) the numerator of which shall be
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such sale and issuance plus (B) the number of shares of Common Stock
which the aggregate consideration received (determined as provided below) for
such sale or issuance would purchase at such Current Market Price per share,
and (ii) the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such sale and issuance. Such
adjustment shall be made successively whenever such an issuance is made. For
the purposes of such adjustment, the maximum number of shares of Common Stock
which the holder of any such rights, options, warrants or convertible or
exchangeable securities shall be entitled to subscribe for or purchase shall
be deemed to be issued and outstanding as of the date of such sale and
issuance and the consideration received by the Company therefor shall be
deemed to be the consideration received by the Company for such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
consideration or premium stated in such rights, options, warrants, or
convertible or exchangeable securities to be paid for the shares of Common
Stock covered thereby. In case the Company shall sell and issue shares of
Common Stock, or rights, options, warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock for a consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the price per share of Common
Stock and the consideration received by the Company for purposes of the first
sentence of this Section 10.4, the Board of Directors of the Company shall
determine, in good faith, the fair value of said property, and such
determination shall be described in a duly adopted board resolution certified
by the Company's Secretary or Assistant Secretary. In case the Company shall
sell and issue rights, options, warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock together with one or more other securities as a part of a unit at a
price per unit, then in determining the price per share of Common Stock and
the consideration received by the Company for purposes of the first sentence
of this Section 10.4, the Board of Directors of the Company shall determine,
in good faith, which determination shall be described in a duly adopted board
resolution certified by the Company's Secretary or Assistant Secretary, the
fair value of the rights, options, warrants, or convertible or exchangeable
securities then being sold as part of such unit. In case the Company shall
sell and issue shares of Common Stock, or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, as an integral part of the issuance of
debt or the obtaining of other financing by the Company, then in determining
the price per share of Common Stock and the consideration
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received by the Company for purposes of the first sentence of this Section
10.4, the Board of Directors of the Company shall determine, in good faith,
which determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, the fair value of
the shares of Common Stock, rights, options, warrants, or convertible or
exchangeable securities issued in connection with such debt or financing
taking into account the interest rate, fees, premiums, dividends and other
amounts payable in connection with such debt or financing and a good faith
estimate of the expected return with respect to such transaction taken as a
whole. Such adjustment shall be made successively whenever such an issuance
occurs, and in the event that such rights, options, warrants, or convertible
or exchangeable securities expire or cease to be convertible or exchangeable
before they are exercised, converted, or exchanged (as the case may be), then
the Exercise Price shall again be adjusted to the Exercise Price that would
then be in effect if such sale and issuance had not occurred, but such
subsequent adjustment shall not affect the number of Shares issued upon any
exercise of Warrants prior to the date such subsequent adjustment is made.
Notwithstanding the foregoing, no adjustment of the Exercise Price shall be
required under this Section 10.4 with regard to: (a) the issuance of shares of
Common Stock, rights, options, warrants, or convertible or exchangeable
securities to employees of the Company or any of its subsidiaries to the
extent that the aggregate number of such shares of Common Stock and shares of
Common Stock to which such rights, options, warrants, or convertible or
exchangeable securities relate, when added to the aggregate number of shares
of Common Stock relating to rights, options, or warrants issued to employees
of the Company or any of its subsidiaries in transactions described in Section
10.2, do not exceed two percent (2%) of the outstanding shares of Common
Stock, on a fully-diluted basis, as of February 7, 1996; and (b) the issuance
of shares of Common Stock, rights, options, warrants, or convertible or
exchangeable securities to any person or persons who are at the time of such
issuance the holders of equity securities of the Company with respect to which
the Holder was entitled to exercise a right of first refusal under Section 5.5
of the Stockholders Agreement.
10.5 (a) In the event that the Company effects a private placement of
Common Stock, by and through (x) an investment banking firm of national
reputation which is a member of the National Association of Securities
Dealers, Inc. or (y) The Jordan Company, a New York general partnership, in an
arms-length transaction with an investor that is not affiliated with the
Company or any officer of the Company, then the Current Market Price per share
of Common Stock for the purpose of any computation under Section 10.4 in
connection with such placement shall be deemed to be equal to the price per
share paid by such investor in such placement. Except as set forth in the
preceding sentence, for the purpose of any computation under Section 10.2,
Section 10.3, Section 10.4, Section 11, or Section 15.1, the "Current Market
Price" per share of the Common Stock on any date (the "Computation Date")
shall be deemed to be the average of the daily closing prices of the Common
Stock (or, if applicable, any class of Common Stock then publicly traded) for
the 20 consecutive trading days ending the tenth trading day before such
Computation Date; provided, however, that if there shall have occurred prior
to the Computation Date a combination or reclassification of the outstanding
shares of Common Stock (or, if applicable, any class of Common Stock then
publicly traded) into a smaller number of shares and such action or
transaction shall have become effective with respect to market transactions at
any time (the "Market-Effect Date") on or after the beginning of such period
of 20 consecutive trading days, then the closing price for each trading day
preceding the Market-
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Effect Date shall be adjusted, for purposes of calculating the Current Market
Price, by multiplying such closing price by a fraction, the numerator of which
is the Exercise Price in effect immediately prior to the Computation Date and
the denominator of which is the Exercise Price in effect immediately prior to
the Market-Effect Date. The closing price for each day shall be (1) if the
security is traded on a national securities exchange (i) its last sale price
or, (ii) if there was no sale on that day, the last sale price on the next
preceding business day on which there was a sale, all as made available over
the Consolidated Last Sale Reporting System of the Consolidated Tape
Association Plan, or (iii) if the security is not then eligible for reporting
over this system, its last sale price on such national securities exchange or,
if there was no sale on that day, on the next preceding business day on which
there was a sale on such exchange, or (2) if the security is not traded on a
national securities exchange but trades solely in the over-the-counter market
and the security is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") (i) the last sale price reported on
NASDAQ or (ii) if the security is an issue for which last sale prices are not
reported on NASDAQ, the average of the closing bid and ask quotations on such
day, but, in each of the next preceding two cases, if the relevant NASDAQ
price or quotation did not exist on such day, then the price or quotation on
the next preceding business day on which there was such a price or quotation
or, (iii) if the security is not reported or quoted on NASDAQ, the highest
average bid and ask quotations as quoted in any of The Wall Street Journal,
the National Quotation Bureau, Inc. pink sheets, the Salomon Brothers
quotation sheets, quotation sheets of registered market makers and, if
necessary, dealers' telephone quotations, or, (3) if no price can be
determined on the basis of the above methods of valuation, then the judgment
of valuation shall be made in good faith by the Board of Directors. If the
Board of Directors is unable to determine any Valuation (as defined below), or
if the Holders of at least fifty-one percent (51%) of the Series Warrants then
outstanding (collectively, the "Requesting Holders") disagree with the Board's
determination of any Valuation by written notice delivered to the Company
within five (5) business days after the Board's determination thereof is
communicated to Holders of the Warrants affected thereby, which notice
specifies a majority-in-interest of the Requesting Holders' determination of
such Valuation, then the Company and a majority-in-interest of the Requesting
Holders shall select a mutually acceptable investment banking firm of national
reputation which has not had a material relationship with the Company or any
officer of the Company within the preceding two years, which shall determine
such Valuation. Such investment banking firm's determination of such Valuation
shall be final, binding and conclusive on the Company and the Holders. If the
Board of Directors was unable to determine such Valuation, all costs and fees
of such investment banking firm shall be borne by the Company. If the Holders
disagreed with the Board's determination of such Valuation, the party whose
determination of such Valuation differed from the Valuation determined by such
investment banking firm by the greatest amount shall bear all costs and fees
of such investment banking firm. For purposes of this Section 10.5, the term
"Valuation" shall mean the determination, to be made initially by the Board of
Directors of the Company, of (i) the value of non-cash consideration in a
subscription price, as set forth in the second sentence of Section 10.2, (ii)
the fair value of rights, options, or warrants being issued as an integral
part of the issuance of debt or the obtaining of other financing by the
Company, as set forth in the third sentence of Section 10.2, (iii) the fair
market value of assets or evidences of indebtedness, as set forth in the first
sentence of Section 10.3, (iv) the fair value of property other than cash or
its equivalent received as consideration, as set forth in the fourth sentence
of Section 10.4, (v) the fair value of rights, options, warrants, or
convertible or exchangeable
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securities being sold as part of a unit, as set forth in the fifth sentence of
Section 10.4, (vi) the fair value of shares of Common Stock, rights, options,
warrants, or convertible or exchangeable securities being sold or issued as an
integral part of the issuance of debt or the obtaining of other financing by
the Company, as set forth in the sixth sentence of Section 10.4, (vii) the
Current Market Price per share of Common Stock pursuant to clause (3) above,
or (viii) the fair market value of shares of stock or other securities,
property or cash to which a holder of Common Stock would be entitled upon a
merger, consolidation, or recapitalization for purposes of Section 10.9.
(b) For the purpose of any calculation under this Section
10, shares of Common Stock owned by or held for the account of the Company or
any majority-owned subsidiary of the Company on any date shall not be deemed
to be outstanding on such date, and the sale or other disposition of any
shares of Common Stock or other securities issued by the Company and owned by
or held for the account of the Company or any majority-owned subsidiary of the
Company shall be deemed an issuance thereof. For the purposes of adjusting the
Exercise Price pursuant to this Section 10, Common Stock shall be deemed to be
outstanding at a particular time if it is outstanding at such time or if it
can be acquired upon the conversion of any then outstanding shares of
convertible or exchangeable securities or can be purchased upon the exercise
of any outstanding rights, warrants, or options or acquired upon the
conversion of any convertible securities which can be purchased upon the
exercise of any outstanding rights, warrants or options.
10.6 (a) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this Section
10.6 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 10
shall be made to the nearest $.0005.
(b) No adjustment shall be made in connection with the
issuance of any shares of Common Stock or other securities in a bona fide
public offering pursuant to a firm commitment underwriting managed by a firm
which is a member of the National Association of Securities Dealers, Inc.
10.7 In the event that at any time, as a result of an adjustment made
pursuant to Section 10.1, the Holder of any Warrant thereafter exercised shall
become entitled to receive any share of capital stock or securities of the
Company other than shares of Class C Stock, thereafter the number of such
other shares or securities so receivable upon exercise of any Warrant and the
exercise price for such shares or securities shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Shares contained in Section 10.1 through
Section 10.4, inclusive, and the provisions of this Warrant Certificate with
respect to the Shares shall apply on like terms to any such other shares or
securities.
10.8 Upon each adjustment of the Exercise Price as a result of the
calculations made in Section 10.1, Section 10.2, Section 10.3, or Section
10.4, each Warrant outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to
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<PAGE>
purchase, at the adjusted Exercise Price, that number of Shares (calculated to
the nearest hundredth) obtained by (i) multiplying the number of shares of
Class C Stock purchasable upon exercise of the Warrant immediately prior to
adjustment by the Exercise Price in effect immediately prior to adjustment of
the Exercise Price and (ii) dividing the product so obtained by the Exercise
Price in effect immediately after such adjustment of the Exercise Price.
However, in the event that the Company is unable or fails (notwithstanding the
provisions of Section 9.1(b) and Schedule 13) to take an action, or obtain an
authorization, exception or consent, necessary in order that the Company may
validly and legally issue fully paid and nonassessable Shares at the Exercise
Price as so adjusted, then the adjustment to the number of Shares evidenced by
each Warrant provided for in the immediately preceding sentence shall
nevertheless take effect immediately at the time provided in Section 10.1,
Section 10.2, Section 10.3, or Section 10.4 for such adjustment of the
Exercise Price; provided, however, that nothing in this sentence shall relieve
the Company of its obligation to comply with Section 9.1(b) and with Section
13.
10.9 In the event of (a) any capital reorganization of the Company,
or any reclassification of the Class C Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value,
and other than a distribution referred to in Section 10.3), (b) any
consolidation of the Company with or the merger of the Company with or into
any other corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding shares of Class C
Stock) or (c) any sale of the properties and assets of the Company as, or
substantially as, an entirety to any other corporation or entity, (each such
event in clauses (a), (b) or (c) being an "Exchange Event") each Warrant shall
after such Exchange Event be exercisable, upon the terms and conditions
specified in this Warrant Certificate, for the number of shares of stock or
other securities, property, or cash to which a holder of the number of Shares
purchasable (at the time of such Exchange Event) upon exercise of such Warrant
would have been entitled upon such Exchange Event; and in any such case, if
necessary, the provisions set forth in this Section 10 with respect to the
rights and interests thereafter of the Holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities, property, or cash thereafter
deliverable on the exercise of the Warrants. At the option of the Company, the
Holders shall exercise the Warrants, subject to the provisions of this Section
10.9, upon any Exchange Event described in clause (b) above which is entered
into by the Company with an unrelated third party on an arm's length basis.
The subdivision or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares shall not be deemed to
be an Exchange Event for the purposes of this Section 10.9. The Company shall
not effect any such Exchange Event, unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company) or
entity resulting from such Exchange Event shall assume, by written instrument,
the obligation to deliver to the Holder of each Warrant such shares of stock,
securities, assets, or cash as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase and all the other obligations under
this Warrant Certificate. In the event of a sale or conveyance or other
transfer of all or substantially all of the assets of the Company as a part of
a plan for liquidation of the Company, all rights to exercise any Warrant
shall terminate thirty (30) days after the Company gives written notice to the
registered Holder of such Warrant that such sale or conveyance or other
transfer has been consummated.
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<PAGE>
11. Fractional Shares. Notwithstanding any adjustment pursuant to
Section 10 in the number of Shares purchasable upon the exercise of a Warrant
or any exercise of the Conversion Right pursuant to Section 15, the Company
shall not be required to issue fractions of Shares upon exercise of the
Warrants or to distribute certificates that evidence fractional Shares. In
lieu of fractional Shares, there shall be paid to the registered Holders of
Warrant Certificates at the time such Warrant Certificates are exercised as
herein provided an amount in cash equal to the same fraction of the Current
Market Price of a share of Common Stock, such amount to be rounded to the
nearest cent. If more than one Warrant Certificate shall be surrendered for
exercise at one time by the same registered Holder, the number of shares of
Class C Stock which shall be issuable upon their exercise shall be computed on
the basis of the aggregate number of Shares evidenced by the Warrant
Certificates so surrendered.
12. Restrictions on Transfer.
12.1 Each of the Holders, by acceptance of such Holder's Series
Warrant Certificate, represents and warrants to the Company (a) that such
Holder is acquiring its Warrants for its own account, and not with a view to
the resale or distribution of its Warrants, the related Shares, or any part
thereof (provided that the disposition of such Holder's property shall at all
times be and remain in the control of such Holder), (b) that such Holder is
experienced in evaluating and investing in securities such as the Warrants and
the Shares, can bear the economic risk of its investment and has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of an investment in the Warrants and the
Shares, (c) that it shall not dispose of any Warrants or Shares except to one
or more Institutional Lenders or as otherwise permitted under the Stockholders
Agreement, and (d) that it shall not dispose of any Warrants or Shares (the
"Restricted Securities") except pursuant to this Section 12.
12.2 (a) Except as otherwise permitted by this Section 12, each
Warrant Certificate (including each Warrant Certificate issued upon the
transfer of any Warrant Certificate) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THESE WARRANTS AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MUST BE HELD
INDEFINITELY UNLESS SUBSEQUENTLY REGISTERED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR TRANSFERRED, SOLD, OR OTHERWISE
DISPOSED OF PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS. THESE WARRANTS AND THE SHARES OF CLASS C COMMON STOCK
PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET
FORTH HEREIN AND THAT CERTAIN STOCKHOLDERS AGREEMENT AMONG THE ISSUER
AND CERTAIN OF ITS STOCKHOLDERS.
(b) Except as otherwise permitted by this Section 12, each
certificate for Class C Stock issued upon the exercise of any Warrant, and
each certificate issued upon the
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<PAGE>
transfer of any such Class C Stock, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS AND MUST BE HELD INDEFINITELY UNLESS SUBSEQUENTLY
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF PURSUANT TO AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS. SUCH SHARES HAVE THE RIGHTS AND
PRIVILEGES AND ARE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN
THAT CERTAIN STOCKHOLDERS AGREEMENT AMONG THE ISSUER AND CERTAIN OF
ITS STOCKHOLDERS.
12.3 Prior to any transfer of any Restricted Securities which are not
registered under an effective registration statement under the Securities Act,
the Holder thereof shall give written notice to the Company of such Holder's
intention to effect such transfer and to comply in all other respects with
this Section 12.3. Each such notice shall (a) describe the manner and
circumstances of the proposed transfer in sufficient detail to enable counsel
to the Company to consider the opinions referred to below; and (b) designate
counsel for the Holder giving such notice (who may be house counsel for such
Holder). The Holder giving such notice shall submit a copy thereof to the
counsel designated in such notice and the Company shall promptly submit a copy
thereof to its counsel. The following provisions shall then apply:
(a) If, in the opinion of counsel to the transferor,
reasonably satisfactory to counsel for the Company (such opinion to be
addressed and delivered to the Company), the proposed transfer may be effected
without registration of such Restricted Securities under the Securities Act,
such Holder shall thereupon be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by such Holder to the
Company. Each certificate representing such securities issued upon or in
connection with such transfer shall bear the restrictive legends required by
Section 12.2, unless the related restrictions on transfer provided for herein
shall have ceased and terminated as to such securities pursuant to Section
12.4.
(b) If the Company does not receive the opinion described in
Section 12.3(a), such Holder shall not be entitled to transfer such Restricted
Securities until either (i) receipt by the Company of a further notice from
such Holder pursuant to the foregoing provisions of this Section 12.3 and
fulfillment of the provisions of clause (a) above or (ii) such Restricted
Securities have been effectively registered under the Securities Act.
12.4 The restrictions imposed by this Section 12 upon the
transferability of Restricted Securities shall cease and terminate as to any
particular Restricted Securities (a) when such Restricted Securities shall
have been effectively registered under the Securities Act and any applicable
securities or "blue sky" law of any state, or (b) when, in the opinion of
counsel for the Holder thereof, reasonably satisfactory to counsel for the
Company (such opinion to be
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<PAGE>
addressed and delivered to the Company), such restrictions are no longer
required in order to ensure compliance with the Securities Act and any
applicable securities or "blue sky" law of any state. Whenever such
restrictions shall cease and terminate as to any Restricted Securities (as
determined pursuant to the preceding sentence), the Holder thereof shall be
entitled to receive from the Company, without expense (other than the payment
of taxes as provided in Section 7), new securities of like tenor not bearing
the applicable legends required by Section 12.2.
13. Company Assurances. The Company will not, by amendment of its
charter or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities, or any other voluntary
action, seek to avoid the observance or performance of any of the terms of
this Warrant Certificate, but will at all times in good faith seek to carry
out all such terms and take all such action as may be necessary or appropriate
in order to protect the rights of the holders of the Warrants and Shares
acquired upon the exercise of the Warrants (collectively, the "Securities")
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not permit the par value (if any) of any Shares to exceed the
Exercise Price and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue, free from
preemptive rights, fully paid and non-assessable Shares upon the exercise of
all Warrants from time to time outstanding; provided, however, that in the
event that the Company proposes to effectuate a stock split and, as a result
thereof, the par value of any Shares would exceed the Exercise Price, the
Company and the Holder shall negotiate an equitable adjustment to the terms of
the Warrants to avoid such result and to provide for substantially equivalent
terms of the Warrants.
14. Availability of Information. If the Company shall file a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall comply with the reporting requirements of Sections 13 and 15(d)
of the Exchange Act and shall comply with all other public information
reporting requirements of the Securities and Exchange Commission (the
"Commission") (including Rule 144 promulgated by the Commission under the
Securities Act) from time to time in effect and relating to the availability
of an exemption from the Securities Act for the sale of any Restricted
Securities. The Company shall also cooperate with each Holder of any
Restricted Securities in supplying such information as may be necessary for
such Holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Restricted Securities.
15. Right to Convert Warrants into Shares; Net Issuance.
15.1 In addition to and without limiting the rights of the
Holder under the terms of this Warrant Certificate, the Holder shall have the
right to convert the Warrants or any portion thereof (the "Conversion Right")
into Shares as provided in this Section 15 at any time on or after the date
hereof and on or before 5:00 p.m., New York time, on the Termination Date.
Upon exercise of the Conversion Right with respect to a particular number of
Shares subject to this Warrant Certificate (the "Converted Warrant Shares"),
the Company shall deliver to the Holder (without payment by the Holder of any
Exercise Price or any cash or other consideration) that number of Shares of
fully paid and nonassessable Class C Stock equal to the
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<PAGE>
quotient obtained by dividing (x) the value of the Warrants (or the specified
portion hereof) as of the date of the Conversion Notice (as defined in Section
15.2, below), which value shall be equal to (i) the aggregate Current Market
Price of the Converted Warrant Shares issuable upon exercise of the Warrants
(or the specified portion thereof) as of the date of the Conversion Notice
less (ii) the aggregate Exercise Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right by (y) the Current
Market Price of one Share as of the date of the Conversion Notice.
Expressed as a formula, such conversion shall be computed as
follows:
X= A - B
-----
Y
Where: X = the number of Shares issued to the Holder under
this Conversion Right
Y = the Current Market Price of one Share
A = the aggregate Current
Market Price (i.e.,
Current Market Price
multiplied by the number
of Converted Warrant
Shares)
B = the aggregate Exercise Price (i.e., Exercise Price
multiplied by the number of Converted Warrant
Shares)
15.2 The Conversion Right may be exercised by the Holder by
the surrender of this Warrant Certificate to the Company together with a
written statement (the "Conversion Notice") specifying that the Holder thereby
intends to exercise the Conversion Right and indicating the number of Shares
subject to this Warrant Certificate which are being surrendered (referred to
in Section 15.1, above, as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon the fifth (5th)
business day following receipt by the Company of this Warrant Certificate
together with the Conversion Notice, or on such later date as is specified
therein.
16. Information to Warrantholders; No Right as Stockholders.
(a) Upon any adjustment of the Exercise Price pursuant to
Section 10, the Company within twenty (20) calendar days thereafter shall
cause to be given to each of the Holders at its address appearing on the
Warrant Register a certificate of the Chief Financial Officer of the Company
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Shares purchasable upon
exercise of a Warrant after such adjustment in the Exercise Price, by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under
the other provisions of this Section 16. At its option, the Holder of a
Warrant may confirm the
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<PAGE>
adjustment noted on the certificate by causing such adjustment to be computed
by an independent certified public account at the expense of the Company.
(b) In case:
(i) the Company shall declare a dividend or authorize a
distribution on the Common Stock payable in shares of Common Stock, authorize
the subdivision or combination of the outstanding Common Stock, authorize the
issuance of any shares of its capital stock in a reclassification of the
Common Stock, or authorize the issuance to all holders of Common Stock of
rights or warrants to subscribe for or purchase capital stock of the Company
or of any other subscription rights or warrants; or
(ii) the Company shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or assets; or
(iii) of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets of the
Company as, or substantially as, an entirety, or of any capital reorganization
or any reclassification of the Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination); or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(v) the Company proposes to take any other action
which would require an adjustment of the Exercise Price pursuant to Section 10;
then the Company shall cause to be given to each of the Holders at his address
appearing on the Warrant Register, at least twenty (20) calendar days (or ten
(10) calendar days in any case specified in clauses (i) or (ii) above) prior
to the applicable record date hereinafter specified, by first-class mail,
postage pre-paid, a written notice stating (x) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
rights, warrants or distribution are to be determined or (y) the date on which
any such consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation, or winding up is expected to
become effective, and the date as of which it is expected that holders of
record of shares of Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon such consolidation,
merger, conveyance, transfer, reorganization, reclassification, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 16 or any defect therein shall not affect the legality or validity of
any distribution, right, warrant, consolidation, merger, conveyance, transfer,
reorganization, reclassification, dissolution, liquidation, or winding up or
the vote upon any action.
(c) Nothing contained in any of the Series Warrant
Certificates shall be construed as conferring upon the Holders the right to
vote or to consent or to receive notice as
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<PAGE>
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company.
17. Registration Rights. The Holder is entitled to registration
rights with respect to the Securities as set forth in the Stockholders
Agreement.
18. Special Call Rights.
18.1 At any time after a Special Call Event (as defined in
Section 18.2, below), the Company shall have the right (each, a "Special Call
Right") to repurchase from the Holder that portion of the Securities of the
Holder determined pursuant to Section 18.3, for the consideration of Ten
Dollars ($10.00) for each Share of Class C Stock (or other capital stock
issued in respect thereof in the event of an adjustment pursuant to the terms
hereof) so repurchased and for no consideration for each Warrant so
repurchased, in accordance with the procedure set forth in this Section 18;
provided, however, that the Special Call Right shall terminate upon the first
to occur of (a) August 7, 1997 and (b) a Change of Control Event (as defined
in the Purchase Agreement) other than the Special Call Event.
18.2 For purposes of this Section 18, "Special Call Event"
means the first sale of Common Stock to the public effected pursuant to a
registration statement filed with the Commission under the Securities Act;
provided that (a) (i) in such sale, the Holders shall have been entitled to
sell all of the Securities (or other securities into which the Shares may be
convertible) of the Holders (other than those subject to the Special Call
Right) for an aggregate amount not less than $2,700,000 (net of underwriter's
commissions and discounts) or (ii) substantially contemporaneous with such
sale, the Company shall elect to purchase, and purchases, all of the
Securities (or other securities into which the Shares may be convertible) of
the Holders (other than those subject to the Special Call Right) at a price
per share not less than the net price per share obtained in such sale and at
an aggregate price not less than $2,700,000; in which event, the Holders shall
sell such Securities (or such other securities) for such price, and (b) from
the proceeds to the Company of such sale or prior thereto, the Subordinated
Notes (as defined in the Purchase Agreement) shall have been paid in full
together with any applicable prepayment premium.
18.3 Upon the occurrence of a Special Call Event, the
Company shall be entitled to repurchase Securities of the Holder representing
Thirty-Nine and 446/1000 (39.446) Shares (as such number may be adjusted
pursuant to Section 10).
18.4 The Company shall exercise the Special Call Right by
providing a written notice to the Holder not later than ninety (90) days after
the occurrence of the Special Call Event, which notice shall expressly state:
(a) the Special Call Event has occurred or shall occur; (b) the date and time
of the closing of the repurchase, which date shall be not less than ten (10)
days after the date of the notice of exercise and on or after the closing of
the Special Call Event; and (c) the place for the closing of the repurchase.
At such closing, the Company shall deliver to the Holder the consideration for
the Securities surrendered by the Holder.
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<PAGE>
19. Notices. All notices and other communications to the Holder
hereof provided for hereunder shall, unless otherwise provided herein, be in
writing and mailed or sent or delivered to its address set forth in the
Warrant Register or sent by facsimile to the facsimile number set forth in the
Warrant Register. All such notices and communications shall be effective as
follows: if sent by hand delivery, upon delivery; if sent by mail, upon the
earlier of the date of receipt or five business days after deposit in the
mail, postage prepaid; and if sent by courier service or by facsimile, upon
receipt.
20. Governing Law. This Warrant Certificate shall be
governed by, and construed in accordance with, the internal laws of the State
of New York.
21. Consent to Amendments. The rights and privileges of the Holders
pursuant to the Series Warrant Certificates may be amended and the Company may
take any action therein prohibited or omit to perform any act therein required
to be performed by it only if the Company shall have obtained the written
consent to such amendment, action, or omission to act, of the Holders of at
least a majority of the Series Warrants at the time outstanding (or, in the
case of an amendment, action or omission to act affecting the rights and
privileges of the holders of Shares, the written consent of the holders of a
majority of the Securities at the time outstanding), and each holder of any
Security at the time or thereafter outstanding shall be bound by any such
consent; provided, however, that notwithstanding anything in this Section 21
to the contrary, without the written consent of the Holders of all Series
Warrants at the time outstanding (or, in the case of a consent, amendment or
waiver affecting the rights and privileges of the holders of Shares, the
written consent of the holders of all Securities at the time outstanding), no
consent, amendment or waiver to or under the Series Warrant Certificates shall
amend or modify the Exercise Price or affect the date on which the Series
Warrants terminate. The Company shall promptly send to each Holder copies of
any amendment, consent, or waiver, and copies of any request approved by the
Company for any amendment, consent, or waiver relating to the Series Warrant
Certificates. No course of dealing between the Company and any holder of
Securities nor any delay in exercising rights shall operate as a waiver of any
rights of any such holder.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be signed by its duly authorized officer as of the date indicated below.
Dated: February 7, 1996 NRE HOLDINGS, INC.,
a Delaware corporation
By: /s/
------------------------
Name:
Title: C.F.O. and Secretary
<PAGE>
[Form of Election to Purchase]
(To be executed upon exercise of Warrant prior to
5:00 p.m., New York time, on the Termination Date)
The undersigned hereby irrevocably elects to exercise, for
the purchase of __________ Shares of Class C Common Stock, __________ Warrants
represented by this Warrant Certificate and to purchase the Shares of Class C
Common Stock issuable upon the exercise of said Warrants and herewith tenders
in consideration for such Shares the amount of $__________ in accordance with
the terms hereof. The undersigned requests that a certificate or certificates
representing such Shares be registered in the name of __________ whose address
is ____________________ and that such certificate(s) be delivered to
__________ whose address is ____________________. If said number of Shares is
less than all the Shares purchasable hereunder, the undersigned requests that
a new Warrant Certificate of like tenor and series representing the balance of
the Warrants remaining after exercise of this Warrant Certificate for the
number of Shares specified above be registered in the name of
_____________________ whose address is ____________________ and that such
Warrant Certificate be delivered to __________ whose address is
___________________. Any cash payments to be paid in lieu of a fractional
Share should be made to __________ whose address is ____________________ and
the check or wire transfer representing payment thereof should delivered to
__________ whose address is ___________________.
Dated: _______________, _____
Name of holder of Warrant Certificate:
(Please print)
Social Security or other identifying number:
Address: ___________________________
____________________________
____________________________
Signature: ___________________________
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever and if the
certificate representing the Shares or any Warrant Certificate
representing Warrants not exercised is to be registered in a name
other than that in which this Warrant Certificate is registered, the
signature of the holder hereof must be guaranteed.
Signature Guaranteed:
<PAGE>
[Form of Assignment]
For value received ________ hereby sells, assigns and
transfers unto _______________ the within Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ______________________, its attorney, to transfer said Warrant
Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated: __________, _____ ______________________________
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed:
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 AND QUALIFICATION UNDER
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS.
NATIONAL RESTAURANT ENTERPRISES, INC.
12.5% SUBORDINATED NOTE DUE 2005
Security No. NRE-SN-1
$15,000,000 February 7, 1996
FOR VALUE RECEIVED, NATIONAL RESTAURANT ENTERPRISES, INC., a
Delaware corporation (the "Company"), hereby promises to pay to ATWELL & CO.,
as nominee for PMI Mezzanine Fund, L.P., a Delaware limited partnership
("PMI"), or registered assigns (the "Holder"), the principal amount of Fifteen
Million Dollars ($15,000,000), with interest (computed on the basis of a 360
day year for actual days elapsed) payable quarterly in arrears on each April
30, July 31, October 31, and January 31, in each year commencing April 30,
1996, on the unpaid principal balance hereof at the rate of twelve and one-half
percent (12.5%) per annum from and including the date hereof until the entire
principal balance hereof and all interest accrued hereunder is paid in full.
Any payment of interest or premium that is not paid when due hereunder shall be
added to the principal balance hereof and thereafter shall accrue interest at
the rate applicable hereunder. Any overdue and unpaid principal and premium, if
any, and (to the extent permitted by applicable law) any overdue interest on
this Subordinated Note shall bear interest at a rate equal to two percent
(2.0%) over the aforementioned rate.
The principal amount hereof shall be due and payable in the
manner, at such times, in such amounts, and with such premiums as provided in
the Note Purchase Agreement, dated as of February 7, 1996 (as amended, modified
or supplemented from time to time in accordance with its terms, the "Note
Purchase Agreement"), among NRE Holdings, Inc., a Delaware corporation, the
Company, and PMI.
Payments of both principal and interest are to be made at The
Chase Manhattan Bank, N.A., New York, New York, ABA #021000021, for credit to
PMI's Account No. 89930- 752-YA, Attention: Ms. Lilian Gonzales, or such other
place as the Holder hereof shall designate
-1-
<PAGE>
to the Company in writing, in lawful money of the United States of America. Any
payments due hereunder that fall due on a day that is not a Business Day shall
be payable on the first succeeding Business Day and such extension of time
shall be included in the computation of interest due hereunder.
This Subordinated Note is one of a series of Subordinated
Notes (herein called the "Subordinated Notes") issued pursuant to, and payable
in accordance with the Note Purchase Agreement, and this Subordinated Note is
subject to the terms and conditions and entitled to the equal and ratable
benefits thereof. Reference hereby is made to the Note Purchase Agreement for a
statement of each of such terms and conditions, and each of the terms and
conditions of the Note Purchase Agreement are incorporated herein by this
reference. Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them in the Note Purchase Agreement.
This Subordinated Note and the indebtedness evidenced hereby
is subordinated in the manner and to the extent set forth in the Note Purchase
Agreement to all Senior Indebtedness, and each Holder of this Subordinated
Note, by its acceptance hereof, shall be bound by the subordination provisions
contained in the Note Purchase Agreement.
In case an Event of Default shall occur and be continuing,
the principal of this Subordinated Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Note Purchase
Agreement.
This Subordinated Note shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be governed
by, construed under, and enforced in accordance with the laws of the State of
New York.
NATIONAL RESTAURANT ENTERPRISES,
INC., a Delaware corporation
By:
-----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
-2-
SUBORDINATED GUARANTY
This SUBORDINATED GUARANTY, dated as of February 7, 1996, by
AMERIKING VIRGINIA CORPORATION I, a Delaware corporation ("AmeriKing
Virginia"), and AMERIKING CINCINNATI CORPORATION I, a Delaware corporation
("AmeriKing Cincinnati," and, collectively with AmeriKing Virginia, the
"Guarantors"), in favor of PMI MEZZANINE FUND, L.P., a Delaware limited
partnership ("PMI," together with all subsequent holders of the Subordinated
Notes, are hereinafter referred to as the "Noteholders").
WHEREAS, NRE Holdings, Inc., a Delaware corporation ("Holdings"),
National Restaurant Enterprises, Inc., a Delaware corporation (the "Company"),
and Purchaser have entered into that certain Note Purchase Agreement, dated as
of February 7, 1996 (as it may hereafter be amended or otherwise modified from
time to time being, the "Note Purchase Agreement");
WHEREAS, the Company and the Guarantors are members of a group of
related corporations, the success of any one of which is dependent in part on
the success of the other member of such group;
WHEREAS, each of the Guarantors expects to receive substantial direct
and indirect benefits from the purchase of the Purchaser Securities by PMI
pursuant to the Note Purchase Agreement (which benefits are hereby
acknowledged);
WHEREAS, it is a condition precedent to the purchase by PMI of the
Purchaser Securities under the Note Purchase Agreement that each of the
Guarantors execute and deliver to PMI a guaranty substantially in the form
hereof; and
WHEREAS, each of the Guarantors wishes to guaranty the Company's
obligations to the Noteholders under or in respect of the Note Purchase
Agreement as provided herein;
NOW, THEREFORE, each of the Guarantors hereby agrees with PMI for its
benefit and the ratable benefit of the Noteholders as follows:
1. Definitions. Except as otherwise provided in Section 6.3 hereof, the
term "Subordinated Obligations" and all other capitalized terms used herein
without definition shall have the respective meanings provided therefor in the
Note Purchase Agreement.
<PAGE>
2. Guaranty of Payment and Performance. Each of the Guarantors hereby
guarantees to the Noteholders the full and punctual payment when due (whether
at stated maturity, by required prepayment, by acceleration or otherwise), as
well as the performance, of all of the Subordinated Obligations including all
such which would become due but for the operation of the automatic stay
pursuant to Section 362(a) of the Federal Bankruptcy Code and the operation of
Sections 502(b) and 506(b) of the Federal Bankruptcy Code. This Subordinated
Guaranty is an absolute, unconditional and continuing joint and several
guaranty by the Guarantors of the full and punctual payment and performance of
all of the Subordinated Obligations and not of their collectibility only and
is in no way conditioned upon any requirement that any Noteholder first
attempt to collect any of the Subordinated Obligations from the Company or
resort to any collateral security or other means of obtaining payment. Should
the Company default in the payment or performance of any of the Subordinated
Obligations, the obligations of each of the Guarantors hereunder with respect
to such Subordinated Obligations in default shall, upon demand by any
Noteholder, become immediately due and payable to such Noteholder without
demand or notice of any nature, all of which are expressly waived by such
Guarantor. Payments by each of the Guarantors hereunder may be required by the
Noteholders on any number of occasions. All payments by such Guarantors
hereunder shall be made to the Noteholders, in the manner and at the place of
payment specified therefor in the Note Purchase Agreement, for the account of
the Noteholders and shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other authority
therein unless such Guarantor is compelled by law to make such deduction or
withholding.
3. Guarantors' Agreement to Pay Enforcement Costs, etc. Each of the
Guarantors further agrees, as the principal obligor and not as a guarantor
only, to pay to the Noteholders, on demand, all costs and expenses (including
court costs and legal expenses) incurred or expended by any Noteholder in
connection with the Subordinated Obligations, this Subordinated Guaranty and
the enforcement thereof, together with interest on amounts recoverable under
this Section 3 from the time when such amounts become due until payment,
whether before or after judgment, at the rate of interest for overdue
principal set forth in the Note Purchase Agreement, provided that if such
interest exceeds the maximum amount permitted to be paid under applicable law,
then such interest shall be reduced to such maximum permitted amount.
4. Waivers by Guarantor; Noteholders' Freedom to Act. Each of the
Guarantors agrees that the Subordinated Obligations will be paid and performed
strictly in accordance with their respective terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of any Noteholder with
2
<PAGE>
respect thereto. Each of the Guarantors waives promptness, diligence,
presentment, demand, protest, notice of acceptance, notice of any Subordinated
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Company or any other entity or other person primarily or secondarily
liable with respect to any of the Subordinated Obligations, and all suretyship
defenses generally. Without limiting the generality of the foregoing, each of
the Guarantors agrees to the provisions of any instrument evidencing or
otherwise executed in connection with any Subordinated Obligation and agrees
that the obligations ofeach of the Guarantors hereunder shall not be released or
discharged, in whole or in part, or otherwise affected by (a) the failure of any
Noteholder to assert any claim or demand or to enforce any right or remedy
against the Company or any other entity or other person primarily or secondarily
liable with respect to any of the Subordinated Obligations; (b) any extensions,
compromise, refinancing, consolidation, or renewals of any Subordinated
Obligation; (c) any change in the time, place, or manner of payment of any of
the Subordinated Obligations or any rescissions, waivers, compromise,
refinancing, consolidation, or other amendments or modifications of any of the
terms or provisions of the Note Purchase Agreement, the Subordinated Notes, the
other Transaction Documents, or any other agreement evidencing or otherwise
executed in connection with any of the Subordinated Obligations, (d) the
addition, substitution or release of any entity or other person primarily or
secondarily liable for any Subordinated Obligation; (e) the adequacy of any
rights which any Noteholder may have against any collateral security or other
means of obtaining repayment of any of the Subordinated Obligations; or (f) any
other act or omission which might in any manner or to any extent vary the risk
of such Guarantor or otherwise operate as a release or discharge of such
Guarantor, all of which may be done without notice to such Guarantor. To the
fullest extent permitted by law, each of the Guarantors hereby expressly waives
any and all rights or defenses arising by reason of (i) any "one action" or
"anti-deficiency" law which would otherwise prevent any Noteholder from bringing
any action, including any claim for a deficiency, or exercising any other right
or remedy (including any right of set-off), against such Guarantor before or
after such Noteholder's commencement or completion of any foreclosure action,
whether judicially, by exercise of power of sale, or otherwise, or (ii) any
other law which in any other way otherwise would require any election of
remedies by any Noteholder.
5. Unenforceability of Subordinated Obligations Against the Company.
If for any reason the Company has no legal existence or is under no legal
obligation to discharge any of the Subordinated Obligations, or if any of the
Subordinated Obligations have become irrecoverable from the Company by reason
of the Company's insolvency, Bankruptcy, or reorganization or by other
operation of law or for any other reason, this Subordinated Guaranty shall
nevertheless be binding on each of the Guarantors to the same extent as such
Guarantor at all times had been the principal obligor on all such Subordinated
Obligations. In the event that acceleration of the time for payment of any of
the Subordinated Obligations is
3
<PAGE>
stayed upon the insolvency, Bankruptcy, or reorganization of the Company, or for
any other reason, all such amounts otherwise subject to acceleration under the
terms of the Note Purchase Agreement, the Subordinated Notes, the other
Transaction Documents, or any other agreement evidencing or otherwise executed
in connection with any Subordinated Obligation shall immediately be due and
payable by each of the Guarantors.
6. Subrogation; Subordination.
6.1. Waiver of Rights Against the Company. Until the final
payment and performance in full of all of the Subordinated
Obligations, none of the Guarantors shall exercise and each of the
Guarantors hereby waives any rights against the Company arising as a
result of payment by such Guarantor hereunder, by way of subrogation,
reimbursement, restitution, contribution, or otherwise, and will not
prove any claim in competition with any Noteholder in respect of any
payment hereunder in any Bankruptcy, insolvency, or reorganization
case or proceedings of any nature; none of the Guarantors will claim
any setoff, recoupment, or counterclaim against the Company in
respect of any liability of such Guarantor to the Company; and each
of the Guarantors waives any benefit of and any right to participate
in any collateral security which may be held by any Noteholder.
6.2. Subordination -- Guarantor. The payment of any amounts
due with respect to any indebtedness of the Company for money
borrowed or credit received now or hereafter owed to each of the
Guarantors is hereby subordinated to the prior payment in full of all
of the Subordinated Obligations. Each of the Guarantors agrees that,
after the occurrence of any default in the payment or performance of
any of the Subordinated Obligations, such Guarantor will not demand,
sue for, or otherwise attempt to collect any such indebtedness of the
Company to such Guarantor until all of the Subordinated Obligations
shall have been paid in full. If, notwithstanding the foregoing
sentence, such Guarantor shall collect, enforce, or receive any
amounts in respect of such indebtedness while any Subordinated
Obligations are still outstanding, such amounts shall be collected,
enforced, and received by such Guarantor as trustee for the
Noteholders and be paid over to the Noteholders on account of the
Subordinated Obligations without affecting in any manner the
liability of such Guarantor under the other provisions of this
Subordinated Guaranty.
6.3. Incorporation of Subordination Provisions. This
Subordinated Guaranty is subordinated, in the manner and to the
extent set forth in Section 10 of the Note Purchase Agreement, in
right of payment to the prior payment in full of all Senior
Indebtedness, as defined in Note Purchase Agreement, and the
Noteholders are subject, with respect to this Subordinated Guaranty,
to the restrictions on the exercise of remedies as set forth in
Section 10 of the Note Purchase Agreement. For purposes
4
<PAGE>
of this subsection 6.3, Section 10 of the Note Purchase Agreement (and
the definitions of any defined terms used therein) are hereby
incorporated by reference in this Subordinated Guaranty; provided,
that all references in such incorporated material (a) to the Company
shall be deemed to refer to the Guarantors, as defined herein, (b) to
the Subordinated Obligations also shall be deemed to include all
obligations of the Guarantors hereunder, and (c) to the Agreement or
the Subordinated Notes also shall be deemed to refer to this
Subordinated Guaranty. The foregoing provisions of this subsection
6.3 shall constitute a continuing offer to all Persons who, in
reliance upon such provisions, become holders of Senior Indebtedness,
and such provisions are made for the benefit of, and may be enforced
directly by, holders of the Senior Indebtedness, who hereby are
expressly stated to be intended beneficiaries of this subsection 6.3.
6.4. Provisions Supplemental. The provisions of this Section 6
shall be supplemental to and not in derogation of any rights and
remedies of the Noteholders under any separate subordination
agreement which the Noteholders may at any time and from time to
time enter into with any of the Guarantors for their benefit.
7. Setoff. Each of the Guarantors hereby authorizes any Noteholder to
set off and apply any deposits and other sums against the obligations of such
Guarantor under this Subordinated Guaranty, at any time and from time to time,
without notice to the Guarantors (any such notice being expressly waived by
each of the Guarantors) and to the fullest extent permitted by law, whether or
not such Noteholder shall have made any demand under this Subordinated
Guaranty and although such obligations may be contingent or unmatured.
8. Further Assurances. Each of the Guarantors agrees that it will
from time to time, at the request of the Noteholders, do all such things and
execute all such documents as the Noteholders may consider necessary or
desirable to give full effect to this Subordinated Guaranty and to perfect and
preserve the rights and powers of the Noteholders hereunder. Each of the
Guarantors acknowledges and confirms that such Guarantor itself has
established its own adequate means of obtaining from the Company on a
continuing basis all information desired by such Guarantor concerning the
financial condition of the Company and that such Guarantor will look to the
Company and not to the Noteholders in order for such Guarantor to keep
adequately informed of changes in the Company's financial condition.
9. Termination; Reinstatement. This Subordinated Guaranty shall
remain in full force and effect until the Noteholders are given written notice
of any of the Guarantors' intention to discontinue this Subordinated Guaranty,
notwithstanding any intermediate or temporary payment or settlement of the
whole or any part of the Subordinated Obligations. No such notice shall be
effective unless received and acknowledged by an officer of each Noteholder at
the address of each Noteholder set forth in Section 13.9 of the Note Purchase
Agreement. No such notice shall affect any rights of any Noteholder hereunder,
including
5
<PAGE>
without limitation the rights set forth in Sections 4 and 6, with
respect to any Subordinated Obligations incurred or accrued prior to the
receipt of such notice or any Subordinated Obligations incurred or accrued
pursuant to any contract or commitment in existence prior to such receipt.
This Subordinated Guaranty shall continue to be effective or be reinstated,
notwithstanding any such notice if at any time any payment made or value
received with respect to any Subordinated Obligation is rescinded or must
otherwise be returned by any Noteholder upon the insolvency, Bankruptcy or
reorganization of the Company, or otherwise, all as though such payment had
not been made or value received.
10. Successors and Assigns. This Subordinated Guaranty shall be
binding upon each of the Guarantors, their successors and assigns, and shall
inure to the benefit of the Noteholders and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing
sentence, each Noteholder may assign or otherwise transfer the Note Purchase
Agreement, the Subordinated Notes, the other Transaction Documents, or any
other agreement or note held by it evidencing or otherwise executed in
connection with the Subordinated Obligations, or sell participations in any
interest therein, to any other entity or other person, and such other entity
or other person shall thereupon become vested, to the extent set forth in the
agreement evidencing such assignment, transfer, or participation, with all the
rights in respect thereof granted to such Noteholder herein, all in accordance
with Section 13.4 of the Note Purchase Agreement. No Guarantor may assign any
of its obligations hereunder.
11. Amendments and Waivers. No amendment or waiver of any provision
of this Subordinated Guaranty nor consent to any departure by any of the
Guarantors therefrom shall be effective unless the same shall be in writing
and signed by the Noteholders. No failure on the part of any Noteholder to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right.
12. Notices. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise specifically provided
herein, shall be deemed to have been duly made or given when delivered by hand
or mailed first class, postage prepaid, or, in the case of telegraphic or
telexed notice, when transmitted, answer back received, addressed as follows:
if to a Guarantor, at the address set forth beneath its signature hereto, if
to PMI, at the address for notices to PMI set forth in Section 13.9 of the
Note Purchase Agreement, or at such address as any party may designate in
writing to the other.
6
<PAGE>
13. Governing Law: Consent to Jurisdiction. THIS SUBORDINATED
GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. Each of the Guarantors agrees that any suit for the enforcement of this
Subordinated Guaranty may be brought in the courts of the State of New York or
any federal court sitting therein and consents to the nonexclusive
jurisdiction of such court and to service of process in any such suit being
made upon such Guarantor by mail at the address specified by reference in
Section 12. Each of the Guarantors hereby waives any objection that it may now
or hereafter have to the venue of any such suit or any such court or that such
suit was brought in an inconvenient court.
14. Waiver of Jury Trial. EACH OF THE GUARANTORS HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS SUBORDINATED GUARANTY, ANY RIGHTS OR
OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR
OBLIGATIONS. Except as prohibited by law, each of the Guarantors hereby waives
any right which it may have to claim or recover in any litigation referred to
in the preceding sentence any special, exemplary, punitive or consequential
damages, or any damages other than, or in addition to, actual damages. Each of
the Guarantors (a) certifies that neither any Noteholder nor any
representative, agent or attorney of any Noteholder has represented, expressly
or otherwise, that any Noteholder would not, in the event of litigation, seek
to enforce the foregoing waivers and (b) acknowledges that, in entering into
the Note Purchase Agreement and the other Transaction Documents to which any
Noteholder is a party, the Noteholders are relying upon, among other things,
the waivers and certifications contained in this Section 14.
15. Miscellaneous. This Subordinated Guaranty constitutes the entire
agreement of each of the Guarantors with respect to the matters set forth
herein. The rights and remedies herein provided are cumulative and not
exclusive of any remedies provided by law or any other agreement, and this
Subordinated Guaranty shall be in addition to any other guaranty of or
collateral security for any of the Subordinated Obligations. The invalidity or
unenforceability of any one or more sections of this Subordinated Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning
of the relevant provisions. The meanings of all defined terms used in this
Subordinated Guaranty shall be equally applicable to the singular and plural
forms of the terms defined.
7
<PAGE>
16. Release of Guaranty. This Subordinated Guaranty shall be
automatically and unconditionally released and discharged upon the release or
discharge of the guaranty by the Guarantors of, and all the security granted
by the Guarantors for, the payment of all Senior Indebtedness or as a result
of payment under such guarantee or security; provided, however, that the
guaranty of, and all security for, the payment of all Senior Indebtedness are
unconditionally released and discharged at or prior to such time; provided,
further, that, if for any reason after any such release or discharge, the
guaranty of, or any security granted by the Guarantors for, the payment of
Senior Indebtedness is revived and reinstated, this Subordinated Guaranty
automatically shall be revived and reinstated.
[remainder of page intentionally left blank]
8
<PAGE>
IN WITNESS WHEREOF, each of the Guarantors has caused this
Subordinated Guaranty to be executed and delivered as of the date first above
written.
AMERIKING VIRGINIA CORPORATION
I, a Delaware corporation
By:
----------------------------------
Title:
Address:
AmeriKing Virginia Corporation I
c/o AmeriKing Corporation
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
Attn: Mr. Lawrence E. Jaro
AMERIKING CINCINNATI
CORPORATION I, a Delaware corporation
By:
----------------------------------
Title:
Address:
AmeriKing Cincinnati Corporation I
c/o AmeriKing Corporation
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
Attn: Mr. Lawrence E. Jaro
9
Exhibit 4.30
SECOND AMENDED AND RESTATED REVOLVING CREDIT NOTE
$15,000,000 As of February 7, 1996
FOR VALUE RECEIVED, the undersigned NATIONAL RESTAURANT ENTERPRISES,
INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the
order of THE FIRST NATIONAL BANK OF BOSTON, a national banking association, (the
"Bank"), at the Agent's Head Office (as defined in the Credit Agreement referred
to below):
(a) prior to or on Revolving Credit Loan Maturity Date the
principal amount of FIFTEEN MILLION DOLLARS ($15,000,000) or, if
less, the aggregate unpaid principal amount of Revolving Credit loans
advanced by the Bank to the Borrower pursuant to the Second Amended
and Restated Revolving Credit and Term Loan Agreement dated as of
February 7, 1996 (as amended and in effect from time to time, the
"Credit Agreement"), among NRE Holdings, Inc., the Borrower, the Bank
and the other lending institutions party thereto;
(b) the principal outstanding hereunder from time to time at the
times provided in the Credit Agreement; and
(c) interest on the principal balance hereof from time to time
outstanding from the Closing Date under the Credit Agreement through
and including the Revolving Credit Loan Maturity Date hereof at the
times and at the rate provided in the Credit Agreement.
This Note constitutes the amendment and restatement in its entirety of
the Amended and Restated Revolving Credit Note of the Borrower to the Bank in
the original principal amount of $3,798,166, dated as of March 10, 1995 (the
"Original Note"), and is in substitution therefor and an amendment and
replacement thereof. Nothing herein or in any other document shall be construed
to constitute payment of the Original Note or to release or terminate any
guaranty or lien, mortgage, pledge or other security entered in favor of the
Bank.
This Note evidences borrowings under and has been issued by the Borrower
in accordance with the terms of the Credit Agreement. The Bank and any holder
hereof is entitled to the benefits of the Credit Agreement, the Security
Documents and the other Loan Documents, and may enforce the agreements of the
Borrower contained therein, and any holder hereof may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All
<PAGE>
-2-
capitalized terms used in this Note and not otherwise defined herein shall have
the same meanings herein as in the Credit Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, reflecting the making of
such Revolving Credit Loan or (as the case may be) the receipt of such payment.
The outstanding amount of the Revolving Credit Loans set forth on the grid
attached to this Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Bank with respect to any
Revolving Credit Loans shall be prima facie evidence of the principal amount
thereof owing and unpaid to the Bank, but the failure to record, or any error in
so recording, any such amount on any such grid, continuation or other record
shall not limit or otherwise affect the obligation of the Borrower hereunder or
under the Credit Agreement to make payments of principal of and interest on this
Note when due.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any further occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution,
<PAGE>
exchange or release of collateral and to the addition or release of any other
party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE
<PAGE>
-3-
MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER
BY MAIL AT THE ADDRESS SPECIFIED IN Section 21 OF THE CREDIT AGREEMENT. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts.
<PAGE>
-4-
IN WITNESS WHEREOF, the undersigned has caused this Second Amended and
Restated Revolving Credit Note to be signed in its corporate name and its
corporate seal to be impressed thereon by its duly authorized officer as of the
day and year first above written.
[Corporate Seal]
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:/S/________________________
Title: Chief Executive Officer
AMOUNT OF BALANCE OF
Amount PRINCIPAL PAID PRINCIPAL NOTATION
Date of Loan OR PREPAID UNPAID MADE BY:
- ------ ----------- ---------------- ------------- -------------
<PAGE>
-1-
SECOND AMENDED AND RESTATED TERM LOAN A NOTE
$24,800,000 AS OF FEBRUARY 15, 1996
- -------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned NATIONAL RESTAURANT ENTERPRISES, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
THE FIRST NATIONAL BANK OF BOSTON, a national banking association (the "Bank"),
at the Agent's Head Office (as defined in the Credit Agreement referred to
below):
(a) prior to or on Term Loan A Maturity Date the principal amount of TWENTY
FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS ($24,800,000), evidencing the Term
Loan A made by the Bank to the Borrower pursuant to the Second Amended and
Restated Revolving Credit and Term Loan Agreement dated as of February 7, 1996
(as amended and in effect from time to time, the "Credit Agreement"), by and
among NRE Holdings, Inc., the Borrower, the Bank and the other lending
institutions thereto;
(b) the principal outstanding hereunder from time to time at the times
provided in the Credit Agreement; and
(c) interest from the date hereof on the principal amount from time to time
outstanding to and including the Term Loan A Maturity Date at the rates and
terms and in all cases in accordance with the terms of the Credit Agreement.
This Note is issued pursuant to, is entitled to the benefits of, and is subject
to, the provisions of the Credit Agreement, and is one of the replacement notes
issued pursuant to the Assignment and Acceptance dated as of the date hereof by
and among the Borrower, the Agent, the Bank and certain lending institutions
who are to become parties to the Credit Agreement, and Section 20 of the Credit
Agreement in replacement of the surrendered Second Amended and Restated Term
Loan A Note dated as of February 7, 1996 in the principal amount of $45,000,000
made by the Borrower in favor of the Lender (the "Original Note"). Nothing
herein or in any other document shall be construed to constitute payment of the
Original Note or to release or terminate any guaranty or lien, mortgage, pledge
or other security entered in favor of the Bank.
This Note evidences borrowings under and has been issued by the Borrower in
accordance with the terms of the Credit Agreement. The Bank and any holder
hereof is entitled to the benefits of the
<PAGE>
-2-
Credit Agreement, the Security Documents and the other Loan Documents, and may
enforce the agreements of the Borrower contained therein, and any holder hereof
may exercise the respective remedies provided for thereby or otherwise
available in respect thereof, all in accordance with the respective terms
thereof. All capitalized terms used in this Note and not otherwise defined
herein shall have the same meanings herein as in the Credit Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be made, at
the time of receipt of any payment of principal of this Note, an appropriate
notation on the grid attached to this Note, or the continuation of such grid,
or any other similar record, including computer records, reflecting the receipt
of such payment. The outstanding amount of the Term Loan A set forth on the
grid attached to this Note, or the continuation of such grid, or any other
similar record, including computer records, maintained by the Bank with respect
to the Term Loan A shall be prima facie evidence of the principal amount of the
Term Loan A owing and unpaid to the Bank, but the failure to record, or any
error in so recording, any such amount on any such grid, continuation or other
record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under the Credit Agreement to make payments of principal of and
interest on this Note when due.
The Borrower has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of
this Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon
may become or be declared due and payable in the manner and with the effect
provided in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in exercising
any right hereunder shall operate as a waiver of such right or of any other
rights of the Bank or such holder, nor shall any delay, omission or waiver on
any one occasion be deemed a bar or waiver of the same or any other right on
any future occasion.
The Borrower and every endorser and guarantor of this Note or the obligation
represented hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE
BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT
SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF
<PAGE>
-3-
SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 21 OF THE CREDIT
AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT IS BROUGHT IN AN INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under the laws
of the Commonwealth of Massachusetts.
<PAGE>
-4-
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed in its
corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.
[Corporate Seal]
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:
Title:
Exhibit 4.32
TERM LOAN B NOTE
$40,000,000 as of February 7, 1996
FOR VALUE RECEIVED, the undersigned NATIONAL RESTAURANT ENTERPRISES,
INC., a Delaware corporation (the "Borrower") hereby promises to pay to the
order of THE FIRST NATIONAL BANK OF BOSTON, a national banking association (the
"Bank"),at the Agent's Head Office (as defined in the Credit Agreement referred
to below):
(a) prior to or on Term Loan B Maturity Date the principal
amount of FORTY MILLION DOLLARS ($40,000,000), evidencing the Term Loan B made
by the Bank to the Borrower pursuant to the Second Amended and Restated
Revolving Credit and Term Loan Agreement dated as of February 7, 1996 (as
amended and in effect from time to time, the "Credit Agreement"), by and among
NRE Holdings, Inc., the Borrower, the Bank and the other lending institutions
thereto;
(b) the principal outstanding hereunder from time to time at
the times provided in the Credit Agreement; and
(c) interest from the date hereof on the principal amount from
time to time outstanding to and including the Term Loan B Maturity Date at the
rates and terms and in all cases in accordance with the terms of the Credit
Agreement.
This Note evidences borrowings under and has been issued by the Borrower
in accordance with the terms of the Credit Agreement. The Bank and any holder
hereof is entitled to the benefits of the Credit Agreement, the Security
Documents and the other Loan Documents, and may enforce the agreements of the
Borrower contained therein, and any holder hereof may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All capitalized terms used in
this Note and not otherwise defined herein shall have the same meanings herein
as in the Credit Agreement.
The Borrower irrevocably authorizes the bank to make or cause to be
made, at the time of receipt of any payment of principal of this Note, an
appropriate notation on the grid attached to this Note, or the continuation of
such grid, or any other similar record, including computer records, reflecting
the receipt of such payment. The outstanding amount of the Term Loan B set
forth in the grid attached to this Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by the Bank
with respect to the Term Loan B shall be prima facie evidence of the principal
-2-
amount of the Term Loan B owing and unpaid to the Bank, but the failure to
record, or any error in so recording, any such amount on any such grid,
continuation or other record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under the Credit Agreement to make payments of
principal of and interest on this Note when due.
The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the principal
of this Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of any
other rights of the Bank or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar or waiver of the same or any other right on
any future occasion.
The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY
FEDERAL COURT SITTING THEREIN AND THE CONSENT OT THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 21 OF THE CREDIT AGREEMENT.
THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed instrument under
the laws of the Commonwealth of Massachusetts.
-3-
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed in
its corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.
[Corporate Seal]
NATIONAL RESTAURANT
ENTERPRISES, INC.
By: \s
Title: Chief Executive Officer
<PAGE>
-1-
BD&G DRAFT
08/30/94
LIMITED GUARANTY
LIMITED GUARANTY, dated as of September 1, 1994, by NRE HOLDINGS,
INC., a Delaware corporation (the "Guarantor") in favor of (a) THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, as agent (hereinafter,
in such capacity, the "Agent") for itself and the other banking institutions
(hereinafter, collectively, the "Banks") which are or may become parties to a
Revolving Credit and Term Loan Agreement dated as of September 1, 1994 (as
amended and in effect from time to time, the "Credit Agreement"), among the
Guarantor, NATIONAL RESTAURANT ENTERPRISES, INC., a Delaware corporation (the
"Borrower"), the Banks and the Agent and (b) each of the Banks.
WHEREAS, the Borrower and the Guarantor are members of a group of
related corporations, the success of any one of which is dependent in part on
the success of the other members of such group;
WHEREAS, the Guarantor expects to receive substantial direct and
indirect benefits from the extensions of credit to the Borrower by the Banks
pursuant to the Credit Agreement (which benefits are hereby acknowledged);
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending credit to the Borrower under the Credit Agreement that the
Guarantor execute and deliver to the Agent, for the benefit of the Banks and the
Agent, a guaranty substantially in the form hereof; and
WHEREAS, the Guarantor wishes to guaranty the Borrower's obligations
to the Banks and the Agent under or in respect of the Credit Agreement as
provided herein;
NOW, THEREFORE, the Guarantor hereby agrees with the Banks and the
Agent as follows:
DEFINITIONS.
The term "Obligations" and all other capitalized terms used herein
without definition shall have the respective meanings provided therefor in the
Credit Agreement.
GUARANTY OF PAYMENT AND PERFORMANCE; LIMITATION ON GUARANTY.
<PAGE>
-2-
(a)
The Guarantor hereby guarantees to the Banks and the Agent the full
and punctual payment when due (whether at stated maturity, by required
pre-payment, by acceleration or otherwise), as well as the performance, of all
of the Obligations including all such which would become due but for the
operation of the automatic stay pursuant to Section 362(a) of the Federal
Bankruptcy Code and the operation of Sections 502(b) and 506(b) of the Federal
Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of all of the
Obligations and not of their collectibility only and is in no way conditioned
upon any requirement that the Agent or any Bank first attempt to collect any of
the Obligations from the Borrower or resort to any collateral security or other
means of obtaining payment. Should the Borrower default in the payment or
performance of any of the Obligations, the obligations of the Guarantor
hereunder with respect to such Obligations in default shall, upon demand by the
Agent, become immediately due and payable to the Agent, for the benefit of the
Banks and the Agent, without demand or notice of any nature, all of which are
expressly waived by the Guarantor. Payments by the Guarantor hereunder may be
required by the Agent on any number of occasions. All payments by the Guarantor
hereunder shall be made to the Agent, in the manner and at the place of payment
specified therefor in the Credit Agreement, for the account of the Banks and the
Agent.
(b) Notwithstanding any other term or provision of this Guaranty to
the contrary, the Guarantor's liability hereunder shall be limited to an amount
equal to (i) the amount of the proceeds received by the Guarantor from the sale
or other disposition of the Voting Stock (as such term is defined in the Stock
Pledge Agreement) of the Borrower, plus (ii) any payments, distributions or
other sums (the "Payments") received by the Guarantor from the Borrower in
violation of the Credit Agreement so long as such Payments were received by the
Guarantor not more than ninety (90) days prior to the earlier of (1) the date
which the Agent or Majority Banks declares all amounts owing with respect to
the Loan Documents immediately due and payable or (2) the date on which all
such amounts shall otherwise become due and payable in accordance with the
terms of the Credit Agreement, and such Payments were in an aggregate amount in
excess of $500,000, plus (iii) interest thereon from the date following the
date of any demand by the Bank hereunder until the date on which payment is
made, plus any amounts payable pursuant to Section 3 hereof.
GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC.
The Guarantor further agrees, as the principal obligor and not as a
guarantor only, to pay to the Agent, on demand, all costs and expenses
(including court costs and legal expenses) incurred or expended by the Agent or
any Bank in connection with the Obligations, this Guaranty and the enforcement
thereof, together with interest on amounts recoverable under this Section 3 from
the
time when such amounts become due until payment, whether before or after
judgment, at the rate of interest for overdue principal set forth in the Credit
Agreement, provided that if such interest exceeds the maximum amount permitted
to be paid under applicable law, then such interest shall be reduced to such
maximum permitted amount.
<PAGE>
-3-
WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT.
The Guarantor agrees that the Obligations will be paid and performed
strictly in accordance with their respective terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Agent or any Bank with respect thereto.
The Guarantor waives promptness, diligences, presentment, demand, protest,
notice of acceptance, notice of any Obligations incurred and all other notices
of any kind, all defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or hereafter in effect, any right
to require the marshalling of assets of the Borrower or any other entity or
other person primarily or secondarily liable with respect to any of the
Obligations, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (a)
the failure of the Agent or any Bank to assert any claim or demand or to
enforce any right or remedy against the Borrower or any other entity or other
person primarily or secondarily liable with respect to any of the Obligations;
(b) any extensions, compromise, refinancing, consolidation or renewals of any
Obligation; (c) any change in the time, place or manner of payment of any of
the Obligations or any rescissions, waivers, compromise, refinancing,
consolidation or other amendments or modifications of any of the terms or
provisions of the Credit Agreement, the Notes, the other Loan Documents, or any
other agreement evidencing, securing or otherwise executed in connection with
any of the Obligation, (d) the addition, substitution or release of any entity
or other person primarily or secondarily liable for any Obligation; (e) the
adequacy of any rights which the Agent or any Bank may have against any
collateral security or other means of obtaining repayment of any of the
Obligations; (f) the impairment of any collateral securing any of the
Obligations, including without limitation the failure to perfect or preserve
any rights which the Agent or any Bank might have in such collateral security
or the substitution, exchange, surrender, release, loss or destruction of any
such collateral security; or (g) any other act or omission which might in any
manner or to any extent vary the risk of the Guarantor or otherwise operate as
a release or discharge of the Guarantor, all of which may be done without
notice to the Guarantor. To the fullest extent permitted by law, the Guarantor
hereby expressly waives any and all rights or defenses arising by reason of (i)
any "one action" or "anti-deficiency" law which would otherwise prevent the
Agent or any Bank from bringing any action, including any claim for a
deficiency, or exercising any other right or remedy (including any right of
set-off), against the Guarantor before or after the Agent's or such Bank's
commencement or completion of any foreclosure action, whether judicially, by
exercise of power of sale or otherwise, or (ii) any other law which in any
other way would otherwise require any election of remedies by the Agent or any
Bank.
UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER.
If for any reason the Borrower has no legal existence or is under no
legal obligation to discharge any of the Obligations, or if any of the
Obligations have become irrecoverable from the
<PAGE>
-4-
Borrower by reason of the Borrower's insolvency, bankruptcy or reorganization
or by other operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the Guarantor
at all times had been the principal obligor on all such Obligations. In the
event that acceleration of the time for payment of any of the Obligations is
stayed upon the insolvency, bankruptcy or reorganization of the Borrower, or
for any other reason, all such amounts otherwise subject to acceleration under
the terms of the Credit Agreement, the Notes, the other Loan Documents, or any
other agreement evidencing, securing or otherwise executed in connection with
any Obligation shall be immediately due and payable by the Guarantor.
SUBROGATION; SUBORDINATION.
WAIVER OF RIGHTS AGAINST BORROWER.
Until the final payment and performance in full of all of the
Obligations, the Guarantor shall not exercise and hereby waives any
rights against the Borrower arising as a result of payment by the
Guarantor hereunder, by way of subrogation, reimbursement,
restitution, contribution or otherwise, and will not prove any claim
in competition with the Agent or any Bank in respect of any payment
hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; the Guarantor will not claim any setoff,
recoupment or counterclaim against the Borrower in respect of any
liability of the Guarantor to the Borrower; and the Guarantor waives
any benefit of and any right to participate in any collateral security
which may be held by the Agent or any Bank.
SUBORDINATION.
The payment of any amounts due with respect to any
indebtedness of the Borrower for money borrowed or credit received now
or hereafter owed to the Guarantor is hereby subordinated to the prior
payment in full of all of the Obligations. The Guarantor agrees that,
after the occurrence of any default in the payment or performance of
any of the Obligations, the Guarantor will not demand, sue for or
otherwise attempt to collect any such indebtedness of the Borrower to
the Guarantor until all of the Obligations shall have been paid in
full. If, notwithstanding the foregoing sentence, the Guarantor shall
collect, enforce or receive any amounts in respect of such
indebtedness while any Obligations are still outstanding, such amounts
shall be collected, enforced and received by the Guarantor as trustee
for the Banks and the Agent and be paid over to the Agent, for the
benefit of the Banks and the Agent, on account of the Obligations
without affecting in any manner the liability of the Guarantor under
the other provisions of this Guaranty.
PROVISIONS SUPPLEMENTAL.
The provisions of this Sectoion 6 shall be supplemental to and
not in derogation of any rights and remedies of the Banks and the Agent
under any separate subordination agreement which
<PAGE>
-5-
the Agent may at any time and from time to time enter into with the
Guarantor for the benefit of the Banks and the Agent.
SECURITY; SETOFF.
The Guarantor grants to each of the Agent and the Banks, as security
for the full and punctual payment and performance of all of the Guarantor's
obligations hereunder, a continuing lien on and security interest in all
securities or other property belonging to the Guarantor now or hereafter held
by the Agent or such Bank and in all deposits (general or special, time or
demand, provisional or final) and other sums credited by or due from the Agent
or such Bank to the Guarantor or subject to withdrawal by the Guarantor.
Regardless of the adequacy of any collateral security or other means of
obtaining payment of any of the Obligations, each of the Agent and the Banks is
hereby authorized at any time and from time to time, without notice to the
Guarantor (any such notice being expressly waived by the Guarantor) and to the
fullest extent permitted by law, to set off and apply such deposits and other
sums against the obligations of the Guarantor under this Guaranty, whether or
not the Agent or such Bank shall have made any demand under this Guaranty and
although such obligations may be contingent or unmatured.
FURTHER ASSURANCES.
The Guarantor agrees that it will from time to time, at the request of
the Agent, do all such things and execute all such documents as the Agent may
consider necessary or desirable to give full effect to this Guaranty and to
perfect and preserve the rights and powers of the Banks and the Agent
hereunder. The Guarantor acknowledges and confirms that the Guarantor itself
has established its own adequate means of obtaining from the Borrower on a
continuing basis all information desired by the Guarantor concerning the
financial condition of the Borrower and that the Guarantor will look to the
Borrower and not to the Agent or any Bank in order for the Guarantor to keep
adequately informed of changes in the Borrower's financial condition.
TERMINATION; REINSTATEMENT.
This Guaranty shall remain in full force and effect until the Agent is
given written notice of the Guarantor's intention to discontinue this Guaranty,
notwithstanding any intermediate or temporary payment or settlement of the
whole or any part of the Obligations. No such notice shall be effective unless
received and acknowledged by an officer of the Agent at the address of the
Agent for notices set forth in Section 21 of the Credit Agreement. No such
notice shall affect any rights of the Agent or any Bank hereunder, including
without limitation the rights set forth in Sections 4 and 6, with respect to
any Obligations incurred or accrued prior to the receipt of such notice or any
Obligations incurred or accrued pursuant to any contract or commitment in
existence prior to such receipt. This Guaranty shall continue to be effective
or be reinstated, notwithstanding any such notice, if at any time any payment
made or value received with respect to any Obligation is rescinded or must
<PAGE>
-6-
otherwise be returned by the Agent or any Bank upon the insolvency, bankruptcy
or reorganization of the Borrower, or otherwise, all as though such payment had
not been made or value received.
SUCCESSORS AND ASSIGNS.
This Guaranty shall be binding upon the Guarantor, its successors and
assigns, and shall inure to the benefit of the Agent and the Banks and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing sentence, each Bank may assign or otherwise transfer the
Credit Agreement, the Notes, the other Loan Documents, or any other agreement
or note held by it evidencing, securing or otherwise executed in connection
with the Obligations, or sell participations in any interest therein, to any
other entity or other person, and such other entity or other person shall
thereupon become vested, to the extent set forth in the agreement evidencing
such assignment, transfer or participation, with all the rights in respect
thereof granted to such Bank herein, all in accordance with Section 20 of the
Credit
Agreement. The Guarantor may not assign any of its obligations hereunder.
AMENDMENTS AND WAIVERS.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by the Guarantor therefrom shall be effective unless the same
shall be in writing and signed by the Agent with the consent of the Majority
Banks. No failure on the part of the Agent or any Bank to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right.
NOTICES.
All notices and other communications called for hereunder shall be
made in writing and, unless otherwise specifically provided herein, shall be
deemed to have been duly made or given when delivered by hand or mailed first
class, postage prepaid, or, in the case of telegraphic or telexed notice, when
transmitted, answer back received, addressed as follows: if to the Guarantor,
at the address set forth beneath its signature hereto, and if to the Agent, at
the address for notices to the Agent set forth in Section 21 of the Credit
Agreement, or at such address as either party may designate in writing to the
other.
GOVERNING LAW; CONSENT TO JURISDICTION.
THE GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS. The Guarantor agrees that any suit for the
enforcement of this Guaranty may be brought in the courts of the Commonwealth
of Massachusetts or any federal court sitting therein and consents to the
nonexclusive jurisdiction of such court and
<PAGE>
-7-
to service of process in any such suit being made upon the Guarantor by mail at
the address specified by reference in Section 12. The Guarantor hereby waives
any objection that it may now or hereafter have to the venue of any such suit or
any such court or that such suit was brought in an inconvenient court.
WAIVER OF JURY TRIAL.
THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO
ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH
RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Guarantor hereby
waives any right which it may have to claim or recover in any litigation
referred to in the preceding sentence any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. The Guarantor (a) certifies that neither the Agent or any Bank nor any
representative, agent or attorney of the Agent or any Bank has represented,
expressly or otherwise, that the Agent or any Bank would not, in the event of
litigation, seek to enforce the foregoing waivers and (b) acknowledges that, in
entering into the Credit Agreement and the other Loan Documents to which the
Agent or any Bank is a party, the Agent and the Banks are relying upon, among
other things, the waivers and certifications contained in this Section 14.
MISCELLANEOUS.
This Guaranty constitutes the entire agreement of the Guarantor with
respect to the matters set forth herein. The rights and remedies herein
provided are cumulative and not exclusive of any remedies provided by law or
any other agreement, and this Guaranty shall be in addition to any other
guaranty of or collateral security for any of the Obligations. The invalidity
or unenforceability of any one or more sections of this Guaranty shall not
affect the validity or enforceability of its remaining provisions. Captions are
for the ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined.
<PAGE>
-8-
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and
delivered as of the date first above written.
NRE HOLDINGS, INC.
By:
Title:
Address:
Telex:
<PAGE>
GUARANTY
GUARANTY, dated as of February 7, 1996, by AMERIKING VIRGINIA
CORPORATION I, a Virginia corporation ("AmeriKing Virginia") and AMERIKING
CINCINNATI CORPORATION I, a Delaware corporation ("AmeriKing Cincinnati", and,
collectively with AmeriKing Virginia, the "Guarantors") in favor of (a) THE
FIRST NATIONAL BANK OF BOSTON, a national banking association, as agent
(hereinafter, in such capacity, the "Agent") for itself and the other lending
institutions (hereinafter, collectively, the "Banks") which are or may become
parties to the Second Amended and Restated Revolving Credit and Term Loan
Agreement dated as of January 31, 1996 (as amended and in effect from time to
time, the "Credit Agreement"), among NRE HOLDINGS, INC., a Delaware corporation,
NATIONAL RESTUARANT ENTERPRISES, INC., a Delaware corporation (the "Borrower"),
the Banks and the Agent and (b) each of the Banks.
WHEREAS, the Borrower and the Guarantors are members of a group of
related corporations, the success of any one of which is dependent in part on
the success of the other member of such group;
WHEREAS, each of the Guarantors expects to receive substantial direct
and indirect benefits from the extensions of credit to the Borrower by the
Banks pursuant to the Credit Agreement (which benefits are hereby
acknowledged);
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending credit to the Borrower under the Credit Agreement that each
of the Guarantors execute and deliver to the Agent, for the benefit of the
Banks and the Agent, a guaranty substantially in the form hereof; and
WHEREAS, each of the Guarantors wishes to guaranty the Borrower's
obligations to the Banks and the Agent under or in respect of the Credit
Agreement as provided herein;
NOW, THEREFORE, each of the Guarantors hereby agrees with the Banks
and the Agent as follows:
DEFINITIONS.
The term "Obligations" and all other capitalized terms used herein
without definition shall have the respective meanings provided therefor in the
Credit Agreement.
GUARANTY OF PAYMENT AND PERFORMANCE.
Each of the Guarantors hereby guarantees to the Banks and the Agent
the full and punctual payment when due (whether at stated maturity, by required
prepayment, by acceleration or otherwise), as well as the performance, of all
of the Obligations including all such which would become due but for the
operation of the automatic stay pursuant to Section 362(a) of the Federal
Bankruptcy Code and the operation of Section 502(b) and 506(b) of the Federal
Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing
joint and several guaranty by the Guarantors of the full and punctual
<PAGE>
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payment and performance of all of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Agent or any Bank first attempt to collect any of the Obligations from the
Borrower or resort to any collateral security or other means of obtaining
payment. Should the Borrower default in the payment or performance of any of
the Obligations, the obligations of each of the Guarantors hereunder with
respect to such Obligations in default shall, upon demand by the Agent, become
immediately due and payable to the Agent, for the benefit of the Banks and the
Agent, without demand or notice of any nature, all of which are expressly
waived by such Guarantor. Payments by each of the Guarantors hereunder may be
required by the Agent on any number of occasions. All payments by such
Guarantors hereunder shall be made to the Agent, in the manner and at the place
of payment specified therefor in the Credit Agreement, for the account of the
Banks and the Agent and shall be made without setoff or counterclaim and free
and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein
unless such Guarantor is compelled by law to make such deduction or
withholding.
GUARANTORS' AGREEMENT TO PAY ENFORCEMENT COSTS, ETC.
Each of the Guarantors further agrees, as the principal obligor and
not as a guarantor only, to pay to the Agent, on demand, all costs and expenses
(including court costs and legal expenses) incurred or expended by the Agent or
any Bank in connection with the Obligations, this Guaranty and the enforcement
thereof, together with interest on amounts recoverable under this Section 3
from the time when such amounts become due until payment, whether before or
after judgment, at the rate of interest for overdue principal set forth in the
Credit Agreement, provided that if such interest exceeds the maximum amount
permitted to be paid under applicable law, then such interest shall be reduced
to such maximum permitted amount.
WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT.
Each of the Guarantors agrees that the Obligations will be paid and
performed strictly in accordance with their respective terms, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Agent or any Bank with respect
thereto. Each of the Guarantors waives promptness, diligences, presentment,
demand, protest, notice of acceptance, notice of any Obligations incurred and
all other notices of any kind, all defenses which may be available by virtue of
any valuation, stay, moratorium law or other similar law now or hereafter in
effect, any right to require the marshalling of assets of the Borrower or any
other entity or other person primarily or secondarily liable with respect to
any of the Obligations, and all suretyship defenses generally. Without limiting
the generality of the foregoing, each of the Guarantors agrees to the
provisions of any instrument evidencing, securing or otherwise executed in
connection with any Obligation and agrees that the obligations of each of the
Guarantors hereunder shall not be released or discharged, in whole or in part,
or otherwise affected by (a) the failure of the Agent or any Bank to assert any
claim or demand or to enforce any right or remedy against the Borrower or any
other entity or other person primarily or secondarily liable with respect to
any of the Obligations; (b) any extensions, compromise, refinancing,
consolidation or renewals of any
<PAGE>
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Obligation; (c) any change in the time, place or manner of payment of any of
the Obligations or any rescissions, waivers, compromise, refinancing,
consolidation or other amendments or modifications of any of the terms or
provisions of the Credit Agreement, the Notes, the other Loan Documents or any
other agreement evidencing, securing or otherwise executed in connection with
any of the Obligation, (d) the addition, substitution or release of any entity
or other person primarily or secondarily liable for any Obligation; (e) the
adequacy of any rights which the Agent or any Bank may have against any
collateral security or other means of obtaining repayment of any of the
Obligations; (f) the impairment of any collateral securing any of the
Obligations, including without limitation the failure to perfect or preserve
any rights which the Agent or any Bank might have in such collateral security
or the substitution, exchange, surrender, release, loss or destruction of any
such collateral security; or (g) any other act or omission which might in any
manner or to any extent vary the risk of such Guarantor or otherwise operate as
a release or discharge of such Guarantor, all of which may be done without
notice to such Guarantor. To the fullest extent permitted by law, each of the
Guarantors hereby expressly waives any and all rights or defenses arising by
reason of (i) any "one action" or "anti-deficiency" law which would otherwise
prevent the Agent or any Bank from bringing any action, including any claim for
a deficiency, or exercising any other right or remedy (including any right of
set-off), against such Guarantor before or after the Agent's or such Bank's
commencement or completion of any foreclosure action, whether judicially, by
exercise of power of sale or otherwise, or (ii) any other law which in any
other way would otherwise require any election of remedies by the Agent or any
Bank.
UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER.
If for any reason the Borrower has no legal existence or is under no
legal obligation to discharge any of the Obligations, or if any of the
Obligations have become irrecoverable from the Borrower by reason of the
Borrower's insolvency, Bankruptcy or reorganization or by other operation of
law or for any other reason, this Guaranty shall nevertheless be binding on
each of the Guarantors to the same extent as such Guarantor at all times had
been the principal obligor on all such Obligations. In the event that
acceleration of the time for payment of any of the Obligations is stayed upon
the insolvency, Bankruptcy or reorganization of the Borrower, or for any other
reason, all such amounts otherwise subject to acceleration under the terms of
the Credit Agreement, the Notes, the other Loan Documents or any other
agreement evidencing, securing or otherwise executed in connection with any
Obligation shall be immediately due and payable by each of the Guarantors.
SUBROGATION; SUBORDINATION.
WAIVER OF RIGHTS AGAINST BORROWER.
Until the final payment and performance in full of all of the
Obligations, none of the Guarantors shall exercise and each of the
Guarantors hereby waives any rights against the Borrower arising as a
result of payment by such Guarantor hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will not
prove any claim in competition with the Agent or any Bank in respect
of any payment hereunder in any Bankruptcy, insolvency or
reorganization case or proceedings of any nature; none of the
<PAGE>
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Guarantors will claim any setoff, recoupment or counterclaim against
the Borrower in respect of any liability of such Guarantor to the
Borrower; and each of the Guarantors waives any benefit of and any
right to participate in any collateral security which may be held by
the Agent or any Bank.
SUBORDINATION.
The payment of any amounts due with respect to any
indebtedness of the Borrower for money borrowed or credit received now
or hereafter owed to each of the Guarantors is hereby subordinated to
the prior payment in full of all of the Obligations. Each of the
Guarantors agrees that, after the occurrence of any default in the
payment or performance of any of the Obligations, such Guarantor will
not demand, sue for or otherwise attempt to collect any such
indebtedness of the Borrower to such Guarantor until all of the
Obligations shall have been paid in full. If, notwithstanding the
foregoing sentence, such Guarantor shall collect, enforce or receive
any amounts in respect of such indebtedness while any Obligations are
still outstanding, such amounts shall be collected, enforced and
received by such Guarantor as trustee for the Banks and the Agent and
be paid over to the Agent, for the benefit of the Banks and the Agent,
on account of the Obligations without affecting in any manner the
liability of such Guarantor under the other provisions of this
Guaranty.
PROVISIONS SUPPLEMENTAL.
The provisions of this Section 6 shall be supplemental to and
not in derogation of any rights and remedies of the Banks and the Agent
under any separate subordination agreement which the Agent may at any
time and from time to time enter into with any of the Guarantors for
the benefit of the Banks and the Agent.
SECURITY; SETOFF.
Each of the Guarantors grants to each of the Agent and the Banks, as
security for the full and punctual payment and performance of all of such
Guarantor's obligations hereunder, a continuing lien on and security interest
in all securities or other property belonging to such Guarantor now or
hereafter held by the Agent or such Bank and in all deposits (general or
special, time or demand, provisional or final) and other sums credited by or
due from the Agent or such Bank to such Guarantor or subject to withdrawal by
such Guarantor. Regardless of the adequacy of any collateral security or other
means of obtaining payment of any of the Obligations, each of the Agent and the
Banks is hereby authorized at any time and from time to time, without notice to
the Guarantors (any such notice being expressly waived by each of the
Guarantors) and to the fullest extent permitted by law, to set off and apply
such deposits and other sums against the obligations of such Guarantor under
this Guaranty, whether or not the Agent or such Bank shall have made any demand
under this Guaranty and although such obligations may be contingent or
unmatured.
FURTHER ASSURANCES.
<PAGE>
-5-
Each of the Guarantors agrees that it will from time to time, at the
request of the Agent, do all such things and execute all such documents as the
Agent may consider necessary or desirable to give full effect to this Guaranty
and to perfect and preserve the rights and powers of the Banks and the Agent
hereunder. Each of the Guarantors acknowledges and confirms that such Guarantor
itself has established its own adequate means of obtaining from the Borrower on
a continuing basis all information desired by such Guarantor concerning the
financial condition of the Borrower and that such Guarantor will look to the
Borrower and not to the Agent or any Bank in order for such Guarantor to keep
adequately informed of changes in the Borrower's financial condition.
TERMINATION; REINSTATEMENT.
This Guaranty shall remain in full force and effect until the Agent is
given written notice of any of the Guarantors' intention to discontinue this
Guaranty, notwithstanding any intermediate or temporary payment or settlement
of the whole or any part of the Obligations. No such notice shall be effective
unless received and acknowledged by an officer of the Agent at the address of
the Agent for notices set forth in Section 21 of the Credit Agreement. No such
notice shall affect any rights of the Agent or any Bank hereunder, including
without limitation the rights set forth in Section 4 and 6, with respect to any
Obligations incurred or accrued prior to the receipt of such notice or any
Obligations incurred or accrued pursuant to any contract or commitment in
existence prior to such receipt. This Guaranty shall continue to be effective
or be reinstated, notwithstanding any such notice, if at any time any payment
made or value received with respect to any Obligation is rescinded or must
otherwise be returned by the Agent or any Bank upon the insolvency, Bankruptcy
or reorganization of the Borrower, or otherwise, all as though such payment had
not been made or value received.
SUCCESSORS AND ASSIGNS.
This Guaranty shall be binding upon each of the Guarantors, their
successors and assigns, and shall inure to the benefit of the Agent and the
Banks and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing sentence, pursuant to Section 20 of the
Credit Agreement, each Bank may assign or otherwise transfer the Credit
Agreement, the Notes, the other Loan Documents or any other agreement or note
held by it evidencing, securing or otherwise executed in connection with the
Obligations, or sell participations in any interest therein, to any other
entity or other person, and such other entity or other person shall thereupon
become vested, to the extent set forth in the agreement evidencing such
assignment, transfer or participation, with all the rights in respect thereof
granted to such Bank herein, all in accordance with Section 20 of the Credit
Agreement. No Guarantor may assign any of its obligations hereunder.
AMENDMENTS AND WAIVERS.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by any of the Guarantors therefrom shall be effective unless
the same shall be in writing and signed by the Agent. No failure on the part of
the Agent or any Bank to exercise, and no delay in exercising,
<PAGE>
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any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
NOTICES.
All notices and other communications called for hereunder shall be
made in writing and, unless otherwise specifically provided herein, shall be
deemed to have been duly made or given when delivered by hand or mailed first
class, postage prepaid, or, in the case of telegraphic or telexed notice, when
transmitted, answer back received, addressed as follows: if to a Guarantor, at
the address set forth beneath its signature hereto, and if to the Agent, at the
address for notices to the Agent set forth in Section 21 of the Credit
Agreement, or at such address as either party may designate in writing to the
other.
GOVERNING LAW; CONSENT TO JURISDICTION.
THE GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS. Each of the Guarantors agrees
that any suit for the enforcement of this Guaranty may be brought in the courts
of the Commonwealth of Massachusetts or any federal court sitting therein and
consents to the nonexclusive jurisdiction of such court and to service of
process in any such suit being made upon such Guarantor by mail at the address
specified by reference in Section 12. Each of the Guarantors hereby waives any
objection that it may now or hereafter have to the venue of any such suit or
any such court or that such suit was brought in an inconvenient court.
WAIVER OF JURY TRIAL.
EACH OF THE GUARANTORS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF
SUCH RIGHTS OR OBLIGATIONS. Except as
prohibited by law, each of the Guarantors hereby waives any right which it may
have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. Each of the Guarantor
(a) certifies that neither the Agent or any Bank nor any representative, agent
or attorney of the Agent or any Bank has represented, expressly or otherwise,
that the Agent or any Bank would not, in the event of litigation, seek to
enforce the foregoing waivers and (b) acknowledges that, in entering into the
Credit Agreement and the other Loan Documents to which the Agent or any Bank is
a party, the Agent and the Banks are relying upon, among other things, the
waivers and certifications contained in this Section 14.
MISCELLANEOUS.
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This Guaranty constitutes the entire agreement of each of the
Guarantors with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of or collateral security for any of the Obligations. The
invalidity or unenforceability of any one or more sections of this Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this
Guaranty shall be equally applicable to the singular and plural forms of the
terms defined.
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IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be
executed and delivered as of the date first above written.
AMERIKING VIRGINIA CORPORATION I
By:
Title:
Address:
AMERIKING CINCINNATI
CORPORATION I
By:
Title:
Address:
<PAGE>
UNCONDITIONAL GUARANTY
OF PAYMENT AND PERFORMANCE
1. FOR VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, the undersigned ("Guarantor") absolutely and irrevocably
guarantees and promises to pay to FFCA ACQUISITION CORPORATION, a Delaware
corporation ("Lessor"), or order, any and all amounts, including, without
limitation, Interim Term Rental, Base Annual Rental, Base Monthly Rental,
Annual Percentage Rental, deposits, reserves, taxes, insurance premiums,
impounds, principal, interest, reimbursements, late charges, default interest,
damages and all other costs, fees, expenses and charges of any kind or type
whatsoever, which may or at any time be due to Lessor pursuant to the following
agreements (collectively, the "Documents"):
A. Sale-Leaseback Agreement, dated as of February 7, 1996
(the "Closing Date"), between Lessor, as buyer, and AmeriKing
[Virginia][Tennessee] Corporation I, a Delaware corporation
("Lessee"), as seller (the "Sale Agreement"), pertaining to certain
land and improvements described on the attached Exhibit A (the
"Premises");
B. Lease, dated as of the date hereof, between Lessor
and Lessee, by which Lessor leases the Premises to Lessee
(the "Lease");
C. Any other document, agreement, instrument or
certificate contemplated by any of the foregoing agreements, or any
other documents, agreements, instruments or certificates
now or hereafter entered into between Lessor and Lessee; and
D. Any amendment of the foregoing agreements or other
documents, agreements, instruments or certificates now or hereafter
entered into between Lessor and Lessee.
2. Guarantor unconditionally guarantees the truthfulness and accuracy
of all representations, warranties and certifications of Lessee, the
satisfaction of all conditions by Lessee and the full and timely performance of
all obligations to be performed by Lessee, under or pursuant to the Documents
(the "Obligations").
3. The obligation of Guarantor is primary, joint and several and
independent of the obligation of any and every other guarantor or of Lessee,
and a separate action or actions may be brought and executed against any one or
more of such guarantors, whether or not such action is brought against Lessee or
any other guarantor and whether or not Lessee or any other guarantor be joined
in such action or actions.
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4. This is an absolute and unconditional guaranty of payment and
performance and not of collection and Guarantor unconditionally (a) waives any
requirement that Lessor first make demand upon, or seek to enforce or exhaust
remedies against, Lessee or any other person or entity (including any other
guarantor) or any of the collateral or property of Lessee or such other person
or entity before demanding payment from, or seeking to enforce this Guaranty
against, such Guarantor; (b) waives and agrees not to assert any and all
rights, benefits and defenses which might otherwise be available under the
provisions of Ariz. Rev. Stat. Sections 12-1641 et seq., 44-141, 44-142 or
47-3605, Arizona Rules of Civil Procedure Rule 17(f), or any other Arizona
statutes or rules (including any statutes or rules amending, supplementing or
supplanting same) which might operate, contrary to Guarantor's agreements in
this Guaranty, to limit Guarantor's liability under, or the enforcement of,
this Guaranty; (c) covenants that this Guaranty will not be discharged until
all of the Obligations are fully satisfied; (d) agrees that this Guaranty shall
remain in full effect without regard to, and shall not be affected or impaired
by, any invalidity, irregularity or unenforceability in whole or in part of any
of the Documents, or any limitation of the liability of Lessee or Guarantor
thereunder, or any limitation on the method or terms of payment thereunder which
may now or hereafter be caused or imposed in any manner whatsoever; and (e)
waives notice of acceptance of this Guaranty, notice of defaults under any of
the Documents, presentment, protest and diligence.
5. This Guaranty is a continuing guaranty, and the obligations,
undertakings and conditions to be performed or observed by Guarantor under this
Guaranty shall not be affected or impaired by reason of the happening from time
to time of the following with respect to the Documents, all without notice to,
or the further consent of, Guarantor:
A. the waiver by Lessor of the observance or
performance by Lessee, Guarantor or any one or more of them of any of
the obligations, undertakings, conditions or other provisions
contained in any of the Documents, except to the extent of such
waiver;
B. the extension, in whole or in part, of the time for
payment of any amount owing or payable under the Documents;
C. the modification or amendment (whether material or
otherwise) of any of the obligations of Lessee under, or any other
provisions of, any of the Documents, except to the extent of such
modification or amendment;
D. the taking or the omission of any of the actions
referred to in any of the Documents (including, without limitation,
the giving of any consent referred to therein);
E. any failure, omission, delay or lack on the part of Lessor
to enforce, assert or exercise any provision of the Documents,
including any right, power or remedy conferred on Lessor in any of the
Documents or any action on the part of Lessor granting indulgence or
extension in any form;
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<PAGE>
F. the assignment to or assumption by any third party
of any or all of the rights or obligations of Lessee under all or any
of the Documents;
G. the release or discharge of Lessee from the performance or
observance of any obligation, undertaking or condition to be
performed by Lessee under any of the Documents by operation of law,
including any rejection or disaffirmance of any of the Documents in
any bankruptcy or similar proceedings;
H. the receipt and acceptance by Lessor or any other
person or entity of notes, checks or other instruments for the
payment of money and extensions and renewals thereof;
I. any action, inaction or election of remedies by
Lessor which results in any impairment or destruction of any
subrogation rights of Guarantor, or any rights of Guarantor to
proceed against any other person or entity for reimbursement;
J. any setoff, defense, counterclaim, abatement, recoupment,
reduction, change in law or any other event or circumstance which
might otherwise constitute a legal or equitable discharge or defense
of a guarantor, indemnitor or surety under the laws of the State of
Arizona, the state in which the real estate which is the subject of
the Lease is located or any other jurisdiction; or
K. the termination or renewal of any of the obligations of
Lessee under any of the Documents or any other provision thereof.
6. Guarantor represents and warrants to Lessor that as of the Closing
Date:
A. Neither the execution nor delivery of this Guaranty nor
fulfillment of nor compliance with the terms and provisions hereof
will conflict with, or result in a breach of the terms or conditions
of, or constitute a default under, or result in the creation of any
lien, charge or encumbrance upon any property or assets of such
Guarantor under any agreement or instrument to which such Guarantor
is now a party or by which such Guarantor may be bound, which
conflict, breach, default, lien, charge or encumbrance could
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), business, prospects, results of
operations or assets of such Guarantor (a "Material Adverse Effect");
B. Other than those obtained prior to Closing (as defined in
the Sale Agreement) or those which could not reasonably be expected
to have a Material Adverse Effect, no further consents, approvals or
authorizations are required for the execution and delivery of this
Guaranty by such Guarantor or for such Guarantor's compliance with
the terms and provisions of this Guaranty;
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<PAGE>
C. This Guaranty is the legal, valid and binding
agreement of such Guarantor and is enforceable against such Guarantor
in accordance with its terms;
D. Such Guarantor has the full power, authority, capacity and
legal right to execute and deliver this Guaranty, and, to the extent
such Guarantor is a corporation or partnership, the parties executing
this Guaranty on behalf of Guarantor are fully authorized and directed
to execute the same to bind Guarantor;
E. Such Guarantor is not a "foreign corporation," "foreign
partnership," "foreign trust," or "foreign estate," as those terms are
defined in the U.S. Internal Revenue Code and the regulations
promulgated thereunder. Such Guarantor's Social Security Number or
Federal Tax Identification Number is accurately set forth herein next
to the signature of such Guarantor;
F. Such Guarantor has delivered to Lessor either audited
financial statements or, if such Guarantor does not have audited
financial statements, financial statements. Such financial statements
and other information relating to such Guarantor heretofore delivered
to Lessor are true, correct and complete in all material respects as
of the date of this Guaranty. Such Guarantor understands that Lessor
is relying upon such information, and such Guarantor represents that
such reliance is reasonable. The financial statements, other than
interim and pro forma financial statements of such Guarantor delivered
by Lessee to Lessor pursuant to the Sale Agreement, have been prepared
in accordance with generally accepted accounting principles
consistently applied and accurately reflect, as of the date of this
Guaranty, the financial condition of such Guarantor;
G. During the term of this Guaranty, such Guarantor will not
transfer or dispose of any material part of its assets except (i) in
the ordinary course of business, (ii) the disposition of obsolete
assets which are no longer used or useful in the current or planned
business operations of the Guarantor, provided Guarantor receives full
and fair consideration and reasonably equivalent value for such
assets, (iii) the sale to Franchisor (as defined in the Sale
Agreement) or its designee of not more than 20 Burger King restaurants
as contemplated by Section 10.5 of that certain Second Amended and
Restated Revolving Credit and Term Loan Agreement dated as of February
7, 1996, among Guarantor, NRE Holdings, Inc., The First National Bank
of Boston and certain other financial institutions named therein, or
(iv) for full and fair consideration and reasonably equivalent value;
furthermore, such Guarantor will furnish Lessor annually, within 90
days after the close of each calendar year, a financial statement
consisting of a balance sheet and such other financial information as
Lessor may reasonably request; and
H. The Documents are conclusively presumed signed in
reliance on this Guaranty and the assumption by Guarantor of its
obligations under this Guaranty results in direct
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financial benefit to such Guarantor.
7. This Guaranty shall commence upon execution and delivery of any of
the Documents and shall continue in full force and effect until all of the
Obligations are duly, finally and permanently paid, performed and discharged
and are not subject to any right of reborrowing or extension by Lessee, and
Lessor gives Guarantor written notice of the full and final satisfaction of the
Obligations. The Obligations shall not be considered fully paid, performed and
discharged unless and until all payments by Lessee to Lessor are no longer
subject to any right on the part of any person whomsoever, including but not
limited to Lessee, Lessee as a debtor-in-possession and/or any trustee in
bankruptcy, to disgorge such payments or seek to recoup the amount of such
payments or any part thereof. The foregoing shall include, by way of example
and not by way of limitation, all rights to recover preferences voidable under
Title 11 of the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et seq., as
amended (the "Code"). In the event that any such payments by Lessee to Lessor
are disgorged after the making thereof, in whole or in part, or settled without
litigation, to the extent of such disgorgement or settlement, Guarantor shall
be liable for the full amount Lessor is required to repay plus interest, late
charges, attorneys' fees and any and all out-of-pocket expenses paid or
incurred by Lessor in connection therewith.
8. Guarantor shall neither have any right of subrogation, indemnity or
reimbursement nor hold any other claim against Lessee, and each of them does
hereby release Lessee from any and all claims by such Guarantor now or
hereafter arising against Lessee. Furthermore, Guarantor hereby unconditionally
and irrevocably waives (a) any right to participate in any security now or
hereafter held by Lessor or in any claim or remedy of Lessor or any other
person against Lessee with respect to obligations guaranteed hereby, (b) any
statute of limitations affecting Guarantor's liability hereunder, (c) all
principles and provisions of law which conflict with the terms of this Guaranty
and (d) diligence, presentment, demand for performance, notice of
nonperformance, notice of intent to accelerate and acceleration, notice of
protest, notice of dishonor, notice of execution of any Documents, notice of
extension, renewal, alteration or amendment, notice of acceptance of this
Guaranty and all other notices whatsoever.
9. Notwithstanding the preceding Section 8, in the event that
Guarantor shall have any claims against Lessee, any indebtedness of Lessee now
or hereafter held by Guarantor is hereby subordinated to the indebtedness of
Lessee to Lessor until such time as the Obligations are satisfied in full. Any
such indebtedness of Lessee to Guarantor, if Lessor so requests, shall be
collected, enforced and received by Guarantor as trustee for Lessor and be paid
over to Lessor on account of the obligations guaranteed hereby, but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
10. It is not necessary for Lessor to inquire into the powers
of Lessee or its officers, directors, partners or agents acting or
purporting to act on its behalf, and Guarantor shall be liable
5
<PAGE>
for the obligations of Lessee in accordance with their terms notwithstanding
any lack of authorization or defect in execution or delivery by Lessee.
11. In addition to the amounts guaranteed under this Guaranty,
Guarantor agrees to pay (i) all of Lessor's attorneys' fees and other
out-of-pocket costs and expenses which may be incurred by Lessor in the
enforcement of this Guaranty and (ii) interest (including postpetition interest
to the extent a petition is filed by or against Lessee under the Code) at the
Default Rate (as defined in the Lease) on any Obligations not paid when due.
12. This Guaranty shall apply to the parties hereto and their
successors and assigns according to the context hereof and without regard to
the number or gender of words or expressions used herein.
13. Guarantor hereby agrees to indemnify and hold harmless Lessor from
any loss, cause of action, claim, cost, expense or fee, including but not
limited to reasonable attorneys' fees, suffered or occasioned by the failure of
Lessee to satisfy its obligations under the Documents. The obligations of
Guarantor under this section shall be the independent and primary obligation of
Guarantor. The agreement to indemnify Lessor contained in this paragraph shall
be enforceable notwithstanding the invalidity or unenforceability of the
Documents or any of them or the invalidity or unenforceability of any other
paragraph contained in this Guaranty.
14. All moneys available to Lessor for application in payment or
reduction of the liabilities of Lessee under the Documents may be applied by
Lessor to the payment or reduction of such liabilities of Lessee, in such
manner, in such amounts and at such time or times as Lessor may elect.
15. All notices, demands, requests, consents, approvals or other
instruments required or permitted to be given pursuant to this Guaranty shall
be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express
overnight delivery service or (iv) certified or registered mail, return receipt
requested, and shall be deemed to have been delivered upon (a) receipt, if hand
delivered, (b) transmission, if delivered by facsimile, (c) the next business
day, if delivered by express overnight delivery service or (d) the third
business day following the day of deposit of such notice with the United States
Postal Service, if sent by certified or registered mail, return receipt
requested. Notices shall be provided to the addresses (or facsimile numbers, as
applicable) specified below:
If to Guarantor: National Restaurant Enterprises, Inc.
Suite 1502
2215 Enterprise Drive
Westchester, IL 60154
Attention: Lawrence E. Jaro and Joel Aaseby
Telephone: (708) 947-2150
Telecopy: (708) 947-2161
6
<PAGE>
With a copy to: A. Richard Caputo, Jr.
The Jordan Company
40th Floor
9 West 57th Street
New York, NY 10019
Telephone: (212) 572-0823
Telecopy: (212) 755-5263
If to Lessor: Dennis L. Ruben, Esq.
Senior Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either Guarantor or Lessor may
from time to time hereafter specify to the other party in a notice delivered in
the manner provided above.
16. This Guaranty is made, executed and delivered in the State of
Arizona, and it is the intent of Guarantor and Lessor that this Guaranty shall
be deemed to be a contract made under and governed by the internal laws of the
State of Arizona. For purposes of any action or proceeding involving this
Guaranty, Guarantor submits to the jurisdiction of all federal and state courts
located in the State of Arizona and consent that they may be served with any
process or paper by registered mail or by personal service within or without
the State of Arizona in accordance with applicable law. Furthermore, Guarantor
waives and agrees not to assert in any such action, suit or proceeding that
they are not personally subject to the jurisdiction of such courts, that the
action, suit or proceeding is brought in an inconvenient forum or that venue of
the action, suit or proceeding is improper. Nothing contained in this section
shall limit or restrict the right of Lessor to commence any proceeding in the
federal or state courts located in the state in which the Premises is located
and/or where Guarantor resides to the extent Lessor deems such proceeding
necessary or advisable to exercise remedies available under the Documents.
17. It is the intent of Guarantor that the conveyance of the Premises
by or at the direction of Lessee to Lessor be an absolute conveyance in effect
as well as form, and the instruments delivered at the Closing (as defined in
the Sale Agreement) with respect to the sale and lease of the Premises are not
intended to serve or operate as a mortgage, equitable mortgage, deed of trust,
security agreement, trust conveyance or security financing or trust arrangement
of any kind, nor as a preference against any creditors of Lessee. Furthermore,
Guarantor intends for the Lease to be a "true lease" and not a financing lease,
capital lease, mortgage, equitable mortgage, deed of trust, security agreement
or other financing or trust arrangement, and the economic realities of the
Lease
7
<PAGE>
are those of a true lease. Notwithstanding the Lease, Guarantor shall not
challenge the validity, enforceability or characterization of the purchase of
the Premises by Lessor as an absolute conveyance, and Guarantors shall support
the intent of the parties that the sale and purchase of the Premises pursuant
to the Sale Agreement provides for an absolute conveyance and does not create a
joint venture, partnership, equitable mortgage, trust, financing device or
arrangement, trust agreement, security interest or the like, if, and to the
extent that, any challenge occurs.
18. Guarantor acknowledges that Lessor is not affiliated with, and has
no business relationship with, Franchisor, other than landlord/tenant
relationships unrelated to the transactions set forth in the Documents, and
Lessor did not prepare or assist in the preparation of any of the projected
financial figures used by Lessee in analyzing the economic viability and
feasibility of the transaction contemplated in the Sale Agreement. Furthermore,
Guarantor acknowledges that Lessee has not relied upon, nor may it hereafter
rely upon, the analysis undertaken by Lessor in determining the Purchase Price
(as defined in the Sale Agreement) and that such analysis will not be made
available to Lessee.
19. All of Lessor's rights and remedies under the Lease and this
Guaranty are intended to be distinct, separate and cumulative and no such right
or remedy is intended to be in exclusion of or a waiver of any of the others.
20. This Guaranty is solely for the benefit of Lessor, its successors
and assigns and is not intended to nor shall be deemed to be for the benefit of
any third party, including, without limitation, Lessee.
21. If any provision of this Guaranty is unenforceable, the
enforceability of the other provisions shall not be affected and they shall
remain in full force and effect.
22. Guarantor agrees to take such action and to sign such other
documents as may be appropriate to carry out the intent of this Agreement.
23. This Guaranty may be executed in one or more counterparts,
each of which shall be deemed an original.
24. LESSOR, BY ACCEPTING THIS GUARANTY, AND GUARANTOR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT THEY MAY HAVE TO A
TRIAL BY JURY WITH RESPECT OF ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY LESSOR OR GUARANTOR AGAINST THE
OTHER OR THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS GUARANTY, THE RELATIONSHIP OF LESSOR, LESSEE AND/OR THE
GUARANTOR, LESSEE'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR
INJURY OR DAMAGE, OR
8
<PAGE>
ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY LESSOR AND THE GUARANTOR OF
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS A
MATERIAL INDUCEMENT FOR LESSOR ACCEPTING THIS GUARANTY. FURTHERMORE, GUARANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO
SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM LESSOR WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY GUARANTOR AGAINST LESSOR OR ITS SUCCESSORS WITH RESPECT
TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY
DOCUMENTS CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY THE GUARANTOR OF
ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT
DAMAGES HAS BEEN NEGOTIATED AND IS A MATERIAL INDUCEMENT FOR LESSOR ACCEPTING
THIS GUARANTY.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned Guarantor has executed this
Guaranty effective as of February 7, 1996.
GUARANTOR:
Federal Tax I.D. Numbers:
36-3970210 NATIONAL RESTAURANT ENTERPRISES,
INC., a Delaware corporation
By
Printed Name
Its
10
<PAGE>
[Conform to state law]
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this day
of , 1996 by , of National Restaurant
Enterprises, Inc., a Delaware corporation, on behalf of the corporation.
Notary Public
My commission expires:
11
JARO PROXY AGREEMENT
This Jaro Proxy Agreement (this "Agreement") is entered into this 1st
day of September, 1994, by and between the undersigned stockholders (the
"Stockholders") of NRE Holdings, Inc. (the "Company") and Lawrence Jaro who is
appointed proxy hereunder (the "Proxyholder"). Capitalized terms not otherwise
defined herein shall have the same meaning ascribed to them in that certain
Stockholders Agreement, of even date herewith, and the parties listed on the
signature pages thereto.
WHEREAS, the Stockholders are simultaneously acquiring shares of
Stock of the Company and it is a condition to such acquisition that the
Stockholders execute this Agreement;
WHEREAS, the parties believe that the best interests of the Company
and its shareholders will be served by the execution of this Agreement;
NOW, THEREFORE, the Stockholders jointly and severally agree with the
Proxyholder as follows:
FIRST: Irrevocable Proxy. The Stockholders and each of them hereby
irrevocably constitutes and appoints the Proxyholder the true and lawful
attorney, agent and proxy, with full power of substitution, for each of the
Stockholders for the period hereinafter defined, for and in the name, place
and stead of each of the Stockholders, to vote all shares of Stock now or
hereafter owned by each Stockholder either of record or beneficially and all
such shares of Stock in which each Stockholder now or hereafter may have any
legal or beneficial interest and all such shares of Stock with respect to
which each Stockholder is now or hereafter may be the agent or proxy or the
record or beneficial owner by authorization or substitution, to vote such
shares of Stock at any and all meetings of the shareholders of the Company,
whether regular or special, and at any adjournment or adjournments thereof,
and to execute with respect to said shares of Stock any and all instruments,
consents, directions or other documents relative to the corporate affairs of
the Company or calling for the approval or disapproval of any corporate act or
transaction by the shareholders of the Company, and the Stockholders do hereby
authorize and empower the Proxyholder to vote or otherwise act, as aforesaid,
upon any and all matters and questions relating to the Company of whatsoever
nature and kind, with all powers the Stockholders would possess as
shareholders if this proxy had not been granted.
SECOND: Prior Proxies. The Stockholders hereby ratify, confirm and
approve everything lawful that the Proxyholder may do by virtue hereof. The
Stockholders hereby represent they have executed no prior proxies covering any
shares of Stock.
-1-
<PAGE>
THIRD: Proxy Coupled with an Interest. This proxy is being given
simultaneously with the purchase by the Stockholders of shares of Stock. It is
understood and agreed by the Stockholders that this proxy is being given as a
material part of the consideration for the consummation of that transaction
and that the consummation of that transaction is conditioned upon the
execution and delivery of this Agreement. For these reasons, among others, the
Stockholders jointly and severally acknowledge and declare that (a) this
Agreement and the proxy hereby granted are irrevocable until the termination
of the Stockholders Agreement and (b) the proxy granted hereby is coupled with
an interest.
FOURTH: Powers. Until the termination of this Agreement and the proxy
granted hereby, the Proxyholder shall possess in respect of the Stock
deposited hereunder, and shall be entitled to, in his sole, absolute and
uncontrolled discretion, all of the rights and powers granted under paragraph
FIRST above, including but not by way of limitation, the right (1) to consent
for every purpose and (2) to vote or otherwise act with respect to any and all
matters and questions of whatsoever kind and nature, including, but not by way
of limitation, (i) the sale or other disposition of all or any part of the
assets and business of the Company, (ii) the readjustment of its capital
structure and (iii) the reorganization of the Company.
FIFTH: Delegation. The Proxyholder may appoint any person or persons
to represent him at any meeting of the shareholders of the Company and at such
meeting to vote and otherwise to exercise all rights appurtenant to the proxy
granted hereby; and such person or persons appointment shall be deemed the
proxy and power of attorney for all of the Stockholders. The Proxyholder may
also cause the Stock subject to the proxy granted hereunder to be voted and
the rights appurtenant thereto to be exercised in any other appropriate and
lawful manner.
SIXTH: Officers and Directors. The Proxyholder may act as a director
and/or officer of the Company, an affiliate of the Company, or any direct or
indirect subsidiary of the Company.
SEVENTH: Liability. In voting the Stock subject to the proxy granted
hereunder, or acting with respect to this Agreement, the Proxyholder assumes
no responsibility and shall incur no liability because of any act which he may
do or omit to do while acting in good faith. Any act done or omitted by the
Proxyholder pursuant to the advice of his own attorneys shall be conclusive
evidence of such good faith. The Proxyholder may be or become interested
individually or in any other capacity in the Company, an affiliate of the
Company, or a direct or indirect subsidiary of the Company, and in such
connection may receive compensation from the Company for such subsidiary or
affiliate. The Proxyholder in his individual capacity or any concern in which
he may have an interest may deal with the Company as if he in fact were not a
Proxyholder hereunder and, without limiting the generality of the foregoing,
any such dealing approved by a majority of the directors of the Company (even
though elected by the Proxyholder) shall be conclusively presumed to be fair
to the Company.
EIGHTH: Necessary Documents. The undersigned agree to execute or
cause to be executed at any time upon demand of the Proxyholder, any and all
documents or instruments
<PAGE>
necessary, or deemed advisable by the Proxyholder, to carry out the terms of
this Agreement and the proxy granted hereby, including but not limited to,
specific written proxies with respect to any shares of Stock covered by this
Agreement.
NINTH: Successors and Assigns. The Stockholders, for themselves,
their representatives, assigns and successors in interest, respectively,
hereby expressly approve, consent to, and agree to abide by this Agreement and
the proxy granted hereby and each and all of the provisions hereof, and agree
that each and all of the same shall be carried into effect in accordance with
the terms hereof. In the event the Proxyholder is no longer employed by
Enterprises, then the Stockholders hereby expressly approve, consent to, and
agree that this Agreement and the proxy granted hereby may be exercised by a
majority of the Management Directors.
TENTH: Counterparts. This Agreement may be simultaneously executed in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts shall together constitute but a single
instrument.
ELEVENTH: Governing Law. This Agreement shall be government by,
construed, applied and enforced in accordance with the laws of the State of
Illinois.
TWELFTH: Definition of Proxyholder. The term "Proxyholder" shall be
deemed to refer to any individual who may at the time be a duly appointed and
acting Proxyholder hereunder.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.
----------------------------------------
Name: Lawrence Jaro
TABOR RESTRAURANTS
ASSOCIATES, INC.
----------------------------------------
Name:
Title:
JARO ENTERPRISES, INC.
----------------------------------------
Name:
Title:
JARO RESTAURANTS, INC.
----------------------------------------
Name:
Title:
JB RESTAURANTS, INC.
----------------------------------------
Name:
Title:
-4-
OSBORN PROXY AGREEMENT
This Osborn Proxy Agreement (this "Agreement") is entered into this
1st day of September, 1994, by and between the undersigned stockholders (the
"Stockholders") of NRE Holdings, Inc. (the "Company") and William Osborn who
is appointed proxy hereunder (the "Proxyholder"). Capitalized terms not
otherwise defined herein shall have the same meaning ascribed to them in that
certain Stockholders Agreement, of even date herewith, and the parties listed
on the signature pages thereto.
WHEREAS, the Stockholders are simultaneously acquiring shares of
Stock of the Company and it is a condition to such acquisition that the
Stockholders execute this Agreement;
WHEREAS, the parties believe that the best interests of the Company
and its shareholders will be served by the execution of this Agreement;
NOW, THEREFORE, the Stockholders jointly and severally agree with the
Proxyholder as follows:
FIRST: Irrevocable Proxy. The Stockholders and each of them hereby
irrevocably constitutes and appoints the Proxyholder the true and lawful
attorney, agent and proxy, with full power of substitution, for each of the
Stockholders for the period hereinafter defined, for and in the name, place
and stead of each of the Stockholders, to vote all shares of Stock now or
hereafter owned by each Stockholder either of record or beneficially and all
such shares of Stock in which each Stockholder now or hereafter may have any
legal or beneficial interest and all such shares of Stock with respect to
which each Stockholder is now or hereafter may be the agent or proxy or the
record or beneficial owner by authorization or substitution, to vote such
shares of Stock at any and all meetings of the shareholders of the Company,
whether regular or special, and at any adjournment or adjournments thereof,
and to execute with respect to said shares of Stock any and all instruments,
consents, directions or other documents relative to the corporate affairs of
the Company or calling for the approval or disapproval of any corporate act or
transaction by the shareholders of the Company, and the Stockholders do hereby
authorize and empower the Proxyholder to vote or otherwise act, as aforesaid,
upon any and all matters and questions relating to the Company of whatsoever
nature and kind, with all powers the Stockholders would possess as
shareholders if this proxy had not been granted.
SECOND: Prior Proxies. The Stockholders hereby ratify, confirm and
approve everything lawful that the Proxyholder may do by virtue hereof. The
Stockholders hereby represent they have executed no prior proxies covering any
shares of Stock.
-1-
<PAGE>
THIRD: Proxy Coupled with an Interest. This proxy is being given
simultaneously with the purchase by the Stockholders of shares of Stock. It is
understood and agreed by the Stockholders that this proxy is being given as a
material part of the consideration for the consummation of that transaction
and that the consummation of that transaction is conditioned upon the
execution and delivery of this Agreement. For these reasons, among others, the
Stockholders jointly and severally acknowledge and declare that (a) this
Agreement and the proxy hereby granted are irrevocable until the termination
of the Stockholders Agreement and (b) the proxy granted hereby is coupled with
an interest.
FOURTH: Powers. Until the termination of this Agreement and the proxy
granted hereby, the Proxyholder shall possess in respect of the Stock
deposited hereunder, and shall be entitled to, in his sole, absolute and
uncontrolled discretion, all of the rights and powers granted under paragraph
FIRST above, including but not by way of limitation, the right (1) to consent
for every purpose and (2) to vote or otherwise act with respect to any and all
matters and questions of whatsoever kind and nature, including, but not by way
of limitation, (i) the sale or other disposition of all or any part of the
assets and business of the Company, (ii) the readjustment of its capital
structure and (iii) the reorganization of the Company.
FIFTH: Delegation. The Proxyholder may appoint any person or persons
to represent him at any meeting of the shareholders of the Company and at such
meeting to vote and otherwise to exercise all rights appurtenant to the proxy
granted hereby; and such person or persons appointment shall be deemed the
proxy and power of attorney for all of the Stockholders. The Proxyholder may
also cause the Stock subject to the proxy granted hereunder to be voted and
the rights appurtenant thereto to be exercised in any other appropriate and
lawful manner.
SIXTH: Officers and Directors. The Proxyholder may act as a director
and/or officer of the Company, an affiliate of the Company, or any direct or
indirect subsidiary of the Company.
SEVENTH: Liability. In voting the Stock subject to the proxy granted
hereunder, or acting with respect to this Agreement, the Proxyholder assumes
no responsibility and shall incur no liability because of any act which he may
do or omit to do while acting in good faith. Any act done or omitted by the
Proxyholder pursuant to the advice of his own attorneys shall be conclusive
evidence of such good faith. The Proxyholder may be or become interested
individually or in any other capacity in the Company, an affiliate of the
Company, or a direct or indirect subsidiary of the Company, and in such
connection may receive compensation from the Company for such subsidiary or
affiliate. The Proxyholder in his individual capacity or any concern in which
he may have an interest may deal with the Company as if he in fact were not a
Proxyholder hereunder and, without limiting the generality of the foregoing,
any such dealing approved by a majority of the directors of the Company (even
though elected by the Proxyholder) shall be conclusively presumed to be fair
to the Company.
EIGHTH: Necessary Documents. The undersigned agree to execute or
cause to be executed at any time upon demand of the Proxyholder, any and all
documents or instruments
<PAGE>
necessary, or deemed advisable by the Proxyholder, to carry out the terms of
this Agreement and the proxy granted hereby, including but not limited to,
specific written proxies with respect to any shares of Stock covered by this
Agreement.
NINTH: Successors and Assigns. The Stockholders, for themselves,
their representatives, assigns and successors in interest, respectively,
hereby expressly approve, consent to, and agree to abide by this Agreement and
the proxy granted hereby and each and all of the provisions hereof, and agree
that each and all of the same shall be carried into effect in accordance with
the terms hereof. In the event the Proxyholder is no longer employed by
Enterprises, then the Stockholders hereby expressly approve, consent to, and
agree that this Agreement and the proxy granted hereby may be exercised by a
majority of the Management Directors.
TENTH: Counterparts. This Agreement may be simultaneously executed in
several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts shall together constitute but a single
instrument.
ELEVENTH: Governing Law. This Agreement shall be government by,
construed, applied and enforced in accordance with the laws of the State of
Illinois.
TWELFTH: Definition of Proxyholder. The term "Proxyholder" shall be
deemed to refer to any individual who may at the time be a duly appointed and
acting Proxyholder hereunder.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.
-----------------------------------
Name: William Osborn
CASTLEKING, INC.
By:
--------------------------------
Name:
Title:
OSBURGER, INC.
By:
--------------------------------
Name:
Title:
WHITE-OSBORN, INC.
By:
--------------------------------
Name:
Title:
-4-
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of February 7, 1996
among
NATIONAL RESTAURANT ENTERPRISES, INC.,
NRE HOLDINGS, INC.
and
THE FIRST NATIONAL BANK OF BOSTON and
those other lending institutions listed on Schedule 1
hereto
and
THE FIRST NATIONAL BANK OF BOSTON, as Agent
<PAGE>
-1-
TABLE OF CONTENTS
<PAGE>
EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Revolving Credit Loan Request
Exhibit C-1 Form of Term Loan A Note
Exhibit C-2 Form of Term Loan B Note
Exhibit D Form of Compliance Certificate
Exhibit E Form of Guaranty
Exhibit F-1 Form of Security Agreement (Borrower)
Exhibit F-2 Form of Security Agreement (Subsidiaries)
Exhibit G Form of Stock Pledge Agreement
Exhibit H Form of Assignment and Acceptance
Exhibit I Form of Mortgage
SCHEDULES
Schedule 1 Commitments
Schedule 1A Mortgaged Properties
Schedule 8.3 Title to Properties; Leases
Schedule 8.7 Litigation
Schedule 8.15 Transactions with Affiliates
Schedule 8.18 Environmental Matters
Schedule 8.19 Subsidiaries
Schedule 8.20 Chief Executive Offices of Subsidiaries
Schedule 8.21 Fiscal Years
Schedule 8.25 Insurance
Schedule 10.1 Permitted Indebtedness
Schedule 10.2 Permitted Liens
Schedule 10.3 Permitted Investments
<PAGE>
-2-
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT is made as of February 7, 1996, by and among NRE HOLDINGS, INC.
("Holdings"), a Delaware corporation, NATIONAL RESTAURANT ENTERPRISES, INC.
(the "Borrower"), a Delaware corporation having its principal place of
business at 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154 and
THE FIRST NATIONAL BANK OF BOSTON, a national banking association and the
other lending institutions listed on Schedule 1 and THE FIRST NATIONAL BANK OF
BOSTON as agent for itself and such other lending institutions.
WHEREAS, pursuant to an Amended and Restated Revolving Credit and
Term Loan Agreement dated as of November 30, 1994 (as amended from time to
time, the "Original Credit Agreement"), by and among Holdings, the Borrower,
certain of the Banks (as hereinafter defined) and the Agent (as hereinafter
defined), the Banks party thereto made term loans to the Borrower for the
purpose of financing certain acquisitions and made available revolving credit
loans to finance certain acquisitions and for general corporate and working
capital purposes; and
WHEREAS, the Borrower has requested, among other things, additional
financing to effect the Acquisitions (as hereinafter defined) and refinance
certain Indebtedness (as hereinafter defined) and the Banks are willing to
provide such additional financing on the terms and conditions set forth
herein;
NOW, THEREFORE, Holdings, the Borrower, the Banks and the Agent agree
that on the Closing Date the Original Credit Agreement is hereby amended and
restated in its entirety as set forth herein.
DEFINITIONS AND RULES OF INTERPRETATION.
DEFINITIONS.
The following terms shall have the meanings set forth in this Section 1
or elsewhere in the provisions of this Credit Agreement referred to below:
Aaseby Sale Agreement. Those provisions of the Employment Agreement
dated as of September 1, 1994 between the Borrower and Joel Aaseby pertaining
to the sale by the Borrower to Joel Aaseby of the restaurant identified as the
BKC Restaurant #209.
Acquisitions. The AmeriKing Cincinnati Acquisition and the AmeriKing
Virginia Acquisition.
Acquisition Documents. The AmeriKing Cincinnati Acquisition Documents
and the AmeriKing Virginia Acquisition Documents.
<PAGE>
-3-
Adjustment Date. The first day of the month immediately following the
month in which a Compliance Certificate is to be delivered by the Borrower
pursuant to Section 9.4(d).
Affected Bank. See Section 6.12 hereof.
Affiliate. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower was
issuing securities; provided, however, that the term "Affiliate" as it applies
to Holdings and its Subsidiaries shall not include MCIT PLC or PMI.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent
may designate from time to time.
Agent. The First National Bank of Boston acting as agent for the
Banks.
Agent's Fee. See Section 6.2 hereof.
Agent's Special Counsel. Bingham, Dana & Gould or such other counsel
as may be approved by the Agent.
AmeriKing Cincinnati. AmeriKing Cincinnati Corporation I, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
AmeriKing Cincinnati Acquisition. The transaction in which AmeriKing
Cincinnati shall have purchased (a) certain of the assets and business of
Houston, Inc. consisting of two (2) restaurants pursuant to the
AmeriKing/Houston Asset Purchase Agreement on the AmeriKing Cincinnati
Acquisition Closing Date; (b) certain of the assets and business of Fifth &
Race, Inc. consisting of one (1) restaurant pursuant to the AmeriKing/FRI
Asset Purchase Agreement on the AmeriKing Cincinnati Acquisition Closing Date;
and (c) certain of the assets and business of Thirty-Forty, Inc. consisting of
nine (9) restaurants pursuant to the AmeriKing/TFI Asset Purchase Agreement on
the AmeriKing Cincinnati Acquisition Closing Date.
AmeriKing Cincinnati Acquisition Closing Date. The first date on
which the conditions set forth in the AmeriKing/Houston Asset Purchase
Agreement, the AmeriKing/FRI Asset Purchase Agreement and the AmeriKing/TFI
Asset Purchase Agreement have been satisfied and the AmeriKing Cincinnati
Acquisition has occurred.
AmeriKing Cincinnati Acquisition Documents. The AmeriKing/Houston
Asset Purchase Agreement, the AmeriKing/FRI Asset Purchase Agreement, the
AmeriKing TFI Asset Purchase Agreement and related bills of sale, instruments
of assignment, leases, Franchise Agreements and other documents, instruments
and certificates delivered in connection with any of the foregoing.
<PAGE>
-4-
AmeriKing Colorado. AmeriKing Colorado Corporation I, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
AmeriKing Colorado Acquisition. The transaction in which AmeriKing
Colorado purchased (a) certain of the assets and business of DMW, Inc.
consisting of three (3) restaurants pursuant to the AmeriKing/DMW Asset
Purchase Agreement on July 5, 1995 and (b) certain of the assets and business
of WSG, Inc. consisting of one (1) restaurant pursuant to the AmeriKing/WSG
Asset Purchase Agreement on July 5, 1995.
AmeriKing/DMW Asset Purchase Agreement. The Asset Purchase Agreement
dated as of July 5, 1995 by and among DMW, Inc., Daniel L. White and AmeriKing
Colorado.
AmeriKing/FRI Asset Purchase Agreement. The Asset Purchase Agreement
dated as of November 6, 1995 by and among Fifth & Race, Inc., James P. Borke,
W. Curtis Smith, William T. Keller and AmeriKing Cincinnati as amended by
Amendment No. 1 dated on or prior to the Closing Date, in the form delivered
to the Agent prior to the Closing Date.
AmeriKing/Houston Asset Purchase Agreement. The Asset Purchase
Agreement dated as of November 6, 1995 by and among Houston, Inc., James P.
Borke, W. Curtis Smith, William T. Keller, the Borrower and AmeriKing
Cincinnati as amended by Amendment No. 1 dated on or prior to the Closing
Date, in the form delivered to the Agent prior to the Closing Date.
AmeriKing Tennessee. AmeriKing Tennessee Corporation I, a Delaware
corporation and wholly-owned Subsidiary of the Borrower.
AmeriKing Tennessee Acquisition. The transaction in which AmeriKing
Tennessee purchased (a) the outstanding capital stock of QSC, Inc., whose
assets consist of, among other items, eight (8) restaurants pursuant to the
BKC/QSC Stock Purchase Agreement on November 21, 1995 and (b) the outstanding
capital stock of Ro-Lank, Inc., whose assets consist of, among other items,
three (3) restaurants pursuant to the BKC/Ro-Lank Stock Purchase Agreement on
November 21, 1995.
AmeriKing Tennessee Sellers. Collectively, Ronny D. Lankford, Robert
W. Lankford, Michael A. Reed, QSC, Inc. and Ro-Lank, Inc.
AmerKing/TFI Asset Purchase Agreement. The Asset Purchase Agreement
dated as of November 6, 1995 by and among Thirty-Forty, Inc., James P. Borke,
W. Curtis Smith and AmeriKing Cincinnati as amended by Amendment No. 1 dated
on or prior to the Closing Date, in the form delivered to the Agent prior to
the Closing Date.
AmeriKing Virginia. AmeriKing Virginia Corporation I, a Delaware
Corporation and wholly-owned Subsidiary of the Borrower.
<PAGE>
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AmeriKing Virginia Acquisition. The transaction in which AmeriKing
Virginia shall have purchased certain of the assets and business of the
Virginia Sellers, consisting of twenty-four (24) restaurants pursuant to the
AmeriKing Virginia Asset Purchase Agreement on the AmeriKing Virginia
Acquisition Closing Date.
AmeriKing Virginia Acquisition Closing Date. The first date on which
the conditions set forth in the AmeriKing Virginia Asset Purchase Agreement,
have been satisfied and the AmeriKing Virginia Acquisition has occurred.
AmeriKing Virginia Acquisition Documents. The AmeriKing Virginia
Asset Purchase Agreement and related bills of sale, instruments of assignment,
leases, Franchise Agreements and other documents, instruments and certificates
delivered in connection with any of the foregoing.
AmeriKing/Virginia Asset Purchase Agreement. The Asset Purchase
Agreement dated as of November 30, 1994 by and among the Virginia Sellers and
AmeriKing Virginia, as amended by Amendment No. 1 dated on or prior to the
Closing Date, in each case in the form delivered to the Agent prior to the
Closing Date.
AmeriKing/WSG Asset Purchase Agreement. The Asset Purchase Agreement
dated as of July 5, 1995 by and among WSG, Inc., Daniel L. White, Susan J.
Wakeman, George Alaniz, Jr. and AmeriKing Colorado.
Applicable Margin. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrower's Leverage Ratio, as determined for
the fiscal period of the Borrower and its Subsidiaries ending immediately
prior to the applicable Rate Adjustment Period.
<TABLE>
<CAPTION>
Base Rate Eurodollar Rate Eurodollar Letter
Revolving Revolving Credit Base Rate Rate B of Credit
Leverage Ratio Credit Loans Loans and B Loans Loans Fees
and Eurodollar Rate
Base Rate A
A Loans Loans
- ------------------------------ -------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Greater than 3.50:1.00
1 1/2% 2 3/4% 2% 3 1/4% 2 3/4%
- ------------------------------ -------------- ---------------- ---------------- ---------------- ---------------
Less than or equal to 3.50:1.00
but greater than or equal to 1 1/4% 2 1/2% 2% 3 1/4% 2 1/2%
2.75:100
- ------------------------------ -------------- ---------------- ---------------- ---------------- ---------------
Less than 2.75:1.00 1% 2 1/4% 2% 3 1/4% 2 1/4%
- ------------------------------ -------------- ---------------- ---------------- ---------------- ---------------
</TABLE>
Notwithstanding the foregoing, (a) for Loans outstanding and the Letter of
Credit Fees payable during the period commencing on the Closing Date through
the date immediately preceding the first Adjustment Date to occur after the
fiscal quarter ending March 31, 1997, the Applicable Margin shall be the
highest Applicable Margin set forth above, and (b) if the Borrower fails to
deliver any Compliance
<PAGE>
-6-
Certificate pursuant to Section 9.4(d) hereof then, for the period commencing on
the next Adjustment Date to occur subsequent to such failure through the date
immediately following the date on which such Compliance Certificate is
delivered, the Applicable Margin shall be the highest Applicable Margin set
forth above.
Asset Purchase Agreement. The Asset Purchase Agreement dated as of
September 30, 1994 by and between BNB, Sheldon Friedman and the Borrower.
Assignment and Acceptance. See Section 20.1 hereof.
Balance Sheet Date. November 27, 1995.
Banks. FNBB and the other lending institutions listed on Schedule 1
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 20.
Base Rate. The annual rate of interest announced from time to time by
FNBB at its head office in Boston, Massachusetts, as its "base rate".
Base Rate A Loans. Revolving Credit Loans and all or any portion of
Term Loan A bearing interest calculated by reference to the Base Rate.
Base Rate B Loan. All or any portion of Term Loan B bearing interest
calculated by reference to the Base Rate.
Base Rate Loans. The Base Rate A Loans and Base Rate B Loan.
BBI. BancBoston Investments Inc., a Massachusetts corporation.
BKC. Burger King Corporation, a Florida corporation.
BKC Assignment. The Assignment and Assumption Agreement dated as of
November 21, 1995 among BKC, the AmeriKing Tennessee Sellers and AmeriKing
Tennessee, pursuant to which BKC assigned all of its rights and obligations
under the BKC/QSC Stock Purchase Agreement and the BKC/Ro-Lank Stock Purchase
Agreement to AmeriKing Tennessee.
BKC Note. The Secured Promissory Note dated as of November 21, 1995
from AmeriKing Tennessee to BKC in the original principal amount of
$6,920,700.
BKC/QSC Stock Purchase Agreement. The Purchase Agreement dated as of
November 21, 1995 by and among Ronny D. Lankford, Robert W. Lankford, Michael
A. Reed and QSC, Inc., which Purchase Agreement was subject to the BKC
Assignment.
BKC/Ro-Lank Stock Purchase Agreement. The Purchase Agreement dated as
of November 21, 1995 by and among Ronny D. Lankford, Robert W. Lankford and
Ro-Lank, Inc., which Purchase Agreement was subject to the BKC Assignment.
<PAGE>
-7-
BKC Restaurant. A quick service restaurant franchised by BKC that is
located in the United States, its territories, or Canada.
BNB. BNB Land Venture, Inc., an Illinois corporation.
Borrower. As defined in the preamble hereto.
Borrower Stock Pledge Agreements. Collectively, (a) the Stock Pledge
Agreement, dated as of November 21, 1995, between the Borrower and the Agent,
as amended by the Second Security Documents Amendment, and as the same may be
further amended, restated, supplemented or modified from time to time; and (b)
the Stock Pledge Agreement, dated or to be dated on or prior to the Closing
Date, between the Borrower and the Agent, as the same may be amended,
restated, supplemented or modified from time to time.
Business Day. Any day (other than Saturdays or Sundays) on which
banking institutions in Boston, Massachusetts, Los Angeles, California and
Chicago, Illinois are open for the transaction of banking business and, in the
case of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises and good will); provided that Capital
Assets shall not include any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or less in accordance
with generally accepted accounting principles.
Capital Expenditures. Amounts paid or indebtedness incurred by
Holdings, the Borrower or any of their Subsidiaries in connection with the
purchase or lease by Holdings, the Borrower or any of their Subsidiaries of
Capital Assets that would be required to be capitalized and shown on the
balance sheet of such Person in accordance with generally accepted accounting
principles, provided, however amounts paid or indebtedness incurred by the
Borrower in connection with Permitted Acquisitions other than in connection
with the development of restaurants shall not be included as Capital
Expenditures.
Capitalized Leases. Leases under which Holdings, the Borrower or any
of their Subsidiaries is the lessee or obligor, the discounted future rental
payment obligations under which are required to be capitalized on the balance
sheet of the lessee or obligor in accordance with generally accepted
accounting principles, provided, however, for purposes of this Credit
Agreement all real estate leases (including the FFCA Leases) of BKC
restaurants shall be considered operating leases.
Capitalization Documents. The Subordination Documents, the Management
Subscription Agreement, the Investor Subscription Agreement, the Executive
Subscription Agreement, the Stockholders Agreement and the certificates of
incorporation of Holdings, the Borrower and their Subsidiaries.
Cash Equivalents. Collectively, (a) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof, (b) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"), (or, if at any time neither such rating service
shall be rating such obligations, then from such other nationally
<PAGE>
-8-
recognized rating services acceptable to the Majority Banks), (c) commercial
paper maturing in no more than one year from the date of creation thereof and,
at the time of acquisition, having the highest rating obtainable from either
S&P or Moody's (or, if at any time neither such rating service shall be rating
such obligaitons, then from such other nationally recognized rating service
acceptable to the Majority Banks), (d) certificates of deposit (domestic or
eurodollar), bankers' acceptances, or time deposits maturing within one year
from the date of acquisition thereof issued by commercial banks organized
under the laws of the United States of America or any state thereof or the
District of Columbia, each having combined capital and surplus of not less
than $500,000,000 ("Qualifying Banks"), (e) repurchase agreements and reverse
repurchase agreements with Qualifying Banks, provided that the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy -- Repurchase Agreements
of Depository Institutions with Securities Dealers and Others as adopted by
the Comptroller of the Currency on October 31, 1985 (the "Supervisory
Policy"), and provided further that possession or control of the underlying
securities is established as provided in the Supervisory Policy, (f)
investments in money market funds or money market deposit accounts that invest
solely in Cash Equivalents described in clauses (a) through (e) above and (g)
any other Investment permitted under Section 10.3(a), (b), (c) or (d) of the
Credit Agreement (as in effect on the date hereof).
CERCLA. See Section 8.18 hereof.
Closing Date. The first date on which the conditions set forth in
Section 12 have been satisfied, the Original Credit Agreement shall be amended
and restated as set forth herein, the existing Loans and Letters of Credit
under the Original Credit Agreement are converted to Loans or Letters of Credit
hereunder, as the case may be, and any Revolving Credit Loans and the Term Loans
are to be made or any Letter of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
Collateral. All of the property, rights and interests of Holdings,
the Borrower and their Subsidiaries that are or are intended to be subject to
the security interests created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on
Schedule 1 hereto as the amount of such Bank's commitment to make Revolving
Credit Loans to, and to participate in the issuance, extension and renewal of
Letters of Credit for the account of, the Borrower, as the same may be reduced
from time to time; or if such commitment is terminated pursuant to the
provisions hereof, zero.
Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks, and with respect to Term Loan A and Term Loan
B, the percentage amount set forth on Schedule 1 of such Bank's commitment to
make Term Loan A and Term Loan B.
Compliance Certificate. See Section 9.4(d) hereof.
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of Holdings and its
Subsidiaries or the Borrower and its Subsidiaries, as applicable, consolidated
in accordance with generally accepted accounting principles.
Consolidated Cash Flow. With respect to any fiscal period, an amount
equal to the sum of (a) Consolidated Net Income for such fiscal period, plus
(b) depreciation and amortization for such period, plus (c) without
duplication, other noncash charges made in calculating Consolidated Net Income
for such period, plus (d) tax expense for such period, plus (e) Consolidated
Total Interest Expense paid or accrued during such period, plus
<PAGE>
-9-
(f) non-cash expenses relating to Financial Accounting Standards Board
Statements Nos. 106 and 109 deducted in the calculation of Consolidated Net
Income for such period, plus (g) the aggregate amount of non-capitalized
transaction costs incurred in connection with financings and acquisitions,
(including, but not limited to, financing and refinancing fees), to the extent
such costs were deducted in the calculation of such Person's Consolidated Net
Income, minus (h) Capital Expenditures made in such period, minus (i) cash
taxes paid in such period, all as determined on a consolidated basis in
accordance with generally accepted accounting principles.
Consolidated Excess Cash Flow. With respect to Holdings and its
Subsidiaries on a consolidated basis, and for any particular fiscal period, an
amount equal to the sum of Consolidated Cash Flow of Holdings and its
Subsidiaries for such period plus, to the extent deducted in the calculation
of such Person's Consolidated Cash Flow, the aggregate amount of the financed
portion of all Capital Expenditures made by such Person in such period, less
the sum of (without duplication) (a) all mandatory principal payments on any
Indebtedness of Holdings or any of its Subsidiaries paid or due and payable
during such period (other than payments made in respect of the prior fiscal
year's Consolidated Excess Cash Flow) and all voluntary permanent prepayments
of the Term Loans paid during such period, (b) cash interest payments of
Holdings and its Subsidiaries for such period, (c) to the extent not already
deducted in the calculation of Consolidated Cash Flow for such period, cash
expenditures made during such period for Permitted Acquisitions net of any
proceeds received from the financing of such cash expenditures in such period,
including related cash transaction costs, cash Investments permitted pursuant
to Section 10.3(g), (h) or (i) and cash Distributions permitted pursuant to
Section 10.4 other than Section 10.4(e), (d) any deposits required to be made in
cash during such period pursuant to the Franchise Agreements, and (e)
nonrecurring cash consolidation expenses of the Borrower and its Subsidiaries
which are excluded pursuant to clause (c) of Consolidated Net Income.
Consolidated Net Income. For any period, the consolidated net income
(or net deficit) of any Person and its Subsidiaries, after deduction of all
expenses, taxes, and other proper charges, determined in accordance with
generally accepted accounting principles, after excluding therefrom (a)
dividends paid or payable to the extent deducted from Consolidated Net Income;
(b) without duplication, all nonrecurring nonoperating income or expenses,
including but not limited to gains or losses realized upon the termination of
pension plans, upon the sale of assets or the satisfaction of Indebtedness;
and (c) nonrecurring cash consolidation expenses of the Borrower and its
Subsidiaries pertaining to the Acquisitions, to the extent such cash expenses
(i) which, in the aggregate are greater than $250,000 but less than $500,000
in any fiscal year, are approved by the Agent and (ii) which in the aggregate
are greater than $500,000 in any fiscal year are approved by the Majority
Banks.
Consolidated Total Interest Expense. With respect to any Person, for
any fiscal period, the aggregate amount of interest expense in respect of all
Indebtedness (other than Indebtedness relating to Franchise Agreements,
licenses, leases or other agreements with BKC other than the BKC Note) of such
Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with generally accepted accounting principles
(including all non-cash interest payments, the interest portion of any
deferred payment obligation and the interest component of Capitalized Leases,
but excluding amortization of deferred financing fees if such amortization
would otherwise be included in interest expense).
Conversion Request. A notice given by the Borrower to the Agent of
the Borrower's election to convert or continue a Loan in accordance with
Section 2.7.
Credit Agreement. This Second Amended and Restated Revolving Credit
and Term Loan Agreement, including the Schedules and Exhibits hereto.
Debt Service Coverage Ratio. As at the date of determination and with
respect to the Borrower and its Subsidiaries, the ratio of (a) the
Consolidated Cash Flow of the Borrower and its Subsidiaries for the Reference
Period to (b) the Total Debt Service of the Borrower and its Subsidiaries for
such Reference Period.
Default. See Section 14.1 hereof.
<PAGE>
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Delinquent Bank. See Section 16.5.3 hereof.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of a Person, other than
dividends payable solely in shares of common stock or Preferred Stock of such
Person; the purchase, redemption, or other retirement of any shares of any
class of capital stock of a Person, directly or indirectly through a
Subsidiary of such Person or otherwise; the return of capital by a Person to
its shareholders as such; or any other distribution on or in respect of any
shares of any class of capital stock of a Person.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Bank
designated as such in Schedule 1 hereto; thereafter, such other office of such
Bank, if any, located within the United States that will be making or
maintaining Base Rate Loans.
Drawdown Date. The date on which any Revolving Credit Loan or any of
the Term Loans is made or is to be made, and the date on which any Revolving
Credit Loan is converted or continued in accordance with Section 2.7 or all or
any portion of the Term Loans is converted or continued in accordance with
Section 4.5.2.
Dual-Use Establishment. A single location at which more than one
business activity is conducted, but as to which the primary business is the
conduct of a BKC Restaurant.
EBITDA. With respect to any fiscal period, an amount equal to the sum
of (a) Consolidated Net Income for such fiscal period, plus (b) depreciation
and amortization for such period, plus (c) without duplication, other noncash
charges made in calculating Consolidated Net Income for such period plus (d)
tax expense for such period, plus (e) Consolidated Total Interest Expense paid
or accrued during such period, plus (f) non-cash expenses relating to
Financial Accounting Standards Board Statements Nos. 106 and 109 deducted in
the calculation of Consolidated Net Income for such period, plus (g) the
aggregate amount of non-capitalized transaction costs incurred in connection
with financings and acquisitions, (including, but not limited to, financing
and refinancing fees), to the extent such costs were deducted in the
calculation of such Person's Consolidated Net Income, all as determined in
accordance with generally accepted accounting principles.
Eligible Assignee. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any
such country, and having total assets in excess of $1,000,000,000, provided
that such bank is acting through a branch or agency located in the country in
which it is organized or another country which is also a member of the OECD;
(d) the central bank of any country which is a member of the OECD; and (e) if,
but only if, any Event of Default has occurred and is continuing, any other
bank, insurance company, commercial finance company or other financial
institution or other Person approved by the Agent, such approval not to be
unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning
of Section 3(3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
<PAGE>
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Environmental Laws. See Section 8.18(a) hereof.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer
with the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has
not been waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender
subject thereto would be required to maintain reserves under Regulation D of
the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against
"Eurocurrency Liabilities" (as that term is used in Regulation D), if such
liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open
for international business (including dealings in Dollar deposits) in London
or such other eurodollar interbank market as may be selected by the Agent in
its sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank
designated as such in Schedule 1 hereto; thereafter, such other office of such
Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (a) the rate per annum (rounded
upwards to the nearest 1/16 of one percent) at which the Reference Bank's
Eurodollar Lending Office is offered Dollar deposits two (2) Eurodollar
Business Days prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations of such Eurodollar Lending Office are customarily conducted, for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the Eurodollar
Rate Loan of such Reference Bank to which such Interest Period applies,
divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if
applicable.
Eurodollar Rate A Loans. Revolving Credit Loans and all or any
portion of Term Loan A bearing interest calculated by reference to the
Eurodollar Rate.
Eurodollar Rate B Loan. All or any portion of Term Loan B bearing
interest calculated by reference to the Eurodollar Rate.
Eurodollar Rate Loans. The Eurodollar Rate A Loans and the Eurodollar
Rate B Loans.
Event of Default. See Section 14.1 hereof.
CAPITAL PRINTING SYSTEMS]
<PAGE>
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Executive Subscription Agreement. The Executive and Advisor
Subscription Agreement, dated as of September 1, 1994, between Holdings and
the parties listed on the signature pages thereto.
Fee Letter. The fee letter dated or to be dated on or prior to the
Closing Date between the Borrower and the Agent, in form and substance
satisfactory to the Agent and the Banks.
FFCA. FFCA Acquisition Corporation, a Delaware corporation.
FFCA Agreement. The Sale-Leaseback Agreement dated on or prior to the
Closing Date by and among FFCA, AmeriKing Virginia and AmeriKing Tennessee,
and in form and substance satisfactory to the Agent.
FFCA Documents. Collectively, the FFCA Agreement, the FFCA Franchisor
Certificates, the FFCA Guaranty and the FFCA Leases.
FFCA Franchisor Certificates. Those certain BKC Franchisor
Certificates executed by BKC with respect to the franchise, license or area
development agreements by and between the Borrower, AmeriKing Virginia and
AmeriKing Tennessee, as the case may be, and BKC, and in form and substance
satisfactory to the Agent.
FFCA Guaranty. The Unconditional Guaranty of Payment and Performance
by the Borrower in favor of FFCA of the obligations of AmeriKing Virginia and
AmeriKing Tennessee with respect to the FFCA Agreement and the FFCA Leases,
and in form and substance satisfactory to the Agent.
FFCA Leases. Those certain lease agreements by and between FFCA, as
lessor, and AmeriKing Virginia, as lessee, for each of the premises for which
the "Lessee" on Exhibit A thereto is AmeriKing Virginia, and by and between
FFCA, as lessor, and AmeriKing Tennessee, as lessee, for each of the premises
for which the "Lessee" on Exhibit A thereto is AmeriKing Tennessee, each in
form and substance satisfactory to the Agent.
FFCA Transaction. The transaction in which AmeriKing Virginia and
AmeriKing Tennessee shall cause the Virginia Sellers and AmeriKing Tennessee
to transfer certain Real Estate as more fully described in the FFCA Documents
to FFCA on the AmeriKing Virginia Acquisition Closing Date, and which Real
Estate shall be subject to a sale/leaseback transaction among FFCA, AmeriKing
Virginia and AmeriKing Tennessee pursuant to the FFCA Documents.
FNBB. The First National Bank of Boston, a national banking
association, in its individual capacity.
Former Agent. See Section 16.12 hereof.
Franchise Agreements. The several Franchise Agreements (a) dated on
or prior to the Closing Date between the Borrower, AmeriKing Colorado,
AmeriKing Tennessee, AmeriKing Cincinnati or AmeriKing Virginia, as the case
may be, and BKC, each in form and substance satisfactory to the Agent, (b)
dated after the Closing Date between the Borrower and BKC, each in form and
substance substantially similar to those Franchise Agreements entered into
between such parties on or prior to the Closing Date, (c) dated after the
Closing Date between any Restricted Subsidiary and BKC, each in form and
substance substantially similar to those Franchise Agreements entered into
between
<PAGE>
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any other Restricted Subsidiary and BKC on or prior to the Closing Date, and
(d) dated after the Closing Date between any Unrestricted Subsidiary and BKC,
each in form and substance substantially similar to those Franchise Agreements
entered into between any other Unrestricted Subsidiary and BKC on or prior to
the Closing Date.
Friedman Acquisition. The transaction in which the Borrower purchased
certain of the assets and business of BNB and its affiliates consisting of
thirty-nine (39) restaurants pursuant to the Asset Purchase Agreement on
November 30, 1994.
generally accepted accounting principles. (a) When used in Section 11,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect on January 1, 1996, and (ii) to the extent consistent
with such principles, the accounting practice of the Borrower reflected in its
financial statements for the year ended on January 1, 1996, and (b) when used
in general, other than as provided above, means principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to
time, and (ii) consistently applied with past financial statements of the
Borrower adopting the same principles, provided that in each case referred to
in this definition of "generally accepted accounting principles" a certified
public accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles)
as to financial statements in which such principles have been properly
applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
Guarantees. Collectively, (a) the Limited Guaranty, dated as of
September 1, 1994, made by Holdings in favor of the Banks and the Agent
pursuant to which Holdings guaranties to the Banks and the Agent the payment
and performance of certain of the Obligations, as amended by the Security
Documents Amendment and the Second Security Documents Amendment, and as the
same may be further amended, restated, supplemented or modified from time to
time; and (b) the Guaranty, dated on or prior to the Closing Date, made by
AmeriKing Cincinnati and AmeriKing Virginia in favor of the Banks and the
Agent, substantially in the form of Exhibit E hereto, pursuant to which
AmeriKing Cincinnati and AmeriKing Virginia jointly and severally guaranty to
the Banks and the Agent the payment and performance of the Obligations, as the
same may be amended, restated, supplemented or modified from time to time.
Hazardous Substances. See Section 8.18(b) hereof.
Holdings. As defined in the preamble hereto.
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment
of the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.
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Initial Acquisition. The transaction in which the Borrower purchased
(a) certain of the assets of BKC consisting of sixty-eight (68) restaurants,
(b) certain of the assets and business of Lawrence Jaro and/or his affiliates
consisting of eleven (11) restaurants and (c) certain of the assets and
business of William C. Osborn and/or his affiliates consisting of three (3)
restaurants pursuant to the Initial Asset Purchase Agreements on September 1,
1994.
Initial Asset Purchase Agreements. The several Asset Purchase
Agreements dated as of September 1, 1994 by and between (a) BKC and the
Borrower, (b) Lawrence Jaro and/or his affiliates and the Borrower, and (c)
William C. Osborn and/or his affiliates and the Borrower.
Intercompany Management Agreement. The Intercompany Management
Consulting Agreement dated as of September 1, 1994 by and between the Borrower
and Holdings.
Intercreditor Agreement. The Intercreditor Agreement, dated as of
September 1, 1994 (as amended pursuant to a First Amendment to Intercreditor
Agreement dated as of November 30, 1994 and a Second Amendment to
Intercreditor Agreement dated as of the Closing Date), between BKC, the
Borrower, the Agent and MCIT PLC, as the same may be amended, restated,
supplemented or modified from time to time.
Interest Coverage Ratio. As at any date of determination and with
respect to the Borrower, the ratio of (a) the sum of the EBITDA of the
Borrower and its Subsidiaries for the Reference Period ending on such date to
(b) Consolidated Total Interest Expense of the Borrower and its Subsidiaries
for such Reference Period.
Interest Payment Date. (a) As to any Base Rate Loan, the last day of
the calendar quarter which includes the Drawdown Date thereof; and (b) as to
any Eurodollar Rate Loan in respect of which the Interest Period is (i) 3
months or less, the last day of such Interest Period and (ii) more than 3
months, the date that is 3 months from the first day of such Interest Period
and, in addition, the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan or all or
any relevant portion of the Term Loans (a) initially, the period commencing on
the Drawdown Date of such Loan and ending on the last day of one of the
periods set forth below, as selected by the Borrower in a Loan Request (i) for
any Base Rate Loan, the last day of the calendar quarter; and (ii) for any
Eurodollar Rate Loan, 1, 2, 3, or 6 months; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Revolving Credit Loan or all or such portion of the Term Loans and ending
on the last day of one of the periods set forth above, as selected by the
Borrower in a Conversion Request; provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, that Interest Period shall be extended to the next succeeding
Eurodollar Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Eurodollar Business Day;
(ii) if any Interest Period with respect to a Base Rate Loan
would end on a day that is not a Business Day, that Interest Period
shall end on the next succeeding Business Day;
(iii) if the Borrower shall fail to give notice as provided
in Section 2.7, the Borrower shall be deemed to have requested a
conversion of the affected Eurodollar Rate Loan to a Base Rate Loan
and the continuance of all Base Rate Loans as Base Rate Loans on the
last day of the then current Interest Period with respect thereto;
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(iv) any Interest Period relating to any Eurodollar Rate
Loan that begins on the last Eurodollar Business Day of a calendar
month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall
end on the last Eurodollar Business Day of a calendar month; and
(v) any Interest Period relating to any Eurodollar Rate Loan
that would otherwise extend beyond the Revolving Credit Loan Maturity
Date (if comprising a Revolving Credit Loan) or the Term Loan A
Maturity Date or the Term Loan B Maturity Date, as the case may be
(if comprising the Term Loan or a portion thereof) shall end on the
Revolving Credit Loan Maturity Date or (as the case may be) the Term
Loan A Maturity Date or the Term Loan B Maturity Date, as the case
may be.
Investments. All expenditures made (other than Capital Expenditures
not incurred or made in connection with the acquisition and/or development of
restaurants) and all liabilities incurred (contingently or otherwise) for the
acquisition of stock or Indebtedness of, or for loans, advances, capital
contributions or transfers of property to, or in respect of any guaranties (or
other commitments as described under Indebtedness), or obligations of, any
Person. In determining the aggregate amount of Investments outstanding at any
particular time: (a) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and still outstanding; (b) there shall be included as an Investment
all interest accrued with respect to Indebtedness constituting an Investment
unless and until such interest is paid; (c) there shall be deducted in respect
of each such Investment any amount received as a return of capital in cash
(but only by repurchase, redemption, retirement, repayment, liquidating
dividend or liquidating distribution); (d) there shall not be deducted in
respect of any Investment any amounts received as earnings on such Investment,
whether as dividends, interest or otherwise, except that accrued interest
included as provided in the foregoing clause (b) may be deducted when paid;
and (e) there shall not be deducted from or added to, as the case may be, the
aggregate amount of Investments any decrease or increase, as the case may be,
in the value thereof.
Investors. MCIT PLC, the Jordan Investors (as defined in the
Stockholders Agreement), the Management Stockholders (as defined in the
Stockholders Agreement) and the Executive and Advisors Stockholders (as
defined in the Stockholders Agreement).
Investor Subscription Agreement. The Jordan Investor Subscription
Agreement, dated as of September 1, 1994, by and among Holdings and the
Stockholders (as defined therein).
Jaro Loan Agreement. The Revolving Credit Agreement, dated as of
September 1, 1994, by and between Jaro Enterprises, Inc. and/or its affiliates
and the Borrower providing the loans to Jaro Enterprises, Inc. and/or its
affiliates of up to $700,000.
Jordan Affiliates. Leucadia Investors, Inc., John W. Jordan II, David
W. Zalaznick, Jonathan F. Boucher, John R. Lowden, Adam E. Max, A. Richard
Caputo, Jr., John M. Camp, Jordan/Zalaznick Capital Company, John M. Camp
Profit Sharing Plan, James E. Jordan, Jr. Profit Sharing Plan and Trust, John
W. Jordan Revocable Trust and Paul Rodzevick Profit Sharing Plan and Trust,
Paul R. Rodzevick, James E. Jordan, Thomas H. Quinn and JII Partners, Inc.
Jordan Principal. Collectively, (a) each partner, executive or
employee of TJC, (b) any wholly-owned Subsidiary of any one (or jointly of
more than one of any) Person specified in clause (a), and (c) the spouse or
any immediate family member of any Person specified in clause (a) or any trust
solely for the benefit of any such Person where the spouse or any immediate
family member of such Person.
Leases. The several leases (a) dated on or prior to the Closing Date
between (i) the Borrower, AmeriKing Colorado, AmeriKing Tennessee, AmeriKing
Cincinnati or AmeriKing Virginia, as the case may be, and BKC, (ii) the
Borrower and the current landlords of the restaurants acquired from Lawrence
Jaro and/or his affiliates in the Initial Acquisition, (iii) the Borrower and
the current landlords of the restaurants acquired from William C. Osborn in
the Initial Acquisition, (iv) the Borrower and the current landlords of the
restaurants acquired from BNB if such real property is not owned by BNB, (v)
the Borrower and BNB as to those restaurants acquired from BNB for which BNB
and/or an affiliate of BNB is the owner of the real property, or such
successor in interest to BNB, (vi) AmeriKing Colorado and the current
landlords of the restaurants acquired in the AmeriKing Colorado Acquisition,
(vii) AmeriKing Tennessee and the current landlords of the restaurants
acquired in the AmeriKing Tennessee Acquisition, (viii) AmeriKing Cincinnati
<PAGE>
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and the current landlords of the restaurants to be acquired in the AmeriKing
Cincinnati Acquisition, (ix) AmeriKing Virginia and the current landlords of
the restaurants to be acquired in the AmeriKing Virginia Acquisition, (x)
AmeriKing Virginia and AmeriKing Tennessee and FFCA, all in form and substance
acceptable to the Agent and (xi) AmeriKing Virginia and certain of the
Virginia Sellers of the restaurants acquired in connection with the AmeriKing
Virginia Acquisition; (b) dated after the Closing Date between the Borrower
and the owner of the real property which is the subject of such lease, so long
as the terms and conditions of such leases are in form and substance
substantially similar to those leases entered into by the Borrower on or prior
to the Closing Date; (c) dated after the Closing Date between any Restricted
Subsidiary and the owner of the real property which is the subject of such
lease, so long as the terms and conditions of such leases are in form and
substance substantially similar to those leases entered into by any other
Restricted Subsidiary on or prior to the Closing Date; and (d) dated after the
Closing Date between any Unrestricted Subsidiary and the owner of the real
property which is the subject of such lease, so long as the terms and
conditions of such leases are in form and substance substantially similar to
those leases entered into by any other Unrestricted Subsidiary on or prior to
the Closing Date.
Letter of Credit. See Section 5.1(a) hereof.
Letter of Credit Application. See Section 5.1.1 hereof.
Letter of Credit Fee. See Section 5.6 hereof.
Letter of Credit Participation. See Section 5.1.4 hereof.
Leverage Ratio. As at any date of determination, the ratio of (a)
Total Funded Indebtedness of the Borrower and its Subsidiaries outstanding on
such date less cash and Cash Equivalents of the Borrower and its Subsidiaries
on such date to (b) the EBITDA of the Borrower and its Subsidiaries for any
period of four consecutive fiscal quarters (treated as a single accounting
period) ended on such date provided, when calculating the Leverage Ratio for
any period in which a Permitted Acquisition occurred, the calculation of the
Leverage Ratio shall be made on a Pro Forma Basis.
Loan Documents. This Credit Agreement, the Notes, the Letter of
Credit Applications, the Letters of Credit, the Intercreditor Agreement and
the Security Documents.
Loan Request. See Section 2.6 hereof.
Loans. The Revolving Credit Loans and the Term Loans.
Majority Banks. As of any date, the Banks holding at least sixty
percent (60%) of the outstanding principal amount of the Notes and the
unfunded portion of the Commitments on such date, and if no such principal is
outstanding, the Banks whose aggregate Commitments constitute at least sixty
percent (60%) of the Total Commitment.
Management Agreement. The Management Agreement as of September 1,
1994, by and among TJC Management Corp., Holdings and the Borrower, as amended
by Amendment No. 1 to Management Agreement dated February 7, 1996.
Management Subscription Agreement. The Management Subscription
Agreement, dated as of September 1, 1994, between Holdings and the
Stockholders (as defined therein).
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as
such aggregate amount may be reduced from time to time pursuant to the terms
of the Letters of Credit.
Mortgaged Property. Any Real Estate which is subject to any Mortgage.
The Mortgaged Properties on the Closing Date shall include those properties
listed on Schedule 1A attached hereto.
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Mortgages. The several mortgages and deeds of trust, dated or to be
dated on or prior to the Closing Date or entered into after the Closing Date
pursuant to Section 9.16, from the Borrower and its Restricted Subsidiaries to
the Agent with respect to the leasehold interests of the Borrower and its
Restricted Subsidiaries in the Real Estate, in substantially the form of
Exhibit I attached hereto.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Non-Affected Bank(s). As at any date of determination, those Banks
which are not Affected Banks.
Notes. The Term Notes and the Revolving Credit Notes.
Obligations. All indebtedness, obligations and liabilities of any of
Holdings, the Borrower and their Subsidiaries to any of the Banks and the
Agent, individually or collectively, existing on the date of this Credit
Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Credit Agreement or any of the other Loan
Documents (other than the Warrants) or in respect of any of the Loans made or
Reimbursement Obligations incurred or any of the Notes, Letter of Credit
Application, Letter of Credit, or arising or incurred in connection with any
interest rate protection arrangements contemplated by Section 9.15 or any
documents, agreements or instruments executed in connection therewith, or
other instruments at any time evidencing any thereof.
Option. The option of the borrower or its assignee or designee to
purchase certain real property from BNB pursuant to Section 19 of the Asset
Purchase Agreement.
outstanding. With respect to the Loans, the aggregate unpaid
principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Perfection Certificate. The Amended and Restated Perfection
Certificate, as defined in the Security Agreement.
Permitted Acquisitions. See Section 10.5.1 hereof.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 10.2.
Person. Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity, and any
government or any governmental agency or political subdivision thereof.
PMI. PMI Mezzanine Fund, L.P, a Delaware limited partnership.
PMI Warrant. The warrant issued to PMI pursuant to the Subordinated
Purchase Agreement, which warrant shall be on terms and conditions reasonably
satisfactory to the Agent and the Banks.
Preferred Stock. As applied to the capital stock of any Person, means
the capital stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of capital stock of any other class of such Person.
Pro Forma Basis. Following a Permitted Acquisition other than
Permitted Acquisitions in connection with the development of restaurants, the
Total Funded Indebtedness (or, in the case of Consolidated Total Interest
Expenses, all Indebtedness) and EBITDA for the fiscal quarter in which such
Permitted Acquisition occurred and each of the three fiscal quarters
immediately following such Permitted Acquisition with reference to the audited
historical financial results of the Person so acquired and the Borrower and
its
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Subsidiaries for the applicable Test Period after giving effect on a pro forma
basis to such Permitted Acquisition and assuming that such Permitted
Acquisition had been consummated at the beginning of such Test Period in the
manner described in (i), (ii) and (iii) below:
(i) all Indebtedness (whether under this Credit Agreement or
otherwise) and any other balance sheet adjustments incurred or made
in connection with the Permitted Acquisition shall be deemed to have
been incurred or made on the first day of the Test Period, and all
Indebtedness of the Person acquired or to be acquired in such
Permitted Acquisition which was or will have been repaid in
connection with the consummation of the Permitted Acquisition shall
be deemed to have been repaid concurrently with the incurrence of the
Indebtedness incurred in connection with the Permitted Acquisition;
(ii) all Indebtedness assumed to have been incurred pursuant
to the preceding clause (i) shall be deemed to have borne interest at
the sum of (a) the arithmetic mean of (x) the Eurodollar Rate for
Eurodollar Rate Loans having an Interest Period of one month in
effect on the first day of the Test Period and (y) the Eurodollar
Rate for Eurodollar Rate Loans having an Interest Period of one month
in effect on the last day of the Test Period plus (b) the Applicable
Margin for Revolving Credit Loans then in effect (after giving effect
to the Permitted Acquisition on a Pro Forma Basis); and
(iii) other reasonable cost savings, expenses and other
income statement or operating statement adjustments which are
attributable to the change in ownership and/or management resulting
from such Permitted Acquisition as may be approved by the Agent in
writing (which approval shall not be unreasonably withheld) shall be
deemed to have been realized on the first day of the Test Period.
Rate Adjustment Period. See the definition of Applicable Margin.
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by
any Bank with respect to any Loan referred to in such Note.
Reference Bank. FNBB.
Reference Period. The period of four (4) consecutive fiscal quarters
(or such shorter period of one, two or three full consecutive fiscal quarters
as has elapsed since the Closing Date).
Reimbursement Obligation. The Borrower's obligation to reimburse the
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in Section 5.2.
Restaurant Cash Flow. For each restaurant, the EBITDA of such
restaurant for the period of the immediately preceding twelve (12) months
plus, to the extent deducted in calculating EBITDA, the aggregate amount of
allocated general and administrative expenses not directly associated with
such restaurant during such period in accordance with past practices of the
Borrower.
Restricted Payment. In relation to the Borrower and its Subsidiaries,
(a) any Distribution or (b) any payment or transfer of property by the
Borrower or its Subsidiaries to Holdings or to any other Affiliate of the
Borrower or Holdings; provided, however, that payments made by the Borrower
pursuant to the Subordinated Guaranty shall not be deemed to be a Restricted
Payment so long as such payment is not in any manner in violation of the
subordination provisions thereof and all terms concerning subordination
contained therein are complied with in all respects.
Restricted Subsidiary. Any Subsidiary of the Borrower which is not an
Unrestricted Subsidiary.
Revolving Credit Loan Maturity Date. January 31, 2002.
Revolving Credit Loans. Revolving credit loans made or to be made by
the Banks to the Borrower pursuant to Section 2.
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Revolving Credit Note Record. A Record with respect to a Revolving
Credit Note.
Revolving Credit Notes. See Section 2.4 hereof.
Second Security Documents Amendment. The Second Amendment of Security
Documents Agreement dated or to be dated on or prior to the Closing Date,
amending certain provisions of certain of the Security Documents among the
parties to each of the Security Documents being amended, and in form and
substance satisfactory to the Banks and the Agent.
Securities Purchase Agreement. That certain Securities Purchase
Agreement dated as of November 30, 1994, between Holdings and BBI pursuant to
which (a) certain junior subordinated notes in an original aggregate principal
amount of $600,000 were issued by Holdings and (b) BBI purchased $1,900,000 of
preferred stock of Holdings, as amended by Amendment No. 1 to the Securities
Purchase Agreement dated as of the Closing Date between Holdings and BBI, and
as the same may be further amended and in effect from time to time in
accordance with the terms of this Credit Agreement and the other Loan
Documents.
Security Agreements. Collectively, (a) the Security Agreement, dated
as of September 1, 1994, between the Borrower and the Agent, substantially in
the form of Exhibit F-1 hereto, as amended by the Security Documents Amendment
and the Second Security Documents Amendment, and as the same may be further
amended, restated, supplemented or modified from time to time; and (b) the
Security Agreement, dated or to be dated on or prior to the Closing Date,
among AmeriKing Cincinnati, AmeriKing Virginia and the Agent, substantially in
the form of Exhibit F-2 hereto, as the same may be amended, restated,
supplemented or modified from time to time.
Security Documents. The Guarantees, the Security Agreements, the
Borrower Stock Pledge Agreement, the Subsidiary Stock Pledge Agreement, the
Mortgages and the Stock Pledge Agreements.
Security Documents Amendment. The First Amendment of Security
Documents Agreement dated as of November 30, 1994, amending certain provisions
of the Security Documents between the parties to each of the Security
Documents.
Stock Pledge Agreement. The Stock Pledge Agreement, dated as of
September 1, 1994, between Holdings and the Agent, substantially in the form
of Exhibit G hereto, as amended by the Security Documents Amendment and the
Second Security Documents Amendment and as the same may be further amended,
restated, supplemented or modified from time to time.
Stockholders Agreement. The Stockholders Agreement, dated as of
September 1, 1994, among the Borrower, FNBB, BBI, the Investors and Holdings,
as amended by Consent and Amendment No. 1 to the Stockholders Agreement dated
as of November 30, 1994 and Consent and Amendment No. 2 to the Stockholders
Agreement dated on or prior to the Closing Date, each among the Borrower, BBI,
the Investors and Holdings.
Subordinated Agreement. That certain Amended and Restated Purchase
Agreement, dated on or prior to the Closing Date, among Holdings and MCIT PLC
pursuant to which, among other things, certain Subordinated Notes in an
original aggregate principal amount of $11,000,000 were issued by Holdings, in
form and substance satisfactory to the Agent, and as such agreement may be
amended and in effect from time to time in accordance with the terms of this
Credit Agreement and the other Loan Documents.
Subordinated Debt. Indebtedness of Holdings, the Borrower or any of
their Subsidiaries evidenced by the Subordination Documents, that is expressly
subordinated and made junior to the payment and performance in full of the
Obligations, and other Indebtedness incurred under the Subordinated Agreement.
Subordinated Guaranty. That certain subordinated Amended and Restated
Deferred Limited Interest Guaranty, dated on or prior to the Closing Date,
from the Borrower to MCIT PLC in the form delivered to the Agent and the Banks
on or prior to the Closing Date.
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Subordinated Notes. The (a) 12.75% Subordinated Notes due 2005 issued
by Holdings pursuant to the Subordinated Agreement, in the original principal
amount of $11,000,000, (b) the subordinated notes issued by Holdings pursuant
to the Management Subscription Agreement, in the aggregate original principal
amount of $4,400,000, (c) any Non-Negotiable Three Year Junior Subordinated
Notes issued pursuant to the Management Subscription Agreement and (d) the
12.50% Subordinated Notes due 2005 issued by the Borrower pursuant to the
Subordinated Purchase Agreement, in the original principal amount of
$15,000,000.
Subordinated Pledge Agreement. That certain Pledge Agreement, dated
as of September 1, 1994, from Holdings to MCIT PLC individually and as agent
for itself and the other Noteholders (as defined in the Pledge Agreement).
Subordinated PMI Guaranty. That certain subordinated Guaranty, dated
on or prior to the Closing Date, from certain Subsidiaries of the Borrower to
PMI, and in the form delivered to the Agent and the Banks on or prior to the
Closing Date.
Subordinated Purchase Agreement. That certain Note Purchase
Agreement, dated or to be dated on or prior to the Closing Date, among the
Borrower, Holdings and PMI pursuant to which, among other things, certain
Subordinated Notes in an original aggregate principal amount of $15,000,000
are to be issued by the Borrower on the Closing Date, and as such agreement
may be amended from time to time in accordance with the terms of this Credit
Agreement.
Subordination Documents. The Subordinated Agreement, the Subordinated
Guaranty, the Subordinated PMI Guaranty, the Subordinated Pledge Agreement,
the Subordinated Purchase Agreement, the Subordinated Notes and that portion
of the Securities Purchase Agreement which governs the subordinated notes
issued to BBI.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Subsidiary Stock Pledge Agreement. The Stock Pledge Agreement, dated
or to be dated on or prior to the Closing Date, between AmeriKing Tennessee
and the Agent, as the same may be amended, restated, supplemented or modified
from time to time.
Survey. In relation to each Mortgaged Property, an instrument survey
of such Mortgaged Property which shall show the location of all buildings,
structures, easements and utility lines on such Mortgaged Property, shall be
sufficient to remove the survey exception from the Title Policy, shall show
that all buildings and structures are within the lot lines of such Mortgaged
Property, shall not show any material encroachments by others, shall show the
zoning district or districts in which such Mortgaged Property is located in a
flood hazard district as established by the Federal Emergency Management
Agency or any successor agency or is located in any flood plain, flood hazard
or wetland protection district established under federal, state or local law.
Surveyor Certificate. In relation to each Mortgaged Property for
which a Survey has been conducted, a certificate executed by the surveyor who
prepared such Survey dated as of a recent date and containing such information
relating to such Mortgaged Property as the Agent or the Title Insurance
Company may require, such certificate to be reasonably satisfactory to the
Agent in form and substance.
Tax Sharing Agreement. The Amended and Restated Tax Sharing
Agreement, dated on or prior to the Closing Date, by and among Holdings, the
Borrower and their Subsidiaries, which shall be in form and substance
satisfactory to the Agent.
Term Loan A. The term loan made or to be made by the Banks to the
Borrower on the Closing Date in the aggregate principal amount of
$45,000,000.00 pursuant to Section 4.1.1.
Term Loan A Maturity Date. January 31, 2002.
Term Loan A Note Record. A Record with respect to a Term Loan A Note.
Term Loan A Notes. See Section 4.2.1 hereof.
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Term Loan B. The term loan made or to be made by the Banks to the
Borrower on the Closing Date in the aggregate principal amount of $40,000,000
pursuant to Section 4.1.2.
Term Loan B Maturity Date. January 31, 2004.
Term Loan B Note Record. A Record with respect to a Term Loan B Note.
Term Loan B Notes. See Section 4.2.2 hereof.
Term Loans. Term Loan A and Term Loan B.
Term Notes. The Term Loan A Notes and the Term Loan B Notes.
Term Note Record. A Record with respect to a Term Note.
Test Period. The period of all fiscal quarters (and any portion of a
fiscal quarter) prior to the date of such Permitted Acquisition as set forth
in the definition of Pro Forma Basis.
Title Insurance Company. Lawyers Title Insurance Company.
Title Policy. In relation to each Mortgaged Property, an ALTA
standard form title insurance policy issued by the Title Insurance Company
(with such reinsurance or co-insurance as the Agent may reasonably require,
any such reinsurance to be with direct access endorsements) in such amount as
may be reasonably determined by the Agent insuring the priority of the
Mortgage of such Mortgaged Property and that the Borrower or one of its
Subsidiaries holds marketable leasehold title to such Mortgaged Property,
subject only to the encumbrances permitted by such Mortgage and which shall
not contain exceptions for mechanics liens or persons in occupancy, shall not
insure over any matter except to the extent that any such affirmative
insurance is acceptable to the Agent in its reasonable discretion, and shall
contain such endorsements and affirmative insurance as the Agent in its
discretion may reasonably require, if available in the applicable
jurisdiction, including but not limited to (a) comprehensive endorsement, (b)
variable rate of interest endorsement, (c) usury endorsement, (d) revolving
credit endorsement, (e) tie-in endorsement, (f) doing business endorsement and
(g) ALTA form 3.1 zoning endorsement.
TJC. The Jordan Company, a New York general partnership.
Total Commitment. The sum of the Commitments of the Banks, as in
effect from time to time.
Total Debt Service. For any period with respect to the Borrower and
its Subsidiaries, all scheduled mandatory payments of principal on
Indebtedness of the Borrower and its Subsidiaries (other than Indebtedness
relating to Franchise Agreements, leases, licenses and other agreements with
BKC) made or required to be made in that period plus the Consolidated Total
Interest Expense of the Borrower and its Subsidiaries for that period.
Total Funded Indebtedness. All Indebtedness of the Borrower and its
Subsidiaries for borrowed money, purchase money Indebtedness and with respect
to Capitalized Leases, determined on a consolidated basis in accordance with
generally accepted accounting principles, provided, for purposes of
calculating Indebtedness of the Borrower under the Revolving Credit Loans for
any period, the amount shall be the daily average outstanding amount of
Revolving Credit Loans for such period.
Type. As to any Revolving Credit Loan or all or any portion of the
Term Loans, its nature as a Base Rate Loan or a Eurodollar Rate Loan.
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Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto
adopted by the Agent in the ordinary course of its business as a letter of
credit issuer and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for
which the Borrower does not reimburse the Agent and the Banks on the date
specified in, and in accordance with, Section 5.2.
Unrestricted Subsidiary. Each of (a) AmeriKing Colorado (provided it
complies with clauses (ii) through (v) hereof); (b) AmeriKing Tennessee
(provided it complies with clauses (ii) through (v) hereof), unless it is
required to become a Restricted Subsidiary pursuant to Section 9.18; and (c) any
other Subsidiary of the Borrower as to which (i) the Board of Directors of the
Borrower has designated such Subsidiary as an Unrestricted Subsidiary at or
prior to the time such Subsidiary is formed or acquired by the Borrower, as
the case may be, and the Borrower has provided written notice to the Agent in
reasonable detail of such designation within five (5) Business Days after
designation thereof; (ii) the Borrower owns not less than eighty percent (80%)
of the capital stock of such Subsidiary and eighty percent (80%) of the Voting
Stock of such Subsidiary; (iii) such Subsidiary has become a party to the Tax
Sharing Agreement; (iv) all of such Subsidiary's liabilities are non-recourse
as to Holdings, the Borrower or any Restricted Subsidiary except for (1) the
guaranty obligation of the Borrower and Holdings of certain obligations of
AmeriKing Colorado to BKC pursuant to a certain Guarantee, Indemnification and
Acknowledgment dated September 12, 1995; (2) the guaranty obligation of the
Borrower of certain obligations of AmeriKing Colorado to DMW, Inc. and WSG,
Inc. pursuant to the several Lease Assignment and Assumption Agreements dated
as of September 12, 1995; (3) the guaranty obligation of the Borrower of
certain obligations of AmeriKing Tennessee pursuant to the FFCA Guaranty; and
(4) guaranty obligations of the Borrower and Holdings of the obligations of
AmeriKing Tennessee to BKC arising out of any Franchise Agreement or Lease
between AmeriKing Tennessee and BKC; and (v) no Jordan Principal owns capital
stock of such Subsidiary (except indirectly through Holdings).
Virginia Sellers. C&N Dining, Inc. and its Affiliates (as defined in
the AmeriKing/Virginia Asset Purchase Agreement).
Voting Bank. See Section 6.12 hereof.
Voting Stock. Stock or similar equity interest of a Person pursuant
to which the holders thereof have, at the time of determination, the general
voting power under ordinary circumstances to vote for the election of
directors (or persons performing similar functions), managers, trustees or
general partners of such Person (irrespective of whether or not at the time
any other class or classes will have or might have voting power by reason of
the happening of any contingency).
Warrant Amendment. The Second Amendment to Common Stock Purchase
Warrants dated or to be dated on or prior to the Closing Date, amending
certain provisions of the Warrants, in form and substance satisfactory to BBI.
Warrants. The warrants issued to BBI by Holdings.
RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this
Credit Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
<PAGE>
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(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by
generally accepted accounting principles, which terms are defined in
the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts, have the meanings assigned to them therein, with the
term "instrument" being that defined under Article 9 of the Uniform
Commercial Code.
(h) Reference to a particular "Section " refers to that
section of this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not
to any particular section or subdivision of this Credit Agreement.
THE REVOLVING CREDIT FACILITY.
COMMITMENT TO LEND.
Subject to the terms and conditions set forth in this Credit
Agreement, each of the Banks severally agrees to lend to the Borrower and the
Borrower may borrow, repay, and reborrow from time to time between the Closing
Date and the Revolving Credit Loan Maturity Date upon notice by the Borrower
to the Agent given in accordance with Section 2.6, such sums as are requested
by the Borrower up to a maximum aggregate amount outstanding (after giving
effect to all amounts requested) at any one time equal to such Bank's Commitment
minus such Bank's Commitment Percentage of the sum of the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations, provided that the sum of the
outstanding amount of the Revolving Credit Loans (after giving effect to all
amounts requested) plus the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not at any time exceed the Total Commitment.
The Revolving Credit Loans shall be made pro rata in accordance with each
Bank's Commitment Percentage. Each request for a Revolving Credit Loan
hereunder shall constitute a representation and warranty by the Borrower that
the conditions set forth in Section 12 and Section 13, in the case of the
initial Revolving Credit Loans to be made on the Closing Date, and Section 13,
in the case of all other Revolving Credit Loans, have been satisfied on the date
of such request.
COMMITMENT FEE.
The Borrower agrees to pay to the Agent for the accounts of the Banks
in accordance with their respective Commitment Percentages a commitment fee
calculated at the rate of one-half of one percent (1/2%) per annum on the
average daily amount during each calendar quarter or portion thereof from the
Closing Date to the Revolving Credit Loan Maturity Date by which the Total
Commitment minus the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the outstanding amount of Revolving Credit
Loans during such calendar quarter. The commitment fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the Revolving Credit
Maturity Date or any earlier date on which the Commitments shall terminate.
REDUCTION OF TOTAL COMMITMENT.
The Borrower shall have the right at any time and from time to time
upon three (3) Business Days prior written notice to the Agent to reduce by
$500,000 or an integral multiple of $100,000 in excess thereof the unborrowed
portion of the Total Commitment or terminate entirely the Total Commitment,
whereupon the Commitments of the Banks shall be reduced pro rata in accordance
with their respective Commitment Percentages of the amount specified in such
notice or, as the case may be, terminated. Promptly after receiving any notice
of the Borrower delivered pursuant to this Section 2.3, the Agent will notify
the Banks of the substance thereof. Upon the effective date of any such
reduction or termination, the Borrower shall pay to the Agent for the respective
accounts of the Banks the full amount of any commitment fee then accrued on
the amount of the reduction. No reduction or termination of the Commitments
may be reinstated.
THE REVOLVING CREDIT NOTES.
<PAGE>
-24-
The Revolving Credit Loans shall be evidenced by separate amended and
restated promissory notes of the Borrower in substantially the form of Exhibit
A hereto (each a "Revolving Credit Note"), dated as of the Closing Date and
completed with appropriate insertions. One Revolving Credit Note shall be
payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the
time of receipt of any payment of principal on such Bank's Revolving Credit
Note, an appropriate notation on such Bank's Revolving Credit Note Record
reflecting the making of such Revolving Credit Loan or (as the case may be)
the receipt of such payment. The outstanding amount of the Revolving Credit
Loans set forth on such Bank's Revolving Credit Note Record shall be prima
facie evidence of the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any such amount on
such Bank's Revolving Credit Note Record shall not limit or otherwise affect
the obligations of the Borrower hereunder or under any Revolving Credit Note
to make payments of principal of or interest on any Revolving Credit Note when
due.
INTEREST ON REVOLVING CREDIT LOANS.
Except as otherwise provided in Section 6.11,
(a) each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day
of the Interest Period with respect thereto at the rate per annum
equal to the Base Rate plus the Applicable Margin.
(b) Each Eurodollar Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the
last day of the Interest Period with respect thereto at the rate per
annum equal to the Eurodollar Rate for such Interest Period plus the
Applicable Margin.
(c) The Borrower promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect
thereto.
REQUESTS FOR REVOLVING CREDIT LOANS.
The Borrower shall give to the Agent written notice in the form of
Exhibit B hereto (or telephonic notice confirmed in a writing in the form of
Exhibit B hereto) of each Revolving Credit Loan requested hereunder (a "Loan
Request") no less than 1:00 p.m. (Boston time) (a) one (1) Business Day prior
to the proposed Drawdown Date of any Base Rate Loan and (b) three (3)
Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar
Rate Loan, provided, however, the Borrower shall not request any Eurodollar
Rate Loans with an Interest Period of more than one month until the date which
is sixty (60) Business Days following the Closing Date. Each such notice shall
specify (i) the principal amount of the Revolving Credit Loan requested, (ii)
the proposed Drawdown Date of such Revolving Credit Loan, (iii) the Interest
Period for such Revolving Credit Loan and (iv) the Type of such Revolving
Credit Loan. Promptly upon receipt of any such notice, the Agent shall notify
each of the Banks thereof. Each Loan Request shall be irrevocable and binding
on the Borrower and shall obligate the Borrower to accept the Revolving Credit
Loan requested from the Banks on the proposed Drawdown Date. Each Loan Request
shall be in a minimum aggregate amount of $500,000 or a larger integral
multiple of $100,000.
CONVERSION OPTIONS.
CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN.
The Borrower may elect from time to time to convert any
outstanding Revolving Credit Loan to a Revolving Credit Loan of
another Type, provided that (a) with respect to any such conversion
of a Revolving Credit Loan to a Base Rate Loan, the Borrower shall
give the Agent at least one (1) Business Day's prior written notice
of such election; (b) with respect to any such conversion of a Base
Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the
Agent at least three (3)
<PAGE>
-25-
Eurodollar Business Days prior written notice of such election; (c)
with respect to any such conversion of a Eurodollar Rate Loan into a
Base Rate Loan, such conversion shall only be made on the last day of
the Interest Period with respect thereto; (d) no Revolving Credit
Loan may be converted into a Eurodollar Rate Loan when any Default or
Event of Default has occurred and is continuing; (e) no Revolving
Credit Loan may be converted into a Eurodollar Rate Loan with an
Interest Period of more than thirty (30) days until the date which is
sixty (60) Business Days after the Closing Date; and (f) no more than
five (5) Eurodollar Rate Loans having different Interest Periods may
be outstanding at any time. On the date on which such conversion is
being made each Bank shall take such action as is necessary to
transfer its Commitment Percentage of such Revolving Credit Loans to
its Domestic Lending Office or its Eurodollar Lending Office, as the
case may be. All or any part of outstanding Revolving Credit Loans of
any Type may be converted into a Revolving Credit Loan of another
Type as provided herein, provided that any partial conversion shall
be in an aggregate principal amount of $500,000 or a larger integral
multiple of $100,000 in excess thereof. Each Conversion Request
relating to the conversion of a Base Rate Loan to a Eurodollar Rate
Loan shall be irrevocable by the Borrower.
CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN.
Any Revolving Credit Loan of any Type may be continued as a
Revolving Credit Loan of the same Type upon the expiration of an
Interest Period with respect thereto by compliance by the Borrower
with the notice provisions contained in Section 2.7.1; provided that
no Eurodollar Rate Loan may be continued as such when any Default or
Event of Default has occurred and is continuing, but shall be
automatically converted to a Base Rate Loan on the last day of the
first Interest Period relating thereto ending during the continuance
of any Default or Event of Default of which officers of the Agent
active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect
to the continuation of any Eurodollar Rate Loan as such, then such
Eurodollar Rate Loan shall be automatically converted to a Base Rate
Loan on the last day of the first Interest Period relating thereto.
The Agent shall notify the Banks promptly when any such automatic
conversion contemplated by this Section 2.7 is scheduled to occur.
EURODOLLAR RATE LOANS.
Any conversion to or from Eurodollar Rate Loans shall be in
such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be
less than $500,000 or a larger integral multiple of $100,000 in
excess thereof.
FUNDS FOR REVOLVING CREDIT LOAN.
FUNDING PROCEDURES.
Not later than 1:00 p.m. (Boston time) on the proposed
Drawdown Date of any Revolving Credit Loans, each of the Banks will
make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Commitment
Percentage of the amount of the requested Revolving Credit Loans.
Upon receipt from each Bank of such amount, and upon receipt of the
documents required by Sections 12 and 13 and the satisfaction of the
other conditions set forth therein, to the extent applicable, the
Agent will make available to the Borrower the aggregate amount of
such Revolving Credit Loans made available to the Agent by the Banks.
The failure or refusal of any Bank to make available to the Agent at
the aforesaid time and place on any Drawdown Date the amount of its
Commitment Percentage of the requested Revolving Credit Loans shall
not relieve any other Bank from its several obligation hereunder to
make available to the Agent the amount of such other Bank's
Commitment Percentage of any requested Revolving Credit Loans.
ADVANCES BY AGENT.
The Agent may, unless notified to the contrary by any Bank
prior to a Drawdown Date, assume that such Bank has made available to
the Agent on such Drawdown Date the amount of such Bank's Commitment
Percentage of the Revolving Credit Loans to be made on such Drawdown
Date, and the Agent may (but it shall not be required to), in
reliance upon such
<PAGE>
-26-
assumption, make available to the Borrower a corresponding amount. If
any Bank makes available to the Agent such amount on a date after
such Drawdown Date, such Bank shall pay to the Agent on demand an
amount equal to the product of (a) the average computed for the
period referred to in clause (c) below, of the weighted average
interest rate paid by the Agent for federal funds acquired by the
Agent during each day included in such period, times (b) the amount
of such Bank's Commitment Percentage of such Revolving Credit Loans,
times (c) a fraction, the numerator of which is the number of days
that elapse from and including such Drawdown Date to the date on
which the amount of such Bank's Commitment Percentage of such
Revolving Credit Loans shall become immediately available to the
Agent, and the denominator of which is 365. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and owing
to the Agent by such Bank. If the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans is not made available to
the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount
from the Borrower on demand, with interest thereon at the rate per
annum applicable to the Revolving Credit Loans made on such Drawdown
Date.
REPAYMENT OF THE REVOLVING CREDIT LOANS.
MATURITY.
The Borrower promises to pay on the Revolving Credit Loan Maturity
Date, and there shall become absolutely due and payable on the Revolving
Credit Loan Maturity Date, all of the Revolving Credit Loans outstanding on
such date, together with any and all accrued and unpaid interest thereon.
MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS.
If at any time the sum of the outstanding amount of the Revolving
Credit Loans, the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations exceeds the Total Commitment then the Borrower shall immediately
pay the amount of such excess to the Agent for the respective accounts of the
Banks for application: first, to any Unpaid Reimbursement Obligations; second,
to the Revolving Credit Loans; and third, to provide to the Agent cash
collateral for Reimbursement Obligations as contemplated by Section 5.2(b) and
(c). Each payment of any Unpaid Reimbursement Obligations or prepayment of
Revolving Credit Loans shall be allocated among the Banks, in proportion, as
nearly as practicable, to each Reimbursement Obligation or (as the case may
be) the respective unpaid principal amount of each Bank's Revolving Credit
Note, with adjustments to the extent practicable to equalize any prior
payments or repayments not exactly in proportion.
OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS.
The Borrower shall have the right, at its election, to repay the
outstanding amount of the Revolving Credit Loans, as a whole or in part, at
any time without penalty or premium, provided that any full or partial
prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to
this Section 3.3 may be made only on the last day of the Interest Period
relating thereto, or, if such prepayment is made prior to the last day of the
Interest Period relating thereto, the Borrower pays any costs associated with
such prepayment as more fully described in Section 6.10. The Borrower shall give
the Agent, no later than 11:00 a.m. (Boston time), at least one (1) Business Day
prior written notice of any proposed prepayment pursuant to this Section 3.3 of
Base Rate Loans, and three (3) Eurodollar Business Days notice of any proposed
prepayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case
specifying the proposed date of prepayment of Revolving Credit Loans and the
principal amount to be prepaid. Each such partial prepayment of the Revolving
Credit Loans shall be in an integral multiple of $100,000, shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of prepayment and shall be applied, in the absence of instruction by the
Borrower, first to the principal of Base Rate Loans and then to the principal
of Eurodollar Rate Loans. Each partial prepayment shall be allocated among the
Banks, in proportion, as nearly as practicable, to the respective
<PAGE>
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unpaid principal amount of each Bank's Revolving Credit Note, with adjustments
to the extent practicable to equalize any prior repayments not exactly in
proportion.
THE TERM LOANS.
COMMITMENT TO LEND.
TERM LOAN A.
Subject to the terms and conditions set forth in this Credit
Agreement, each Bank agrees to lend to the Borrower on the Closing
Date the amount of its Term Loan A Commitment Percentage of the
principal amount of $45,000,000.
TERM LOAN B.
Subject to the terms and conditions set forth in this Credit
Agreement, each Bank agrees to lend to the Borrower on the Closing
Date the amount of its Term Loan B Commitment Percentage of the
principal amount of $40,000,000.
<PAGE>
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THE TERM NOTES.
THE TERM LOAN A NOTES.
Term Loan A shall be evidenced by separate amended and
restated promissory notes of the Borrower in substantially the form
of Exhibit C-1 hereto (each a "Term Loan A Note"), dated the Closing
Date and completed with appropriate insertions. One Term Loan A Note
shall be payable to the order of each Bank in a principal amount
equal to such Bank's Commitment Percentage of the Term Loan A and
representing the obligation of the Borrower to pay to such Bank such
principal amount or, if less, the outstanding amount of such Bank's
Commitment Percentage of the Term Loan A, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes each
Bank to make or cause to be made a notation on such Bank's Term Loan
A Note Record reflecting the original principal amount of such Bank's
Commitment Percentage of the Term Loan A and, at or about the time of
such Bank's receipt of any principal payment on such Bank's Term Loan
A Note, an appropriate notation on such Bank's Term Loan A Note
Record reflecting such payment. The aggregate unpaid amount set forth
on such Bank's Term Loan A Note Record shall be prima facie evidence
of the principal amount thereof owing and unpaid to such Bank, but
the failure to record, or any error in so recording, any such amount
on such Bank's Term Loan A Note Record shall not affect the
obligations of the Borrower hereunder or under any Term Loan A Note
to make payments of principal of and interest on any Term Loan A Note
when due.
THE TERM LOAN B NOTES.
Term Loan B shall be evidenced by separate amended and
restated promissory notes of the Borrower in substantially the form
of Exhibit C-2 hereto (each a "Term Loan B Note"), dated the Closing
Date and completed with appropriate insertions. One Term Loan B Note
shall be payable to the order of each Bank in a principal amount
equal to such Bank's Commitment Percentage of the Term Loan B and
representing the obligation of the Borrower to pay to such Bank such
principal amount or, if less, the outstanding amount of such Bank's
Commitment Percentage of the Term Loan B, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes each
Bank to make or cause to be made a notation on such Bank's Term Loan
B Note Record reflecting the original principal amount of such Bank's
Commitment Percentage of the Term Loan B and, at or about the time of
such Bank's receipt of any principal payment on such Bank's Term Loan
B Note, an appropriate notation on such Bank's Term Loan B Note
Record reflecting such payment. The aggregate unpaid amount set forth
on such Bank's Term Loan B Note Record shall be prima facie evidence
of the principal amount thereof owing and unpaid to such Bank, but
the failure to record, or any error in so recording, any such amount
on such Bank's Term Loan B Note Record shall not affect the
obligations of the Borrower hereunder or under any Term Loan B Note
to make payments of principal of and interest on any Term Loan B Note
when due.
<PAGE>
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MANDATORY PAYMENTS OF PRINCIPAL OF TERM LOANS.
TERM LOAN A.
The Borrower promises to pay to the Agent for the account of
the Banks the principal amount of Term Loan A in twenty- four (24)
consecutive quarterly payments, payable on the last Business Day of
each calendar quarter ending within any period set forth below in the
amount set forth opposite such period, commencing on July 1, 1996
with a final payment on the Term Loan A Maturity Date in an amount
equal to the unpaid balance of Term Loan A.
Amount of
Quarter Ending: Each Payment
- ------------------------------------------------------------ -----------------
- ------------------------------------------------------------ -----------------
July 1, 1996 - March 31, 1997 $ 375,000
- ------------------------------------------------------------ -----------------
June 30, 1997 - March 30, 1998 $ 875,000
- ------------------------------------------------------------ -----------------
June 29, 1998 - March 29, 1999 $1,375,000
- ------------------------------------------------------------ -----------------
June 28, 1999 - March 27, 2000 $2,250,000
- ------------------------------------------------------------ -----------------
June 26, 2000 - March 26, 2001 $2,750,000
- ------------------------------------------------------------ -----------------
June 25, 2001 - December 24, 2001 $3,625,000
- ------------------------------------------------------------ -----------------
Term Loan A Maturity Date $3,625,000
- ------------------------------------------------------------ -----------------
TERM LOAN B.
The Borrower promises to pay
to the Agent for the account
of the Banks the principal
amount of Term Loan B in
thirty-two (32) consecutive
quarterly payments, payable
on the last Business Day of
each calendar quarter ending
within any period set forth
below in the amount set
forth opposite such period,
commencing on July 1, 1996
with a final payment on the
Term Loan B Maturity Date in
an amount equal to the
unpaid balance of Term Loan
B.
<PAGE>
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Amount of
Quarter Ending: Each Payment
- ------------------------------------------------------------ ----------------
- ------------------------------------------------------------ ----------------
July 1, 1996 - March 25, 2002 $ 100,000
- ------------------------------------------------------------ ----------------
June 24, 2002 - December 22, 2003 $4,700,000
- ------------------------------------------------------------ ----------------
Term Loan B Maturity Date $4,700,000
- ------------------------------------------------------------ ----------------
EXCESS CASH FLOW
RECAPTURE.
For each four-quarter period
of the Borrower commencing
with the four-quarter period
ending December 30, 1996,
the Borrower shall make a
prepayment of principal on
the Term Loans in an amount
equal to the greater of (a)
$1,000,000 and (b)
seventy-five percent (75%)
of Consolidated Excess Cash
Flow (or fifty percent (50%)
of Consolidated Excess Cash
Flow if the Leverage Ratio
is 2.75:1.00 or less as of
the end of the applicable
fiscal year and no Default
or Event of Default is
continuing at the time the
prepayment is due) provided,
however, if the Leverage
Ratio is 2.75:1.00 or less
at all times during the
four- quarter period ending
December 27, 1999 or
December 25, 2000, as the
case may be, the Borrower
shall only be required to
make a prepayment for such
four-quarter period in the
amount set forth in (b)
above, and provided,
further, for any
<PAGE>
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four-quarter period after
December 25, 2000, the
Borrower shall only be
required to make a
prepayment for such
four-quarter period in the
amount set forth in (b)
above. Such mandatory
prepayment shall be due one
hundred (100) days after the
end of each applicable year
and shall be applied pro
rata to each of the Term
Loans and then applied
against the scheduled
installments of principal
due on the respective Term
Loan in the inverse order of
maturity.
OPTIONAL PREPAYMENT OF TERM LOAN.
The Borrower shall have the right at any time to prepay the Term
Notes on or before the Term Loan A Maturity Date and Term Loan B Maturity
Date, as the case may be, as a whole, or in part, upon not less than three (3)
Business Days prior written notice to the Agent, without premium or penalty,
provided that (a) each partial prepayment shall be in the principal amount of
$500,000 or a larger integral multiple of $100,000 in excess thereof, (b) no
portion of the Term Loans bearing interest at the Eurodollar Rate may be
prepaid pursuant to this Section 4.4 except on the last day of the Interest
Period relating thereto, (c) each partial prepayment shall be allocated among
the Banks, in proportion, as nearly as practicable, to the respective
outstanding amount of each Bank's Term Note, with adjustments to the extent
practicable to equalize any prior prepayments not exactly in proportion and (d)
each such prepayment shall be applied pro rata to Term Loan A and Term Loan B.
Any prepayment of principal of the Term Loan shall include all interest accrued
to the date of prepayment and shall be applied against the scheduled
installments of principal due on such Term Loan in the inverse order of
maturity. No amount repaid with respect to the Term Loans may be reborrowed.
INTEREST ON TERM LOANS.
INTEREST RATES.
Except as otherwise provided in Section 6.11, the Term Loans
shall bear interest during each Interest Period relating to all or
any portion of the Term Loans at the following rates:
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(a) to the extent that all or any portion of the
Term Loans bears interest during such Interest Period at the
Base Rate, the Term Loans or such portion shall bear
interest during such Interest Period at the rate per annum
equal to the Base Rate plus the Applicable Margin for Term
Loan A and Term Loan B, as the case may be.
(b) To the extent that all or any portion of the
Term Loans bears interest during such Interest Period at the
Eurodollar Rate, the Term Loans or such portion shall bear
interest during such Interest Period at the rate per annum
equal to the Eurodollar Rate plus the Applicable Margin for
Term Loan A and Term Loan B, as the case may be.
The Borrower promises to pay interest on the Term Loans or any
portion thereof outstanding during each Interest Period in arrears on
each Interest Payment Date applicable to such Interest Period.
NOTIFICATION BY BORROWER.
The Borrower shall notify the Agent, such notice to be
irrevocable, at least one (1) Business Day prior to the Drawdown Date
of the Term Loans if all or any portion of the Term Loans are to bear
interest at the Base Rate and at least three (3) Eurodollar Business
Days prior to the Drawdown Date of the Term Loans if all or any
portion of the Term Loans are to bear interest at the Eurodollar
Rate, provided, however, that the Borrower shall not request any
Eurodollar Rate Loans with an Interest Period of more than one month
until the date which is sixty (60) Business Days after the Closing
Date. After the Term Loans have been made, the provisions of
Section 2.7 shall apply mutatis mutandis with respect to all or any
portion of the Term Loans so that the Borrower may have the same
interest rate options with respect to all or any portion of the Term
Loans as it would be entitled to with respect to the Revolving Credit
Loans, subject to the same limitations as applied to Revolving Credit
Loans.
AMOUNTS, ETC.
Any portion of the Term Loans bearing interest at the
Eurodollar Rate relating to any Interest Period shall be in the
amount of $500,000 or a larger integral multiple of $100,000 in
excess thereof. No Interest Period relating to the Term Loans or any
portion thereof bearing interest at the Eurodollar Rate shall extend
beyond the date on which a regularly scheduled installment payment of
the principal of the Term Loans are to be made unless a portion of
the Term Loans at least equal to such installment payment has an
Interest Period ending on such date or is then bearing interest at
the Base Rate.
LETTERS OF CREDIT.
LETTER OF CREDIT COMMITMENTS.
COMMITMENT TO ISSUE LETTERS OF CREDIT.
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Subject to the terms and conditions hereof and the execution
and delivery by the Borrower of a letter of credit application on the
Agent's customary form (a "Letter of Credit Application"), the Agent
on behalf of the Banks and in reliance upon the agreement of the
Banks set forth in Section 5.1.4 and upon the representations and
warranties of the Borrower contained herein, agrees, in its
individual capacity, to issue, extend and renew for the account of
the Borrower one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be
requested from time to time by the Borrower and agreed to by the
Agent; provided, however, that, after giving effect to such request,
(a) the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $5,000,000 at any one
time, and (b) the sum of (i) the Maximum Drawing Amount on all
Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and
(iii) the amount of all Revolving Credit Loans outstanding shall not
exceed the Total Commitment
LETTER OF CREDIT APPLICATIONS.
Each Letter of Credit Application shall be completed to the
satisfaction of the Agent. In the event that any provision of any
Letter of Credit Application shall be inconsistent with any provision
of this Credit Agreement, then the provisions of this Credit
Agreement shall, to the extent of any such inconsistency, govern.
TERMS OF LETTERS OF CREDIT.
Each Letter of Credit issued, extended or renewed hereunder
shall, among other things, (a) provide for the payment of sight
drafts for honor thereunder when presented in accordance with the
terms thereof and when accompanied by the documents described
therein, and (b) have an expiry date no later than the date which is
fourteen (14) days (or, if the Letter of Credit is confirmed by a
confirming bank or otherwise provides for one or more nominated
persons, forty-five (45) days) prior to the Revolving Credit Loan
Maturity Date. Each Letter of Credit so issued, extended or renewed
shall be subject to the Uniform Customs.
REIMBURSEMENT OBLIGATIONS OF BANKS.
Each Bank severally agrees that it shall be absolutely
liable, without regard to the occurrence of any Default or Event of
Default or any other condition precedent whatsoever, to the extent of
such Bank's Commitment Percentage, to reimburse the Agent on demand
for the amount of each draft paid by the Agent under each Letter of
Credit to the extent that such amount is not reimbursed by the
Borrower pursuant to Section 5.2 (such agreement for a Bank being
called herein the "Letter of Credit Participation" of such Bank).
PARTICIPATIONS OF BANKS.
Each such payment made by a Bank shall be treated as the
purchase by such Bank of a participating interest in the Borrower's
Reimbursement Obligation under Section 5.2 in an amount equal to
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such payment. Each Bank shall share in accordance with its
participating interest in any interest which accrues pursuant to
Section 5.2.
REIMBURSEMENT OBLIGATION OF THE BORROWER.
In order to induce the Agent to issue, extend and renew each Letter
of Credit and the Banks to participate therein, the Borrower hereby agrees to
reimburse or pay to the Agent, for the account of the Agent or (as the case
may be) the Banks, with respect to each Letter of Credit issued, extended or
renewed by the Agent hereunder,
(a) except as otherwise expressly provided in Section 5.2(b)
and (c), on each date that any draft presented under such Letter of
Credit is honored by the Agent, or the Agent otherwise makes a
payment with respect thereto, (i) the amount paid by the Agent under
or with respect to such Letter of Credit, and (ii) the amount of any
taxes, fees, charges or other costs and expenses whatsoever incurred
by the Agent or any Bank in connection with any payment made by the
Agent or any Bank under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an
amount equal to such difference, which amount shall be held by the
Agent for the benefit of the Banks and the Agent as cash collateral
for all Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with Section 14, an amount equal to the
then Maximum Drawing Amount on all Letters of Credit, which amount
shall be held by the Agent for the benefit of the Banks and the Agent
as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrower under this Section 5.2 at any time from the date such amounts
become due and payable (whether as stated in this Section 5.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Agent on demand at the rate specified in Section 6.11 for overdue
principal on the Revolving Credit Loans.
LETTER OF CREDIT PAYMENTS.
If any draft shall be presented or other demand for payment shall be
made under any Letter of Credit, the Agent shall notify the Borrower of the
date and amount of the draft presented or demand for payment and of the date
and time when it expects to pay such draft or honor such demand for payment.
If the Borrower fails to reimburse the Agent as provided in Section 5.2 on or
before the date that such draft is paid or other payment is made by the Agent,
the Agent may at any time thereafter notify the Banks of the amount of any
such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on
the Business Day next following the receipt of such notice, each Bank shall
make available to the Agent, at its Head Office, in immediately
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available funds, such Bank's Commitment Percentage of such Unpaid
Reimbursement Obligation, together with an amount equal to the product of (a)
the average, computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds acquired by
the Agent during each day included in such period, times (b) the amount equal
to such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation,
times (c) a fraction, the numerator of which is the number of days that elapse
from and including the date the Agent paid the draft presented for honor or
otherwise made payment to the date on which such Bank's Commitment Percentage
of such Unpaid Reimbursement obligation shall become immediately available to
the Agent, and the denominator of which is 360. The responsibility of the
Agent to the Borrower and the Banks shall be only to determine that the
documents (including each draft) delivered under each Letter of Credit in
connection with such presentment shall be in conformity in all material
respects with such Letter of Credit.
OBLIGATIONS ABSOLUTE.
The Borrower's obligations under this Section 5 shall be absolute and
unconditional under any and all circumstances and irrespective of the
occurrence of any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the Agent, any Bank or any beneficiary
of a Letter of Credit. The Borrower further agrees with the Agent and the
Banks that the Agent and the Banks shall not be responsible for, and the
Borrower's Reimbursement Obligations under Section 5.2 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of
any Letter of Credit or any such transferee. The Agent and the Banks shall not
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit. The Borrower agrees that any action
taken or omitted by the Agent or any Bank under or in connection with each
Letter of Credit and the related drafts and documents, if done in good faith,
shall be binding upon the Borrower and shall not result in any liability on
the part of the Agent or any Bank to the Borrower.
RELIANCE BY ISSUER.
To the extent not inconsistent with Section 5.4, the Agent shall be
entitled to rely, and shall be fully protected in relying upon, any Letter of
Credit, draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel, independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall first have
received such advice or concurrence of the Majority Banks as it reasonably
deems appropriate or it shall first be indemnified to its reasonable
satisfaction by the Banks against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases
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be fully protected in acting, or in refraining from acting, under this
Agreement in accordance with a request of the Majority Banks, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Banks and all future holders of the Revolving Credit Notes or of a Letter
of Credit Participation.
LETTER OF CREDIT FEE.
The Borrower shall pay to the Agent a fee (in each case, a "Letter of
Credit Fee") (a) in respect of each standby Letter of Credit issued pursuant
to this Credit Agreement, calculated at the rate of the Applicable Margin per
annum on the face amount of each such Letter of Credit, and the Agent shall,
in turn, remit to each Bank its pro rata portion of such Letter of Credit Fee
calculated at a rate of the Applicable Margin minus 1/4% per annum on the face
amount of each such Letter of Credit, and (b) in respect of each documentary
Letter of Credit issued pursuant to this Credit Agreement, calculated at the
rate of the Applicable Margin minus 1/2% per annum on the face amount of such
Letter of Credit, and the Agent shall, in turn, remit to each Bank its pro
rata portion of such Letter of Credit Fee calculated at a rate of the
Applicable Margin minus 3/4% per annum on the face amount of each such Letter
of Credit. The Letter of Credit Fee for each Letter of Credit shall be payable
annually in advance, on the date of issuance of such Letter of Credit, and on
each anniversary thereof until such Letter of Credit expires or is canceled.
In addition, the Borrower shall pay to the Agent, for its own account, the
Agent's standard issuance, processing, negotiation, amendment and
administrative fees, determined in accordance with customary fees and charges
for similar facilities.
CERTAIN GENERAL PROVISIONS.
CLOSING FEE AND AMENDMENT FEE.
The Borrower agrees to pay to the Agent a closing fee and an
amendment fee in the amounts and at the times as set forth in the Fee Letter.
AGENT'S FEE.
The Borrower shall pay to the Agent, an Agent's fee (the "Agent's
Fee") as provided in the Fee Letter.
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FUNDS FOR PAYMENTS.
PAYMENTS TO AGENT.
All payments of principal, interest, Reimbursement
Obligations, commitment fees, Letter of Credit Fees and any other
amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and
the Agent, at the Agent's Head Office or at such other location in
the Boston, Massachusetts, area that the Agent may from time to time
designate, in each case in immediately available funds.
NO OFFSET, ETC.
Except as otherwise provided in Section 6.7, all payments by
the Borrower hereunder and under any of the other Loan Documents shall
be made without setoff or counterclaim and free and clear of and
without deduction for any taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make
such deduction or withholding. Except as otherwise provided in
Section 6.7, if any such obligation is imposed upon the Borrower with
respect to any amount payable by it hereunder or under any of the
other Loan Documents, the Borrower will pay to the Agent, for the
account of the Banks or (as the case may be) the Agent, on the date
on which such amount is due and payable hereunder or under such other
Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due
date had no such obligation been imposed upon the Borrower. The
Borrower will deliver promptly to the Agent certificates or other
valid vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder or under such
other Loan Document.
COMPUTATIONS.
All computations of interest on the Loans and of commitment fees,
Letter of Credit Fees or other fees shall be based on a 360-day year and paid
for the actual number of days elapsed. Except as otherwise provided in the
definition of the term "Interest Period" with respect to Eurodollar Rate
Loans, whenever a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment
shall be extended to the next succeeding Business Day, and interest shall
accrue during such extension. The outstanding amount of the Loans as reflected
on the Revolving Credit Note Records and the Term Note Records from time to
time shall be considered correct and binding on the Borrower unless within
five (5) Business Days after receipt of any notice by the Agent or any of the
Banks of such outstanding amount, the Agent or such Bank shall notify the
Borrower to the contrary.
INABILITY TO DETERMINE EURODOLLAR RATE.
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In the event, prior to the commencement of any Interest Period
relating to any Eurodollar Rate Loan, the Agent shall determine or be notified
by the Majority Banks that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which
shall be conclusive and binding on the Borrower and the Banks) to the Borrower
and the Banks. In such event (a) any Loan Request or Conversion Request with
respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be
deemed a request for Base Rate Loans, (b) each Eurodollar Rate Loan will
automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan, and (c) the obligations of the Banks to make
Eurodollar Rate Loans shall be suspended until the Agent or the Majority Banks
determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
ILLEGALITY.
Notwithstanding any other provisions herein, if any present or future
law, regulation, treaty or directive or in the interpretation or application
thereof shall make it unlawful for any Bank to make or maintain Eurodollar
Rate Loans, such Bank shall forthwith give notice of such circumstances to the
Borrower and the other Banks and thereupon (a) the commitment of such Bank to
make Eurodollar Rate Loans or convert Loans of another Type to Eurodollar Rate
Loans shall forthwith be suspended and (b) such Bank's Revolving Credit Loans
then outstanding as Eurodollar Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the last day of each Interest Period
applicable to such Eurodollar Rate Loans or within such earlier period as may
be required by law. The Borrower hereby agrees promptly to pay the Agent for
the account of such Bank, upon demand by such Bank, any additional amounts
necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this Section 6.6, including any
interest or fees payable by such Bank to lenders of funds obtained by it in
order to make or maintain its Eurodollar Loans hereunder.
ADDITIONAL COSTS, ETC.
If any present or future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at
any time or from time to time hereafter made upon or otherwise issued to any
Bank or the Agent by any central bank or other fiscal, monetary or other
authority (whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with
respect to this Credit Agreement, the other Loan Documents, any
Letters of Credit, such Bank's Commitment or the Loans (other than
taxes based upon or measured by the income or profits of such Bank or
the Agent), or
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(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other amounts
payable to any Bank or the Agent under this Credit Agreement or any
of the other Loan Documents, or
(c) impose or increase or render applicable (other than to
the extent specifically provided for elsewhere in this Credit
Agreement) any special deposit, reserve, assessment, liquidity,
capital adequacy or other similar requirements (whether or not having
the force of law) against assets held by, or deposits in or for the
account of, or loans by, or letters of credit issued by, or
commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment,
or any class of loans, letters of credit or commitments of which any
of the Loans or such Bank's Commitment forms a part,
and the result of any of the foregoing is:
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment or any Letter of Credit,
or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such
Bank or the Agent hereunder on account of such Bank's
Commitment, any Letter of Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement
Obligation or other sum payable hereunder, the amount of
which payment or foregone interest or Reimbursement
Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by
such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank
or (as the case may be) the Agent at any time and from time to time and as
often as the occasion therefor may arise, pay to such Bank or the Agent such
additional amounts as will be sufficient to compensate such Bank or the Agent
for such additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum. On or before the date it becomes a
party to this Credit Agreement and from time to time thereafter upon any
change in status rendering any certificate or document previously delivered
pursuant to this Section 6.7 invalid or inaccurate, each Bank that is organized
under the laws of a jurisdiction outside the United States shall (but, with
respect to any renewal or change in status, if legally able to do so) deliver
to the Borrower such certificates, documents or other evidence, as required by
the Code or Treasury Regulations issued pursuant thereto, including Internal
Revenue Service Form 1001 or Form 4224 and any other certificate or statement
of exemption required by Treasury Regulation Section 1.1441-1, 1.1441-4 or
1.1441-6(c) or any subsequent version thereof or subsequent version thereto,
properly completed and duly executed by such Bank establishing that such
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payment is (a) not subject to United States Federal withholding tax under the
Code because such payment is effectively connected with conduct by such Bank
of a trade or business in the United States or (b) totally exempt from United
States Federal withholding tax, or (other than in the case of such Bank on the
date such Bank became a party to this Credit Agreement), subject to a reduced
rate of such tax under a provision of an applicable tax treaty. The Borrower
shall not be required to pay any additional amounts to any Bank pursuant to
Section 6.3 or this Section 6.7 to the extent that the obligation to pay such
additional amounts would not have arisen but for a failure by such Bank to
comply with the provisions of the preceding sentence.
Any Bank claiming any additional amounts payable pursuant to Section
6.3 or this Section 6.7 shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document reasonably
requested in writing by the Borrower or to change the jurisdiction of its
applicable lending certificate office if the making of such a filing or change
would avoid the need for or substantially reduce the amount of any such
additional amounts which may thereafter accrue and would not, in the sole and
absolute determination of such Bank be otherwise disadvantageous to such Bank,
which determination by such Bank shall be conclusive.
If a Bank or the Agent shall become aware that it is entitled to
receive a refund in respect of taxes as to which it has been indemnified by
the Borrower pursuant to Section 6.3 or this Section 6.7, it shall promptly
notify the Borrower of the availability of such refund and shall, within thirty
(30) days after receipt of a request by the Borrower, apply for such refund at
the Borrower's expense. If any Bank or the Agent, as applicable, receives a
refund in respect of any taxes to which it has been indemnified by the Borrower
pursuant to Section 6.3 or this Section 6.7, it shall promptly repay such refund
to the Borrower (to the extent of amounts that have been paid by the Borrower
under Section 6.3 or this Section 6.7 with respect to such refund), net of all
out-of-pocket expenses (including taxes imposed with respect to such refund) of
such Bank or the Agent, as applicable, and without interest; provided, however,
that the Borrower, upon the request of such Bank or the Agent, as applicable,
agrees to return such refund (plus penalties, interest or other charges) to such
Bank or the Agent in the event such Bank or the Agent is required to repay such
refund.
CAPITAL ADEQUACY.
If after the date hereof any Bank or the Agent determines that (a)
the adoption of or change after the Closing Date in any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) regarding capital requirements for banks or bank holding
companies or any change in the interpretation or application thereof by a
court or governmental authority with appropriate jurisdiction, or (b)
compliance by such Bank or the Agent or any corporation controlling such Bank
or the Agent with any law, governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) of any such entity
regarding capital adequacy, has the effect of reducing the return on such
Bank's or the Agent's Commitment with respect to any Loans or the Loans to a
level below that which such Bank or the Agent could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's or the
Agent's then existing policies with respect to capital adequacy and assuming
full utilization of such entity's capital) by any amount deemed by such Bank
or (as the case may be) the Agent to be material, then such Bank or the Agent
may notify the Borrower of such fact. To the extent that the amount of such
reduction in the
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return on capital is not reflected in the Base Rate, the Borrower and such
Bank shall thereafter attempt to negotiate in good faith, within thirty (30)
days of the day on which the Borrower receives such notice, an adjustment
payable hereunder that will adequately compensate such Bank in light of these
circumstances. If the Borrower and such Bank are unable to agree to such
adjustment within thirty (30) days of the date on which the Borrower receives
such notice, then commencing on the date of such notice (but not earlier than
the effective date of any such increased capital requirement), the fees
payable hereunder shall increase by an amount that will, in such Bank's
reasonable determination, provide adequate compensation. Each Bank shall
allocate such cost increases among its customers in good faith and on an
equitable basis.
CERTIFICATE.
A certificate setting forth any additional amounts payable pursuant
to Sections 6.7 or 6.8 and a brief explanation of such amounts which are due,
submitted by any Bank or the Agent to the Borrower, shall be conclusive,
absent manifest error, that such amounts are due and owing.
INDEMNITY.
The Borrower agrees to indemnify each Bank and to hold each Bank
harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of
(a) default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Rate Loans as and when due and payable, including
any such loss or expense arising from interest or fees payable by such Bank to
lenders of funds obtained by it in order to maintain its Eurodollar Rate
Loans, (b) default by the Borrower in making a borrowing or conversion after
the Borrower has given (or is deemed to have given) a Loan Request, notice (in
the case of all or any portion of the Term Loans) pursuant to Section 4.5.2 or a
Conversion Request relating thereto in accordance with Section 2.6 or Section
2.7 or Section 4.5 or (c) the making of any payment of a Eurodollar Rate Loan or
the making of any conversion of any such Loan to a Base Rate Loan on a day that
is not the last day of the applicable Interest Period with respect thereto,
including interest or fees payable by such Bank to lenders of funds obtained
by it in order to maintain any such Loans.
INTEREST ON OVERDUE AMOUNTS.
Overdue principal and (to the extent permitted by applicable law)
interest on the Loans and all other overdue amounts payable hereunder or under
any of the other Loan Documents shall bear interest compounded monthly and
payable on demand at a rate per annum equal to two percent (2%) above the Base
Rate until such amount shall be paid in full (after as well as before
judgment).
6.12 REPLACEMENT BANKS.
Within thirty (30) days after (a) any Bank has demanded compensation
from the Borrower pursuant to Sections 6.7 or 6.8 hereof, or (b) there shall
have occurred a change in law with respect to any Bank as a consequence of which
it shall have become unlawful for such Bank to make a Eurodollar Rate Loan on
any Drawdown Date, as described in Section 6.6 hereof (any such Bank described
in the foregoing clauses (a) or (b) is
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hereinafter referred to as an "Affected Bank"), the Borrower may request that
the Non-Affected Banks acquire all, but not less than all, of the Affected
Bank's outstanding Loans and assume all, but not less than all, of the
Affected Bank's Commitment. If the Borrower so requests, the Non-Affected
Banks may elect to acquire all or any portion of the Affected Bank's
outstanding Loans and to assume all or any portion of the Affected Bank's
Commitment. If the Non-Affected Banks do not elect to acquire and assume all
of the Affected Bank's outstanding Loans and Commitment, the Borrower may
designate a replacement bank or banks, which must be satisfactory to the
Agent, to acquire and assume that portion of the outstanding Loans and
Commitment of the Affected Bank not being acquired and assumed by the
Non-Affected Banks. The provisions of Section 20 hereof shall apply to all
reallocations pursuant to this Section 6.12, and the Affected Bank and any
Non-Affected Banks and/or replacement banks which are to acquire the Loans and
Commitment of the Affected Bank shall execute and deliver to the Agent, in
accordance with the provisions of Section 20 hereof, such Assignments and
Acceptances and other instruments, including, without limitation, Notes, as
are required pursuant to Section 20 hereof to give effect to such reallocations.
Any Non-Affected Banks and/or replacement banks which are to acquire the
Revolving Credit Loans and Commitment of the Affected Bank shall be deemed to
be Eligible Assignees for all purposes of Section 20 hereof. On the effective
date of the applicable Assignments and Acceptances, the Borrower shall pay to
the Affected Bank all interest accrued on its Loans up to but excluding such
date, along with any fees payable to such Affected Bank hereunder up to but
excluding such date.
COLLATERAL SECURITY AND GUARANTEES.
SECURITY OF BORROWER AND SUBSIDIARIES; GUARANTY OF SUBSIDIARIES.
The Obligations shall be secured by a perfected first priority
security interest in certain of the assets of the Borrower (including a pledge
of the non-voting capital stock of each of the Borrower's
Subsidiaries,including, without limitation, the Unrestricted Subsidiaries,
provided, however, in the event such Unrestricted Subsidiary has incurred
Indebtedness permitted by Section 10.1(g) hereof and the lender of such
Indebtedness has requested a pledge of the non-voting capital stock of such
Unrestricted Subsidiary by the Borrower, the Borrower shall only be required to
grant to the Agent for the benefit of the Banks a second priority security
interest in such non-voting capital stock until such Indebtedness has been
repaid in full) and its Restricted Subsidiaries, whether now owned or hereafter
acquired, pursuant to the terms of the Security Documents to which the Borrower
and such Restricted Subsidiaries are parties. The Obligations shall also be
secured by a pledge of the non-voting capital stock of each Unrestricted
Subsidiary's Subsidiaries, provided, however, in the event such Unrestricted
Subsidiary has incurred Indebtedness permitted by Section 10.1(g) hereof and the
lender of such Indebtedness has requested a pledge of the non-voting capital
stock of such Unrestricted Subsidiary's Subsidiaries, such Unrestricted
Subsidiary shall only be required to grant to the Agent for the benefit of the
Banks a second priority security interest in such non-voting capital stock until
such Indebtedness has been repaid in full. In addition, the Obligations shall
also be guaranteed by each of the Borrower's Restricted Subsidiaries pursuant to
the terms of the Guaranty of such Restricted Subsidiaries.
GUARANTIES AND SECURITY OF HOLDINGS.
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Certain of the Obligations shall also be guaranteed by Holdings
pursuant to the terms of the Guaranty. The Obligations shall be secured by a
perfected first priority security interest in certain of the stock owned by
Holdings, pursuant to the terms of the Stock Pledge Agreement to which
Holdings is a party.
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REPRESENTATIONS AND WARRANTIES.
Each of the Borrower and, to the extent applicable, Holdings
represents and warrants to the Banks and the Agent as follows:
CORPORATE AUTHORITY.
INCORPORATION; GOOD STANDING.
Each of Holdings, the Borrower and each of their respective
Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation,
(b) has all requisite corporate power to own its property and conduct
its business as now conducted and as presently contemplated, and (c)
is in good standing as a foreign corporation and is duly authorized
to do business in each jurisdiction where such qualification is
necessary except where a failure to be so qualified would not have a
materially adverse effect on the business, assets or financial
condition of the Borrower or such Subsidiary.
AUTHORIZATION.
The execution, delivery and performance of this Credit
Agreement and the other Loan Documents to which Holdings, the
Borrower or any of their Subsidiaries is or is to become a party and
the transactions contemplated hereby and thereby (a) are within the
corporate authority of such Person, (b) have been duly authorized by
all necessary corporate proceedings, (c) do not conflict with or
result in any breach or contravention of any provision of law,
statute, rule or regulation to which Holdings, the Borrower or any of
their Subsidiaries is subject or any judgment, order, writ,
injunction, license or permit applicable to Holdings, the Borrower or
any of their Subsidiaries, the violation of which would have a
materially adverse effect on the business, assets or financial
condition of Holdings, the Borrower or such Subsidiary and (d) do not
conflict with any provision of the corporate charter or bylaws of, or
any agreement or other instrument binding upon, Holdings, the
Borrower or any of their Subsidiaries.
ENFORCEABILITY.
The execution and delivery of this Credit Agreement and the
other Loan Documents to which Holdings, the Borrower or any of their
Subsidiaries is or is to become a party will result in valid and
legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except
to the extent that availability of the remedy of specific performance
or injunctive relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
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GOVERNMENTAL APPROVALS.
The execution, delivery and performance by Holdings, the Borrower and
any of their Subsidiaries of this Credit Agreement and the other Loan
Documents, the Acquisition Documents and the Capitalization Documents to which
Holdings, the Borrower or any of their Subsidiaries is or is to become a party
and the transactions contemplated hereby and thereby do not require the
approval or consent of, or filing with, any governmental agency or authority
other than those already obtained and are not in violation of any municipal or
other local law, ordinance or governmental rule or regulation relating to the
occupancy or operation of any of the BKC restaurants, which violation would
have a material adverse effect on the business, assets or financial condition
of Holdings, the Borrower and their Subsidiaries, taken as a whole
TITLE TO PROPERTIES; LEASES.
Except as indicated on Schedule 8.3 hereto, Holdings, the Borrower
and their Subsidiaries own or lease all of the assets reflected in the pro
forma consolidated balance sheet of Holdings, the Borrower and their
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date) and to be acquired pursuant to the Acquisitions,
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances
except Permitted Liens.
FINANCIAL STATEMENTS AND PROJECTIONS.
FINANCIAL STATEMENTS.
There has been furnished to each of the Banks a pro forma
consolidated balance sheet of Holdings, the Borrower and their
Subsidiaries as at the Closing Date, which properly gives effect to
the Loans, the Subordinated Debt, and the Acquisitions. Such balance
sheet fairly presents the financial condition of the Borrower and its
Subsidiaries as at the close of business on the date thereof. There
are no contingent liabilities of Holdings, the Borrower or any of
their Subsidiaries as of such date involving material amounts, which
were not disclosed in such balance sheet and the notes related
thereto or in this Credit Agreement or the Acquisition Documents.
PROJECTIONS.
The projections of the annual operating budgets of Holdings,
the Borrower and their Subsidiaries on a consolidated basis,
including balance sheets and cash flow statements for the 1996
through 2003 fiscal years (with the projections for the 1996 fiscal
year being calculated on a pro forma basis), copies of which have
been delivered to each Bank, disclose all assumptions made with
respect to general economic, financial and market conditions used in
formulating such projections. To the knowledge of Holdings, the
Borrower or any of their Subsidiaries, no facts exist that
(individually or in the aggregate) would result in any material
change in any of such projections. The projections are based upon
reasonable estimates and assumptions, have been prepared on the basis
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of the assumptions stated therein and reflect the reasonable
estimates of Holdings, the Borrower and their Subsidiaries of the
results of operations and other information projected therein.
NO MATERIAL CHANGES, ETC.
(a) Since the Balance Sheet Date there has occurred no materially
adverse change in the assets, financial condition or business of Holdings, the
Borrower and their Subsidiaries as shown on or reflected in the consolidated
balance sheet of Holdings, the Borrower and their Subsidiaries as at the
Balance Sheet Date other than changes in the ordinary course of business that
have not had any materially adverse effect either individually or in the
aggregate on the assets, business or financial condition of Holdings, the
Borrower or any of their Subsidiaries. Since August 31, 1995 there have been
no changes in the business or assets to be acquired in the AmeriKing
Cincinnati Acquisition which have been, either individually or in the
aggregate, materially adverse, and since October 31, 1995, there have been no
changes in the business or assets to be acquired in the AmeriKing Virginia
Acquisition which have been, either individually or in the aggregate,
materially adverse.
(b) Each of Holdings, the Borrower and each of its Subsidiaries
(before and after giving effect to the transactions contemplated by this
Credit Agreement and the other Loan Documents) (i) is solvent, (ii) has assets
having a fair value in excess of its liabilities, (iii) has assets having a
fair value in excess of the amount required to pay its liabilities on existing
debts as such debts become absolute and matured, and (iv) has, and expects to
continue to have, access to adequate capital for the conduct of its business
and the ability to pay its debts from time to time incurred in connection with
the operation of its business as such debts mature.
FRANCHISES, PATENTS, COPYRIGHTS, ETC.
Each of the Borrower and its Subsidiaries possesses all franchises,
patents, copyrights, trademarks, trade names, licenses and permits, and rights
in respect of the foregoing, adequate for the conduct of its business
substantially as now conducted without known conflict with any rights of
others.
LITIGATION.
Except as set forth in Schedule 8.7 hereto, there are no actions,
suits, proceedings or investigations of any kind pending or threatened against
Holdings, the Borrower or any of their Subsidiaries before any court, tribunal
or administrative agency or board that, if adversely determined, might, either
in any case or in the aggregate, materially adversely affect the properties,
assets, financial condition or business of Holdings, the Borrower and their
Subsidiaries or materially impair the right of Holdings, the Borrower and
their Subsidiaries, considered as a whole, to carry on business substantially
as now conducted by them, or result in any substantial liability not
adequately covered by insurance, or for which adequate reserves are not
maintained on the consolidated balance sheet of Holdings, the Borrower and
their Subsidiaries, or which question the validity of this Credit Agreement or
any of the other Loan Documents, or any action taken or to be taken pursuant
hereto or thereto.
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NO MATERIALLY ADVERSE CONTRACTS, ETC.
None of Holdings, the Borrower nor any of their Subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation that has or is expected in the future to
have a materially adverse effect on the business, assets or financial
condition of Holdings, the Borrower or any of their Subsidiaries. None of
Holdings, the Borrower nor any of their Subsidiaries is a party to any
contract or agreement that has or is expected, in the judgment of the
Borrower's officers, to have any materially adverse effect on the business of
Holdings, the Borrower or any of their Subsidiaries considered as a whole.
COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.
None of Holdings, the Borrower nor any of their Subsidiaries is in
violation of any provision of its charter documents, bylaws, or any agreement
or instrument to which it may be subject or by which it or any of its
properties may be bound or any decree, order, judgment, statute, license, rule
or regulation, in any of the foregoing cases in a manner that could result in
the imposition of substantial penalties or materially and adversely affect the
financial condition, properties or business of Holdings, the Borrower or any
of their Subsidiaries considered as a whole.
TAX STATUS.
Each of Holdings, the Borrower and their Subsidiaries (a) have made
or filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (b)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim.
NO EVENT OF DEFAULT.
No Default or Event of Default has occurred and is continuing.
HOLDING COMPANY AND INVESTMENT COMPANY ACTS.
None of Holdings, the Borrower nor any of their Subsidiaries is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is it an "investment company", or an
"affiliated company" or a "principal underwriter" of an "investment company",
as such terms are defined in the Investment Company Act of 1940.
ABSENCE OF FINANCING STATEMENTS, ETC.
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Except with respect to Permitted Liens or as permitted by this Credit
Agreement or the Security Documents, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry or other public office, that
purports to cover, affect or give notice of any present or possible future
lien on, or security interest in, any assets or property of Holdings, the
Borrower or any of their Subsidiaries or any rights relating thereto.
PERFECTION OF SECURITY INTEREST.
All filings, assignments, pledges and deposits of documents or
instruments have been made and all other actions have been taken that are
necessary or advisable, under applicable law, to establish and perfect the
Agent's security interest in the Collateral. The Collateral and the Agent's
rights with respect to the Collateral are not subject to any setoff, claims,
withholdings or other defenses. The Borrower, its Subsidiaries or Holdings, as
the case may be, is the owner of the Collateral free from any lien, security
interest, encumbrance and any other claim or demand, except for Permitted
Liens.
CERTAIN TRANSACTIONS.
Except as set forth on Schedule 8.15 hereto, and for arm's length
transactions pursuant to which Holdings, the Borrower or any of their
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than Holdings, the Borrower or such Subsidiary could obtain
from third parties, none of the officers, directors, or employees of Holdings,
the Borrower or any of their Subsidiaries is presently a party to any
transaction with Holdings, the Borrower or any of their Subsidiaries (other
than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Borrower, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has
a substantial interest or is an officer, director, trustee or partner.
EMPLOYEE BENEFIT PLANS.
IN GENERAL.
Each Employee Benefit Plan has been maintained and operated
in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited transactions.
TERMINABILITY OF WELFARE PLANS.
Under each Employee Benefit Plan which is an employee
welfare benefit plan within the meaning of Section 3(1) or
Section 3(2)(B) of ERISA, no benefits are due unless the event giving
rise to the benefit entitlement occurs prior to plan termination
(except as required by Title I, Part 6 of ERISA). The Borrower or an
ERISA Affiliate, as appropriate, may terminate each such Plan at any
time (or at any
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time subsequent to the expiration of any applicable bargaining
agreement) in the discretion of the Borrower or such ERISA Affiliate
without liability to any Person.
GUARANTEED PENSION PLANS.
Each contribution required to be made to a Guaranteed
Pension Plan, whether required to be made to avoid the incurrence of
an accumulated funding deficiency, the notice or lien provisions of
Section 302(f) of ERISA, or otherwise, has been timely made. No waiver
of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension
Plan. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the
Borrower or any ERISA Affiliate with respect to any Guaranteed
Pension Plan and there has not been any ERISA Reportable Event, or
any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC. Based on the
latest valuation of each Guaranteed Pension Plan (which in each case
occurred within twelve months of the date of this representation),
and on the actuarial methods and assumptions employed for that
valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of Section 4001 of ERISA did not
exceed the aggregate value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the benefit liabilities and
assets of any Guaranteed Pension Plan with assets in excess of
benefit liabilities.
MULTIEMPLOYER PLANS.
Neither the Borrower nor any ERISA Affiliate has incurred
any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan under Section 4201 of ERISA or as a result
of a sale of assets described in Section 4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and within
the meaning of Section 4241 or Section 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
REGULATIONS G, U AND X.
The proceeds of the Loans shall be used (a) for the Acquisitions, (b)
to convert existing Indebtedness to the Banks under the Original Credit
Agreement to Loans and Letters of Credit, as the case may be, hereunder, and
(c) for working capital and general corporate purposes. The Borrower will
obtain Letters of Credit solely for working capital and general corporate
purposes. No portion of any Loan is to be used, and no portion of any Letter
of Credit is to be obtained, for the purpose of purchasing or carrying any
"margin security" or "margin stock" as such terms are used in Regulations G, U
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
221 and 224.
ENVIRONMENTAL COMPLIANCE.
To the best of the Borrower's knowledge, except as disclosed on
Schedule 8.18 attached hereto:
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(a) none of the Borrower, its Subsidiaries or any operator
of the Real Estate or any operations thereon is in violation, nor has
the Borrower or any of its Subsidiaries received notice that it, or
any operator of the Real Estate is in alleged violation, of any
judgment, decree, order, law, license, rule or regulation pertaining
to environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act,
the Federal Clean Air Act, the Toxic Substances Control Act, or any
state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter
"Environmental Laws"), which violation would have a material adverse
effect on the environment or the business, assets or financial
condition of the Borrower and its Subsidiaries considered as a whole;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation:
any federal, state or local governmental authority: (i) that any one
of them has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List,
40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste,
as defined by 42 U.S.C. Section 6903(5), any hazardous substances as
defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. Section 9601(33) and any toxic substances, oil or
hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has
conducted or has ordered that the Borrower or any of its Subsidiaries
conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) except to the extent that
the following would not have a material adverse effect on the
business, assets of financial condition of the Borrower and its
Subsidiaries, taken as a whole, that it is or shall be a named party
to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses,
losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances;
(c) (i) no portion of the Real Estate has been used for the
handling, processing, storage or disposal of Hazardous Substances
other than in accordance with applicable Environmental Laws the
noncompliance with which would have a material adverse effect on the
business, assets or financial condition of the Borrower and its
Subsidiaries, taken as a whole; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on
any portion of the Real Estate in violation of any applicable
Environmental Law the noncompliance with which would have a material
adverse effect on the business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole; (ii) in the course
of any activities conducted by the Borrower, its Subsidiaries or
operators of such Person's properties, no Hazardous Substances have
been generated or are being used on the Real Estate except in
accordance (in all material respects) with applicable Environmental
Laws the noncompliance with which would have a material adverse
effect on the business, assets or financial condition of the Borrower
and its Subsidiaries, taken as a whole; (iii)
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there have been no releases (i.e. any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of
Hazardous Substances on, upon, into or from the properties of the
Borrower or its Subsidiaries, which releases would have a material
adverse effect on the value of any of the business, assets or
financial condition of the Borrower and its Subsidiaries, taken as a
whole; (iv) there have been no releases on, upon, from or into any
real property in the vicinity of any of the Real Estate which,
through soil or groundwater contamination, may have come to be
located on any of the Real Estate, and which would have a material
adverse effect on the business, assets or financial condition of the
Borrower and its Subsidiaries, taken as a whole and (v) in addition,
except to the extent that the following would not have a materially
adverse effect on the business, assets, or financial conditions of
the Borrower and its Subsidiaries, taken as a whole any Hazardous
Substances that have been generated on any of the Real Estate have
been transported offsite only by carriers having an identification
number issued by the EPA, treated or disposed of only by treatment or
disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities have
been and are operating in compliance with such permits and applicable
Environmental Laws; and
(d) none of the Borrower and its Subsidiaries, or any of the
Real Estate is subject to any applicable environmental law requiring
the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of
notice to any governmental agency or the recording or delivery to
other Persons of an environmental disclosure document or statement by
virtue of the transactions set forth herein and contemplated hereby.
SUBSIDIARIES, ETC.
As of the Closing Date, the Borrower's Subsidiaries are AmeriKing
Colorado, AmeriKing Tennessee, AmeriKing Cincinnati and AmeriKing Virginia,
each of which is a wholly-owned Subsidiary of the Borrower. Holdings is the
record and beneficial owner of 100% of the outstanding capital stock of the
Borrower. Except as set forth on Schedule 8.19 hereto, neither the Borrower
nor any Subsidiary of the Borrower is engaged in any joint venture or
partnership with any other Person.
CHIEF EXECUTIVE OFFICES.
Each of the Borrower's and Holdings' chief executive office is at
2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154, at which
location its books and records are kept. The chief executive office of each
Subsidiary is as set forth on Schedule 8.20 hereto.
FISCAL YEAR.
Each of Holdings and the Borrower has a fiscal year which is the
twelve (12) months ending on the date set forth opposite the respective years
on Schedule 8.21 attached hereto.
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NO AMENDMENTS TO CERTAIN DOCUMENTS.
Neither the Borrower nor its Subsidiaries has amended any of the
Acquisition Documents in any material respect. Each of the representations and
warranties made by the Borrower and its Subsidiaries in any of the Loan
Documents, Subordination Documents and the Acquisition Documents was true and
correct in all material respects when made and continues to be true and
correct in all material respects on the Closing Date, except to the extent
that any of such representations and warranties relate, by the express terms
thereof, solely to a date falling prior to the Closing Date, and except to the
extent that any of such representations and warranties may have been affected
by the consummation of the transactions contemplated and permitted or required
by the Loan Documents or the Acquisitions.
DISCLOSURE
No representation or warranty made by Holdings, the Borrower or any
of their Subsidiaries in this Credit Agreement or in any agreement,
instrument, document, certificate, statement or letter furnished to the Agent
or any Bank by or on behalf of Holdings, the Borrower or any of their
Subsidiaries in connection with any of the transactions contemplated by any of
the Loan Documents or the Acquisition Documents, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to
make the statements contained therein not misleading in light of the
circumstances in which they are made. There is no fact known to Holdings or
the Borrower as of the Closing Date (other than general economic and political
conditions affecting business generally) which materially adversely affects,
or which is reasonably likely to in the future materially adversely affect,
the financial position, business, operations, or affairs of Holdings, the
Borrower and their respective Subsidiaries taken, as a whole.
REPRESENTATIONS UNDER ACQUISITION DOCUMENT.
To the best of the Borrower's knowledge, each of the representations
and warranties of the seller contained in the Acquisition Documents are true
and correct in all material respects as of the Closing Date, and each of the
AmeriKing Cincinnati Acquisition Closing Date and the AmeriKing Virginia
Acquisition Closing Date.
INSURANCE.
The Borrower and each of its Subsidiaries maintains with financially
sound and reputable insurers insurance with respect to its properties and
businesses against such casualties and contingencies as are in accordance with
general practices and businesses engaged in similar activities and similar
geographic areas, with the details of such coverage being more fully described
on Schedule 8.25 hereto.
SPECIAL PURPOSE HOLDING COMPANY.
Except as contemplated by this Credit Agreement and the other Loan
Documents, on September 1, 1994 Holdings was created solely for the purposes
of the transactions contemplated by the Revolving Credit
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and Term Loan Agreement dated as of September 1, 1994 among the Borrower,
Holdings, certain of the Banks and the Agent, and, as of the Closing Date,
Holdings does not have any significant liabilities (other than liabilities
arising under the Subordination Documents, the Certificate of Incorporation of
Holdings, the Stockholders Agreement (including under the agreements and
instruments which are exhibits thereto), the Subordinated Agreement or this
Credit Agreement), own any significant assets (other than the capital stock of
the Borrower) or engage in any other significant activity or business.
AFFIRMATIVE COVENANTS OF THE BORROWER.
Each of Holdings and the Borrower covenant and agree that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligation to issue, extend or renew any Letters of Credit:
PUNCTUAL PAYMENT.
The Borrower will duly and punctually pay or cause to be paid the
principal and interest on the Loans, all Reimbursement Obligations, the Letter
of Credit Fees, the commitment fees, the Agent's Fee and all other amounts
provided for in this Credit Agreement and the other Loan Documents to which
the Borrower or any of its Subsidiaries is a party, all in accordance with the
terms of this Credit Agreement and such other Loan Documents.
MAINTENANCE OF OFFICE.
Each of Holdings and the Borrower will maintain its chief executive
office at 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154, or
at such other place in the United States of America as the Borrower shall
designate upon written notice to the Agent, where notices, presentations and
demands to or upon Holdings or the Borrower in respect of the Loan Documents
to which Holdings or the Borrower is a party may be given or made.
RECORDS AND ACCOUNTS.
Each of Holdings and the Borrower will (a) keep, and cause each of
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles and (b) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation, depletion, obsolescence
and amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves.
FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION.
The Borrower will deliver to the Agent, with sufficient copies for
each of the Banks:
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(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of Holdings and
the Borrower, (i) the consolidated balance sheet of Holdings and its
Subsidiaries as at the end of such year, and the related consolidated
statement of income and consolidated statement of cash flow for such
year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in
reasonable detail, prepared in accordance with generally accepted
accounting principles, and certified without qualification by
Deloitte & Touche or by other independent certified public
accountants satisfactory to the Agent, and (ii) the unaudited
consolidating balance sheet of Holdings and its Subsidiaries as at
the end of such year, and the related unaudited consolidating
statement of income and unaudited consolidating statements of cash
flow for such year, each setting forth in comparative form the
figures for the previous fiscal year and all such consolidating
statements to be in reasonable detail, prepared by management in
accordance with the past financial practice of Holdings and its
Subsidiaries and that the information contained in such financial
statements fairly presents the financial position of Holdings and its
Subsidiaries on the date hereof;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of
the Borrower, copies of the unaudited consolidated and consolidating
balance sheets of Holdings and its Subsidiaries each as at the end of
such quarter, and the related consolidated and consolidating
statements of income and consolidated and consolidating statements of
cash flow for the portion of Holdings' fiscal year then elapsed, each
setting forth in comparative form the figures for the previous fiscal
year and a comparison setting forth the corresponding figures from
the budgeted or projected figures set forth in the projections
described in Section 8.4 hereof for such period and all in reasonable
detail and prepared in accordance with generally accepted accounting
principles, and in each case together with a certification by the
principal financial or accounting officer of the Borrower that the
information contained in such financial statements fairly presents
the financial position of Holdings and its Subsidiaries on the date
thereof (subject to year-end adjustments);
(c) as soon as practicable, but in any event within thirty
(30) days after the end of each month in each fiscal year of the
Borrower, unaudited monthly consolidated and consolidating financial
statements of Holdings and its Subsidiaries for such month, each
setting forth in comparative form the figures for the previous fiscal
year and a comparison setting forth the corresponding figures from
the budgeted or projected figures set forth in the projections
described in Section 8.4 for such period, prepared in accordance with
generally accepted accounting principles, together with a
certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements
fairly presents the financial condition of Holdings and its
Subsidiaries on the date thereof (subject to year-end adjustments);
(d) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement
certified by the principal financial or accounting officer of the
Borrower in substantially the form of Exhibit D (the "Compliance
Certificate") hereto and setting forth in reasonable detail
computations evidencing compliance with the covenants contained in
Section 11 and (if
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applicable) reconciliations to reflect changes in generally accepted
accounting principles since the Balance Sheet Date;
(e) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the
Securities and Exchange Commission or sent to the stockholders of
Holdings or the Borrower;
(f) not later than the beginning of each fiscal year of the
Borrower, projections of Holdings, the Borrower and their
Subsidiaries updating those projections delivered to the Banks and
referred to in Section 8.4.2 or, if applicable, updating any later such
projections delivered pursuant to this Section 9.4(f);
(g) contemporaneously with the delivery thereof, copies of
all accountants' management letters delivered to Holdings, the
Borrower or any of their Subsidiaries; and
(h) from time to time such other financial data and
information as the Agent or any Bank may reasonably request.
The Banks and the Agent agree that they will treat in confidence all financial
information with respect to Holdings and its Subsidiaries which has not become
public, and will not, without the consent of the Borrower, disclose such
information to any third party, and, if any representative or agent of the
Banks or the Agent shall not be an employee of one of the Banks or the Agent
or any affiliate of the Banks or the Agent, such designee shall be reputable
and of recognized standing and shall agree to treat in confidence the
information obtained during any such inspection and, without the prior written
consent of the Borrower, not to disclose such information to any third party
or make use of such information for personal gain. Notwithstanding the
foregoing, the Borrower hereby authorizes the Agent and each of the Banks to
disclose information obtained pursuant to this Credit Agreement which has not
become public to banks or other financial institutions who are participants or
assignees or potential participants or assignees of the Loans made or to be
made hereunder with the Borrower's consent not to be unreasonably withheld,
and where required or requested by governmental or regulatory authorities.
NOTICES.
DEFAULTS.
The Borrower will give notice in writing to the Agent
promptly (but in no event later than five (5) days) of becoming aware
of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a
claimed default (whether or not constituting an Event of Default)
under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect
to which the Borrower or any of its Subsidiaries is a party or
obligor, whether as principal, guarantor, surety or otherwise, the
Borrower shall forthwith give written notice thereof to the Agent and
each of the Banks, describing the notice or action and the nature of
the claimed default.
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ENVIRONMENTAL EVENTS.
The Borrower will promptly give notice to the Agent and each
of the Banks (a) of any violation of any Environmental Law that the
Borrower or any of its Subsidiaries reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or
local environmental agency and (b) upon becoming aware thereof, of
any inquiry, proceeding, investigation, or other action, including a
notice from any agency of potential environmental liability, or any
federal, state or local environmental agency or board, that has the
potential to materially affect the assets, liabilities, financial
conditions or operations of the Borrower or any of its Subsidiaries,
or the Agent's security interests pursuant to the Security Documents.
NOTIFICATION OF CLAIM AGAINST COLLATERAL.
The Borrower will, immediately upon becoming aware thereof,
notify the Agent and each of the Banks in writing of any setoff,
claims (including, with respect to the Real Estate, environmental
claims), withholdings or other defenses (collectively, the
"Collateral Claims") to which any of the Collateral, or the Agent's
rights with respect to the Collateral, are subject if the amount of
such Collateral Claim is in excess of $750,000 in the aggregate.
NOTICE OF LITIGATION AND JUDGMENTS.
Each of Holdings and the Borrower will, and will cause each
of its Subsidiaries to, give notice to the Agent and each of the
Banks in writing within ten (10) Business Days of becoming aware of
any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting Holdings, the Borrower or any of
their Subsidiaries or to which Holdings, the Borrower or any of their
Subsidiaries is or becomes a party involving an uninsured claim of
more than $1,500,000 against Holdings, the Borrower or any of their
Subsidiaries that could reasonably be expected to have a materially
adverse effect on Holdings, the Borrower or any of their Subsidiaries
and stating the nature and status of such litigation or proceedings.
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, give notice to the Agent and each of the Banks, in
writing, in form and detail satisfactory to the Agent, within ten
(10) Business Days of any judgment not covered by insurance, final or
otherwise, against the Borrower or any of its Subsidiaries in an
amount in excess of $750,000.
NOTICE OF CHANGE OF LANDLORD ON BKC LEASES.
The Borrower will, and will cause each of its Restricted
Subsidiaires to give, immediately upon becoming aware thereof, notice
to the Agent in writing of any sale, assignment or other transfer by
BKC of BKC's ownership interest in any Real Estate leased by the
Borrower or any of its Restricted Subsidiaries from BKC.
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CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES.
Each of Holdings and the Borrower will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises and those of its Subsidiaries except as
permitted under Section 10.5.1 hereof or the dissolution of any Subsidiary of
the Borrower whose operation has been discontinued if such dissolution is, in
the judgment of the Borrower, desirable in the conduct of its business and does
not materially adversely affect the business of the Borrower and its
Subsidiaries on a consolidated basis. Each (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of Holdings and
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided
that nothing in this Section 9.6 shall prevent Holdings or the Borrower from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of
Holdings or the Borrower, as the case may be, desirable in the conduct of its
or their business and that do not in the aggregate materially adversely affect
the business of Holdings, the Borrower and their Subsidiaries on a
consolidated basis.
INSURANCE.
The Borrower will, and will cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers insurance with respect
to its properties and business against such casualties and contingencies as
shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts, containing such
terms, in such forms and for such periods as may be reasonable and prudent and
in accordance with the terms of the Security Agreement and Schedule 8.25.
TAXES.
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by
law become a lien or charge upon any of its property; provided that any such
tax, assessment, charge, levy or claim need not be paid if the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if Holdings, the Borrower or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto; and provided
further that Holdings, the Borrower and each Subsidiary of Holdings and the
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
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INSPECTION OF PROPERTIES AND BOOKS, ETC.
GENERAL.
Each of Holdings and the Borrower shall permit the Banks,
through the Agent or any of the Banks' other designated
representatives, to (a) visit and inspect any of the properties of
Holdings, the Borrower or any of their Subsidiaries, (b) to examine
the books of account of the Borrower and their Subsidiaries (and to
make copies thereof and extracts therefrom), (c) to discuss the
affairs, finances and accounts of Holdings, the Borrower and their
Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times during normal business hours
and at such reasonable intervals as the Agent or any Bank may
reasonably request and (d) conduct commercial finance examinations
and appraisals of assets, all at such reasonable times during normal
business hours and such reasonable intervals as the Agent or any Bank
may reasonably request. Each of the Banks agrees that it will treat
in confidence the information obtained during any inspection which is
designated by the Borrower as confidential and will not, without the
consent of the Borrower disclose such information to any third party
and, if any representative or agent of any Bank or the Agent shall
not be an employee of such Bank or the Agent, as the case may be, or
any affiliate of such Bank or the Agent, as the case may be, such
designee shall be reputable and of recognized standing and shall
agree in writing to treat in confidence the information obtained
during any such inspection and, without the prior written consent of
the Borrower, not to disclose such information to any third party or
make use of such information for personal gain. Notwithstanding the
foregoing, the Banks and the Agent may disclose information obtained
pursuant to this Credit Agreement to other banks or financial
institutions who are potential participants or potential assignees or
participants in the Loans made or to be made hereunder with the
Borrower's consent not to be unreasonably withheld, and where
required or requested by governmental or regulatory authorities.
COMMUNICATIONS WITH ACCOUNTANTS.
Each of Holdings and the Borrower authorizes the Agent and,
if accompanied by the Agent, the Banks to communicate directly with
Holdings' and the Borrower's independent certified public accountants
and authorizes such accountants to disclose to the Agent and the
Banks any and all financial statements and other supporting financial
documents and schedules including copies of any management letter
with respect to the business, financial condition and other affairs
of Holdings, the Borrower or any of their Subsidiaries. At the
request of the Agent, the Borrower shall deliver a letter addressed
to such accountants instructing them to comply with the provisions of
this Section 9.9.2.
ENVIRONMENTAL ASSESSMENTS.
The Agent may, from time to time, in its discretion, obtain
one or more environmental assessments or audits of any Mortgaged
Property prepared by a hydrogeologist, an independent engineer or
other qualified consultant or expert approved by the Agent to
evaluate or confirm (a) whether any Hazardous Materials are present
in the soil or water at such Mortgaged Property and (b)
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whether the use and operation of such Mortgaged Property complies
with all Environmental Laws. Environmental assessments may include
detailed visual inspections of such Mortgaged Property including any
and all storage areas, storage tanks, drains, dry wells, and leaching
areas, and the taking of soil samples, surface water samples and
ground water samples, as well as such other investigations or
analysis as the Agent deems appropriate. The Agent shall provide the
Borrower with written notice prior to beginning any such assessment
and shall provide the Borrower with reasonable detail as to the scope
of work to be conducted. In addition, the Borrower shall be given the
option to conduct such assessments on behalf of the Agent, provided
the Borrower commences and completes such assessments within a
reasonable time of the request by the Agent for such assessment.
Except after the occurrence and during the continuance of an Event of
Default pursuant to Section 14.1(a) or (b), all such environmental
assessments shall be conducted and made at the expense of the Banks.
COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, comply with (a) the applicable laws and regulations wherever
its business is conducted, including all Environmental Laws the noncompliance
with which would have a material adverse affect on the business, assets or
financial condition of Holdings, the Borrower and the Subsidiaries considered
as a whole or the ability of Holdings or the Borrower or any of their
Subsidiaries to fulfill its obligations under this Credit Agreement or the
other Loan Documents to which such Person is a party, (b) the provisions of
its charter documents and by-laws, (c) all agreements and instruments by which
it or any of its properties may be bound, including, without limitation, all
leases and Franchise Agreements, the noncompliance with which could have a
material adverse effect on the business, assets or financial condition of
Holdings, the Borrower and the Subsidiaries considered as a whole or the
ability of Holdings or the Borrower or any of their Subsidiaries to fulfill
its obligations under this Credit Agreement or the other Loan Documents to
which such Person is a party, and (d) all applicable decrees, orders, and
judgments the noncompliance with which could have a material adverse affect on
the business, assets or financial condition of Holdings, the Borrower and the
Subsidiaries considered as a whole or the ability of Holdings or the Borrower
or any of their Subsidiaries to fulfill its obligations under this Credit
Agreement or the other Loan Documents to which such Person is a party. If any
authorization, consent, approval, permit or license from any officer, agency
or instrumentality of any government shall become necessary or required in
order that Holdings, the Borrower or any of their Subsidiaries may fulfill any
of its obligations hereunder or any of the other Loan Documents to which such
Person is a party, Holdings or the Borrower will, or (as the case may be) will
cause such Subsidiary to, immediately take or cause to be taken all reasonable
steps within the power of such Person to obtain such authorization, consent,
approval, permit or license and furnish the Agent and the Banks with evidence
thereof.
EMPLOYEE BENEFIT PLANS.
Each of Holdings and the Borrower will (a) promptly upon filing the
same with the Department of Labor or Internal Revenue Service upon request of
the Agent, furnish to the Agent a copy of the most recent actuarial statement
required to be submitted under Section 103(d) of ERISA and Annual Report, Form
5500, with all required attachments, in respect of each Guaranteed Pension
Plan and (b) promptly upon receipt or
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dispatch, furnish to the Agent any notice, report or demand sent or received
in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043,
4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
USE OF PROCEEDS.
The Borrower will use the proceeds of the Loans (a) to finance the
Acquisitions and Permitted Acquisitions, (b) to convert existing Indebtedness
to the Banks under the Original Credit Agreement to Loans or Letters of
Credit, as the case may be, hereunder and (c) and for general corporate and
working capital purposes. The Borrower will obtain Letters of Credit solely
for general corporate and working capital purposes.
FAIR LABOR STANDARDS ACT.
Each of Holdings and the Borrower will, and each of their
Subsidiaries shall at all times operate its business in compliance with all
material applicable provisions of the Fair Labor Standards Act of 1938, as
amended. None of the inventory of Holdings, the Borrower or any of their
Subsidiaries are or will be produced by employees of (a) Holdings, the
Borrower or any of their Subsidiaries or (b) to the best knowledge of
Holdings, the Borrower and each of their Subsidiaries, by employees of
suppliers, who are, in each case, employed in violation of the minimum wage or
maximum hour provisions of the Fair Labor Standards Act (29 U.S.C. Sections 206
and 207) or any regulations promulgated thereunder, in each case, as in effect
from time to time.
FURTHER ASSURANCES.
Each of Holdings and the Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such
further instruments and documents as the Banks or the Agent shall reasonably
request to carry out to their satisfaction the transactions contemplated by
this Credit Agreement and the other Loan Documents.
INTEREST RATE PROTECTION.
The Borrower will, not later than April 30, 1996, purchase an
interest rate cap or swap or effect other interest rate protection
arrangements for a minimum period of two (2) years applicable to not less than
sixty percent (60%) of the Term Loans, on terms and conditions satisfactory to
the Agent.
MORTGAGED PROPERTY.
If, after the Closing Date, the Borrower or any of its Restricted
Subsidiaries acquires in any one transaction or a series of related
transactions real estate with either a fair market value or acquisition price
of more than $500,000, the Borrower or such Restricted Subsidiary, as the case
may be, shall forthwith deliver to the Agent, if the Agent so requests, a
fully executed mortgage or deed of trust over such real estate (which
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shall exclude fixtures, furniture and equipment), in form and substance
satisfactory to the Agent, together with title insurance policies, surveys,
evidences of insurance with the Agent named as loss payee and additional
insured, legal opinions and other documents and certificates with respect to
such real estate consistent with the Mortgages and related documents delivered
hereunder. In addition, if, after the Closing Date, the Borrower or any of its
Restricted Subsidiaries leases any real estate and, immediately after giving
effect to such lease, a single landlord and/or its affiliates other than BKC
owns twenty (20) or more pieces of real property leased to the Borrower or any
of the Restricted Subsidiaries, the Borrower or such Restricted Subsidiary, as
the case may be, shall use commercially reasonable efforts to obtain and
deliver to the Agent, if the Agent so requests, a fully executed leasehold
mortgage or leasehold deed of trust over all such real estate (which shall
exclude fixtures, furniture and equipment) owned by such landlord and/or its
affiliates, in form and substance satisfactory to the Agent, together with
title insurance policies, surveys, evidences of insurance with the Agent named
as loss payee and additional insured, legal opinions and other documents and
certificates with respect to such real estate consistent with the Mortgages
and related documents delivered hereunder. The Borrower further agrees that,
following the taking of any such actions with respect to such real estate, the
Agent shall have for the benefit of the Banks and the Agent a valid and
enforceable first priority mortgage or deed of trust over such real estate,
free and clear of all defects and encumbrances except for Permitted Liens.
CLASS OF STOCK.
Each of the Borrower and its Subsidiaries shall at all times have a
voting class of capital stock and a non-voting class of capital stock,
provided that not less than ninety-five percent (95%) of the value of the
Borrower or such Subsidiary, as the case may be, shall be represented by the
non-voting class of capital stock.
RECLASSIFICATION OF SUBSIDIARY.
In the event the Borrower consummates the sale of certain of its
restaurants to Bruce Taylor or his designee pursuant to Section 10.5.2(f) and
any of the proceeds thereof are used to repay the BKC Note and, within ninety
(90) days of such sale the capital represented by the repaid amount of the BKC
Note has not been completely replaced with other financing and the proceeds of
such other financing have not been distributed to the Borrower by AmeriKing
Tennessee, AmeriKing Tennessee shall become a Restricted Subsidiary and shall
immediately execute and deliver to the Agent a guaranty and security agreement
in form and substance satisfactory to the Agent.
APPLICATION OF PROCEEDS OF DISTRIBUTION.
In the event the Borrower receives a dividend from AmeriKing
Tennessee pursuant to Section 9.18 hereof, the amount of such dividend received
by the Borrower shall be applied as set forth in either Section 10.5.2(B)
or (C).
CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
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Each of Holdings and the Borrower covenant and agree that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligations to issue, extend or renew any Letters of Credit:
RESTRICTIONS ON INDEBTEDNESS.
Each of Holdings and the Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume, guarantee or be or remain
liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under
any of the Loan Documents;
(b) current liabilities of Holdings, the Borrower or such
Subsidiary incurred in the ordinary course of business not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and
in fact extended in connection with normal purchases of goods and
services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 9.8;
(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an
appeal so long as execution is not levied thereunder and Holdings,
the Borrower or such Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and in respect of
which a stay of execution shall have been obtained pending such
appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(f) Subordinated Debt (including the Subordinated Guaranty);
(g) Indebtedness consisting of (i) unsecured Indebtedness of
the Borrower and the Restricted Subsidiaries not otherwise permitted
hereunder, (ii) obligations of the Borrower and the Restricted
Subsidiaries under Capitalized Leases, and (iii) purchase money
Indebtedness incurred in connection with the acquisition after the
date hereof of any real or personal property by the Borrower or such
Restricted Subsidiary in an amount not to exceed $15,000,000 in the
aggregate, provided that the Borrower or such Restricted Subsidiary
shall not be permitted to finance more than eighty percent (80%) of
the purchase price of the property acquired, and further provided,
that the aggregate principal amount of all such Indebtedness
permitted under this clause (g) shall not exceed $15,000,000
outstanding at any one time;
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(h) Indebtedness existing on the date hereof and listed and
described on Schedule 10.1 hereto;
(i) Indebtedness in respect of interest rate protection
arrangements so long as such arrangements are purchased from or
issued by any of the Banks;
(j) Indebtedness in respect of performance, surety,
statutory, appeal or similar bonds obtained in the ordinary course
of business;
(k) Indebtedness to BKC arising under the Franchise
Agreements or the Leases (including, but not limited to, (i) any
guaranty by Holdings of the Borrower's obligations to BKC under the
Franchise Agreements or the Leases or (ii) any guaranty by the
Borrower or a Restricted Subsidiary of another Restricted
Subsidiary's obligations to BKC under the Franchise Agreements or the
Leases);
(l) contingent obligations to Jaro Enterprises, Inc.
consisting of earn-out payments relating to the sale of one
restaurant to the Borrower by Jaro Enterprises, Inc.;
(m) Indebtedness to TJC Management Corp. and Holdings
arising under the Management Agreement and Tax Sharing Agreement;
(n) Indebtedness of the Borrower or any of its Subsidiaries
incurred to refinance or replace Indebtedness of such Person
permitted under clause (f) hereof, provided, that (i) the principal
amount (or committed principal amount) of such refinancing
Indebtedness shall not exceed the outstanding principal amount (or
committed principal amount) of the Indebtedness being refinanced,
(ii) the terms of such refinancing Indebtedness are no more onerous
to the Borrower or such Subsidiary, as applicable, than the terms of
the Indebtedness being refinanced, and (iii) the Majority Banks shall
have consented to the incurrence of such refinancing Indebtedness,
such consent not to be unreasonably withheld;
(o) Indebtedness consisting of obligations of the Borrower
or any of its Subsidiaries under any operating lease or real estate
lease other than guarantees by Holdings, the Borrower or any
Restricted Subsidiary of the obligations under any operating lease or
real estate lease of an Unrestricted Subsidiary; and
(p) Indebtedness of any Unrestricted Subsidiary.
Notwithstanding anything to the contary contained in this Section 10.1, in no
event shall Holdings, the Borrower or its Restricted Subsidiaries, after the
Closing Date, incur Indebtedness under Section 10.1(g) if an Event of Default
exists or would exist after giving effect to the incurrence of such additional
Indebtedness.
RESTRICTIONS ON LIENS.
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Each of Holdings and the Borrower will not, and will not permit any
of its Subsidiaries to, (a) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or
the income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to
exist for a period of more than thirty (30) days after the same shall have
been incurred any Indebtedness or claim or demand against it that if unpaid
might by law or upon bankruptcy or insolvency, or otherwise, be given any
priority whatsoever over its general creditors; or (e) sell, assign, pledge or
otherwise transfer any accounts, contract rights, general intangibles, chattel
paper or instruments, with or without recourse; provided that Holdings, the
Borrower and any Subsidiary of Holdings or the Borrower may create or incur or
suffer to be created or incurred or to exist:
(i) subordinated liens in favor of MCIT, as agent pursuant
to the Subordinated Pledge Agreement;
(ii) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties
to secure claims for labor, material or supplies in respect of
obligations not overdue;
(iii) deposits or pledges made in connection with, or to
secure payment of, workmen's compensation, unemployment insurance,
old age pensions or other social security obligations;
(iv) liens on properties other than the Mortgaged Properties
in respect of judgments or awards, the Indebtedness with respect to
which is permitted by Section 10.1(d);
(v) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties, in existence less
than 120 days from the date of creation thereof in respect of
obligations not overdue;
(vi) encumbrances on Real Estate other than the Mortgaged
Properties consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects
and irregularities in the title thereto, landlord's or lessor's liens
under leases to which Holdings, the Borrower or a Subsidiary of
Holdings or the Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of Holdings, the Borrower
interferes materially with the use of the property affected in the
ordinary conduct of the business of Holdings, the Borrower and their
Subsidiaries, which defects do not individually or in the aggregate
have a materially adverse effect on the business of the Borrower
individually or of Holdings, the Borrower and their Subsidiaries on a
consolidated basis;
(vii) liens existing on the date hereof and listed on
Schedule 10.2 hereto;
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(viii) purchase money security interests in or purchase
money mortgages on real or personal property acquired after the date
hereof to secure purchase money Indebtedness of the type and amount
permitted by Section 10.1(g), incurred in connection with the
acquisition of such property, which security interests or mortgages
cover only the real or personal property so acquired;
(ix) liens in favor of the Agent for the benefit of the
Banks and the Agent under the Loan Documents;
(x) liens in favor of BKC to the extent provided in the
Franchise Agreements and Leases;
(xi) encumbrances or restrictions on the restaurant
identified as BKC Restaurant #209, to the extent provided in the
Aaseby Sale Agreement; and
(xii) liens on assets of the Unrestricted Subsidiaries.
RESTRICTIONS ON INVESTMENTS.
Neither Holdings nor the Borrower will, and neither will permit any
of their Subsidiaries to, make or permit to exist or to remain outstanding any
Investment except Investments in:
(a) marketable direct or guaranteed obligations of the
United States of America that mature within one (1) year from the
date of purchase by Holdings or the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $500,000,000;
(c) securities commonly known as "commercial paper" issued
by a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by Moody's Investors Services, Inc., and not less than "A 1" if
rated by Standard and Poor's;
(d) Repurchase agreements secured by any one or more of the
foregoing;
(e) Investments existing on the date hereof and listed on
Schedule 10.3 hereto and in amounts not to exceed the amounts listed
on Schedule 10.3 hereto;
(f) Investments consisting of the Guaranty or Subordinated
Guaranty or Investments by the Borrower in Subsidiaries of the
Borrower existing on February 7, 1996
(g) Investments by Holdings in Subsidiaries of Holdings
formed or acquired after September 1, 1994 other than Unrestricted
Subsidiaries, provided (i) such Subsidiary has become a party to the
Credit Agreement as a Borrower and has complied with Section 10.5.1,
(ii) such Investments do not exceed,
<PAGE>
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in the aggregate, $5,000,000 outstanding at any one time and (iii)
the Agent has approved such Investments;
(h) Investments by the Borrower in any of its Restricted
Subsidiaries, provided, such Restricted Subsidiary has executed and
delivered to the Agent for the benefit of the Agent and the Banks a
guaranty and security agreement and such Investments do not exceed,
in the aggregate, $6,000,000 outstanding at any one time;
(i) Investments by the Borrower in any of its Unrestricted
Subsidiaries, provided, such Investments in such Unrestricted
Subsidiaries do not exceed, in the aggregate, $5,000,000 outstanding
at any one time;
(j) Investments by the Borrower in Jaro Enterprises, Inc.
and/or its affiliates pursuant to the terms of the Jaro Loan
Agreement;
(k) Investments by the Borrower or any of its Subsidiaries
made in connection with any Indebtedness permitted under
Section 10.1(m) hereof;
(l) Investments by the Borrower consisting of Distributions
permitted by Section 10.4;
(m) Investments by the Borrower in AmeriKing Tennessee,
provided (i) the aggregate amount of such Investment is not more than
the aggregate amount outstanding under the BKC Note at the time of
such Investment, (ii) such Investment is made simultaneously with a
permitted disposition to Bruce Taylor pursuant to Section 10.5.2 and
(iii) the proceeds of such Investment shall be used solely to repay the
BKC Note; and
(n) Investment by Unrestricted Subsidiaries in Persons other
than Holdings, the Borrower or any Restricted Subsidiary.
DISTRIBUTIONS.
Holdings will not make any Distributions, and the Borrower and its
Subsidiares will not make any Restricted Payments, other than dividends or
payments:
(a) by the Borrower to Holdings required under the Tax
Sharing Agreement to permit Holdings to pay income, franchise and
other taxes and governmental levies owed or payable by Holdings,
provided such dividends or payments shall not be made earlier than
fifteen (15) days prior to the date such payments are due and payable
pursuant to the Tax Sharing Agreement;
<PAGE>
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(b) by the Borrower to Holdings to permit Holdings to pay
director fees (not to exceed $75,000 in the aggregate in any calendar
year);
(c) so long as no Default or Event of Default exists and is
continuing at the time of such payment or would result therefrom,
payments by the Borrower to Holdings to permit Holdings to (i) fund
indemnity payments required by Holdings' certificate of incorporation
or by-laws or director indemnity agreements existing on the date
hereof, (ii) pay filing, registration and reporting fees and
expenses, and fees and expenses associated with state qualifications
and other state, federal or regulatory compliance matters, (iii)
comply with expense reimbursement and indemnity provisions under the
Management Agreement, and (iv) comply with expense reimbursement
provisions under the Capitalization Documents, but only to the extent
no Default or Event of Default exists and is continuing at the time
of such payment or result therefrom, provided, such dividends or
payments permitted by this 10.4(c)(i) - (iv) shall not be made
earlier than fifteen (15) days prior to the date such payments are
due and payable from Holdings;
(d) by the Borrower, so long as no Default or Event of
Default under Section 14.1(a), (b)(i) or, only as relates to failure to
comply with Section 11 hereof, (c), has occurred or is continuing, or
would result therefrom, or, if a Default or Event of Default under
Section 14.1(b)(ii) through (v) has occurred, the Agent has not
provided the Borrower with notice of such Default or Event of Default,
which notice specifies that the Borrower is not permitted to make
payments to Holdings pursuant to this Section 10.4(d), to:
(i) Holdings in each fiscal year up to an aggregate
amount equal to (1) the amount of interest Holdings is
required to pay on the Subordinated Notes described in (a)
and (b) of such definition in such fiscal year solely for
the purpose of making such interest payments, provided,
however, the amount shall not include any Restricted
Payments to fund any increases in the rate of interest on
such Subordinated Notes after the Closing Date and provided,
further such dividends or payments shall not be made earlier
than fifteen (15) days prior to the date such interest
payments are due and payable by Holdings plus (2) an amount
of interest, if any, not to exceed six (6) months' accrued
interest on such Subordinated Notes which is in arrears on
such Subordinated Notes, solely for the purpose of making
such past due interest payments, with the application of
such payments to be in accordance with the terms of the
Subordinated Agreement;
(ii) TJC Management Corporation and/or Holdings
consisting of quarterly management fee payments in an
aggregate annual amount of either (a) two and one-half
percent (2 1/2%) of EBITDA for such fiscal year, up to an
amount not to exceed $600,000 minus any amounts paid
pursuant to Section 10.4(b in any fiscal year prior to the
fiscal year ending December 31, 1999 or (b) if greater,
$500,000 per fiscal year, which are due and payable in such
fiscal year pursuant to the Management Agreement or the
Intercompany Management Agreement and indemnity payments
required to be made under the Management Agreement, provided
such dividends or
<PAGE>
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payments shall not be made earlier than fifteen (15) days
prior to the date such payments are due and payable pursuant
to the terms of the Management Agreement or the Intercompany
Management Agreement, as the case may be; and
(iii) TJC Management Corporation and/or its
designee on or after the Closing Date an investment banking
fee of not more than $1,000,000 in the aggregate and
Valuefinder Group and/or its designee on or after the
Closing Date a broker's fee of not more than $570,175 in the
aggregate; and
(e) by any Subsidiary of the Borrower to the Borrower.
MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
MERGERS AND ACQUISITIONS.
Neither Holdings nor the Borrower will, and neither will
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than the acquisition of assets in the ordinary
course of business consistent with past practices) except (a) the
merger or consolidation of one or more of the Subsidiaries of
Holdings (other than the Borrower) or the Borrower with and into its
parent provided that the survivor of such merger may not be an
Unrestricted Subsidiary, (b) the merger or consolidation of two or
more Subsidiaries of Holdings (other than the Borrower) or the
Borrower, provided that the survivor of such merger may not be an
Unrestricted Subsidiary unless the merger involves only Unrestricted
Subsidiaries, (c) the Acquisitions and (d) other acquisitions of the
assets and businesses of BKC Restaurants, or the development of such
restaurants or other quick service restaurants (the "Permitted
Acquisitions") where (i) no Default or Event of Default has occurred
or is continuing or would exist after giving effect thereto; (ii) the
Borrower has provided the Agent with prior written notice of such
acquisition or development; (iii) the Borrower or the Restricted
Subsidiary, as the case may be, has taken all necessary actions to
grant to the Agent a first priority perfected lien in such assets
other than those assets which are not permitted to be encumbered by
any Franchise Agreement or lease affecting such restaurant or which
secure purchase money Indebtedness permitted pursuant to
Section 10.1(g), and, in the case of an Unrestricted Subsidiary, such
Unrestricted Subsidiary has taken all necessary action to grant to the
Agent a perfected lien on the non-voting capital stock of its
Subsidiaries pursuant to the requirements of Section 7.1 hereof;
(iv) the Borrower and its Subsidiaries do not acquire or develop in
any fiscal year that number of restaurants which would exceed twenty
percent (20%) of the number of restaurants owned by the Borrower and
its Subsidiaries at the end of the immediately preceding fiscal year;
provided, however, for the period from the Closing Date through the
next fiscal year, those restaurants owned by AmeriKing Virginia and
AmeriKing Cincinnati shall be deemed to have been owned in the
immediately preceding fiscal year; (v) the Borrower has demonstrated
to the Agent based on a pro forma Compliance Certificate covenant
compliance with Section 11 on a Pro Forma Basis immediately prior to
and after giving effect to such acquisition or development; (vi) any
acquisition-related Indebtedness would not violate the restrictions
on Indebtedness set forth in Section 10.1;
<PAGE>
-69-
(vii) immediately after giving effect to such acquisition or
development, the Total Commitment exceeds the sum of (1) the
aggregate outstanding Revolving Credit Loans plus (2) the Maximum
Drawing Amount plus (3) all Unpaid Reimbursement Obligations by at
least $1,000,000; and (viii) immediately after giving effect to such
acquisition and/or development, the total number of non-BKC
Restaurants does not exceed, in the aggregate, ten (10) restaurants
and the total number of Dual-Use Establishments does not exceed ten
percent (10%) of the number of restaurants owned by the Borrower and
its Subsidiaries at the end of the immediately preceding fiscal year.
In the event any new Restricted Subsidiary is formed as a
result of or in connection with any acquisition or development, the
Loan Documents shall be amended and/or supplemented as necessary to
make the terms and conditions of the Loan Documents applicable to
such Restricted Subsidiary. In the case of Holdings forming such
Subsidiary, such Subsidiary shall become a Borrower hereunder, and in
the case of the Borrower forming such Restricted Subsidiary, such
Restricted Subsidiary shall be a guarantor hereunder.
DISPOSITION OF ASSETS.
Neither Holdings nor the Borrower will, and neither will
permit any of its Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than (a) the sale of
inventory in the ordinary course of business, consistent with past
practices, (b) the disposition of obsolete assets which are no longer
used or useful in current or planned business operations of such
Person, (c) the disposition of assets in the ordinary course of
business, consistent with past practices, (d) the assignment of the
Borrower's Option, so long as at the time such assignee exercises the
Option, the Borrower and such assignee enter into a lease with terms
no less favorable to the Borrower than the terms of the lease being
replaced as a result of the exercise of the Option, (e) so long as no
Default or Event of Default has occurred or is continuing, the sale
of the restaurant identified as BKC Restaurant #209 to Joel Aaseby,
provided such sale is on terms and conditions substantially as set
forth in the Aaseby Sale Agreement and (f) so long as no Default or
Event of Default has occurred or is continuing or would result
therefrom, the sale to BKC or its minority designee of not more than
twenty (20) of the restaurants acquired by the Borrower in the
Initial Acquisition (as such term is defined in the Original Credit
Agreement) and the Acquisition (as defined in the Original Credit
Agreement), provided (i) the cash consideration for each restaurant
sold is at least equal to 4.75 times Restaurant Cash Flow for such
restaurant, (ii) all cash proceeds of each such sale is applied to
either (A) repay existing Indebtedness to BKC owing under the BKC
Note in an amount not to exceed $6,920,700 in the aggregate in the
event such sale is to Bruce Taylor or his designee; (B) the purchase
within ninety (90) days of such sale of a replacement restaurant from
BKC for a purchase price of not more than 4.75 times the Restaurant
Cash Flow of the restaurant purchased or (C) pro rata to the
repayment of the Term Loans with such payments then applied against
the scheduled installments of principal due on the respective Term
Loan in the inverse order of maturity; and (iii) such sales are on
terms and conditions satisfactory to the Agent.
SALE AND LEASEBACK.
<PAGE>
-70-
Other than the FFCA Transaction, neither Holdings nor the Borrower
will, and neither will permit any of its Subsidiaries to, enter into any
arrangement, directly or indirectly, whereby Holdings, the Borrower or any
Subsidiary of Holdings or the Borrower shall sell or transfer any property
owned by it in order then or thereafter to lease such property or lease other
property that Holdings or the Borrower or any Subsidiary of Holdings or the
Borrower intends to use for substantially the same purpose as the property
being sold or transferred, provided, however, that Holdings, the Borrower or
any of their Subsidiaries may enter into such sale-leaseback transactions to
the extent that the Indebtedness incurred in connection with such transactions
is permitted under Section 10.1(g) hereof.
COMPLIANCE WITH ENVIRONMENTAL LAWS.
Except as set forth on Schedule 10.7 hereto, neither Holdings nor the
Borrower will, and neither will permit any of its Subsidiaries to, (a) use any
of the Real Estate or any portion thereof for the handling, processing,
storage or disposal of Hazardous Substances in violation of any Environmental
Law the noncompliance with which would have a material adverse effect on the
business, assets or financial condition of Holdings, the Borrower or their
Subsidiaries taken as a whole, (b) cause or permit to be located on any of the
Real Estate any underground tank or other underground storage receptacle for
Hazardous Substances in violation of any Environmental Law the noncompliance
with which would have a material adverse effect on the business, assets or
financial condition of Holdings, the Borrower or their Subsidiaries taken as a
whole, (c) generate any Hazardous Substances on any of the Real Estate in
violation of any Environmental Law the noncompliance with which would have a
material adverse effect on the business, assets or financial condition of
Holdings, the Borrower or their Subsidiaries taken as a whole, (d) conduct any
activity at any Real Estate or use any Real Estate in any manner so as to
cause a release (i.e. releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping) or threatened release of Hazardous Substances on, upon or into the
Real Estate or (e) otherwise conduct any activity at any Real Estate or use
any Real Estate in any manner that would violate any Environmental Law or
bring such Real Estate in violation of any Environmental Law in each case if
such violation would have a material adverse effect on the business, assets or
financial condition of Holdings, the Borrower and its Subsidiaries, taken as a
whole.
SUBORDINATED DEBT AND PREFERRED STOCK.
From and after the Closing Date neither Holdings nor the Borrower
will, and neither will permit any of its Subsidiaries to, (a) amend,
supplement or otherwise modify the terms of any of the Subordinated Debt (i)
which amendment, supplement or modification effects any increase in the
principal amount of the Subordinated Notes, the interest rate thereon or any
fees under the Subordination Documents or (ii) which amendment, supplement or
modification relates to other terms and provisions of the Subordination
Documents and the cumulative effect of which is to materially adversely effect
the Agent's or the Bank's rights or interests under the Loan Documents or the
Borrower's ability to fulfill their obligations under the Loan Documents, or
prepay, redeem, repurchase or make any payment in defeasance of any of the
Subordinated Debt or send any notice of redemption, prepayment, repurchase or
defeasance with respect to any of the Subordinated Debt or (b) amend,
supplement or otherwise modify the terms of the Stockholders Agreement if such
amendment,
<PAGE>
-71-
supplement or modification could reasonably be expected to adversely affect
the Agent's or the Banks' rights or impact the Borrower's or Holdings'
abilities to fulfill their obligations under the Loan Documents.
EMPLOYEE BENEFIT PLANS.
Neither Holdings, the Borrower nor any ERISA Affiliate will
(a) engage in any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code which
could result in a material liability for the Borrower or any of its
Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, whether or not such deficiency is or may be
waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to
Section 302(f) or Section 4068 of ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities, by more than the amount set forth in
Section 8.16.3.
CHANGE IN TERMS OF CAPITAL STOCK.
Neither Holdings nor the Borrower will, and neither will permit any
of its Restricted Subsidiaries to effect or permit any change in or amendment
to any document or instrument pertaining to the terms of such Person's capital
stock without the written consent of the Banks unless such change or amendment
is of an immaterial or ministerial nature that would not have any adverse
effect on the Agent's or the Banks' rights under the Loan Documents or the
Borrower's or Holdings' obligations under the Loan Documents; provided,
however, so long as no Default of Event of Default has occurred and is
continuing or would exist as a result thereof, Holdings shall be entitled to
modify its outstanding capital stock or issue shares of a new class of capital
stock provided that (i) the terms of such capital stock do not permit any cash
dividends to be paid to the holders thereof until all of the Obligations have
been indefeasibly repaid in full in cash and the Commitment has been
permanently reduced to zero; (ii) the terms of such capital stock do not
contain any mandatory redemption rights until such time as all of the
Obligations have been indefeasibly repaid in full in cash and the Commitment
has been permanently reduced to zero; and (iii) such capital stock is
non-voting and, if convertible, is only convertible into a non-voting class of
capital stock.
FISCAL YEAR.
Neither Holdings nor the Borrower nor any Subsidiaries will change
the date of the end of their respective fiscal years from that set forth in
Section 8.21 hereof.
<PAGE>
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BUSINESS ACTIVITIES.
Holdings will not engage in any business activity, except its
consummation of the Acquisitions, activities in connection with Investments
permitted by Section 10.3(g), its ownership of the Borrower and its performance
from time to time of its obligations under this Credit Agreement, the other
Loan Documents, the Stock Purchase Agreement, the Subordinated Purchase
Agreement, the Capitalization Documents and each other agreement, instrument
or document contemplated hereby, whether or not executed on or before the
Closing Date.
MODIFICATION OF DOCUMENTS.
Neither Holdings nor the Borrower will consent to or agree to any
amendment, supplement or other modification to the Tax Sharing Agreement, the
Management Agreement, the Management Subscription Agreement or the
Intercompany Management Agreement which affects, in a manner adverse to
Holdings or the Borrower, the amount or timing of payments required to be made
by the Borrower or Holdings thereunder, or if such amendment, supplement or
modification could reasonably be expected to adversely affect the Agent's or
the Banks' rights or interests or adversely affect the Borrower's or Holdings'
abilities to fulfill their obligations under the Loan Documents.
NEGATIVE PLEDGES.
Neither Holdings, the Borrower nor any of their Subsidiaries other
than the Unrestricted Subsidiaries will enter into any agreement (excluding
this Credit Agreement, the Loan Documents, the Subordinated Agreement and the
Subordinated Purchase Agreement) prohibiting the creation or assumption of any
lien upon its properties, revenues or assets or those of any of its
Subsidiaries, whether now owned or hereafter acquired other than agreements
with Persons prohibiting any such lien on assets in which such Person has a
prior security interest which is permitted by Section 10.2.
TRANSACTIONS WITH AFFILIATES.
Neither Holdings nor the Borrower will, nor will they permit any of
their Subsidiaries to, enter into, or cause, suffer or permit to exist (a) any
arrangement or contract with any of its other Affiliates of a nature
customarily entered into by Persons which are Affiliates of each other
(including management or similar contracts or arrangements relating to the
allocation of revenues, taxes and expenses or otherwise) requiring any
payments to be made by Holdings, the Borrower or any of their Subsidiaries to
any Affiliate unless such arrangement is fair and equitable to Holdings, the
Borrower or such Subsidiary; or (b) any other transaction, arrangement,
contract with any of their other Affiliates which would not be entered into by
a prudent Person in the position of Holdings, the Borrower or such Subsidiary
with, or which is on terms which are less favorable than are obtainable from,
any Person which is not one of its Affiliates, provided, however, nothing
contained in this Section 10.15 shall prohibit Holdings or the Borrower from
making or receiving payments otherwise permitted by Section 10.4 hereof.
<PAGE>
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UPSTREAM LIMITATIONS.
The Borrower will not, nor will the Borrower permit any of its
Restricted Subsidiaries to enter into any agreement, contract or arrangement
(other than the Credit Agreement and the other Loan Documents or the
Subordinated Purchase Agreement) restricting the ability of any Restricted
Subsidiary to pay or make dividends or distributions in cash or kind, to make
loans, advances or other payments of whatsoever nature or to make transfers or
distributions of all or any part of its assets to the Borrower or to any
Subsidiary of such Restricted Subsidiary.
INCONSISTENT AGREEMENTS.
Neither Holdings nor the Borrower will, nor will they permit any of
their Subsidiaries to, enter into any agreement containing any provision which
would be violated or breached by the performance by Holdings, the Borrower or
such Subsidiary of its obligations hereunder or under any of the Loan
Documents.
CAPITAL EXPENDITURES.
The Borrower will not make, or permit any Subsidiary to make, Capital
Expenditures in any fiscal period set forth on the table below that exceed, in
the aggregate the amount set forth opposite such fiscal period in such table:
<TABLE>
<CAPTION>
Fiscal Period Ending Amount
- -------------------------------------------------------------- ----------------------------
<S> <C>
Fiscal Quarter ending April 1, 1996 $ 2,000,000
- -------------------------------------------------------------- ----------------------------
Fiscal Period from January 2, 1996 through July 1, 1996
$ 7,000,000
- -------------------------------------------------------------- ----------------------------
Fiscal Period from January 2, 1996 through September 30, 1996
$ 8,000,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 30, 1996 $ 8,600,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 29, 1997 $ 8,800,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 28, 1998 $ 9,400,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 27, 1999 $10,150,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 25, 2000 $11,100,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 24, 2001 $12,000,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 23, 2002 $13,000,000
- -------------------------------------------------------------- ----------------------------
Fiscal Year ending December 22, 2003 and each fiscal year ending
in December thereafter $13,800,000
- -------------------------------------------------------------- ----------------------------
</TABLE>
FINANCIAL COVENANTS OF THE BORROWER.
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The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
DEBT SERVICE COVERAGE RATIO.
The Borrower will not, as of the end of any fiscal quarter ending
during any period described in the table set forth below, permit the Debt
Service Coverage Ratio for the Reference Period ending on such date to be less
than the ratio set forth opposite such period in such table:
Fiscal Quarter Ending Ratio
- --------------------------------------------------- -----------------------
March 31, 1997 1.16:1.00
- --------------------------------------------------- -----------------------
June 30, 1997 - March 30, 1998 1.14:1.00
- --------------------------------------------------- -----------------------
June 29, 1998 - March 29, 1999 1.13:1.00
- --------------------------------------------------- -----------------------
June 28, 1999 and thereafter 1.11:1.00
- --------------------------------------------------- -----------------------
INTEREST COVERAGE RATIO.
The Borrower will not, as of the end of any fiscal quarter ending
during any period described in the table set forth below, permit the Interest
Coverage Ratio for the Reference Period ending on such date to be less than
the ratio set forth opposite such period in such table:
Fiscal Quarter Ending Ratio
- ---------------------------------------------------- ----------------------
Closing Date - December 30, 1996 2.00:1.00
- ---------------------------------------------------- ----------------------
March 31, 1997 - December 29, 1997 2.00:1.00
- ---------------------------------------------------- ----------------------
March 30, 1998 - December 28, 1998 2.20:1.00
- ---------------------------------------------------- ----------------------
March 29, 1999 - December 27, 1999 2.50:1.00
- ---------------------------------------------------- ----------------------
March 27, 2000 - December 25, 2000 2.90:1.00
- ---------------------------------------------------- ----------------------
March 26, 2001 - December 24, 2001 3.25:1.00
- ---------------------------------------------------- ----------------------
March 25, 2002 and thereafter 3.75:1.00
- ---------------------------------------------------- ----------------------
For purposes of calculating the Interest Coverage Ratio for fiscal quarters
ending on or before December 30, 1996, the following adjustments shall be
made:
(a) EBITDA for each of the fiscal quarters ending June 30, 1995,
October 2, 1995 and January 1, 1996 shall be deemed to be $6,250,000,
(b) Consolidated Total Interest Expense for each of the fiscal
quarters ending June 30, 1995, October 2, 1995 and January 1, 1996 shall be
deemed to be $2,627,000, and
(c) EBITDA and Consolidated Total Interest Expense for the fiscal
quarter ending April 1, 1996 shall be calculated on a Pro Forma Basis upon the
assumption that the Test Period commences January 1, 1996.
<PAGE>
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MINIMUM EBITDA.
The Borrower will not, as of the end of any fiscal quarter ending
during any period described in the table set forth below, permit EBITDA of the
Borrower and its Subsidiaries for the Reference Period ending on such date, to
be less than the amount set forth opposite such period in such table:
Fiscal Quarter Ending Amount
- -------------------------------------------------------- ----------------
April 1, 1996 $22,750,000
- -------------------------------------------------------- ----------------
July 1, 1996 $22,500,000
- -------------------------------------------------------- ----------------
September 30, 1996 $22,650,000
- ------------------------------------------------------- -----------------
December 30, 1996 $22,000,000
- -------------------------------------------------------- ----------------
March 31, 1997 - December 29, 1997 $21,120,000
- -------------------------------------------------------- ----------------
March 30, 1998 - December 28, 1998 $21,650,000
- -------------------------------------------------------- ----------------
March 29, 1999 - December 27, 1999 $22,190,000
- -------------------------------------------------------- ----------------
March 27, 2000 - December 25, 2000 $22,745,000
- -------------------------------------------------------- ----------------
March 26, 2001 - December 24, 2001 $23,315,000
- -------------------------------------------------------- ----------------
March 25, 2002 - December 23, 2002 $23,900,000
- --------------------------------------------------------- ---------------
March 24, 2003 and thereafter $24,500,000
- -------------------------------------------------------- ----------------
For purposes of calculating the EBITDA for fiscal quarters ending on or before
December 30, 1996, the following adjustments shall be made:
(a) EBITDA for each of the fiscal quarters ending June 30, 1995,
October 2, 1995 and January 1, 1996 shall be deemed to be $6,250,000, and
(b) EBITDA for the fiscal quarter ending April 1, 1996 shall be
calculated on a Pro Forma Basis upon the assumption that the Test Period
commences January 1, 1996.
LEVERAGE RATIO.
The Borrower will not, at any time during any period described in the
table set forth below, permit the Leverage Ratio to exceed the ratio set forth
opposite such period in such table:
Period Ratio
- --------------------------------------------------- ------------------------
March 31, 1997 - March 29, 1998 4.975:1.00
- --------------------------------------------------- ------------------------
March 30, 1998 - March 28, 1999 4.55:1.00
- --------------------------------------------------- ------------------------
March 29, 1999 - March 26, 2000 4.00:1.00
- --------------------------------------------------- ------------------------
<PAGE>
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- ----------------------------------------------- -----------------------------
March 27, 2000 - March 25, 2001 3.50:1.00
- ----------------------------------------------- -----------------------------
March 26, 2001 - March 24, 2002 3.00:1.00
- ----------------------------------------------- -----------------------------
March 25, 2002 and thereafter 2.50:1.00
- ----------------------------------------------- -----------------------------
<PAGE>
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CLOSING CONDITIONS. The obligations of the Banks to make the initial
Revolving Credit Loans and the Term Loans and of the Agent to issue any
initial Letters of Credit shall be subject to the satisfaction of the
following conditions precedent on or prior to February 7, 1996:
LOAN DOCUMENTS ETC.
LOAN DOCUMENTS
Each of the Loan Documents shall have been duly executed and
delivered by the respective parties thereto, shall be in full force and effect
and shall be in form and substance satisfactory to each of the Banks. Each
Bank shall have received a fully executed copy of each such document.
SUBORDINATION DOCUMENTS.
Each of the Subordination Documents not previously executed and
delivered pursuant to the Original Credit Agreement, and all amendments
thereto, shall have been duly executed and delivered by the respective parties
thereto, shall be in full force and effect and shall be in form and substance
reasonably satisfactory to each of the Banks. Each Bank shall have received a
fully executed copy of each such document. In addition, the Agent shall have
received evidence satisfactory to the Agent that the Borrower has received the
proceeds of the Subordinated Notes issued pursuant to the Subordinated
Purchase Agreement of at least $15,000,000 in cash.
ACQUISITION AND CAPITALIZATION
DOCUMENTS.
Each of the Acquisition Documents, the Capitalization Documents not
previously executed and delivered pursuant to the Original Credit Agreement,
and any amendments thereto shall have been duly executed and delivered by the
respective parties thereto, shall be in full force and effect and shall be in
form and substance satisfactory to each of the Banks. The Agent shall have
received a fully executed copy of each such document.
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WARRANT AMENDMENT.
The Warrant dated as of September 1, 1994 and delivered pursuant to
the Original Credit Agreement shall have been amended pursuant to the terms of
the Warrant Amendment.
CERTIFIED COPIES OF CHARTER DOCUMENTS.
Each of the Banks shall have received from Holdings, the Borrower and
each of its Subsidiaries a copy, certified by a duly authorized officer of
such Person to be true and complete on the Closing Date, of each of (a) its
charter or other incorporation documents as in effect on such date of
certification, and (b) its by-laws as in effect on such date.
CORPORATE ACTION.
All corporate action necessary for the valid execution, delivery and
performance by Holdings, the Borrower and its Subsidiaries of this Credit
Agreement and the other Loan Documents to which it is or is to become a party
shall have been duly and effectively taken, and evidence thereof satisfactory
to the Banks shall have been provided to each of the Banks.
INCUMBENCY CERTIFICATE.
Each of the Banks shall have received from Holdings, the Borrower and
its Subsidiaries an incumbency certificate, dated as of the Closing Date,
signed by a duly authorized officer of Holdings, the Borrower and its
Subsidiaries, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf of
each of Holdings, the Borrower and its Subsidiaries, each of the Loan
Documents and Subordination Documents to which the Borrower and its
Subsidiaries is or is to become a party; (b) in the case of the Borrower, to
make Loan Requests and Conversion Requests and to apply for Letters of Credit;
and (c) to give notices and to take other action on its behalf under the Loan
Documents.
VALIDITY OF LIENS.
The Security Documents shall be effective to create in favor of the
Agent a legal, valid and enforceable first (except for Permitted Liens
entitled to priority under applicable law) security interest in and lien upon
the Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected. The Agent
shall have received evidence thereof in form and substance
satisfactory to the Agent.
PERFECTION CERTIFICATES AND UCC SEARCH
RESULTS.
The Agent shall have received from each of Holdings, the Borrower and
its Subsidiaries other than the Unrestricted Subsidiaries a completed and
fully executed Perfection Certificate and the results of UCC searches with
respect to the Collateral, indicating no liens other than Permitted Liens and
otherwise in form and substance satisfactory to the Agent.
CERTIFICATES OF INSURANCE.
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The Agent shall have received a certificate of insurance from an
independent insurance broker dated as of the Closing Date, identifying
insurers, types of insurance, insurance limits, and policy terms, and
otherwise describing the insurance obtained in accordance with the provisions
of the Security Documents.
SOLVENCY CERTIFICATE.
Each of the Banks shall have received an officer's certificate of the
Borrower dated as of the Closing Date as to the solvency of Holdings, the
Borrower and their Subsidiaries following the consummation of the transactions
contemplated herein and in form and substance satisfactory to the Banks.
OPINION OF COUNSEL.
Each of the Banks and the Agent shall have received a favorable legal
opinion addressed to the Banks and the Agent, dated as of the Closing Date, in
form and substance reasonably satisfactory to the Agent, from Mayer, Brown &
Platt, special counsel to Holdings, the Borrower and AmeriKing Virginia and
Freeborn & Peters, special counsel to AmeriKing Cincinnati.
PAYMENT OF FEES AND OTHER ARRANGEMENTS.
The Borrower shall have paid to the Banks or the Agent, as
appropriate, the closing fee, the amendment fee and the Agent's Fee and
complied with all other arrangements set forth in the Fee Letter between the
Agent and the Borrower.
DISBURSEMENT INSTRUCTIONS.
The Agent shall have received disbursement instructions from the
Borrower with respect to the proceeds of the Term Loans and the initial
Revolving Credit Loan.
SATISFACTION OF CONDITIONS OF ACQUISITION DOCUMENTS.
The Agent shall have received evidence that all of the closing
conditions in the Acquisition Documents have been satisfied or waived in
writing by the appropriate parties.
COMPLETION OF ACQUISITION, ETC.
The Acquisitions shall have been completed pursuant to the
Acquisition Documents and otherwise on terms and conditions that are
satisfactory to the Agent in all respects.
COMPLETION OF SUCCESSFUL FINANCIAL INQUIRY.
The Agent and the Bank, shall be satisfied that all information
provided to the Agent prior to the Closing Date accurately sets forth the cash
flow for such period attributable to the assets and business to be acquired in
the Acquisitions.
TAXES.
The Agent shall have received evidence of payment of real estate
taxes and municipal charges on all Real Estate due on or before the Closing
Date.
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TITLE INSURANCE.
The Agent shall have received a Title Policy covering each Mortgaged
Property (or commitments to issue such policies, with all conditions to
issuance of the Title Policy deleted by an authorized agent of the Title
Insurance Company) together with proof of payment of all fees and premiums for
such policies, from the Title Insurance Company and in amounts satisfactory to
the Agent, insuring the interest of the Agent and each of the Banks as
mortgagee under the Mortgages.
LANDLORD CONSENTS.
The Borrower and its Subsidiaries shall have delivered to the Agent
all consents which are required for the Agent to receive, as part of the
Security Documents, a leasehold mortgage on each of the Mortgaged Properties
existing on the Closing Date and estoppel certificates on each of the
Mortgaged Properties as the Agent may reasonably
request.
HAZARDOUS WASTE ASSESSMENTS.
The Agent shall have received hazardous waste site assessments from
environmental engineers and in form and substance reasonably satisfactory to
the Agent, covering all Mortgaged Properties and all other real property in
respect of which the Borrower or any of its Subsidiaries may have material
liability, whether contingent or otherwise, for dumping or disposal of
Hazardous Substances.
CONSENTS AND APPROVALS.
The Agent shall have received evidence that all consents and
approvals necessary to complete the Acquisitions and the transactions
contemplated hereby, including but not limited to all consents and approvals
contemplated by the Acquisition Documents, have been obtained.
EVIDENCE OF MERGER/PLEDGE OF STOCK.
The Agent shall have received either (a) evidence of the merger of
QSC, Inc. and Ro-Lank, Inc. with and into AmeriKing Tennessee on or prior to
February 7, 1996, with AmeriKing Tennessee being the survivor of such merger
or (b) an executed stock pledge agreement in form and substance satisfactory
to the Agent from AmeriKing Tennessee granting to the Agent for the benefit of
the Agent and the Banks a perfected security interest in the non-voting
capital stock of each of QSC, Inc. and Ro-Lank, Inc.
ALLOCATION ADJUSTMENTS.
The Agent shall have received evidence that the parties hereto have
agreed to any necessary adjustments regarding interest and fees owing to any
of the Banks under the Original Credit Agreement resulting from the
reallocation of the Commitments under this Credit Agreement.
CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, including the
Revolving Credit Loan and the Term Loans, and of the Agent to issue, extend or
renew any Letter of Credit, in each case whether on or after the Closing Date,
shall also be subject to the satisfaction of the following conditions
precedent:
REPRESENTATIONS TRUE; NO EVENT OF DEFAULT.
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Each of the representations and warranties of any of Holdings, the
Borrower and their Subsidiaries contained in this Credit Agreement, the other
Loan Documents or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of which
they were made and shall also be true at and as of the time of the making of
such Loan or the issuance, extension or renewal of such Letter of Credit, with
the same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially adverse,
and to the extent that such representations and warranties relate expressly to
an earlier date) and no Default or Event of Default shall have occurred and be
continuing.
NO LEGAL IMPEDIMENT.
No change shall have occurred in any law or regulations thereunder or
interpretations thereof that in the reasonable opinion of any Bank would make
it illegal for such Bank to make such Loan or to participate in the issuance,
extension or renewal of such Letter of Credit or in the reasonable opinion of
the Agent would make it illegal for the Agent to issue, extend or renew such
Letter of Credit.
GOVERNMENTAL REGULATION.
Each Bank shall have received such statements in substance and form
reasonably satisfactory to such Bank as such Bank shall require for the
purpose of compliance with any applicable regulations of the Comptroller of
the Currency or the Board of Governors of the Federal Reserve System.
PROCEEDINGS AND DOCUMENTS.
All proceedings in connection with the transactions contemplated by
this Credit Agreement, the other Loan Documents and all other documents
incident thereto shall be satisfactory in substance and in form to the Banks
and to the Agent and the Agent's Special Counsel, and the Banks, the Agent and
such counsel shall have received all information and such counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
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EVENTS OF DEFAULT; ACCELERATION; ETC.
EVENTS OF DEFAULT AND ACCELERATION.
If any of the following events ("Events of Default" or, if the giving
of notice or the lapse of time or both is required, then, prior to such notice
or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable, whether
at the stated date of maturity or any accelerated date of maturity or at any
other date fixed for payment;
(b) the Borrower shall fail to pay any (i) interest on the Loans,
(ii) the commitment fee, (iii) any Letter of Credit Fee, (iv) the Agent's fee,
or (v) other sums due hereunder or under any of the other Loan Documents, when
the same shall become due and payable, whether at the stated date of maturity
or any accelerated date of maturity or at any other date fixed for payment and
such failure shall continue for five (5) days;
(c) the Borrower or Holdings shall fail to comply with any of its
covenants contained in the first sentence of Section 9.6, Sections 9.9, 9.12,
9.13, 10.1 through 10.6, 10.8, 10.10, 10.11 or Section 11;
(d) Holdings, the Borrower or any of their Subsidiaries shall fail to
perform any term, covenant or agreement contained herein or in any of the
other Loan Documents (other than those specified elsewhere in this Section 14.1)
for thirty (30) days after written notice of such failure has been given to
the Borrower by the Agent;
(e) any representation or warranty of Holdings, the Borrower or any
of their Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to or in
connection with this Credit Agreement shall prove to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
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(f) Holdings, the Borrower or any of their Subsidiaries other than
the Unrestricted Subsidiaries shall (i) fail to pay at maturity, or within any
applicable period of grace, any obligation for borrowed money or credit
received or in respect of any Capitalized Leases in an aggregate amount in
excess of $2,000,000, or (ii) fail to observe or perform any material term,
covenant or agreement contained in any agreement by which it is bound,
evidencing or securing borrowed money or credit received or in respect of any
Capitalized Leases in an aggregate amount in excess of $2,000,000 for such
period of time as would permit (assuming the giving of appropriate notice if
required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof, or any Indebtedness of any of
the Unrestricted Subsidiaries shall be accelerated by the holders thereof;
(g) Holdings, the Borrower or any of their Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of such Person or of any substantial part of the assets
of such Person or shall commence any case or other proceeding relating to such
Person under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such petition
or application shall be filed or any such case or other proceeding shall be
commenced against such Person and such Person shall indicate its approval
thereof, consent thereto or acquiescence therein;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Holdings, the Borrower or
any of their Subsidiaries bankrupt or insolvent, or approving a petition
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in any such case or other proceeding, or a decree or order for relief
is entered in respect of any such Person in an involuntary case under federal
bankruptcy laws as now or hereafter constituted and such case or proceeding
remains undismissed for sixty (60) days;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any
final judgment against Holdings, the Borrower or any of their Subsidiaries
that, with other outstanding final judgments, undischarged, against such
Persons exceeds in the aggregate $750,000;
(j) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt or the
Subordinated Debt or Preferred Stock shall be prepaid, redeemed or repurchased
in whole or in part;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens in
substantially all of the Collateral shall cease to be perfected, or shall
cease to have the priority contemplated by the Security Documents, in each
case otherwise than in accordance with the terms thereof or with the express
prior written agreement, consent or approval of the Banks, or any action at
law, suit or in equity or other legal proceeding to cancel, revoke or rescind
any of the Loan Documents shall be commenced by or on behalf of Holdings, the
Borrower or any of their Subsidiaries party thereto or any of their respective
stockholders, or any court or any other governmental or regulatory authority
or agency of competent jurisdiction shall make a determination that, or issue
a judgment, order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with the
terms thereof;
(l) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have
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occurred and the Majority Banks shall have determined in their reasonable
discretion that such event reasonably could be expected to result in
liability of the Borrower or any of its Subsidiaries to the PBGC or such
Guaranteed Pension Plan in an aggregate amount exceeding $500,000 and such
event in the circumstances occurring reasonably could constitute grounds for
the termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan; or a trustee shall have been
appointed by the United States District Court to administer such Plan; or the
PBGC shall have instituted proceedings to terminate such Guaranteed Pension
Plan;
(m) Holdings, the Borrower or any of their Subsidiaries shall be
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of its
business and such order shall continue in effect for more than thirty (30)
days;
(n) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty, which in any such case causes, for more than fifteen (15)
consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower or any of its
Subsidiaries if such event or circumstance is not covered by business
interruption insurance and would have a material adverse effect on the
business or financial condition of the Borrower or such Subsidiary;
(o) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
Holdings, the Borrower or any of their Subsidiaries if such loss, suspension,
revocation or failure to renew would have a material adverse effect on the
business or
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financial condition of Holdings, the Borrower and their Subsidiaries
taken as a whole;
(p) Holdings shall at any time, legally or beneficially own less than
100% of the outstanding capital stock of the Borrower, or the Borrower shall
at any time, legally or beneficially own less than 100% of the outstanding
capital stock of any of its Restricted Subsidiaries and 80% of the outstanding
capital stock of any of its Unrestricted Subsidiaries;
(q) TJC and its Affiliates shall at any time have less than a
majority of the directors on the board of directors of each of Holdings and
the Borrower;
(r) The Jordan Affiliates and MCIT PLC shall at any time, legally or
beneficially own less than forty percent (40%) of the outstanding common stock
of Holdings; provided, however, after the occurrence of a firmly underwritten
public offering of the capital stock of Holdings, such percentage shall be
reduced to twenty-four percent (24%) of the outstanding common stock of
Holdings;
(s) Leases on or Franchise Agreements with respect to restaurants
representing more then fifteen percent (15%) of Restaurant Cash Flow shall
have been terminated or expired without renewal (determined in the aggregate
over the term of this Credit Agreement), or at the time of any Lease or
Franchise Agreement termination or expiration the Borrower fails to
demonstrate pro forma compliance with Section 11 hereof for a period of twelve
(12) months, after eliminating the results of all such terminated restaurants;
(t) The Unrestricted Subsidiaries shall at any time have aggregate
revenues of greater than twenty percent 20% of the consolidated revenues of
the Borrower at such time;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in
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the event of any Event of Default specified in Sections 14.1(g), 14.1(h) or
14.1(j), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Agent or any
Bank.
TERMINATION OF COMMITMENTS.
If any one or more of the Events of Default specified in Section
14.1(g), Section 14.1(h) or Section 14.1(j) shall occur, any unused portion of
the credit hereunder shall forthwith terminate and each of the Banks shall be
relieved of all further obligations to make Loans to the Borrower and the Agent
shall be relieved of all further obligations to issue, extend or renew Letters
of Credit. If any other Event of Default shall have occurred and be continuing,
the Agent may and, upon the request of the Majority Banks, shall, by notice to
the Borrower, terminate the unused portion of the credit hereunder, and upon
such notice being given such unused portion of the credit hereunder shall
terminate immediately and each of the Banks shall be relieved of all further
obligations to make Loans and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of the
credit hereunder shall relieve Holdings, the Borrower or any of their
Subsidiaries of any of the Obligations.
REMEDIES.
In case any one or more of the Events of Default shall have occurred
and be continuing, and whether or not the Banks shall have accelerated the
maturity of the Loans pursuant to Section 14.1, each Bank, if owed any amount
with respect to the Loans or the Reimbursement Obligations, may, with the
consent of the Majority Banks but not otherwise, proceed to protect and enforce
its rights by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Credit Agreement and the other Loan Documents or any instrument pursuant
to which the Obligations to such Bank are evidenced, including as permitted by
applicable law the obtaining of the ex parte appointment of a receiver, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such
Bank. No remedy herein conferred upon any Bank or the Agent or the holder of
any Note or purchaser of any Letter of Credit Participation is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or any other provision of
law.
DISTRIBUTION OF COLLATERAL PROCEEDS.
In the event that following the occurrence or during the continuance
of any Default or Event of Default, the Agent or any Bank, as the case may be,
receives any monies in connection with the enforcement of any the Security
Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(a) first, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or sustained
by the Agent in connection with the collection of such monies by the Agent,
for the exercise, protection or enforcement by the Agent of all or any of the
rights, remedies, powers and privileges of the Agent under this Credit
Agreement or any of the other Loan Documents or in respect of the Collateral
or in support of any provision of adequate indemnity to the Agent against any
taxes or liens which by law shall have, or may
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have, priority over the rights of the Agent to such monies;
(b) second, to all other Obligations in such order or preference as
the Majority Banks may determine; provided, however, that distributions in
respect of such obligations shall be made (i) pari passu among Obligations
with respect to the Agent's Fee payable pursuant to Section 6.2 and all other
Obligations and (ii) Obligations owing to the Banks with respect to each type
of Obligation such as interest, principal, fees and expenses, shall be made
among the Banks pro rata; and provided, further, that the Agent may in its
discretion make proper allowance to take into account any Obligations not then
due and payable;
(c) third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant to
Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
(d) fourth, the excess, if any, of proceeds from the sale of stock
pledged pursuant to the Stock Pledge Agreement shall be turned over to the
Mezzanine Agent (as defined in the Subordinated Pledge Agreement); and
(e) fifth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
SETOFF.
Regardless of the adequacy of any collateral, during the continuance
of any Event of Default, any deposits or other sums credited by or due from
any of the Banks to the Borrower and any securities or other property of the
Borrower in the possession of such Bank may be applied to or set off by such
Bank against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of the Borrower to such Bank. Each of the Banks
agrees with each other Bank that (a) if an amount to be set off is to be
applied to Indebtedness of the Borrower to such Bank, other than Indebtedness
evidenced by the Notes held by such Bank or constituting Reimbursement
Obligations owed to such Bank, such amount shall be applied ratably to such
other Indebtedness and to the Indebtedness evidenced by all such Notes held by
such Bank or constituting Reimbursement Obligations owed to such Bank, and (b)
if such Bank shall receive from the Borrower, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of
the claim evidenced by the Notes held by, or constituting Reimbursement
Obligations owed to, such Bank by
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proceedings against the Borrower at law or in equity or by proof thereof in
bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Note or Notes
held by, or Reimbursement Obligations owed to, such Bank any amount in excess
of its ratable portion of the payments received by all of the Banks with
respect to the Notes held by, and Reimbursement Obligations owed to, all of
the Banks, such Bank will make such disposition and arrangements with the
other Banks with respect to such excess, either by way of distribution, pro
tanto assignment of claims, subrogation or otherwise as shall result in each
Bank receiving in respect of the Notes held by it or Reimbursement Obligations
owed it, its proportionate payment as contemplated by this Credit Agreement;
provided that if all or any part of such excess payment is thereafter
recovered from such Bank, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
THE AGENT.
AUTHORIZATION.
The Agent is authorized to take such action on behalf of each of the
Banks and to exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, provided that no
duties or responsibilities not expressly assumed herein or therein shall be
implied to have been assumed by the Agent. The relationship between the Agent
and the Banks is and shall be that of agent and principal only, and nothing
contained in this Credit Agreement or any of the other Loan Documents shall be
construed to constitute the Agent as a trustee for any Bank.
EMPLOYEES AND AGENTS.
The Agent may exercise its powers and execute its duties by or
through employees or agents and shall be entitled to take, and to rely on,
advice of counsel concerning all matters pertaining to its rights and duties
under this Credit Agreement and the other Loan Documents. The Agent may
utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
NO LIABILITY.
Neither the Agent nor any of its shareholders, directors, officers or
employees nor any other Person assisting them in their duties nor any agent or
employee thereof, shall be liable for any waiver, consent or approval given or
any action taken, or omitted to be taken, in good faith by it or them
hereunder or under any of the other Loan Documents, or in connection herewith
or therewith, or be responsible for the consequences of any oversight or error
of judgment whatsoever, except that the Agent or such other Person, as the
case may be, may be liable for losses due to its willful misconduct or gross
negligence.
NO REPRESENTATIONS.
The Agent shall not be responsible for the execution or validity or
enforceability of this Credit Agreement, the Notes, the Letters of Credit, any
of the other Loan Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made herein or in any of
the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of Holdings, the Borrower or any of their
Subsidiaries, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or
in any instrument at any time constituting, or intended to constitute,
collateral security for the Notes or to inspect any of the properties, books
or records of Holdings, the Borrower or any of their Subsidiaries. The Agent
shall not be bound to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrower or any holder of any of the Notes shall have
been duly authorized or is true, accurate and complete. The Agent has not made
nor does it now make any representations or warranties, express or implied,
nor does it assume any liability to the Banks, with
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respect to the credit worthiness or financial conditions of Holdings, the
Borrower or any of their Subsidiaries. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
upon such information and documents as it has deemed appropriate, made its own
credit analysis and decision to enter into this Credit Agreement.
PAYMENTS.
PAYMENTS TO AGENT.
A payment by the Borrower to the Agent hereunder or any of the other
Loan Documents for the account of any Bank shall constitute a payment to such
Bank. The Agent agrees promptly to distribute to each Bank such Bank's pro
rata share of payments received by the Agent for the account of the Banks
except as otherwise expressly provided herein or in any of the other Loan
Documents.
DISTRIBUTION BY AGENT.
If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated
by a court of competent jurisdiction. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by the Agent is to be
repaid, each Person to whom any such distribution shall have been made shall
either repay to the Agent its proportionate share of the amount so adjudged to
be repaid or shall pay over the same in such manner and to such Persons as
shall be determined by such court.
DELINQUENT BANKS.
Notwithstanding anything to the contrary contained in this Credit
Agreement or any of the other Loan Documents, any Bank that fails (i) to make
available to the Agent its pro rata share of any Loan or to purchase any
Letter of Credit Participation or (ii) to comply with the provisions of
Section 15 with respect to making dispositions and arrangements with the other
Banks, where such Bank's share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of
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such payments due and payable to all of the Banks, in each case as, when and to
the full extent required by the provisions of this Credit Agreement, shall be
deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank
until such time as such delinquency is satisfied. A Delinquent Bank shall be
deemed to have assigned any and all payments due to it from the Borrower,
whether on account of outstanding Loans, Unpaid Reimbursement Obligations,
interest, fees or otherwise, to the remaining nondelinquent Banks for
application to, and reduction of, their respective pro rata shares of all
outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Bank
hereby authorizes the Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective pro rata shares of all outstanding Loans
and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed to have
satisfied in full a delinquency when and if, as a result of application of the
assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations
of the nondelinquent Banks, the Banks' respective pro rata shares of all
outstanding Loans and Unpaid Reimbursement Obligations have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
HOLDERS OF NOTES.
The Agent may deem and treat the payee of any Note or the purchaser
of any Letter of Credit Participation as the absolute owner or purchaser
thereof for all purposes hereof until it shall have been furnished in writing
with a different name by such payee or by a subsequent holder, assignee or
transferee.
INDEMNITY.
The Banks ratably agree hereby to indemnify and hold harmless the
Agent from and against any and all claims, actions and suits (whether
groundless or otherwise), losses, damages, costs, expenses (including any
expenses for which the Agent has not been reimbursed by the Borrower as
required by Section 17), and liabilities of every nature and character arising
out of or related to this Credit Agreement, the Notes, or any of the other Loan
Documents or the transactions contemplated or evidenced hereby or thereby, or
the Agent's actions taken hereunder or thereunder, except to the extent that
any of the same shall be directly caused by the Agent's willful misconduct or
gross negligence.
AGENT AS BANK.
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In its individual capacity, FNBB shall have the same obligations and
the same rights, powers and privileges in respect to its Commitment and the
Loans made by it, and as the holder of any of the Notes and as the purchaser
of any Letter of Credit Participations, as it would have were it not also the
Agent.
RESIGNATION.
The Agent may resign at any time by giving sixty (60) days prior
written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the
Borrower. If no successor Agent shall have been so appointed by the Majority
Banks and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a
financial institution having a rating of not less than A or its equivalent by
Standard & Poor's Corporation. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the provisions
of this Credit Agreement and the other Loan Documents shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Agent.
NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.
Each Bank hereby agrees that, upon learning of the existence of a
Default or an Event of Default, it shall promptly notify the Agent thereof.
The Agent hereby agrees that upon receipt of any notice under this Section 16.10
it shall promptly notify the other Banks of the existence of such Default or
Event of Default.
DUTIES IN THE CASE OF ENFORCEMENT.
In case one of more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations shall have
occurred, the Agent shall, if (i) so requested by the Majority Banks and (ii)
the Banks have provided to the Agent such additional indemnities and
assurances against expenses and liabilities as the Agent may reasonably
request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale
or other disposition, the Banks hereby agreeing to indemnify and hold the
Agent, harmless from all liabilities incurred in respect of all actions taken
or omitted in accordance with such directions, provided that the Agent need
not comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
REMOVAL OF AGENT.
All Banks other than the Agent may remove the Agent from its capacity
as Agent at any time by giving sixty (60) days prior written notice thereof to
the Agent (the "Former Agent"), the Banks and the Borrower. Upon any such
removal, the Banks holding at least eighty percent (80%) of the outstanding
principal amount of the Notes on such date, and if no such principal is
outstanding, the Banks whose aggregate Commitments constitute at least eighty
percent (80%) of the Total Commitment (the "Voting Banks") on such date shall
have the right to appoint a successor Agent. Unless a Default or Event of
Default shall have occurred and be continuing, such successor Agent shall be
reasonably acceptable to the Borrower. If no successor Agent shall have been
so appointed by the Voting Banks and shall have accepted such appointment
within thirty (30) days after the Majority Banks vote to remove the Former
Agent, then any Bank shall have the right to petition a court of competent
jurisdiction for the appointment of a successor Agent. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties
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of the Former Agent, and the Former Agent shall be discharged from its duties
and obligations hereunder. After any Former Agent's removal, the provisions of
this Credit Agreement and the other Loan Documents shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Agent.
EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, and subject to Section 9.9.3 hereof, the Borrower promises to pay
(a) the reasonable costs of (i) producing and reproducing this Credit Agreement,
the other Loan Documents and the other agreements and instruments mentioned
herein and (ii) any taxes (including any interest and penalties in respect
thereto), filing fees or recording fees or taxes payable by any Bank (other
than taxes based upon the Bank's net income) on or with respect to the
transactions contemplated by this Credit Agreement or the other Loan Documents
(the Borrower hereby agreeing to indemnify each Bank with respect thereto),
(b) the documented fees, expenses and disbursements of the Agent's Special
Counsel or any local counsel to the Agent incurred in connection with the
preparation of this Credit Agreement, the other Loan Documents and other
instruments mentioned herein, each closing hereunder, amendments,
modifications, approvals, consents or waivers hereto or hereunder and the
syndication and the termination hereof, (c) all reasonable fees, expenses and
disbursements incurred by FNBB in connection with the syndication of its
Commitment hereunder, provided that the Borrower shall not bear the costs of
syndication hereunder which are in excess of $5,000; and (d) all out-of-pocket
expenses (including reasonable attorneys' fees and costs), incurred by any
Bank or the Agent in connection with (i) the enforcement of or preservation of
rights under any this Credit Agreement, the Notes and the other Loan Documents
against Holdings, the Borrower or any of their Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default
and (ii) in connection with any litigation, proceeding or dispute whether
arising hereunder or under the other Loan Document or arising out of the
transactions contemplated hereby or thereby. The covenants of this Section 17
shall survive payment or satisfaction of all other Obligations.
INDEMNIFICATION.
The Borrower further agrees to indemnify and hold harmless the Agent
and the Banks as well as each such Person's shareholders, directors, agents,
officers, Subsidiaries and affiliates, from and against all damages, losses,
settlement payments, obligations, liabilities, claims, actions or causes of
action, and costs and expenses incurred, suffered, sustained or required to be
paid by an indemnified party by reason of or resulting from the transactions
contemplated hereby, except any of the foregoing which result from the gross
negligence or willful misconduct of the indemnified party. In any
investigation, proceeding or litigation, or the preparation therefor, each
Bank and the Agent shall be entitled to select its own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
fees and expenses of such counsel. If, and to the extent that the obligations
of the Borrower under this Section 18 are unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment in
satisfaction of such obligations which is permissible under applicable law.
The covenants contained in this Section 18 shall survive payment or satisfaction
in full of all other Obligations.
SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made
herein, in the Notes, in any of the other Loan Documents or in any documents
or other papers delivered by or on behalf of Holdings, the Borrower or any of
their Subsidiaries pursuant hereto shall be deemed to have been relied upon by
the Banks and the Agent, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Banks of
any of the Loans and the issuance, extension or renewal of any Letters of
Credit, as herein contemplated, and shall continue in full force and effect so
long as any Letter of Credit or any amount due under this Credit Agreement or
the Notes or any of the other Loan Documents remains outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letter of Credit, and for such further time as may be
otherwise expressly specified in this Credit Agreement. All statements
contained in any certificate or other paper delivered to any Bank or the Agent
at any time by or on behalf of Holdings, the Borrower or any of their
Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by
Holdings, the Borrower or such Subsidiary hereunder.
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ASSIGNMENT AND PARTICIPATION.
CONDITIONS TO ASSIGNMENT BY BANKS.
Except as provided herein, each Bank may assign to one or more
Eligible Assignees all or a portion of its interests, rights and obligations
under this Credit Agreement (including all or a portion of its Commitment
Percentage with respect to Revolving Credit Loans, Term Loan A or Term Loan B
and the same portion of the Loans at the time owing to it, the Notes held by
it and its participating interest in the risk relating to any Letters of
Credit); provided that (a) each of the Agent and the Borrower shall have given
its prior written consent to such assignment, which consent, in the case of
the Borrower, will not be unreasonably withheld, (b) each such assignment
shall be of a constant, and not a varying, percentage of all the assigning
Bank's rights and obligations in respect of the Revolving Credit Loans, Term
Loan A or Term Loan B under this Credit Agreement, (c) each assignment shall
be in an amount no less than $5,000,000, or a larger integral multiple of
$1,000,000, and (d) the parties to such assignment shall execute and deliver
to the Agent, for recording in the Register (as hereinafter defined), an
Assignment and Acceptance, substantially in the form of Exhibit H hereto (an
"Assignment and Acceptance"), together with any Notes subject to such
assignment. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (i) the assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the
extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in Section 20.3, be released from its obligations
under this Credit Agreement.
CERTAIN REPRESENTATIONS AND WARRANTIES;
LIMITATIONS; COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties
to the assignment thereunder confirm to and agree with each other and the
other parties hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear of
any adverse claim, the assigning Bank makes no representation or warranty,
express or implied, and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or the
attachment, perfection or priority of any security interest or mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or observance
by the Borrower and its Subsidiaries or any other
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Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Credit Agreement or any of
the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in Section 8.4 and Section 9.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Credit Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee and that, on the effective date of such Assignment and Acceptance,
the circumstances described in Sections 6.7 and 6.8 hereof are not applicable to
such assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit Agreement
are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
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(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its pro rata
share of Letter of Credit Fees in respect of outstanding Letters of Credit.
REGISTER.
The Agent shall maintain a copy of each Assignment and Acceptance
delivered to it and a register or similar list (the "Register") for the
recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Banks from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $5,000.00.
NEW NOTES.
Upon its receipt of an Assignment and Acceptance executed by the
parties to such assignment, together with each Note subject to such
assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt
of such notice, the Borrower, at its own expense, shall execute and deliver to
the Agent, in exchange for each surrendered Note, a new Note to the order of
such Eligible Assignee in an amount equal to the amount assumed by such
Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such in Assignment and Acceptance and shall
otherwise be substantially the form of the assigned Notes. Within five (5)
days of issuance of any new Notes pursuant to this Section 20.4, the Borrower
shall, if requested by the assigning Bank or the assignee Bank, deliver an
opinion of counsel, addressed to the Banks and the Agent, relating to the due
authorization, execution and delivery of such new Notes and the legality,
validity and binding effect thereof, in form and substance satisfactory to the
Banks. The surrendered Notes shall be cancelled
and returned to the Borrower.
PARTICIPATIONS.
Each Bank may sell participations to one or more banks or other
entities in all or a portion of such Bank's rights and obligations under this
Credit Agreement and the other Loan Documents; provided that (a) each such
participation shall be in an amount of not less than $5,000,000, (b) any such
sale or participation shall not affect the rights and duties of the selling
Bank hereunder to the Borrower and (c) the only rights granted to the
participant pursuant to such participation arrangements with respect to
waivers, amendments or modifications of the Loan Documents shall be the rights
to approve waivers, amendments or modifications that would forgive any
principal of or reduce the interest rate on any Loans, extend the term or
increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees or Letter of Credit Fees
to which such participant is entitled or extend any regularly scheduled
payment date for principal or interest.
DISCLOSURE.
The Borrower agrees that in addition to disclosures made in
accordance with standard and customary banking practices any Bank may disclose
information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such
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assignees or participants or potential assignees or participants shall agree
(a) to treat in confidence such information unless such information otherwise
becomes public knowledge, (b) not to disclose such information to a third
party, except as required by law or legal process and (c) not to make use of
such information for purposes of transactions unrelated to such contemplated
assignment or participation.
ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE
BORROWER.
If any assignee Bank is an Affiliate of the Borrower, then any such
assignee Bank shall have no right to vote as a Bank hereunder or under any of
the other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Agent pursuant to Section
14.1 or Section 14.2, and the determination of the Majority Banks shall for all
purposes of this Agreement and the other Loan Documents be made without regard
to such assignee Bank's interest in any of the Loans. If any Bank sells a
participating interest in any of the Loans or Reimbursement Obligations to a
participant, and such participant is the Borrower or an Affiliate of the
Borrower, then such transferor Bank shall promptly notify the Agent of the
sale of such participation. A transferor Bank shall have no right to vote as a
Bank hereunder or under any of the other Loan Documents for purposes of
granting consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making requests
to the Agent pursuant to Section 14.1 or Section 14.2 to the extent that such
participation is beneficially owned by the Borrower or any Affiliate of the
Borrower, and the determination of the Majority Banks shall for all purposes
of this Agreement and the other Loan Documents be made without regard to the
interest of such transferor Bank in the Loans to the extent of such
participation.
MISCELLANEOUS ASSIGNMENT PROVISIONS.
Any assigning Bank shall retain its rights to be indemnified pursuant
to Section 18 with respect to any claims or actions arising prior to the date of
such assignment. If any assignee Bank is not incorporated under the laws of
the United States of America or any state thereof, it shall, prior to the date
on which any interest or fees are payable hereunder or under any of the other
Loan Documents for its account, deliver to the Borrower and the Agent
certification as to its exemption from deduction or withholding of any United
States federal income taxes. If FNBB transfers all of its interest, rights and
obligations under this Credit Agreement, the Agent shall, in consultation with
the Borrower and with the consent of the Borrower and the Majority Banks,
appoint another Bank to act as the Reference Bank hereunder. Anything
contained in this Section 20 to the contrary notwithstanding, any Bank may at
any time pledge all or any portion of its interest and rights under this Credit
Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof shall release the
pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.
ASSIGNMENT BY BORROWER.
The Borrower shall not assign or transfer any of its rights or
obligations under any of the Loan Documents without the prior written consent
of each of the Banks.
NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or
sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via
courier or postal service, addressed as follows:
(a) if to the Borrower, at 2215 Enterprise Drive, Suite 1502,
Westchester, Illinois
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60154, Attention: Joel Aaseby, or at such other address for notice as
the Borrower shall last have furnished in writing to the Person giving the
notice;
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Gordon L. Nelson, Jr., Director, or such other address
for notice as the Agent shall last have furnished in writing to the Person
giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier
or facsimile to a responsible officer of the party to which it is directed, at
the time of the receipt thereof by such officer or the sending of such
facsimile and (ii) if sent by registered or certified first-class mail,
postage prepaid, on the third Business Day following the mailing thereof.
GOVERNING LAW.
THIS CREDIT AGREEMENT AND,
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN
DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY
MAIL AT THE ADDRESS SPECIFIED IN SECTION 21. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
HEADINGS.
The captions in this Credit Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.
COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of
which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement it
shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
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ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged
or terminated, except as provided in Section 27.
WAIVER OF JURY TRIAL.
Each of Holdings and the Borrower hereby waives its right to a jury
trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Notes or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the
performance of which rights and obligations. Except as prohibited by law, each
of Holdings and the Borrower hereby waives any right it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. Each of Holdings and the Borrower (a) certifies
that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party and the
Subordination Documents to which it is a party by, among other things, the
waivers and certifications contained herein.
CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit
Agreement to be given by all of the Banks may be given, and any term of this
Credit Agreement, the other Loan Documents or any other instrument related
hereto or mentioned herein may be amended, and the performance or observance
by Holdings, the Borrower or any of their Subsidiaries of any terms of this
Credit Agreement, the other Loan Documents or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with,
but only with, the written consent of the Borrower and the written consent of
the Majority Banks. Notwithstanding the foregoing, the rate of interest on the
Notes, the maturity of or extension of scheduled payments on the Notes, the
release of all or substantially all of the Collateral, the amount of the
Commitments of the Banks, an increase in the maximum principal amounts of the
Term Loans of the Banks and the amount of commitment fee or Letter of Credit
Fees hereunder may not be changed without the written consent of the Borrower
and the written consent of each Bank; the definition of Majority Banks and
this Section 27 may not be amended without the written consent of all of the
Banks; and the amount of the Agent's Fee or any Letter of Credit Fees payable
for the Agent's account and Section 16 may not be amended without the written
consent of the Agent. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of dealing or
delay or omission on the part of the Agent or any Bank in exercising any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand upon the Borrower shall entitle the Borrower to other or further
notice or demand in similar or other circumstances.
SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction,
and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Credit Agreement in any
jurisdiction.
TRANSITIONAL ARRANGEMENTS
ORIGINAL CREDIT AGREEMENT SUPERSEDED.
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This Credit Agreement shall on the Closing Date supersede the
Original Credit Agreement in its entirety, except as provided in this Section
29. On the Closing Date, the rights and obligations of the parties evidenced by
the Original Credit Agreement shall be evidenced by the Credit Agreement and
other Loan Documents, the "Revolving Credit Loans" as defined in the Original
Credit Agreement shall be converted to Revolving Credit Loans as defined
herein, "Term Loan A" as defined in the Original Credit Agreement shall be
converted to a portion of the Term Loan A as defined herein, "Term Loan B" as
defined in the Original Credit Agreement shall be converted to a portion of
the Term Loan B as defined herein, and all outstanding letters of credit
issued by the Agent for the account of the Borrower prior to the Closing Date
shall, for the purposes of this Credit Agreement, be Letters of Credit.
RETURN AND CANCELLATION OF NOTES.
As soon as reasonably practicable after its receipt of its Revolving
Credit Note and Term Notes hereunder on the Closing Date, the Banks will
promptly return to the Borrower, marked "Substituted" or "Cancelled", as the
case may be, any notes of the Borrower held by the Banks pursuant to the
Original Credit Agreement.
INTEREST AND FEES UNDER SUPERSEDED
AGREEMENT.
All interest and fees and expenses, if any, owing or accruing under
or in respect of the Original Credit Agreement through the Closing Date shall
be calculated as of the Closing Date (prorated in the case of any fractional
periods), and shall be paid in accordance with the method, and on the dates,
specified in the Original Credit Agreement, as if the Original Credit
Agreement were still in effect. Commencing on the Closing Date, the commitment
fees shall be payable by the Borrower to the Agent for the account of the
Banks in accordance with Section 2.2.
<PAGE>
-101-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement
as a sealed instrument as of the date first set forth above.
NATIONAL RESTAURANT ENTERPRISES, INC.
By:
Name:
Title:
NRE HOLDINGS, INC.
By:
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By:
Name:
Director
-1-
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of September 1, 1994, between NATIONAL
RESTAURANT ENTERPRISES, INC., a Delaware corporation (the "Borrower"), and THE
FIRST NATIONAL BANK OF BOSTON, a national banking association, as agent
(hereinafter, in such capacity, the "Agent") for itself and other lending
institutions (hereinafter, collectively, the "Banks") which are or may become
parties to a Revolving Credit and Term Loan Agreement dated as of September 1,
1994 (as amended and in effect from time to time, the "Credit Agreement"),
among the Borrower, NRE Holdings, Inc., the Banks and the Agent.
WHEREAS, it is a condition precedent to the Banks' making any loans
or otherwise extending credit to the Borrower under the Credit Agreement that
the Borrower execute and deliver to the Agent, for the benefit of the Banks
and the Agent, a security agreement in substantially the form hereof; and
WHEREAS, the Borrower wishes to grant security interests in favor of
the Agent, for the benefit of the Banks and the Agent, as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
DEFINITIONS.
All capitalized terms used herein without definitions shall have the
respective meanings provided therefor in the Credit Agreement. All terms
defined in the Uniform Commercial Code of the Commonwealth of Massachusetts
and used herein shall have the same definitions herein as specified therein.
GRANT OF SECURITY INTEREST.
<PAGE>
-2-
COLLATERAL GRANTED.
The Borrower hereby grants to the Agent, for the benefit of
the Banks and the Agent, to secure the payment and performance in
full of all of the Obligations, a security interest in and so pledges
and assigns to the Agent, for the benefit of the Banks and the Agent,
the following properties, assets and rights of the Borrower, wherever
located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof (all of the same being hereinafter
called the "Collateral"):
All personal and fixture property of every kind and
nature including without limitation all furniture, fixtures,
equipment, raw materials, inventory, goods, accounts,
contract rights, rights to the payment of money, insurance
refund claims and all other insurance claims and proceeds,
tort claims, chattel paper, documents, instruments
(including certificated securities), deposit accounts and
all general intangibles including, without limitation, all
uncertificated securities, tax refund claims, license fees,
patents, patent applications, trademarks, trademark
applications, trade names (other than trademarks and trade
names owned by Burger King Corporation and licensed to the
Borrower), copyrights, copyright applications, rights to sue
and recover for past infringement of patents, trademarks and
copyrights, computer programs, computer software,
engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind
or nature pursuant to which the Borrower possesses, uses or
has authority to possess or use property (whether tangible
or intangible) of others or others possess, use or have
authority to possess or use property (whether tangible or
intangible) of the Borrower, and all recorded data of any
kind or nature, regardless of the medium of recording
including, without limitation, all software, writings,
plans, specifications and schematics.
DELIVERY OF INSTRUMENTS, ETC.
Pursuant to the terms hereof, the Borrower has endorsed,
assigned and delivered to the Agent all negotiable or non-negotiable
instruments (including certificated securities) and chattel paper
pledged by it hereunder, together with instruments of transfer or
assignment duly executed in blank as the Agent may have specified. In
the event that the Borrower shall, after the date of this Agreement,
acquire any other negotiable or non-negotiable instruments (including
certificated
<PAGE>
-3-
securities) or chattel paper to be pledged by it hereunder, the
Borrower shall forthwith endorse, assign and deliver the same to the
Agent, accompanied by such instruments of transfer or assignment duly
executed in blank as the Agent may from time to time specify. To the
extent that any securities are uncertificated, appropriate book-entry
transfers reflecting the pledge of such securities created hereby
have been or, in the case of uncertificated securities hereafter
acquired by the Borrower, will at the time of such acquisition be,
duly made for the account of the Agent or one or more nominees of the
Agent with the issuer of such securities or other appropriate
book-entry facility or financial intermediary, with the Agent having
at all times the right to obtain definitive certificates (in the
Agent's name or in the name of one or more nominees of the Agent)
where the issuer customarily or otherwise issues certificates, all to
be held as Collateral hereunder. The Borrower hereby acknowledges
that the Agent may, in its discretion, appoint one or more financial
institutions to act as the Agent's agent in holding in custodial
account instruments or other financial assets in which the Agent is
granted a security interest hereunder, including, without limitation,
certificates of deposit and other instruments evidencing short term
obligations.
EXCLUDED COLLATERAL.
Notwithstanding the foregoing provisions of this Section 2,
such grant of security interest shall not extend to, and the term
"Collateral" shall not include, any chattel paper and general
intangibles which are now or hereafter held by the Borrower as
licensee, lessee or otherwise, to the extent that (i) such chattel
paper and general intangibles are not assignable or capable of being
encumbered as a matter of law or under the terms of the license,
lease or other agreement applicable thereto (but solely to the extent
that any such restriction shall be enforceable under applicable law),
without the consent of the licensor or lessor thereof or other
applicable party thereto and (ii) such consent has not been obtained;
provided, however, that the foregoing grant of security interest
shall extend to, and the term "Collateral" shall include, (A) any and
all proceeds of such chattel paper and general intangibles to the
extent that the assignment or encumbering of such proceeds is not so
restricted and (B) upon any such licensor, lessor or other applicable
party consent with respect to any such otherwise excluded chattel
paper or general intangibles being obtained, thereafter such chattel
paper or general intangibles as well as any and all proceeds thereof
that might have theretofore have been excluded from such grant of a
security interest and the term "Collateral".
<PAGE>
-4-
TITLE TO COLLATERAL, ETC.
The Borrower is the owner of the Collateral free from any adverse
lien, security interest or other encumbrance, except for the security interest
created by this Agreement and other liens permitted by the Credit Agreement.
None of the Collateral constitutes, or is the proceeds of, "farm products" as
defined in Section 9-109(3) of the Uniform Commercial Code of the Commonwealth
of Massachusetts. None of the account debtors in respect of any accounts,
chattel paper or general intangibles and none of the obligors in respect of any
instruments included in the Collateral is a governmental authority subject to
the Federal Assignment of Claims Act.
CONTINUOUS PERFECTION.
The Borrower's places of business or, if more than one, chief
executive offices are indicated on the Borrower's Perfection Certificate
delivered to the Agent herewith (collectively, the "Perfection Certificate").
The Borrower will not change the same, or the names, identities or corporate
structures of the Borrower in any manner, without providing at least thirty
(30) days prior written notice to the Agent. The Collateral, to the extent not
delivered to the Agent pursuant to Section 2.2, will be kept at those locations
listed on the Perfection Certificate and the Borrower will not remove the
Collateral from such locations, without providing at least thirty (30) days
prior written notice to the Agent.
NO LIENS.
Except for the security interest herein granted and liens permitted
by the Credit Agreement, the Borrower shall be the owner of the Collateral
free from any lien, security interest or other encumbrance, and the Borrower
shall defend the same against all claims and demands of all persons at any
time claiming the same or any interests therein adverse to the Agent or any of
the Banks. The Borrower shall not pledge, mortgage or create, or suffer to
exist a security interest in the Collateral in favor of any person other than
the Agent, for the benefit of the Banks and the Agent, except for liens
permitted by the Credit Agreement.
NO TRANSFERS.
The Borrower will not sell or offer to sell or otherwise transfer the
Collateral or any interest therein except for (a) sales and leases of
inventory and licenses of general
<PAGE>
-5-
intangibles in the ordinary course of business and (b) sales or other
dispositions of obsolescent items of equipment in the ordinary course of
business consistent with past practices.
INSURANCE.
MAINTENANCE OF INSURANCE.
The Borrower will maintain with financially sound and
reputable insurers insurance with respect to its properties and
businesses against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar
activities in similar geographic areas. Such insurance shall be in
such minimum amounts that the Borrower will not be deemed co-insurers
under applicable insurance laws, regulations and policies and
otherwise shall be in such amounts, contain such terms, be in such
forms and be for such periods as may be reasonably satisfactory to
the Agent. In addition, all such insurance shall be payable to the
Agent as loss payee under a "standard" or "New York" loss payee
clause for the benefit of the Banks and the Agent. Without limiting
the foregoing, the Borrower will (a) keep all of its physical
property insured with casualty or physical hazard insurance on an
"all risks" basis, with broad form flood and earthquake coverages and
electronic data processing coverage, with a full replacement cost
endorsement and an "agreed amount" clause in an amount equal to 100%
of the full replacement cost of such property, (b) maintain all such
workers' compensation or similar insurance as may be required by law
and (c) maintain, in amounts and with deductibles equal to those
generally maintained by businesses engaged in similar activities in
similar geographic areas, general public liability insurance against
claims of bodily injury, death or property damage occurring, on, in
or about the properties of the Borrower; business interruption
insurance; and product liability insurance.
INSURANCE PROCEEDS.
The proceeds of any casualty insurance in respect of any
casualty loss of any of the Collateral shall, subject to the rights,
if any, of other parties with a prior interest in the property
covered thereby, (a) so long as no Event of Default has occurred and
is continuing and to the extent that the amount of such proceeds is
less than $50,000.00, be disbursed to the Company for direct
application by the Borrower solely to the repair or replacement of
the Borrower's property so damaged
<PAGE>
-6-
or destroyed and (b) in all other circumstances, be held by the Agent
as cash collateral for the Obligations. The Agent may, at its sole
option, disburse from time to time all or any part of such proceeds
so held as cash collateral, upon such terms and conditions as the
Agent may reasonably prescribe, for direct application by the
Borrower solely to the repair or replacement of the Borrower's
property so damaged or destroyed, or the Agent may apply all or any
part of such proceeds to the Obligations with the Total Commitment
(if not then terminated) being reduced by the amount so applied to
the Obligations.
NOTICE OF CANCELLATION, ETC.
All policies of insurance shall provide for at least thirty
(30) days prior written cancellation notice to the Agent. In the
event of failure by the Borrower to provide and maintain insurance as
herein provided, the Agent may, at its option, provide such insurance
and charge the amount thereof to the Borrower. The Borrower shall
furnish the Agent with certificates of insurance and policies
evidencing compliance with the foregoing insurance provision.
MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW.
The Borrower will keep the Collateral in good order and repair and
will not use the same in violation of law or any policy of insurance thereon.
The Agent, or its designee, may inspect the Collateral at any reasonable time,
wherever located. The Borrower will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred
in connection with the use or operation of such Collateral or incurred in
connection with this Agreement. The Borrower has at all times operated, and
the Borrower will continue to operate, their businesses in compliance with all
applicable provisions of the federal Fair Labor Standards Act, as amended, and
with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of
hazardous materials or substances.
COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
EXPENSES INCURRED BY AGENT.
In its discretion, the Agent may discharge taxes and other
encumbrances at any time levied or placed on any of the Collateral,
make repairs thereto and pay any necessary filing fees. The Borrower
agrees to reimburse the Agent on demand for
<PAGE>
-7-
any and all expenditures so made. The Agent shall have no obligation
to the Borrower to make any such expenditures, nor shall the making
thereof relieve the Borrower of any default.
AGENT'S OBLIGATIONS AND DUTIES.
Anything herein to the contrary notwithstanding, the
Borrower shall remain liable under each contract or agreement
comprised in the Collateral to be observed or performed by the
Borrower thereunder. Neither the Agent nor any Bank shall have any
obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the
Agent or any Bank of any payment relating to any of the Collateral,
nor shall the Agent or any Bank be obligated in any manner to perform
any of the obligations of the Borrower under or pursuant to any such
contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Agent or any Bank in
respect of the Collateral or as to the sufficiency of any performance
by any party under any such contract or agreement, to present or file
any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to
the Agent or to which the Agent or any Bank may be entitled at any
time or times. The Agent's sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Uniform Commercial Code of the
Commonwealth of Massachusetts or otherwise, shall be to deal with
such Collateral in the same manner as the Agent deals with similar
property for its own account.
SECURITIES AND DEPOSITS.
The Agent may at any time, at its option, transfer to itself or any
nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations.
Whether or not any Obligations are due, the Agent may demand, sue for,
collect, or make any settlement or compromise which it deems desirable with
respect to the Collateral. Regardless of the adequacy of Collateral or any
other security for the Obligations, any deposits or other sums at any time
credited by or due from the Agent or any Bank to the Borrower may at any time
be applied to or set off against any of the Obligations.
NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS.
<PAGE>
-8-
If a Default or an Event of Default shall have occurred and be
continuing, the Borrower shall, at the request of the Agent, notify account
debtors on accounts, chattel paper and general intangibles of the Borrower and
obligors on instruments for which the Borrower are an obligee of the security
interest of the Agent in any account, chattel paper, general intangible or
instrument and that payment thereof is to be made directly to the Agent or to
any financial institution designated by the Agent as the Agent's agent
therefor, and the Agent may itself, if a Default or an Event of Default shall
have occurred and be continuing, without notice to or demand upon the
Borrower, so notify account debtors and obligors. After the making of such a
request or the giving of any such notification, the Borrower shall hold any
proceeds of collection of accounts, chattel paper, general intangibles and
instruments received by the Borrower as trustee for the Agent, for the benefit
of the Banks and the Agent, without commingling the same with other funds of
the Borrower and shall turn the same over to the Agent in the identical form
received, together with any necessary endorsements or assignments. The Agent
shall apply the proceeds of collection of accounts, chattel paper, general
intangibles and instruments received by the Agent to the Obligations, such
proceeds to be immediately entered after final payment in cash or solvent
credits of the items giving rise to them.
FURTHER ASSURANCES.
The Borrower, at its own expense, shall do, make, execute and deliver
all such additional and further acts, things, deeds, assurances and
instruments as the Agent may require more completely to vest in and assure to
the Agent and the Banks their respective rights hereunder or in any of the
Collateral, including, without limitation, (a) executing, delivering and,
where appropriate, filing financing statements and continuation statements
under the Uniform Commercial Code, (b) obtaining governmental and other third
party consents and approvals, including without limitation any consent of any
licensor, lessor or other applicable party referred to in Section 2.3, (c)
obtaining waivers from mortgagees and landlords and (d) taking all actions
required by Sections 8-313 and 8-321 of the Uniform Commercial Code, as
applicable in each relevant jurisdiction, with respect to certificated and
uncertificated securities.
POWER OF ATTORNEY.
APPOINTMENT AND POWERS OF AGENT.
The Borrower hereby irrevocably constitutes and appoints the
Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful
<PAGE>
-9-
attorneys-in-fact with full irrevocable power and authority in the
place and stead of the Borrower or in the Agent's own name, for the
purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the
purposes of this Agreement and, without limiting the generality of
the foregoing, hereby gives said attorneys the power and right, on
behalf of the Borrower, without notice to or assent by the Borrower,
to do the following:
(a) upon the occurrence and during the continuance
of a Default or an Event of Default, generally to sell,
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral in such manner as
is consistent with the Uniform Commercial Code of the
Commonwealth of Massachusetts and as fully and completely as
though the Agent were the absolute owner thereof for all
purposes, and to do at the Borrower's expense, at any time,
or from time to time, all acts and things which the Agent
deems necessary to protect, preserve or realize upon the
Collateral and the Agent's security interest therein, in
order to effect the intent of this Agreement, all as fully
and effectively as the Borrower might do, including, without
limitation, (i) the filing and prosecuting of registration
and transfer applications with the appropriate federal or
local agencies or authorities with respect to trademarks,
copyrights and patentable inventions and processes, (ii)
upon written notice to the Borrower, the exercise of voting
rights with respect to voting securities, which rights may
be exercised, if the Agent so elects, with a view to causing
the liquidation in a commercially reasonable manner of
assets of the issuer of any such securities and (iii) the
execution, delivery and recording, in connection with any
sale or other disposition of any Collateral, of the
endorsements, assignments or other instruments of conveyance
or transfer with respect to such Collateral; and
(b) to file such financing statements with respect
hereto, with or without the Borrower's signature, or a
photocopy of this Agreement in substitution for a financing
statement, as the Agent may deem appropriate and to execute
in the Borrower's name such financing statements and
amendments thereto and continuation statements which may
require the Borrower's signature.
RATIFICATION BY BORROWER.
<PAGE>
-10-
To the extent permitted by law, the Borrower hereby ratifies
all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
NO DUTY ON AGENT.
The powers conferred on the Agent hereunder are solely to
protect the interests of the Agent and the Banks in the Collateral
and shall not impose any duty upon the Agent to exercise any such
powers. The Agent shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or agents
shall be responsible to the Borrower for any act or failure to act,
except for the Agent's own gross negligence or willful misconduct.
REMEDIES.
If an Event of Default shall have occurred and be continuing, the
Agent may, without notice to or demand upon the Borrower, declare this
Agreement to be in default, and the Agent shall thereafter have in any
jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Agent may, so far as
the Borrower can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Agent may in its
discretion require the Borrower to assemble all or any part of the Collateral
at such location or locations within the state(s) of the Borrower's principal
office(s) or at such other locations as the Agent may designate. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Agent shall give to the
Borrower at least five Business Days prior written notice of the time and
place of any public sale of Collateral or of the time after which any private
sale or any other intended disposition is to be made. The Borrower hereby
acknowledges that five Business Days prior written notice of such sale or
sales shall be reasonable notice. In addition, the Borrower waives any and all
rights that it may have to a judicial hearing in advance of the enforcement of
any of the Agent's rights hereunder, including, without limitation, its right
following an Event of Default to take immediate possession of the Collateral
and to exercise its rights with respect thereto. To the extent that any of the
Obligations are to be paid or performed by a person other than the Borrower,
the Borrower waives and agrees not to assert any rights or privileges which it
<PAGE>
-11-
may have under Section 9-112 of the Uniform Commercial Code of the Commonwealth
of
Massachusetts.
NO WAIVER, ETC.
The Borrower waives demand, notice, protest, notice of acceptance of
this Agreement, notice of loans made, credit extended, Collateral received or
delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to both the Obligations and the
Collateral, the Borrower assents to any extension or postponement of the time
of payment or any other indulgence, to any substitution, exchange or release
of or failure to perfect any security interest in any Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Agent may deem advisable. The Agent shall have no duty as to the collection or
protection of the Collateral or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in Section 9.2.
The Agent shall not be deemed to have waived any of its rights upon or under the
Obligations or the Collateral unless such waiver shall be in writing and
signed by the Agent with the consent of the Majority Banks. No delay or
omission on the part of the Agent in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right on any future occasion.
All rights and remedies of the Agent with respect to the Obligations or the
Collateral, whether evidenced hereby or by any other instrument or papers,
shall be cumulative and may be exercised singularly, alternatively,
successively or concurrently at such time or at such times as the Agent deems
expedient.
MARSHALLING.
Neither the Agent nor any Bank shall be required to marshal any
present or future collateral security (including but not limited to this
Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of the rights of the
Agent hereunder and of the Agent or any Bank in respect of such collateral
security and other assurances of payment shall be cumulative and in addition
to all other rights, however existing or arising. To the extent that it
lawfully may, the Borrower hereby agrees that they will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Agent's rights under this Agreement or under any other
<PAGE>
-12-
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured
or payment thereof is otherwise assured, and, to the extent that it lawfully
may, the Borrower hereby irrevocably waives the benefits of all such laws.
PROCEEDS OF DISPOSITIONS; EXPENSES.
The Borrower shall pay to the Agent on demand any and all expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by
the Agent in protecting, preserving or enforcing the Agent's rights under or
in respect of any of the Obligations or any of the Collateral. After deducting
all of said expenses, the residue of any proceeds of collection or sale of the
Obligations or Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in such order or preference as the
Bank may determine or in such order or preference as is provided in the Credit
Agreement, proper allowance and provision being made for any Obligations not
then due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Section 9-504(1)(c) of
the Uniform Commercial Code of the Commonwealth of Massachusetts, any excess
shall be returned to the Borrower, and the Borrower shall remain liable for
any deficiency in the payment of the Obligations.
OVERDUE AMOUNTS.
Until paid, all amounts due and payable by the Borrower hereunder
shall be a debt secured by the Collateral and shall bear, whether before or
after judgment, interest at the rate of interest for overdue principal set
forth in the Credit Agreement.
GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED
INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. The Borrower
agrees that any suit for the enforcement of this Agreement may be brought in
the courts of the Commonwealth of Massachusetts or any federal court sitting
therein and consents to the non-exclusive jurisdiction of such court and to
service of process in any such suit being made upon the Borrower by mail at
the address specified in Section 21 of the Credit Agreement. The Borrower hereby
waives any objection that it may now or hereafter have to the venue of any
such suit or any such court or that such suit is brought in an inconvenient
court.
<PAGE>
-13-
WAIVER OF JURY TRIAL.
THE BORROWER WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR
OBLIGATIONS. Except as prohibited by law, the Borrower waives any right which
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (i)
certifies that neither the Agent or any Bank nor any representative, agent or
attorney of the Agent or any Bank has represented, expressly or otherwise,
that the Agent or any Bank would not, in the event of litigation, seek to
enforce the foregoing waivers and (ii) acknowledges that, in entering into the
Credit Agreement and the other Loan Documents to which the Agent or any Bank
is a party, the Agent and the Banks are relying upon, among other things, the
waivers and certifications contained in this Section 20.
MISCELLANEOUS.
The headings of each section of this Agreement are for convenience
only and shall not define or limit the provisions thereof. This Agreement and
all rights and obligations hereunder shall be binding upon the Borrower and
its respective successors and assigns, and shall inure to the benefit of the
Agent, the Banks and their respective successors and assigns. If any term of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby, and
this Agreement shall be construed and be enforceable as if such invalid,
illegal or unenforceable term had not been included herein. The Borrower
acknowledges receipt of a copy of this Agreement.
<PAGE>
-14-
IN WITNESS WHEREOF, intending to be legally bound, the Borrower has caused
this Agreement to be duly executed as of the date first above written.
NATIONAL RESTAURANT ENTERPRISES,
INC.
By:
Title:
Accepted:
THE FIRST NATIONAL
BANK OF BOSTON,
as Agent
By:
Title:
<PAGE>
-15-
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF )
) ss.
COUNTY OF )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 1st day of September, 1994, personally appeared
______________ to me known personally, and who, being by me duly sworn,
deposes and says that she/he is the ____________ of National Restaurant
Enterprises, Inc. and that said instrument was signed and sealed on behalf of
said corporation by authority of its Board of Directors, and said ____________
acknowledged said instrument to be the free act and deed of said corporation.
------------------------------
Notary Public
My commission expires:
Exhibit 10.3
SECOND AMENDMENT OF SECURITY DOCUMENTS AGREEMENT
SECOND AMENDMENT OF SECURITY DOCUMENTS AGREEMENT, dated as of February
7, 1996 (the "Amendment"), by and among NATIONAL RESTAURANT ENTERPRISES, INC.,
a Delaware corporation (the "Borrower"), NRE HOLDINGS, INC., a Delaware
corporation ("Holdings"), and THE FIRST NATIONAL BANK OF BOSTON, a national
banking association as agent (in such capacity, the "Agent") for the Banks (as
hereinafter defined).
WHEREAS, The Borrower, Holdings, the Agent and the Banks entered into an
Amended and Restated Revolving Credit and Term Loan Agreement dated as of
November 30, 1994 (as amended, the "Original Agreement") and;
WHEREAS, the Borrower, Holdings, the Agent and the Banks have agreed to
amend and restate the Original Agreement pursuant to a Second Amended and
Restated Revolving Credit and Term Loan Agreement dated as of the date hereof by
and among the Borrower, Holdings, the Agent and the lending institutions from
time to time listed on Schedule 1 thereto (the "Banks") (as further amended and
in effect from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower and the Agent are parties to a Security Agreement
dated as of September 1, 1994 (as amended by the First Amendment of Security
Documents Agreement dated as of November 30, 1994 (the "First Amendment") and as
further amended and in effect from time to time, the "Security Agreement"); and
WHEREAS, the Borrower and the Agent are parties to a Stock Pledge
Agreement dated as of November 21, 1995 (as amended and in effect from time to
time, the "Subsidiary Stock Pledge Agreement"); and
WHEREAS, Holdings and the Agent are parties to a Stock Pledge Agreement
dated as of September 1, 1994 (as amended by the First Amendment and as further
amended and in effect from time to time, the "Stock Pledge Agreement"); and
WHEREAS, Holdings has executed and delivered to the Agent a Limited
Guaranty dated as of September 1, 1994 (as amended by the First Amendment and as
further amended and in effect from time to time, the "Guaranty") in favor of the
Agent and the Banks; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement that the Borrower and Holdings enter into this Amendment amending the
terms of the Security Agreement, the Subsidiary Stock Pledge Agreement, the
Stock Pledge Agreement and the Guaranty (collectively, as each document is in
effect prior to the effectiveness hereof, the "Existing Security Documents");
-2-
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. CREDIT AGREEMENT REFERENCES. The parties hereto acknowledge and
agree that each reference to the Original Agreement, however so defined, in the
Existing Security Documents includes the Original Agreement as amended and
restated pursuant to the Credit Agreement and agree that the Existing Security
Documents shall be amended by (a) substituting a reference to the Credit
Agreement as herein defined in place of each reference to the Original Agreement
(whether referred to by the full name of the Original Agreement or by any other
name which refers thereto by definition); (b) substituting for all references to
specific sections of the Original Agreement references to the sections of the
Credit Agreement which contain the condition precedent, covenant, notice,
default or event of default, as amended, as applicable, included in such section
of the Original Agreement; and (c) substituting for the definition of each
capitalized term defined by reference to the Original Agreement the definition
of such capitalized term set forth in the Credit Agreement, including without
limitation the definition of the term "Obligations".
2. SECURITY AGREEMENT. The parties hereto acknowledge and agree
that wherever the term "Perfection Certificate" is used in the Security
Agreement it shall refer to the Perfection Certificate dated as of the date
hereof and delivered to the Agent pursuant to the Credit Agreement.
3. CONTINUED VALIDITY OF SECURITY DOCUMENTS. Except as
specifically amended by this Amendment, the Existing Security Documents shall
remain in full force and effect, and each of the Borrower and Holdings reaffirms
the continued validity of the Existing Security Documents as amended on the date
hereof. Each of the Existing Security Documents and this Amendment shall be
read and construed as a single agreement. All references in each of the
Existing Security Documents or any related agreement or instrument to the
Existing Security Documents shall hereafter refer to each of the Existing
Security Documents as amended hereby.
4. REPRESENTATIONS AND WARRANTIES. Each of the Borrower and
Holdings represents and warrants that all the representations and warranties as
set forth in each of the Existing Security Documents are true and correct in all
material respects on and as of the date hereof. All such representations and
warranties are hereby ratified, affirmed and incorporated herein by reference,
with the same force and effect as though set forth herein in their entirety.
5. DEFINITIONS. Each capitalized term used herein without specific
definition shall have the same meaning herein as in the Credit Agreement.
6. NO WAIVER. Nothing contained herein shall constitute a
waiver of, impair or otherwise affect any Obligations, any other obligation or
the Borrower or Holdings or any right of the Agent or any Banks consequent
thereon.
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7. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
9. EFFECTIVENESS OF AMENDMENT. This Amendment shall become
effective as of the date hereof upon receipt by the Agent of counterparts of
this Amendment duly executed by each of the Borrower, Holdings and the Agent and
the occurrence of the Closing Date under the Credit Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to Security Documents to be executed by their duly authorized officers as a
document under seal as of the date first set forth above.
NATIONAL RESTAURANT ENTERPRISES, INC.
By:
Title:
NRE HOLDINGS, INC.
By: \s A. Richard Caputo, Jr.
Title: Vice President
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
By: \s A. Richard Caputo, Jr.
Title: Vice President
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IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to Security Documents to be executed by their duly authorized officers as a
document under seal as of the date first set forth above.
NATIONAL RESTAURANT ENTERPRISES, INC.
By: \s A. Richard Caputo, Jr.
Title: Vice President
NRE HOLDINGS, INC.
By: \s A. Richard Caputo, Jr.
Title: Vice President
THE FIRST NATIONAL BANK OF
BOSTON, As agent
By: \s Gordon l. Nelson, Jr.
Title: Director, Vice President
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CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF NEW YORK )
) ss
COUNTY OF NEW YORK )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 7th day of February, 1996 personally appeared \s A. Richard
Caputo, Jr. to me known personally, and who, being by me duly sworn, deposes and
says that s/he is the Vice President of NATIONAL RESTAURANT ENTERPRISES, INC.,
that being duly authorized he/she did sign and seal this instrument as such
officer of and on behalf of such corporation, and that the same is such
corporation's free act and deed.
\s David L. Chu
Notary Public
My Commission Expires:
CERTIFICATE OF ACKNOWLEDGEMENT
STATE OF NEW YORK )
) ss
COUNTY OF NEW YORK )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 7th day of February, 1996 personally appeared \s A. Richard
Caputo, Jr. to me known personally, and who, being by me duly sworn, deposes and
says that s/he is the Vice President of NRE HOLDINGS, INC., that being duly
authorized he/she did sign and seal this instrument as such officer of and on
behalf of such corporation, and that the same is such corporation's free act and
deed.
s\ David L. Chu
Notary Public
My Commission Expires:
-1-
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT is made as of September 1, 1994, by and
between NRE HOLDINGS, INC., a Delaware corporation (the "Company"), and THE
FIRST NATIONAL BANK OF BOSTON, a national banking association, as agent
(hereinafter, in such capacity, the "Agent") for itself and the other lending
institutions (hereinafter, collectively, the "Banks") which are or may become
parties to a Revolving Credit and Term Loan Agreement dated as of September 1,
1994 (as amended and in effect from time to time, the "Credit Agreement"),
among the Company, National Restaurant Enterprises, Inc. (the "Borrower"), the
Banks and the Agent.
WHEREAS, the Borrower, a Delaware corporation and wholly-owned
subsidiary of the Company, the Company, the Banks and the Agent have entered
into the Credit Agreement, pursuant to which the Banks, subject to the terms
and conditions contained therein, are to provide certain financial
accommodations to the Borrower;
WHEREAS, the Company is expected to receive substantial direct and
indirect benefits from the making of loans and other extensions of credit to
the Borrower by the Banks pursuant to the Credit Agreement (which benefits are
hereby acknowledged);
WHEREAS, the Company has executed and delivered to the Agent, for the
benefit of the Banks and the Agent, a Limited Guaranty (as amended and in
effect from time to time, the "Guaranty") dated as of the date hereof of the
payment and performance of the Borrower's Obligations to the Banks and the
Agent under or in respect of the Credit Agreement; and
WHEREAS, the Company is the direct or indirect legal and beneficial
owner of all of the issued and outstanding shares of each class of the capital
stock of each of the corporations described on Annex A (the "Subsidiaries");
and
WHEREAS, it is a condition precedent to the Banks' making any loans
or otherwise extending credit to the Borrower under the Credit Agreement that
the Company execute and deliver to the Agent, for the benefit of the Banks and
the Agent, a pledge agreement in substantially the form hereof; and
WHEREAS, the Company wishes to grant pledges and security interests
in favor of the Agent, for the benefit of the Banks and the Agent, as herein
provided;
<PAGE>
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NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
PLEDGE OF STOCK, ETC.
PLEDGE OF STOCK.
The Company hereby pledges, assigns, grants a security
interest in, and delivers to the Agent, for the benefit of the Banks
and the Agent, all of the shares of capital stock of the Subsidiaries
of every class other than the Voting Stock, as more fully described
on Annex A hereto, to be held by the Agent, for the benefit of the
Banks and the Agent, subject to the terms and conditions hereinafter
set forth. The certificates for such shares, accompanied by stock
powers or other appropriate instruments of assignment thereof duly
executed in blank by the Company, have been delivered to the Agent.
ADDITIONAL STOCK.
In case the Company shall acquire any additional shares of
the capital stock (other than the Voting Stock) of any Subsidiary or
corporation which is the successor of any Subsidiary, or any
securities exchangeable for or convertible into shares of such
capital stock of any class of any Subsidiary, by purchase, stock
dividend, stock split or otherwise, then the Company shall forthwith
deliver to and pledge such shares or other securities to the Agent,
for the benefit of the Banks and the Agent, under this Agreement and
shall deliver to the Agent forthwith any certificates therefor,
accompanied by stock powers or other appropriate instruments of
assignment duly executed by the Company in blank. The Company agrees
that the Agent may from time to time attach as Annex A hereto an
updated list of the shares of capital stock or securities at the time
pledged with the Agent hereunder.
DEFINITIONS.
The term "Obligations" and all other capitalized terms used herein
without definition shall have the respective meanings provided therefor in the
Credit Agreement. Terms used herein and not defined in the Credit Agreement or
otherwise defined herein that are defined in the Massachusetts UCC have such
defined meanings herein, unless the context otherwise indicated or requires,
and the following terms shall have the following meanings:
Stock. Includes the shares of stock described in Annex A attached
hereto and any additional shares of stock at the time pledged with the Agent
hereunder, but does not include Voting Stock.
<PAGE>
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Stock Collateral. The property at any time pledged to the Agent
hereunder (whether described herein or not) and all income therefrom,
increases therein and proceeds thereof, including without limitation that
included in Cash Collateral, but excluding from the definition of "Stock
Collateral" any income, increases or proceeds received by the Company to the
extent expressly permitted by Section 6.
Voting Stock. Any stock or similar equity interest of a Person
pursuant to which the holders thereof have, at the time of determination, the
general voting power under ordinary circumstances to vote for the election of
directors, managers, trustees or general partners of such Person (irrespective
of whether or not at the time any other class or classes will have or might
have voting power by reason of a happening of any contingency).
SECURITY FOR OBLIGATIONS.
This Agreement and the security interest in and pledge of the Stock
Collateral hereunder are made with and granted to the Agent, for the benefit
of the Banks and the Agent, as security for the payment and performance in
full of all the Obligations under the Credit Agreement and to secure the
Company's obligations under the Guaranty.
LIQUIDATION, RECAPITALIZATION, ETC. Any sums or other property paid
or distributed upon or with respect to any of the Stock, whether by dividend
or redemption or upon the liquidation or dissolution of the issuer thereof or
otherwise, shall, except to the limited extent provided in Section 6, be paid
over and delivered to the Agent to be held by the Agent, for the benefit of the
Banks and the Agent, as security for the payment and performance in full of
all of the Obligations. In case, pursuant to the recapitalization or
reclassification of the capital of the issuer thereof or pursuant to the
reorganization thereof, any distribution of capital shall be made on or in
respect of any of the Stock or any property shall be distributed upon or with
respect to any of the Stock, the property so distributed shall be delivered to
the Agent, for the benefit of the Banks and the Agent, to be held by it as
security for the Obligations. Except to the limited extent provided in Section
6, all sums of money and property paid or distributed in respect of the Stock,
whether as a dividend or upon such a liquidation, dissolution, recapitalization
or reclassification or otherwise, that are received by the Company shall, until
paid or delivered to the Agent, be held in trust for the Agent, for the benefit
of the Banks and the Agent, as security for the payment and performance in full
of all of the Obligations.
WARRANTY OF TITLE; AUTHORITY.
The Company hereby represents and warrants that: (a) the Company has
good and marketable title to, and is the sole record and beneficial owner of,
the Stock described in Section 1, subject to no pledges, liens, security
interests, charges, options, restrictions or other encumbrances except the
pledge and security interest created by this Agreement, (b) all of the Stock
described in Section 1 is validly issued, fully paid and non-assessable, (c) the
Company has full power, authority and legal
<PAGE>
-4-
right to execute, deliver and perform its obligations under this Agreement and
to pledge and grant a security interest in all of the Stock Collateral
pursuant to this Agreement, and the execution, delivery and performance hereof
and the pledge of and granting of a security interest in the Stock Collateral
hereunder have been duly authorized by all necessary corporate or other action
and do not contravene any law, rule or regulation or any provision of the
Company's charter documents or by-laws or of any judgment, decree or order of
any tribunal or of any agreement or instrument to which the Company is a party
or by which it or any of its property is bound or affected or constitute a
default thereunder, and (d) the information set forth in Annex A hereto
relating to the Stock is true, correct and complete in all respects. The
Company covenants that it will defend the rights of the Banks and the Agent
and security interest of the Agent, for the benefit of the Banks and the
Agent, in such Stock against the claims and demands of all other persons
whomsoever. The Company further covenants that it will have the like title to
and right to pledge and grant a security interest in the Stock Collateral
hereafter pledged or in which a security interest is granted to the Agent
hereunder and will likewise defend the rights, pledge and security interest
thereof and therein of the Banks and the Agent.
DIVIDENDS, ETC., PRIOR TO MATURITY. So long as no Event of Default
shall have occurred and be continuing, the Company shall be entitled to
receive all cash dividends paid in respect of the Stock and to give consents,
waivers and ratifications in respect of the Stock; provided, however, that no
consent, waiver or ratification given by the Company if the effect thereof
would in the reasonable judgment of the Majority Banks impair any of the Stock
Collateral or be inconsistent with or result in any violation of any of the
provisions of the Credit Agreement, the Notes or any of the other Loan
Documents. All such rights of the Company to receive cash dividends shall be
in accordance with Section 10.4 of the Credit Agreement. All such rights of the
Company to give consents, waivers and ratifications with respect to the Stock
shall, at the Agent's option, as evidenced by the Agent's notifying the
Company of such election, cease in case an Event of Default shall have
occurred and be continuing.
REMEDIES.
IN GENERAL.
If a Default or an Event of Default shall have occurred and
be continuing, the Agent shall thereafter have the following rights
and remedies (to the extent permitted by applicable law) in addition
to the rights and remedies of a secured party under the Massachusetts
UCC, all such rights and remedies being cumulative, not exclusive,
and enforceable alternatively, successively or concurrently, at such
time or times as the Agent deems expedient:
(a) if the Agent so elects and gives notice of such
election to the Company, the Agent may vote any or all
shares of the Stock (whether or not the same shall have been
transferred into its name or the name of its nominee or
nominees) for any lawful purpose, including, without
limitation, if the Agent so elects, for the
<PAGE>
-5-
liquidation of the assets of the issuer thereof, and give
all consents, waivers and ratifications in respect of the
Stock and otherwise act with respect thereto as though it
were the outright owner thereof (the Company hereby
irrevocably constituting and appointing the Agent the proxy
and attorney-in-fact of the Company, with full power of
substitution, to do so);
(b) the Agent may demand, sue for, collect or make
any compromise or settlement the Agent deems suitable in
respect of any Stock Collateral;
(c) the Agent may sell, resell, assign and deliver,
or otherwise dispose of any or all of the Stock Collateral,
for cash or credit or both and upon such terms at such place
or places, at such time or times and to such entities or
other persons as the Agent thinks expedient, all without
demand for performance by the Company or any notice or
advertisement whatsoever except as expressly provided herein
or as may otherwise be required by law;
(d) the Agent may cause all or any part of the
Stock held by it to be transferred into its name or the name
of its nominee or nominees; and
(e) the Agent may set off against the Obligations
any and all sums deposited with it or held by it.
SALE OF STOCK COLLATERAL.
In the event of any disposition of the Stock Collateral as
provided in clause (c) of Section 7.1, the Agent shall give to the
Company at least five (5) Business Days prior written notice of the
time and place of any public sale of the Stock Collateral or of the
time after which any private sale or any other intended disposition is
to be made. The Company hereby acknowledges that five (5) Business
Days prior written notice of such sale or sales shall be reasonable
notice. The Agent may enforce its rights hereunder without any other
notice and without compliance with any other condition precedent now
or hereunder imposed by statute, rule of law or otherwise (all of
which are hereby expressly waived by the Company, to the fullest
extent permitted by law). The Agent may buy any part or all of the
Stock Collateral at any public sale and if any part or all of the
Stock Collateral is of a type customarily sold in a recognized market
or is of the type which is the subject of widely-distributed standard
price quotations, the Agent may buy at private sale and may make
payments thereof by any means. The Agent may apply the cash proceeds
actually received from any sale or other disposition to the
reasonable expenses of retaking, holding, preparing for sale, selling
and the like, to reasonable attorneys' fees, travel and all other
expenses which may be incurred by the Agent in attempting to collect
the Obligations or to enforce this Agreement or in the prosecution or
defense of any action or proceeding related to the subject matter of
this
<PAGE>
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Agreement, and then to the Obligations in the order set forth in such
order or preference as the Agent may determine after proper allowance
for Obligations not then due. Only after such applications, and after
payment by the Agent of any amount required by Section 9-504(1)(c) of
the Massachusetts UCC, need the Agent account to the Company for any
surplus. To the extent that any of the Obligations are to be paid or
performed by a person other than the Company, the Company waives and
agrees not to assert any rights or privileges which it may have under
Section 9-112 of the Massachusetts UCC.
REGISTRATION OF STOCK.
If the Agent shall determine to exercise its right to sell
any or all of the Stock pursuant to this Section 7, and if in the
opinion of counsel for the Agent it is necessary, or if in the
reasonable opinion of the Agent it is advisable, to have the Stock, or
that portion thereof to be sold, registered under the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the
Company agrees to use its best efforts to cause the issuer or issuers
of the Stock contemplated to be sold, to execute and deliver, and
cause the directors and officers of such issuer to execute and
deliver, all at the Company's expense, all such instruments and
documents, and to do or cause to be done all such other acts and
things as may be necessary or, in the reasonable opinion of the
Agent, advisable to register such Stock under the provisions of the
Securities Act and to cause the registration statement relating
thereto to become effective and to remain effective for a period of 9
months from the date such registration statement became effective,
and to make all amendments thereto or to the related prospectus or
both that, in the reasonable opinion of the Agent, are necessary or
advisable, all in conformity with the requirements of the Securities
Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Company agrees to use its best
efforts to cause such issuer or issuers to comply with the provisions
of the securities or "Blue Sky" laws of any jurisdiction which the
Agent shall designate and to cause such issuer or issuers to make
available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.
PRIVATE SALES.
The Company recognizes that the Agent may be unable to
effect a public sale of the Stock by reason of certain prohibitions
contained in the Securities Act, federal banking laws, and other
applicable laws, but may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers. The
Company agrees that any such private sales may be at prices and other
terms less favorable to the seller than if sold at public sales and
that such private sales shall not by reason thereof be deemed not to
have been made in a commercially reasonable manner. The Agent shall
be under no obligation to delay a sale of any of the Stock for the
period of time necessary to permit the issuer of such securities to
<PAGE>
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register such securities for public sale under the Securities Act, or
such other federal banking or other applicable laws, even if the
issuer would agree to do so. Subject to the foregoing, the Agent
agrees that any sale of the Stock shall be made in a commercially
reasonable manner, and the Company agrees to use its best efforts to
cause the issuer or issuers of the Stock contemplated to be sold, to
execute and deliver, and cause the directors and officers of such
issuer to execute and deliver, all at the Company's expense, all such
instruments and documents, and to do or cause to be done all such
other acts and things as may be necessary or, in the reasonable
opinion of the Agent, advisable to exempt such Stock from
registration under the provisions of the Securities Act, and to make
all amendments to such instruments and documents which, in the
opinion of the Agent, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable
thereto. The Company further agrees to use its best efforts to cause
such issuer or issuers to comply with the provisions of the
securities or "Blue Sky" laws of any jurisdiction which the Agent
shall designate and, if required, to cause such issuer or issuers to
make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.
COMPANY'S AGREEMENTS, ETC.
The Company further agrees to do or cause to be done all
such other acts and things as may be reasonably necessary to make any
sales of any portion or all of the Stock pursuant to this Section 7
valid and binding and in compliance with any and all applicable laws
(including, without limitation, the Securities Act, the Securities
Exchange Act of 1934, as amended, the rules and regulations of the
Securities and Exchange Commission applicable thereto and all
applicable state securities or "Blue Sky" laws), regulations, orders,
writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at the Company's
expense. The Company further agrees that a breach of any of the
covenants contained in this Section 7 will cause irreparable injury to
the Agent and the Banks, that the Agent and the Banks have no adequate
remedy at law in respect of such breach and, as a consequence, agrees
that each and every covenant contained in this Section 7 shall be
specifically enforceable against the Company by the Agent and the
Company hereby waives and agrees not to assert any defenses against
an action for specific performance of such covenants.
MARSHALLING.
Neither the Agent nor any Bank shall be required to marshal any
present or future collateral security for (including but not limited to this
Agreement and the Stock Collateral), or other assurances of payment of, the
Obligations or any of them, or to resort to such collateral security or other
assurances of payment in any particular order. All of the Agent's rights
hereunder and of the
<PAGE>
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Banks and the Agent in respect of such collateral security and other
assurances of payment shall be cumulative and in addition to all other rights,
however existing or arising. To the extent that it lawfully may, the Company
hereby agrees that it will not invoke any law relating to the marshalling of
collateral that might cause delay in or impede the enforcement of the Agent's
rights under this Agreement or under any other instrument evidencing any of
the Obligations or under which any of the Obligations is outstanding or by
which any of the Obligations is secured or payment thereof is otherwise
assured, and to the extent that it lawfully may the Company hereby irrevocably
waives the benefits of all such laws.
COMPANY'S OBLIGATIONS NOT AFFECTED.
The obligations of the Company hereunder shall remain in full force
and effect without regard to, and shall not be impaired by (a) any exercise or
nonexercise, or any waiver, by the Agent or any Bank of any right, remedy,
power or privilege under or in respect of any of the Obligations or any
security thereof (including this Agreement); (b) any amendment to or
modification of the Credit Agreement, the Note, the other Loan Documents or
any of the Obligations; (c) any amendment to or modification of any instrument
(other than this Agreement) securing any of the Obligations, including,
without limitation, any of the Security Documents; or (d) the taking of
additional security for, or any other assurances of payment of, any of the
Obligations or the release or discharge or termination of any security or
other assurances of payment or performance for any of the Obligations; whether
or not the Company shall have notice or knowledge of any of the foregoing.
TRANSFER, ETC., BY COMPANY.
Without the prior written consent of the Agent, the Company will not
sell, assign, transfer or otherwise dispose of, grant any option with respect
to, or pledge or grant any security interest in or otherwise encumber or
restrict any of the Stock Collateral or any interest therein, except for the
pledge thereof and security interest therein provided for in this Agreement.
FURTHER ASSURANCES.
The Company will do all such acts, and will furnish to the Agent all
such financing statements, certificates, legal opinions and other documents
and will obtain all such governmental consents and corporate approvals and
will do or cause to be done all such other things as the Agent may reasonably
request from time to time in order to give full effect to this Agreement and
to secure the rights of the Banks and the Agent hereunder, all without any
cost or expense to the Agent or any Bank. If the Agent so elects, a photocopy
of this Agreement may at any time and from time to time be filed by the Agent
as a financing statement in any recording office in any jurisdiction.
AGENT'S EXONERATION.
<PAGE>
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Under no circumstances shall the Agent be deemed to assume any
responsibility for or obligation or duty with respect to any part or all of
the Stock Collateral of any nature or kind or any matter or proceedings
arising out of or relating thereto, other than (a) to exercise reasonable care
in the physical custody of the Stock Collateral and (b) after a Default or an
Event of Default shall have occurred and be continuing to act in a
commercially reasonable manner. Neither the Agent nor any Bank shall be
required to take any action of any kind to collect, preserve or protect its or
the Company's rights in the Stock Collateral or against other parties thereto.
The Agent's prior recourse to any part or all of the Stock Collateral shall
not constitute a condition of any demand, suit or proceeding for payment or
collection of any of the Obligations.
NO WAIVER, ETC.
Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated except by a written instrument expressly referring to
this Agreement and to the provisions so modified or limited, and executed by
the Agent, with the consent of the Majority Banks, and the Company. No act,
failure or delay by the Agent shall constitute a waiver of its rights and
remedies hereunder or otherwise. No single or partial waiver by the Agent of
any default or right or remedy that it may have shall operate as a waiver of
any other default, right or remedy or of the same default, right or remedy on
a future occasion. The Company hereby waives presentment, notice of dishonor
and protest of all instruments, included in or evidencing any of the
Obligations or the Stock Collateral, and any and all other notices and demands
whatsoever (except as expressly provided herein or in the Credit Agreement).
NOTICE, ETC.
All notices, requests and other communications hereunder shall be
made in the manner set forth in Section 21 of the Credit Agreement.
TERMINATION.
Upon final payment and performance in full of the Obligations, this
Agreement shall terminate and the Agent shall, at the Company's request and
expense, return such Stock Collateral in the possession or control of the
Agent as has not theretofore been disposed of pursuant to the provisions
hereof, together with any moneys and other property at the time held by the
Agent hereunder.
OVERDUE AMOUNTS.
Until paid, all amounts due and payable by the Company hereunder
shall be a debt secured by the Stock Collateral and shall bear, whether before
or after judgment, interest at the rate of interest for overdue principal set
forth in the Credit Agreement.
<PAGE>
-10-
GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS. The Company agrees that any suit for the
enforcement of this Agreement may be brought in the courts of the Commonwealth
of Massachusetts or any federal court sitting therein and consents to the
non-exclusive jurisdiction of such court and to service of process in any such
suit being made upon the Company by mail at the address specified in Section 21
of the Credit Agreement. The Company hereby waives any objection that it may now
or hereafter have to the venue of any such suit or any such court or that such
suit is brought in an inconvenient court.
WAIVER OF JURY TRIAL.
THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR
OBLIGATIONS. Except as prohibited by law, the Company waives any right which
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Company (a)
certifies that neither the Agent or any Bank nor any representative, agent or
attorney of the Agent or any Bank has represented, expressly or otherwise,
that the Agent or any Bank would not, in the event of litigation, seek to
enforce the foregoing waivers and (b) acknowledges that, in entering into the
Credit Agreement and the other Loan Documents to which the Agent is a party,
the Agent and the Banks are relying upon, among other things, the waivers and
certifications contained in this Section 18.
MISCELLANEOUS.
The headings of each section of this Agreement are for convenience
only and shall not define or limit the provisions thereof. This Agreement and
all rights and obligations hereunder shall be binding upon the Company and its
respective successors and assigns, and shall inure to the benefit of the Agent
and the Banks and their respective successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity
of all other terms hereof shall be in no way affected thereby, and this
Agreement shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Company acknowledges
receipt of a copy of this Agreement.
INTENT OF PARTIES.
Notwithstanding the language of any provision of this Agreement which
might otherwise be construed to the contrary, the parties hereto acknowledge
and agree that the Agent shall not take any
<PAGE>
-11-
action or require the Company to make any acknowledgements, agreements, or
take any actions, which would violate the terms and conditions of the
Intercreditor Agreement.
<PAGE>
-1-
IN WITNESS WHEREOF, intending to be legally bound, the Company and the Agent
have caused this Agreement to be executed as of the date first above written.
NRE HOLDINGS, INC.
By:
Title:
THE FIRST NATIONAL BANK OF BOSTON, as
Agent
By:
Title:
The undersigned Subsidiaries hereby join in the above Agreement for
the sole purpose of consenting to and being bound by the provisions of
Sections 4.1, 6 and 7 thereof, the undersigned hereby agreeing to cooperate
fully and in good faith with the Agent and the Company in carrying out such
provisions.
NATIONAL RESTAURANT ENTERPRISES, INC.
By:
Title:
<PAGE>
-2-
ANNEX A TO PLEDGE AGREEMENT
None of the issuers has any authorized, issued or outstanding shares
of its capital stock of any class or any commitments to issue any shares of
its capital stock of any class or any securities convertible into or
exchangeable for any shares of its capital stock of any class except as
otherwise stated in this Annex A.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | Number of | Number of | Number of | Par or |
| | Record | Class of | Authorized | Issued | Outstanding | Liquidation |
| Issuer | Owner | Shares | Shares | Shares | Shares | Value |
| ------ | ------ | -------- | ---------- | ---------- | ----------- | -------- |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
|---------------|---------------|---------------|---------------|---------------|---------------|---------------|
| | | | | | | |
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit 10.5
WAIVER AND AMENDMENT NO. 2
TO
STOCKHOLDERS AGREEMENT
THIS WAIVER AND AMENDMENT NO. 2 TO STOCKHOLDERS AGREEMENT
(this "Amendment No. 2"), dated as of February 7, 1996, is made by and among NRE
Holdings, Inc., a Delaware corporation, National Restaurant Enterprises, Inc., a
Delaware corporation, The First National Bank of Boston, a national banking
association, BancBoston Investments Inc., MCIT PLC, a corporation organized
under the laws of England, PMI Mezzanine Fund, L.P., a Delaware limited
partnership ("PMI"), the Jordan Investors, the Management Stockholders, the Jar
Investors and the Osborn Investors (each as defined in the Stockholders
Agreement, dated as of September 1, 1994, as amended by the Consent and
Amendment No. 1 to Stockholders Agreement, dated as of November 30, 1994 (as so
amended, the "Original Stockholders Agreement"), between the Company and certain
of the parties hereto.
Except as otherwise expressly provided herein, capitalized terms used
herein which are defined in the Original Stockholders Agreement shall have the
same meaning herein as specified for such terms in the Original Stockholders
Agreement, as so amended.
W I T N E S S E T H:
WHEREAS, the Company and certain of the parties hereto executed the
Original Stockholders Agreement to promote their mutual interest and the
interest of the Company by imposing certain restrictions on the transfer of
shares of capital stock of the Company owned or thereafter acquired by the
Stockholders and to set forth their respective agreements with respect to
certain other matters, all upon the terms and conditions therein set forth;
WHEREAS, concurrent with the date hereof, the Company, Enterprises, and
PMI are entering into a note purchase agreement whereby PMI will purchase from
Enterprises senior subordinated notes and from the Company warrants convertible
into shares of Class B Common Stock (as amended or modified from time to time,
the "PMI Note Purchase Agreement");
WHEREAS, the parties to the Original Stockholders Agreement desire (i)
to waive certain rights granted to them under the original Stockholders
Agreement and (ii) to make certain amendments to the Original Stockholders
Agreement, as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. Representations and Warranties.
(a) each Stockholder that is a party hereto represents on behalf of
itself that it is the record and beneficial owner of the number of shares of the
Company's capital stock set forth opposite such Stockholder's name on Schedule 1
attached hereto.
(b) the Company represents and warrants that the Stockholders which are
parties hereto constitute all the holders of record of the Company's capital
stock and that their respective record ownership of shares of the Company's
capital stock is set forth on Schedule 1 attached hereto.
SECTION 2. Amendments to Original Stockholders Agreement. The parties hereto
agree that the Original Stockholders Agreement is hereby amended as follows:
(a) Article I is amended by:
(i) Adding the following definitions in appropriate
alphabetical sequence:
"Institutional Lender shall mean any bank, savings and loan
association, insurance company, or other institutional lender."
"MCIT Purchase Agreement shall mean the Amended and Restated
Purchase Agreement, dated as of February 7, 1996, between the Company and MCIT,
as amended or supplemented from time to time."
"PMI shall have the meaning set forth in the preamble to this
Amendment No. 2."
"PMI Note Purchase Agreement shall have the meaning set forth in
the second recital to this Amendment No. 2."
"PMI Subordinated Notes shall mean those 12.5% subordinated
notes of Enterprises in the original aggregate principal amount of $15 million
with a maturity of January 31, 2005.
(ii) Deleting the definition of "Stockholder" in its entirety
and inserting the following in lieu thereof:
-2-
"Stockholder shall mean any of the Jordan Investors,
MCIT, The Bank of Boston, FNBB Affiliate, PMI, the Management Investors, the Jar
Investors, the Osborn Investors, holders of the Company's capital stock issued
pursuant to the Stock Option Agreement to any Permitted Transferee of any such
Person who becomes a party to or bound by the provisions of this Agreement in
accordance with the terms hereof."
(iii) Deleting the definition of "Transaction Documents" in its
entirety and inserting the following in lieu thereof:
"Transaction Documents shall mean this Agreement, the
Securities Purchase Agreement, the PMI Note Purchase Agreement, the Purchase and
Sale Agreement, the Jaro Purchase Agreement, the Osborn Purchase Agreement, the
Franchise Agreement, the Management Consulting Agreement, the MCIT Purchase
Agreement, the Revolving Credit and Term Loan Agreement, the Executive and
Advisors Subscription Agreement, the Jordan Investors Subscription Agreement,
the Management Subscription Agreement, each of the agreements that are exhibits
hereto and thereto, and all agreements, instruments and documents contemplated
thereby."
(iv) Deleting the definition of "Warrants" in its entirety and
inserting the following in lieu thereof:
"Warrants shall mean (i) the Warrant, initially exercisable to
purchase 31.2801 shares of Class B Common Stock, issued to The First National
Bank of Boston or its designee pursuant to the Revolving Credit and Term Loan
Agreement, substantially in the form of Exhibit F hereto, (ii) the Warrant,
initially exercisable to purchase 81.0799 shares of Class B Common Stock, issued
to FNBB Affiliate, substantially in the form of Exhibit G hereto, and (iii) the
Warrants, initially exercisable to purchase 71.72 shares of Class C Common
Stock, issued to PMI pursuant to the PMI Note Purchase Agreement, substantially
in the form of Exhibit H hereto, as such Warrants may from time to time be
amended, modified or supplemented in accordance with the terms hereof and
thereof."
(v) Deleting the definition of "Registrable Securities" in its
entirety and inserting the following definitions in lieu thereof:
"Registrable Securities shall mean the following:
(a) all shares of Class A Common Stock outstanding on the date hereof
and now or hereafter owned of record by the Jordan Investors; and
-3-
(b) all shares of Class B Common Stock outstanding on the date hereof,
and all shares of Class A Common Stock issued or issuable upon (x) the
conversion or exchange of outstanding shares of Class B Common Stock in
accordance with the applicable provisions of the Certificate of Incorporation or
this Agreement, or (y) the conversion or exchange of the Warrant Stock;
provided, however, that no holder of shares of Class B Common Stock shall have
any registration rights hereunder with respect to any shares of Class B Common
Stock, but only with respect to shares of Class A Common Stock into which such
shares of Class B Common Stock shall be so exchanged or converted in connection
with an effective registration and sale under the Securities Act of such shares
of Class A Common Stock; and, solely for purposes of Article VI of this
Agreement, each holder of shares of Class B Common Stock and each holder of
Warrants to purchase shares of Class B Common Stock which are to be converted
into shares of Class A Common Stock to be sold in connection with such a
registration shall be deemed to be the holder of the shares of Class A Common
Stock into which such shares of Class B Common Stock shall be convertible; and
(c) all shares of Class C Common Stock outstanding on the date hereof
and all shares of Class A Common Stock issued or issuable upon (x) the
conversion of outstanding shares of Class C Common Stock in accordance with the
applicable provisions of the Certificate of Incorporation or this Agreement, or
(y) the conversion or exchange of the Warrant Stock; provided, however, that no
holder of shares of Class C Common Stock shall have any registration rights
hereunder with respect to any shares of Class C Common Stock, but only with
respect to shares of Class A Common Stock into which such shares of Class C
Common Stock shall be so exchanged or converted in connection with an effective
registration and sale under the Securities Act of such shares of Class A Common
Stock; and, solely for purposes of Article VI of this Agreement, each holder of
shares of Class C Common Stock which are to be converted into shares of Class A
Common Stock to be sold in connection with such a registration shall be deemed
to be the holder of the shares of Class A Common Stock into which such shares of
Class C Common Stock shall be convertible; and
(d) all shares of Class D Common Stock acquired by the Management
Investors, the Jaro Investors and the Osborn Investors, and all shares of Class
A Common Stock issued or issuable upon the conversion of outstanding shares of
Class D Common Stock in accordance with the applicable provisions of the
Certificate of Incorporation; provided, however, that no holder of shares of
Class D Common Stock shall have any registration rights hereunder with respect
to any shares of Class D Common Stock, but only with respect to shares of Class
A Common Stock into which such shares of Class D Common Stock shall be so
exchanged or converted in connection with an effective registration and sale
under the Securities Act of such shares of Class A Common Stock; and, solely for
purposes of Article VI of this Agreement, each holder of shares of Class D
Common Stock which are to be converted into shares of Class A Common Stock to be
sold in connection with such a registration shall be deemed to be the holder of
the shares of Class A Common Stock into which such shares of Class D Common
Stock shall be convertible; and
-4-
(e) any shares of capital stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing clause (a),
(b), (c) or (d) by way of a stock dividend or stock split or in connection with
a combination or subdivision of shares, reclassification, recapitalization,
merger, consolidation or other reorganization of the Company.
As to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144, (iii) they shall have been otherwise
transferred or disposed of, and new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company, and
subsequent transfer or disposition of them shall not require their registration
or qualification under the Securities Act or any similar state law then in
force, or (iv) they shall have ceased to be outstanding."
(b) Deleting from Section 2.1(a)(i) the phrase "not to exceed in the
aggregate an amount per year of the higher of (x) $300,000, or (y) .35% of the
Company's sales".
(c) Amending Section 2.1(a)(i)(2) by replacing "$50,000" with
"$75,000."
(d) Amending Section 4.1 by inserting an additional subclause to read
as follows:
"or (g) with regard to any pledge, hypothecation or charge by
MCIT."
(e) Amending Section 4.2(c) in its entirety to read as follows:
"(c) from The First National Bank of Boston, FNBB Affiliate, or
PMI to any of their respective affiliates, or the Jordan Investors or, in the
case of The First National Bank of Boston, FNBB Affiliate or PMI, any
Institutional Lender."
(f) Inserting "PMI" after "Bank of Boston" in Section 5.1(b)(iii).
(g) Deleting the Section 5.5(b) in its entirety and inserting the
following in lieu thereof:
"(b) "New Securities" shall mean any authorized but unissued
shares, and any treasury shares, of capital stock of the Company and all rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock; provided,
however, that the term "New Securities" does not include (i) securities issued
upon conversion of shares of Class B Common Stock, Class C Common Stock or Class
D Common Stock into Class A Common Stock, in accordance with the Certificate of
Incorporation and this
-5-
Agreement; (ii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of all or substantially all of
the assets or other reorganization whereby the Company shall become the owner of
more than 50% of the voting power of such corporation; (iii) shares of Common
Stock issued in connection with any stock split or stock dividend of the
Company; (iv) any borrowings, direct or indirect, from financial institutions or
other Persons by the Company, whether or not presently authorized, including any
type of loan or payment evidenced by any type of debt instrument, and any
capital stock issued in connection with such borrowings (other than a borrowing
from a Jordan Party), including warrants, options or other rights to purchase
capital stock, provided that such borrowings are not convertible into or
exchangeable for capital stock of the Company; (v) shares of Class A Common
Stock issued pursuant to any Public Offering; (vi) shares of Class A Common
Stock issued in connection with an exchange for Class B Common Stock in
accordance with Section 8.1(b) of this Agreement; (vii) Warrant Stock; (viii)
shares of Preferred Stock issued and paid as dividends on outstanding Preferred
Stock or (ix) shares of capital stock or rights, options or warrants to purchase
capital stock to be issued to employees of the Company or its Subsidiaries,
provided, that no more than two percent (2%) of the outstanding capital stock on
February 7, 1995 shall be available for issuances after such date."
(h) Inserting "PMI" after "Bank of Boston" in Section 5.8.
(i) Inserting "PMI" after "each Jaro Investor" in Section 5.9.
(j) Deleting Section 6.1 in its entirety and inserting the following in
lieu thereof:
"Section 6.1 Demand Registrations.
(a) At any time and from time to time after the earlier of
the fourth anniversary of the Closing Date or the effectuation of an Initial
Public Offering by the Company, holders of a majority of the shares of Stock
held by the Jordan Investors (other than MCIT) and Bank of Boston may request in
writing that the Company effect the registration under the Securities Act of all
or part of such holders' Registrable Securities, specifying in the request the
number and type of Registrable Securities to be registered by each such holder
and the intended method of disposition thereof (such notice is hereinafter
referred to as a "Holder Request"). Upon receipt of such Holder Request, the
Company will promptly give written notice of such requested registration to all
other holders of Registrable Securities, which other holders shall have the
right to include the Registrable Securities held by them in such registration
and thereupon the Company will, as expeditiously as possible, use its best
efforts to effect the registration under the Securities Act of:
-6-
(i) the Registration Securities which the Company has been so
requested to register by such requesting Stockholders; and
(ii) all other Registrable Securities which the Company has
been requested to register by any other holder thereof by written request given
to the Company within 30 calendar days after the giving of such written notice
by the Company (which request shall specify the intended method of disposition
of such Registrable Securities), all to the extent necessary to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered;
provided, however, that the Company shall not be obligated to file a
registration statement relating to any Holder Request under this Section 6.1(a);
(x) unless the Company shall have received requests for such
registration with respect to at least 15% of the shares of Common Stock then
outstanding (including all Warrant Stock) with respect to the first Holder
Request, and unless the Company shall have received requests for such
registration with respect to 10% of the shares of Common Stock then outstanding
with respect to each Holder Request under this Section 6 thereafter;
(y) other than a registration statement on Form S-3 or a
similar short form registration statement, within a period of 12 months after
the effective date of any other registration statement relating to any
registration request under this Section 6.1(a) that was not effected on Form S-3
(or any similar short form); or
(z) within a nine-month period immediately following the
effective date of a registration previously effected by the Company pursuant to
this Section 6.1;
provided, further, however, that the Company may postpone for not more than 90
calendar days, on one occasion only with respect to each request for
registration made under this Section 6.1(a), the filing or effectiveness of a
registration statement under this Section 6.1(a) if the Company and a majority
of the Jordan Investors agree that such registration might reasonably be
expected to have an adverse effect on any proposal or plan by the Company to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction;
provided, that in such event, the holders of Registrable Securities initiating
the request for such registration will be entitled to withdraw such request, and
if such request is withdrawn such registration will not count as one of the
permitted registrations under this Section 6.1. In any event, the Company will
pay all
-7-
Registration Expenses in connection with any registration initiated under this
Section 6.1.
(b) At any time and from time to time after September 1,
1999, holders of a majority of the shares of Stock held by PMI as of the date of
Amendment No. 2 to this Agreement may request in writing that the Company effect
the registration under the Securities Act of all or part of such holders'
Registrable Securities, specifying in the request the number and type of
Registrable Securities to be registered by each such holder and the intended
method of disposition thereof (such notice is hereinafter referred to as a "PMI
Holder Request"). Upon receipt of such PMI Holder Request, the Company will
promptly give written notice of such requested registration to all other holders
of Registrable Securities, which other holders shall have the right to include
the Registrable Securities held by them in such registration and thereupon the
Company will, as expeditiously as possible, use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such requesting Stockholders; and
(ii) all other Registrable Securities which the Company
has been requested to register by any other holder thereof by written request
given to the Company within 30 calendar days after the giving of such written
notice by the Company (which request shall specify the intended method of
disposition of such Registrable Securities), all to the extent necessary to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered;
provided, however, that the Company shall not be obligated to file a
registration statement relating to any PMI Holder Request under this Section
6.1(b);
(x) other than a registration statement on Form S-3
or a similar short form registration statement, within a period of 12 months
after the effective date of any other registration statement relating to any
registration request under this Section 6.1(b) that was not effected on Form S-3
(or any similar short form); or
(y) within a nine-month period immediately following
the effective date of a registration previously effected by the Company pursuant
to this Section 6.1;
provided, further, however, that the Company may postpone for not more
than 90 calendar days, on one occasion only with respect to each request for
registration made under this Section 6.1(b), the filing or effectiveness of a
registration statement under
-8-
this Section 6.1(b) if the Company believes that such registration might
reasonably be expected to have an adverse effect on any proposal or plan by the
Company to engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or similar
transaction; provided, that in such event, the holders of Registrable Securities
initiating the request for such registration will be entitled to withdraw such
request, and if such request is withdrawn such registration will not count as
one of the permitted registrations under this Section 6.1. In any event, the
Company will pay all Registration Expenses in connection with any registration
initiated under this Section 6.1.
(c) Notwithstanding the foregoing provisions of Section
6.1(a) and (b), (i) the Company shall not be obligated to effect more than one
registration pursuant to this Section 6.1 at the request of a majority of the
Jordan Investors, in any twelve month period, in each case through a firm
commitment underwriting through a nationally recognized underwriter (an
"Underwritten Offering") and (ii) the Company shall not be obligated to effect
more than two registrations pursuant to Section 6.1(b), in each case, through an
Underwritten Offering.
(d) If the Company proposes to effect a registration
requested pursuant to this Section 6.1 by the filing of a registration statement
on Form S-3 (or any similar short-form registration statement), the Company will
comply with any request by the Managing Underwriter (as defined in Subsection
(g), below) to effect such registration on another permitted form if such
Managing Underwriter advises the Company that, in its opinion, the use of
another form of registration statement is of material importance of such
proposed offering.
(e) A registration requested pursuant to Section 6.1(a) or
(b) will not be deemed to have been effected unless it has become effective;
provided, that if after it has become effective, the offering of Registrable
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court, such registration will be deemed not to have been effected.
(f) The Company will pay all Registration Expenses in
connection with each of the registrations of Registrable Securities effected by
it pursuant to this Section 6.1.
(g) The Company shall have the right, with the approval of
the Jordan Investors or, in the case of a PMI Holder Request, PMI, to select the
investment banker (or investment bankers) that shall manage the offering
(collectively, the "Managing Underwriter").
-9-
(h) In connection with any offering pursuant to this Section
6.1, the only shares that may be included in such offering are (i) Registrable
Securities, and (ii) shares of authorized but unissued Class A Common Stock that
the Company elects to include in such offering ("Company Securities").
(i) If in connection with any Underwritten Offering pursuant
to this Section 6.1. the Managing Underwriter shall advise the Company that, in
its judgment, the number of shares proposed to be included in such offering
should be limited due to market conditions, then the Company will promptly so
advise each holder of Registrable Securities that has requested registration,
and shares shall be excluded from such offering in the following order until
such limitation has been met:
(A) in the case of an offering requested under Section
6.1(a),
(1) Company Securities, if any, shall be excluded
until all of the Company Securities shall have been so excluded, and,
thereafter,
(2) until the Jordan Investors shall have been
included in such offering the lesser of (i) 25% of the aggregate amount of
Securities held by the Jordan Investors as of February 7, 1996 (such amount as
adjusted for stock splits, recapitalizations and similar events and reduced by
the amount of Securities previously sold by the Jordan Investors pursuant to
Section 6.1 or 6.2) and (ii) the total amount of Registrable Securities
requested by the Jordan Investors to be included in such offering, the
Registrable Securities requested to be included in such offering pursuant to
Section 6.1(a) by Persons shall be excluded pro rata, based on the respective
number of Registrable Securities as to which registration has been so requested
by such Persons, and, thereafter
(3) the Registrable Securities requested to be
included in such offering pursuant to Section 6.1(a) by Persons other than PMI
or the Bank of Boston shall be excluded pro rata, based on the respective number
of Registrable Securities as to which registration has been so requested by such
Persons, and
(B) in the case of an offering requested under Section
6.1(b),
(1) Company Securities, if any, shall be excluded
until all of the Company Securities shall have been so excluded, and,
thereafter,
-10-
(2) the Registrable Securities requested to be
included by Persons other than the Bank of Boston in such offering pursuant to
Section 6.1(b)(ii) shall be excluded pro rata, based on the respective number of
Registrable Securities as to which registration has been so requested by such
Persons, and, thereafter,
(3) the Registrable Securities requested to be
included in such offering by PMI pursuant to Section 6.1(b)(i) or by the Bank of
Boston pursuant to Section 6.1(b)(ii) shall be excluded pro rata, based on the
respective number of Registrable Securities as to which registration has been so
requested by such Persons.
(j) If any shares of Class A Common Stock requested to be
included in a sale pursuant to this Section 6.1. shall not be outstanding but
shall be issuable upon conversion of shares of Class B Common Stock which are
outstanding, then the Bank of Boston and the Company shall take all actions
necessary in order to convert such shares of Class B Common Stock into shares of
Class A Common Stock in order to effect such sale. If any shares of Class A
Common Stock requested to be included in a sale pursuant to this Section 6.1.
shall not be outstanding but shall be issuable upon conversion of shares of
Class C Common Stock which are outstanding, then the Jordan Investors, PMI and
the Company shall take all actions necessary in order to convert such shares of
Class C Common Stock into shares of Class A Common Stock in order to effect such
sale. If any shares of Class A Common Stock requested to be included in a sale
pursuant to this Section 6.1 shall not be outstanding but shall be issuable upon
conversion of shares of Class D Common Stock which are outstanding, then the
Management Investors and the Company shall take all actions necessary in order
to convert such shares of Class D Common Stock into Shares of Class A Common
Stock in order to effect such sale."
(k) Inserting "or PMI, as the case may be," after "Bank of
Boston" in Section 6.2(a)(i).
(l) Inserting ", PMI and the Company" after "Jordan
Investors" in Section 6.2(f).
(m) Deleting Section 6.2(d) in its entirety and inserting
the following in lieu thereof:
"(d) If in connection with any Underwritten Offering pursuant
to this Section 6.2. the Managing Underwriter shall advise the Company that, in
its judgment, the number of shares proposed to be included in such offering
should be
-11-
limited due to market conditions, then the Company shall exclude shares
from such offering in the following order until such limitation has been met:
(1) until the Jordan Investors shall have included in such
offering the lesser of (i) 25% of the aggregate amount of Securities held by the
Jordan Investors as of February 7, 1996 (such amount as adjusted for stock
splits, recapitalizations and similar events and reduced by the amount of
Securities previously sold by the Jordan Investors pursuant to Section 6.1 or
6.2 and (ii) the total amount of Registrable Securities requested by the Jordan
Investors to be included in such offering, the Registrable Securities requested
to be included in such offering, the Registrable Securities requested to be
included in such offering shall be excluded pro rata, based on the respective
number of Registrable Securities as to which registration has been so requested
by such Persons, and, thereafter
(2) the Registrable Securities requested to be included in
such offering by Persons other than PMI or the Bank of Boston shall be excluded
pro rata, based on the respective number of Registrable Securities as to which
registration has been so requested by such Persons."
(n) Inserting "or, in the case of PMI Holder Request, PMI"
after "Jordan Investors" in Section 6.3(a)(ii).
(o) Replacing the reference to "Section 6.1(h)" with
"Section 6.1(i)" in Section 6.3(f).
(p) Deleting Section 8.6(a)(i) in its entirety and inserting
the following in lieu thereof:
"(i) the holders of a majority of the shares of capital
stock held by the Jordan Investors,"
(q) Amending Section 8.6(a) by adding a new subclause (iv) at
the end of the first sentence thereof to read as follows:
"and (iv) to the extent such proposed amendment would materially
adversely affect the rights of PMI under this Agreement, PMI."
SECTION 3. Waiver of First Refusal. Each of the parties hereto hereby waives
any right of first refusal it may have pursuant to Section 5.5 of the Original
Stockholders Agreement arising from the issuance and sale of the PMI
Subordinated Notes and Warrants pursuant to the PMI Note Purchase Agreement,
including, but not limited to, any prior notice or response periods specified in
the Original Stockholders Agreement.
-12-
SECTION 4. Waiver of Anti-Dilution Rights. Each of the parties hereto hereby
waives any right it may have to anti-dilution adjustment of its capital stock
arising from the issuance of the PMI Subordinated Notes and the Warrants
pursuant to PMI Note Purchase Agreement.
SECTION 5. Effect of Amendment No. 2. The waivers and amendments granted
hereunder shall be limited precisely as written and shall not otherwise
constitute a waiver or modification of any other covenants, terms or provisions
of the Original Stockholders Agreement, which shall remain in full force and
effect. Without limiting the foregoing, this Amendment No. 2 shall not
prejudice any right or rights which the Stockholders may otherwise have (now or
in the future) under or in connection with the Original Stockholders Agreement
or otherwise.
SECTION 6. Governing Law. This Amendment No. 2 shall be governed by, and
construed in accordance with, the laws of the State of Illinois (other than any
conflict of laws rule which might result in the application of the laws of any
other jurisdiction).
SECTION 7. Counterparts. This Amendment No. 2 may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument, and all signatures
need not appear on any one counterpart.
-13-
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
NRE HOLDINGS, INC.
By: /S Lawrence E. J
Name:
Title: C.E.O.
MCIT PLC
By: /S James E. Jordan
Name: James E. Jordan
Title: Director
BANCBOSTON INVESTMENTS INC.
By:/S Mary Josephs Reilly
Name: Mary Josephs Reilly
Title: Vice-President
PMI MEZZANINE FUND, L.P.
By: Pacific Mezzanine Investors, LLC,
its General Partner
By:/S
Name:
Title:
JORDAN INVESTORS:
JORDAN/ZALANZNICK CAPITAL COMPANY
By:/S
Name:
Title:
LEUCADIA INVESTORS, INC.
By:/S
Name: Ruth K. Lindtworth
Title: Vice-President
JOHN W. JORDAN, II REVOCABLE TRUST
/S
Name: John W. Jordan, II
Title: Trustee
/S
David W. Zalaznick
/S
Jonathan F. Boucher
/S
John R. Lowden
/S
Adam E. Max
JOHN M. CAMP PROFIT SHARING PLAN
By:/S
Name: John M. Camp
Title: Trustee
/S
John M. Camp
/S
A. Richard Caputo, Jr.
JAMES E. JORDAN, JR. PROFIT SHARING
PLAN AND TRUST
By:/S
Name: James E. Jordan, Jr.
Title: Trustee
PAUL RODZEVIK PROFIT SHARING PLAN
AND TRUST
By:/S
Name: Paul Rodzevik
Title: Trustee
MANAGEMENT STOCKHOLDERS:
/S
Lawrence Jaro
/S
William Osborn
/S
Gary Hubert
/S
Joel Aaseby
/S
Donald Stahurski
/S
Scott Vasatka
JARO INVESTORS:
TABOR RESTAURANTS ASSOCIATES, INC.
By:/S
Name: Lawrence Jaro
Title: President
JARO ENTERPRISES, INC.
By:/S
Name: Lawrence Jaro
Title: President
JARO RESTAURANTS ASSOCIATES, INC.
By:/S
Name: Lawrence Jaro
Title: President
JB RESTAURANTS, INC.
By:/S
Name: Lawrence Jaro
Title: President
OSBORN INVESTORS:
OSBURGER, INC.
By:/S
Name: William Osborn
Title: President
CASTLEKING, INC.
By:/S
Name: William Osborn
Title: President
WHITE-OSBORN RESTAURANTS, INC.
By:/S
Name: William Osborn
Title: President
/S
Thomas H. Quinn
-1-
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 7, 1996, among AMERIKING VIRGINIA
CORPORATION I, a Delaware Corporation ("AmeriKing Virginia"), AMERIKING
CINCINNATI CORPORATION I, a Delaware Corporation ("AmeriKing Cincinnati", and,
collectively with AmeriKing Virginia, the "Subsidiaries"), and THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, as agent
(hereinafter, in such capacity, the "Agent") for itself and other lending
institutions (hereinafter, collectively, the "Banks") which are or may become
parties to the Credit Agreement (as hereinafter defined).
WHEREAS, NRE Holdings, Inc. and National Restaurant Enterprises, Inc. (the
"Borrower") have entered into a certain Second Amended and Restated Revolving
Credit and Term Loan Agreement dated as of the date hereof (as amended and in
effect from time to time, the "Credit Agreement") with the Banks and the
Agent, pursuant to which the Banks, subject to the terms and conditions
contained therein, provide certain financial accommodations to the Borrower;
and
WHEREAS, the Subsidiaries are expected to receive substantial direct and
indirect benefits from the making of Loans and other extensions of credit to
the Borrower by the Banks pursuant to the Credit Agreement (which benefits are
hereby acknowledged); and
WHEREAS, the Subsidiaries have executed and delivered to the Agent, for the
benefit of the Agent and the Banks, a Guaranty dated as of the date hereof (as
amended and in effect from time to time, the "Guaranty"), pursuant to which
the Subsidiaries guaranteed to the Agent and the Banks the payment and
performance of the Borrower's obligations to the Banks and the Agent under or
in respect of the Credit Agreement; and
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending credit to the Borrower under the Credit Agreement that the
Subsidiaries execute and deliver to the Agent, for the benefit of the Banks
and the Agent, a security agreement in substantially the form hereof; and
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
I. DEFINITIONS.
ALL CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITIONS SHALL HAVE THE
RESPECTIVE MEANINGS PROVIDED THEREFOR IN THE CREDIT AGREEMENT. ALL TERMS
DEFINED IN THE UNIFORM COMMERCIAL CODE OF THE
<PAGE>
-2-
COMMONWEALTH OF MASSACHUSETTS AND USED HEREIN SHALL HAVE THE SAME DEFINITIONS
HEREIN AS SPECIFIED THEREIN.
II. GRANT OF SECURITY INTEREST.
A. COLLATERAL GRANTED.
EACH OF THE SUBSIDIARIES HEREBY GRANTS TO THE AGENT, FOR THE BENEFIT OF THE
BANKS AND THE AGENT, TO SECURE THE PAYMENT AND PERFORMANCE IN FULL OF ALL OF
THE OBLIGATIONS, A SECURITY INTEREST IN AND SO PLEDGES AND ASSIGNS TO THE
AGENT, FOR THE BENEFIT OF THE BANKS AND THE AGENT, THE FOLLOWING PROPERTIES,
ASSETS AND RIGHTS OF SUCH SUBSIDIARY, WHEREVER LOCATED, WHETHER NOW OWNED OR
HEREAFTER ACQUIRED OR ARISING, AND ALL PROCEEDS AND PRODUCTS THEREOF (ALL OF
THE SAME BEING HEREINAFTER CALLED THE "COLLATERAL"):
ALL PERSONAL AND FIXTURE PROPERTY OF EVERY KIND AND NATURE INCLUDING WITHOUT
LIMITATION ALL FURNITURE, FIXTURES, EQUIPMENT, RAW MATERIALS, INVENTORY,
GOODS, ACCOUNTS, CONTRACT RIGHTS, RIGHTS TO THE PAYMENT OF MONEY, INSURANCE
REFUND CLAIMS AND ALL OTHER INSURANCE CLAIMS AND PROCEEDS, TORT CLAIMS,
CHATTEL PAPER, DOCUMENTS, INSTRUMENTS (INCLUDING CERTIFICATED SECURITIES),
DEPOSIT ACCOUNTS AND ALL GENERAL INTANGIBLES INCLUDING, WITHOUT LIMITATION,
ALL UNCERTIFICATED SECURITIES, TAX REFUND CLAIMS, LICENSE FEES, PATENTS,
PATENT APPLICATIONS, TRADEMARKS, TRADEMARK APPLICATIONS, TRADE NAMES (OTHER
THAN TRADEMARKS AND TRADE NAMES OWNED BY BURGER KING CORPORATION AND LICENSED
TO SUCH SUBSIDIARY COPYRIGHTS, COPYRIGHT APPLICATIONS, RIGHTS TO SUE AND
RECOVER FOR PAST INFRINGEMENT OF PATENTS, TRADEMARKS AND COPYRIGHTS, COMPUTER
PROGRAMS, COMPUTER SOFTWARE, ENGINEERING DRAWINGS, SERVICE MARKS, CUSTOMER
LISTS, GOODWILL, AND ALL LICENSES, PERMITS, AGREEMENTS OF ANY KIND OR NATURE
PURSUANT TO WHICH SUCH SUBSIDIARY POSSESSES, USES OR HAS AUTHORITY TO POSSESS
OR USE PROPERTY (WHETHER TANGIBLE OR INTANGIBLE) OF OTHERS OR OTHERS POSSESS,
USE OR HAVE AUTHORITY TO POSSESS OR USE PROPERTY (WHETHER TANGIBLE OR
INTANGIBLE) OF SUCH SUBSIDIARY, AND ALL RECORDED DATA OF ANY KIND OR NATURE,
REGARDLESS OF THE MEDIUM OF RECORDING INCLUDING, WITHOUT LIMITATION, ALL
SOFTWARE, WRITINGS, PLANS, SPECIFICATIONS AND SCHEMATICS.
B. DELIVERY OF INSTRUMENTS, ETC.
PURSUANT TO THE TERMS HEREOF, EACH OF THE SUBSIDIARIES HAS ENDORSED, ASSIGNED
AND DELIVERED TO THE AGENT ALL NEGOTIABLE OR NON-NEGOTIABLE INSTRUMENTS
(INCLUDING CERTIFICATED SECURITIES) AND CHATTEL PAPER PLEDGED BY IT HEREUNDER,
TOGETHER WITH INSTRUMENTS OF TRANSFER OR ASSIGNMENT DULY EXECUTED IN BLANK AS
THE AGENT MAY HAVE SPECIFIED. IN THE EVENT THAT EITHER SUBSIDIARY SHALL, AFTER
THE DATE OF THIS AGREEMENT, ACQUIRE ANY OTHER NEGOTIABLE OR NON-NEGOTIABLE
INSTRUMENTS (INCLUDING CERTIFICATED SECURITIES) OR CHATTEL PAPER TO BE PLEDGED
BY IT HEREUNDER, SUCH SUBSIDIARY SHALL FORTHWITH ENDORSE, ASSIGN AND DELIVER
THE SAME TO THE AGENT, ACCOMPANIED BY SUCH INSTRUMENTS OF TRANSFER OR
ASSIGNMENT DULY EXECUTED IN BLANK AS THE AGENT MAY FROM TIME TO TIME
<PAGE>
-3-
SPECIFY. TO THE EXTENT THAT ANY SECURITIES ARE UNCERTIFICATED, APPROPRIATE
BOOK-ENTRY TRANSFERS REFLECTING THE PLEDGE OF SUCH SECURITIES CREATED HEREBY
HAVE BEEN OR, IN THE CASE OF UNCERTIFICATED SECURITIES HEREAFTER ACQUIRED BY
SUCH SUBSIDIARY, WILL AT THE TIME OF SUCH ACQUISITION BE, DULY MADE FOR THE
ACCOUNT OF THE AGENT OR ONE OR MORE NOMINEES OF THE AGENT WITH THE ISSUER OF
SUCH SECURITIES OR OTHER APPROPRIATE BOOK-ENTRY FACILITY OR FINANCIAL
INTERMEDIARY, WITH THE AGENT HAVING AT ALL TIMES THE RIGHT TO OBTAIN
DEFINITIVE CERTIFICATES (IN THE AGENT'S NAME OR IN THE NAME OF ONE OR MORE
NOMINEES OF THE AGENT) WHERE THE ISSUER CUSTOMARILY OR OTHERWISE ISSUES
CERTIFICATES, ALL TO BE HELD AS COLLATERAL HEREUNDER. EACH OF THE SUBSIDIARIES
HEREBY ACKNOWLEDGES THAT THE AGENT MAY, IN ITS DISCRETION, APPOINT ONE OR MORE
FINANCIAL INSTITUTIONS TO ACT AS THE AGENT'S AGENT IN HOLDING IN CUSTODIAL
ACCOUNT INSTRUMENTS OR OTHER FINANCIAL ASSETS IN WHICH THE AGENT IS GRANTED A
SECURITY INTEREST HEREUNDER, INCLUDING, WITHOUT LIMITATION, CERTIFICATES OF
DEPOSIT AND OTHER INSTRUMENTS EVIDENCING SHORT TERM OBLIGATIONS.
C. EXCLUDED COLLATERAL.
NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 2, SUCH GRANT OF
SECURITY INTEREST SHALL NOT EXTEND TO, AND THE TERM "COLLATERAL" SHALL NOT
INCLUDE, ANY CHATTEL PAPER AND GENERAL INTANGIBLES WHICH ARE NOW OR HEREAFTER
HELD BY ANY SUBSIDIARY AS LICENSEE, LESSEE OR OTHERWISE, TO THE EXTENT THAT (I)
SUCH CHATTEL PAPER AND GENERAL INTANGIBLES ARE NOT ASSIGNABLE OR CAPABLE OF
BEING ENCUMBERED AS A MATTER OF LAW OR UNDER THE TERMS OF THE LICENSE, LEASE OR
OTHER AGREEMENT APPLICABLE THERETO (BUT SOLELY TO THE EXTENT THAT ANY SUCH
RESTRICTION SHALL BE ENFORCEABLE UNDER APPLICABLE LAW), WITHOUT THE CONSENT OF
THE LICENSOR OR LESSOR THEREOF OR OTHER APPLICABLE PARTY THERETO AND (II) SUCH
CONSENT HAS NOT BEEN OBTAINED; PROVIDED, HOWEVER, THAT THE FOREGOING GRANT OF
SECURITY INTEREST SHALL EXTEND TO, AND THE TERM "COLLATERAL" SHALL INCLUDE,
(A) ANY AND ALL PROCEEDS OF SUCH CHATTEL PAPER AND GENERAL INTANGIBLES TO THE
EXTENT THAT THE ASSIGNMENT OR ENCUMBERING OF SUCH PROCEEDS IS NOT SO
RESTRICTED AND (B) UPON ANY SUCH LICENSOR, LESSOR OR OTHER APPLICABLE PARTY
CONSENT WITH RESPECT TO ANY SUCH OTHERWISE EXCLUDED CHATTEL PAPER OR GENERAL
INTANGIBLES BEING OBTAINED, THEREAFTER SUCH CHATTEL PAPER OR GENERAL
INTANGIBLES AS WELL AS ANY AND ALL PROCEEDS THEREOF THAT MIGHT HAVE
THERETOFORE HAVE BEEN EXCLUDED FROM SUCH GRANT OF A SECURITY INTEREST AND THE
TERM "COLLATERAL".
III. TITLE TO COLLATERAL, ETC.
EACH OF THE SUBSIDIARIES IS THE OWNER OF THE COLLATERAL FREE FROM ANY ADVERSE
LIEN, SECURITY INTEREST OR OTHER ENCUMBRANCE, EXCEPT FOR THE SECURITY INTEREST
CREATED BY THIS AGREEMENT AND OTHER LIENS PERMITTED BY THE CREDIT AGREEMENT.
NONE OF THE COLLATERAL CONSTITUTES, OR IS THE PROCEEDS OF, "FARM PRODUCTS" AS
DEFINED IN SECTION 9-109(3) OF THE UNIFORM COMMERCIAL CODE OF THE COMMONWEALTH
OF MASSACHUSETTS. NONE OF THE ACCOUNT DEBTORS IN RESPECT OF ANY ACCOUNTS,
CHATTEL PAPER OR GENERAL INTANGIBLES AND NONE OF THE OBLIGORS IN RESPECT OF ANY
INSTRUMENTS INCLUDED IN THE COLLATERAL IS A GOVERNMENTAL AUTHORITY SUBJECT TO
THE FEDERAL ASSIGNMENT OF CLAIMS ACT.
<PAGE>
-4-
IV. CONTINUOUS PERFECTION.
EACH SUBSIDIARY'S PLACES OF BUSINESS OR, IF MORE THAN ONE, CHIEF EXECUTIVE
OFFICES ARE INDICATED ON SUCH SUBSIDIARY'S PERFECTION CERTIFICATE DELIVERED TO
THE AGENT HEREWITH (COLLECTIVELY, THE "PERFECTION CERTIFICATE"). NONE OF THE
SUBSIDIARIES WILL CHANGE THE SAME, OR THE NAMES, IDENTITIES OR CORPORATE
STRUCTURES OF SUCH SUBSIDIARY IN ANY MANNER, WITHOUT PROVIDING AT LEAST THIRTY
(30) DAYS PRIOR WRITTEN NOTICE TO THE AGENT. THE COLLATERAL, TO THE EXTENT NOT
DELIVERED TO THE AGENT PURSUANT TO SECTION 2.2, WILL BE KEPT AT THOSE LOCATIONS
LISTED ON THE PERFECTION CERTIFICATE AND EACH SUBSIDIARY WILL NOT REMOVE THE
COLLATERAL FROM SUCH LOCATIONS, WITHOUT PROVIDING AT LEAST THIRTY (30) DAYS
PRIOR WRITTEN NOTICE TO THE AGENT.
V. NO LIENS.
EXCEPT FOR THE SECURITY INTEREST HEREIN GRANTED AND LIENS PERMITTED BY THE
CREDIT AGREEMENT, EACH OF THE SUBSIDIARIES SHALL BE THE OWNER OF THE
COLLATERAL FREE FROM ANY LIEN, SECURITY INTEREST OR OTHER ENCUMBRANCE, AND
EACH SUCH SUBSIDIARY SHALL DEFEND THE SAME AGAINST ALL CLAIMS AND DEMANDS OF
ALL PERSONS AT ANY TIME CLAIMING THE SAME OR ANY INTERESTS THEREIN ADVERSE TO
THE AGENT OR ANY OF THE BANKS. NO SUBSIDIARY SHALL PLEDGE, MORTGAGE OR CREATE,
OR SUFFER TO EXIST A SECURITY INTEREST IN THE COLLATERAL IN FAVOR OF ANY
PERSON OTHER THAN THE AGENT, FOR THE BENEFIT OF THE BANKS AND THE AGENT,
EXCEPT FOR LIENS PERMITTED BY THE CREDIT AGREEMENT.
VI. NO TRANSFERS.
NO SUBSIDIARY WILL SELL OR OFFER TO SELL OR OTHERWISE TRANSFER THE COLLATERAL
OR ANY INTEREST THEREIN EXCEPT FOR (A) SALES AND LEASES OF INVENTORY AND
LICENSES OF GENERAL INTANGIBLES IN THE ORDINARY COURSE OF BUSINESS AND (B)
SALES OR OTHER DISPOSITIONS OF OBSOLESCENT ITEMS OF EQUIPMENT IN THE ORDINARY
COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICES.
VII. INSURANCE.
A. MAINTENANCE OF INSURANCE.
EACH SUBSIDIARY WILL MAINTAIN WITH FINANCIALLY SOUND AND REPUTABLE INSURERS
INSURANCE WITH RESPECT TO ITS PROPERTIES AND BUSINESSES AGAINST SUCH
CASUALTIES AND CONTINGENCIES AS SHALL BE IN ACCORDANCE WITH GENERAL PRACTICES
OF BUSINESSES ENGAGED IN SIMILAR ACTIVITIES IN SIMILAR GEOGRAPHIC AREAS. SUCH
INSURANCE SHALL BE IN SUCH MINIMUM AMOUNTS THAT SUCH SUBSIDIARY WILL NOT BE
DEEMED CO-INSURERS UNDER APPLICABLE INSURANCE LAWS, REGULATIONS AND POLICIES
AND OTHERWISE SHALL BE IN SUCH AMOUNTS, CONTAIN SUCH TERMS, BE IN SUCH FORMS
AND BE FOR SUCH PERIODS AS MAY BE REASONABLY SATISFACTORY TO THE AGENT. IN
ADDITION, ALL SUCH INSURANCE SHALL BE PAYABLE TO THE AGENT AS LOSS PAYEE UNDER
A "STANDARD" OR "NEW YORK" LOSS PAYEE CLAUSE FOR THE BENEFIT OF THE BANKS AND
THE AGENT. WITHOUT LIMITING THE FOREGOING, EACH SUBSIDIARY WILL (A) KEEP ALL
OF ITS PHYSICAL PROPERTY INSURED WITH CASUALTY OR PHYSICAL HAZARD INSURANCE ON
AN "ALL RISKS" BASIS, WITH BROAD FORM FLOOD AND EARTHQUAKE COVERAGES AND
ELECTRONIC DATA PROCESSING COVERAGE, WITH
<PAGE>
-5-
A FULL REPLACEMENT COST ENDORSEMENT AND AN "AGREED AMOUNT" CLAUSE IN AN AMOUNT
EQUAL TO 100% OF THE FULL REPLACEMENT COST OF SUCH PROPERTY, (B) MAINTAIN ALL
SUCH WORKERS' COMPENSATION OR SIMILAR INSURANCE AS MAY BE REQUIRED BY LAW AND
(C) MAINTAIN, IN AMOUNTS AND WITH DEDUCTIBLES EQUAL TO THOSE GENERALLY
MAINTAINED BY BUSINESSES ENGAGED IN SIMILAR ACTIVITIES IN SIMILAR GEOGRAPHIC
AREAS, GENERAL PUBLIC LIABILITY INSURANCE AGAINST CLAIMS OF BODILY INJURY,
DEATH OR PROPERTY DAMAGE OCCURRING, ON, IN OR ABOUT THE PROPERTIES OF SUCH
SUBSIDIARY; BUSINESS INTERRUPTION INSURANCE; AND PRODUCT LIABILITY INSURANCE.
B. INSURANCE PROCEEDS.
THE PROCEEDS OF ANY CASUALTY INSURANCE IN RESPECT OF ANY CASUALTY LOSS OF ANY
OF THE COLLATERAL SHALL, SUBJECT TO THE RIGHTS, IF ANY, OF OTHER PARTIES WITH
A PRIOR INTEREST IN THE PROPERTY COVERED THEREBY, (A) SO LONG AS NO EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING AND TO THE EXTENT THAT THE AMOUNT OF
SUCH PROCEEDS IS LESS THAN $50,000.00, BE DISBURSED TO THE APPROPRIATE
SUBSIDIARY FOR DIRECT APPLICATION BY SUCH SUBSIDIARY SOLELY TO THE REPAIR OR
REPLACEMENT OF SUCH SUBSIDIARY'S PROPERTY SO DAMAGED OR DESTROYED AND (B) IN
ALL OTHER CIRCUMSTANCES, BE HELD BY THE AGENT AS CASH COLLATERAL FOR THE
OBLIGATIONS. THE AGENT MAY, AT ITS SOLE OPTION, DISBURSE FROM TIME TO TIME ALL
OR ANY PART OF SUCH PROCEEDS SO HELD AS CASH COLLATERAL, UPON SUCH TERMS AND
CONDITIONS AS THE AGENT MAY REASONABLY PRESCRIBE, FOR DIRECT APPLICATION BY
SUCH SUBSIDIARY SOLELY TO THE REPAIR OR REPLACEMENT OF SUCH SUBSIDIARY'S
PROPERTY SO DAMAGED OR DESTROYED, OR THE AGENT MAY APPLY ALL OR ANY PART OF
SUCH PROCEEDS TO THE OBLIGATIONS WITH THE TOTAL COMMITMENT (IF NOT THEN
TERMINATED) BEING REDUCED BY THE AMOUNT SO APPLIED TO THE OBLIGATIONS.
C. NOTICE OF CANCELLATION, ETC.
ALL POLICIES OF INSURANCE SHALL PROVIDE FOR AT LEAST THIRTY (30) DAYS PRIOR
WRITTEN CANCELLATION NOTICE TO THE AGENT. IN THE EVENT OF FAILURE BY ANY
SUBSIDIARY TO PROVIDE AND MAINTAIN INSURANCE AS HEREIN PROVIDED, THE AGENT
MAY, AT ITS OPTION, PROVIDE SUCH INSURANCE AND CHARGE THE AMOUNT THEREOF TO
SUCH SUBSIDIARY. EACH SUBSIDIARY SHALL FURNISH THE AGENT WITH CERTIFICATES OF
INSURANCE AND POLICIES EVIDENCING COMPLIANCE WITH THE FOREGOING INSURANCE
PROVISION.
VIII. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW.
EACH OF THE SUBSIDIARIES WILL KEEP THE COLLATERAL IN GOOD ORDER AND REPAIR AND
WILL NOT USE THE SAME IN VIOLATION OF LAW OR ANY POLICY OF INSURANCE THEREON.
THE AGENT, OR ITS DESIGNEE, MAY INSPECT THE COLLATERAL AT ANY REASONABLE TIME,
WHEREVER LOCATED. EACH OF THE SUBSIDIARIES WILL PAY PROMPTLY WHEN DUE ALL
TAXES, ASSESSMENTS, GOVERNMENTAL CHARGES AND LEVIES UPON THE COLLATERAL OR
INCURRED IN CONNECTION WITH THE USE OR OPERATION OF SUCH COLLATERAL OR
INCURRED IN CONNECTION WITH THIS AGREEMENT. EACH SUBSIDIARY HAS AT ALL TIMES
OPERATED, AND EACH SUCH SUBSIDIARY WILL CONTINUE TO OPERATE, THEIR BUSINESSES
IN COMPLIANCE WITH ALL APPLICABLE PROVISIONS
<PAGE>
-6-
OF THE FEDERAL FAIR LABOR STANDARDS ACT, AS AMENDED, AND WITH ALL APPLICABLE
PROVISIONS OF FEDERAL, STATE AND LOCAL STATUTES AND ORDINANCES DEALING WITH
THE CONTROL, SHIPMENT, STORAGE OR DISPOSAL OF HAZARDOUS MATERIALS OR
SUBSTANCES.
IX. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
A. EXPENSES INCURRED BY AGENT.
IN ITS DISCRETION, THE AGENT MAY DISCHARGE TAXES AND OTHER ENCUMBRANCES AT ANY
TIME LEVIED OR PLACED ON ANY OF THE COLLATERAL, MAKE REPAIRS THERETO AND PAY
ANY NECESSARY FILING FEES. EACH OF THE SUBSIDIARIES AGREES TO REIMBURSE THE
AGENT ON DEMAND FOR ANY AND ALL EXPENDITURES SO MADE. THE AGENT SHALL HAVE NO
OBLIGATION TO ANY SUBSIDIARY TO MAKE ANY SUCH EXPENDITURES, NOR SHALL THE
MAKING THEREOF RELIEVE SUCH SUBSIDIARY OF ANY DEFAULT.
B. AGENT'S OBLIGATIONS AND DUTIES.
ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, EACH OF THE SUBSIDIARIES
SHALL REMAIN LIABLE UNDER EACH CONTRACT OR AGREEMENT COMPRISED IN THE
COLLATERAL TO BE OBSERVED OR PERFORMED BY SUCH SUBSIDIARY THEREUNDER. NEITHER
THE AGENT NOR ANY BANK SHALL HAVE ANY OBLIGATION OR LIABILITY UNDER ANY SUCH
CONTRACT OR AGREEMENT BY REASON OF OR ARISING OUT OF THIS AGREEMENT OR THE
RECEIPT BY THE AGENT OR ANY BANK OF ANY PAYMENT RELATING TO ANY OF THE
COLLATERAL, NOR SHALL THE AGENT OR ANY BANK BE OBLIGATED IN ANY MANNER TO
PERFORM ANY OF THE OBLIGATIONS OF SUCH SUBSIDIARY UNDER OR PURSUANT TO ANY
SUCH CONTRACT OR AGREEMENT, TO MAKE INQUIRY AS TO THE NATURE OR SUFFICIENCY OF
ANY PAYMENT RECEIVED BY THE AGENT OR ANY BANK IN RESPECT OF THE COLLATERAL OR
AS TO THE SUFFICIENCY OF ANY PERFORMANCE BY ANY PARTY UNDER ANY SUCH CONTRACT
OR AGREEMENT, TO PRESENT OR FILE ANY CLAIM, TO TAKE ANY ACTION TO ENFORCE ANY
PERFORMANCE OR TO COLLECT THE PAYMENT OF ANY AMOUNTS WHICH MAY HAVE BEEN
ASSIGNED TO THE AGENT OR TO WHICH THE AGENT OR ANY BANK MAY BE ENTITLED AT ANY
TIME OR TIMES. THE AGENT'S SOLE DUTY WITH RESPECT TO THE CUSTODY, SAFE KEEPING
AND PHYSICAL PRESERVATION OF THE COLLATERAL IN ITS POSSESSION, UNDER
SECTION 9-207 OF THE UNIFORM COMMERCIAL CODE OF THE COMMONWEALTH OF
MASSACHUSETTS OR OTHERWISE, SHALL BE TO DEAL WITH SUCH COLLATERAL IN THE SAME
MANNER AS THE AGENT DEALS WITH SIMILAR PROPERTY FOR ITS OWN ACCOUNT.
X. SECURITIES AND DEPOSITS.
THE AGENT MAY AT ANY TIME, AT ITS OPTION, TRANSFER TO ITSELF OR ANY NOMINEE
ANY SECURITIES CONSTITUTING COLLATERAL, RECEIVE ANY INCOME THEREON AND HOLD
SUCH INCOME AS ADDITIONAL COLLATERAL OR APPLY IT TO THE OBLIGATIONS. WHETHER
OR NOT ANY OBLIGATIONS ARE DUE, THE AGENT MAY DEMAND, SUE FOR, COLLECT, OR
MAKE ANY SETTLEMENT OR COMPROMISE WHICH IT DEEMS DESIRABLE WITH RESPECT TO THE
COLLATERAL. REGARDLESS OF THE ADEQUACY OF COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, ANY DEPOSITS OR OTHER SUMS AT ANY TIME CREDITED BY OR DUE
FROM THE AGENT
<PAGE>
-7-
OR ANY BANK TO ANY OF THE SUBSIDIARIES MAY AT ANY TIME BE APPLIED TO OR SET
OFF AGAINST ANY OF THE OBLIGATIONS.
XI. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS.
IF A DEFAULT OR AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING,
EACH SUBSIDIARY SHALL, AT THE REQUEST OF THE AGENT, NOTIFY ACCOUNT DEBTORS ON
ACCOUNTS, CHATTEL PAPER AND GENERAL INTANGIBLES OF ANY OF THE SUBSIDIARIES AND
OBLIGORS ON INSTRUMENTS FOR WHICH SUCH SUBSIDIARY ARE AN OBLIGEE OF THE
SECURITY INTEREST OF THE AGENT IN ANY ACCOUNT, CHATTEL PAPER, GENERAL
INTANGIBLE OR INSTRUMENT AND THAT PAYMENT THEREOF IS TO BE MADE DIRECTLY TO
THE AGENT OR TO ANY FINANCIAL INSTITUTION DESIGNATED BY THE AGENT AS THE
AGENT'S AGENT THEREFOR, AND THE AGENT MAY ITSELF, IF A DEFAULT OR AN EVENT OF
DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, WITHOUT NOTICE TO OR DEMAND
UPON SUCH SUBSIDIARY, SO NOTIFY ACCOUNT DEBTORS AND OBLIGORS. AFTER THE MAKING
OF SUCH A REQUEST OR THE GIVING OF ANY SUCH NOTIFICATION, EACH SUCH SUBSIDIARY
SHALL HOLD ANY PROCEEDS OF COLLECTION OF ACCOUNTS, CHATTEL PAPER, GENERAL
INTANGIBLES AND INSTRUMENTS RECEIVED BY SUCH SUBSIDIARY AS TRUSTEE FOR THE
AGENT, FOR THE BENEFIT OF THE BANKS AND THE AGENT, WITHOUT COMMINGLING THE
SAME WITH OTHER FUNDS OF SUCH SUBSIDIARY AND SHALL TURN THE SAME OVER TO THE
AGENT IN THE IDENTICAL FORM RECEIVED, TOGETHER WITH ANY NECESSARY ENDORSEMENTS
OR ASSIGNMENTS. THE AGENT SHALL APPLY THE PROCEEDS OF COLLECTION OF ACCOUNTS,
CHATTEL PAPER, GENERAL INTANGIBLES AND INSTRUMENTS RECEIVED BY THE AGENT TO
THE OBLIGATIONS, SUCH PROCEEDS TO BE IMMEDIATELY ENTERED AFTER FINAL PAYMENT
IN CASH OR SOLVENT CREDITS OF THE ITEMS GIVING RISE TO THEM.
XII. FURTHER ASSURANCES.
EACH SUBSIDIARY WILL, AT ITS OWN EXPENSE, SHALL DO, MAKE, EXECUTE AND DELIVER
ALL SUCH ADDITIONAL AND FURTHER ACTS, THINGS, DEEDS, ASSURANCES AND
INSTRUMENTS AS THE AGENT MAY REQUIRE MORE COMPLETELY TO VEST IN AND ASSURE TO
THE AGENT AND THE BANKS THEIR RESPECTIVE RIGHTS HEREUNDER OR IN ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, (A) EXECUTING, DELIVERING AND,
WHERE APPROPRIATE, FILING FINANCING STATEMENTS AND CONTINUATION STATEMENTS
UNDER THE UNIFORM COMMERCIAL CODE, (B) OBTAINING GOVERNMENTAL AND OTHER THIRD
PARTY CONSENTS AND APPROVALS, INCLUDING WITHOUT LIMITATION ANY CONSENT OF ANY
LICENSOR, LESSOR OR OTHER APPLICABLE PARTY REFERRED TO IN SECTION 2.3, (C)
OBTAINING WAIVERS FROM MORTGAGEES AND LANDLORDS AND (D) TAKING ALL ACTIONS
REQUIRED BY SECTIONS 8-313 AND 8-321 OF THE UNIFORM COMMERCIAL CODE, AS
APPLICABLE IN EACH RELEVANT JURISDICTION, WITH RESPECT TO CERTIFICATED AND
UNCERTIFICATED SECURITIES.
XIII. POWER OF ATTORNEY.
A. APPOINTMENT AND POWERS OF AGENT.
EACH SUBSIDIARY HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE AGENT AND ANY
OFFICER OR AGENT THEREOF, WITH FULL POWER OF SUBSTITUTION, AS ITS TRUE AND
LAWFUL ATTORNEYS-IN-FACT WITH FULL
<PAGE>
-8-
IRREVOCABLE POWER AND AUTHORITY IN THE PLACE AND STEAD OF SUCH SUBSIDIARY OR
IN THE AGENT'S OWN NAME, FOR THE PURPOSE OF CARRYING OUT THE TERMS OF THIS
AGREEMENT, TO TAKE ANY AND ALL APPROPRIATE ACTION AND TO EXECUTE ANY AND ALL
DOCUMENTS AND INSTRUMENTS THAT MAY BE NECESSARY OR DESIRABLE TO ACCOMPLISH THE
PURPOSES OF THIS AGREEMENT AND, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, HEREBY GIVES SAID ATTORNEYS THE POWER AND RIGHT, ON BEHALF OF SUCH
SUBSIDIARY, WITHOUT NOTICE TO OR ASSENT BY SUCH SUBSIDIARY, TO DO THE
FOLLOWING:
(A) UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF A DEFAULT OR AN EVENT OF
DEFAULT, GENERALLY TO SELL, TRANSFER, PLEDGE, MAKE ANY AGREEMENT WITH RESPECT
TO OR OTHERWISE DEAL WITH ANY OF THE COLLATERAL IN SUCH MANNER AS IS
CONSISTENT WITH THE UNIFORM COMMERCIAL CODE OF THE COMMONWEALTH OF
MASSACHUSETTS AND AS FULLY AND COMPLETELY AS THOUGH THE AGENT WERE THE
ABSOLUTE OWNER THEREOF FOR ALL PURPOSES, AND TO DO AT SUCH SUBSIDIARY'S
EXPENSE, AT ANY TIME, OR FROM TIME TO TIME, ALL ACTS AND THINGS WHICH THE
AGENT DEEMS NECESSARY TO PROTECT, PRESERVE OR REALIZE UPON THE COLLATERAL AND
THE AGENT'S SECURITY INTEREST THEREIN, IN ORDER TO EFFECT THE INTENT OF THIS
AGREEMENT, ALL AS FULLY AND EFFECTIVELY AS SUCH SUBSIDIARY MIGHT DO,
INCLUDING, WITHOUT LIMITATION, (I) THE FILING AND PROSECUTING OF REGISTRATION
AND TRANSFER APPLICATIONS WITH THE APPROPRIATE FEDERAL OR LOCAL AGENCIES OR
AUTHORITIES WITH RESPECT TO TRADEMARKS, COPYRIGHTS AND PATENTABLE INVENTIONS
AND PROCESSES, (II) UPON WRITTEN NOTICE TO SUCH SUBSIDIARY, THE EXERCISE OF
VOTING RIGHTS WITH RESPECT TO VOTING SECURITIES, WHICH RIGHTS MAY BE
EXERCISED, IF THE AGENT SO ELECTS, WITH A VIEW TO CAUSING THE LIQUIDATION IN A
COMMERCIALLY REASONABLE MANNER OF ASSETS OF THE ISSUER OF ANY SUCH SECURITIES
AND (III) THE EXECUTION, DELIVERY AND RECORDING, IN CONNECTION WITH ANY SALE
OR OTHER DISPOSITION OF ANY COLLATERAL, OF THE ENDORSEMENTS, ASSIGNMENTS OR
OTHER INSTRUMENTS OF CONVEYANCE OR TRANSFER WITH RESPECT TO SUCH COLLATERAL;
AND
(B) TO FILE SUCH FINANCING STATEMENTS WITH RESPECT HERETO, WITH OR WITHOUT
SUCH SUBSIDIARY'S SIGNATURE, OR A PHOTOCOPY OF THIS AGREEMENT IN SUBSTITUTION
FOR A FINANCING STATEMENT, AS THE AGENT MAY DEEM APPROPRIATE AND TO EXECUTE IN
SUCH SUBSIDIARY'S NAME SUCH FINANCING STATEMENTS AND AMENDMENTS THERETO AND
CONTINUATION STATEMENTS WHICH MAY REQUIRE SUCH SUBSIDIARY'S SIGNATURE.
B. RATIFICATION BY SUBSIDIARY.
TO THE EXTENT PERMITTED BY LAW, EACH SUBSIDIARY HEREBY RATIFIES ALL THAT SAID
ATTORNEYS SHALL LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. THIS POWER
OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE.
C. NO DUTY ON AGENT.
THE POWERS CONFERRED ON THE AGENT HEREUNDER ARE SOLELY TO PROTECT THE
INTERESTS OF THE AGENT AND THE BANKS IN THE COLLATERAL AND SHALL NOT IMPOSE
ANY DUTY UPON THE AGENT TO EXERCISE ANY SUCH
<PAGE>
-9-
POWERS. THE AGENT SHALL BE ACCOUNTABLE ONLY FOR THE AMOUNTS THAT IT ACTUALLY
RECEIVES AS A RESULT OF THE EXERCISE OF SUCH POWERS AND NEITHER IT NOR ANY OF
ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS SHALL BE RESPONSIBLE TO EACH
SUBSIDIARY FOR ANY ACT OR FAILURE TO ACT, EXCEPT FOR THE AGENT'S OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
XIV. REMEDIES.
IF AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THE AGENT MAY,
WITHOUT NOTICE TO OR DEMAND UPON EITHER OR THE SUBSIDIARIES DECLARE THIS
AGREEMENT TO BE IN DEFAULT, AND THE AGENT SHALL THEREAFTER HAVE IN ANY
JURISDICTION IN WHICH ENFORCEMENT HEREOF IS SOUGHT, IN ADDITION TO ALL OTHER
RIGHTS AND REMEDIES, THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER THE
UNIFORM COMMERCIAL CODE, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO TAKE
POSSESSION OF THE COLLATERAL, AND FOR THAT PURPOSE THE AGENT MAY, SO FAR AS
EITHER SUBSIDIARY CAN GIVE AUTHORITY THEREFOR, ENTER UPON ANY PREMISES ON
WHICH THE COLLATERAL MAY BE SITUATED AND REMOVE THE SAME THEREFROM. THE AGENT
MAY IN ITS DISCRETION REQUIRE EITHER SUBSIDIARY TO ASSEMBLE ALL OR ANY PART OF
THE COLLATERAL AT SUCH LOCATION OR LOCATIONS WITHIN THE STATE(S) OF THE
SUBSIDIARY'S PRINCIPAL OFFICE(S) OR AT SUCH OTHER LOCATIONS AS THE AGENT MAY
DESIGNATE. UNLESS THE COLLATERAL IS PERISHABLE OR THREATENS TO DECLINE
SPEEDILY IN VALUE OR IS OF A TYPE CUSTOMARILY SOLD ON A RECOGNIZED MARKET, THE
AGENT SHALL GIVE TO SUCH SUBSIDIARY AT LEAST FIVE BUSINESS DAYS PRIOR WRITTEN
NOTICE OF THE TIME AND PLACE OF ANY PUBLIC SALE OF COLLATERAL OR OF THE TIME
AFTER WHICH ANY PRIVATE SALE OR ANY OTHER INTENDED DISPOSITION IS TO BE MADE.
EACH OF THE SUBSIDIARIES HEREBY ACKNOWLEDGES THAT FIVE BUSINESS DAYS PRIOR
WRITTEN NOTICE OF SUCH SALE OR SALES SHALL BE REASONABLE NOTICE. IN ADDITION,
EACH SUBSIDIARY WAIVES ANY AND ALL RIGHTS THAT IT MAY HAVE TO A JUDICIAL
HEARING IN ADVANCE OF THE ENFORCEMENT OF ANY OF THE AGENT'S RIGHTS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, ITS RIGHT FOLLOWING AN EVENT OF DEFAULT TO TAKE
IMMEDIATE POSSESSION OF THE COLLATERAL AND TO EXERCISE ITS RIGHTS WITH RESPECT
THERETO. TO THE EXTENT THAT ANY OF THE OBLIGATIONS ARE TO BE PAID OR PERFORMED
BY A PERSON OTHER THAN SUCH SUBSIDIARY, EACH OF THE SUBSIDIARIES WAIVES AND
AGREES NOT TO ASSERT ANY RIGHTS OR PRIVILEGES WHICH IT MAY HAVE UNDER
SECTION 9-112 OF THE UNIFORM COMMERCIAL CODE OF THE COMMONWEALTH OF
MASSACHUSETTS.
XV. NO WAIVER, ETC.
EACH OF THE SUBSIDIARIES WAIVES DEMAND, NOTICE, PROTEST, NOTICE OF ACCEPTANCE
OF THIS AGREEMENT, NOTICE OF LOANS MADE, CREDIT EXTENDED, COLLATERAL RECEIVED
OR DELIVERED OR OTHER ACTION TAKEN IN RELIANCE HEREON AND ALL OTHER DEMANDS
AND NOTICES OF ANY DESCRIPTION. WITH RESPECT TO BOTH THE OBLIGATIONS AND THE
COLLATERAL, EACH OF THE SUBSIDIARIES ASSENTS TO ANY EXTENSION OR POSTPONEMENT
OF THE TIME OF PAYMENT OR ANY OTHER INDULGENCE, TO ANY SUBSTITUTION, EXCHANGE
OR RELEASE OF OR FAILURE TO PERFECT ANY SECURITY INTEREST IN ANY COLLATERAL,
TO THE ADDITION OR RELEASE OF ANY PARTY OR PERSON PRIMARILY OR SECONDARILY
LIABLE, TO THE ACCEPTANCE OF PARTIAL PAYMENT THEREON AND THE SETTLEMENT,
COMPROMISING OR ADJUSTING OF ANY THEREOF, ALL IN SUCH MANNER AND AT SUCH TIME
OR TIMES AS THE AGENT MAY DEEM ADVISABLE. THE AGENT SHALL HAVE NO DUTY AS TO
THE COLLECTION OR PROTECTION OF THE COLLATERAL OR ANY INCOME THEREON, NOR AS
TO THE PRESERVATION OF RIGHTS AGAINST PRIOR PARTIES, NOR AS TO THE
PRESERVATION OF ANY RIGHTS PERTAINING THERETO BEYOND THE SAFE CUSTODY THEREOF
AS SET FORTH IN SECTION 9.2. THE AGENT SHALL NOT BE DEEMED TO HAVE WAIVED ANY
<PAGE>
-10-
OF ITS RIGHTS UPON OR UNDER THE OBLIGATIONS OR THE COLLATERAL UNLESS SUCH
WAIVER SHALL BE IN WRITING AND SIGNED BY THE AGENT WITH THE CONSENT OF THE
MAJORITY BANKS. NO DELAY OR OMISSION ON THE PART OF THE AGENT IN EXERCISING
ANY RIGHT SHALL OPERATE AS A WAIVER OF SUCH RIGHT OR ANY OTHER RIGHT. A WAIVER
ON ANY ONE OCCASION SHALL NOT BE CONSTRUED AS A BAR TO OR WAIVER OF ANY RIGHT
ON ANY FUTURE OCCASION. ALL RIGHTS AND REMEDIES OF THE AGENT WITH RESPECT TO
THE OBLIGATIONS OR THE COLLATERAL, WHETHER EVIDENCED HEREBY OR BY ANY OTHER
INSTRUMENT OR PAPERS, SHALL BE CUMULATIVE AND MAY BE EXERCISED SINGULARLY,
ALTERNATIVELY, SUCCESSIVELY OR CONCURRENTLY AT SUCH TIME OR AT SUCH TIMES AS
THE AGENT DEEMS EXPEDIENT.
XVI. MARSHALLING.
NEITHER THE AGENT NOR ANY BANK SHALL BE REQUIRED TO MARSHAL ANY PRESENT OR
FUTURE COLLATERAL SECURITY (INCLUDING BUT NOT LIMITED TO THIS AGREEMENT AND
THE COLLATERAL) FOR, OR OTHER ASSURANCES OF PAYMENT OF, THE OBLIGATIONS OR ANY
OF THEM OR TO RESORT TO SUCH COLLATERAL SECURITY OR OTHER ASSURANCES OF
PAYMENT IN ANY PARTICULAR ORDER, AND ALL OF THE RIGHTS OF THE AGENT HEREUNDER
AND OF THE AGENT OR ANY BANK IN RESPECT OF SUCH COLLATERAL SECURITY AND OTHER
ASSURANCES OF PAYMENT SHALL BE CUMULATIVE AND IN ADDITION TO ALL OTHER RIGHTS,
HOWEVER EXISTING OR ARISING. TO THE EXTENT THAT IT LAWFULLY MAY, EACH OF THE
SUBSIDIARIES HEREBY AGREES THAT THEY WILL NOT INVOKE ANY LAW RELATING TO THE
MARSHALLING OF COLLATERAL WHICH MIGHT CAUSE DELAY IN OR IMPEDE THE ENFORCEMENT
OF THE AGENT'S RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER INSTRUMENT
CREATING OR EVIDENCING ANY OF THE OBLIGATIONS OR UNDER WHICH ANY OF THE
OBLIGATIONS IS OUTSTANDING OR BY WHICH ANY OF THE OBLIGATIONS IS SECURED OR
PAYMENT THEREOF IS OTHERWISE ASSURED, AND, TO THE EXTENT THAT IT LAWFULLY MAY,
EACH OF THE SUBSIDIARIES HEREBY IRREVOCABLY WAIVES THE BENEFITS OF ALL SUCH
LAWS.
XVII. PROCEEDS OF DISPOSITIONS; EXPENSES.
EACH OF THE SUBSIDIARIES SHALL PAY TO THE AGENT ON DEMAND ANY AND ALL
EXPENSES, INCLUDING REASONABLE ATTORNEYS' FEES AND DISBURSEMENTS, INCURRED OR
PAID BY THE AGENT IN PROTECTING, PRESERVING OR ENFORCING THE AGENT'S RIGHTS
UNDER OR IN RESPECT OF ANY OF THE OBLIGATIONS OR ANY OF THE COLLATERAL. AFTER
DEDUCTING ALL OF SAID EXPENSES, THE RESIDUE OF ANY PROCEEDS OF COLLECTION OR
SALE OF THE OBLIGATIONS OR COLLATERAL SHALL, TO THE EXTENT ACTUALLY RECEIVED
IN CASH, BE APPLIED TO THE PAYMENT OF THE OBLIGATIONS IN SUCH ORDER OR
PREFERENCE AS THE BANK MAY DETERMINE OR IN SUCH ORDER OR PREFERENCE AS IS
PROVIDED IN THE CREDIT AGREEMENT, PROPER ALLOWANCE AND PROVISION BEING MADE
FOR ANY OBLIGATIONS NOT THEN DUE. UPON THE FINAL PAYMENT AND SATISFACTION IN
FULL OF ALL OF THE OBLIGATIONS AND AFTER MAKING ANY PAYMENTS REQUIRED BY
SECTION 9-504(1)(C) OF THE UNIFORM COMMERCIAL CODE OF THE COMMONWEALTH OF
MASSACHUSETTS, ANY EXCESS SHALL BE RETURNED TO THE APPROPRIATE SUBSIDIARY, AND
SUCH SUBSIDIARY SHALL REMAIN LIABLE FOR ANY DEFICIENCY IN THE PAYMENT OF THE
OBLIGATIONS.
XVIII. OVERDUE AMOUNTS.
UNTIL PAID, ALL AMOUNTS DUE AND PAYABLE BY ANY SUBSIDIARY HEREUNDER SHALL BE A
DEBT SECURED BY THE COLLATERAL AND SHALL BEAR, WHETHER BEFORE OR AFTER
JUDGMENT, INTEREST AT THE RATE OF INTEREST FOR OVERDUE PRINCIPAL SET FORTH IN
THE CREDIT AGREEMENT.
<PAGE>
-11-
XIX. GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. EACH OF THE SUBSIDIARIES AGREES THAT ANY
SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT AND TO SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON SUCH SUBSIDIARY BY MAIL AT THE
ADDRESS FOR THE BORROWER SPECIFIED IN SECTION 21 OF THE CREDIT AGREEMENT. EACH
OF
THE SUBSIDIARIES HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT
IN AN INCONVENIENT COURT.
XX. WAIVER OF JURY TRIAL.
EACH OF THE SUBSIDIARIES WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR
OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE SUBSIDIARIES WAIVES ANY
RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE
PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH SUBSIDIARY (I)
CERTIFIES THAT NEITHER THE AGENT OR ANY BANK NOR ANY REPRESENTATIVE, AGENT OR
ATTORNEY OF THE AGENT OR ANY BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
THE AGENT OR ANY BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT, IN ENTERING INTO THE CREDIT
AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THE AGENT OR ANY BANK IS A
PARTY, THE AGENT AND THE BANKS ARE RELYING UPON, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED IN THIS SECTION 20.
XXI. MISCELLANEOUS.
THE HEADINGS OF EACH SECTION OF THIS AGREEMENT ARE FOR CONVENIENCE ONLY AND
SHALL NOT DEFINE OR LIMIT THE PROVISIONS THEREOF. THIS AGREEMENT AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE BINDING UPON EACH OF THE
SUBSIDIARIES AND ITS RESPECTIVE SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE
BENEFIT OF THE AGENT, THE BANKS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
IF ANY TERM OF THIS AGREEMENT SHALL BE HELD TO BE INVALID, ILLEGAL OR
UNENFORCEABLE, THE VALIDITY OF ALL OTHER TERMS HEREOF SHALL IN NO WAY BE
AFFECTED THEREBY, AND THIS AGREEMENT SHALL BE CONSTRUED AND BE ENFORCEABLE AS
IF SUCH INVALID, ILLEGAL OR UNENFORCEABLE TERM HAD NOT BEEN INCLUDED HEREIN.
EACH SUBSIDIARY ACKNOWLEDGES RECEIPT OF A COPY OF THIS AGREEMENT.
<PAGE>
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IN WITNESS WHEREOF, INTENDING TO BE LEGALLY BOUND, EACH SUBSIDIARY HAS CAUSED
THIS AGREEMENT TO BE DULY EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
AMERIKING VIRGINIA CORPORATION I
BY:
- -------------------------------------
TITLE:
AMERIKING CINCINNATI CORPORATION I
BY:
- -------------------------------------
TITLE:
ACCEPTED:
THE FIRST NATIONAL
BANK OF BOSTON,
AS AGENT
BY:
- ------------------------------------
TITLE:
<PAGE>
-13-
CERTIFICATE OF
ACKNOWLEDGMENT
COMMONWEALTH OR
STATE OF
)
) SS.
COUNTY OF
)
BEFORE ME, THE UNDERSIGNED, A NOTARY PUBLIC IN AND FOR THE COUNTY AFORESAID,
ON THIS 7TH DAY OF FEBRUARY, 1996, PERSONALLY APPEARED ______________ TO ME
KNOWN PERSONALLY, AND WHO, BEING BY ME DULY SWORN, DEPOSES AND SAYS THAT
SHE/HE IS THE ____________ OF EACH OF AMERIKING VIRGINIA CORPORATION I AND
AMERIKING CINCINNATI CORPORATION I AND THAT SAID INSTRUMENT WAS SIGNED AND
SEALED ON BEHALF OF EACH SAID CORPORATION BY AUTHORITY OF ITS BOARD OF
DIRECTORS, AND SAID ____________ ACKNOWLEDGED SAID INSTRUMENT TO BE THE FREE
ACT AND DEED OF EACH SAID CORPORATION.
- --------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
-1-
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made as of February 7, 1996, by and between
NATIONAL RESTAURANT ENTERPRISES, INC., a Delaware corporation (the
"Borrower"), and THE FIRST NATIONAL BANK OF BOSTON, a national banking
association, as agent (hereinafter, in such capacity, the "Agent") for itself
and the other lending institutions (hereinafter, collectively, the "Banks")
which are or may become parties to a Second Amended and Restated Revolving
Credit and Term Loan Agreement dated as of February 7, 1996 (as amended and in
effect from time to time, the "Credit Agreement"), among the Borrower, NRE
Holdings, Inc. ("Holdings"), the Banks and the Agent.
WHEREAS, the Borrower, Holdings, the Banks and the Agent have entered into the
Credit Agreement, pursuant to which the Banks, subject to the terms and
conditions contained therein, are providing certain financial accommodations
to the Borrower;
WHEREAS, the Borrower is the direct or indirect legal and beneficial owner of
all of the issued and outstanding shares of each class of the capital stock of
each of the corporations described on Annex A (the "Subsidiaries");
WHEREAS, it is a condition precedent to the Banks' continuing to make loans or
otherwise extending credit to the Borrower under the Credit Agreement that the
Borrower execute and deliver to the Agent, for the benefit of the Banks and
the Agent, a pledge agreement in substantially the form hereof;
WHEREAS, the Borrower wishes to grant pledges and security interests in favor
of the Agent, for the benefit of the Banks and the Agent, as herein provided;
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
I. PLEDGE OF STOCK, ETC.
A. PLEDGE OF STOCK.
THE BORROWER HEREBY PLEDGES, ASSIGNS, GRANTS A SECURITY INTEREST IN AND
DELIVERS TO THE AGENT, FOR THE BENEFIT OF THE BANKS AND THE AGENT, ALL OF THE
SHARES OF CAPITAL STOCK OF THE SUBSIDIARIES OF
<PAGE>
-2-
EVERY CLASS OTHER THAN THE VOTING STOCK, AS MORE FULLY DESCRIBED ON ANNEX A
HERETO, TO BE HELD BY THE AGENT, FOR THE BENEFIT OF THE BANKS AND THE AGENT,
SUBJECT TO THE TERMS AND CONDITIONS HEREINAFTER SET FORTH. THE CERTIFICATES
FOR SUCH SHARES, ACCOMPANIED BY STOCK POWERS OR OTHER APPROPRIATE INSTRUMENTS
OF ASSIGNMENT THEREOF DULY EXECUTED IN BLANK BY THE BORROWER, HAVE BEEN
DELIVERED TO THE AGENT.
B. ADDITIONAL STOCK.
IN CASE THE BORROWER SHALL ACQUIRE ANY ADDITIONAL SHARES OF THE CAPITAL STOCK
(OTHER THAN THE VOTING STOCK) OF ANY SUBSIDIARY OR CORPORATION WHICH IS THE
SUCCESSOR OF ANY SUBSIDIARY, OR ANY SECURITIES EXCHANGEABLE FOR OR CONVERTIBLE
INTO SHARES OF SUCH CAPITAL STOCK OF ANY CLASS OF ANY SUBSIDIARY, BY PURCHASE,
STOCK DIVIDEND, STOCK SPLIT OR OTHERWISE, THEN THE BORROWER SHALL FORTHWITH
DELIVER TO AND PLEDGE SUCH SHARES OR OTHER SECURITIES TO THE AGENT, FOR THE
BENEFIT OF THE BANKS AND THE AGENT, UNDER THIS AGREEMENT AND SHALL DELIVER TO
THE AGENT FORTHWITH ANY CERTIFICATES THEREFOR, ACCOMPANIED BY STOCK POWERS OR
OTHER APPROPRIATE INSTRUMENTS OF ASSIGNMENT DULY EXECUTED BY THE BORROWER IN
BLANK. THE BORROWER AGREES THAT THE AGENT MAY FROM TIME TO TIME ATTACH AS
ANNEX A HERETO AN UPDATED LIST OF THE SHARES OF CAPITAL STOCK OR SECURITIES AT
THE TIME PLEDGED WITH THE AGENT HEREUNDER.
II. DEFINITIONS.
THE TERM "OBLIGATIONS" AND ALL OTHER CAPITALIZED TERMS USED HEREIN WITHOUT
DEFINITION SHALL HAVE THE RESPECTIVE MEANINGS PROVIDED THEREFOR IN THE CREDIT
AGREEMENT. TERMS USED HEREIN AND NOT DEFINED IN THE CREDIT AGREEMENT OR
OTHERWISE DEFINED HEREIN THAT ARE DEFINED IN THE MASSACHUSETTS UCC HAVE SUCH
DEFINED MEANINGS HEREIN, UNLESS THE CONTEXT OTHERWISE INDICATED OR REQUIRES,
AND THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
STOCK. INCLUDES THE SHARES OF STOCK DESCRIBED IN ANNEX A
ATTACHED HERETO AND ANY ADDITIONAL SHARES OF STOCK AT THE TIME PLEDGED WITH
THE AGENT HEREUNDER, BUT DOES NOT INCLUDE VOTING STOCK.
STOCK COLLATERAL. THE PROPERTY AT ANY TIME PLEDGED TO THE
AGENT HEREUNDER (WHETHER DESCRIBED HEREIN OR NOT) AND ALL INCOME THEREFROM,
INCREASES THEREIN AND PROCEEDS THEREOF, INCLUDING WITHOUT LIMITATION THAT
INCLUDED IN CASH COLLATERAL, BUT EXCLUDING FROM THE DEFINITION OF "STOCK
COLLATERAL" ANY INCOME, INCREASES OR PROCEEDS RECEIVED BY THE BORROWER TO THE
EXTENT EXPRESSLY PERMITTED BY SECTION 6.
VOTING STOCK. ANY STOCK OR SIMILAR EQUITY INTEREST OF A
PERSON PURSUANT TO WHICH THE HOLDERS THEREOF HAVE, AT THE TIME OF
DETERMINATION, THE GENERAL VOTING POWER UNDER ORDINARY CIRCUMSTANCES TO VOTE
FOR THE ELECTION OF DIRECTORS, MANAGERS, TRUSTEES OR GENERAL PARTNERS OF SUCH
PERSON (IRRESPECTIVE OF WHETHER OR NOT AT THE TIME ANY OTHER CLASS OR CLASSES
WILL HAVE OR MIGHT HAVE VOTING POWER BY REASON OF A HAPPENING OF ANY
CONTINGENCY).
<PAGE>
-3-
III. SECURITY FOR OBLIGATIONS.
THIS AGREEMENT AND THE SECURITY INTEREST IN AND PLEDGE OF THE STOCK COLLATERAL
HEREUNDER ARE MADE WITH AND GRANTED TO THE AGENT, FOR THE BENEFIT OF THE BANKS
AND THE AGENT, AS SECURITY FOR THE PAYMENT AND PERFORMANCE IN FULL OF ALL THE
OBLIGATIONS UNDER THE CREDIT AGREEMENT.
IV. LIQUIDATION, RECAPITALIZATION, ETC. ANY SUMS OR OTHER PROPERTY PAID OR
DISTRIBUTED UPON OR WITH RESPECT TO ANY OF THE STOCK, WHETHER BY DIVIDEND OR
REDEMPTION OR UPON THE LIQUIDATION OR DISSOLUTION OF THE ISSUER THEREOF OR
OTHERWISE, SHALL, EXCEPT TO THE LIMITED EXTENT PROVIDED IN SECTION 6, BE PAID
OVER AND DELIVERED TO THE AGENT TO BE HELD BY THE AGENT, FOR THE BENEFIT OF THE
BANKS AND THE AGENT, AS SECURITY FOR THE PAYMENT AND PERFORMANCE IN FULL OF
ALL OF THE OBLIGATIONS. IN CASE, PURSUANT TO THE RECAPITALIZATION OR
RECLASSIFICATION OF THE CAPITAL OF THE ISSUER THEREOF OR PURSUANT TO THE
REORGANIZATION THEREOF, ANY DISTRIBUTION OF CAPITAL SHALL BE MADE ON OR IN
RESPECT OF ANY OF THE STOCK OR ANY PROPERTY SHALL BE DISTRIBUTED UPON OR WITH
RESPECT TO ANY OF THE STOCK, THE PROPERTY SO DISTRIBUTED SHALL BE DELIVERED TO
THE AGENT, FOR THE BENEFIT OF THE BANKS AND THE AGENT, TO BE HELD BY IT AS
SECURITY FOR THE OBLIGATIONS. EXCEPT TO THE LIMITED EXTENT PROVIDED IN SECTION
6, ALL SUMS OF MONEY AND PROPERTY PAID OR DISTRIBUTED IN RESPECT OF THE
STOCK, WHETHER AS A DIVIDEND OR UPON SUCH A LIQUIDATION, DISSOLUTION,
RECAPITALIZATION OR RECLASSIFICATION OR OTHERWISE, THAT ARE RECEIVED BY THE
BORROWER SHALL, UNTIL PAID OR DELIVERED TO THE AGENT, BE HELD IN TRUST FOR THE
AGENT, FOR THE BENEFIT OF THE BANKS AND THE AGENT, AS SECURITY FOR THE PAYMENT
AND PERFORMANCE IN FULL OF ALL OF THE OBLIGATIONS.
V. WARRANTY OF TITLE; AUTHORITY.
THE BORROWER HEREBY REPRESENTS AND WARRANTS THAT: (A) THE BORROWER HAS GOOD
AND MARKETABLE TITLE TO, AND IS THE SOLE RECORD AND BENEFICIAL OWNER OF, THE
STOCK DESCRIBED IN SECTION 1, SUBJECT TO NO PLEDGES, LIENS, SECURITY INTERESTS,
CHARGES, OPTIONS, RESTRICTIONS OR OTHER ENCUMBRANCES EXCEPT THE PLEDGE AND
SECURITY INTEREST CREATED BY THIS AGREEMENT, (B) ALL OF THE STOCK DESCRIBED IN
SECTION 1 IS VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE, (C) THE BORROWER HAS
FULL POWER, AUTHORITY AND LEGAL RIGHT TO EXECUTE, DELIVER AND PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT AND TO PLEDGE AND GRANT A SECURITY INTEREST
IN ALL OF THE STOCK COLLATERAL PURSUANT TO THIS AGREEMENT, AND THE EXECUTION,
DELIVERY AND PERFORMANCE HEREOF AND THE PLEDGE OF AND GRANTING OF A SECURITY
INTEREST IN THE STOCK COLLATERAL HEREUNDER HAVE BEEN DULY AUTHORIZED BY ALL
NECESSARY CORPORATE OR OTHER ACTION AND DO NOT CONTRAVENE ANY LAW, RULE OR
REGULATION OR ANY PROVISION OF THE BORROWER'S CHARTER DOCUMENTS OR BY-LAWS OR
OF ANY JUDGMENT, DECREE OR ORDER OF ANY TRIBUNAL OR OF ANY AGREEMENT OR
INSTRUMENT TO WHICH THE BORROWER IS A PARTY OR BY WHICH IT OR ANY OF ITS
PROPERTY IS BOUND OR AFFECTED OR CONSTITUTE A DEFAULT THEREUNDER, AND (D) THE
INFORMATION SET FORTH IN ANNEX A HERETO RELATING TO THE STOCK IS TRUE, CORRECT
AND COMPLETE IN ALL RESPECTS. THE BORROWER COVENANTS THAT IT WILL DEFEND THE
RIGHTS OF THE BANKS AND THE AGENT AND SECURITY INTEREST OF THE AGENT, FOR THE
BENEFIT OF THE BANKS AND THE AGENT, IN SUCH STOCK AGAINST THE CLAIMS AND
DEMANDS OF ALL OTHER PERSONS WHOMSOEVER. THE BORROWER FURTHER COVENANTS THAT
IT WILL HAVE THE LIKE TITLE TO AND RIGHT TO PLEDGE AND GRANT A SECURITY
INTEREST IN THE STOCK COLLATERAL HEREAFTER PLEDGED OR IN WHICH A SECURITY
INTEREST IS GRANTED TO THE AGENT HEREUNDER AND WILL LIKEWISE DEFEND THE
RIGHTS,
<PAGE>
-4-
PLEDGE AND SECURITY INTEREST THEREOF AND THEREIN OF THE BANKS AND THE AGENT.
VI. DIVIDENDS, ETC., PRIOR TO MATURITY. SO LONG AS NO EVENT OF DEFAULT SHALL
HAVE OCCURRED AND BE CONTINUING, THE BORROWER SHALL BE ENTITLED TO RECEIVE ALL
CASH DIVIDENDS PAID IN RESPECT OF THE STOCK AND TO GIVE CONSENTS, WAIVERS AND
RATIFICATIONS IN RESPECT OF THE STOCK; PROVIDED, HOWEVER, THAT NO CONSENT,
WAIVER OR RATIFICATION GIVEN BY THE BORROWER IF THE EFFECT THEREOF WOULD IN
THE REASONABLE JUDGMENT OF THE MAJORITY BANKS IMPAIR ANY OF THE STOCK
COLLATERAL OR BE INCONSISTENT WITH OR RESULT IN ANY VIOLATION OF ANY OF THE
PROVISIONS OF THE CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS. ALL SUCH RIGHTS OF THE BORROWER TO RECEIVE CASH DIVIDENDS SHALL BE
IN ACCORDANCE WITH SECTION 10.4 OF THE CREDIT AGREEMENT. ALL SUCH RIGHTS OF THE
BORROWER TO GIVE CONSENTS, WAIVERS AND RATIFICATIONS WITH RESPECT TO THE STOCK
SHALL, AT THE AGENT'S OPTION, AS EVIDENCED BY THE AGENT'S NOTIFYING THE
BORROWER OF SUCH ELECTION, CEASE IN CASE AN EVENT OF DEFAULT SHALL HAVE
OCCURRED AND BE CONTINUING.
VII. REMEDIES.
A. IN GENERAL.
IF A DEFAULT OR AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THE
AGENT SHALL THEREAFTER HAVE THE FOLLOWING RIGHTS AND REMEDIES (TO THE EXTENT
PERMITTED BY APPLICABLE LAW) IN ADDITION TO THE RIGHTS AND REMEDIES OF A
SECURED PARTY UNDER THE MASSACHUSETTS UCC, ALL SUCH RIGHTS AND REMEDIES BEING
CUMULATIVE, NOT EXCLUSIVE, AND ENFORCEABLE ALTERNATIVELY, SUCCESSIVELY OR
CONCURRENTLY, AT SUCH TIME OR TIMES AS THE AGENT DEEMS EXPEDIENT:
(A) IF THE AGENT SO ELECTS AND GIVES NOTICE OF SUCH ELECTION TO THE BORROWER,
THE AGENT MAY VOTE ANY OR ALL SHARES OF THE STOCK (WHETHER OR NOT THE SAME
SHALL HAVE BEEN TRANSFERRED INTO ITS NAME OR THE NAME OF ITS NOMINEE OR
NOMINEES) FOR ANY LAWFUL PURPOSE, INCLUDING, WITHOUT LIMITATION, IF THE AGENT
SO ELECTS, FOR THE LIQUIDATION OF THE ASSETS OF THE ISSUER THEREOF, AND GIVE
ALL CONSENTS, WAIVERS AND RATIFICATIONS IN RESPECT OF THE STOCK AND OTHERWISE
ACT WITH RESPECT THERETO AS THOUGH IT WERE THE OUTRIGHT OWNER THEREOF (THE
BORROWER HEREBY IRREVOCABLY CONSTITUTING AND APPOINTING THE AGENT THE PROXY
AND ATTORNEY-IN-FACT OF THE BORROWER, WITH FULL POWER OF SUBSTITUTION, TO DO
SO);
(B) THE AGENT MAY DEMAND, SUE FOR, COLLECT OR MAKE ANY COMPROMISE OR
SETTLEMENT THE AGENT DEEMS SUITABLE IN RESPECT OF ANY STOCK COLLATERAL;
(C) THE AGENT MAY SELL, RESELL, ASSIGN AND DELIVER, OR OTHERWISE DISPOSE OF
ANY OR ALL OF THE STOCK COLLATERAL, FOR CASH OR CREDIT OR BOTH AND UPON SUCH
TERMS AT SUCH PLACE OR PLACES, AT SUCH TIME OR TIMES AND TO SUCH ENTITIES OR
OTHER PERSONS AS THE AGENT THINKS EXPEDIENT, ALL WITHOUT DEMAND FOR
PERFORMANCE BY THE BORROWER OR ANY NOTICE OR ADVERTISEMENT WHATSOEVER EXCEPT
AS EXPRESSLY
<PAGE>
-5-
PROVIDED HEREIN OR AS MAY OTHERWISE BE REQUIRED BY LAW;
(D) THE AGENT MAY CAUSE ALL OR ANY PART OF THE STOCK HELD BY IT TO BE
TRANSFERRED INTO ITS NAME OR THE NAME OF ITS NOMINEE OR NOMINEES; AND
(E) THE AGENT MAY SET OFF AGAINST THE OBLIGATIONS ANY AND ALL SUMS DEPOSITED
WITH IT OR HELD BY IT.
B. SALE OF STOCK COLLATERAL.
IN THE EVENT OF ANY DISPOSITION OF THE STOCK COLLATERAL AS PROVIDED IN CLAUSE
(C) OF SECTION 7.1, THE AGENT SHALL GIVE TO THE BORROWER AT LEAST FIVE (5)
BUSINESS DAYS PRIOR WRITTEN NOTICE OF THE TIME AND PLACE OF ANY PUBLIC SALE OF
THE STOCK COLLATERAL OR OF THE TIME AFTER WHICH ANY PRIVATE SALE OR ANY OTHER
INTENDED DISPOSITION IS TO BE MADE. THE BORROWER HEREBY ACKNOWLEDGES THAT FIVE
(5) BUSINESS DAYS PRIOR WRITTEN NOTICE OF SUCH SALE OR SALES SHALL BE
REASONABLE NOTICE. THE AGENT MAY ENFORCE ITS RIGHTS HEREUNDER WITHOUT ANY
OTHER NOTICE AND WITHOUT COMPLIANCE WITH ANY OTHER CONDITION PRECEDENT NOW OR
HEREUNDER IMPOSED BY STATUTE, RULE OF LAW OR OTHERWISE (ALL OF WHICH ARE
HEREBY EXPRESSLY WAIVED BY THE BORROWER, TO THE FULLEST EXTENT PERMITTED BY
LAW). THE AGENT MAY BUY ANY PART OR ALL OF THE STOCK COLLATERAL AT ANY PUBLIC
SALE AND IF ANY PART OR ALL OF THE STOCK COLLATERAL IS OF A TYPE CUSTOMARILY
SOLD IN A RECOGNIZED MARKET OR IS OF THE TYPE WHICH IS THE SUBJECT OF
WIDELY-DISTRIBUTED STANDARD PRICE QUOTATIONS, THE AGENT MAY BUY AT PRIVATE
SALE AND MAY MAKE PAYMENTS THEREOF BY ANY MEANS. THE AGENT MAY APPLY THE CASH
PROCEEDS ACTUALLY RECEIVED FROM ANY SALE OR OTHER DISPOSITION TO THE
REASONABLE EXPENSES OF RETAKING, HOLDING, PREPARING FOR SALE, SELLING AND THE
LIKE, TO REASONABLE ATTORNEYS' FEES, TRAVEL AND ALL OTHER EXPENSES WHICH MAY
BE INCURRED BY THE AGENT IN ATTEMPTING TO COLLECT THE OBLIGATIONS OR TO
ENFORCE THIS AGREEMENT OR IN THE PROSECUTION OR DEFENSE OF ANY ACTION OR
PROCEEDING RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, AND THEN TO THE
OBLIGATIONS IN THE ORDER SET FORTH IN SUCH ORDER OR PREFERENCE AS THE AGENT
MAY DETERMINE AFTER PROPER ALLOWANCE FOR OBLIGATIONS NOT THEN DUE. ONLY AFTER
SUCH APPLICATIONS, AND AFTER PAYMENT BY THE AGENT OF ANY AMOUNT REQUIRED BY
SECTION 9-504(1)(C) OF THE MASSACHUSETTS UCC, NEED THE AGENT ACCOUNT TO THE
BORROWER FOR ANY SURPLUS. TO THE EXTENT THAT ANY OF THE OBLIGATIONS ARE TO BE
PAID OR PERFORMED BY A PERSON OTHER THAN THE BORROWER, THE BORROWER WAIVES AND
AGREES NOT TO ASSERT ANY RIGHTS OR PRIVILEGES WHICH IT MAY HAVE UNDER SECTION
9-112 OF THE MASSACHUSETTS UCC.
C. REGISTRATION OF STOCK.
IF THE AGENT SHALL DETERMINE TO EXERCISE ITS RIGHT TO SELL ANY OR ALL OF THE
STOCK PURSUANT TO THIS SECTION 7, AND IF IN THE OPINION OF COUNSEL FOR THE AGENT
IT IS NECESSARY, OR IF IN THE REASONABLE OPINION
<PAGE>
-6-
OF THE AGENT IT IS ADVISABLE, TO HAVE THE STOCK, OR THAT PORTION THEREOF TO BE
SOLD, REGISTERED UNDER THE PROVISIONS OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), THE BORROWER AGREES TO USE ITS BEST EFFORTS TO
CAUSE THE ISSUER OR ISSUERS OF THE STOCK CONTEMPLATED TO BE SOLD, TO EXECUTE
AND DELIVER, AND CAUSE THE DIRECTORS AND OFFICERS OF SUCH ISSUER TO EXECUTE
AND DELIVER, ALL AT THE BORROWER'S EXPENSE, ALL SUCH INSTRUMENTS AND
DOCUMENTS, AND TO DO OR CAUSE TO BE DONE ALL SUCH OTHER ACTS AND THINGS AS MAY
BE NECESSARY OR, IN THE REASONABLE OPINION OF THE AGENT, ADVISABLE TO REGISTER
SUCH STOCK UNDER THE PROVISIONS OF THE SECURITIES ACT AND TO CAUSE THE
REGISTRATION STATEMENT RELATING THERETO TO BECOME EFFECTIVE AND TO REMAIN
EFFECTIVE FOR A PERIOD OF 9 MONTHS FROM THE DATE SUCH REGISTRATION STATEMENT
BECAME EFFECTIVE, AND TO MAKE ALL AMENDMENTS THERETO OR TO THE RELATED
PROSPECTUS OR BOTH THAT, IN THE REASONABLE OPINION OF THE AGENT, ARE NECESSARY
OR ADVISABLE, ALL IN CONFORMITY WITH THE REQUIREMENTS OF THE SECURITIES ACT
AND THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION
APPLICABLE THERETO. THE BORROWER AGREES TO USE ITS BEST EFFORTS TO CAUSE SUCH
ISSUER OR ISSUERS TO COMPLY WITH THE PROVISIONS OF THE SECURITIES OR "BLUE
SKY" LAWS OF ANY JURISDICTION WHICH THE AGENT SHALL DESIGNATE AND TO CAUSE
SUCH ISSUER OR ISSUERS TO MAKE AVAILABLE TO ITS SECURITY HOLDERS, AS SOON AS
PRACTICABLE, AN EARNINGS STATEMENT (WHICH NEED NOT BE AUDITED) WHICH WILL
SATISFY THE PROVISIONS OF SECTION 11(A) OF THE SECURITIES ACT.
D. PRIVATE SALES.
THE BORROWER RECOGNIZES THAT THE AGENT MAY BE UNABLE TO EFFECT A PUBLIC SALE
OF THE STOCK BY REASON OF CERTAIN PROHIBITIONS CONTAINED IN THE SECURITIES
ACT, FEDERAL BANKING LAWS, AND OTHER APPLICABLE LAWS, BUT MAY BE COMPELLED TO
RESORT TO ONE OR MORE PRIVATE SALES THEREOF TO A RESTRICTED GROUP OF
PURCHASERS. THE BORROWER AGREES THAT ANY SUCH PRIVATE SALES MAY BE AT PRICES
AND OTHER TERMS LESS FAVORABLE TO THE SELLER THAN IF SOLD AT PUBLIC SALES AND
THAT SUCH PRIVATE SALES SHALL NOT BY REASON THEREOF BE DEEMED NOT TO HAVE BEEN
MADE IN A COMMERCIALLY REASONABLE MANNER. THE AGENT SHALL BE UNDER NO
OBLIGATION TO DELAY A SALE OF ANY OF THE STOCK FOR THE PERIOD OF TIME
NECESSARY TO PERMIT THE ISSUER OF SUCH SECURITIES TO REGISTER SUCH SECURITIES
FOR PUBLIC SALE UNDER THE SECURITIES ACT, OR SUCH OTHER FEDERAL BANKING OR
OTHER APPLICABLE LAWS, EVEN IF THE ISSUER WOULD AGREE TO DO SO. SUBJECT TO THE
FOREGOING, THE AGENT AGREES THAT ANY SALE OF THE STOCK SHALL BE MADE IN A
COMMERCIALLY REASONABLE MANNER, AND THE BORROWER AGREES TO USE ITS BEST
EFFORTS TO CAUSE THE ISSUER OR ISSUERS OF THE STOCK CONTEMPLATED TO BE SOLD,
TO EXECUTE AND DELIVER, AND CAUSE THE DIRECTORS AND OFFICERS OF SUCH ISSUER TO
EXECUTE AND DELIVER, ALL AT THE BORROWER'S EXPENSE, ALL SUCH INSTRUMENTS AND
DOCUMENTS, AND TO DO OR CAUSE TO BE DONE ALL SUCH OTHER ACTS AND THINGS AS MAY
BE NECESSARY OR, IN THE REASONABLE OPINION OF THE AGENT, ADVISABLE TO EXEMPT
SUCH STOCK FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT, AND
TO MAKE ALL AMENDMENTS TO SUCH INSTRUMENTS AND DOCUMENTS WHICH, IN THE OPINION
OF THE AGENT, ARE NECESSARY OR ADVISABLE, ALL IN CONFORMITY WITH THE
REQUIREMENTS OF THE SECURITIES ACT AND THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION APPLICABLE THERETO. THE BORROWER FURTHER
AGREES TO USE ITS BEST EFFORTS TO CAUSE SUCH ISSUER OR ISSUERS TO COMPLY WITH
THE PROVISIONS OF THE SECURITIES OR "BLUE SKY" LAWS OF ANY JURISDICTION WHICH
THE AGENT SHALL DESIGNATE AND, IF REQUIRED, TO CAUSE SUCH ISSUER OR ISSUERS TO
MAKE AVAILABLE TO ITS SECURITY HOLDERS, AS SOON AS PRACTICABLE, AN EARNINGS
STATEMENT (WHICH NEED NOT BE AUDITED) WHICH WILL SATISFY THE PROVISIONS OF
SECTION 11(A) OF THE SECURITIES ACT.
<PAGE>
-7-
E. BORROWER'S AGREEMENTS, ETC.
THE BORROWER FURTHER AGREES TO DO OR CAUSE TO BE DONE ALL SUCH OTHER ACTS AND
THINGS AS MAY BE REASONABLY NECESSARY TO MAKE ANY SALES OF ANY PORTION OR ALL
OF THE STOCK PURSUANT TO THIS SECTION 7 VALID AND BINDING AND IN COMPLIANCE WITH
ANY AND ALL APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, THE SECURITIES
ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION APPLICABLE THERETO AND
ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS), REGULATIONS, ORDERS,
WRITS, INJUNCTIONS, DECREES OR AWARDS OF ANY AND ALL COURTS, ARBITRATORS OR
GOVERNMENTAL INSTRUMENTALITIES, DOMESTIC OR FOREIGN, HAVING JURISDICTION OVER
ANY SUCH SALE OR SALES, ALL AT THE BORROWER'S EXPENSE. THE BORROWER FURTHER
AGREES THAT A BREACH OF ANY OF THE COVENANTS CONTAINED IN THIS SECTION 7 WILL
CAUSE IRREPARABLE INJURY TO THE AGENT AND THE BANKS, THAT THE AGENT AND THE
BANKS HAVE NO ADEQUATE REMEDY AT LAW IN RESPECT OF SUCH BREACH AND, AS A
CONSEQUENCE, AGREES THAT EACH AND EVERY COVENANT CONTAINED IN THIS SECTION 7
SHALL BE SPECIFICALLY ENFORCEABLE AGAINST THE BORROWER BY THE AGENT AND THE
BORROWER HEREBY WAIVES AND AGREES NOT TO ASSERT ANY DEFENSES AGAINST AN ACTION
FOR SPECIFIC PERFORMANCE OF SUCH COVENANTS.
VIII. MARSHALLING.
NEITHER THE AGENT NOR ANY BANK SHALL BE REQUIRED TO MARSHAL ANY PRESENT OR
FUTURE COLLATERAL SECURITY FOR (INCLUDING BUT NOT LIMITED TO THIS AGREEMENT
AND THE STOCK COLLATERAL), OR OTHER ASSURANCES OF PAYMENT OF, THE OBLIGATIONS
OR ANY OF THEM, OR TO RESORT TO SUCH COLLATERAL SECURITY OR OTHER ASSURANCES
OF PAYMENT IN ANY PARTICULAR ORDER. ALL OF THE AGENT'S RIGHTS HEREUNDER AND OF
THE BANKS AND THE AGENT IN RESPECT OF SUCH COLLATERAL SECURITY AND OTHER
ASSURANCES OF PAYMENT SHALL BE CUMULATIVE AND IN ADDITION TO ALL OTHER RIGHTS,
HOWEVER EXISTING OR ARISING. TO THE EXTENT THAT IT LAWFULLY MAY, THE BORROWER
HEREBY AGREES THAT IT WILL NOT INVOKE ANY LAW RELATING TO THE MARSHALLING OF
COLLATERAL THAT MIGHT CAUSE DELAY IN OR IMPEDE THE ENFORCEMENT OF THE AGENT'S
RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER INSTRUMENT EVIDENCING ANY OF
THE OBLIGATIONS OR UNDER WHICH ANY OF THE OBLIGATIONS IS OUTSTANDING OR BY
WHICH ANY OF THE OBLIGATIONS IS SECURED OR PAYMENT THEREOF IS OTHERWISE
ASSURED, AND TO THE EXTENT THAT IT LAWFULLY MAY THE BORROWER HEREBY
IRREVOCABLY WAIVES THE BENEFITS OF ALL SUCH LAWS.
IX. BORROWER'S OBLIGATIONS NOT AFFECTED.
THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL REMAIN IN FULL FORCE AND
EFFECT WITHOUT REGARD TO, AND SHALL NOT BE IMPAIRED BY (A) ANY EXERCISE OR
NONEXERCISE, OR ANY WAIVER, BY THE AGENT OR ANY BANK OF ANY RIGHT, REMEDY,
POWER OR PRIVILEGE UNDER OR IN RESPECT OF ANY OF THE OBLIGATIONS OR ANY
SECURITY THEREOF (INCLUDING THIS AGREEMENT); (B) ANY AMENDMENT TO OR
MODIFICATION OF THE CREDIT AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS OR
ANY OF THE OBLIGATIONS; (C) ANY AMENDMENT TO OR MODIFICATION OF ANY INSTRUMENT
(OTHER THAN THIS AGREEMENT) SECURING ANY OF THE OBLIGATIONS, INCLUDING,
WITHOUT LIMITATION, ANY OF THE SECURITY DOCUMENTS; OR (D) THE TAKING
<PAGE>
-8-
OF ADDITIONAL SECURITY FOR, OR ANY OTHER ASSURANCES OF PAYMENT OF, ANY OF THE
OBLIGATIONS OR THE RELEASE OR DISCHARGE OR TERMINATION OF ANY SECURITY OR
OTHER ASSURANCES OF PAYMENT OR PERFORMANCE FOR ANY OF THE OBLIGATIONS; WHETHER
OR NOT THE BORROWER SHALL HAVE NOTICE OR KNOWLEDGE OF ANY OF THE FOREGOING.
X. TRANSFER, ETC., BY BORROWER.
WITHOUT THE PRIOR WRITTEN CONSENT OF THE AGENT, THE BORROWER WILL NOT SELL,
ASSIGN, TRANSFER OR OTHERWISE DISPOSE OF, GRANT ANY OPTION WITH RESPECT TO, OR
PLEDGE OR GRANT ANY SECURITY INTEREST IN OR OTHERWISE ENCUMBER OR RESTRICT ANY
OF THE STOCK COLLATERAL OR ANY INTEREST THEREIN, EXCEPT FOR THE PLEDGE THEREOF
AND SECURITY INTEREST THEREIN PROVIDED FOR IN THIS AGREEMENT.
XI. FURTHER ASSURANCES.
THE BORROWER WILL DO ALL SUCH ACTS, AND WILL FURNISH TO THE AGENT ALL SUCH
FINANCING STATEMENTS, CERTIFICATES, LEGAL OPINIONS AND OTHER DOCUMENTS AND
WILL OBTAIN ALL SUCH GOVERNMENTAL CONSENTS AND CORPORATE APPROVALS AND WILL DO
OR CAUSE TO BE DONE ALL SUCH OTHER THINGS AS THE AGENT MAY REASONABLY REQUEST
FROM TIME TO TIME IN ORDER TO GIVE FULL EFFECT TO THIS AGREEMENT AND TO SECURE
THE RIGHTS OF THE BANKS AND THE AGENT HEREUNDER, ALL WITHOUT ANY COST OR
EXPENSE TO THE AGENT OR ANY BANK. IF THE AGENT SO ELECTS, A PHOTOCOPY OF THIS
AGREEMENT MAY AT ANY TIME AND FROM TIME TO TIME BE FILED BY THE AGENT AS A
FINANCING STATEMENT IN ANY RECORDING OFFICE IN ANY JURISDICTION.
XII. AGENT'S EXONERATION.
UNDER NO CIRCUMSTANCES SHALL THE AGENT BE DEEMED TO ASSUME ANY RESPONSIBILITY
FOR OR OBLIGATION OR DUTY WITH RESPECT TO ANY PART OR ALL OF THE STOCK
COLLATERAL OF ANY NATURE OR KIND OR ANY MATTER OR PROCEEDINGS ARISING OUT OF
OR RELATING THERETO, OTHER THAN (A) TO EXERCISE REASONABLE CARE IN THE
PHYSICAL CUSTODY OF THE STOCK COLLATERAL WHICH IS IN ITS POSSESSION AND (B)
AFTER A DEFAULT OR AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING
TO ACT IN A COMMERCIALLY REASONABLE MANNER. NEITHER THE AGENT NOR ANY BANK
SHALL BE REQUIRED TO TAKE ANY ACTION OF ANY KIND TO COLLECT, PRESERVE OR
PROTECT ITS OR THE BORROWER'S RIGHTS IN THE STOCK COLLATERAL OR AGAINST OTHER
PARTIES THERETO. THE AGENT'S PRIOR RECOURSE TO ANY PART OR ALL OF THE STOCK
COLLATERAL SHALL NOT CONSTITUTE A CONDITION OF ANY DEMAND, SUIT OR PROCEEDING
FOR PAYMENT OR COLLECTION OF ANY OF THE OBLIGATIONS.
XIII. NO WAIVER, ETC.
NEITHER THIS AGREEMENT NOR ANY TERM HEREOF MAY BE CHANGED, WAIVED, DISCHARGED
OR TERMINATED EXCEPT BY A WRITTEN INSTRUMENT EXPRESSLY REFERRING TO THIS
AGREEMENT AND TO THE PROVISIONS SO MODIFIED OR LIMITED, AND EXECUTED BY THE
AGENT, WITH THE CONSENT OF THE MAJORITY BANKS, AND THE BORROWER. NO ACT,
FAILURE OR DELAY BY THE AGENT SHALL CONSTITUTE A WAIVER OF ITS RIGHTS AND
REMEDIES HEREUNDER OR OTHERWISE. NO SINGLE OR PARTIAL WAIVER BY THE AGENT OF
ANY DEFAULT OR RIGHT OR REMEDY THAT IT MAY HAVE SHALL OPERATE AS A WAIVER OF
ANY OTHER DEFAULT, RIGHT OR REMEDY
<PAGE>
-9-
OR OF THE SAME DEFAULT, RIGHT OR REMEDY ON A FUTURE OCCASION. THE BORROWER
HEREBY WAIVES PRESENTMENT, NOTICE OF DISHONOR AND PROTEST OF ALL INSTRUMENTS,
INCLUDED IN OR EVIDENCING ANY OF THE OBLIGATIONS OR THE STOCK COLLATERAL, AND
ANY AND ALL OTHER NOTICES AND DEMANDS WHATSOEVER (EXCEPT AS EXPRESSLY PROVIDED
HEREIN OR IN THE CREDIT AGREEMENT).
XIV. NOTICE, ETC.
ALL NOTICES, REQUESTS AND OTHER COMMUNICATIONS HEREUNDER SHALL BE MADE IN THE
MANNER SET FORTH IN SECTION 21 OF THE CREDIT AGREEMENT.
XV. TERMINATION.
UPON FINAL PAYMENT AND PERFORMANCE IN FULL OF THE OBLIGATIONS, THIS AGREEMENT
SHALL TERMINATE AND THE AGENT SHALL, AT THE BORROWER'S REQUEST AND EXPENSE,
RETURN SUCH STOCK COLLATERAL IN THE POSSESSION OR CONTROL OF THE AGENT AS HAS
NOT THERETOFORE BEEN DISPOSED OF PURSUANT TO THE PROVISIONS HEREOF, TOGETHER
WITH ANY MONEYS AND OTHER PROPERTY AT THE TIME HELD BY THE AGENT HEREUNDER.
XVI. OVERDUE AMOUNTS.
UNTIL PAID, ALL AMOUNTS DUE AND PAYABLE BY THE BORROWER HEREUNDER SHALL BE A
DEBT SECURED BY THE STOCK COLLATERAL AND SHALL BEAR, WHETHER BEFORE OR AFTER
JUDGMENT, INTEREST AT THE RATE OF INTEREST FOR OVERDUE PRINCIPAL SET FORTH IN
THE CREDIT AGREEMENT.
XVII. GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR
ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION
OF SUCH COURT AND TO SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 21 OF THE CREDIT AGREEMENT.
THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
XVIII. WAIVER OF JURY TRIAL.
THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS
OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS.
EXCEPT AS PROHIBITED BY LAW, THE BORROWER WAIVES ANY RIGHT WHICH IT MAY HAVE
TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE
<PAGE>
-10-
PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A)
CERTIFIES THAT NEITHER THE AGENT OR ANY BANK NOR ANY REPRESENTATIVE, AGENT OR
ATTORNEY OF THE AGENT OR ANY BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE AGENT OR ANY BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT, IN ENTERING INTO THE
CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THE AGENT IS A PARTY,
THE AGENT AND THE BANKS ARE RELYING UPON, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 18.
XIX. MISCELLANEOUS.
THE HEADINGS OF EACH SECTION OF THIS AGREEMENT ARE FOR CONVENIENCE ONLY AND
SHALL NOT DEFINE OR LIMIT THE PROVISIONS THEREOF. THIS AGREEMENT AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE BINDING UPON THE BORROWER AND ITS
RESPECTIVE SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE BENEFIT OF THE AGENT
AND THE BANKS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. IF ANY TERM OF THIS
AGREEMENT SHALL BE HELD TO BE INVALID, ILLEGAL OR UNENFORCEABLE, THE VALIDITY
OF ALL OTHER TERMS HEREOF SHALL BE IN NO WAY AFFECTED THEREBY, AND THIS
AGREEMENT SHALL BE CONSTRUED AND BE ENFORCEABLE AS IF SUCH INVALID, ILLEGAL OR
UNENFORCEABLE TERM HAD NOT BEEN INCLUDED HEREIN. THE BORROWER ACKNOWLEDGES
RECEIPT OF A COPY OF THIS AGREEMENT.
XX. INTENT OF PARTIES.
NOTWITHSTANDING THE LANGUAGE OF ANY PROVISION OF THIS AGREEMENT WHICH MIGHT
OTHERWISE BE CONSTRUED TO THE CONTRARY, THE PARTIES HERETO ACKNOWLEDGE AND
AGREE THAT THE AGENT SHALL NOT TAKE ANY ACTION OR REQUIRE THE BORROWER TO MAKE
ANY ACKNOWLEDGEMENTS, AGREEMENTS, OR TAKE ANY ACTIONS, WHICH WOULD VIOLATE THE
TERMS AND CONDITIONS OF THE INTERCREDITOR AGREEMENT OR THE BKC INTERCREDITOR
AGREEMENT.
<PAGE>
-11-
IN WITNESS WHEREOF, INTENDING TO BE LEGALLY BOUND, THE BORROWER AND THE AGENT
HAVE CAUSED THIS AGREEMENT TO BE EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
NATIONAL RESTAURANT ENTERPRISES, INC.
BY:
- ---------------------------------
TITLE:
THE FIRST NATIONAL BANK OF BOSTON, AS AGENT
BY:
- --------------------------------
TITLE:
THE UNDERSIGNED SUBSIDIARY HEREBY JOINS IN THE ABOVE AGREEMENT FOR THE SOLE
PURPOSE OF CONSENTING TO AND BEING BOUND BY THE PROVISIONS OF SECTIONS 4.1, 6
AND 7 THEREOF, THE UNDERSIGNED HEREBY AGREEING TO COOPERATE FULLY AND IN GOOD
FAITH WITH THE AGENT AND THE BORROWER IN CARRYING OUT SUCH PROVISIONS.
AMERIKING CINCINNATI CORPORATION I
BY:
- ---------------------------------
TITLE:
AMERIKING VIRGINIA CORPORATION I
<PAGE>
-12-
BY:
- ---------------------------------
TITLE:
<PAGE>
-1-
ANNEX A TO PLEDGE AGREEMENT
NONE OF THE ISSUERS HAS ANY AUTHORIZED, ISSUED OR OUTSTANDING SHARES OF ITS
CAPITAL STOCK OF ANY CLASS OR ANY COMMITMENTS TO ISSUE ANY SHARES OF ITS
CAPITAL STOCK OF ANY CLASS OR ANY SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE
FOR ANY SHARES OF ITS CAPITAL STOCK OF ANY CLASS EXCEPT AS OTHERWISE STATED IN
THIS ANNEX A.
<TABLE>
<CAPTION>
Number of Number of Number of Par or
Record Class of Authorized Issued Outstanding Liquidation
Issuer Owner Shares Shares Shares Shares Value
- ---------------- ------------ ------------ ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
[EXECUTION]
AMENDED AND RESTATED
PURCHASE AGREEMENT,
dated as of September 1, 1994
and modified as of November 30, 1994
and October 13, 1995
and amended and restated as of February 7, 1996,
between
NRE HOLDINGS, INC.
and
MCIT PLC
for
$11,000,000 Principal Amount of
12.75% Subordinated Notes due August 31, 2005
and
3,000 Class A-1 Preferred Shares,
500 Class B Preferred Shares
and
285.31 Class A Common Shares.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
1.1. Defined Terms.............................................. 5
1.2. Use of Defined Terms....................................... 30
1.3. Cross-References........................................... 30
1.4. Accounting and Financial Determinations.................... 30
ARTICLE II
THE SUBJECT SECURITIES, ETC.
2.1. The Note................................................... 31
2.2. Preferred and Common Shares................................ 31
2.3. Issue Price................................................ 31
ARTICLE III
CONDITIONS TO RESTATEMENT EFFECTIVE DATE
3.1. Certificate of Incorporation............................... 32
3.2. Resolutions, etc........................................... 32
3.3. Stockholders Agreement..................................... 33
3.4. Mezzanine Pledge Agreement................................. 33
3.5. FNBB Intercreditor Letter.................................. 33
3.6. Deferred Limited Interest Guaranty......................... 33
3.7. Seller and BBI Junior Notes................................ 33
3.8. Certain Affiliate Agreements............................... 34
3.9. Completion, etc., of 1995/1996
Acquisitions........................................... 35
3.10. Effectiveness, etc. of Senior Credit
Agreement.............................................. 35
3.11. Effectiveness of PMI Agreement............................. 36
3.12. Effectiveness of FFCA Arrangements......................... 37
3.13. Performance; No Default.................................... 37
3.14. Absence of Litigation, etc................................. 38
3.15. Certificate as to Compliance............................... 38
3.16. Certificate as to Solvency, etc............................ 38
3.17. Preemption Letter.......................................... 38
3.18. Opinion of Counsel......................................... 38
3.19. Legal Expenses............................................. 39
3.20. Satisfactory Legal Form.................................... 39
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE IV
PAYMENTS, REGISTRATION, ETC.
4.1. Place of Payment........................................... 39
4.2. Home Office Payment........................................ 39
4.3. Optional Payments.......................................... 40
4.4. Allocation................................................. 40
4.5. Mandatory Redemption of Notes.............................. 41
4.6. Registration, Transfer, etc................................ 41
4.7. Transfer and Exchange...................................... 41
4.8. Replacement................................................ 42
4.9. Taxes...................................................... 42
ARTICLE V
WARRANTIES, ETC.
5.2. Due Authorization.......................................... 45
5.3. Validity, etc.............................................. 45
5.4. Financial Information...................................... 45
5.5. Absence of Material Adverse Change......................... 46
5.6. Continuing Indebtedness.................................... 46
5.7. Litigation, etc............................................ 46
5.8. Capitalization............................................. 47
5.9. Regulation G............................................... 48
5.10. Government Regulation...................................... 48
5.11. Patents, Trademarks, etc................................... 49
5.12. Environmental Matters...................................... 49
5.13. Title to and Condition of Properties....................... 50
5.14. Offering of Subject Securities............................. 50
5.15. Special Purpose Holding Company............................ 51
5.16. Subsidiaries............................................... 51
5.17. Accuracy of Information.................................... 51
ARTICLE VI
COVENANTS
6.1. Certain Affirmative Covenants.............................. 52
6.1.1. Financial Information, etc................................. 52
6.1.2. Notice of Default, Litigation, etc......................... 54
6.1.3. Perform Senior Credit Agreement............................ 55
6.1.4. Conforming Changes......................................... 56
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.1.5. Additional AmeriKing Guarantors............................ 56
6.1.6. Performance of Purchase Documents.......................... 57
6.2. Certain Negative Covenants................................. 57
6.2.1. Business Activities........................................ 57
6.2.2. Indebtedness............................................... 57
6.2.3. Liens...................................................... 59
6.2.4. Minimum EBITDA............................................. 60
6.2.5. Restricted Payments, etc................................... 61
6.2.6. Investments................................................ 63
6.2.7. Consolidation, Merger, etc................................. 63
6.2.8. Modification of Senior Credit Agreement
...................................................... 63
6.2.9. Modification of PMI Agreement.............................. 64
6.2.10. Modification of Seller Notes, etc.......................... 64
6.2.11. Modification of Other NRE Instruments...................... 64
6.2.12. Modification of Certificates of
Incorporation.......................................... 65
6.2.13. Negative Pledges........................................... 65
6.2.14. Upstream Limitations....................................... 65
6.2.15. Transactions with Affiliates............................... 66
6.2.16. Inconsistent Agreements.................................... 66
ARTICLE VII
EVENTS OF DEFAULT
7.1. Events of Default.......................................... 67
7.1.1. Non-Payment of Obligations................................. 67
7.1.2. Default on Other Indebtedness.............................. 67
7.1.3. Bankruptcy, Insolvency, etc................................ 67
7.1.4. Breach of Warranty......................................... 68
7.1.5. Non-Performance of Certain Undertakings
...................................................... 68
7.1.6. Non-Performance of Other Undertakings...................... 68
7.1.7. Judgments.................................................. 68
7.1.8. Ownership of NRE........................................... 69
7.1.9. Leases and BKC Franchises.................................. 69
7.1.10. Unrestricted Subsidiary Revenue............................ 69
7.2. Action if Bankruptcy....................................... 69
7.3. Action if Other Event of Default........................... 69
ARTICLE VIII
SUBORDINATION
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TABLE OF CONTENTS
(CONTINUED)
PAGE
8.1. Acceleration, Dissolution, etc............................. 70
8.2. Turnover................................................... 71
8.3. Unconditional Obligation, etc.............................. 71
8.4. Waivers, etc............................................... 72
8.5. Amendment of Subordination Provisions...................... 72
8.6. Notice to the Noteholders.................................. 73
8.7. Proving, etc. Claims....................................... 73
8.8. Reliance on Judicial Order or
Certificate of Liquidating Agent....................... 73
8.9. Amendment of Subordination Provisions...................... 73
ARTICLE IX
MISCELLANEOUS
9.1. Waivers, Amendments, etc................................... 74
9.2. Notices.................................................... 74
9.3. Costs and Expenses......................................... 75
9.4. Indemnification............................................ 75
9.5. Survival................................................... 76
9.6. Severability............................................... 76
9.7. Headings................................................... 76
9.8. Counterparts............................................... 76
9.9. Governing Law; Entire Agreement............................ 77
9.10. Jurisdiction............................................... 77
9.11. Successors and Assigns..................................... 77
9.12. Waiver of Jury Trial....................................... 77
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SCHEDULE AND EXHIBITS:
SCHEDULE I - Disclosure Schedule
EXHIBIT A - Note
EXHIBIT B-1 - Certificate as to Company Certificate of Incorporation
EXHIBIT B-2 - Certificates as to NRE Certificate of Incorporation
EXHIBIT C - Certificate as to Authorizing Resolutions, etc.
EXHIBIT D - Certificate as to Stockholders Agreement
EXHIBIT E - Mezzanine Pledge Agreement
EXHIBIT F - Affirmation of FNBB Intercreditor Letter
EXHIBIT G - Deferred Limited Interest Guaranty
EXHIBIT H - Certificate as to Seller Notes and BBI Junior Notes
EXHIBIT I - Certificate as to Certain Affiliate Agreements
EXHIBIT J - Certificate as to 1995/1996 Acquisitions
EXHIBIT K - Certificate as to Senior Credit Agreement
EXHIBIT L - Certificate as to PMI Agreement
EXHIBIT M - Certificate as to FFCA Arrangements
EXHIBIT N - Certificate as to Compliance
EXHIBIT O - Certificate as to Solvency
EXHIBIT P - Preemption Letter
EXHIBIT Q - Opinion of Counsel to the Company
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PURCHASE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AGREEMENT, dated as of September
1, 1994 and modified as of November 30, 1994 and October 13, 1995 and amended
and restated as of February 7, 1996, between NRE HOLDINGS, INC., a Delaware
corporation (the "Company"), and MCIT PLC, a public company incorporated in
England (the "Purchaser"),
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser entered into a purchase
agreement, dated as of September 1, 1994 ("this Agreement as Originally in
Effect"), pursuant to which on September 1, 1994 (the "Original Closing Date")
the Purchaser purchased from the Company:
(a) a 12.75% subordinated note due August 31, 2004 in
the original principal amount of $11,000,000 (the "Original
Note");
(b) certificates representing 3,000 Class A-1 Preferred
Shares (the "Class A-1 Preferred Certificate") and 500 Class B
Preferred Shares (the "Class B Preferred Certificate"); and
(c) a certificate representing 285.31 Class C Common Shares
(the "Original Common Certificate"), which then represented
(i) 28.531% of the aggregate number of Common
Shares then issued and outstanding, and
(ii) 27.367% of the aggregate number of Common
Shares then either issued and outstanding or reserved for
issuance upon the exercise of the FNBB Warrant and
Management Options; and
WHEREAS, on the Original Closing Date, the Company's wholly-owned
subsidiary, National Restaurant Enterprises, Inc., a Delaware corporation
("NRE"), acquired
(a) from Burger King Corporation, a Florida corporation
("BKC"), the assets and businesses of 68 BKC franchised restaurants
(the "Chicago Restaurants") located in the Chicago metropolitan area
of Illinois and Indiana; and
(b) from Lawrence Jaro ("Jaro") and the other Jaro
Investors, the assets and businesses of 11 BKC franchised
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restaurants located in Colorado and Texas (the "Jaro
Restaurants"); and
(c) from William Osborn ("Osborn") and the other Osborn
Investors, the assets and businesses of three BKC franchised
restaurants located in Colorado (the "Osborn Restaurants"); and
WHEREAS, the Company and the Purchaser entered into a modification
letter, dated as of November 30, 1994 ("Modification No. 1"), modifying this
Agreement as Originally in Effect, and, in connection therewith on November
30, 1994 (the "Modification No. 1 Effective Date"), NRE acquired the assets
and businesses of 39 BKC franchised restaurants in Chicago, Illinois from BNB
Land Venture, Inc., an Illinois corporation ("BNB") wholly-owned by Sheldon
Friedman (the "BNB Restaurants"); and
WHEREAS, NRE obtained financing to acquire the Chicago Restaurants,
the Jaro Restaurants, the Osborn Restaurants and the BNB Restaurants in part
from the proceeds of borrowings under a revolving credit and term loan
agreement, dated as of the Original Closing Date and amended and restated as
of the Modification No. 1 Effective Date (the "Existing Senior Credit
Agreement"), among the Company, NRE and The First National Bank of Boston
("FNBB"), as lender (together with the other institutional lenders parties
thereto) and as agent for the lenders, pursuant to which NRE is permitted to
obtain extensions of credit in an aggregate principal amount not to exceed
$74,500,000; and
WHEREAS, in connection with obtaining financing under the
Existing Senior Credit Agreement,
(a) the Company issued to FNBB, a warrant dated the Original
Closing Date (the "FNBB Warrant"), to purchase 31.2801 Class B Common
Shares; and
(b) the Company entered into a securities purchase
agreement, dated as of the Modification No. 1 Effective Date (the
"BBI Existing Agreement"), Affiliate BancBoston Investments Inc., a
Massachusetts corporation and an Affiliate of FNBB ("BBI"), pursuant
to which the Company then issued to BBI
(i) junior subordinated notes due August 31, 2005
(the "BBI Existing Junior Note") in the aggregate original
principal amount of $600,000; and
(ii) a warrant (the "BBI Warrant") to purchase
81.0799 Class B Common Shares which had the effect of
diluting the Purchaser's Original Common Certificate from
27.367% to 25.392% on a fully diluted basis; and
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WHEREAS, the Company and the Purchaser entered into a modification
letter, dated as of October 13, 1995 ("Modification No. 2"), modifying this
Agreement as Previously in Effect, and, in connection therewith, the Company
issued to MCIT Existing Pool Limited (the "Existing Pool Nominee"), as nominee
for the Purchaser,
(a) a 12.75% promissory note, dated April 30, 1995 and due
August 31, 2004 (the "Existing Note"), in the principal amount of
$11,000,000 in substitution for (but not in payment of) the Original
Note;
(b) a certificate representing 285.31 Class A Common Shares
(the "Existing Common Certificate") in exchange for the Original
Common Certificate; and
WHEREAS, during 1995, NRE acquired
(a) through AmeriKing Colorado, the assets and
businesses of the four Colorado Restaurants;
(b) through AmeriKing Tennessee, the assets and
businesses of the 11 Tennessee Restaurants; and
WHEREAS, contemporaneously with the occurrence of the
Restatement Effective Date, NRE will acquire
(a) through AmeriKing Virginia, the assets and
businesses of the 24 Virginia Restaurants; and
(b) through AmeriKing Cincinnati, the assets and
businesses of the 12 Cincinnati Restaurants; and
WHEREAS, contemporaneously with the occurrence of the Restatement
Effective Date, AmeriKing Tennessee and AmeriKing Virginia are entering into
with FFCA Acquisition Corporation, a Delaware corporation ("FFCA"), a
sale-leaseback arrangement (the "FFCA Sale/Leaseback"), with respect to the
premises of one of the Tennessee Restaurants and certain of the Virginia
Restaurants pursuant to which FFCA will purchase such premises for an
aggregate purchase price not to exceed $16,200,000 and then enter into 20 year
leases with each of AmeriKing Tennessee and AmeriKing Virginia with respect to
the Tennessee Restaurants and Virginia Restaurants, respectively; and
WHEREAS, contemporaneously with the occurrence of the Restatement
Effective Date, the Company and NRE are entering into an amendment and
restatement of the Existing Senior Credit Agreement pursuant to which the
maximum aggregate principal amount of Indebtedness permitted to be incurred
and at any time
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outstanding thereunder will be increased from $74,500,000 to
$100,000,000; and
WHEREAS, in connection with the effectiveness of the amendment and
restatement of the Existing Senior Credit Agreement (and as a condition
thereto), the Company is entering into an amendment and restatement of the
Existing BBI Agreement with BBCI pursuant to which BBCI will accept, in
substitution for (and not in payment of) the Existing BBCI Note, a promissory
note due August 31, 2006; and
WHEREAS, contemporaneously with the occurrence of the Restatement
Effective Date, the Company and the Company are entering into a note purchase
agreement with PMI Mezzanine Fund, L.P., a Delaware limited partnership
("PMI"), pursuant to which PMI will purchase
(a) from NRE, a 12.5% senior subordinated note due
January 31, 2005 in the original principal amount of
$15,000,000; and
(b) from the Company, a detachable warrant to purchase 59.14
Class C Common Shares which will have the effect of diluting the
Purchaser's Existing Common Shares from 25.392% to 23.868% on a fully
diluted basis; and
WHEREAS, to facilitate all of the foregoing contemporaneous
acquisition, sale/leaseback and financing transactions, the Company and the
Purchaser desire to amend and restate this Agreement as Previously in Effect,
and, in connection with such amendment and restatement, the Company has
requested that
(a) the Purchaser accept in substitution for (but not in
payment of) the Existing Note, a new 12.75% promissory note, dated
October 31, 1995, in the principal amount of $11,000,000 to be
payable in the entirety in a single payment, without scheduled
prepayments, on August 31, 2005;
(b) the Purchaser permit the incurrence by NRE and its
Subsidiaries of the increased principal amounts of Indebtedness to be
incurred pursuant to the FFCA Guaranty, the Senior Credit Agreement
and the PMI Notes; and
(c) consent to an amendment to the Company's certificate of
incorporation which will increase the authorized number of Common
Shares from 3,300 to 5,500 for purposes of the PMI Warrant;
NOW, THEREFORE, the parties hereto hereby agree that, on the date
(the "Restatement Effective Date") when all of the conditions of Article III
are satisfied in full, this Agreement as Previously
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in Effect and all Schedules and Exhibits thereto hereby are, concurrently with
(and subject to) the satisfaction of all such conditions, amended and restated
in their entireties in the form of this Agreement and all Schedules and
Exhibits hereto.
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular and plural
forms thereof):
"Acquisition" means any of the Chicago Acquisition, the Jaro
Acquisition, the Osborn Acquisition, the BNB Acquisition, the
Colorado Acquisition, the Tennessee Acquisition, the Cincinnati
Acquisition or the Virginia Acquisition.
"Acquisition Agreement" means any of the BKC Acquisition Agreement,
the Jaro Acquisition Agreement, the Osborn Acquisition Agreement, the BNB
Acquisition Agreement, the Colorado Acquisition Agreement, the Tennessee Stock
Purchase Agreement, the Cincinnati Acquisition Agreement or the Virginia
Acquisition Agreement.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls or is controlled by or under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). For the purposes of this definition, "control"
(including the correlative terms "controlling", "controlled by" and "under
common control with"), relative to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of Voting Stock, by
agreement or otherwise; provided, however, that
(a) beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control; and
(b) any of the foregoing to the contrary notwithstanding,
the term "Affiliate," relative to the Company and Subsidiaries, shall
not include the Purchaser, the Existing Pool Nominee or any other
Noteholder, or PMI.
"this Agreement" means, on any date, this Amended and Restated
Purchase Agreement as in effect on the Restatement Effective Date and as
thereafter from time to time amended,
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supplemented or otherwise modified in accordance with the terms hereof and in
effect on such date.
"this Agreement as Originally in Effect" is defined in the
first recital.
"this Agreement as Previously in Effect" means, relative to any date
prior to the Restatement Effective Date, this Agreement as Originally in
Effect and as thereafter from time to time on or prior to such date, amended,
supplemented or otherwise modified and then in effect.
"AmeriKing Cincinnati" means AmeriKing Cincinnati Corporation I, a
Delaware corporation and a direct, wholly-owned Subsidiary of NRE.
"AmeriKing Colorado" means AmeriKing Colorado Corporation I, a
Delaware corporation and a direct, wholly-owned Subsidiary of NRE.
"AmeriKing Guarantors" means
(a) AmeriKing Cincinnati and AmeriKing Virginia; and
(b) each such other Restricted Subsidiary as shall after the
Restatement Effective Date become a party to the Deferred Limited
Interest Guaranty from time to time in accordance with Section 6.1.5.
"AmeriKing Tennessee" means AmeriKing Tennessee Corporation I, a
Delaware corporation and a direct, wholly-owned Subsidiary of NRE.
"AmeriKing Virginia" means AmeriKing Virginia Corporation I, a
Delaware corporation and a direct, wholly-owned Subsidiary of NRE.
"Approval" means, relative to any Obligor, each approval, consent,
filing or registration by or with any Federal, state or other regulatory
authority necessary to authorize or permit the execution, delivery or
performance of
(a) this Agreement, the Notes, the Deferred Limited Interest
Guaranty, the Mezzanine Pledge Agreement, any other Purchase Document
or the Stockholders Agreement or for the validity or enforceability
hereof or thereof;
(b) any Acquisition Agreement;
(c) the Senior Credit Agreement or any other Senior
Loan Document executed and delivered by the Company, NRE or
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any Subsidiary pursuant thereto or for the validity or
enforceability thereof;
(d) the PMI Purchase Agreement or any other PMI Document
executed and delivered by the Company, NRE or any Subsidiary pursuant
thereto or for the validity or enforceability thereof; and
(e) the FFCA Sale/Leaseback Agreement, the FFCA Leases or
any other FFCA Document executed and delivered by the Company, NRE or
any Subsidiary pursuant thereto or for the validity or enforceability
thereof.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Purchaser pursuant to clause (a)(ii) of Section 3.2.
"BBI" is defined in clause (b) of the fifth recital.
"BBI Agreement" is defined in clause (b)(i) of Section 3.7. At any
time after the Restatement Effective Date, "BBI Agreement" also means the BBI
Agreement as originally executed and delivered, together with all amendments,
supplements, modifications, extensions and renewals made thereto from time to
time after the Restatement Effective Date; provided, however, that no such
amendment, supplement, etc. may (x) effect any increase in the principal
amount of the BBI Junior Notes, the interest rate thereon or any fees under
the BBI Agreement or (y) if it relates to other terms and provisions of the
BBI Agreement or BBI Junior Notes, have a cumulative effect which is to
materially adversely affect the Purchaser's rights or interests under the
Purchase Documents or the Company's ability to fulfill its obligations under
the Purchase Documents.
"BBI Existing Agreement" is defined in clause (b) of the
fifth recital.
"BBI Existing Junior Note" is defined in clause (b)(i) of the
fifth recital.
"BBI Junior Note" is defined in clause (b)(iii) of
Section 3.7.
"BBI Warrant" is defined in clause (b)(ii) of the fifth
recital.
"BKC" is defined in clause (a) of the second recital.
"BKC Acquisition Agreement" means the asset purchase and sale
agreement, dated the Original Closing Date, between the Company
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and NRE and BKC pursuant to which NRE acquired from BKC the Chicago
Restaurants for an aggregate consideration in cash of approximately the excess
of $41,500,000 over net current operating liabilities.
"BKC Acquisition Document" means each of the BKC Acquisition
Agreement, the BKC Franchise Agreements, the BKC Lease/Sublease Agreements,
the BKC Franchise and Lease Guaranty and the Employment Agreements.
"BKC Franchise Agreement" means any franchise agreement between NRE
or any of its Subsidiaries and BKC with respect to any Restaurant.
"BKC Franchise and Lease Guaranty" means, collectively,
(a) the Guarantee, Indemnification and Acknowledgment in
favor of BKC, dated the Original Closing Date, with respect to the
Burger King Franchise Agreements referred to therein, and
(b) the Guarantee, Indemnification and Acknowledgment in
favor of BKC, dated the Original Closing Date with respect to the
Lease/Sublease Agreements referred to therein,
in each case executed and delivered by the Company in the form furnished to
the Purchaser prior to its execution and delivery of this Agreement as
Originally in Effect, together, in each case, with all modifications, if any,
thereto becoming effective from time to time.
"BKC Intercreditor Agreement" means the intercreditor agreement,
dated the Original Closing Date, among BKC, the Company, NRE, Jaro, Osborn,
Hubert, the Senior Agent and the Purchaser, as agent for the Noteholders.
"BKC/PMI Intercreditor Letter" is defined in clause (d)(iv)
of Section 6.1.2.
"BKC Subordination Letter" means the letter agreement, dated the
Original Closing Date, between BKC and the Purchaser as to subordination by
BKC of certain payments after the occurrence of, and to the extent of proceeds
received by the Company with respect to, a transfer or assignment of Voting
Stock of NRE concurrently with any exercise of remedies by the Senior Agent or
the MCIT, as agent for itself and the Noteholders, under the Senior Pledge
Agreement or Mezzanine Pledge Agreement, respectively.
"BKC UFOC" means the BKC Uniform Franchise Offering Circular, dated
December 31, 1993.
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"BNB" is defined in the third recital.
"BNB Acquisition" means the acquisition by NRE from BNB of BKC
franchises for 39 restaurants located in the Chicago, Illinois area pursuant
to the BNB Acquisition Agreement, together with all related transactions
contemplated thereby to occur among the Company, NRE, BNB and BKC.
"BNB Acquisition Agreement" means an asset purchase agreement, dated
the Modification No. 1 Effective Date, between NRE and BNB pursuant to which
NRE acquired the assets and businesses of the BNB Restaurants.
"BNB Restaurant" is defined in the third recital.
"Business Day" means any day which is neither a Saturday or Sunday
nor a legal holiday on which banks are authorized or required to be closed in
New York, New York.
"Capital Stock" means, relative to any Person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, including partnership interests and other indicia of
ownership of such Person and all warrants, options, purchase rights,
conversion or exchange rights, voting rights, calls or any claims of any
character with respect thereto.
"Change of Control" means
(a) the sale, lease or transfer of all or substantially all
the assets of the Company to any Person or group (as such term is
defined in Section 13(d)(3) of the Exchange Act) other than the
Jordan Parties;
(b) the liquidation or dissolution of (or adoption of a
plan of liquidation by) the Company;
(c) the acquisition by any Person or group (as so defined)
(other than the Jordan Parties) of a direct or indirect majority in
interest (more than 50%) of the Voting Stock of the Company by way of
merger or consolidation or otherwise;
(d) any transaction the result of which is that any Person
or group (as so defined) beneficially owns, directly or indirectly,
more of the Voting Stock of the Company than is owned beneficially,
directly or indirectly, by the Jordan Parties;
(e) after the first sale of common equity by the
Company pursuant to a registration statement under the
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Securities Act that results in at least 20% of the Voting Stock of
the Company being held by the public,
(i) the Jordan Parties own beneficially, directly
or indirectly, less than 25% of the aggregate amount of
Voting Stock of the Company, or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company
was approved by a vote of at least 66-2/3% of the directors
then still in office who were either directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the
Company then in office; or
(f) any Change of Control Event (as defined in the PMI
Agreement as in effect on the Restatement Effective Date) or the
occurrence under Section 14.1(q) or 14.1(r) of the Senior Credit
Agreement as in effect on the Restatement Effective Date of any
Default (as defined therein).
"Chicago Acquisition" means the acquisition by NRE of the Chicago
Restaurants pursuant to the BKC Acquisition Agreement.
"Chicago Restaurant" is defined in clause (a) of the second
recital.
"Cincinnati Acquisition" means the acquisition by AmeriKing
Cincinnati of the assets and businesses of 12 BKC franchised restaurants
located in the Cincinnati, Ohio area pursuant to the Cincinnati Acquisition
Agreement, together will all related transactions contemplated thereby to
occur among the Company, NRE, AmeriKing Cincinnati, the Cincinnati Sellers and
BKC.
"Cincinnati Acquisition Agreement" means collectively the asset
purchase agreements between AmeriKing Cincinnati and the Cincinnati Sellers, a
copy of a fully executed counterpart of which shall have been delivered in
accordance with Section 3.9 in substantially the form furnished to the
Purchaser prior to its execution and delivery of this Agreement.
"Cincinnati Restaurant" means each of the 12 restaurants identified
in Schedule A to the Cincinnati Acquisition Agreement.
"Cincinnati Seller" means each of Houston, Inc.; Fifth &
Race, Inc.; and Thirty-Forty, Inc.
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"Class A Common Share" means a Common Share issued as ordinary voting
Class A Common Stock.
"Class A-1 Preferred Certificate" is defined in clause (b) of
the first recital.
"Class A-1 Preferred Share" means a Preferred Share issued as a share
of 6% Class A-1 PIK Preferred Stock.
"Class A-2 Preferred Share" means a Preferred Share issued as a share
of 6% Class A-2 Cumulative Preferred Stock.
"Class B Common Share" means a Common Share issued as a share of
non-voting Class B Common Stock and convertible by its holder at any time into
a Class A Common Share subject to the provisions of the Company Certificate of
Incorporation.
"Class B Preferred Certificate" is defined in clause (b) of
the first recital.
"Class B Preferred Share" means a Preferred Share issued as a share
of 6% Class B Cumulative Preferred Stock.
"Class C Common Share" means a Common Share issued as a share of
non-voting Class C Common Stock and convertible by its holder into a Class A
Common Share at any time in accordance with the Company Certificate of
Incorporation.
"Class D Common Share" means a Common Share issued as an initially
voting share of Class D Common Stock and convertible by its holder into a
Class A Common Share at any time in accordance with the Company Certificate of
Incorporation.
"Closing" is defined in Article III.
"Code" means the Internal Revenue Code of 1986, as amended, reformed,
or otherwise modified from time to time.
"Colorado Acquisition" means the acquisition by AmeriKing Colorado of
the assets and businesses of four BKC franchised restaurants located in the
Denver, Colorado area pursuant to the Colorado Acquisition Agreement, together
with all related transactions contemplated thereby to occur among the Company,
NRE, AmeriKing Colorado, the Colorado Sellers and BKC.
"Colorado Acquisition Agreement" means collectively the asset
purchase agreements between AmeriKing Colorado and the Colorado Sellers.
"Colorado Restaurant" means each of the four restaurants identified
in Schedule A to the Colorado Acquisition Agreement.
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"Colorado Seller" means each of George Alaniz, Jr.; Susan J.
Wakeman; and Daniel L. White.
"Common Share" means a share of common stock, $0.01 par value per
share, of the Company as authorized by the Company Certificate of
Incorporation.
"Company" is defined in the preamble.
"Company Certificate of Incorporation" is defined in clause
(a) of Section 3.1.
"Contingent Liability" means, relative to any Person, any agreement,
undertaking or arrangement by which such Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the Indebtedness, obligation or any other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions
upon the shares of any other Person. The amount of any Person's Contingent
Liability shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount (or maximum principal amount, if larger) of
the Indebtedness, obligation or other liability guaranteed thereby.
"Contractual Obligation" means, relative to any Obligor, any
provision of any security issued by it or of any Instrument or undertaking to
which it is a party or by which it or any of its property is bound.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of
the Code or section 4001(b)(1) of ERISA.
"Default" means
(a) any Event of Default or any condition or event which,
after notice or lapse of time or both, would constitute an Event of
Default; and
(b) any condition or event which has resulted in, or would
(including after notice or lapse of time or both) permit, any or all
of the monetary obligations of the Company or any Subsidiary under
the Senior Credit Agreement or the
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PMI Agreement to be declared immediately due and payable prior to
their stated maturity.
"Deferred Limited Interest Guaranty" is defined in
Section 3.6.
"Disclosure Schedule" means Schedule I hereto.
"Dunn/Hogerty" means each of Jerry Dunn and Dennis Hogerty, together
with (x) the spouse or any immediate family member of any such Person or (y)
any trust solely for the benefit of any such Person or the spouse or any
immediate family member of any such Person.
"EBITDA" shall have the meaning set forth in the Senior Credit
Agreement as in effect on the Restatement Effective Date.
"Employment Agreement" means the employment and noninterference
agreements, dated the Original Closing Date, between NRE and each Management
Investor.
"Environmental Claim" is defined in clause (a)(i) of
Section 5.12.
"Environmental Law" means all Federal, state or local laws, statutes,
ordinances, codes, rules, regulations, orders, decrees or directives imposing
liability or standards of conduct relating to the environment, industrial
hygiene, land use or the protection of human health and safety, natural
resources, pollution or waste management.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 7.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive and Advisors Subscription Agreement" means the
subscription agreement, dated the Original Closing Date, between the Company
and the Executive Investors.
"Executive Investor" means each of the Persons named under
the caption "Executives, et. al." in Item 3.3 ("Investors") of the
Disclosure Schedule.
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"Existing Common Certificate" is defined in clause (b) of the
sixth recital.
"Existing Note" is defined in clause (a) of the sixth
recital.
"Existing Pool Nominee" is defined in the sixth recital.
"Existing Senior Credit Agreement" is defined in the fourth
recital.
"FAC" means Franchise Acceptance Corporation Limited, a corporation
organized under the laws of Ireland.
"FAC Note" means the promissory note of Ameriking Colorado dated
November 29, 1995, in the original principal amount of $1,865,000 due December
25, 2005, in favor of FAC.
"FFCA" is defined in the ninth recital.
"FFCA Document" means the FAC Note, the FFCA Guaranty and the
FFCA Lease.
"FFCA Guaranty" is defined in clause (c) of Section 3.12.
"FFCA Lease" is defined in clause (b) of Section 3.12.
"FFCA Sale/Leaseback" is defined in the ninth recital.
"FFCA Sale/Leaseback Agreement" is defined in clause (a) of
Section 3.12.
"Financing Memorandum" is defined in Section 5.17.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means each period of 364 days ending on each of the
following dates: January 1, 1996, December 30, 1996, December 29, 1997,
December 28, 1998, December 27, 1999, December 25, 2000, December 24, 2001,
December 23, 2002, and December 22, 2003.
"FNBB" is defined in the fourth recital.
"FNBB Intercreditor Agreement" is defined in Section 3.5.
"FNBB Warrant" is defined in clause (a) of the fifth recital.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"GAAP" is defined in Section 1.4.
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"Hazardous Material" means:
(a) any substances that are defined or listed in, or
otherwise classified pursuant to, any applicable Environmental Laws
as "hazardous substances", "hazardous materials", "hazardous wastes",
"toxic substances" or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity or "TLCP" toxicity or "EP" toxicity;
(b) any oil, petroleum or petroleum derived substances,
natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or
geothermal resources;
(c) any flammable substances or explosives or any
radioactive materials; or
(d) any asbestos in any form or electrical equipment which
contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Purchase Document refer to this Agreement or
such other Purchase Document, as the case may be, as a whole and not to any
particular Article, Section, paragraph or provision of this Agreement or such
other Purchase Document.
"Hubert" means Gary Hubert.
"including" means including without limiting the generality of any
description preceding such term.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money
(including all notes payable and drafts accepted representing
extensions of credit) and all obligations evidenced by bonds,
debentures, notes or other similar instruments on which interest
charges are customarily paid;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
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<PAGE>
(c) all other items
(i) which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance
sheet of such Person (including any leasing or similar
arrangement which in accordance with GAAP is (or should be)
classified as a capitalized lease) as of the date at which
Indebtedness is to be determined, and
(ii) which are incurred as a financing, whether or
not in the ordinary course of business;
(d) whether or not so included as liabilities in
accordance with GAAP,
(i) all obligations of such Person to pay the
deferred purchase price of property or services (excluding
trade accounts payable arising in the ordinary course of
business which are not overdue by more than 90 days) and
indebtedness (excluding prepaid interest thereon) secured by
a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; provided, however, that, for purposes
of determining the amount of any Indebtedness of the type
described in this clause, if recourse with respect to such
Indebtedness is limited to such property, the amount of such
Indebtedness shall be limited to the fair market value of
such property; and
(ii) all Contingent Liabilities made by such
Person; and
(e) net obligations under interest rate swap, exchange, cap
or other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
provided, however, that obligations of NRE or any of its Subsidiaries under
any Lease or the BKC Franchise Agreements shall not constitute "Indebtedness".
"Institutional Holder" means the Purchaser (so long as it or its
nominee shall hold a Note or other Subject Security) and each other financial
institution which shall hold a Note or other Subject Security (other than a
financial institution which acquired all of the other Subject Securities held
by it in a distribution to the public or as the direct or indirect transferee
of Subject Securities acquired in such a distribution).
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"Instrument" means any contract, agreement, indenture, mortgage,
document or other writing (whether by formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken or any Lien (or
right or interest therein) is granted or perfected.
"Intellectual Property" is defined in Section 5.11.
"Intercompany Consulting Agreement" is defined in clause (c)
of Section 3.8.
"Investment" means, relative to any Person, all investments by such
Person in other any other Person (including Affiliates) in the forms of loans,
advances (excluding, however, commission, travel and similar advances to
officers and employees of such Person made in the ordinary course of
business), Contingent Liabilities, capital contributions, purchases or other
acquisitions for consideration of Indebtedness, equity interests or other
securities and any other items that are or would be classified as investments
on a balance sheet prepared in accordance with GAAP.
"Investor Subscription Agreement" means the subscription agreement,
dated the Original Closing Date, between the Non- Management Investors and the
Company.
"Jaro" is defined in clause (b) of the second recital.
"Jaro Acquisition" means the acquisition by NRE of the 11 Jaro
Restaurants pursuant to the Jaro Acquisition Agreement.
"Jaro Acquisition Agreement" means collectively the three purchase
and sale agreements, dated the Original Closing Date, between NRE and each
Jaro Predecessor Company pursuant to which NRE acquired the Jaro Restaurants
for an aggregate amount of consideration of approximately $6,255,000,
consisting of cash, Seller Notes, Class A-2 Preferred Shares and Class D
Common Shares.
"Jaro Investor" means Jaro and each of his co-investors in each Jaro
Predecessor Company.
"Jaro Predecessor Company" means each of Tabor Restaurant Associates,
Inc., a Colorado corporation; Jaro Restaurants, Inc., a Colorado corporation;
Jaro Enterprises, Inc., a Colorado corporation; and JB Restaurants, Inc., a
Texas corporation.
"Jaro Restaurant" is defined in clause (b) of the second
recital.
"JII Partners" means JII Partners, an Illinois partnership.
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"Jordan Party" means TJC, its Affiliates (other than the Company and
Subsidiaries) and the Purchaser and, with respect to each of the foregoing,
(a) each general partner, each limited partner and
employee thereof or any Affiliate thereof as of the Closing
Date;
(b) any 50% (or more) owned Subsidiary of any one (or
jointly of more than one of any) Person specified in clause
(a); and
(c) the spouse or any immediate family member of any Person
specified in clause (a) or any trust solely for the benefit of any
such Person or the spouse or any immediate family member of such
Person.
"Jordan Principal" means
(a) each partner, executive or employee of TJC;
(b) any wholly-owned Subsidiary of any one (or jointly
of more than one of any) Person specified in clause (a); and
(c) the spouse or any immediate family member of any Person
specified in clause (a) or any trust solely for the benefit of any
such Person or the spouse or any immediate family member of such
Person.
"JZAI" means Jordan/Zalaznick Advisers, Inc., a Delaware
corporation.
"JZCC" means Jordan/Zalaznick Capital Company, a New York
partnership.
"Lease" means the several leases,
(a) dated on or prior to the Restatement Effective
Date, between
(i) NRE, AmeriKing Colorado, AmeriKing Tennessee,
AmeriKing Cincinnati or AmeriKing Virginia, as the case
may be, and BKC,
(ii) NRE, and the current landlords of the Jaro
Restaurants and Osborn Restaurants,
(iii) NRE, and the current landlords of the BNB
Restaurants if such real property is not owned by BNB,
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<PAGE>
(iv) NRE, and BNB as to BNB restaurants for which
BNB and/or an affiliate of BNB is the owner of the real
property, or such successor in interest to BNB,
(v) AmeriKing Colorado and the current landlords
of the Colorado Restaurants,
(vi) AmeriKing Tennessee and the current landlords
of the Tennessee Restaurants,
(vii) AmeriKing Cincinnati and the current
landlords of the Cincinnati Restaurants,
(viii) AmeriKing Virginia and the current landlords
of the Virginia Restaurants, and
(ix) AmeriKing Virginia and AmeriKing Tennessee
and FFCA;
(b) dated after the Restatement Effective Date, between NRE
and owner of the real property which is the subject of such lease, so
long as the terms and conditions of such leases are in form and
substance substantially similar to those leases entered into by NRE
on or prior to the Restatement Effective Date;
(c) dated after the Restatement Effective Date, between any
Restricted Subsidiary and the owner of the real property which is the
subject of such lease, so long as the terms and conditions of such
leases are in form and substance substantially similar to those
leases entered into by any other Restricted Subsidiary on or prior to
the Restatement Effective Date; and
(d) dated after the Restatement Effective Date, between any
Unrestricted Subsidiary and the owner of the real property which is
the subject of such lease, so long as the terms and conditions of
such leases are in form and substance substantially similar to those
leases entered into by any other Unrestricted Subsidiary on or prior
to the Restatement Effective Date.
"Lien" means
(a) any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or preference,
priority or other security agreement, whether or not filed, recorded
or otherwise perfected under applicable law;
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(b) any financing statement filed under the Uniform
Commercial Code (or comparable law of any jurisdiction); and
(c) any option or other agreement to sell or to provide any
instrument or financing statement of the nature referred to in clause
(a) or (b).
"Management Consulting Agreement" is defined in clause (b) of
Section 3.8.
"Management Investor" means each Jaro Investor, Osborn Investor and
each other Person named under the caption "Management et al." in Item 3.3
("Investors") of the Disclosure Schedule.
"Management Note" means each promissory note issued pursuant to the
Management Subscription Agreement as a three-year junior note in the form
attached as Exhibit 2 to the Management Subscription Agreement.
"Management Option" means options issued on the Original Closing Date
by the Company to Don Stahurski and Scott Vasatka for the number of Class D
Common Shares set forth opposite their respective names in Item 3.3
("Investors") of the Disclosure Schedule.
"Management Subscription Agreement" means the subscription agreement,
dated the Original Closing Date, between the Company and the Management
Investors.
"Materially Adverse Effect" means, relative to any Person, an effect,
resulting from any occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding), materially adverse to the consolidated properties, business
prospects, operations, earnings, assets, liabilities, or condition (financial
or otherwise) of such Person and its Subsidiaries.
"Mezzanine Pledge Agreement" is defined in Section 3.4.
"Modification No. 1" is defined in the third recital.
"Modification No. 1 Effective Date" is defined in the third
recital.
"Modification No. 2" is defined in the sixth recital.
"1995 Financial Statement" is defined in Section 5.4.
"1995/1996 Acquisition" means each of the Colorado
Acquisition, Tennessee Acquisition, Cincinnati Acquisition and
Virginia Acquisition.
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"Non-Management Investor" means each Person named under the caption
"Others" in Item 3.3 ("Investors") of the Disclosure Schedule.
"Note" is defined in Section 2.1. At any time after the Restatement
Effective Date, "Note" also means each promissory note of the Company in the
form of Exhibit A hereto (as such promissory note may be amended, endorsed or
otherwise modified from time to time) and all other promissory notes accepted
from time to time in substitution, replacement or renewal therefor, including
pursuant to Section 4.7 or 4.8.
"Noteholder" means at any time each Person (including the Existing
Pool Nominee) then registered in accordance with Section 4.6 as the owner of a
Note.
"NRE" is defined in the second recital.
"NRE Certificate of Incorporation" means the amended and restated
certificate of incorporation of NRE in the form furnished to the Purchaser on
the Original Closing Date.
"NRE Exempt Shares" means the 50 shares of Class A voting stock
authorized by the NRE Certificate of Incorporation.
"NRE Pledged Shares" means the 950 shares of Class B non-voting
shares of common stock authorized by the NRE Certificate of Incorporation.
"Obligation" means all obligations of the Company with respect to the
repayment or performance of all obligations (monetary or otherwise) of the
Company arising under or in connection with the Notes or under this Agreement
or any other Purchase Document in respect of the Notes, the Indebtedness
evidenced thereby or to any Person as the holder of a Note.
"Obligor" means each of the Company, NRE and each AmeriKing
Guarantor.
"or" is not exclusive.
"Organic Document" means, relative to any Obligor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of Capital
Stock.
"Original Closing Date" is defined in the first recital.
"Original Common Certificate" is defined in clause (c) of the
first recital.
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"Original Note" is defined in clause (a) of the first
recital.
"Original Seller Note" means each of the promissory notes, dated the
Original Closing Date, issued by the Company to the Jaro Investors and Osborn
Investors in the aggregate original principal amounts of $3,355,000 and
$1,045,000, respectively.
"Osborn" is defined in clause (c) of the second recital.
"Osborn Acquisition" means the acquisition by NRE of the three Osborn
Restaurants pursuant to the Osborn Acquisition Agreement.
"Osborn Acquisition Agreement" means collectively the three purchase
and sale agreements, dated the Original Closing Date, each between the Company
and an Osborn Predecessor Company.
"Osborn Investor" means Osborn and each of his co-investors in each
Osborn Predecessor Company pursuant to which NRE acquired the Osborn
Restaurants for an aggregate consideration of approximately $1,725,000
consisting of cash, Seller Notes, Class 4-2 Preferred Shares, Class D Common
Shares plus the assumption of certain obligations.
"Osborn Predecessor Company" means each of Castleking, Inc., a
Colorado corporation; Osburger, Inc, a Colorado corporation; and White-Osborn
Restaurants, Inc., a Colorado corporation.
"Osborn Restaurant" is defined in clause (c) of the second
recital.
"outstanding" means, at any time relative to the Notes, any Notes
theretofore issued pursuant to Section 2.1, 4.7 or 4.8 and not surrendered
pursuant to Section 4.7 or 4.8 but excluding, however, all Notes which are
owned by the Company or any Subsidiary.
"Permitted Junior Payment Date" means, relative to the payment in
cash of any amount which is expressly conditioned by Section 6.2.5 or 6.2.15
as being permitted only then to be made, any date when, after giving effect to
the payment in full in cash of such amount, in the good faith determination of
the Board of Directors of the Company evidenced by a duly adopted resolution
of such Board,
(a) the funds then available to the Company are sufficient
(and are reasonably expected to continue to be sufficient) to make
the next scheduled payment of interest to become due, and all other
payments due and to become due in the next 190 days, on the Notes;
and
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(b) no Default shall have occurred and be continuing (or be
reasonably expected to occur within the next 190 days).
"Person" means any natural person, corporation, firm, association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Plan" means
(a) a "pension plan," as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to
which the Company or any corporation, trade or business that is,
along with the Company, a member of a Controlled Group, may have
liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at
any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under section 4069 of ERISA; or
(b) a "welfare plan," as such term is defined in
section 3(1) of ERISA.
"PMI" is defined in the twelfth recital.
"PMI Agreement" is defined in clause (a) of Section 3.11. At any time
after the Restatement Effective Date, "PMI Agreement" also means the PMI
Agreement originally executed and delivered, together with
(a) each successor Instrument pursuant to which NRE obtains
from other financial institutions loans to refinance indebtedness
outstanding under the PMI Agreement in effect on the date of such
refinancing; provided, however, that such successor Instrument shall
contain no limitations of the nature referred to in Section 6.2.14
which are collectively more restrictive in any material respect than
the comparable limitations contained in the PMI Agreement in effect
on the date of such refinancing; and
(b) all amendments, supplements, modifications, extensions
and renewals made thereto or to any such successor Instrument from
time to time after the Restatement Effective Date that are not in
violation of Section 6.2.9.
"PMI Document" means any Transaction Document as defined (on the
Restatement Effective Date) in the PMI Purchase Agreement.
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"PMI Liability" means all Indebtedness of NRE evidenced by the PMI
Notes and otherwise arising under the PMI Documents.
"PMI Note" is defined in clause (c) of Section 3.11. At any time
after the Restatement Date, "PMI Note" also means the PMI Notes as they may be
amended or modified from time to time, and all other promissory notes accepted
from time to time in substitution, replacement or renewal thereof, all in
accordance with Section 6.2.9.
"PMI Warrant" is defined in clause (b) of Section 3.11.
"Preemption Letter" is defined in Section 3.17.
"Preferred Share" means a share of Preferred Stock, $0.01 par value
per share, of the Company.
"Pro Forma Balance Sheet" is defined in clause (a) of
Section 5.4.
"Pro Forma Transaction" means each of
(a) the incurrence by NRE of all of the Indebtedness to be
incurred on the Restatement Effective Date under the Senior Credit
Agreement, the PMI Agreement, the FFCA Sale/Leaseback Agreement and
FCA Note; and
(b) the consummation of all of the 1995/1996
Acquisitions.
"Projections" is defined in clause (b) of Section 5.4.
"Purchase Document" means this Agreement, the Notes, the Deferred
Limited Interest Guaranty, the Mezzanine Pledge Agreement and each other
Instrument executed and delivered from time to time by the Company or any
Subsidiary to the Purchaser or any other Noteholder pursuant hereto, whether
or not mentioned herein.
"Purchaser" is defined in the preamble.
"Quinn" means Thomas H. Quinn, who, on the Original Closing Date, was
intended to be elected a Director, and Chairman of the Board of Directors, of
the Company.
"Required Noteholders" means, at any time, Noteholders owning 51% or
more of the then outstanding principal amount of the Notes. Any Note which
from time to time is held by any Affiliate of the Company shall be deemed to
be not outstanding for all purposes of Sections 7.3 and 9.1 and of any other
determination to be made by, or action to be taken by or at the direction of,
the Required Noteholders.
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"Restatement Effective Date" is defined in the paragraph
immediately following the thirteenth recital.
"Restaurant" means any Chicago Restaurant, any Jaro Restaurant, any
Osborn Restaurant, any BNB Restaurant, any Colorado Restaurant, any Tennessee
Restaurant, any Cincinnati Restaurant or any Virginia Restaurant and any other
BKC franchised restaurant the assets and business of which are acquired or
developed by NRE or any of its Subsidiaries from time to time after the
Restatement Effective Date in accordance with Section 6.1.3.
"Restaurant Cash Flow" means, relative to any Restaurant, the EBITDA
of such Restaurant for the period of the immediately preceding 12 months plus,
to the extent deducted in calculating EBITDA, for such Restaurant, the
aggregate amount of allocated general and administrative expenses not directly
associated with such Restaurant during such period which expenses are approved
in by the Senior Agent.
"Restricted Subsidiary" means any Subsidiary of NRE which is
not an Unrestricted Subsidiary.
"SEC" means the Securities Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Seller Note" is defined in clause (a)(ii) of Section 3.7.
"Senior Agent" is defined in clause (a) of Section 3.10 and also
refers to any replacement or successor agent under a successor Senior Credit
Agreement as provided in clause (a) of the definition of such term.
"Senior Credit Agreement" is defined in clause (a) of Section 3.10.
At any time after the Restatement Effective Date, "Senior Credit Agreement"
also means the Senior Credit Agreement as originally executed and delivered,
together with
(a) each successor Instrument pursuant to which NRE obtains
from other financial institutions loans to refinance indebtedness
outstanding under the Senior Credit Agreement in effect on the date
of such refinancing; provided, however, that such successor
Instrument shall contain no limitations of the nature referred to in
Section 6.2.14 which are collectively more restrictive in any
material respect than the comparable limitations contained in the
Senior Credit Agreement in effect on the date of such refinancing;
and
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(b) all amendments, supplements, modifications, extensions
and renewals made thereto or to any such successor Instrument from
time to time after the Restatement Effective Date in accordance with
Section 6.2.8.
"Senior Lender" is defined in clause (a) of Section 3.10 and also
refers to any replacement or successor senior lenders under a successor Senior
Credit Agreement as provided in clause (a) of the definition of such term.
"Senior Liability" means all Obligations under (and as defined on the
Restatement Effective Date in) the Senior Credit Agreement.
"Senior Loan" means a loan outstanding from time to time under the
Senior Credit Agreement.
"Senior Loan Document" means any Loan Document as defined in
the Senior Credit Agreement.
"Senior Pledge Agreement" is defined in clause (b) of
Section 3.10.
"Senior Recovery Amount" means, for purposes of determining the
occurrence and extent of recourse under the Senior Recovery Guaranty, an
amount equal to the sum at any time of:
(a) the amount of the proceeds received by the Company
from the sale or other disposition of all NRE Exempt Shares,
plus
(b) any payments, distributions or other sums (the
"Payments") received by the Company from NRE in violation of Section
10.4 of the Senior Credit Agreement (as in effect on the Closing
Date) so long as
(i) such Payments were received by the Company not
more than ninety (90) days prior to the earlier of the date
(x) on which the Senior Agent or Senior Lenders declare all
amounts owing with respect to the Senior Loan Documents
immediately due and payable or (y) the date on which all
such amounts shall otherwise become due and payable in
accordance with the terms of the Senior Loan Documents, and
(ii) such Payments were in an aggregate amount in
excess of $500,000,
plus
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(c) interest on such Payments from the date referred to in
clause (b)(i) until the date on which payment is made pursuant to the
Senior Recovery Guaranty,
plus
(d) all costs and expenses (including court costs and legal
expenses) incurred or expended by the Senior Agent in connection with
the Senior Recovery Guaranty and the enforcement thereof.
"Senior Recovery Debt" means all indebtedness, obligations and
liabilities of the Company to the Senior Lenders, whether now existing or
hereafter created, arising out of or under the Senior Recovery Guaranty,
including all principal, interest (including interest accruing after the
commencement of bankruptcy, insolvency or similar proceedings with respect to
the Company, whether or not the claim therefor shall be enforceable) and other
amounts payable under any letter of credit reimbursement agreement, bankers
acceptance, note or instrument issued under the Senior Credit Agreement;
provided, however, that the aggregate principal amount of Senior Recovery Debt
under or in respect of the Senior Recovery Guaranty shall not at any time
exceed the lesser of:
(a) the then Senior Recovery Amount; and
(b) the aggregate principal amount of Indebtedness then
permitted by clause (c) of Section 6.2.2 to be outstanding, plus
interest, costs, fees and expenses as provided in the Senior Credit
Agreement.
"Senior Recovery Guaranty" is defined in clause (c) of
Section 3.10.
"Senior Security Amendment No. 1" means the first amendment
to security documents, dated the Modification No. 1 Effective
Date, among the Company, NRE and the Senior Agent.
"Senior Security Amendment No. 2" means the second amendment
to security documents, dated the Restatement Effective Date, among
the Company, NRE and the Senior Agent.
"Stockholder" means each of the Persons identified in Item 3.3
("Stockholders") of the Disclosure Schedule.
"Stockholders Agreement" means the stockholders agreement,
dated the Original Closing Date and amended by Consent and
Amendment No. 1, dated the Modification No. 1 Effective Date, and
Consent and Amendment No. 2, dated the Restatement Effective Date,
among the Company, NRE and all Stockholders.
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"Subject Security" is defined in Section 2.2.
"Subscription Agreement" means the Investor Subscription
Agreement, the Management Subscription Agreement or the Executive
and Advisors Subscription Agreement.
"Subsidiary" of any Person means
(a) any corporation, association or other business entity
more than 50.0% of the outstanding shares of Voting Stock of which is
owned directly or indirectly by such Person; and
(b) any partnership in which such Person is a general
partner.
Except as otherwise indicated herein, references to a Subsidiary refer to a
Subsidiary of the Company.
"Tax Sharing Agreement" is defined in clause (a) of
Section 3.8.
"Taxes" is defined in Section 4.9.
"Tennessee Acquisition" means the acquisition by AmeriKing Tennessee
from the Tennessee Sellers of the outstanding capital stock of QSC, Inc. and
Ro-Lank, Inc., whose collective assets consist of, among other things, 11 BKC
franchised restaurants located in the Chattanooga, Tennessee area, pursuant to
the Tennessee Stock Purchase Agreement, together will all related transactions
contemplated thereby to occur among the Company, NRE, AmeriKing Tennessee, the
Tennessee Sellers and BKC.
"Tennessee Stock Purchase Agreement" means collectively the BKC/QSC
Stock Purchase Agreement dated November 21, 1995 and the BKC/Ro-Lank Stock
Purchase Agreement dated November 21, 1995.
"Tennessee Restaurant" means each of the 11 restaurants identified in
Schedule A to the Tennessee Stock Purchase Agreement.
"Tennessee Seller" means each of Ronny D. Lankford; Robert W.
Lankford; Michael A. Reed; Ro-Lank, Inc.; and QSC, Inc.
"TJC" means The Jordan Company, a New York general
partnership.
"TJC Management" is defined in clause (b) of Section 3.8.
"Unrestricted Subsidiary" means
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(a) AmeriKing Colorado;
(b) AmeriKing Tennessee; and
(c) each other Subsidiary of NRE as to which
(i) the Board of Directors of NRE has designated
such Subsidiary as an Unrestricted Subsidiary at or prior to
the time such Subsidiary is formed or acquired by NRE, as
the case may be, and NRE has provided written notice to the
Senior Agent in reasonable detail of such designation
pursuant to the Senior Credit Agreement;
(ii) NRE owns not less than eighty percent (80%) of
the capital stock of such Subsidiary and eighty percent
(80%) of the Voting Stock of such Subsidiary;
(iii) such Subsidiary has become a party to the
Tax Sharing Agreement;
(iv) all of such Subsidiary's liabilities (other
than liabilities owing to BKC) are non-recourse as to the
Company, NRE or any Restricted Subsidiary; and
(v) no Jordan Principal owns any Capital Stock of
such Subsidiary (except indirectly through the Company).
"Virginia Acquisition" means the acquisition by AmeriKing Virginia
from the Virginia Sellers of the assets and businesses of 24 BKC franchised
restaurants located in the Richmond, Virginia area pursuant to the Virginia
Acquisition Agreement, together will all related transactions contemplated
thereby to occur among the Company, NRE, AmeriKing Virginia, the Virginia
Sellers and BKC.
"Virginia Acquisition Agreement" means the asset purchase agreement
between AmeriKing Virginia and the Virginia Sellers, a fully executed copy of
a counterpart of which shall have been delivered in accordance with Section
3.9, in substantially the form furnished to the Purchaser prior to its
execution and delivery of this Agreement.
"Virginia Restaurant" means each of the 24 restaurants identified in
Schedule A to the Virginia Acquisition Agreement.
"Virginia Seller" means C&N Dining, Inc. and its Affiliates.
"Voting Stock" means, relative to any Person, stock or similar equity
interests of such Person, pursuant to which the holders thereof have, at the
time of determination, the general voting power under ordinary circumstances
to vote for the election of directors (or Persons performing similar
functions), managers,
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trustees or general partners of such Person (irrespective of whether or not at
the time any other class or classes will have or might have voting power by
reason of the happening of any contingency).
"Warrant Amendment" is defined in clause (c) of Section 3.7.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule, each
Note and any other Purchase Document or any notice or other communication
delivered from time to time in connection with any Purchase Document. A
reference to any Person includes its permitted successors and permitted
assigns.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Purchase Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Purchase Document, as the case may be, and unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Section, Article or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Purchase
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder for periods after the Restatement Effective Date shall
be made and all financial statements required to be delivered hereunder or
thereunder shall be prepared, in accordance with generally accepted accounting
principles (subject, in the case of the 1995 Financial Statements and other
financial information for any period other than a Fiscal Year, to the absence
of footnotes and year-end adjustments) as in effect on the Restatement
Effective Date and applied consistently with the financial statements as at
and for such date ("GAAP").
ARTICLE II
THE SUBJECT SECURITIES, ETC.
SECTION 2.1. The Note. The Purchaser hereby agrees, subject to the
terms and conditions of this Agreement (including Article III), to accept on
the Restatement Effective Date from the Company, in substitution for (but not
in payment of) the Existing Note and in continuation under this Agreement of
the Indebtedness outstanding under this Agreement as Previously in Effect and
evidenced by the Existing Note, a promissory note, dated October 30, 1995 (the
"Note"), in the original principal amount of $11,000,000 and otherwise in the
form of Exhibit A hereto.
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SECTION 2.2. Preferred and Common Shares. The Purchaser will continue
on and after the Restatement Effective Date to own and hold through the
Existing Pool Nominee the following securities (collectively with the Notes,
the "Subject Securities"):
(a) the 3,000 Class A-1 Preferred Shares represented by the
Class A-1 Preferred Certificate for which the Purchaser paid $1,000
per share on the Original Closing Date;
(b) the 500 Class B Preferred Shares represented by the
Class B Certificate for which the Purchaser paid $1,000 per share on
the Original Closing Date; and
(c) the 285.31 Class A Common Shares represented by the
Existing Common Certificate which was issued upon the conversion of
the Original Common Certificate for which the Purchaser paid $100 per
share on the Original Closing Date.
SECTION 2.3. Issue Price. The Company and the Purchaser agree that,
for purposes of section 1271 et seq. of the Code, the issue price of each Note
was 100% of the original principal amount of each Original Note, and the issue
price of each Class A-1 Preferred Share, Class B Preferred Share and Common
Share is the price set forth respectively for such Subject Security in Section
2.2, and that this agreement is intended to constitute an agreement as to the
issue price of each Subject Security for all Federal and other income tax
purposes.
ARTICLE III
CONDITIONS TO RESTATEMENT EFFECTIVE DATE
The Purchaser's obligations to accept the Note in exchange for the
Existing Note and to amend and restate the Existing Agreement in the form of
this Agreement are subject to the prior or concurrent fulfillment, to the
Purchaser's satisfaction, of all of the following conditions, evidence of
which fulfillment shall be made available at a closing (the "Closing") at the
offices of Mayer, Brown & Platt, 1675 Broadway, New York, New York at 10:00
a.m., local time, on February 7, 1996 or such other Business Day on or prior
to February 9, 1996 as may be agreed upon by the Company and the Purchaser:
SECTION 3.1. Certificate of Incorporation. Each of the following
shall have occurred (and the Purchaser shall have received from each of the
Company and NRE a certificate, dated the Restatement Effective Date, of its
Secretary or Assistant Secretary in the form of Exhibit B-1 or B-2,
respectively, hereto
confirming inter alia that):
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(a) the Company shall have adopted and duly filed with the
Secretary of State of the State of Delaware an amended and restated
certificate of incorporation in the form furnished to the Purchaser
prior to the execution and delivery of this Agreement (the "Company
Certificate of Incorporation"), and no further amendments or
modifications thereto shall have been adopted or filed; and
(b) NRE shall not since the Original Closing Date have
adopted or filed any amendment or modification to the NRE Certificate
of Incorporation, and the authorized capital stock of NRE shall
continue to consist exclusively of the NRE Exempt Shares and NRE
Pledged Shares.
SECTION 3.2. Resolutions, etc. The Purchaser shall have
received:
(a) from each Obligor, a certificate, dated the
Restatement Effective Date, in the form of Exhibit C hereto
as to
(i) resolutions of its Board of Directors then in
full force and effect authorizing (x) in the case of the
Company, the issuance of the Notes and the execution,
delivery and performance of this Agreement, the Notes, each
other Purchase Document to be executed by it and the
Stockholders Agreement and (y) in the case of NRE and each
AmeriKing Guarantor, the execution, delivery and performance
of the Deferred Limited Interest Guaranty, and
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement,
each other Purchase Document executed by it and the
Stockholders Agreement; and
(b) such other documents (certified if requested) as the
Purchaser may reasonably request with respect to any Organic
Document, Contractual Obligation or Approval.
SECTION 3.3. Stockholders Agreement. The stockholders agreement,
dated the Original Closing Date and amended on the Modification No. 1
Effective Date, shall have been amended by a Consent and Amendment No. 2 in
substantially the form furnished to the Purchaser prior to its execution and
delivery of this Agreement, and the Purchaser shall have received from the
Company a certificate, dated the Restatement Effective Date, in the form of
Exhibit D hereto.
SECTION 3.4. Mezzanine Pledge Agreement. The pledge
agreement, dated the Original Closing Date (the "Mezzanine Pledge
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Agreement"), between the Company and the Purchaser in the form of Exhibit E
hereto shall continue in full force and effect.
SECTION 3.5. FNBB Intercreditor Letter. The letter agreement, dated
the Original Closing Date and amended as of the Modification No. 1 Effective
Date (the "FNBB Intercreditor Letter"), in the form of Attachment 1 to Exhibit
F hereto shall continue in full force and effect, without further amendment or
modification, and the Purchaser shall have exchanged confirmation thereof with
the Senior Agent in the form of Exhibit F hereto.
SECTION 3.6. Deferred Limited Interest Guaranty. NRE and each
AmeriKing Guarantor shall have executed and delivered to the Purchaser an
amended and restated deferred limited interest guaranty, dated the Restatement
Effective Date (the "Deferred Limited Interest Guaranty"), in substantially
the form of Exhibit G hereto.
SECTION 3.7. Seller and BBI Junior Notes. Each of the following shall
have occurred (and the Purchaser shall have received from the Company a
certificate, dated the Restatement Effective Date, in the form of Exhibit H
hereto confirming inter alia that):
(a) each Person identified in Item 3.7 ("Seller Notes")
of the Disclosure Schedule
(i) shall have surrendered to the Company an
Original Seller Note payable to his order in the original
principal amount shown in such item opposite his name, and
(ii) shall have accepted in substitution therefor
(but not payment thereof) a new promissory note, dated
November 30, 1995 (collectively, the "Seller Notes"), in
like principal amount due in a single maturity, and without
required installment prepayments, on August 31, 2005 in the
form furnished to the Purchaser prior to its execution and
delivery of this Agreement;
(b) BBI shall have entered into with the Company an
amendment and allonge dated the Restatement Effective Date (the "BBI
Amendment"), to the BBI Existing Agreement and the BBI Existing
Junior Note (as such note is modified by such amendment and allonge,
the "BBI Junior Note"), pursuant to which the BBI Junior Note is
amended to be payable in its entirety in a single payment, without
scheduled prepayments, on August 31, 2006, and the BBI Amendment
shall be in substantially the form furnished to the Purchaser prior
to its execution and delivery of this Agreement; and
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(c) BBI, as assignee of FNBB, shall have entered into with
the Company an amendment dated the Restatement Effective Date (the
"Warrant Amendment"), to the FNBB Warrant and the BBI Warrant, and
the Warrant Amendment shall be in substantially the form furnished to
the Purchaser prior to its execution and delivery of this Agreement.
SECTION 3.8. Certain Affiliate Agreements. Each of the following
shall have occurred (and the Purchaser shall have received from the Company a
certificate, dated the Restatement Effective Date, in the form of Exhibit I
hereto confirming inter alia that):
(a) the Company and NRE shall have entered into an amended
and restated tax sharing agreement, dated the Restatement Effective
Date, (as so originally executed and delivered, the "Tax Sharing
Agreement") substantially in the form furnished to the Purchaser
prior to its execution and delivery hereof,
(b) the Company shall have entered into with NRE and TJC
Management Corporation, a Delaware corporation ("TJC Management"), an
amendment, dated the Restatement Effective Date, substantially in the
form furnished to the Purchaser prior to its execution and delivery
of this Agreement, to that certain management consulting agreement,
dated the Original Closing Date (as so amended, the "Management
Consulting Agreement"), among the Company, NRE and the TJC
Management, and
(c) the management consulting agreement, dated the Original
Closing Date (the "Intercompany Consulting Agreement"), between the
Company and NRE continues in full force and effect,
in each case in the form furnished to the Purchaser prior to its execution and
delivery of this Agreement.
SECTION 3.9. Completion, etc., of 1995/1996 Acquisitions. Each of the
following shall have occurred (and the Purchaser shall have received from the
Company a certificate, dated the Restatement Effective Date, in the form of
Exhibit J hereto confirming inter alia that):
(a) the Cincinnati Acquisition Agreement and Virginia
Acquisition Agreement shall be in full force and effect, and no term
or condition thereof shall have been amended, waived or otherwise
modified;
(b) all conditions in the Cincinnati Acquisition
Agreement and Virginia Acquisition Agreement to the
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consummation of the Cincinnati Acquisition and the Colorado
Acquisition, respectively, shall have been satisfied without recourse
to any provision permitting the waiver by NRE of any condition,
obligation, covenant or other requirement; and
(c) the series of transactions comprising the closings under
each of the Cincinnati Acquisition Agreement and Virginia Acquisition
Agreement shall be consummated
concurrently with the Closing.
SECTION 3.10. Effectiveness, etc. of Senior Credit Agreement. Each of
the following shall have occurred (and the Purchaser shall have received from
the Company a certificate, dated the Restatement Effective Date, in the form
of Exhibit K hereto confirming inter alia that):
(a) the Company, NRE and FNBB, as the successor to all of
the lenders parties to the Existing Credit Agreement (FNBB and such
other lenders as are or may become parties to the Senior Credit
Agreement in accordance with the terms thereof, the "Senior Lenders")
and FNBB, as agent for the Senior Lenders (the "Senior Agent"), shall
have amended and restated the Existing Credit Agreement by executing
and delivering an amended and restated revolving credit and term loan
agreement, dated as of the Restatement Effective Date (the "Senior
Credit Agreement"), in the form furnished to the Purchaser prior to
its execution and delivery of this Agreement;
(b) the Company and the Senior Agent shall have entered into
an amendment, dated the Restatement Effective Date, substantially in
the form furnished to the Purchaser prior to its execution and
delivery of this Agreement, to that certain pledge agreement, dated
the Original Closing Date (as so amended and as amended by Senior
Security Amendment No. 1 and Senior Security Amendment No. 2, the
"Senior Pledge Agreement"), from the Company to the Senior Agent, and
the Senior Agent shall continue to hold in pledge thereunder all of
the issued and outstanding shares of Capital Stock of NRE other than
the NRE Exempt Shares;
(c) the limited guaranty agreement, dated the Original
Closing Date and amended by the Senior Security Amendment No. 1 and
Senior Security Amendment No. 2 (the "Senior Recovery Guaranty"),
executed and delivered by the Company to the Senior Agent shall
continue in effect without further amendment or modification, and the
recourse of the Senior Lenders and the Senior Agent thereunder
against the Company shall in all respects be limited to the
occurrence and extent from time to time of the Senior Recovery
Amount, if any; and
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(d) all conditions in the Senior Credit Agreement to NRE
obtaining the term loans to be made thereunder on the Closing Date
under (and as defined in) the Senior Credit Agreement shall have been
satisfied without recourse to any provision permitting the waiver by
any party thereto of any condition, obligation, covenant or other
requirement, and NRE shall have procured a term loan borrowing
thereunder of at least $85,000,000.
SECTION 3.11. Effectiveness of PMI Agreement. Each of the following
shall have occurred (and the Purchaser shall have received from the Company a
certificate, dated the Restatement Effective Date, in the form of Exhibit L
hereto confirming inter alia that):
(a) the Company, NRE and PMI shall have executed and
delivered a note purchase agreement, dated the Restatement Effective
Date (the "PMI Agreement"), in the form furnished to the Purchaser
prior to its execution and delivery of this Agreement;
(b) PMI (or its nominee) shall have received from the
Company a warrant to purchase for nominal consideration 59.14 Class C
Common Shares (the "PMI Warrant") in the form furnished to the
Purchaser prior to its execution and delivery of this Agreement;
(c) all conditions in the PMI Agreement to PMI purchasing
thereunder the 12-1/2% senior subordinated notes, dated the
Restatement Effective Date (the "PMI Notes"), in the aggregate
original principal amount of $15,000,000 due January 31, 2005 shall
have been satisfied without recourse to any provision permitting the
waiver by any party thereto of any condition, obligation, covenant or
other requirement, and NRE shall have received net proceeds from the
sale of the PMI Notes and the PMI Warrant of at least $14,750,000.
SECTION 3.12. Effectiveness of FFCA Arrangements. Each of the
following shall have occurred (and the Purchaser shall have received from NRE
a certificate, dated the Restatement Effective Date, in the form of Exhibit M
hereto confirming inter alia that):
(a) AmeriKing Tennessee and AmeriKing Virginia shall have
entered into with FFCA a sale/leaseback agreement, dated the
Restatement Effective Date (the "FFCA Sale/Leaseback Agreement"), in
substantially the form furnished to the Purchaser prior to its
execution and delivery of this
Agreement;
(b) each of AmeriKing Tennessee and AmeriKing Virginia shall
have entered into with FFCA a separate lease, dated the
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Restatement Effective Date (collectively, the "FFCA Leases"), in
covering the premises of the Tennessee Restaurants and Virginia
Restaurants, respectively;
(c) the guaranties executed and delivered by NRE of the FFCA
Sale/Leaseback Agreement and the FFCA Loans on the Restatement
Effective Date (the "FFCA Guaranties") shall be in substantially the
for furnished to the Purchaser prior to its execution and delivery of
this Agreement; and
(d) AmeriKing Tennessee and AmeriKing Virginia shall have
received net proceeds from the FFCA Sale/Leaseback of at least
$821,000.
SECTION 3.13. Performance; No Default. The representations and
warranties of the Company contained in this Agreement and those made in
writing by or on behalf of the Company in connection with any other Purchase
Document shall be correct when made and on the Restatement Effective Date. The
Company shall have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied with by it
prior to or on the Restatement Effective Date, and, on the Restatement
Effective Date (and after giving effect to all of the Pro Forma Transactions),
no Default shall have occurred and be continuing.
SECTION 3.14. Absence of Litigation, etc. Except as
disclosed by the Company pursuant to Section 5.7,
(a) no litigation, arbitration or governmental investigation
or proceeding shall be pending or, to the knowledge of the Company,
threatened against NRE, the Company, any Subsidiary or any Restaurant
(i) which affects any of their respective
properties, business prospects, operations, earnings,
assets, liabilities or condition (financial or otherwise)
and which might, in the opinion of the Purchaser, have a
Materially Adverse Effect on the Company and Subsidiaries,
or
(ii) which relates to any Acquisition Agreement,
this Agreement or the Subject Securities; and
(b) no development shall have occurred in any such
litigation, arbitration or governmental investigation or proceeding
so disclosed, which might, in the opinion of the Purchaser, have a
Materially Adverse Effect on the Company and Subsidiaries.
SECTION 3.15. Certificate as to Compliance. The Purchaser
shall have received from the Company a certificate, dated the
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Restatement Effective Date, of its chief executive or financial officer in the
form of Exhibit N hereto as to satisfaction of the conditions set forth in
Sections 3.13 and 3.14.
SECTION 3.16. Certificate as to Solvency, etc. The Purchaser shall
have received a certificate, dated the Restatement Effective Date, of the
chief accounting and financial officer of the Company, in the form of Exhibit
O hereto.
SECTION 3.17. Preemption Letter. The Company shall have delivered to
the Purchaser a duly executed letter, dated the Closing Date (the "Preemption
Letter"), in the form of Exhibit P hereto.
SECTION 3.18. Opinion of Counsel. The Purchaser shall have received
an opinion, dated the Restatement Effective Date, from Mayer, Brown & Platt,
counsel to the Company, substantially in the form of Exhibit Q hereto.
SECTION 3.19. Legal Expenses. The Company shall have made payment in
full of all fees and expenses of counsel to the Purchaser which shall have
been invoiced to the Company on or prior to the Restatement Effective Date
(including amounts invoiced on account).
SECTION 3.20. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Company shall be satisfactory
in form and substance to the Purchaser and its counsel; the Purchaser and its
counsel shall have received all information, and such counterpart originals or
such certified or other copies of such Instrument, as the Purchaser or its
counsel may reasonably request; and all legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory to counsel
to the Purchaser.
ARTICLE IV
PAYMENTS, REGISTRATION, ETC.
SECTION 4.1. Place of Payment. Payments of principal and interest
becoming due and payable on the Notes and any dividends or other payments on
or in respect of any Subject Securities shall be made at the office of
Republic National Bank of New York, 452 Fifth Avenue, 26th Floor, New York,
New York 10018.
SECTION 4.2. Home Office Payment. So long as the Purchaser or its
nominee (including the Existing Pool Nominee) shall be the holder of any
Subject Security, and notwithstanding anything contained in Section 4.1 or in
any Subject Security to the contrary, the Company will pay all sums becoming
due for principal
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of and interest on such Note and all dividends or other payments on or in
respect of any other Subject Security, not later than 12:00 o'clock noon, New
York City time, on the date such payment is due, in immediately available
funds,
(a) in accordance with the payment instructions set forth
below the Purchaser's signature hereto with instructions (including,
in the case of payments on any Note held by the Existing Pool
Nominee, to its appropriate account so set forth) to the payee
identified in such instructions to telephone advice of credit in
accordance with such instructions, or
(b) by such other method or at such other address or
bank account as the Purchaser may designate in writing,
without the presentation or surrender of such Subject Security or the making
of any notation thereon, except that any Note paid or prepaid (or any other
Subject Security which is redeemed in full) shall be surrendered to the
Company at its principal office for cancellation. Prior to any sale or other
disposition of any Note held by the Purchaser or its nominee, the Purchaser
will, at its election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes, as the case may
be, pursuant to Section 4.7. The Company will afford the benefits of this
Section to any Institutional Holder which is the direct or indirect transferee
of any Subject Security purchased by the Purchaser under this Agreement and
which has made the same agreement relating to such Subject Security as the
Purchaser has made in this Section.
SECTION 4.3. Optional Payments. The Company may, at its option,
prepay at any time all or any part (in an integral multiple of $1,000) of the
outstanding principal amount of, or of interest due or to become due on the
next semi-annual payment date under, the Notes. Prepayments of principal shall
be in the amount so prepaid and be accompanied by payment in full of all
interest accrued on such principal amount and not yet paid. Each prepayment
shall be subject to the Company having given each Noteholder written notice of
such prepayment not more than 10 days and not less than five days prior to the
date fixed for such prepayment, in each case specifying (x) such date, (y) the
aggregate principal amount, if any, of (and the amount of unpaid interest
accrued on such principal amount), or the amount of unpaid interest on, the
Notes to be prepaid on such date and (z) the principal amount, if any, of (and
the amount of unpaid interest accrued on such principal amount), or the amount
of unpaid interest on, each Note held by such Noteholder to be prepaid on such
date. Such notice shall be accompanied by an officers' certificate certifying
that the conditions to such
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prepayment have been fulfilled and specifying the particulars of such
fulfillment. Amounts specified in any such notice for voluntarily prepayment
in accordance with this Section on any date shall be due and payable on such
date and in the amount so specified.
SECTION 4.4. Allocation. Each partial prepayment paid or to be
prepaid of principal of the Notes and each prepayment of interest paid or to
be prepaid shall be allocated (in integral multiples of $1,000) among all of
the Notes at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof, with adjustments, to the
extent practicable, to compensate for any prior prepayments not made exactly
in such proportion. In the case of each prepayment of principal of the Notes,
the principal amount to be prepaid, together with interest on such principal
amount accrued to such date, shall mature and become due and payable on the
date fixed for such prepayment. From and after such date, unless the Company
shall fail to pay such principal amount when so due and payable, together with
the interest, as aforesaid, interest on such principal amount shall cease to
accrue. Any Note paid or prepaid in full shall be surrendered to the Company
and cancelled and shall not be reissued, and no Note shall be issued in lieu
of any prepaid principal amount of any Note.
SECTION 4.5. Mandatory Redemption of Notes. Upon the
earliest to occur of
(a) any Change of Control,
(b) the Company entering into any written or other
arrangement which will give rise to a Change of Control, or
(c) the Company having notice that any other Person has
entered into a written or other arrangement which will give rise to a
Change of Control,
the Company will immediately give written notice of such transaction or event
to each Noteholder, which notice shall describe such transaction or event in
reasonable detail. Immediately upon (and concurrently with) the occurrence of
any Change of Control, the Company will purchase from each Noteholder all of
the outstanding Notes held by it at a purchase price equal to the unpaid
principal amount thereof together with all unpaid interest accrued thereon to
the date of such purchase in immediately available funds.
SECTION 4.6. Registration, Transfer, etc. The Company will
keep at its principal office a register in which the Company will
provide for the registration of the Notes and their transfer. The
Company may treat the Person in whose name any Note is registered
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on such register as the owner thereof for the purpose of receiving payment of
the principal of and interest on such Note and for all other purposes, whether
or not such Note shall be overdue, and the Company shall not be affected by
any notice to the contrary from any Person other than the applicable
Noteholder. All references in this Agreement to a "holder" of any Note shall
mean the Person in whose name such Note is at the time registered on such
register.
SECTION 4.7. Transfer and Exchange. Upon surrender of any Note for
registration of transfer or for exchange to the Company at its principal
office, the Company at its expense will execute and deliver in exchange
therefor a new Note or Notes, as the case may be, of the same class in
denominations of at least $100,000 (except a Note may be issued in a lesser
principal amount if the unpaid principal amount of the surrendered Note is not
evenly divisible by, or is less than, $100,000), as requested by the holder or
transferee, which aggregate the unpaid principal amount of such Note,
registered as such holder or transferee may request, dated so that there will
be no loss of interest on such surrendered Note and otherwise of like tenor.
SECTION 4.8. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Note and, in the case of any such loss, theft or destruction of any Note,
upon delivery of an indemnity bond in such reasonable amount as the Company
may determine (or, in the case of any Note or Notes held by the Purchaser or
another Institutional Holder or the Purchaser's or its nominee, of an
unsecured indemnity agreement from the Purchaser or such other holder
reasonably satisfactory to the Company), or, in the case of any such
mutilation, upon the surrender of such Note for cancellation to the Company at
its principal office, the Company at its expense will execute and deliver, in
lieu thereof, a new Note of the same class and of like tenor, dated so that
there will be no loss of interest on such lost, stolen, destroyed or mutilated
Note. Any Note in lieu of which any such new Note has been so executed and
delivered by the Company shall not be deemed to be an outstanding Note for any
purpose of this Agreement.
SECTION 4.9. Taxes. Except as otherwise provided in this Section, all
payments by the Company of principal of, and interest on, the Notes and all
other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes
and other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise taxes and
taxes imposed on or measured by the Purchaser's or any other Noteholder's net
income or receipts (such non-excluded items being called "Taxes"). In the
event that any
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withholding or deduction from any payment to be made by the Company hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Company will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Purchaser and each other
Noteholder an official receipt or other documentation satisfactory to
the Purchaser and each other Noteholder evidencing such payment to
such authority; and
(c) except as otherwise provided in this Section, pay to the
Purchaser and each other Noteholder such additional amount or amounts
as is necessary to ensure that the net amount actually received by
each Noteholder will equal the full amount such Noteholder would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Purchaser or any
Noteholder with respect to any payment received by the Purchaser or such
Noteholder hereunder, the Purchaser or such Noteholder may pay such Taxes and
except as otherwise provided in this Section, the Company will promptly pay
such additional amount (including any penalties, interest or expenses) as is
necessary in order that the net amount received by the Purchaser or such
Noteholder after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount the Purchaser or such Noteholder
would have received had not such Taxes been asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Purchaser and the other Noteholders
the required receipts or other required documentary evidence, the Company
shall indemnify the Purchaser and the other Noteholders for any incremental
Taxes, interest or penalties that may become payable by the Purchaser or any
other Noteholder as a result of any such failure. For purposes of this
Section, a distribution hereunder by the Purchase or any other Noteholder to
of for the account of any Noteholder shall be deemed a payment by the Company.
The Purchaser shall provide to the Company on or prior to the due
date of the first payment under the Notes, two original signed copies of
Internal Revenue Service Form 4224 or Form 1001 certifying to the Purchaser's
entitlement to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement and under any
Note. Any Noteholder which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes (a "Non-U.S. Noteholder") that becomes a
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Noteholder under this Agreement after the Closing shall, upon the date of such
Noteholder becoming a Noteholder hereunder, provide to the Company two
original signed copies of Internal Revenue Service Form 4224 or Form 1001
certifying as to such Noteholder's entitlement to a complete exemption from
United States withholding tax with respect to payments of interest to be made
under this Agreement and under any Note; provided, however, that if such
Non-U.S. Noteholder is an Affiliate of the Purchaser and is organized under
the laws of the same jurisdiction as Purchaser, such Noteholder will only be
required to deliver such forms certifying as to such Noteholder's entitlement
to the same exemption from or reduction in such withholding tax to which the
Purchaser would be entitled with respect to such payments as of such date. To
the extent legally entitled to do so, on or before the date any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Company, and
otherwise from time to time upon the reasonable written request of the Company
after the Closing, each Noteholder (including the Purchaser) that is a
Non-U.S. Noteholder will provide to the Company two original signed copies of
Internal Revenue Service Form 4224 or Form 1001 (or any successor forms)
certifying to such Noteholder's entitlement to an exemption from, or reduction
in, United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Note. Notwithstanding anything to the
contrary contained in this Section, the Company shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Noteholder that is a non-U.S. Noteholder and
that has not provided to the Company the forms required to be provided to the
Company pursuant to the preceding paragraph, and the Company shall have no
obligation to pay any additional amount to a Non-U.S. Noteholder with respect
to such withheld amounts or with respect to Taxes incurred by such Non-U.S.
Noteholder to the extent such withholding would not have been required or such
Taxes would not have been incurred if such Non-U.S. Noteholder would have
provided such forms to the Company in the manner required by the preceding
paragraph.
ARTICLE V
WARRANTIES, ETC.
To induce the Purchaser to enter into this Agreement and to exchange
the Existing Note for the Note, the Company represents and warrants unto the
Purchaser as follows:
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SECTION 5.1. Organization, Power, Authority, etc. Each Obligor is a
corporation validly organized and existing and in good standing under the
jurisdiction of its incorporation and has full power and authority and holds
all requisite governmental licenses, permits and other approvals to own and
hold its property and to conduct its business substantially as currently
conducted by it. The Company has full power and authority to enter into and
perform its obligations under this Agreement, the Notes, the other Subject
Securities, the Mezzanine Pledge Agreement, each other Purchase Document
executed by it and the Stockholders Agreement and to issue the Subject
Securities, and each of NRE and each AmeriKing Guarantor has full power and
authority to enter into and perform its obligations under the Deferred Limited
Interest Guaranty and each other Purchase Document executed by it.
SECTION 5.2. Due Authorization. The execution and delivery by the
Company of this Agreement, the Notes and other Subject Securities, the
Mezzanine Pledge Agreement, each other Purchase Document executed by it and
the Stockholders Agreement, the performance by the Company of its obligations
hereunder and thereunder, and the issuance of the Subject Securities by the
Company, and the execution and delivery by NRE and each AmeriKing Guarantor of
the Deferred Limited Interest Guaranty and each other Purchase Document
executed by it and the performance by NRE and each AmeriKing Guarantor of its
obligations thereunder, have been duly authorized by all necessary corporate
action, do not require any Approval, do not and will not conflict with, result
in any violation of, or constitute any default under, any provision of any
Organic Document or material Contractual Obligation or any law or governmental
regulation or court decree or order and will not result in or require the
creation or imposition of any Lien on any of its properties pursuant to the
provisions of any material Contractual Obligation.
SECTION 5.3. Validity, etc. This Agreement constitutes, and the Notes
and other Subject Securities, each other Purchase Document executed by the
Company and the Stockholders Agreement will on the due execution and delivery
thereof constitute, the legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject, as to
enforcement only, to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability of the rights
of creditors generally. The Deferred Limited Interest Guaranty constitutes,
and each other Purchase Document executed by NRE and each AmeriKing Guarantor
will on the due execution and delivery thereof constitute, the legal, valid
and binding obligations of NRE and such AmeriKing Guarantor enforceable in
accordance with their respective terms, subject, as to enforcement only, as
aforesaid.
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SECTION 5.4. Financial Information. The financial forecasts
provided to the Purchaser in connection with the Restatement
Effective Date, including
(a) the pro forma consolidated balance sheet of the Company
and Subsidiaries dated as of the Restatement Effective Date and based
upon the Company's unaudited financial statement for the Fiscal Year
ended January 1, 1996 (the "Pro Forma Balance Sheet") and assuming
that all of the Pro Forma Transactions were completed on such date,
and
(b) the projections as to the financial performance of the
Company and Subsidiaries (the "Projections") from November 30, 1995
(after giving effect to the assumed occurrence on such date of all of
the Pro Forma Transactions) for Fiscal Year 1996 through Fiscal Year
2000 on an annual basis and for Fiscal Year 1996 and Fiscal Year 1997
on a quarterly basis
were prepared in good faith by the Company based upon reasonable assumptions
and upon the financial information of the Company and Subsidiaries since the
Original Closing Date and, with respect to the Restaurants acquired in the
1995/1996 Acquisitions, the financial information provided by the Colorado
Sellers, Tennessee Sellers, Cincinnati Sellers and Virginia Sellers. All
balance sheets, all statements of operations, shareholders' equity and changes
in financial position as to the Company and Subsidiaries which have been
furnished pursuant to this Agreement as Previously in Effect (including the
consolidated balance sheet at, and the consolidated statements of income and
cash flow for, the Fiscal Year ending on January 1, 1996, as specified therein
(the "1995 Financial Statements") of the Company and Subsidiaries) have been,
and all other financial information as to the Company and Subsidiaries which
shall hereafter be furnished by or on behalf of the Company to the Noteholders
for the purposes of or in connection with this Agreement or any transaction
contemplated hereby will be, prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
(except as disclosed therein) and present fairly the consolidated financial
condition of the corporations covered thereby as at the dates thereof and the
results of their operations for the periods then ended. Neither the Company
nor any Subsidiary has any material contingent liability or liabilities for
taxes, long-term leases or unusual forward or long-term commitments or
material unrealized or unanticipated losses from unfavorable commitments which
are not reflected in the Pro Forma Balance Sheet or in the notes thereto or in
Item 5.4 ("Contingent Liabilities, etc.") of the Disclosure Schedule.
SECTION 5.5. Absence of Material Adverse Change. There have
been no occurrences since January 1, 1996 which, individually or
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in the aggregate, have had a Materially Adverse Effect on NRE and
its Subsidiaries or the Company and its Subsidiaries.
SECTION 5.6. Continuing Indebtedness. The Pro Forma Balance Sheet
sets forth and identifies in reasonable detail all long-term Indebtedness of
the Company and Subsidiaries (including NRE) on a consolidated basis expected
to be outstanding immediately after giving effect to all Pro Forma
Transactions.
SECTION 5.7. Litigation, etc. There is no pending or, to the
knowledge of the Company, threatened litigation, arbitration or governmental
investigation or proceeding against either any Restaurant or the Company or
any Subsidiary or to which any of the properties, assets or revenues of any
thereof is subject
(a) which, if adversely determined, might have a Materially
Adverse Effect on the Company and Subsidiaries, except as disclosed
in Item 5.7 ("Litigation") of the Disclosure Schedule; or
(b) which relates to any Acquisition Agreement.
SECTION 5.8. Capitalization. On the Restatement Effective Date, the
authorized Capital Stock of the Company will be 18,375 shares, consisting of
12,875 Preferred Shares and 5,500 Common Shares, of which the following shall
be issued and outstanding:
(a) 4,425 Class A-1 Preferred Shares,
(b) 1,200 Class A-2 Preferred Shares,
(c) 1,875 Class B Preferred Shares, and
(d) 1,000.02 Common Shares,
all of which will be issued and outstanding in conformity with Item 3.5 of the
Disclosure Schedule. Of the 5,375 authorized Preferred Shares and 4,499.98
authorized Common Shares which will be unissued on the Restatement Effective
Date,
(e) 2,950 Class A-1 Preferred Shares will be reserved for
issuance from time to time in satisfaction of pay-in-kind
obligations;
(f) 112.36 Class A Common Shares will be reserved for
issuance upon conversion of the Class B Common Shares;
(g) 71.72 Class A Common Shares will be reserved for
issuance upon conversion of the Class C Common Shares held by PMI;
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(h) 377.24 Class A Common Shares will be reserved for
issuance upon conversion of Class D Common Shares;
(i) 112.36 Class B Common Shares will be reserved for
issuance upon the exercise of the FNBB Warrant;
(j) 71.72 Class C Common Shares will be reserved for
issuance upon the exercise of the PMI Warrant;
(k) 11.24 Class D Common Shares will be reserved for
issuance upon the exercise of the Management Options; and
(l) all other unissued and unreserved Common Shares and
Preferred Shares will be subject to the preemptive rights of Section
5.5 of the Stockholders' Agreement.
The Common Shares and the Preferred Shares issued to the Purchaser have been
duly authorized for issuance and are validly issued, fully paid and
non-assessable and are free and clear of all preemptive rights and Liens and
are entitled to the respective voting powers, designations, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof as are set forth with respect thereto in
the Company Certificate of Incorporation. The Company does not have
outstanding any Capital Stock or securities convertible into or exchangeable
for any shares of its Capital Stock, nor does it have outstanding any rights
or options to subscribe for or to purchase any Capital Stock or securities
convertible into or exchangeable for any of its shares of Capital Stock,
except as described in this Section. Except as disclosed in Item 5.8
("Repurchase, etc. Obligations") of the Disclosure Schedule, the Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its Capital Stock. Except as set
forth in the Stockholders Agreement, none of the Company or any Subsidiaries
has entered into an agreement to register any of its securities under the
Securities Act.
SECTION 5.9. Regulation G. The Company is not engaged principally, or
as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock, and less than 25% of the
assets of the Company, individually and on a consolidated basis with all
Subsidiaries, consists of margin stock. None of the proceeds of any Note, PMI
Note or Senior Loan will be used for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regulation G, U or X. Terms for which meanings
are provided in F.R.S. Board Regulation G or any regulations substituted
therefor, as from time to time in effect, are used in this Section with such
meanings.
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SECTION 5.10. Government Regulation. Neither the Company
nor any Subsidiary is (or shall upon the consummation of the
transactions contemplated hereby become)
(a) an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended; or
(b) subject to regulation under the Federal Power Act, the
Interstate Commerce Act, the Commodity Exchange Act or any Federal or
state statute or regulation limiting its ability to incur or assume
Indebtedness for borrowed money.
SECTION 5.11. Patents, Trademarks, etc. The Company, NRE, and the
Restaurants own, or are licensed under, and have the rights to use, all
material patents, trademarks, trade names, copyrights, technology, recipes,
know-how and processes (collectively, "Intellectual Property") necessary for
the conduct of their businesses as set forth in the Financing Memorandum, and
the consummation of the transactions contemplated by this Agreement and the
other Purchase Documents do not alter or impair any such rights. Except as
disclosed in Item 5.11 ("Patents, Trademarks, etc.") of the Disclosure
Schedule, there is no
(a) claim which has been asserted by any Person to the use
of any Intellectual Property or challenging or questioning the
validity or effectiveness of any license or agreement related
thereto; or
(b) valid basis for any such claim or any claim that the use
of such Intellectual Property by the Company and Subsidiaries
infringes or will infringe on the rights of any Person.
SECTION 5.12. Environmental Matters. Except as disclosed in
Item 5.12 ("Environmental Matters") of the Disclosure Schedule,
(a) none of the Company, NRE, and the Restaurants
(i) has pending or asserted against it or any real
property currently or formerly owned, leased or operated by
it any claims, liabilities, investigations, litigation,
administrative proceedings, whether pending or threatened,
or judgments or orders relating to any Hazardous Materials
(collectively, "Environmental Claims"),
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(ii) has caused or permitted any Hazardous Material
to be used, generated, reclaimed, transported, released,
treated, stored or disposed of in a manner which could form
the basis for an Environmental Claim against it, or
(iii) has assumed (by contract or by operation of
law) any liability of any Person for cleanup, remediation
compliance or required capital expenditures in connection
with any Environmental Claim,
(b) no Hazardous Materials are or were stored or otherwise
located, and no underground storage tanks or surface impoundments are
or were located, on real property currently or formerly owned, leased
or operated by the Company, NRE or any Subsidiary or, to the
Company's knowledge, on adjacent parcels of real property, and no
part of such real property or, to the Company's knowledge, no part of
such adjacent parcels of real property, including the groundwater
located thereon, is presently contaminated by Hazardous Materials,
and
(c) each of the Company, NRE and its Subsidiaries has been
and is currently in compliance with all applicable Environmental
Laws, including obtaining and maintaining in effect all permits,
licenses or other authorizations required by applicable Environmental
Laws,
except as would not reasonably be expected, singly or in the aggregate, to
have a Materially Adverse Effect on the Company and Subsidiaries.
SECTION 5.13. Title to and Condition of Properties. Each of the
Company and NRE has good and marketable title to all the real property, and
valid title to all of the personal properties and other assets (tangible,
intangible or mixed), which it purports to own, free and clear of all Liens,
except for Liens permitted by Section 6.2.3, and enjoys peaceful and
undisturbed possession under all leases to which it is a party as lessee,
except for such leases that the absence of which, in the aggregate, could not
have a Materially Adverse Effect on the Company and Subsidiaries. All
Contractual Obligations to which the Company or NRE is a party are valid and
binding and in full force and effect and no default has occurred or is
continuing thereunder. No consent need be obtained from any Person (which is
not required by Article III to be obtained on or prior to the Restatement
Effective Date) in respect of any such Contractual Obligation in connection
with the transactions contemplated by this Agreement, which could, singly or
in the aggregate, have a Materially Adverse Effect on the Company and
Subsidiaries.
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SECTION 5.14. Offering of Subject Securities. Neither the Company,
NRE nor TJC (or any Person employed to act on behalf of any thereof in
connection with the offer and sale of the Subject Securities) has directly or
indirectly offered the Notes, the Common Shares, the Preferred Shares or any
part thereof or any similar securities for sale to, or solicited any offer to
buy any of the same from, or otherwise approached or negotiated in respect
thereof with, anyone other than the Persons identified in Item 3.3
("Stockholders") of the Disclosure Schedule. Neither the Company, TJC nor
anyone acting on behalf of any of them has taken or will take any action which
would subject the issuance or sale of the Notes, Common Shares or Preferred
Shares to the provisions of Section 5 of the Securities Act or to the
registration or qualification requirements of any securities or blue sky law
of any applicable jurisdiction.
SECTION 5.15. Special Purpose Holding Company. Except as contemplated
by this Agreement and the other Purchase Documents, the Company had been
created on the Original Closing Date solely for purposes of the transactions
contemplated by this Agreement as Originally in Effect and did not have any
significant liabilities, and on the Restatement Effective Date the Company
will not have any significant liabilities (other than the Notes, the Seller
Notes, the BBI Junior Note, the BKC Acquisition Documents and repurchase
obligations pursuant to Section 9 of the Management Subscription Agreement),
own any significant assets other than the Capital Stock of NRE or be engaged
significantly in any other business.
SECTION 5.16. Subsidiaries. As of the Restatement Effective
Date,
(a) the Company will have no Subsidiaries other than
NRE and its Subsidiaries;
(b) NRE will have no Subsidiaries and no other Investments
in any joint venture, partnership or other Person, except as
disclosed in Item 5.16 ("NRE Subsidiaries, etc.") of the Disclosure
Schedule; and
(c) the Company will be the record and beneficial owner,
free of Liens (except under the Mezzanine Pledge Agreement and Senior
Pledge Agreement), of 100% of the issued and outstanding Capital
Stock of NRE.
SECTION 5.17. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Company in
writing to the Purchaser for purposes of or in connection with this Agreement
or any transaction contemplated hereby, including the BKC UFOC and the draft
financing memorandum, dated July 6, 1994 and supplemented
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August 23, 1994 and September 15, 1994 and November 14, 1996 (as so
supplemented, the "Financing Memorandum"), prepared by TJC and transmitted
under letters, dated July 6, 1994, August 23, 1994 November 15, 1994 and
February 6, 1996, from JZAI to the Purchaser, is, and all other such factual
information hereafter furnished by or on behalf of the Company to the
Purchaser will be, true and accurate in every material respect on the date as
of which such information is dated or certified and as of the date of
execution and delivery of this Agreement by the Purchaser, and such
information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information not
misleading. There is no fact known to the Company or NRE that the Company or
NRE has not disclosed to the Purchaser in writing that could, singly or in the
aggregate, have a Materially Adverse Effect on the Company and Subsidiaries.
The Projections and the Pro Forma Balance Sheet contained in the Financing
Memorandum are based on good faith estimates and assumptions by the management
of the Company, and are believed by the Company to be fair and reasonable in
light of the historical financial performance of the Restaurants and current
and reasonably foreseeable business conditions, and, to the knowledge of the
Company there are no facts or circumstances presently existing which, singly
or in the aggregate, would cause a material change in the Projections, it
being recognized by the Purchaser, however, that projections as to future
events are not to be viewed as fact and that actual results during the period
or periods covered by the Projections may differ from the projected results
and that the differences may be material.
ARTICLE VI
COVENANTS
SECTION 6.1. Certain Affirmative Covenants. The Company
agrees with
(a) the Purchaser and each other Noteholder that, until all
Obligations with respect to the Notes have been paid and performed in
full, the Company will perform all of the covenants contained in
Section 6.1; and
(b) with the Purchaser and each other Institutional Holder
that, until all of the other Subject Securities shall have been sold
or transferred by the Purchaser and each other Institutional Holder
or been purchased or redeemed by the Company, the Company will
perform the covenants contained in clause (a) (i) of Section 6.1.1,
clause (b) of Section 6.1.1 (insofar as it relates to consolidated
financial information) and clause (a)(i) of Section 6.1.3 (insofar as
it relates to Sections 9.6, 9.8 and 9.9.1 of the Senior Credit
Agreement).
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SECTION 6.1.1. Financial Information, etc. The Company will furnish,
or will cause to be furnished, to the Purchaser and each other Noteholder
copies of the following financial statements, reports and information:
(a) promptly when available and in any event within 90
days after the close of each Fiscal Year
(i) a consolidated balance sheet as of the end of
such Fiscal Year, and consolidated statements of income and
of cash flow for such Fiscal Year, of the Company and
Subsidiaries, prepared on a comparative basis with the
preceding Fiscal Year and certified without qualification by
Deloitte & Touche (or other independent public accountants
of recognized standing selected by the Company and consented
to by the Required Noteholders),
(ii) a certificate of such accountants stating that
they have examined the provisions of this Agreement and at
the date of said statement are not aware of any default in
the performance by the Company of any obligation to be
performed by it hereunder, except such, if any, as may be
disclosed, including the nature thereof, in such statement,
(iii) an unaudited consolidating balance sheet as
of the end of such Fiscal Year, and consolidating statements
of income and of cash flow for such Fiscal Year, of the
Company and Subsidiaries, prepared on a comparative basis
with the preceding Fiscal Year and certified by the chief
accounting, executive or financial Authorized Officer of the
Company, and
(iv) a certificate of the chief accounting,
executive or financial Authorized Officer of the Company
stating that no Default had occurred or was continuing
during the fourth quarter of such Fiscal Year (or if a
Default had occurred or was continuing, a description
thereof and a statement as to whether it is continuing and
as to what actions are being taken to cure it);
(b) if, and to the extent, not separately furnished pursuant
to clause (a), promptly when available and in any event within 45
days after the close of each Fiscal Quarter (and only if, and to the
extent, not being furnished pursuant to clause (a)), consolidated and
consolidating balance sheets at the close of such Fiscal Quarter, and
consolidated and consolidating statements of income and of cash flow
for such Fiscal Quarter and for the period commencing at the close of
the previous Fiscal Year and ending with the close of such
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Fiscal Quarter, of the Company and Subsidiaries (with comparative
information at the close of and for the corresponding Fiscal Quarter
of the prior Fiscal Year and for the corresponding portion of such
prior Fiscal Year), certified by the chief accounting, executive or
financial Authorized Officer of the Company; and
(c) if, and to the extent, not separately furnished pursuant
to clause (a) or (b), promptly when available and in any event when
furnished pursuant to the Senior Credit Agreement or the PMI
Agreement, copies of all financial statements, certificates, audit
and other reports, filings, projections, management letters and other
information furnished pursuant to Section 9.4 of the Senior Credit
Agreement or Section 8.1 of the PMI Agreement (and the Company hereby
agrees that (x) the Purchaser and each Noteholder are hereby entitled
to rely on such information as if it were required to have been
furnished directly pursuant to this Agreement and (y) all
certifications and representations made therein shall be deemed to be
made directly to the Purchaser and each Noteholder as if such
information was expressly addressed to them).
SECTION 6.1.2. Notice of Default, Litigation, etc. The Company will
furnish, or will cause to be furnished, to the Purchaser and each other
Noteholder prompt notice (with a description in reasonable detail) of:
(a) the occurrence of any Default;
(b) each consent, approval, waiver, modification, notice,
communication or other writing delivered, received or exchanged
pursuant to Section 9.5.1, 9.5.2, 9.5.3, 9.5.4, 9.11, 10.4(d), 14.1,
14.2, 14.3, 16.9, and 20.1 or of the Senior Credit Agreement, Section
6 of the Senior Pledge Agreement or Section 2 of the Senior Recovery
Guaranty (including therewith, in each case, a copy of such consent,
etc.); and
(c) each consent, approval, waiver, modification, notice,
communication or other writing delivered, received or exchanged
pursuant to Section 3.2, 3.3, 8.10, 10, 11 or 13.3 of the PMI
Agreement (including therewith a copy of such consent, etc.); and
(d) if, and to the extent that, notice thereof is not
separately furnished pursuant to clause (a), (b) or (c):
(i) the occurrence of any litigation, arbitration
or governmental investigation, inquiry or proceeding not
previously disclosed by the Company pursuant hereto
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(including the receipt of any request for information
pursuant to any Environmental Law) which has been instituted
or, to the knowledge of the Company, is threatened against,
the Company or any Subsidiary or to which any properties,
assets or revenues of any thereof is subject which, if
adversely determined, might have a Materially Adverse Effect
on the Company and Subsidiaries,
(ii) the occurrence of any circumstance which has a
reasonable likelihood of having a Materially Adverse
Effect on the Company and Subsidiaries,
(iii) any material development which shall occur in
any litigation, arbitration or governmental investigation or
proceeding previously disclosed by the Company,
(iv) the occurrence of a Reportable Event (as
defined in the Employee Retirement Income Security Act of
1974, as amended) under, or the institution of steps by the
Company or any Subsidiary to withdraw from, or the
institution by the Pension Benefit Guaranty Corporation or
otherwise of any steps to terminate, any employee benefit
plan covered by Title IV of such Act; and
(v) any notice delivered by BKC to the Company and
PMI for purposes of the subordination agreement, dates the
Restatement Effective Date (the "BKC/PMI Intercreditor
Letter"), between BKC and PMI.
SECTION 6.1.3. Perform Senior Credit Agreement. The Company
will, and will cause NRE to perform, comply with and be bound by
(a) at all times, (and whether or not the Senior Credit
Agreement shall continue to remain in effect among the parties
thereto), all of its agreements, covenants and obligations
(i) contained in Sections 9.3, 9.9.2, and 9.10 of
the Senior Credit Agreement as in effect on the
Restatement Effective Date, and
(ii) contained in Sections 9.7, 10.7, and 10.9 of
the Senior Credit Agreement as in effect on the Restatement
Effective Date and as such agreements, covenants and
obligations may, subject to Section 6.2.8, from time to
time, be waived, amended or otherwise modified by the
parties thereto, and
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(b) at all times after the Senior Credit Agreement shall
cease to remain in effect among the parties thereto, all of its
agreements, covenants and obligations contained in Section 10.6 of
the Senior Credit Agreement as in effect immediately prior to such
cessation,
in each case, such Sections, and all other terms of the Senior Credit
Agreement to which reference is made herein, together with all related
definitions and ancillary provisions, being hereby incorporated into this
Agreement by reference as though specifically set forth in this Agreement;
provided, however, that:
(c) all references to the "Agent" and the "Banks" shall
be deemed to refer to the Purchaser;
(d) all references to the "Borrower" shall be deemed to
refer to NRE;
(e) all references to "Holdings" shall be deemed to
refer to the Company;
(f) all references to "Loans" or "Commitments" shall be
deemed to refer to the Notes outstanding hereunder;
(g) all references to "Default" and "Event of Default" shall
be deemed to refer to a Default and Event of Default, respectively,
under this Agreement; and
(h) all references to "this Credit Agreement" and "herein,"
"hereof" and words of similar purport shall, except where the context
otherwise requires, be deemed to refer to this Agreement.
All such Sections and other terms, definitions and provisions of the Senior
Credit Agreement shall, except as otherwise consented to by the Required
Noteholders for purposes of this Agreement, continue in full force and effect
for the benefit of all Noteholders as if they were Banks (as defined in the
Senior Credit Agreement), whether or not the Notes (as so defined) remain
outstanding or the Senior Credit Agreement remains in effect.
SECTION 6.1.4. Conforming Changes. Concurrently with the execution
and delivery by NRE of a successor Instrument which qualifies as the Senior
Credit Agreement or PMI Agreement in accordance with the definition of such
term, the Company will enter into an amendment to this Agreement clarifying or
correcting, as shall be necessary or appropriate, all references herein
(including in Sections 6.1.1, 6.1.2, 6.1.3 and 6.2.7) to the Senior Credit
Agreement or PMI Agreement to refer to such successor Instrument and its terms
and provisions.
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SECTION 6.1.5. Additional AmeriKing Guarantors. The Company will
cause NRE to cause each Restricted Subsidiary which from time to time executes
and delivers a counterpart of either (x) a Guarantee (as defined in the Senior
Credit Agreement in clause (b) of the definition of such term) pursuant to
Section 10.5.1 of the Senior Credit Agreement or (y) a Subordinated Subsidiary
Guaranty (as defined in the PMI Agreement) pursuant to Section 9.15 of the PMI
Agreement, to execute and deliver to the Purchaser, concurrently therewith, a
counterpart of the Deferred Limited Interest Guaranty.
SECTION 6.1.6. Performance of Purchase Documents. The Company will
perform promptly and faithfully all of its obligations under each Purchase
Document.
SECTION 6.2. Certain Negative Covenants. The Company
agrees with
(a) the Purchaser and each other Noteholder that, until all
Obligations with respect to the Notes have been paid and performed in
full, the Company will perform all of the covenants contained in
Section 6.2; and
(b) the Purchaser that, until all of the other Subject
Securities shall have been sold or transferred by the Purchaser or
been purchased or redeemed by the Company, the Company will perform
the covenants contained in Section 6.2.15 and 6.2.16.
SECTION 6.2.1. Business Activities. The Company will not engage in
any business activity, except its consummation of the Acquisitions, its
ownership thereafter of NRE and its performance from time to time of its
obligations under this Agreement, each other Purchase Document, the
Stockholders Agreement, the Acquisition Agreements, the Senior Credit
Agreement, the Senior Pledge Agreement, the Senior Recovery Guaranty, the FNBB
Warrant, the BBI Agreement, the BBI Junior Note, the BBI Warrant, the PMI
Agreement, the PMI Warrant, the Tax Sharing Agreement, the Management
Consulting Agreement, the Intercompany Consulting Agreement.
SECTION 6.2.2. Indebtedness. The Company will not,
and will not permit any Subsidiary to, create, incur, assume or
suffer to exist or otherwise become or be liable in respect of any
Indebtedness other than:
(a) Indebtedness in respect of the Notes and other
Obligations;
(b) Indebtedness of the Company in respect of the
Senior Pledge Agreement, the Senior Recovery Guaranty, the
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Seller Notes, the Management Notes, the BBI Junior Note and
the Consulting Services Agreement;
(c) Indebtedness of NRE under the Senior Credit Agreement in
an aggregate principal amount at any time outstanding not to exceed
the excess of $110,000,000 over the aggregate amount of all permanent
payments and prepayments of principal, and (without duplication) all
permanent commitment reductions, to commitments, made from time to
time thereunder (excluding, however, all such payments and
prepayments made from the proceeds of any refinancing provided under
a successor Senior Credit Agreement as provided in clause (a) of the
definition of such term);
(d) Indebtedness of NRE under the PMI Agreement in an
aggregate principal amount at any time outstanding not to exceed the
excess of $16,500,000 over the aggregate amount of all payments,
prepayments and redemptions of principal of the PMI Notes made from
time to time thereunder (excluding, however, all such payments and
prepayments made from the proceeds of any refinancing provided under
a successor PMI Agreement as provided in clause (a) of the definition
of such term);
(e) the FFCA Guarantee and Indebtedness of AmeriKing
Colorado under the promissory note, dated November 29, 1995, to the
order of FAC in the principal amount of $1,865,000;
(f) for so long as NRE shall have any Indebtedness
outstanding (or unused commitments in effect) under the Senior Credit
Agreement, such other Indebtedness of NRE and its Subsidiaries which
shall then be permitted by the Senior Credit Agreement to be
outstanding;
(g) at any time after payment in full of all Indebtedness of
NRE under the Senior Credit Agreement (and the termination or
expiration of all commitments thereunder),
(i) for so long as NRE shall have any Indebtedness
outstanding under the PMI Agreement, such other Indebtedness
of NRE and its Subsidiaries which shall then be permitted by
the PMI Agreement to be outstanding, and
(ii) at any time after payment in full of all
Indebtedness of NRE under the PMI Agreement, Indebtedness of
NRE and its Subsidiaries in an aggregate principal amount
not exceeding $6,000,000 at any one time outstanding;
(h) Indebtedness owing among NRE and its Subsidiaries;
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(i) Indebtedness of Unrestricted Subsidiaries; and
(j) unsecured Indebtedness of the Company in an aggregate
principal amount at any time not exceeding $5,000,000 which is
subordinated and subject to postponement and standstill provisions,
and which has terms of payment and other covenants, defaults, rights
and privileges, consented to by the Required Noteholders;
provided, however, that, any of the foregoing to the contrary notwithstanding,
the Company will not permit NRE or any of its Subsidiaries to incur any
Indebtedness to any Affiliate of the Company which is not such a Subsidiary or
to any Stockholder.
SECTION 6.2.3. Liens. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of
its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens, including the Lien of Mezzanine Pledge
Agreement, securing the Obligations;
(b) Liens granted by the Company pursuant to the Senior
Pledge Agreement, and by NRE or any of its Subsidiaries, to
secure the Senior Liabilities;
(c) Liens granted by NRE or any of its Subsidiaries to
secure Indebtedness which is permitted from time to time to be
outstanding by clause (f) or clause (g) of Section 6.2.2 which were
granted at any time when NRE had any Indebtedness outstanding (or
unused commitments in effect) under the Senior Credit Agreement and
which were then permitted by the Senior Credit Agreement to have been
granted;
(d) granted by NRE or any of its Subsidiaries to secure
Indebtedness which is permitted from time to time to be outstanding
by Clause (f) or (g) of Section 6.2.2 which were granted at any time
when NRE no longer had any Indebtedness outstanding (or unused
commitments in effect) under the Senior Credit Agreement and when NRE
did have Indebtedness outstanding under the PMI Agreement and which
were then permitted by the PMI Agreement to have been granted;
(e) Liens granted by any Unrestricted Subsidiary to
secure Indebtedness of such Unrestricted Subsidiary;
(f) Liens permitted by the Senior Credit Agreement to be
granted by NRE or any of its Subsidiaries to secure Indebtedness
which is permitted from time to time to be outstanding by clause (f)
or (g) of Section 6.2.2;
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(g) Liens for taxes, assessments, or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(h) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums
not overdue or being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside
on its books;
(i) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, other than pursuant to
ERISA or Environmental Law, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds; and
(j) judgment liens in existence less than 15 days after the
entry thereof or with respect to which execution has been stayed or
the payment of which is covered in full (subject to a customary
deductible) by insurance or which, if against NRE or any of its
Subsidiaries, are being contested in good faith by appropriate
proceedings and for which adequate reserves have been set aside on
its books.
SECTION 6.2.4. Minimum EBITDA. The Company will not, as of the end of
any Fiscal Quarter, permit EBITDA of NRE and its Subsidiaries for the four
Fiscal Quarters then ended to be less than the amount set forth opposite the
period in which such date occurs:
Period Ending Minimum EBITDA
------------- --------------
Restatement
Effective Date - 4/1/96 $16,436,875
7/1/96 $16,256,250
9/30/96 $16,364,625
12/30/96 $15,898,000
3/31/97 - 12/29/97 $15,259,200
3/30/98 - 12/28/98 $15,642,125
3/29/99 - 12/27/99 $16,032,275
3/27/00 - 12/25/00 $16,433,263
3/26/01 - 12/24/01 $16,845,088
3/25/02 - 12/23/02 $17,267,750
3/24/03 and thereafter $17,701,250
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provided, however, that for purposes of calculating the EBITDA for Fiscal
Quarters ending on or before December 30, 1996, the following adjustments
shall be made:
(a) EBITDA for each of the Fiscal Quarters ending June 30,
1995, October 2, 1995 and January 1, 1996 shall be deemed to be
$6,250,000; and
(b) EBITDA for the Fiscal Quarter ending April 1, 1996 shall
be calculated on a Pro Forma Basis upon the assumption that the Test
Period commences January 1, 1996 (for purposes of this clause (b),
"Pro Forma Basis" and "Test Period" have the meanings specified in
the Senior Credit Agreement).
SECTION 6.2.5. Restricted Payments, etc. On or after the
Closing Date,
(a) the Company will not declare, pay or make any dividend
or distribution (in cash, property or obligations) on any shares of
any class of its Capital Stock (now or hereafter outstanding) or on
any warrants, options or other rights with respect to any shares of
any class of its Capital Stock (now or hereafter outstanding) (other
than dividends or distributions payable in its Capital Stock, or
warrants to purchase its Capital Stock, or split-ups or
reclassifications of its Capital Stock into additional or other
shares of its Capital Stock) or apply, or permit any Subsidiary to
apply, any of its funds, property or assets to the purchase,
redemption, sinking fund or other retirement or defeasance of any
shares of any class of Capital Stock (now or hereafter outstanding)
of the Company;
(b) the Company will not, and will not permit any Subsidiary
to, apply any of its funds, property or assets to the purchase,
redemption, sinking fund or other retirement or defeasance of any
shares of any class of Capital Stock (now or hereafter outstanding)
of any Subsidiary unless such shares are owned by the Company or any
wholly-owned Subsidiary;
(c) the Company will not, and will not permit any Subsidiary
to, purchase, redeem, retire, defease or make any payment of
principal of or interest on any Seller Note or the BBI Junior Note;
and
(d) the Company will not, and will not permit any
Subsidiary to, make any deposit for any of the foregoing
purposes;
provided, however, that:
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(e) subject to the subordination and postponement provisions
contained in the Seller Notes, the Company may make payments of
interest accrued on the Seller Notes on the dates on which such
payments are scheduled to be due by the terms thereof;
(f) the Company may repurchase, in exchange for cash or
Management Notes, Common Shares held by a Management Investor upon
the occurrence of any of the events referred to in Section 9 of the
Management Subscription Agreement and solely in accordance with the
terms of such subparagraph and, in the case of any portion of such
redemption price to be paid in cash, only on a Permitted Junior
Payment Date; and
(g) the Company may on any Permitted Junior Payment
Date
(i) subject to the subordination and postponement
provisions applicable to the Management Notes, make
payments of interest accrued thereon, and
(ii) declare and pay dividends on the Class A
Preferred Shares and the Class B Preferred Shares in
accordance with the Company Certificate of Incorporation and
pay accrued interest on the BBI Junior Note;
provided, however, further that
(h) the aggregate amount of all payments made in cash
from time to time pursuant to clauses (f) and (g) shall not
exceed $2,000,000; and
(i) nothing in this Section shall be construed to restrict
any payment to an Affiliate expressly permitted to be made by, or
expressly excluded from the restrictions of, Section 6.2.15.
SECTION 6.2.6. Investments. The Company will not make any
Investments, except:
(a) Investments in NRE
(i) prior to the Restatement Effective Date in the
manner contemplated by the Financing Memorandum,
(ii) pursuant to the Senior Recovery Guaranty as
in effect on the Restatement Effective Date, and
(iii) from time to time pursuant to the Tax
Sharing Agreement as in effect on the Restatement
Effective Date; and
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(b) Cash Equivalents as defined (on the Restatement
Effective Date) in the PMI Agreement.
SECTION 6.2.7. Consolidation, Merger, etc. The Company will not
consolidate with, or merge into or with, any other corporation; provided,
however, that the Company may merge with and into NRE, if NRE shall assume all
obligations of the Company under the Notes and other Purchase Documents
pursuant to an assumption agreement, and shall have modified its capital
structure, all in a manner satisfactory to the Required Noteholders.
SECTION 6.2.8. Modification of Senior Credit Agreement. The Company
will not, and will not permit NRE to, consent or agree at any time to any
amendment, supplement, waiver or other modification to the Senior Credit
Agreement or any other Senior Loan Document so as to:
(a) increase the maximum principal amount of Indebtedness
permitted to be incurred pursuant to the Senior Credit Agreement
above the maximum aggregate principal amount of Indebtedness then
permitted to be outstanding thereunder by clause (c) of Section
6.2.2;
(b) amend Section 10.3 or 10.4 thereof or Section 6 of the
Senior Pledge Agreement, or any other Section, provision or
definition of any Senior Loan Document to which any of such Sections
relate, in a manner which materially adversely affects NRE's ability
to make payments to the Company;
(c) extend the stated maturity of the Senior Loans or the
effectiveness of the Senior Credit Agreement to a date later than
August 31, 2004.
SECTION 6.2.9. Modification of PMI Agreement. The Company will not
permit NRE to consent or agree at any time to any amendment, supplement,
waiver or other modification to the PMI Purchase Agreement or any other PMI
Document so as to:
(a) increase the maximum principal amount of Indebtedness
permitted to be outstanding pursuant to the PMI Purchase Agreement
above the maximum aggregate principal amount of Indebtedness then
permitted to be outstanding thereunder by clause (d) of Section
6.2.2;
(b) amend Section 9.3 or 9.4 thereof, or any other Section,
provision or definition of any PMI Purchase Document to which either
such Section relates, in a manner which materially adversely affects
NRE's ability to make payments to the Company; or
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(c) extend the stated maturity of the PMI Notes to a date
later than July 31, 2005.
SECTION 6.2.10. Modification of Seller Notes, etc. The
Company will not consent or agree to any amendment, supplement or
other modification to the Seller Notes so as to
(a) increase the frequency or amount, or shorten the
maturity of, any payments of principal of or interest on the
Seller Notes;
(b) materially increase any of the rights of the
holders of the Seller Notes, or any of the obligations of the
Company, under the Seller Notes; or
(c) modify in any respect any of the subordination
provisions applicable to payments of interest on the Seller
Notes.
SECTION 6.2.11. Modification of Other NRE Instruments. The Company
will not permit NRE to consent or agree to any amendment, supplement or other
modification to the Tax Sharing Agreement or Intercompany Consulting Agreement
which affects, in a manner adverse to the Company, the amount or timing of
payments required to be made by NRE.
SECTION 6.2.12. Modification of Certificates of
Incorporation. The Company will not
(a) take any action to amend or modify any terms of
Paragraph (2) of Article Fourth of the Company Amended and Restated
Certificate of Incorporation or any terms of Section 8.6(a) of the
Stockholders Agreement; and
(b) permit NRE to take any action to amend or modify any
terms of the first paragraph of Article Fourth of the NRE Certificate
of Incorporation
unless such change or amendment is of an immaterial or ministerial nature that
will not have any adverse effect on either the Purchaser's rights under any
Purchase Document or NRE's ability to perform its obligations under the Senior
Credit Agreement.
SECTION 6.2.13. Negative Pledges. The Company will not
enter into any agreement prohibiting the creation or assumption of
any Lien upon its properties, revenues or assets, whether now
owned or hereafter acquired, except
(a) the Senior Credit Agreement and the Senior Pledge
Agreement, in each case as in effect on the Restatement Effective
Date or amended in accordance with Section 6.2.8;
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(b) the PMI Agreement as in effect on the Restatement
Date or amended in accordance with Section 6.2.9; or
(c) this Agreement or the Mezzanine Pledge Agreement.
SECTION 6.2.14. Upstream Limitations. The Company will not, and will
not permit any Subsidiary to, enter into any agreement, contract or
arrangement restricting the ability of any Subsidiary to pay or make dividends
or distributions in cash or kind, to make loans, advances or other payments of
whatsoever nature or to make transfers or distributions of all or any part of
its assets to the Company or to any Subsidiary of which such Subsidiary is a
Subsidiary, except
(a) the Senior Credit Agreement or any Senior Loan Document
as in effect on the Restatement Effective Date or amended from time
to time thereafter in accordance with Section 6.2.8;
(b) the PMI Agreement as in effect on the Restatement
effective Date or amended from time to time thereafter in accordance
with Section 6.2.9; and
(c) non-assignment provisions in leases and other agreements
entered into prior to the Restatement Effective Date and customary
non-assignment provisions in leases and other agreements entered into
on or after the Restatement Effective Date in the ordinary course of
business.
SECTION 6.2.15. Transactions with Affiliates. The Company
will not, and will not permit any Subsidiary to, enter into, or
cause, suffer, or permit to exist:
(a) any arrangement or contract with any of its other
Affiliates of a nature customarily entered into by Persons which are
Affiliates of each other (including management or similar contracts
or arrangements relating to the allocation of revenues, taxes and
expenses or otherwise) requiring any payments to be made by the
Company or any Subsidiary to any Affiliate unless such arrangement is
fair and equitable to the Company or such Subsidiary; or
(b) any other transaction, arrangement or contract with any
of its other Affiliates which would not be entered into by a prudent
Person in the position of the Company or such Subsidiary with, or
which is on terms which are less favorable than are obtainable from,
any Person which is not one of its Affiliates.
Without any implication that the foregoing shall restrict payment
of any of the following,
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(c) the Company may from time to time make payment when due
of all amounts payable under the Management Consulting Agreement not
exceeding in respect of any Fiscal Year 3% of EBITDA for such Fiscal
Year;
(d) NRE may pay TJC and/or its designee an investment
banking fee of $1,000,000 and its out-of-pocket expenses in
connection with the consummation of the Cincinnati Acquisition and
the Colorado Acquisition; and
(e) the Company may from time to time make payment to
directors for compensation for services in such capacity not
exceeding $100,000 in the aggregate in any Fiscal Year,
in each case at any time when due by the terms of such arrangement, but, in
the case of any such payment, only if such payment is made on a Permitted
Junior Payment Date.
SECTION 6.2.16. Inconsistent Agreements. The Company will not, and
will not permit any Subsidiary to, enter into any agreement containing any
provision which would be violated or breached by the performance by the
Company of its obligations hereunder or under any Purchase Document.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1. Events of Default. The term "Event of
Default" shall mean any of the following events:
SECTION 7.1.1. Non-Payment of Obligations. The Company shall default
in the payment or prepayment when due of any principal of any Note, or the
Company shall default (and such default shall continue unremedied for a period
of 10 days) in the payment when due of interest on any Note or any other
Obligation.
SECTION 7.1.2. Default on Other Indebtedness. Any default shall occur
under the terms applicable to any Indebtedness outstanding in a principal
amount exceeding $1,000,000 of the Company (treating the Seller Notes as a
single obligation without regard to how many Seller Notes are issued or
holders exist) or $5,000,000 of any Subsidiary (other than an Unrestricted
Subsidiary) representing any borrowing or financing or arising under any other
material agreement, and such default shall:
(a) consist of the failure to make any payment or redemption
(or to make any required offer to redeem) of such Indebtedness when
due (subject to any applicable grace period) in accordance with the
terms thereof, and such
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failure, if it shall have occurred under the Senior Credit Agreement,
shall continue unremedied and unwaived for a period of 30 days; or
(b) have resulted in any or all of such Indebtedness having
become (or, in the case of any Indebtedness of the Company, continue
unremedied for a period of time sufficient to permit any holder of
such Indebtedness to declare any or all of such Indebtedness to be)
due and payable in accordance with its terms prior to its stated
maturity, whether by declaration or otherwise.
SECTION 7.1.3. Bankruptcy, Insolvency, etc. The Company
or any Subsidiary shall
(a) become insolvent or generally fail to pay, or admit
in writing its inability to pay, debts as they become due;
(b) apply for, consent to or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the
Company or any Subsidiary or any property of any thereof or make a
general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any
Subsidiary or for a substantial part of the property of any thereof,
and such trustee, receiver, sequestrator or other custodian shall not
be discharged within 60 days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the
Company or any Subsidiary, and, if such case or proceeding is not
commenced by the Company or such Subsidiary, such case or proceeding
shall be consented to or acquiesced in by the Company or such
Subsidiary or shall result in the entry of an order for relief or
shall remain for 60 days undismissed; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 7.1.4. Breach of Warranty. Any warranty of the
Company hereunder or in any other Purchase Document or any other
writing furnished by or on behalf of the Company to the Purchaser
or any other Noteholder for the purposes of or in connection with
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this Agreement or any such Purchase Document is or shall be incorrect when
made in any material respect.
SECTION 7.1.5. Non-Performance of Certain Undertakings. The Company
shall default in the due performance and observation of any agreement
contained in Section 6.2.3 (as it relates to the Company), 6.2.4, 6.2.5,
6.2.6, 6.2.7, 6.2.8, 6.2.9, 6.2.10 or 6.2.13.
SECTION 7.1.6. Non-Performance of Other Undertakings. Any Obligor
shall default in the due performance and observance of any other agreement
contained herein or in any other Purchase Document, and such default shall
continue unremedied for a period of (x) at any time when the Senior Credit
Agreement or PMI Agreement shall continue to be in effect, 60 days, or (y) at
any time thereafter, 30 days, in each case after notice thereof shall have
been given to the Company by the Purchaser or Required Noteholders.
SECTION 7.1.7. Judgments. A final judgment not fully covered by
insurance, shall be rendered against the Company or any Subsidiary and (x) if
such judgment is rendered against the Company, such judgment, together with
all other such outstanding final judgments against the Company, exceeds (to
the extent of all such uninsured portions) an aggregate of $1,000,000 or (y)
if such judgment is rendered against NRE or any of its Subsidiaries, such
judgment, together with all other such outstanding final judgments against NRE
or any of its Subsidiaries, exceeds (to the extent of all such uninsured
portions) an aggregate of $2,000,000, and, in each case, within 30 days after
entry thereof, such judgment shall not have been discharged or execution
thereof stayed pending appeal, or, within 30 days after the expiration of any
such stay, such judgment shall not have been discharged.
SECTION 7.1.8. Ownership of NRE. The Company shall for any
reason cease to own and hold,
(a) free of any Liens, 100% of the issued and
outstanding Capital Stock of NRE representing NRE Exempt
Shares; and
(b) free of any Liens (except the Liens of the Senior Pledge
Agreement and Mezzanine Pledge Agreement), 100% of all issued and
outstanding shares of Capital Stock of NRE.
SECTION 7.1.9. Leases and BKC Franchises. Leases on or Franchise
Agreements with respect to Restaurants representing more than 30% of
Restaurant Cash Flow shall have been terminated or expired without renewal
(determined in the aggregate since the Restatement Effective Date) or at the
time of any Lease or Franchise Agreement termination or expiration NRE fails
to
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demonstrate pro forma compliance with Section 6.2.4 for a period of 12 months,
after eliminating the results of all such terminated Restaurant.
SECTION 7.1.10. Unrestricted Subsidiary Revenue. The Unrestricted
Subsidiaries shall for any Fiscal Quarter have aggregate revenues greater than
30% of the consolidated revenues of NRE and all Subsidiaries of NRE for such
Fiscal Quarter.
SECTION 7.2. Action if Bankruptcy. If any Event of Default described
in clauses (a) through (d) of Section 7.1.3 shall occur, the outstanding
principal amount of all outstanding Notes and all other Obligations shall
automatically be and become immediately due and payable, without notice or
demand.
SECTION 7.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (a) through (d)
of Section 7.1.3) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Required Noteholders may, upon notice or
demand, declare all or any portion of the outstanding principal amount of the
Notes to be due and payable and any or all other Obligations to be due and
payable, whereupon the full unpaid amount of such Notes and any and all other
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment.
ARTICLE VIII
SUBORDINATION
All Obligations of the Company pursuant to this Agreement shall be
subordinate and junior in right of payment to Senior Recovery Debt in the
manner and with the effect provided in Section 8.1 through 8.7, and each
holder of a Note, by its acceptance thereof, agrees to be bound by such terms
of subordination.
SECTION 8.1. Acceleration, Dissolution, etc. In the event
that
(a) the maturity of all of the principal amount of the
Obligations under (and as defined in) the Senior Credit Agreement
shall have been accelerated in accordance with its terms, or
(b) any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or
otherwise, of all or any part of the property, assets or
business of the Company, or the proceeds thereof, to any
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creditor or creditors of the Company or upon any indebtedness of the
Company, by reason of any liquidation, dissolution or other winding
up of the Company or its business or by reason of any sale,
receivership, insolvency or bankruptcy proceedings or assignment for
the benefit of creditors or any proceeding by or against the Company
for any relief under any bankruptcy, reorganization or insolvency law
or laws, federal or state, or any law, federal or state, relating to
the relief of debtors, readjustment of indebtedness, reorganization,
composition or extension,
then and in any such event and if and to the extent that a Senior Recovery
Amount shall exist, any payment or distribution of any kind or character,
whether in cash, property or securities which, but for the subordination
provisions of this Article, would otherwise be payable or deliverable upon or
in respect of this Agreement, shall instead be paid over or delivered to the
Senior Agent for application to Senior Recovery Debt and, until the Senior
Recovery Debt has been repaid in full, neither the Purchaser nor any
Noteholder shall receive any such payment or distribution or benefit
therefrom. If the Mezzanine Agent (as defined in the Mezzanine Pledge
Agreement) has not filed, proved or voted, as the case may be, in any
proceeding of the nature referred to in clause (b) above, the Senior Agent
may, upon five days prior written notice to the Mezzanine Agent (as so
defined), so file, prove or vote, as the case may be, in the name of the
Noteholders or otherwise, with respect to any and all claims of the
Noteholders relating to the Obligations of the Company.
SECTION 8.2. Turnover. In the event that, notwithstanding the
provisions of Section 8.1, any such direct or indirect payment or distribution
shall be received by the Purchaser or any Noteholder in contravention of the
provisions of any such Section, such payments and distributions shall be held
in trust for the benefit of, and upon receipt by such holder of written notice
that such payment or distribution has been made in violation of such Section,
shall be immediately paid over to, the Senior Agent for application to the pro
rata payment of all Senior Recovery Debt at the time outstanding until all
such Senior Recovery Debt shall have been paid in full, after giving effect to
any concurrent payment or distribution to the holders of such Senior Recovery
Debt.
SECTION 8.3. Unconditional Obligation, etc. Nothing contained in this
Article is intended to or shall impair, as between the Company, its creditors
(other than the holders of Senior Recovery Debt) and the Purchaser and the
Noteholders, the obligation of the Company, which is absolute and
unconditional, to pay to the Purchaser and the Noteholders all amounts owing
under this Agreement, the Notes and all other Purchase Documents as and when
such amounts become due and payable in accordance with the
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terms hereof, or to in any way affect the relative rights of the Purchaser or
the Noteholders and creditors of the Company other than the holders of Senior
Recovery Debt. Subject to the payment in full of all Senior Recovery Debt, the
Purchaser and the Noteholders shall be subrogated to the rights of the holders
of Senior Recovery Debt to receive payments or distributions of assets of the
Company made on the Senior Recovery Debt until all Obligations shall be paid
in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of Senior Recovery Debt of any cash, property or
securities to which the Purchaser and the Noteholders would be entitled except
for these provisions shall, as between the Company and its creditors (other
than the Senior Lenders and the Purchaser and the Noteholders), be deemed to
be a payment by the Company to or on account of Senior Recovery Debt, it being
understood that these provisions are intended solely for the purpose of
defining the relative rights of the Purchaser and the Noteholders, on the one
hand, and the Senior Lenders on the other hand.
SECTION 8.4. Waivers, etc. The Purchaser hereby waives any and all
notice of renewal, extension or accrual of any Senior Recovery Debt, present
or future, and agrees and consents that without notice to or assent by the
Purchaser and the Noteholders:
(a) subject to the provisions of Section 6.2.7, the
obligations and liabilities of the Company or any other party or
parties for or upon the Senior Recovery Debt (and/or any promissory
note(s), security document or guaranty evidencing or securing the
same) may, from time to time, in whole or in part, be renewed,
extended, modified, amended, accelerated, compromised, supplemented,
terminated, sold, exchanged, waived or released,
(b) subject to the provisions of Section 6.2.7, the Senior
Lenders may exercise or refrain from exercising any right, remedy or
power granted by the Senior Recovery Guaranty or any other document
creating, evidencing or otherwise related to Senior Recovery Debt or
at law, in equity or otherwise, with respect to Senior Recovery Debt
or any collateral security or lien (legal or equitable) held, given
or intended to be given therefor (including the right to perfect any
lien or security interest created in connection therewith),
(c) subject to the provisions of Section 6.2.7, any and all
collateral security and/or liens (legal or equitable) at any time,
present or future, held, given or intended to be given for Senior
Recovery Debt, and any rights or remedies of the Senior Lenders in
respect thereof, may, from time to time, in whole or in part, be
exchanged, sold, surrendered,
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released, modified, waived or extended by the Senior Lenders,
and
(d) any balance or balances of funds with the Senior Lenders
at any time standing to the credit of the Company or any guarantor of
any Senior Recovery Debt may, from time to time, in whole or in part,
be surrendered or released,
all as the Senior Lenders may deem advisable and all without impairing,
abridging, diminishing, releasing or affecting the subordination to Senior
Recovery Debt provided for herein. The Senior Lenders shall not be prejudiced
in their right to enforce the subordination contained herein in accordance
with the terms hereof by any act or failure to act on the part of the Company.
SECTION 8.5. Amendment of Subordination Provisions. The subordination
provisions contained herein are for the benefit of the holders of Senior
Recovery Debt and may not be rescinded, cancelled, amended or modified in any
way without the prior written consent thereto of the Senior Lenders.
SECTION 8.6. Notice to the Noteholders. The Company shall give prompt
written notice to the Purchaser and any Noteholder of any fact known to the
Company which would prohibit the making of any payment to the Purchaser or any
Noteholder under this Agreement. Notwithstanding the provisions of this
Article VIII or any other provision of this Agreement, the Purchaser
(a) shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to the
Purchaser or any Noteholder under this Agreement in respect of this
Agreement, unless and until the Purchaser shall have received written
notice thereof from the Company, the Senior Agent or a holder of
Senior Recovery Debt or from any trustee therefor (and, prior to the
receipt of any such written notice, the Purchaser shall be entitled
in all respects to assume that no such facts exist); and
(b) shall be entitled to receive and retain all payments
made by or on behalf of the Company prior to receipt by the Purchaser
under this Agreement of any such written notice.
SECTION 8.7. Proving, etc. Claims. If the Noteholders have not filed,
proved or voted, as the case may be, in any proceeding of the nature referred
to in clause (b) of Section 8.1, the Senior Agent may, upon five days prior
written notice to the Mezzanine Agent, so file, prove or vote, as the case may
be, in the name of the Noteholders or otherwise, with respect to any and all
claims of the Noteholders relating to the Obligations of the Company.
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SECTION 8.8. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to
in this Article VIII, the Purchaser and any other Noteholder shall be entitled
to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other
Person making such payment or distribution, delivered to the Purchaser and any
other Noteholder, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Recovery
Debt and other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article.
SECTION 8.9. Amendment of Subordination Provisions. The subordination
provisions contained in this Article are for the benefit of the holders of
Senior Indebtedness and may not be rescinded, cancelled, amended or modified
in any way without the prior written consent thereto of the Senior Agent.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each Purchase Document may from time to time be amended,
waived or otherwise modified, if such amendment, waiver or modification is in
writing and consented to by the Company and the Required Noteholders;
provided, however, that no such amendment, waiver or modification:
(a) which would modify any requirement hereunder that any
particular action be taken by each Noteholder or by the Required
Noteholders shall be effective unless consented to by each
Noteholder; or
(b) which would modify this Section or change the definition
of "Required Noteholders" or which would extend the due date for, or
reduce the amount of, any payment or prepayment of principal of or
interest on any Note (or reduce the rate of interest on any Note)
shall be made without the consent of each Noteholder.
No failure or delay on the part of the Purchaser or any other
Noteholder in exercising any power or right under this Agreement or any other
Purchase Document shall operate as a waiver thereof,
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nor shall any single or partial exercise of any such power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. No notice to or demand on the Company in any case shall entitle it to
any notice or demand in similar or other circumstances. No waiver or approval
by the Purchaser or any other Noteholder under this Agreement or any other
Purchase Document shall, except as may be otherwise stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
SECTION 9.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Purchase Document shall
be in writing and addressed or delivered to it at its address set forth below
its signature hereto or at such other address as may be designated by such
party in a notice to the other parties. Any notice, if sent by mail or courier
and properly addressed and prepaid, shall be deemed given when received; any
notice, if transmitted by telecopy, shall be deemed given when transmitted.
SECTION 9.3. Costs and Expenses. The Company agrees to pay all
expenses of the Purchaser for the negotiation, preparation, execution and
delivery of this Agreement and each other Purchase Document, including
Schedules and Exhibits, and any amendments, waivers, consents, supplements or
other modifications to this Agreement or any other Purchase Document as may
from time to time hereafter be required (including the reasonable fees and
expenses of counsel for the Purchaser from time to time incurred in connection
therewith), whether or not the transactions contemplated hereby are
consummated, and to pay all expenses of the Purchaser (including reasonable
fees and expenses of counsel to the Purchaser) incurred in connection with the
preparation and review of the form of any Instrument relevant to this
Agreement or any other Purchase Document and the consideration of legal
questions relevant hereto and thereto or to any preservation of rights as to,
or restructuring or "work-out" of, any Obligations; provided, however, that,
from and after the Restructuring Effective Date and the completion of
activities incidental thereto, the Company shall not be obligated to reimburse
the Purchaser for the fees and expenses of its counsel incurred in any Fiscal
Year if all such fees and expenses do not aggregate in excess of $10,000. The
Company also agrees to reimburse each Noteholder upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal
expenses) incurred by such Noteholder in enforcing the obligations of the
Company under this Agreement or any other Purchase Document.
SECTION 9.4. Indemnification. In consideration of the
execution and delivery of this Agreement by the Purchaser, the
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Company hereby indemnifies, exonerates and holds the Purchaser and each other
Noteholder and each of their respective officers, directors, employees and
agents (the "Indemnified Parties") free and harmless from and against any and
all actions, causes of action, suits, losses, costs, liabilities and damages
and expenses actually incurred in connection therewith (irrespective of
whether such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any
Note,
(b) the entering into and performance of this Agreement and
any other Purchase Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Company as the
result of any determination by the Purchaser pursuant to Article III
to not purchase the Subject Securities), or
(c) any investigation, litigation or proceeding related
to the Acquisition Agreement,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
SECTION 9.5. Survival. The obligations of the Company under Section
9.4 shall remain in full force and effect regardless of any investigation made
by or on behalf of any Indemnified Party, and the obligations of the Company
under Sections 9.3 and 9.4 shall survive the payment or prepayment of the
Subject Securities, at maturity, upon redemption or otherwise, any transfer of
the Subject Securities by the Purchaser, the Existing Pool Nominee or any
other Noteholder, and any termination of this Agreement and the other Purchase
Documents. The representations and warranties made by the Company in this
Agreement and in each other Purchase Document shall survive the execution and
delivery of this Agreement and each such other Purchase Document.
SECTION 9.6. Severability. Any provision of this
Agreement or any other Purchase Document which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
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be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or such Purchase
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 9.7. Headings. The various headings of this Agreement and of
each other Purchase Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such Purchase
Document or any provisions hereof or thereof.
SECTION 9.8. Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be executed by the
Company and the Purchaser and be deemed to be an original and all of which
shall constitute together but one and the same agreement.
SECTION 9.9. Governing Law; Entire Agreement. This Agreement, the
Notes, the Mezzanine Pledge Agreement, the Deferred Limited Interest Guaranty
and each other Purchase Document shall each be deemed to be a contract made
under and governed by the internal laws of the State of New York. This
Agreement, the Notes and the other Purchase Documents constitute the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 9.10. Jurisdiction. For purpose of any action or proceeding
involving this Agreement or any other Purchase Document, the Company hereby
expressly submits to the jurisdiction of all Federal and State Courts located
in the City of New York, State of New York and consents that it may be served
with any process or paper by registered mail or by personal service within or
without the State of New York, provided a reasonable time for appearance is
allowed.
SECTION 9.11. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Company may not assign or transfer its rights
or obligations hereunder without the prior written consent of
all Noteholders; and
(b) the rights of sale, assignment and transfer of the
Notes are subject to Section 4.7.
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SECTION 9.12. WAIVER OF JURY TRIAL. THE PURCHASER AND THE COMPANY
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER PURCHASE
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE PURCHASER OR THE COMPANY. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE PURCHASER ENTERING INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
NRE HOLDINGS, INC.
By
--------------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
Address: c/o AmeriKing Corporation
2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
Telecopy No.: 708-947-2161
Attention: A. Richard Caputo, Jr.
with a copy to:
The Jordan Company
9 West 57th Street
40th Floor
New York, New York 10019
Telecopy No.: 212-755-5263
Attention: A. Richard Caputo, Jr.
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MCIT PLC
By
--------------------------------------
Name: James E. Jordan
Title: Director
Notices: c/o Jordan/Zalaznick
Advisers, Inc.
9 West 57th Street
New York, New York 10019
Attention: Mr. James E. Jordan
Telecopy No.: 212-755-5263
Payments to: Republic National Bank
of New York
(ABA No. 026-0048-28)
452 Fifth Avenue
26th Floor
New York, New York 10018
Account No. 458105201
Confirmation to: Mr. James E. Jordan
c/o Jordan/Zalaznick
Advisers, Inc.
Telephone No.: 212-572-0840
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[EXECUTION]
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (herein sometimes called this "Agreement"),
dated as of September 1, 1994 between NRE HOLDINGS, INC., a Delaware
corporation (the "Company"), and MEZZANINE CAPITAL & INCOME TRUST 2001 PLC, a
public company incorporated in England, individually (the "Purchaser"), and as
agent (the "Mezzanine Agent") for itself and the other Noteholders (such and
all other capitalized terms being used herein with the meanings provided in
Article I),
W I T N E S S E T H
WHEREAS, pursuant to a Purchase Agreement, dated as of September 1,
1994 (together with all amendments and other modifications, if any, from time
to time hereafter made thereto (the "Purchase Agreement"), between the Company
and the Purchaser, the Purchaser has agreed to purchase $14,528,531 of debt
and equity securities of the Company, including $11,000,000 principal amount
of the Company's 12.75% Notes due August 31, 2004 (the "MCIT Notes");
WHEREAS, as a condition precedent to the purchase by Purchaser of the
MCIT Notes, the Company is required to execute and deliver this Agreement and
to grant the Mezzanine Agent under this Agreement a continuing security
interest in all shares of stock owned by the Company (except that, in the case
of National Restaurant Enterprises, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ("NRE"), only the non-voting shares of
stock described in Schedule I hereto (the "NRE Shares") are subject to such
security interest); and
WHEREAS, pursuant to the Additional Acquisition Agreements, the
Company may issue to the Management Sellers 12.75% promissory notes due August
31, 2004 in an aggregate principal amount not to exceed $4,400,000 (the
"Seller Notes") and by the terms of the Additional Acquisition Agreements the
Seller Notes are required to be secured pursuant to this Pledge Agreement on a
pari passu basis with the MCIT Notes; and
WHEREAS, the Company has duly authorized the execution,
delivery and performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged by it, and in order to induce the Purchaser to
purchase the Notes from the Company
<PAGE>
pursuant to the Purchase Agreement, the Company agrees with the Agent, for the
Ratable benefit of the Noteholders, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable
to the singular and plural forms thereof):
"Collateral" is defined in Section 2.1.
"Company" is defined in the preamble.
"Distributions" shall mean all stock dividends, liquidating
dividends, shares of stock resulting from stock splits, reclassifications,
warrants, options, non-cash dividends and other distributions on or with
respect to any shares of capital stock whether similar or dissimilar to the
foregoing but shall not mean Dividends as that term is defined herein.
"Dividends" shall mean cash dividends and cash distribution made out
of capital surplus.
"Instrument" shall mean any document or writing (whether by formal
agreement, letter or otherwise) under which any obligations is evidenced,
assumed or undertaken, or any right to any security interest is granted or
perfected.
"Instrument executed pursuant hereto" and similar terms shall mean
each Instrument executed and delivered by the Company pursuant to this
Agreement, whether or not mentioned herein.
"Intercreditor Letter" is defined in Section 2.4.
"MCIT Note" is defined in the first recital and shall also refer to
all amendments, endorsements and other modifications made from time to time to
such notes and to all other promissory notes accepted from time to time in
substitution, replacement or renewal of such notes.
"Mezzanine Agent" shall have the meaning provided in the
preamble hereto.
"Noteholder" means at any time
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(a) each Person then registered in accordance with
Section 4.1 of the Purchase Agreement as the owner of a MCIT
Note; and
(b) each Person then holding a Seller Note.
"NRE" is defined in the second recital.
"NRE Shares" is defined in the second recital.
"Obligations" means all obligations of the Company with respect to
the repayment or performance of all obligations (monetary or otherwise) of the
Company arising under or in connection with this Agreement, the Subject
Securities, the Seller Notes, the Purchase Agreement and each other Purchase
Document.
"Pledged Property" shall mean the NRE Shares and all other pledged
notes or shares of capital stock (which, in the case of NRE, shall be
non-voting), all other securities, all assignments of any amounts due or to
become due and all other Instruments which are now being delivered by the
Company to the Senior Agent or Mezzanine Agent or may from time to time
hereafter be delivered by the Company to the Senior Agent or Mezzanine Agent
for the purpose of pledge under the Senior Pledge Agreement or this Agreement.
"Pledged Shares" shall mean the NRE Shares and all other shares of
capital stock of any Subsidiary of the Pledgor (which, in the case of NRE,
shall be non-voting) which are delivered by the Pledgor to the Senior Agent or
Mezzanine Agent as Pledged Property hereunder.
"Ratable", "Ratably" or "Ratable Distribution" shall mean, in the
context of a distribution of Collateral or a distribution of proceeds of any
of the Collateral, an allocation of such moneys among the Noteholders pro rata
in accordance with their respective proportion of the aggregate dollar amount
of the Obligations to which the distribution is being applied.
"Seller Note" is defined in the third recital and shall also refer to
all amendments, endorsements and other modifications made from time to time to
such notes and to all other promissory notes accepted from time to time in
substitution, replacement or renewal of such notes.
"Senior Agent" means The First National Bank of Boston, in its
capacity as agent for itself and other Senior Lenders which are or may become
parties to the Senior Credit Agreement.
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"Senior Lender" means collectively all of the lending institutions
which are or become parties to the Senior Credit Agreement.
SECTION 1.2. Purchase Agreement Definitions. Terms for which meanings
are provided in the Purchase Agreement (including "Default", "Event of
Default" and "Required Noteholders") are, unless otherwise defined herein or
the context otherwise requires, used in this Agreement with such meanings.
SECTION 1.3. References to Parties. References to any
party in this Agreement shall include its permitted successors
and assigns.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. As security for payment of
all Obligations, the Company hereby pledges, assigns and transfers to the
Mezzanine Agent (as agent for all Noteholders, as aforesaid) a continuing
security interest in and to the NRE Shares and all other Pledged Property,
whether now or hereafter delivered to the Agent, together with all Dividends,
Distributions, interest and other payments and rights with respect thereto and
all proceeds of any of the foregoing (herein called the "Collateral").
All advances, charges, costs and expenses, including reasonable
attorney's fees, incurred or paid by the Mezzanine Agent in exercising any
right, power or remedy conferred by this Agreement, or in the enforcement
hereof or thereof, shall, to the extent unlawful, become a part of the
Obligations secured hereby.
SECTION 2.2. Continuing Security Interest; Transfer of
Notes. This Agreement shall
(a) create a continuing security interest in the
Collateral;
(b) remain in full force and effect until payment in
full of all Obligations;
(c) be binding upon the Company, its successors and
assigns; and
(d) inure to the benefit of the Mezzanine Agent, the
Noteholders and their successors, transferees, and assigns.
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Without limiting the foregoing, any Noteholder may assign or otherwise
transfer any Note held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted
herein or otherwise.
SECTION 2.3. Release of Pledged Property. In the event that any
Dividend is paid on any Pledged Share at a time when no Default of the nature
referred to has occurred and is continuing, such Dividend or interest or
principal shall thereupon cease to be Pledged Property and shall be deemed to
be released by the Mezzanine Agent to the Company.
SECTION 2.4. Subordination. Notwithstanding any provision to the
contrary in this Agreement, the Mezzanine Agent hereby acknowledges that the
Pledged Property is subject to the prior lien of the Senior Agent under the
Senior Pledge Agreement and hereby agrees to subordinate its lien in the
Collateral to the lien of the Senior Agent therein, all in accordance with
that certain intercreditor letter, of even date (the "Intercreditor Letter"),
between the Senior Agent and the Mezzanine Agent. Accordingly, on the date
hereof, the Company shall endorse and deliver the Pledged Property to the
Senior Agent. Upon payment in full of the Company's obligations under the
Senior Credit Agreement, the Pledged Property shall be endorsed and delivered
to the Mezzanine Agent as security for the Obligations; provided, however,
that if the Senior Agent sells or transfers the Pledged Property to a third
party pursuant to a foreclosure proceeding under the Senior Pledge Agreement,
the Mezzanine Agent agrees, upon demand, to release its lien in the Pledged
Property upon receipt of the surplus, if any, of proceeds received over
amounts owing under the Senior Credit Agreement.
ARTICLE
WARRANTIES, ETC.
SECTION 2.5. Warranties. The Company represents and
warrants unto the Mezzanine Agent and each Noteholder that at the
date of each pledge hereunder by the Company to the Mezzanine
Agent of any Pledged Property,
(a) the Company is or will then be the lawful owner of, and
has or will have good and marketable title to (and has or will have
full right and authority to pledge and assign), such Pledged
Property, free and clear of all liens or encumbrances except any lien
or security interest (i) granted pursuant hereto in favor of the
Mezzanine Agent or (ii) granted pursuant to the Senior Pledge
Agreement in favor of the Senior Agent for the benefit of the Senior
Agent and the Senior Lenders;
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<PAGE>
(b) the pledge of the Pledged Shares pledged hereunder is
effective to create a valid lien on and a security interest in such
Pledged Property and all proceeds thereof, securing the Obligations;
(c) the Pledged Shares constitute all of the non-
voting shares of capital stock of NRE owned by the Company;
and
(d) no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body will be required either
(i) for the pledge by the Company of any
Collateral pursuant to this Agreement or for the
execution, delivery, or performance of this Agreement
by the Company, or
(ii) for the exercise by the Purchaser of the
voting or other rights provided for in this Agreement, or
the remedies in respect of the Collateral pursuant to this
Agreement.
No filing or other action will be necessary to perfect or protect the security
interest described in clause (c).
ARTICLE III
BENEFIT OF PLEDGED SECURITIES ETC.
SECTION 3.1. Protect Collateral. Except in connection with any
transaction permitted by Section 2.3, the Company will not sell, assign,
transfer, pledge or encumber in any other manner the Collateral (except in
favor of the Mezzanine Agent hereunder and the Senior Agent under the Senior
Pledge Agreement). The Company will warrant and defend the right and title
herein granted unto the Mezzanine Agent in and to the Collateral (and all
right, title and interest represented by the Collateral) against the claims
and demands of all Persons whomsoever except the Senior Agent under the Senior
Pledge Agreement. The Company agrees that at any time, and from time to time,
at the expense of the Company, the Company will promptly execute and deliver
all further Instruments, and take all further action, that may be necessary or
desirable, or that the Mezzanine Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Mezzanine Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
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<PAGE>
SECTION 3.2. Stock Powers, Endorsements, etc. The Company agrees that
all Pledged Shares delivered by the Pledgor pursuant to this Agreement will be
accompanied by duly executed undated blank stock powers. The Company will,
from time to time, upon request of the Mezzanine Agent, promptly execute such
endorsements and deliver to the Mezzanine Agent such stock powers and similar
agreements, satisfactory in form and substance to the Mezzanine Agent, with
respect to the Collateral as the Mezzanine Agent may reasonably request and
will, from time to time, upon request of the Mezzanine Agent after the
occurrence of any Event of Default occurring after the discharge of all
obligations secured by the Senior Pledge Agreement, promptly transfer any
shares which are part of the Collateral into the name of any nominee
designated by the Mezzanine Agent.
SECTION 3.3. Certain Other Agreements Regarding Collateral. The
Company will, at all times, keep pledged to the Mezzanine Agent pursuant
hereto (subject to the prior lien of the Senior Agent under the Senior Pledge
Agreement prior to the discharge of the obligations secured thereby) all of
the shares of capital stock of each Subsidiary of the Company and all other
securities, instruments and rights from time to time received by or
distributable to the Company in respect of any Collateral (provided that, in
the case of NRE, only the non-voting shares shall be so pledged).
The Company agrees to deliver (properly endorsed where required
hereby or requested by the Mezzanine Agent) to the Mezzanine Agent after the
discharge of all obligations secured by the Senior Pledge Agreement:
(a) after, but not prior to, the time that any Default of
the nature referred to in clauses (a) through (d) of Section 7.1.3 of
the Purchase Agreement or an Event of Default shall have occurred and
be continuing, promptly upon receipt thereof by the Company and
without any request thereof by the Company and without any request
therefor by the Mezzanine Agent, all interest and other cash payments
and all cash proceeds of the Pledged Property and other Collateral,
all of which shall be held by the Mezzanine Agent as additional
Collateral for use in accordance with Section 5.5; and
(b) after a Default of the nature referred to in clause (a)
through (d) of Section 7.1.3 of the Purchase Agreement or an Event of
Default shall have occurred, promptly upon request of the Mezzanine
Agent, such proxies and other documents as may be necessary to allow
the Mezzanine Agent to exercise the voting power with respect to any
share of capital stock included in the Collateral;
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<PAGE>
provided, however, that unless a Default of the nature referred to in clauses
(a) through (d) of Section 7.1.3 of the Purchase Agreement or an Event of
Default shall have occurred and be continuing, the Company shall, subject to
Article III, be entitled:
(c) to exercise as it shall think fit, but in a manner not
inconsistent with the terms of the Purchase Agreement or any
Instrument executed pursuant thereto, all incidental rights of
ownership with respect to any Pledged Property (subject to the
Company's obligation to deliver to the Mezzanine Agent such capital
stock in pledge hereunder); and
(d) to the prompt return from the Mezzanine Agent of any and
all such Dividends, all interest and other cash payments and all cash
proceeds of the Pledged Property and other Collateral delivered to
the Mezzanine Agent in accordance with clause (a) of Section 5.3
after payment in full of all Obligations then due or to become due
within 30 days thereafter.
All Dividends, Distributions and payments which may at any time and
from time to time be held by the Company but which the Company is then
obligated to deliver to the Mezzanine Agent, shall, until delivery to the
Mezzanine Agent, be held by the Company separate and apart from its other
property upon trust for the Mezzanine Agent.
The Mezzanine Agent agrees that unless an Event of Default shall have
occurred and be continuing, the Mezzanine Agent shall, upon the written
request of the Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by the Pledgor which are necessary to
allow the Pledgor to exercise voting power with respect to any share of
capital stock included in the Collateral; provided, however, that no vote
shall be cast or consent, waiver or ratification given or action taken by the
Pledgor that would impair the Collateral or be inconsistent with or violate
any provision of this Agreement, the Purchase Agreement or any other Purchase
Document.
SECTION 3.4. Actions upon Event of Default. Subject to Section 2.4,
whenever an Event of Default shall have occurred and be continuing, the
Mezzanine Agent shall have all rights and remedies of a secured party after
default under the Uniform Commercial Code as in effect in the State of New
York or other applicable law to the extent not inconsistent with all rights
provided hereby. Any notification required by law of intended disposition by
the Mezzanine Agent of any of the Collateral shall be deemed reasonably and
properly given if given at least 30 days before such disposition. Without
limitation of the above, the Mezzanine Agent may, upon direction of the
Required Noteholders,
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<PAGE>
from time to time, before the Obligations shall be declared due and payable,
but only if an Event of Default shall have occurred and be continuing, without
prior notice to the Company, take all or any of the following actions:
(a) transfer all or any part of the Collateral into the name
of the Mezzanine Agent or its nominee, with or without disclosing
that such Collateral is subject to the lien and security interest
hereunder;
(b) notify the parties obligated on any of the
Collateral to make payment to the Mezzanine Agent of any
amount due or to become due thereunder;
(c) enforce collection of any of the Collateral by
suit or otherwise;
(d) endorse any checks, drafts or other writings in
the Company's name to allow collection of the Collateral;
and
(e) take control of any proceeds of the Collateral;
and
(f) execute (in the name, place and stead of the Company)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
In furtherance of the foregoing, the Company hereby irrevocably
constitutes and appoints the Mezzanine Agent, effective upon the occurrence
and during the continuance of an Event of Default, as its true and lawful
attorney-in-fact with full power and (after the discharge of all obligations
secured by the Senior Pledge Agreement) authority in the name and in the place
and stead of the Company, and in its own name, to file any claims or take any
action (in law or in equity) which the Mezzanine Agent may deem desirable to
accomplish the purposes of this Agreement.
The Company understands that compliance with the Federal securities
laws, applicable blue sky or other state securities laws or similar laws
analogous in purpose or effect may strictly limit the course of conduct of the
Mezzanine Agent if the Mezzanine Agent were to attempt to dispose of all or
any part of the Collateral and may also limit the extent to which or the
manner in which any subsequent transferee of the Collateral may dispose of the
same. Accordingly, the Company agrees that IF ANY COLLATERAL IS SOLD AT ANY
PUBLIC OR PRIVATE SALE, THE MEZZANINE AGENT MAY ELECT TO SELL ONLY TO A BUYER
WHO WILL GIVE FURTHER ASSURANCES, SATISFACTORY IN FORM AND SUBSTANCE TO THE
MEZZANINE
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<PAGE>
AGENT, RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE FEDERAL SECURITIES
ACT OF 1933, AS AMENDED; AND A SALE SUBJECT TO SUCH CONDITION SHALL BE DEEMED
COMMERCIALLY REASONABLE. Without limiting the generality of the foregoing, the
provisions of this paragraph would apply if, for example, the Mezzanine Agent
were to place all or any part of the Collateral for private placement by an
investment banking firm, or if such investment banking firm purchased all or
any part of the Collateral for its own account, or if the Mezzanine Agent
placed all or any part of the Collateral privately with a purchaser or
purchasers.
SECTION 3.5. Application of Proceeds. All cash proceeds received by
the Mezzanine Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral after the discharge of all
obligations secured by the Senior Pledge Agreement may, in the discretion of
the Mezzanine Agent, be held by the Mezzanine Agent as additional collateral
security for, or then or at any time thereafter be applied (after payment of
any amounts payable to the Mezzanine Agent pursuant to Section 5.6) in whole
or in part by the Mezzanine Agent against, all or any part of the Obligations
in the following order:
(a) first, Ratably, to the unpaid interest accrued and
then due or owing on any Notes; and
(b) second, Ratably, among Noteholders on account of
all principal of the Notes then due or owing.
Any surplus of such cash or cash proceeds held by the Mezzanine Agent and
remaining after payment in full of all the Obligations shall be paid over to
the Company or to whomsoever may be lawfully entitled to receive such surplus.
SECTION 3.6. Indemnity and Expenses. The Company indemnifies and
holds harmless the Mezzanine Agent from and against any and all claims,
losses, and liabilities growing out of or resulting from this Agreement
(including enforcement of this Agreement), except claims, losses, or
liabilities resulting from the Mezzanine Agent's gross negligence or wilful
misconduct. Upon demand, the Company will pay to the Mezzanine Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Mezzanine Agent may incur in connection with:
(a) the administration of this Agreement, the Purchase
Agreement and each other Purchase Document;
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<PAGE>
(b) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any
of the Collateral;
(c) the exercise or enforcement of any of the rights
of the Mezzanine Agent hereunder; or
(d) the failure by the Company to perform or observe
any of the provisions hereof.
ARTICLE IV
THE MEZZANINE AGENT
SECTION 4.1. Actions. Each Noteholder authorizes the Mezzanine Agent
to act at the direction of the Required Noteholders on behalf of such
Noteholder under this Agreement and to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the Mezzanine Agent
by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Noteholder agrees to reimburse the
Mezzanine Agent Ratably for all reasonable out-of-pocket expenses (including
attorneys' fees) incurred by the Mezzanine Agent hereunder or in connection
herewith or in enforcing the obligations of the Company hereunder and for
which the Mezzanine Agent is not reimbursed by the Company. The Mezzanine
Agent shall not be required to take any action hereunder, or to prosecute or
defend any suit in respect of this Agreement, unless indemnified to its
satisfaction by each Noteholder against loss, costs, liability and expense. If
any indemnity furnished to the Mezzanine Agent shall become impaired, it may
call for additional indemnity and cease to do the acts indemnified against
until such additional indemnity is given.
SECTION 4.2. Exculpation. Neither the Mezzanine Agent nor any of its
directors, officers, employees or agents shall be liable to any Noteholder for
any action taken or omitted to be taken by it or them under this Agreement, or
in connection herewith or therewith, except for its own willful misconduct or
gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due
authorization, execution or delivery of this Agreement, nor to make any
inquiry respecting the performance by the Company of its obligations
hereunder. The Mezzanine Agent shall be entitled to rely upon advice of
counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which it believes to be genuine and to have been
presented by a proper Person.
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<PAGE>
SECTION 4.3. Status as Purchaser. The Mezzanine Agent shall have the
same rights and powers with respect to the Notes held by it as any Noteholder
and may exercise the same as if it were not the Mezzanine Agent, and the term
"Noteholder" shall include the Mezzanine Agent in its individual capacity.
SECTION 4.4. Credit Decisions. Each Noteholder acknowledges that it
has, independently of the Mezzanine Agent and each other Noteholder and based
on the financial information referred to in Section 5.4 of the Purchase
Agreement and such other documents, information and investigations as it has
deemed appropriate, made its own credit decision to purchase its Notes. Each
Noteholder also acknowledges that it will, independently of the Mezzanine
Agent and each other Noteholder and based on such other documents, information
and investigations as it shall deem appropriate at any time, continue to make
its own credit decisions as to exercising or not exercising from time to time
any rights and privileges available to it under this Agreement, any Note or
any other Purchase Document.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Obligations Not Affected. The obligations of
the Company under this Agreement shall remain in full force and
effect without regard to, and shall not be impaired or affected
by:
(a) any amendment or modification or addition or supplement
to the Purchase Agreement, or any Instrument contemplated thereby or
any assignment or transfer thereof, except amendments or
modifications hereto effected in accordance with Section 7.5;
(b) any exercise, non-exercise or waiver by the Mezzanine
Agent or any Noteholder of any right, remedy, power, guaranty,
collateral or privilege under or in respect of, or any release of any
guaranty or collateral provided pursuant to, this Agreement, the
Purchase Agreement, any other Purchase Document or any Instrument
executed pursuant hereto or thereto;
(c) any waiver, consent, extension, indulgence or other
action or inaction in respect of this Agreement, the Purchase
Agreement, any other Purchase Document or any Instrument executed
pursuant hereto or thereto or any assignment or transfer of any
thereof; or
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<PAGE>
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation, or the like, of the Company
or any other Person, whether or not the Company shall have notice or
knowledge of any of the foregoing.
SECTION 5.2. Protection of Collateral. The Mezzanine Agent may from
time to time, at its option, perform any act which the Company agrees
hereunder to perform and which the Company shall fail to perform after being
requested in writing to so perform (it being understood that no such request
need be given after the occurrence and during the continuance of any Event of
Default) and the Mezzanine Agent may from time to time take any other action
which the Mezzanine Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security
interest therein. The Company will, upon demand, repay to the Mezzanine Agent
all moneys advanced by the Mezzanine Agent in connection with the foregoing,
together with interest at a rate (or any maximum lesser rate permitted by
applicable law) per annum equal to 15 1/2% per annum.
SECTION 5.3. Mezzanine Agent Not Responsible. The Mezzanine Agent is
required to exercise reasonable care in the custody and preservation of any of
the Collateral in its possession; however, the Mezzanine Agent shall be deemed
to have exercised reasonable care in the custody and preservation of any of
the Collateral if it takes such action for that purpose as the Company
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Mezzanine
Agent to comply with any such request at any time shall not in itself be
deemed a failure to exercise reasonable care.
SECTION 5.4. Instrument Pursuant to Purchase Agreement. This
Agreement is an Instrument executed pursuant to the Purchase Agreement and
shall (unless otherwise expressly indicated herein) be construed, administered
and applied in accordance with the terms and provisions thereof, including,
without limitation, Article IX thereof.
SECTION 5.5. Amendments. This Agreement may be amended or
otherwise modified from time to time in accordance with the
provisions of Section 9.1 of the Purchase Agreement.
SECTION 5.6. Subrogation. The Company shall not be entitled to be
subrogated to any of the rights of the Mezzanine Agent or any Noteholder by
reason of any amounts received hereunder or in connection with the Collateral
until all Obligations have been paid in full and after the Purchaser's
commitment to purchase the Notes has terminated pursuant to Article II of the
Purchase Agreement.
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<PAGE>
SECTION 5.7. Termination. This Agreement shall terminate and be of no
further force and effect upon the full and final payment of all Obligations
and after the Purchaser's commitment to purchase the Notes has terminated
pursuant to Article II of the Purchase Agreement. Upon any such termination,
the Mezzanine Agent will, at the Company's expense, deliver all certificates
and instruments representing or evidencing all Pledged Collateral, together
with all other Collateral held by the Mezzanine Agent hereunder, and execute
and deliver to the Company, at the Company's expense, such documents as the
Company shall reasonably request to evidence such termination.
SECTION 5.8. Intent of the Parties. Notwithstanding the language of
any provision of this Agreement which might otherwise be construed to the
contrary, the parties hereto acknowledge and agree that neither the Purchaser,
the Mezzanine Agent or any Noteholder shall take any action or require the
Company to make any acknowledgements, agreements, or take any actions, which
would violate the terms and conditions of the Intercreditor Letter or the
Intercreditor Agreement dated the date hereof among BKC, NRE, Jaro, Osborn,
Hubert, the Company, the Senior Agent and the Mezzanine Agent.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
NRE HOLDINGS, INC.
By:
------------------------------------------
Name: A. Richard Caputo, Jr.
Title: Vice President
Address: c/o The Jordan Company
9 West 57th Street
New York, New York 10019
Attention: Mr. A. Richard Caputo, Jr.
MEZZANINE CAPITAL & INCOME TRUST
2001 PLC
By:
------------------------------------------
Name: James E. Jordan
Title:
Notices: c/o Jordan/Zalaznick
Advisers, Inc.
9 West 57th Street
New York, New York 10019
Attention: Mr. James E. Jordan
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SCHEDULE I
Pledged Share Issuer Common Stock
- -------------------- -----------------------------------------------------
Authorized Outstanding % Of Shares
Class of Stock Shares Shares Pledged
-------------- ---------- ----------- -----------
National Restaurant B 950 950 100%
Enterprises, Inc.
16
MEZZANINE CAPITAL & INCOME TRUST 2001 PLC
C/O JORDAN/ZALAZNICK ADVISERS, INC.
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
September 1, 1994
Burger King Corporation
17777 Old Cutler Road
Miami, Florida 33102
Attention: Mr. Craig Prusher
Re: (1) Pledge Agreement, dated as of September 1, 1994
(the "Mezzanine Pledge Agreement"), between NRE
Holdings, Inc., a Delaware corporation (the
"Company"), and Mezzanine Capital & Income Trust
2001 PLC, a public company incorporated in
England, individually ("MCIT"), and as agent (the
"Mezzanine Agent") for itself and the other
Noteholders (as defined therein).
(2) Guaranty, Indemnification and Acknowledgement of
Franchise Agreements dated as of September 1, 1994
(the "Holdings Franchise Guaranty"), between the
Company and Burger King Corporation, a Florida
corporation ("BKC").
(3) Intercreditor Agreement, dated as of September 1,
1994 (the "BKC Intercreditor Agreement"), among
BKC, the Company, Lawrence Jaro, William Osborn
and Gary Hubert, National Restaurant Enterprises,
Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("NRE") as Franchisee
thereunder, The First National Bank of Boston, a
national banking association, as agent (the
"Senior Agent") for the Banks (as defined in the
BKC Intercreditor Agreement), and MCIT.
Dear Mr. Prusher:
In satisfaction of the conditions to MCIT's funding on the date
hereof the purchase of notes of the Company in the aggregate principal amount
of $11,000,000 (the "MCIT Notes") under the Purchase Agreement, please execute
and return to the Mezzanine Agent (as defined in the Mezzanine Pledge
Agreement) the enclosed counterpart of this letter to evidence an agreement
between BKC and the Mezzanine Agent that all obligations of the Company
pursuant to the Holdings Franchise Guaranty shall be subordinate and junior in
right of payment to Mezzanine Debt (as defined
<PAGE>
below) in the manner and with the effect provided in this letter agreement,
and BKC, by its signature below, agrees to be bound by the terms hereof.
Section 1. Acceleration, Dissolution, etc. In the event that the
maturity of all of the principal amount of the MCIT Notes or Seller Notes (as
defined in the Pledge Agreement) shall have been accelerated in accordance
with their terms, then and in any such event and only if and to the extent
that a Mezzanine Recovery Amount shall exist, any payment or distribution of
any kind or character, whether in cash, property or securities which, but for
the subordination provisions of this letter agreement, would otherwise be
payable or deliverable upon or in respect of the Holdings Franchise Guaranty,
shall instead be paid over or delivered to the Mezzanine Agent for application
to Mezzanine Debt and, until the Mezzanine Debt has been repaid in full, BKC
shall not receive any such payment or distribution or benefit therefrom.
Section 2. Turnover. In the event that, notwithstanding the
provisions of Section 1, any such direct or indirect payment or distribution
shall be received by BKC in contravention of the provisions of any such
Section, such payments and distributions shall be held in trust for the
benefit of, and upon receipt by BKC of written notice that such payment or
distribution has been made in violation of Section 1 hereof, shall be
immediately paid over to, the Mezzanine Agent for application to the pro rata
payment of all Mezzanine Debt at the time outstanding until all such Mezzanine
Debt shall have been paid in full, after giving effect to any concurrent
payment or distribution to the holders of such Mezzanine Debt.
Section 3. Unconditional Obligation, etc. Nothing contained in this
letter agreement is intended to or shall impair, as between the Company, its
creditors (other than the holders of Mezzanine Debt), and BKC, the obligation
of the Company, which is absolute and unconditional, to pay to BKC all amounts
owing under the Holdings Franchise Guaranty as and when such amounts become
due and payable in accordance with the terms thereof, or to in any way affect
the relative rights of BKC and creditors of the Company other than the holders
of Mezzanine Debt. Subject to the payment in full of all Mezzanine Debt, BKC
shall be subrogated to the rights of the holders of Mezzanine Debt to receive
payments or distributions of assets of the Company made on the Mezzanine Debt
until all obligations of the Company under the Holdings Franchise Guaranty
shall be paid in full; and, for the purposes of such subrogation, no payments
or distributions to the holders of Mezzanine Debt of any cash, property or
securities to which BKC would be entitled except for these provisions shall,
as between the Company and its creditors (other than the holders of Mezzanine
Debt and BKC) be deemed to be a payment by the Company to or on account of
Mezzanine Debt,
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<PAGE>
it being understood that these provisions are intended solely for the purpose
of defining the relative rights of the holders of Mezzanine Debt, on the one
hand, and BKC on the other hand.
Section 4. Waivers, etc. BKC hereby waives any and all notice of
renewal, extension or accrual of any Mezzanine Debt, present or future, and
agrees and consents that without notice to or assent by BKC:
(a) the obligations and liabilities of the Company or any
other party or parties for or upon the Mezzanine Debt (and/or any
promissory note(s), security document or guaranty evidencing or
securing the same) may, from time to time, in whole or in part, be
renewed, extended, modified, amended, accelerated, compromised,
supplemented, terminated, sold, exchanged, waived or released;
(b) the holders of MCIT Notes Debt may exercise or refrain
from exercising any right, remedy or power granted by the Purchase
Agreement, any Purchase Document (as defined in the Purchase
Agreement) or any other document creating, evidencing or otherwise
related to MCIT Notes or at law, in equity or otherwise, with respect
to MCIT Notes or any collateral security or lien (legal or equitable)
held, given or intended to be given therefor (including the right to
perfect any lien or security interest created in connection
therewith);
(c) any and all collateral security and/or liens (legal or
equitable) at any time, present or future, held, given or intended to
be given for Mezzanine Debt, and any rights or remedies of the
holders of Mezzanine Debt in respect thereof, may, from time to time,
in whole or in part, be exchanged, sold, surrendered, released,
modified, waived or extended by the holders of Mezzanine Debt; and
(d) any balance or balances of funds with the holders of
Mezzanine Debt at any time standing to the credit of the Company or
any guarantor of any Mezzanine Debt may, from time to time, in whole
or in part, be surrendered or released,
all as the holders of Mezzanine Debt may deem advisable and all without
impairing, abridging, diminishing, releasing or affecting the subordination to
Mezzanine Debt provided for herein. The holders of Mezzanine Debt shall not be
prejudiced in their right to enforce the subordination contained herein in
accordance with the terms hereof by any act or failure to act on the part of
the Company.
Section 5. Amendment of Subordination Provisions. The
subordination provisions contained herein are for the benefit of
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<PAGE>
the holders of Mezzanine Debt and may not be rescinded, cancelled, amended or
modified in any way without the prior written consent thereto of the holders
of Mezzanine Debt and BKC.
Section 6. Notice to BKC. The Company shall give prompt written
notice to BKC of any fact known to the Company which would prohibit the making
of any payment to BKC under this letter agreement. Notwithstanding the
provisions of this letter agreement to the contrary, BKC
(a) shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to MCIT
under this letter agreement in respect of the Holdings Franchise
Guaranty, unless and until BKC shall have received written notice by
certified mail thereof from the Company, the Mezzanine Agent or a
holder of Mezzanine Debt or from any trustee therefor (and, prior to
the receipt of any such written notice, BKC shall be entitled in all
respects to assume that no such facts exist); and
(b) shall be entitled to receive and permanently retain all
payments made by or on behalf of the Company prior to receipt by BKC
under this letter agreement of any such written notice.
Section 7. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to
in this letter agreement, BKC shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person (as
defined in the Purchase Agreement) making such payment or distribution,
delivered to BKC, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Mezzanine Debt and
other Indebtedness (as defined in the Purchase Agreement) of the Company, the
amount thereof or payable therein, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to the provisions of this
letter agreement.
Section 8. Bankruptcy. (a) Notwithstanding anything in this letter
agreement to the contrary this Letter Agreement shall become null and void and
the parties hereto shall have no rights or responsibilities in respect of each
other pursuant hereto (i) from and after such time that a petition is filed
with respect to NRE or the Company (voluntary or involuntary) under Chapter 11
or Chapter 7 of the U.S. Bankruptcy Code (the "Code") or any other similar law
or proceeding affecting the rights of creditors
-4-
<PAGE>
generally ("Bankruptcy") or (ii) if pursuant to the Code, by operation of law
or otherwise, BKC is required to grant its consent to the sale of the NV
Equity Interests or Voting Equity Interests (each as defined in the BKC
Intercreditor Agreement) or such a sale or other transfer takes place without
BKC's consent.
(b) Notwithstanding anything in this letter agreement to the
contrary, this letter agreement shall have no effect on or change the order of
creditor priorities between MCIT and BKC under the Code or in any proceeding
thereunder.
As used herein, the following terms shall have the following
meanings:
"Mezzanine Recovery Amount" means, for purposes of determining the
occurrence and extent of subordination under this letter agreement, an amount
equal to all proceeds received by or on behalf of the Company in connection
with a transfer or assignment of any Voting Equity Interest (as defined in the
BKC Intercreditor Agreement) concurrently with any exercise either by the
Senior Agent under the Senior Pledge Agreement or by the Mezzanine Agent of
its rights pursuant to Section 3.4 of the Mezzanine Pledge Agreement, in each
case with respect to NV Equity Interests (as defined in the BKC Intercreditor
Agreement) and provided that BKC shall have given its prior written consent to
such transfer or assignment.
"Mezzanine Debt" means all indebtedness, obligations and liabilities
of the Company to the holders of MCIT Notes and Seller Notes, whether now
existing or hereafter created, arising out of or under the Purchase Agreement,
the other Purchase Documents (as defined in the Purchase Agreement) or the
Seller Notes, including all principal, interest (including interest accruing
after the commencement of bankruptcy, insolvency or similar proceedings with
respect to the Company, whether or not the claim therefor shall be
enforceable) and other amounts payable under any letter of credit
reimbursement agreement, bankers acceptance, note or instrument issued under
the Purchase Agreement; provided, however, that the aggregate principal amount
of Mezzanine Debt for purposes of the subordination provisions hereof shall
not at any time exceed the then Mezzanine Recovery Amount.
-5-
<PAGE>
Very truly yours,
MEZZANINE CAPITAL & INCOME
TRUST 2001 PLC, as Mezzanine
Agent
By:____________________________
Name:
Title:
SO AGREED this 1st day
of September, 1994
BURGER KING CORPORATION
By:____________________________
Name:
Title:
CONSENTED TO AND ACKNOWLEDGED
this 1st day of September, 1994
NRE HOLDINGS, INC.
By:____________________________
Name:
Title:
-6-
Exhibit 10.11
FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT AND
ALLONGE TO JUNIOR SUBORDINATED NOTE
FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT AND ALLONGE TO JUNIOR
SUBORDINATED NOTE, dated as of February 7, 1996 (the "Amendment"), between NRE
HOLDINGS, INC., a Delaware corporation ("Holdings") and BANCBOSTON INVESTMENTS,
INC., a Massachusetts corporation ("BBI").
WHEREAS, Holdings and BBI are parties to a Securities Purchase Agreement
dated as of November 30, 1994 (as amended and in effect from time to time, the
"Agreement"); and
WHEREAS, Holdings has executed and delivered to BBI a Junior
Subordinated Note dated as of November 30,1994 in the original principal amount
of $600,000 (as amended and in effect from time to time, the "BBI Note"); and
WHEREAS, each of Holdings and BBI which to amend certain provisions of
the Agreement and the BBI Note as more specifically set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. Amendment to Section 3 of Securities Purchase Agreement.
Section 3.1 of the Agreement is hereby amended by deleting the date "March 31,
2005" from the first sentence thereof and substituting in place thereof the date
"August 31, 2006".
2. Amendment to Section 10 of Securities Purchase Agreement.
Section 10.2 of the Agreement is hereby amended by (a) deleting the phrase ";
and" in subsection (b) and inserting a period in place thereof and (b) by
deleting subsection (c) in its entirety.
3. Amendment and Allonge to BBI Note. The BBI Note is hereby
amended by deleting the date "March 31, 2005" which appears in the first
sentence of the first paragraph of such BBI Note and substituting in place
thereof the date "August 31, 2006".
4. Representations and Warranties. Holdings represents and
warrants that all the representations and warranties as set forth in each of the
Agreement and the BBI Note are true and correct in all material respects on and
as of the date hereof. All such representations and warranties are hereby
ratified, affirmed and incorporated
-2-
herein by reference, with the same force and effect as though set forth herein
in their entirety.
5. Definitions. Each capitalized term used herein without specific
definition shall have the same meaning herein as in the Agreement.
6. No Waiver. Nothing contained herein shall constitute a waiver
of, impair or otherwise affect any obligation or any of the rights of Holdings
or BBI.
7. Ratification, Etc. Except as expressly amended hereby, the
Agreement and the BBI Note, as the case may be, and all documents, instruments
and agreements related thereto are hereby ratified and confirmed in all respects
and shall continue in full force and effect. The Agreement and this Amendment,
and the BBI Note and this Amendment, as the case may be, shall be read and
construed as a single agreement. All references in the Agreement or the BBI
Note, as the case may be, or any related agreement or instrument to the
Agreement or the BBI Note, as the case may be, shall hereafter refer to the
Agreement and the BBI Note, as the case may be, as amended hereby.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
9. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
10. Effectiveness of Amendment. This Amendment shall become
effective as of the date hereof upon receipt by BBI of counterparts of this
Amendment duly executed by each of Holdings and BBI.
-3-
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Securities Purchase Agreement and Junior Subordinated Note to be executed by
their duly authorized officers as a document under seal as of the date first set
forth above.
NRE HOLDINGS, INC.
By: \s
Title: Chief Executive Officer
BANCBOSTON INVESTMENTS, INC.
By:
Title:
-3-
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Securities Purchase Agreement and Junior Subordinated Note to be executed by
their duly authorized officers as a document under seal as of the date first set
forth above.
NRE HOLDINGS, INC.
By:
Title:
BANCBOSTON INVESTMENTS, INC.
By: \s Mary Josephs
Title: Vice President
<PAGE>
INTERCREDITOR AGREEMENT
TABLE OF CONTENTS
1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FRANCHISEE
AND GUARANTORS
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BKC
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LENDER
4. DEFAULT UNDER THE LOAN AGREEMENTS
4.1 Notice to BKC of Default
4.2 Notice to BKC of Intent to Foreclose
5. REMEDIES UNDER LOAN DOCUMENT5
5.1 Limits on Security Interest and Collateral Assignment
(a) Security Interest
(b) Collateral Assignment
5.2 Review Meeting
5.3 Pre-Conditions to Exercise of Remedies
(a) Control and Dominion
(b) Right of First Refusal; Right of Approval
(c) Payment of Amounts past Due to BKC
(d) Payment of Other Amounts Due to BKC
5.4 Management of Restaurants
(a) BKC Management
(b) Continued Operation by Franchisee or Another BKC Licensee
(c) Election
5.5 Disposition of Restaurants
(a) Sale Within Twenty-Four Months
(b) Terms of Sale; Bundling of Collateral
(c) BKC Approval of Buyer
(d) Consent of New BKL Landlord
(e) No Other Sale
(f) Termination of Affected Franchise Agreements
(g) Lender's Rights
6. BKL LEASES
6.1 Assignment
<PAGE>
7. DEFAULT UNDER FRANCHISE AGREEMENTS AND BKL LEASES
7.1 Notice to Lender of Default
7.2 Lender's Opportunity to Cure Monetary Default
7.3 Lender's Opportunity to Cure Non-Monetary Default
7.4 BKC Right to Close
8. ASSIGNMENT
9. BREACH OF CONTRACT; EQUITABLE REMEDIES
10. TERM OF AGREEMENT
11. CONSENT AND ACKNOWLEDGEMENT OF COMMERCIALLY REASONABLE
TERMS
11.1 Acknowledgments
11.2 Consent to Terms of Sale
12. GENERAL RELEASE
13. RIGHT OF AUDIT
14. CONFIDENTIALITY
15. CAPTION HEADINGS
16. NOTICES
17. CHOICE OF LAW; JURISDICTION AND VENUE
18. NO AMENDMENTS
18.1 This Agreement
18.2 Franchise Agreements
19. INTEGRATION
20. BINDING EFFECT
21. TITLES
22. SEVERABILITY
23. CONSTRUCTION OF AGREEMENT
<PAGE>
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT ("Agreement") dated as of the 7th day of
February, 1996, by and among BURGER KING CORPORATION, a Florida corporation
"BKC"), the individual, individuals, entity and/or entities set forth on
Schedule A hereto (individually, a "Franchisee"), and the individual,
individuals, entity and/or entities set forth on Schedu1e B hereto
(individually a "Guarantor" and collectively, the "Guarantors"), and THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, for itself and for
the Banks as their agent (the "Lender") (the "Banks" are as hereinafter
defined).
WHEREAS, certain Burger King (Registered Trademark) restaurants identified
by BKC store number and address on Schedule C hereto (individually, a
"Restaurant" and collectively, the "Restaurants") are operated by the Franchisee
pursuant to franchise agreements (individually, a "Franchise Agreement" and
collectively, the "Franchise Agreements") issued by BKC;
WHEREAS, certain of the Restaurants are located on real property
(individually, a "BKL Property" and collectively, the "BKL Properties")
currently leased to the Franchisee pursuant to certain lease/sublease
agreements with BKC, as lessor (individually, a "BKL Lease" and collectively,
the "BKL Leases");
WHEREAS, the Franchisees are wholly owned subsidiaries of one of the
Guarantors, National Restaurant Enterprises, Inc.
WHEREAS, NRE is a wholly owned subsidiary of one of the Guarantors, NRE
Holdings, Inc. (the "Parent");
WHEREAS, NRE is the owner of all of the outstanding equity interests in
the Franchisees "Equity Interests");
WHEREAS, the Equity Interests in each Franchisee are divided by class
into 95 shares of non-voting common stock (the "NV Equity Interests") and 5
shares of voting common stock (the "Voting Equity Interests");
WHEREAS, the Guarantors (other than the Parent and NRE) are the owners
of controlling equity interests in the Parent (the "Parent Equity Interests");
WHEREAS, the Guarantors have guaranteed and will guarantee the payment
and performance of all of the Franchisees' debts and obligations to BKC
pursuant to certain agreements of guaranty (the "Guaranties");
WHEREAS, certain of the Guarantors have contemporaneously herewith
entered into a second Amended and Restated Revolving Credit and Term Loan
Agreement dated as of the date
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<PAGE>
hereof (the "Credit Agreement") among certain of the Guarantors, those lending
institutions (including Lender) set forth on Schedule 1 to the Credit
Agreement (collectively, the "Banks") and the Lender in its capacity as agent
for the Banks, and Franchisees have guaranteed all of NRE's obligations under
the Credit Agreement pursuant to guarantees entered into as of the date
hereof, and the Franchisees and the Guarantors have executed certain related
documents (collectively, the "Loan Documents"), including promissory notes
payable to the Banks in the original principal amount of ONE HUNDRED MILLION
DOLLARS ($100,000,000), with the proceeds of the related loan(s) to be used
solely for the purposes set forth under Section 1.6 of this Agreement;
WHEREAS, the Franchisees and Guarantors have requested that BKC consent
to, among other things, a security interest in the Franchise Agreements, and a
pledge of the NV Equity Interests (the "NV Stock Pledge") all as provided in
the Loan Documents; and
WHEREAS, BKC has agreed to consent to these requests subject to and in
consideration of the covenants, terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto agree as follows:
1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
FRANCHISEE AND GUARANTORS.
1.1 Each Franchisee and each Guarantor represents and warrants that
(i) each of the Franchise Agreements and BKL Leases are in full
force and effect; (ii) to the best of their knowledge, there are
no material defaults by BKC under any of the Franchise Agreements
or BKL Leases and no event has occurred which, with the passage
of time or the giving of notice, would constitute a material
default by BKC under any of the Franchise Agreements or BKL
Leases; (iii) they will continue to perform all obligations under
those agreements; and (iv) the obligations of the Guarantors
under the Guaranties are unaffected by this Agreement.
1.2 Except as expressly provided herein, each Franchisee represents
and warrants to BKC that it shall continue to comply with the
terms and conditions of the Franchise Agreements, BKL Leases, and
any other agreement with BKC, including the limitation that it
shall not sell, assign, pledge, encumber, or otherwise transfer
any interest in such agreements, except as set forth herein.
1.3 NRE represents and warrants that it shall not sell, assign,
pledge, encumber or otherwise transfer any legal or beneficial
interest in its Equity Interests in the Franchisee in violation of
the terms of the Franchise Agreements or any other agreement with
BKC, except as set forth herein.
1.4 Each Guarantor represents and warrants that they shall not sell,
assign, pledge, encumber or otherwise transfer any legal or
beneficial interest in their Equity
2
<PAGE>
Interests or their interest in the Parent Equity Interests in violation
of the Franchise Agreements between Franchisee and BKC for the Burger
King (Registered Trademark) Restaurants identified on Schedule C hereto or
in violation of that certain Stockholders Agreement dated September 1,
1994 between each of the Guarantors, NRE, NRE Holdings, Inc. ("Holdings")
and the Lender, as amended as of February 7, 1996 (the "Stockholders
Agreement").
1.5 In the event that any Guarantor is an entity (an "Entity") whose equity
is wholly or partially owned by another Guarantor (an "Owner"), each
such Owner hereby agrees and reaffirms that he shall not sell, assign,
pledge, encumber or otherwise transfer any legal or beneficial interest
in the Entity in violation of the terms of the Franchise Agreements or
any other agreement with BKC.
1.6 NRE and each Franchisee represents and warrants that the funds advanced
under the Loan Documents shall be used only for, and are specifically
restricted to, the following purposes: (i) acquisition and deve1opment
of BKC approved Burger King restaurant sites; (ii) existing Restaurant
upgrades or remodelling; (iii) purchase of existing Burger King
(Registered Trademark) restaurants from BKC or other franchisees; (iv)
refinancing of an existing BKC loan; (v) general corporate and working
capital purposes and NRE will obtain Letters of Credit for general
corporate and working capital purposes for NRE's and the Franchisees'
Burger King restaurant operations; and (vi) refinancing of a loan which
was made for the purpose listed in (i) to (v).
1.7 NRE, Franchisees and Guarantors each acknowledge and agree that this
Agreement and the consent contained herein shall not apply to the Voting
Equity Interests or to the BKL Leases. The Parent, NRE, Franchisees and
Guarantors each warrant and represent to BKC that no interest of the
Guarantors in the Voting Equity Interests, the Parent Equity Interests
or the BKL Leases shall be collateralized, pledged or otherwise
subjected to the terms and conditions of the Loan Documents.
1.8 NRE, the Parent, the Lender and certain of the Banks entered into a
Revolving Credit and Term Loan Agreement dated as of September 1, 1994,
which was amended and restated as of November 30, 1994 (as amended, the
"Original Credit Agreement"), pursuant to which Lender and the Banks
financed, among other things, the acquisition by NRE of certain Burger
King (Registered Trademark) restaurants. The Credit Agreement amends and
restates the Original Credit Agreement. In connection with the Original
Credit Agreement, BKC, NRE, the other Guarantors, and the Lender, among
other persons, entered into an Intercreditor Agreement dated as of
September 1, 1994, and a First Amendment to Intercreditor Agreement dated
as of November 30, 1994 (such Intercreditor Agreement as amended, is
referred to as the "First Intercreditor Agreement"). NRE, the Parent, and
the Guarantors each represent, warrant and agree that: (a)
3
<PAGE>
all of the representations and warranties made by them in the
First Intercreditor Agreement remain and are true and correct in
all material respects on and as of the date hereof, and are not
affected by the entering into of the Credit Agreement and (b) all
of the representations, warranties, and agreements in the First
Intercreditor Agreement are hereby ratified and affirmed.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BKC. BKC hereby
represents and warrants as follows:
2.1 Each of the Franchise Agreements and BKC Leases are in full force
and effect.
2.2 Within the thirty (30) days prior to the date of this Agreement,
BKC has not sent Franchisees a written notice of default under the
Franchise Agreements or BKL Leases.
2.3 BKC makes no warranties or representations except as expressly set
forth above. Without limiting the foregoing, BKC has made no
investigation as to any defaults or breaches of the Franchise
Agreements or BKL Leases nor inspection of any of the Restaurants
except as expressly set forth above.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LENDER. Lender hereby
represents and warrants as follows:
3.1 Lender's rights under the Loan Documents to realize on the
collateral described in Section 5 of this Agreement shall be and
are hereby expressly made subject to the covenants, conditions
and restrictions contained in this Agreement.
3.2 Except as expressly provided herein, or, with respect to the
Parent Equity Interests only, as provided in other Intercreditor
Agreements to which BKC and Lender are parties, Lender has and
will acquire no right, title, security interest, pledge or other
right in, to or against any BKL Lease, any BKL Property, the
Voting Equity Interests or the Parent Equity Interests by virtue
of the Loan Documents, this Agreement, or any other agreement.
3.3 To the best of Lender's acknowledge, the Loan Documents shall
secure only indebtedness incurred by NRE in connection with the
guaranty of the loans of funds, for the purposes set forth in
Section 1.6 above.
3.4 All representations, warranties and covenants made by the Lender
in this Agreement are made by the Lender in its own right and in
its capacity as agent for the Banks; and, without limiting the
foregoing, the restrictions on Lender's rights set forth in this
Agreement shall be binding on the Banks. Lender further
represents and warrants that it has the authority to enter into
and perform this Agreement as agent for the Banks.
4
<PAGE>
3.5 Lender represents, warrants and agrees that: (a) all of the
representations and warranties made by Lender in the First
Intercreditor Agreement remain and are true and correct in all
material respects on and as of the date hereof, and are not
affected by the entering into of the Credit Agreement, and (b)
all of the representations, warranties, and agreements in the
First Intercreditor Agreement are hereby ratified and affirmed.
4. DEFAULT UNDER THE LOAN DOCUMENTS.
4.1 Notice to BKC of Default. In the event Lender delivers a notice
of default or demand for payment under any of the Loan Documents,
Lender shall also give simultaneous written notice of such
default or demand to BKC (a "Loan, Default Notice"). The Loan
Default Notice shall specify the exact default(s) and any
applicable grace period. In the event that such default(s) are
cured within any applicable grace period, Lender shall also
deliver written notice to BKC that the default(s) are cured.
4.2 Notice to BKC of Intent to Foreclose. In the event any Franchisee
fails to timely and properly cure the default(s) set forth in the
Loan Default Notice, Lender shall deliver fourteen (14) days'
prior written notice to BKC and the Franchisee as a condition
precedent to the exercise of its rights and remedies under the
Loan Documents and this Agreement (the "Foreclosure Notice").
5. REMEDIES UNDER LOAN DOCUMENTS. The Lender's rights and remedies under
the Loan Documents shall be limited in the following manner.
5.1 Limits on Security Interest and Collateral Assignment.
(a) Security Interest. Notwithstanding anything in the Loan
Documents to the contrary, the parties to this Agreement
agree that: (i) no security interest granted to the Lender
shall apply to the Voting Equity Interests or the Parent
Equity Interests; and (ii) any security interest in the
Franchise Agreements shall be limited to a security
interest in the proceeds of a private sale of any
Franchisee's rights under the Franchise Agreements pursuant
to the terms and conditions of Section 9504 of the Uniform
Commercial Code as in effect from time to time in the State
in which the individual Restaurant is located (the "UCC"),
and the Lender shall have no right to conduct a public sale
or retain any Franchisee's rights under any Franchise
Agreement in satisfaction of the loan as contemplated by
Section 9-505 of the UCC.
(b) Collateral Assignment. Notwithstanding anything in the Loan
Documents to the contrary, the parties to this Agreement
agree that the Franchisee's tenancy rights under any BKL
Lease can not and will not be collaterally assigned to the
Lender.
5
<PAGE>
5.2 Review Meeting. Upon receipt by BKC of a Foreclosure Notice,
Lender and BKC shall exercise their best efforts to meet within
f0urteen (14) days at a mutually agreed site, for the purpose of
reviewing the Restaurants and the desirability of the application
of this Agreement to each such Restaurant (the "Review Meeting").
At the time of the Review Meeting, upon the mutual agreement of
BKC and Lender, any Restaurant may be excluded from the
provisions of this Agreement and, thereafter, the Lender shall
immediately release its security interest in the Franchise
Agreement for each such Restaurant. Thereafter, BKC shall be free
to exercise its rights and remedies under the Franchise Agreement
and BKL Lease, if any, for each such Restaurant as provided
therein and the Lender shall be free to exercise its rights
against any remaining collateral at the relevant Restaurant site
without reference to this Agreement. All Restaurants which shall
continue to be subject to the provisions of this Agreement
after the Review Meeting shall be referred to hereinafter
individually as an "Affected Restaurant" and collectively as the
"Affected Restaurants." The Franchise Agreements relating to such
Affected Restaurants shall be referred to hereinafter individually
as an "Affected Franchise Agreement" and collectively as the
"Affected Franchise Agreements." The BKL Leases relating to such
Affected Restaurants shall be referred to hereinafter individually
as an "Affected BKL Lease" and collectively as the "Affected BKL
Leases." If the Review Meeting does not take place, then all of the
Restaurants shall be deemed Affected Restaurants.
5.3 Pre-Conditions to Exercise of Remedies: The exercise by the
Lender of its right to force an assignment or sale of any
Franchisee's rights and obligations under the Affected Franchise
Agreements shall be subject to the following terms and conditions
precedent:
(a) Control and Dominion. The Lender must take possession of
and acquire control and dominion over substantially all of the
tangible real and personal property of the Franchisee delivered as
collateral under the Loan Documents, whether by exercise of the
Lenders rights under the Loan Documents or by agreement with the
Franchisee.
(b) Right of First Refusal; Right of Approval. Any transfer of
the Affected Franchise Agreements must be made subject to and in
accordance with BKC'S rights under the Affected Franchise
Agreements, including, but not limited to, (i) BKC's right of
first refusal to purchase any or all of the Affected Restaurants
and the real property and furniture, fixtures and equipment
associated therewith and located therein, and (ii) BKC's right to
approve the sale, transfer and proposed transferee of the Affected
Franchise Agreements and Affected Restaurants pursuant to BKC's
then current standards for approval.
6
<PAGE>
(c) Payment of Amounts Past Due to BKC. Lender's timely payment to
BKC pursuant to Section 7.2 hereof of all sums past due and owing
to BKC under each of the Affected Franchise Agreements and any
Affected BKL Lease covering the premises of any Affected
Restaurants, as well as those past due sums related to products or
supplies sold by BKC for use in the Affected Restaurants,
including without limitation, any pre- and post-petition amounts
due from any Franchisee who is the subject of a proceeding under
the United States Bankruptcy Code or any similar law affecting the
rights of creditors generally.
(d) Payment of Other Amounts Due to BKC. Lender's timely payment to
BKC when due of (i) all sums which become due to BKC under the
Affected Franchise Agreements and Affected BKL Leases in
connection with operation of the Affected Restaurants during the
term of this Agreement, and (ii) all sums which become due to BKC
in connection with products or supplies sold by BKC during the
term of this Agreement for use in the Affected Restaurants.
Without limiting the foregoing, it is expressly understood that
Lender must pay all post-petition amounts due from a Franchisee
which is the subject of a proceeding under the United States
Bankruptcy Code, or any similar law affecting the rights of
creditors generally, when due under the terms of the Affected
Franchise Agreement or Affected BKL Lease, without reference to
any right of such Franchisee to defer such payment pending
assumption of those agreements or for any other reason.
5.4 Management of Restaurants. After receipt by BKC of a Foreclosure Notice
and the satisfaction by the Lender of the requirements of Section 5.3(a)
above (the "Realization Date"), the Affected Restaurants shall be
managed and operated in the following manner:
(a) BKC Management. BKC shall have the initial right, but not the
obligation, to assume the operation of some or all of the Affected
Restaurants under a management agreement (a "Management
Agreement") in form and content reasonably acceptable to counsel
for BKC and Lender for a period of time up to (i) the date on
which any such Affected Restaurant is sold by Lender to a third
party or to BKC pursuant to this Agreement, (ii) the expiration
date of the Affected Franchise Agreements and Affected BKL Leases,
or (iii) expiration of the Sale Period (as defined below),
whichever is earlier (the "Management Period"). In return for
operating the Affected Restaurants, the Management Agreement shall
include, at a minimum and in addition to such other terms as BKC
may require pursuant to the preceding sentence, all of the
following:
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<PAGE>
(1) A management fee in an amount equal to a percentage
of monthly Gross Sales (as defined in the Franchise
Agreements) generated at each Affected Restaurant
operated by BKC, which percentage figure shall be
the greater of ten percent (10%) or the then current
percentage rate charged for comparable management
services in a similar factual situation, if any
(factors to be considered in determining the
applicable percentage rate to be charged are the
number, location and size of the Restaurants to be
operated by BKC). This management fee will be in
addition to and not in lieu of the royalty and
advertising fees and rents due under the Franchise
Agreements and BKL Leases;
(2) The option of expending two and one-half percent
(2.5%) of monthly Gross Sales generated at each such
Restaurant for local marketing, in addition to the
four percent (4%) advertising contribution to be
paid under the Affected Franchise Agreement for each
Affected Restaurant;
(3) The option of expending, out of the Gross Sales for
each Affected Restaurant, up to $25,000.00 per year
for (i) repairs and maintenance and/or (ii)
alterations necessary to conform the Affected
Restaurant to the then current image for Burger
King restaurants; and
(4) The right to replace or add additional signs and/or
equipment to each Affected Restaurant as it becomes
necessary to conform with menu or operational
changes required by BKC to be implemented at such
time. The cost for any such replacement or
additional equipment will be paid out of the Gross
Sales generated at all of the Affected Restaurants.
(b) Continued Operation By Franchisee or another BKC Licensee.
In the event that BKC elects not to manage the Affected
Restaurants as provided in Section 5.4(a) above, BKC shall
do one of the following, the choice of which shall be in
BKC's sole discretion: (i) approve the Franchisee to
continue to operate any or all of the Affected Restaurants
during the Management Period, with the Lender's consent, or
(ii) approve one or more multi-unit BKC licensees
reasonably acceptable to BKC and Lender to supervise the
operation of any or all of the Affected Restaurants during
such period, pursuant to a management agreement reasonably
acceptable to such licensee, BKC and Lender. BKC will, as a
courtesy only, assist the Lender in identifying any such
BKC licensees, but shall owe no legal obligation or duty to
the Lender in this regard and
8
<PAGE>
shall have no liability to the Lender for any failure to so
assist the Lender. If Franchisee and/or an approved BKC
licensee(s), if any, are approved to operate the Affected
Restaurants during such period, such Restaurants shall be
operated pursuant to the terms of the corresponding
Affected Franchise Agreements.
(c) Election. BKC shall exercise its option to operate the
Affected Restaurants pursuant to Section 5A(a) above or designate
the Franchisee or another entity to operate the Affected
Restaurants pursuant to Section 5.4(b) above, by delivering
written notice thereof to the Lender within fourteen (14) days of
BKC's receipt of a Foreclosure Notice (the "Management Election
Notice"). If BKC does not deliver a Management Election Notice,
BKC shall be deemed to have elected to have the Franchisee, with
the Lender's consent, continue to operate the Affected Restaurants
pursuant to Section 5.4(b).
5.5 Disposition of Restaurants and NV Equity Interests. Any sale,
transfer or assignment of the Affected Franchise Agreements, the
NV Equity Interests or Affected BKL Leases by the Lender shall be
subject to the provisions of Section 5.3 and the following
conditions:
(a) Sale Within Twenty Four Months. At any time after its receipt of the
Foreclosure Notice, BKC may deliver written notice (the "Notice to
Sell") to the Lender dictating that the Lender shall have twenty
four (24) months from receipt of the Notice to Sell to sell and
transfer by private sale one or more of the Affected Restaurants
and Affected Franchise Agreements, together with all of the real
and personal property associated therewith, pursuant to the terms
of this Agreement and the Affected Franchise Agreement. Provided,
however, that if Lender is utilizing its best efforts to lift or
remove any stay or judicial or statutory impediment imposed on the
sale of an Affected Restaurant, the twenty four (24) month period
shall not commence, or if it has commenced it shall be tolled,
during any period when Lender is prevented from selling such
Affected Restaurant by reason of the filing by Franchisee of a
petition for relief under the United States Bankruptcy Code or by
reason of any federal, state or local law or any other order of a
court of competent jurisdiction preventing the sale of any such
Restaurant This twenty four (24) month period, together with any
extension (as provided above), is herein referred to as the "Sale
Period."
(b) Terms of Sale: Bundling of Collateral. During the Sale
Period, the Lender shall "bundle" the real property interest
(whether a fee or leasehold), and the personal property used in
connection with the operation of each Affected Restaurant,
together with the Affected Franchise Agreement, in order to
require that any proposed asset sale by
9
<PAGE>
Lender of such Affected Restaurant include the Affected Franchise
Agreements and real property interest, furniture, fixtures,
equipment and other personality necessary to maintain the
operational integrity of each Affected Restaurant. A sale of the
NV Equity Interests as an entity shall be deemed to satisfy this
requirement. While each Affected Restaurant must be sold in this
manner, the Lender is free to sell each Affected Restaurant
separately or in groups, subject only to its obligation (as
limited by the provisions of Section 12 below) to act in a
commercially reasonable manner.
(c) BKC Approval of Buyer. Any purchaser(s) must be acceptable to BKC
and satisfy BKC's then current standards for receiving approval to
acquire an interest in a Burger King restaurant. BKC will provide
Lender with such current standards upon written request by Lender.
Lender, Franchisee, and Guarantors acknowledge, agree, and
understand that (i) the requirements defining acceptable
purchasers and for approving prospective BKC franchisees or the
requests for existing franchisees to develop, operate or acquire
an interest in additional Burger King" restaurants are subject to
change by BKC, in its sole discretion, and (ii) any disapproval by
BKC due to the failure of any prospective purchaser or franchisee
to meet such requirements shall be deemed a reasonable action by
BKC unless BKC has applied its criteria in a bad faith effort to
harm the financial interests of the Lender. BKC agrees to
cooperate with Lender in the latter's efforts to find an acceptable
purchaser(s) for the Affected Restaurants, but has no obligation
to locate buyer(s). Lender agrees to sell or assign the Affected
Restaurants and Affected Franchise Agreements by private sale
only, and not by public sale or auction.
(d) Consent of New BKL Landlord. In the event that BKC sells,
transfers, assigns, mortgages, or pledges its interest in a BKL
Property or BKL Lease to a third party (a "New Landlord") as
provided in Section 6.1(c) below, Lender shall, in addition to
satisfying all of the other conditions set forth in this Section
5.5, obtain the prior written consent (a "Landlord Consent") of
the New Landlord before transferring the Franchisee's rights under
an Affected Franchise Agreement to a third party.
(e) No Other Sale. Any transfer, sale, conveyance or assignment
made in violation of the terms of Section 5.5 above shall
constitute a material breach of this Agreement by Lender and BKC
shall be entitled to any and all remedies permitted by law or
equity, including injunctive relief to enjoin any such
unauthorized sale, transfer, conveyance or assignment.
10
<PAGE>
(f) Consent of BKC to Foreclose on Stock Pledge. The parties
hereto acknowledge and agree that Lender shall not,
without the consent of BKC, foreclose on the Stock Pledge
or otherwise take control of the NV Equity Interests.
Lender hereby accepts and acknowledges that Lender may not,
at any time, foreclose on the Stock Pledge, take control of
the NV Equity Interests or transfer, assign or in any way
alienate the NV Equity Interests, or a portion thereof,
without BKC's consent.
(g) Termination of Affected Franchise Agreements and BKL Leases.
(i) Subject to the provisions of Sections 6.1(c) and 7
of this Agreement, BKC agrees to not terminate any
of the Affected Franchise Agreements or Affected BKL
Leases during the Sale Period if Lender complies
with the terms and conditions of this Agreement and
each and every one of the Affected Franchise
Agreements and Affected BKL Leases, including, but
not limited to, operational standards and all
payment obligations for royalties, advertising and
rent.
(ii) In the event the Affected Restaurants and related
Affected Franchise Agreements and Affected BKL
Leases are not sold and transferred within the Sale
Period applicable to each of them, BKC shall have
the subsequent right to terminate the unsold and
untransferred Affected Franchise Agreements and
Affected BKL Leases upon delivery of thirty (30)
days prior written notice to Lender and the
Franchisee.
(iii) In the event that the Lender or the Franchisee fail
to meet any other condition or obligation under this
Agreement or any of the Affected Franchise
Agreements or Affected BKL Leases, including without
limitation the obligation to pay when due all
amounts payable under the Affected Franchise
Agreements and Affected BKL Leases as a group for
the full term of this Agreement, BKC shall have the
subsequent right to terminate any then unsold and
untransferred Affected Franchise Agreement and
Affected BKL Lease upon delivery of thirty (30) days
prior written notice to Lender and the Franchisee.
(iv) Upon termination of any or all of the Affected
Franchise Agreements or Affected BKL Leases, (x)
Lender's security interest in the relevant Affected
Franchise Agreement shall automatically terminate
and be of no further force and effect, (y)Lender
shall execute and file relevant termination
statements as required by law or requested by the
Franchisee or BKC, and (z) Lender shall comply with
all post.termination covenants
11
<PAGE>
contained in such Franchise Agreements and BKL
Leases, including, but not limited to, making at its
own expense such removals or changes in signs and
the Restaurant buildings and premises as BKC shall
request so as to effectively distinguish the
Restaurant buildings and premises from their former
appearance and from any other Burger King
restaurant. It is expressly understood, however,
that nothing in this Agreement shall obligate the
Lender to compensate BKC for amounts due to BKC
which have not yet accrued at the time of
termination.
(h) Lender's Rights. Upon termination of the Lender's security
interest in any of the Franchise Agreements, whether
pursuant to the provisions of Sections 5.2 or 5.5(g)
hereof, or otherwise, the Lender shall be free to exercise
its rights against its remaining collateral relating to the
corresponding Restaurant pursuant to the terms of the Loan
Documents and without reference to this Agreement.
6. BKL LEASES.
6.1 Assignment. For so long as BKC remains the owner or lessee of the
BKL Property subject to any BKL Lease, BKC agrees as follows:
(a) In the event that the Lender (i) acquires control and
dominion over the tangible personal property used in
connection with the operation of the Restaurant which is
subject to the BKL Lease, (ii) such Restaurant is
designated as an Affected Restaurant, (iii) all obligations
due under the BKL Lease are paid and performed in full
when due, and (iv) the Lender meets all of its obligations
under Section 5.3 hereof, then BKC agrees that the manager
appointed pursuant to the terms of Section 5.4 shall have
the right to occupy the BKL Property on the same terms and
conditions as the Franchisee, and that BKC shall not
terminate the BKL Lease until expiration of the relevant
Sale Period.
(b) In the event that (i) all of the conditions set forth in
Section 6.1(a) are met and (ii) BKC approves an assignment
of the Affected Franchise Agreement relating to the
Affected Restaurant operated on the BKL Property, then BKC
shall also consent to the assignment of the Affected BKL
Lease to the same assignee.
(c) Notwithstanding anything in this Agreement to the contrary,
it is expressly understood that BKC remains free to sell
any BKL Property and assign its rights under any BKL Lease
at any time, and the terms of this Agreement and this
Section 6 shall not apply to, restrict, or obligate any
such buyer or assignee.
12
<PAGE>
7. DEFAULT UNDER FRANCHISE AGREEMENTS AND BKL LEASES.
7.1 Notice to Lender of Default. In the event BKC delivers a notice
of default under any of the Franchise Agreements or BKL Leases (a
"Contract Default Notice"), BKC shall simultaneously deliver a
copy of the Contract Default Notice to Lender. In the event the
default(s) set forth in the Contract Default Notice are subject
to an applicable cure period, BKC shall also deliver notice in
writing to Lender that such default(s) have or have not been
cured within such cure period (the "Cure Notice").
7.2 Lender's Opportunity to Cure Monetary Default.
(a) In the event Franchisees fail to cure a monetary default
under any Franchise Agreement or BKL Lease (a "Payment
Default") within any applicable grace period, BKC agrees
that Lender shall have the right to cure the Payment
Default within fifteen (15) calendar days after Lender
receives its copy of the Cure Notice. In the event Lender
elects not to cure any such Payment Default, then BKC may
immediately terminate the related Franchise Agreement and
BKL Lease, if any, without further notice or opportunity
to cure and pursue any and all remedies permitted
thereunder and by law.
(b) Notwithstanding the foregoing, with respect to each
Franchise Agreement and related BKL Lease, if any, if (i)
Lender should exercise the right to cure Payment Defaults
four (4) consecutive calendar months, or to cure Payment
Defaults in an aggregate of eight (8) calendar months, and
(ii) Lender fails to contemporaneously after such last
default contemplated above deliver a Foreclosure Notice and
file and diligently pursue an action to foreclose on assets
pledged to it under the Loan Documents, then BKC may
terminate the related Franchise Agreement and BKL Lease, if
any.
(c) Notwithstanding the foregoing language in Section 7.2(b)
regarding the eight (8) calendar month aggregate, beginning
on January 1, 1995; Lender shall, to the extent that an
opportunity to cure under Section 7.2(b) has been used,
earn back one additional opportunity to cure a Payment
Default for each full twelve (12) month period during
which the Franchisee has remained current in all payments
due BKC under all of the BKL Leases and all of the
Franchise Agreements. At no point will the Lender
accumulate more than eight (8) available unused
opportunities to cure under this Section 7(c).
7.3 Lender's Opportunity To Cure Non-Monetary Default.
13
<PAGE>
(a) In the event Franchisees fail to cure a non-monetary
default under any Franchise Agreement or BKL Lease (a
"Non-Monetary Default") within any applicable cure period,
Lender shall have thirty (30) days after receipt of the
Cure Notice to deliver a Foreclosure Notice. This thirty
(30) day period is hereinafter be referred to as the
"Election Period."
(b) In the event of the occurrence of a non-curable,
Non-Monetary Default, the Election Period shall commence on
Lender's receipt of the Contract Default Notice.
(c) Franchisees, Guarantors, and Lender agree that during the
Election Period BKC shall have the right, but not the
obligation, in its sole discretion, to: (i) take such
necessary actions to abate and cure the Non-Monetary
Default(s) under the Franchise Agreements which actions
shall include, but not be limited to, temporarily closing
any of the Restaurants affected by such default(s) due to
health reasons or other emergencies (as provided in Section
7.4 below herein); removing from such Restaurants those
products, signs, equipment or other materials which are not
approved by BKC; and taking such other actions which BKC
deems reasonably necessary in order to mitigate damage to
BKC and its trademarks and/or (ii) supervise the operation
of such Restaurants pursuant to a temporary management
agreement which shall include the terms set forth in
Section 5.4(a) herein. Franchisees, Guarantors, and Lender
acknowledge and agree that monetary damages will be
inadequate to remedy the damage caused to BKC in the event
a material Non-Monetary Default under any of the Franchise
Agreements remains uncured. Accordingly, BKC shall be
entitled to injunctive relief, including, but not limited
to, a temporary restraining order, issued by a court of
competent jurisdiction in order to enforce its rights
specified in this Section 7.3(c).
(d) In the event Lender fails to notify BKC of its election
within the Election Period pursuant to said Section 7.3(a)
or fails to diligently pursue its remedies against the
relevant Affected Franchise Agreement or Affected BKL
Lease, then BKC may immediately terminate the relevant
Franchise Agreement and BKL Lease affected by the defaults
without further notice or opportunity to cure and pursue
any and all remedies permitted thereunder and by law
without further notice to Lender.
7.4 BKC Right to Close. Notwithstanding the foregoing provisions of
Section 7.3, BKC shall have the right to immediately close,
without prior notice or any opportunity to cure, any of the
Restaurants which BKC deems, in its sole discretion, necessary
due to reasons of public health and safety or due to an emergency
which impacts public health or safety ("Emergency Situation").
14
<PAGE>
Unless the Emergency Situation is permanent, BKC's right to close
shall last only until such Emergency Situation has, in the sole
opinion of BKC, ended.
8. ASSIGNMENT
8.1 Franchisee may not assign or transfer its interest in this
Agreement without the written consent of the other parties
hereto. BKC or Lender may assign their respective interests
herein without the consent of any party hereto.
9. BREACH OF CONTRACT; EQUITABLE REMEDIES
9.1 In the event any party shall breach the terms of this Agreement,
any other party hereto may declare a breach and pursue any remedy
available at law or in equity. It is expressly understood and
agreed that monetary damages may be inadequate to remedy a
material breach of this Agreement and that injunctive relief may
be granted by a court of competent jurisdiction. Further, in
light of the nature of this Agreement and the potential need for
BKC to take prompt action to abate a dangerous condition and/or
mitigate the damage to its trademarks and service marks, in the
event of default by any of the parties hereunder or by
Franchisees under the Franchise Agreements, if a court orders BKC
to post a bond as a condition to the entry of an order for
injunctive relief, the parties jointly and severally agree that
such bond shall be in a nominal amount of money not to exceed
FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00).
10. TERM OF AGREEMENT.
10.1 This Agreement shall commence on the date first written above and
shall continue until irrevocable payment in full of all
obligations under the Loan Documents or until the expiration or
earlier termination of all of the Franchise Agreements and BKL
Leases, whichever is earlier, at which time this Agreement shall
expire and become of no further force and effect.
10.2 Upon or within a reasonable time after such expiration or
termination the parties agree to sign any reasonable documents
requested by any party in order to confirm such expiration or
termination.
ll. CONSENT AND ACKNOWLEDGMENT.
11.1 Acknowledgments. Franchisees and Guarantors acknowledge and
understand the provisions of this Agreement and the procedures
set forth herein relating to the requirements that, in the event
of an exercise by the Lender of its rights and remedies under the
Loan Documents and this Agreement, such exercise shall be subject
to the terms of Section 5 hereof.
15
<PAGE>
11.2 Consent To Terms of Sale. In consideration of BKC and Lender
executing this Agreement, each Franchisee and each Guarantor, for
themselves and any person or entity claiming by, through or under
them, represent, covenant and agree as follows:
(a) This Agreement and the Loan Documents are not entered into
with any actual intent to hinder, delay or defraud any of
their creditors; that Franchisees and Guarantors do not
intend to incur debts beyond their ability to pay in
connection with the Loan Documents; and that Franchisees
and Guarantors do not have assets unreasonably small in
relation to their businesses as a result of the Loan
Documents or this Agreement.
(b) This Agreement and the procedures set forth in Section 5
with respect to a sale and transfer of the Affected
Restaurants, the Affected Franchise Agreements, the
Affected BKL Leases, and the real and personal property
associated therewith, constitute a commercially reasonable
procedure for disposing of the Lender's collateral, there
being no nationally recognized market therefor, and it
being acknowledged that it is designed to generate a fair
and reasonable equivalent value.
(c) Franchisees and Guarantors shall not seek to challenge or
enjoin the consummation of any sale of an Affected
Restaurant, Affected Franchise Agreement or real or
personal property associated therewith on the grounds that
the procedures set forth in Section 5 are not commercially
reasonable, and agree that their only remedy shall be to
challenge and seek monetary damages from the Lender for any
unreasonable decision by the Lender in determining whether
to sell the Restaurants as a group or individually.
12. GENERAL RELEASE.
12.1 In consideration of BKC executing this Agreement and in
consideration of BKC consenting to the grant to Lender of the
security interest in the Franchise Agreements, the consent to the
Stock Pledge and the right to transfer the BKL Leases subject to
the terms of this Agreement, each Franchisee and each Guarantor
for himself/herself and his/her respective heirs, successors,
assigns, personal representatives, affiliates, subsidiaries and
immediate and remote parent companies (the "Releasing Parties")
hereby release and forever discharge BKC and its respective
successors, assigns, affiliates, parent company, directors,
officers, employees, agents and representatives (the "Released
Parties") as to any and all claims, damages, liabilities and
causes of action whatsoever, whether known or unknown, which the
Releasing Parties have now or may have in the future by reason
of any matter, cause of thing whatsoever arising out of or
relating to the Franchise Agreements, BKL Leases, or any other
agreement
16
<PAGE>
between BKC and any of the Releasing Parties, the relationship
and/or course of dealing between the Releasing Parties and the
Released Parties, and any other matters which existed prior to
the date of this Agreement.
13. RIGHT OF AUDIT.
13.1 Each Franchisee agrees that BKC or its representatives, at BKC
expense, shall at all reasonable times, have the right to examine
or audit the books, records, federal or state tax returns,
accounts of, and any other information or records necessary to
trace or account for loan funds hereunder, as well as to verify
the accuracy of the representations made by the Franchisees
hereunder. In the event an audit discloses a violation of the
terms and conditions of this Agreement, Franchisees shall be
liable for all costs and expenses associated with the audit
including, but not limited to, the costs of accounting fees,
travel, lodging and wages reasonably incurred including wages
paid to BKC employees.
Franchisees and Lender mutually consent to the release to BKC of
all information relating to loan funding, disbursements or
withdrawals under the Loan Documents. BKC shall not provide such
information to any third party without Franchisees' and Lender's
consent unless BKC is required to do so by law, compelled to do
so by subpoena or BKC determines it must introduce such
information as evidence in a public or private adjudication.
14. CONFIDENTIALITY
14.1 The Guarantors, the Lender and the Franchisees, for themselves
and their respective principals, shareholders, parent
corporations, affiliates, officers and directors shall each hold
in confidence and shall not disclose to any person outside its
respective organization the terms of this Agreement (the
"Confidential Information") without the written consent of BKC.
The Franchisees, Guarantors and Lender shall disclose the
Confidential Information only to such agents, attorneys,
accountants or persons within its organization who have a need to
know such Confidential Information. The Guarantors, Lender and
Franchisees shall adopt and maintain programs and procedures
which are reasonably calculated to protect the confidentiality of
the Confidential Information which results from a failure to
comply with this provision. The Lender may disclose the
Confidential Information to institutional lenders to whom Lender
is syndicating the Credit Agreements if such institutional
lenders provide BKC with their prior written agreement to be
bound by the terms of Section 15 of this Agreement. The Lender,
the Guarantors and the Franchisee will promptly report to BKC any
actual or suspected violation of the terms of this Section 15 and
will take all reasonable further steps requested by BKC to
prevent, control or remedy any such violation.
17
<PAGE>
15. CAPTION HEADINGS.
15.1 The caption headings are used in this Agreement only as a matter
of convenience and for reference and do not define, limit or
describe the scope of this Agreement nor the intent of any
provision contained herein.
16. NOTICES
16.1 All notices hereunder shall be in writing and shall be deemed
properly delivered if sent by (i) U.S. Mail return receipt
requested or (ii) nationally recognized overnight courier
service, and if sent to the following addresses:
If to BKC:
Burger King Corporation
17777 Old Cutler Road
Miami,FL 33157
ATTENTION: General Counsel, Senior
Vice President
If to any Franchisee and/or Guarantor:
National Restaurant Enterprises, Inc.
or
AmeriKing, Inc.
2215 Enterprise Drive
Westchester, IL 60154
ATTENTION: Chief Executive Office
If to Lender: The First National Bank of Boston
100 Federal Street
Boston,MA02110
Attention: Gordon Nelson, Jr. Director
or to such persons or places as BKC, Franchisees,
Guarantors, or Lender may direct by written notice to all
of the other parties hereto. Notices or other
communications hereunder shall be deemed delivered and
received on the date of actual delivery.
18
<PAGE>
17. CHOICE OF LAW; JURISDICTION AND VENUE.
17.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida. The parties hereto
acknowledge and agree that the United States District Court for the
Southern District of Florida, or if such court lacks jurisdiction,
the 11th Judicial Court (or its successor) in and for Dade County,
Florida, shall be the venue and the exclusive proper forum in which
to adjudicate any case or controversy arising, either directly or
indirectly, under or in connection with this Agreement or related
documentation and the parties further agree that, in the event of
litigation arising out of or in connection with this Agreement in
these courts, they will not contest or challenge the jurisdiction
or venue of these courts.
18. AMENDMENTS.
18.1 This Agreement. Except as expressly provided herein, nothing in
this Agreement shall be construed to modify or amend any of the
terms and conditions of the Franchise Agreements or BKL Leases and
the Franchise Agreements and BKL Leases shall be controlling in the
event of any ambiguity between this Agreement and the Franchise
Agreements or BKL Leases.
18.2 Franchise Agreements. BKC and the Franchisees shall not materially
amend or terminate by mutual agreement any of the Franchise
Agreements without the prior consent of the Lender, which consent
shall not be unreasonably withheld.
19. INTEGRATION.
19.1 This Agreement and other documents being executed and delivered
pursuant hereto incorporate all prior discussions and negotiations
among the parties and constitute the full and entire agreement and
understanding between the parties hereto with respect to the
subject matter hereof. No amendment hereto shall be effective
unless it is in writing and signed by all of the parties hereto.
20. BINDING EFFECT.
20.1 Except as otherwise expressly provided herein, the provisions of
this Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective heirs, successors, assigns,
executors, personal representatives and administrators.
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<PAGE>
21. TITLES.
21.1 The titles of the provisions of this Agreement are for convenience
or reference only and are not to be considered in construing this
Agreement.
22. SEVERABILITY
22.1 If one or more of the provisions contained in this Agreement or in
any document contemplated hereby, or any application thereof, shall
be invalid, illegal or unenforceable, in any respect under the laws
of any jurisdiction, the validity, legality and enforceability of
the remaining provisions contained herein and therein, and any
application thereof, shall not in any way be affected or impaired
thereby or under the laws of any other jurisdiction.
23. CONSTRUCTION OF AGREEMENT
23.1 This Agreement has been prepared after negotiations between the
parties hereto, and if any ambiguity is contained herein then in
resolving such ambiguity no weight shall be given in favor of or
against either party solely on account of its drafting this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
of first written above:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ [SIGNATURE SPELLING?]
------------------------------
Its: Gordon L. Nelson, Jr.,
Vice President
-----------------------------
Attest: /s/ [SIGNATURE SPELLING?]
--------------------------
Its: Attorney
-----------------------------
BURGER KING CORPORATION
By: /s/ [SIGNATURE SPELLING?]
------------------------------
Vice President
Attest: /s/ Kim A. Goodbard
--------------------------
Assistant Secretary
(SEAL)
20
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
(NRE and Guarantor)
By: /s/ A. Richard Caputo, Jr
--------------------------------
Print Name: A. Richard Caputo, Jr.
------------------------
Title: Vice President
-----------------------------
By: /s/ Joel Raseby
--------------------------------
Print Name: Joel Raseby
------------------------
Title: C.F.O.
-----------------------------
NRE HOLDING, INC.
(the Parent and Guarantor)
By: /s/ A. Richard Caputo, Jr.
--------------------------------
Print Name: A. Richard Caputo, Jr.
------------------------
Title: Vice President
-----------------------------
By: /s/ Joel Raseby
--------------------------------
Print Name: Joel Raseby
------------------------
Title: C.F.O.
-----------------------------
WITNESSES: INDIVIDUAL GUARANTORS
/s/ [SIGNATURE SPELLING?] /s/ Lawrence Jaro, as Attorney-in-fact
- ------------------------------ ---------------------------------------
Lawrence Jaro
/s/ [SIGNATURE SPELLING?] /s/ William Osborn, as Attorney-in-fact
- ------------------------------ ---------------------------------------
William Osborn
[SIGNATURE SPELLING?] /s/ Gary Hubert, as Attorney-in-fact
- ------------------------------ ---------------------------------------
Gary Hubert
21
<PAGE>
AMERIKING VIRGINIA CORPORATION I
(FRANCHISEE)
By: /s/ Joel Raseby
------------------------------
Print Name: Joel Raseby
----------------------
Title: C.F.O.
---------------------------
AMERIKING CINCINNATI CORPORATION I
(FRANCHISEE)
Attest: /s/ A. Richard Capato, Jr.
--------------------------
Print Name: A. Richard Capato, Jr.
----------------------
Title: Vice President
---------------------------
22
APITAL PRINTING SYSTEMS]
<PAGE>
SCHEDULE A TO INTERCREDITOR AGREEMENT
FRANCHISEE:
AmeriKing Virginia Corporation I
AmeriKing Cincinnati Corporation I
23
<PAGE>
SCHEDULE B TO INTERCREDITOR AGREEMENT
GUARANTORS:
Lawrence Jaro
William Osborn
Gary Hubert
National Restaurant Enterprises, Inc.
NRE Holdings, Inc.
24
<PAGE>
SCHEDULE C TO INTERCREDITOR AGREEMENT
AMERIKING VIRGINIA CORPORATION I
PART I
<TABLE>
<CAPTION>
BK DATE OF DATE OF BKL DATE OF
REST. FRANCHISE LEASE (IF GUARANTY
NO. ADDRESS AGT. ANY) (IF ANY)
- ------- ----------------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
298 3106 Jefferson Av. 02/07/96 N/A 02/07/96
Newport News VA. 23607
1003 10721 Jefferson Av. 02/07/96 N/A 02/07/96
Newport News VA. 23601
2758 1545 Richmond Rd. 02/07/96 N/A 02/07/96
Williamsburg VA. 23185
3211 1480 Weldon Rd. 02/07/96 05/21/81 02/07/96
Roanoke Rapids NC. 27870
3853 200 W. Mercury Blvd. 02/07/96 N/A 02/07/96
Hampton VA.23669
4390 1620 S. Military Hwy 02/07/96 N/A 02/07/96
Chesapeake VA. 23320
4973 221 Fox Hill Rd. 02/07/96 N/A 02/07/96
Hampton VA.23669
5311 713 N. Battlefield Blvd. 02/07/96 N/A 02/07/96
Chesapeake VA. 23320
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
BK DATE OF DATE OF BKL DATE OF
REST. FRANCHISE LEASE (IF GUARANTY
NO. ADDRESS AGT. ANY) (IF ANY)
- ------- ----------------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
5314 6546 Richmond Rd. 02/07/96 N/A 02/07/96
Williamsburg VA. 23185
5423 2208 Cunningham Dr. 02/07/96 N/A 02/07/96
Hampton VA. 23666
6001 1901 South Military Hwy 02/07/96 N/A 02/07/96
Chesapeake VA. 23320
6142 730 S. Battlefield Blvd. 02/07/96 N/A 02/07/96
Chesapeake VA. 23320
6450 Box 189 York River 02/07/96 N/A 02/07/96
Crossing Hayes VA.
23072
6458 5269 John Taylor Hwy 02/07/96 N/A 02/07/96
Williamsburg VA. 23185
6600 100 Market Dr. Emporia 02/07/96 N/A 02/07/96
VA. 23847
7048 1901 Pocahontas Trail 02/07/96 N/A 02/07/96
Williamsburg VA. 23185
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
BK DATE OF DATE OF BKL DATE OF
REST. FRANCHISE LEASE (IF GUARANTY
NO. ADDRESS AGT. ANY) (IF ANY)
- ------- ----------------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
7313 901 Roanoke Av. 02/07/96 N/A 02/07/96
Roanoke Rapid NC. 27870
7584 11321 Polo Place 02/07/96 N/A 02/07/96
Midlothian VA. 23113
7609 8801 Staples Mill Rd. 02/07/96 N/A 02/07/96
Richmond VA. 23228
7699 900 Bland Av. Newport 02/07/96 N/A 02/07/96
News VA. 23602
7923 Route 2, Box 175 02/07/96 N/A 02/07/96
Doswell VA. 23005
9219 10097 Brook Rd. Glen 02/07/96 N/A 02/07/96
Allen VA. 23060
9220 Route 1, Box 40B 02/07/96 N/A 02/07/96
Garysburg NC. 27831
</TABLE>
27
<PAGE>
SCHEDULE C TO INTERCREDITOR AGREEMENT
AMERIKING CINCINNATI CORPORATION I
PART 2
<TABLE>
<CAPTION>
BK DATE OF DATE OF BKL DATE OF
REST. FRANCHISE LEASE (IF GUARANTY
NO. ADDRESS AGT. ANY) (IF ANY)
- ------- ---------------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
1851 7958 US Hwy 42 02/07/96 N/A 02/07/96
Florence KY. 41042
2394 512 Ohio Pike 02/07/96 N/A 02/07/96
Cincinnati Oh. 45230
2729 544 Clifty Dr. Madison 02/07/96 N/A 02/07/96
IN. 47250
3330 337 Terry Lane 02/07/96 N/A 02/07/96
Covington KY. 41017
3758 3100 Dixie Hwy 02/07/96 N/A 02/07/96
Erlanger KY. 41018
4556 812 Eastgate South Dr. 02/07/96 N/A 02/07/96
Cincinnati OH. 45245
5435 316 Philadelphia St., 02/07/96 N/A 02/07/96
Covington KY. 41011
6186 830 Green Blvd. Aurora 02/07/96 N/A 02/07/96
IN. 47001
6489 14 Carothers Rd. 02/07/96 N/A 02/07/96
Newport KY. 41071
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
BK DATE OF DATE OF BKL DATE OF
REST. FRANCHISE LEASE (IF GUARANTY
NO. ADDRESS AGT. ANY) (IF ANY)
- ------- ---------------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
7751 4868 Houston Rd. 02/07/96 N/A 02/07/96
Florence KY. 41042
8483 418 Market Square Dr. 02/07/96 N/A 02/07/96
Maysville KY. 41056
</TABLE>
29
STOCK PLEDGE AGREEMENT
from
NATIONAL RESTAURANT ENTERPRISES, INC.
to
BURGER KING CORPORATION
November 21, 1995
<PAGE>
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
1. SECURITY INTEREST....................................................................... 4
1.01 (a) Security Interest..................................................... 4
(b) Continued Priority of Security Interest............................... 4
(c) Required Action....................................................... 4
(d) Authorized Action..................................................... 4
1.02 The Pledgor Remains Obligated; The Secured Party Not Obligated 5
1.03 Pledgor Not Released........................................................... 5
(a) No Release of Pledgor................................................. 5
(b) Secured Obligations Deemed to Survive................................. 5
1.04 Termination of Secured Party................................................... 6
2. REPRESENTATIONS AND WARRANTIES OF PLEDGOR............................................... 6
2.01 (a) Status of Securities and Instrument Collateral 6
(b) Ownership of Collateral............................................... 6
(c) Right to Vote......................................................... 6
(d) Right to Pledge....................................................... 6
(e) Valid Agreement....................................................... 6
(f) No Consent............................................................ 6
(g) No Violation.......................................................... 6
(h) Creation of Perfected Security Interest............................... 7
(I) Validity of Liens..................................................... 7
3. COVENANTS............................................................................... 7
3.01 (a) Ownership and Defense of Collateral................................... 7
(b) Inclusion of "Proceeds" Not Consent to Sale 7
3.02 Taxes; Compliance.............................................................. 7
3.03 Notice of Materially Adverse Effect............................................ 7
3.04 Liens.......................................................................... 7
3.05 Stock Issuances................................................................ 7
3.06 Information.................................................................... 8
3.07 Certain Duties of Pledgor...................................................... 8
3.08 Certain Rights of Secured Party and Pledgor.................................... 8
4. EVENT OF DEFAULT........................................................................ 9
I. Remedies....................................................................... 9
4.01 Disposition of Securities and Instrumental Collateral 9
2
<PAGE>
INDEX (Cont'd)
Page
II. Proceeds....................................................................... 9
4.02 Application of Proceeds........................................................ 9
5. MISCELLANEOUS........................................................................... 10
5.01 (a) Expenses of Pledgor's Agreements and Duties 10
(b) (i) Secured Party's right to Perform on
Pledgor's Behalf..................................... 10
(ii) Secured Party's Right to Use Agents and to
Act in the Name of Pledgor........................... 10
(c) No Notice; Legal Process or Compensation 10
(d) Limitation on Secured Party's Liability............................... 10
(e) Amounts Payable Due on Demand; Interest
Obligations.......................................... 11
5.02 Assignment ..................................................... 11
5.03 (a) Rights of a Secured Party............................................. 11
(b) Governing Law; Jurisdiction........................................... 11
(c) Certain Waivers ..................................................... 11
6. DEFINITIONS ..................................................... 13
6.01 Interpretation ..................................................... 13
(a) Certain Terms Defined by Reference.................................... 13
(b) Other Defined Terms................................................... 13
(c) Other Definitional Provisions......................................... 15
SCHEDULE 2.01(C) SCHEDULE OF INITIAL SECURITIES AND INSTRUMENTAL COLLATERAL............. 17
</TABLE>
3
<PAGE>
STOCK PLEDGE AGREEMENT
Dated as of November 21, 1995
In consideration of the acceptance by the Secured Party of the Note of
AmeriKing Tennessee, the Pledgor hereby agrees for the benefit of the Secured
Party as follows (with certain terms used herein being defined in Article 6):
ARTICLE I
SECURITY INTEREST
Section 1.01 (a) Security Interest. To secure the payment of the Note,
the Pledgor hereby hypothecates, mortgages, pledges and assigns all of the
Collateral to the Secured Party, and grants to the Secured Party a continuing
security interest in, and a continuing lien upon, all of the Collateral. The
Collateral has been delivered into the possession of the Secured Party.
(b) Continued Priority of Security Interest. The Security Interest shall
at all times be valid, perfected and enforceable against the Pledgor and all
third parties, in accordance with the terms hereof, as security for the
Secured Obligations, and, other than as set forth in the FNBB Stock Pledge
Agreement, the Collateral shall not at any time be subject to any Lien that is
prior to, on a parity with, or junior to such Security Interest.
(c) Required Action. The Pledgor shall take all action that may be
necessary or desirable, or that the Secured Party may request, so as at all
times to maintain the validity, perfection, enforceability and priority of the
Security Interest in the Collateral in conformity with the requirements of
Section 1.01(b), and to enable the Secured Party to protect or preserve the
Collateral or to protect, preserve, exercise or enforce its rights therein and
hereunder and under the Note, including but not limited to (i) immediately
discharging all Liens, (ii) delivering to the Secured Party, endorsed or
accompanied by such instruments of assignment as the Secured Party may
specify, and stamping or marking, in such manner as the Secured Party may
specify, any and all securities and instruments evidencing or forming a part
of the Collateral, and (iii) executing and delivering financing statements,
instruments of hypothecation, pledges, mortgages, notices, instructions,
proxies, stock and bond powers and other powers of attorney and assignments,
in each case in form and substance satisfactory to the Secured Party.
(d) Authorized Action. The Secured Party is hereby authorized to file one
or more financing or continuation statements or amendments thereto without the
signature of or in the name of the Pledgor. A carbon photographic or other
reproduction of this Agreement or of any financing statement filed in
connection with this Agreement shall be sufficient as a financing statement.
4
<PAGE>
Section 1.02 The Pledgor Remains Obligated; The Secured Party Not
Obligated. The grant by the Pledgor to the Secured Party of the Security
Interest shall not relieve the Pledgor from the performance of any term,
covenant, condition or agreement on its part to be performed or observed, or
from any liability to any Person, under or in respect of any of the Collateral
or impose any obligation on the Secured Party to perform or observe any such
term, covenant, condition or agreement on the Pledgor's part to be so
performed or observed or impose any liability on the Secured Party for any act
or omission on the part of the Pledgor relative thereto.
Section 1.03 Pledgor Not Released.
(a) No Release of Pledgor. THE OBLIGATIONS OF THE PLEDGOR UNDER THIS
AGREEMENT SHALL NOT BE REDUCED, LIMITED OR TERMINATED, NOR SHALL THE PLEDGOR
BE DISCHARGED FROM ANY THEREOF, FOR ANY REASON WHATSOEVER (other than the
payment, observance and performance of the Secured Obligations), including,
but not limited to (and whether or not the Pledgor shall have received notice
thereof or assented thereto): (i) any increase in the principal amount of, or
interest rate applicable to, any or all of the Secured Obligations; (ii) (A)
any extension of the time of payment, observance or performance, or any other
amendment or modification of any of the other terms and provisions of the
Secured Obligations, (B) any composition or settlement (whether by way of
release, acceptance of a plan of reorganization or otherwise) of the Secured
Obligations, and (C) the release of any or all of the Collateral, or any
release, compromise, settlement, or extension of the time of payment of, any
obligations constituting Collateral, now or hereafter securing any or all of
the Secured Obligations; (iii) any election not or failure to exercise, any
delay in the exercise of, any exercise or waiver of, or any forbearance or
other indulgence with respect to, any right, remedy or power available to the
Secured Party, including but not limited to: (A) any election not or failure
to (1) (aa) protect or preserve any Collateral or (bb) protect, perfect or
continue the perfection of any Lien upon any Collateral, now or hereafter
securing any or all of the Secured Obligations or (2) exercise any right of
setoff, recoupment or counterclaim, (B) any election of remedies effected by
the Secured Party, and (C) any election by the Secured Party in any proceeding
under the Bankruptcy Code of the application of Section 1111(b)(2) of such
Code; (iv) any subordination (whether present or future or contractual or
otherwise) of any or all of the Secured Obligations; (v) any disallowance,
invalidity, illegality, voidness or unenforceability of any or all of the
Secured Obligations; and (vi) ANY OTHER ACT OR FAILURE TO ACT WHICH VARIES THE
RISK OF THE PLEDGOR HEREUNDER OR, BUT FOR THE PROVISIONS HEREOF, WOULD, AS A
MATTER OF STATUtE OR RULE OF LAW OR EQUITY, OPERATE TO REDUCE, LIMIT OR
TERMINATE THE OBLIGATIONS OF THE PLEDGOR UNDER THIS AGREEMENT OR DISCHARGE THE
PLEDGOR FROM ANY THEREOF.
(b) Secured Obligations Deemed to Survive. In the event that any or all
of the Secured Obligations shall, in part, be or be determined to be or
become, whether by operation of any present or future law or by order of any
court or governmental agency, disallowed, invalid, illegal, void or
unenforceable, such Secured Obligations shall, for all purposes of this
Agreement, nonetheless be deemed to continue to be outstanding and in full
force and effect to secure the portion of the Secured Obligations not so
disallowed.
5
<PAGE>
Section 1.04 Termination of Security Interest. The pledge, assignment,
mortgage and hypothecation hereunder shall terminate upon the
payment in full of the Secured Obligations.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PLEDGOR
The Pledgor represents and warrants that:
Section 2.01 (a) Status of Securities and Instrument Collateral. To the
best knowledge of Pledgor, all Securities and Instrument Collateral has been
duly authorized and validly issued and is fully paid and non-assessable.
(b) Ownership of Collateral. Pledgor possesses title to the Collateral
unencumbered by any Lien or other interest of any other person in or to such
Collateral, except as otherwise provided herein or in the FNBB Stock Pledge
Agreement.
(c) Right to Vote. Except as otherwise provided herein, the Pledgor has
the unrestricted right to vote all Securities and Instrument Collateral in
accordance with the terms thereof and, as of the Agreement Date, and to the
best knowledge of Pledgor, the Securities and Instrument Collateral listed on
Schedule 2.01(c) represents 100% of the outstanding capital stock of AmerKing
Tennessee.
(d) Right to Pledge. Pledgor has full power, authority and legal right to
pledge all of its right, title and interest in and to the Collateral pursuant
to this Agreement.
(e) Valid Agreement. This Agreement has been duly executed and delivered
by the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms.
(f) No Consent. No consent of any other party (including, without
limiting the generality of the foregoing, creditors of the Pledgor) and no
consent, license, permit, approval or authorization of, exemption by, notice
or report to, or registration, filing or declaration with, any governmental
authority, domestic or foreign, is required to be obtained by the Pledgor in
connection with the execution, delivery or performance of this Agreement.
(g) No Violation. The execution, delivery and performance of this
Agreement will not violate to the best of Pledgor's knowledge any provision of
any applicable law or regulation or of any order, judgment, writ, award,
decree of any court, arbitrator or governmental authority, domestic or
foreign, or of any mortgage, indenture, lease contract, or other agreement,
instrument or undertaking to which the Pledgor is a party or which purports to
be binding upon the Pledgor or upon its assets and will not result in the
creation or imposition of any Lien on any of the assets of the Pledgor except
as contemplated by this Agreement or the FNBB Stock Pledge Agreement.
6
<PAGE>
(h) Creation of Perfected Security Interest. The pledge and delivery of
such Collateral pursuant to this Agreement creates a first priority perfected
security interest in, all right, title or interest of the Pledgor in or to the
Collateral, and an interest in the proceeds thereof, subject to, other than as
set forth in the FNBB Stock Pledge Agreement, no prior pledge, lien,
hypothecation, security interest, charge, option or encumbrance or to any
agreement purporting to grant to any third party a security interest in the
property or assets of the Pledgor which would include the Collateral.
(i) Validity of Liens. Each of the Liens granted pursuant to this
Agreement constitutes a valid, perfected, first priority Lien on the
Collateral enforceable as such against all creditors of the Pledgor.
ARTICLE 3
COVENANTS
Unless the Secured Party shall otherwise consent in writing:
Section 3.01 (a) Ownership and Defense of Collateral. The Pledgor shall,
subject to the terms and conditions of the FNBB Stock Pledge Agreement, at all
times (i) be the owner of the Collateral free from any right, title or
interest of any third Person and (ii) defend the Collateral against the claims
and demands of all third Persons.
(b) Inclusion of "Proceeds" Not Consent to Sale. The inclusion of
"proceeds" of the Collateral under the Security Interest shall not be deemed a
consent by the Secured Party to any sale or other disposition of any part or
all of the Collateral not otherwise specifically permitted by the terms hereof
or consented to by the Secured Party in writing.
Section 3.02 Taxes; Compliance. The Pledgor shall (a) pay or cause to be
paid all taxes, assessments and governmental charges levied or assessed or
imposed upon or with respect to any of the Collateral and (b) comply with all
Applicable Law relating to the Collateral.
Section 3.03 Notice of Materially Adverse Effect. The Pledgor shall give
prompt notice to the Secured Party of any matter or event which has had, or
may have, a Materially Adverse Effect upon the value of any of the Collateral.
Section 3.04 Liens. The Pledgor shall not, other than as set forth in the
FNBB Stock Pledge Agreement, (i) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the Collateral, or
(ii) create, incur, assume or suffer to exist any Lien on the Collateral.
Section 3.05 Stock Issuances. The Pledgor shall not vote to enable, or
take any other action to permit, either AmeriKing Tennessee, QSC or Ro-Lank to
issue any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to
7
<PAGE>
purchase or exchange for any stock or other equity securities of either
AmeriKing Tennessee, QSC or Ro-Lank of any nature.
Section 3.06 Information. In addition to such other information as
shall be specifically provided for herein, the Pledgor shall furnish to the
Secured Party such other information with respect to the Collateral as the
Secured Party may reasonably request from time to time.
Section 3.07 Certain Duties of the Pledgor. The Pledgor will receive
and hold all Stock Dividends in trust for the Secured Party, not commingle the
same with any of its other funds or property and immediately deliver same to
the Secured Party in the identical form received.
Section 3.08 Certain Rights of Secured Party and Pledgor.
(a) At any time and from time to time, following the occurrence of an
Event of Default under the Note, the Secured Party may and is hereby
authorized to transfer into or register in the name of itself or its nominee
any or all of the Securities and Instrument Collateral.
(b) Should any Event of Default of the Pledgor in respect of its
obligations under the Note at any time occur and be continuing, the Secured
Party or any holder of the Note may, by notice to the Pledgor, terminate the
Pledgor's rights under Section 3.08(d) and, in its own or the Pledgor's name,
exercise any and all powers with respect the Securities and Instrument
Collateral with the same force and effect as would the Pledgor.
(c) The Pledgor hereby agrees that, until the Secured Obligations are
paid in full, the Pledgor shall not affirmatively vote the Securities and
Instrument Collateral in favor of:
(i) other than in connection with any
merger or consolidation permitted
pursuant to Section 3.08(c)(ii),
any amendment to the Articles of
Incorporation or Bylaws of
AmeriKing Tennessee; or
(ii) any merger, consolidation or sale
of all or substantially all of the
assets of AmeriKing Tennessee,
other than a merger of QSC and/or
Ro-Lank with and into AmeriKing
Tennessee, which merger shall not
require the consent of the Secured
Party or any holder of the
Note.
(d) Unless and until the Secured Party exercises its rights under Section
3.07(b), the Pledgor may, with respect to any of the Securities and Instrument
Collateral, (i) vote and give consents, ratifications and waivers with respect
thereto, except in contravention of this Agreement or to the extent that any
such would be for a purpose that would constitute a Default or an Event of
Default, and (ii) receive and collect or have paid over all dividends, except
Stock Dividends.
8
<PAGE>
ARTICLE 4
EVENT OF DEFAULT
I. Remedies. If an Event of Default under the Note shall have occurred
and be continuing, then:
Section 4.01 Disposition of Securities and Instrument Collateral.
(a) If the Secured Party elects to sell or otherwise dispose of any
Securities and Instrument Collateral, the Secured Party shall restrict the
number of prospective bidders so as to comply with the provisions of Section 5
of the Securities Act of 1933, as amended (the "Act"), and any applicable
state securities or "blue sky" laws and regulations, and to such persons who
will represent and agree that they are "Accredited Investors" as such term is
defined in Regulation D promulgated under the Act and are reasonably believed
by the Secured Party to be "Accredited Investors" and are purchasing for their
own account for investment and not with a view to distribution or resale and
who will further agree that any such Securities and Instrument Collateral
purchased by them may bear an appropriate restrictive legend to that effect.
(b) If the Secured Party elects, in its sole discretion, to make a bid to
purchase all or any part of the Securities and Instrument Collateral in a
public sale, the Secured Party shall receive a credit in the amount of the
unpaid Secured Obligations and all of the costs and expenses incurred by the
Secured Party in connection with the enforcement of the Note and the sale or
other realization upon of Collateral, including reasonable attorneys' fees and
disbursements, which credit shall increase the amount of the Secured Party's
bid price for the Securities and Instrument Collateral.
(c) In the event of any disposition of the Securities and Instrument
Collateral pursuant to Section 4.01(a), the Secured Party shall give the
Pledgor five (5) Business Days prior written notice of the time and place of
any public sale of the Securities and Instrument Collateral or of the time and
place after which any private sale or any other disposition is to be made. The
Pledgor hereby acknowledges that five (5) Business Days prior written notice
of such sale or sales shall be reasonable notice.
II. Proceeds.
Section 4.02 Application of Proceeds. All proceeds from each sale of, or
other realization upon, all or any part of the Collateral following an Event
of Default shall be applied or paid over as follows:
First: To the payment of all reasonable out-of-pocket costs and expenses
incurred in connection with the sale or other realization upon of Collateral,
including attorneys' fees and disbursements;
9
<PAGE>
Second: To the payment of the Secured Obligations (with the Pledgor
remaining liable for any deficiency) in such order as the Secured Party shall
elect; and
Third: To the extent of the balance (if any) of such proceeds, to the
Pledgor, subject to Applicable Law and to any duty to pay such balance to the
holder of any subordinate Lien in the Collateral.
ARTICLE 4
MISCELLANEOUS
Section 5.01 (a) Expenses of Pledgor's Agreements and Duties. The terms,
conditions, covenants and agreements to be observed or performed by the
Pledgor under this Agreement and the Note shall be observed or performed by it
at its sole cost and expense.
(b) (i) Secured Party's Right to Perform on Pledgor's Behalf. If the
Pledgor shall fail to observe or perform any of the terms, conditions,
covenants and agreements to be observed or performed by it under this
Agreement and the Note, the Secured Party may (but shall not be obligated to)
do the same or cause it to be done or performed or observed, either in its
name or in the name and on behalf of the Pledgor, and the Pledgor hereby
irrevocably authorizes the Secured Party so to do.
(ii) Secured Party's Right to Use Agents and to Act in the Name of
Pledgor. The Secured Party may exercise any or all of its rights and remedies
under this Agreement and the Note through an agent or other designee and, in
the exercise thereof, the Secured Party or any such other Person may act in
its own name, or in the name and on behalf of the Pledgor.
(c) No Notice; Legal Process or Compensation. Subject to the provisions
of Section 4.01(e), the Secured Party may exercise any or all of its rights
and remedies under this Agreement and the Note (i) without (A) notice to or
demand upon the Pledgor, (B) process of law, and (C) payment of any kind to
the Pledgor and (ii) for the account and at the expense of the Pledgor.
(d) Limitation on Secured Party's Liability.
(i) The Secured Party shall not be liable to the Pledgor (A) for any loss
or damage sustained by it, or (B) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral, that may occur as a result
of, in connection with, or that is in any way related to, (X) any exercise by
the Secured Party of any right or remedy under this Agreement and the Note or
(Y) any other act of or failure to act by the Secured Party, except for any
such to the extent that the same is determined, by a judgment of a court
referred to in Section 5.03(b) that is binding on the Pledgor and the Secured
Party, final and not subject to review on
10
<PAGE>
appeal, to be the result of acts or omissions on the part of the Secured Party
constituting willful misconduct or violations of law.
(ii) Nothing contained in any of the Collateral Documents shall be
construed as requiring or obligating the Secured Party, and the Secured Party
shall not be required or obligated, to (A) make any demand, or to make any
inquiry as to the nature or sufficiency of any payment received by him, or to
present or file any claim or notice or take any action, with respect to any
Secured Obligations or the monies due or to become due thereunder or in
connection therewith, (B) take any steps necessary to preserve any rights
against prior parties, (C) notify the Pledgor of any decline in the value of
any of the Collateral or (D) other than as set forth in Section 4.01(c),
ascertain or act upon, or to notify the Pledgor of, any maturities, calls or
conversions of, or exchanges, offers or tenders for or similar matters
relating to, any securities or instruments evidencing or forming a part of the
Collateral, whether or not the Secured Party shall have had, or shall be
deemed to have had, knowledge or notice thereof.
(e) Amounts Payable Due on Demand; Interest Obligations. All amounts
payable by the Pledgor under this Section 5.01 shall be due on demand and
shall bear interest from the date due until paid at the highest rate of
interest in effect during such period under the Note.
Section 5.02 Assignment. The Secured Party may not assign any or all
of the Secured Obligations and may not transfer any or all of the Collateral,
except pursuant to this Agreement and FNBB Stock Pledge Agreement.
Section 5.03 (a) Rights of a Secured Party. The Secured Party shall
have the rights and remedies of a secured party under applicable law,
including but not limited to, the Uniform Commercial Code.
(b) Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made to be performed in Florida and shall be enforced in Federal or
State Courts located in the City of Miami, Metropolitan Dade County, State of
Florida. The Pledgor hereby irrevocably submits to the jurisdiction of any
Florida State or Federal court sitting in the City of Miami, Florida and any
appellate court thereof in any action or proceeding arising out of or relating
to this Agreement. The Pledgor hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding and any right to jurisdiction on
account of the place of residence or domicile of the Pledgor. The Pledgor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
(c) Certain Waivers.
(i) The Pledgor waives (A) personal service of process and consents that
service of process upon it may be made by certified or registered mail, return
receipt requested, directed to the Pledgor at its address last specified for
notices hereunder, and service
11
<PAGE>
so made shall be deemed completed two days after the same shall have been so
mailed, (B) any claim that, as to any part of the Collateral, a public sale,
should the Secured Party elect so to proceed, is, in and of itself, not a
commercially reasonable method of sale for such Collateral, (C) except as
otherwise provided in this Agreement or the Note, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURED
PARTY'S TAKING POSSESSION OR DISPOSITION OF ANY OF THE COLLATERAL INCLUDING,
BUT NOT LIMITED TO, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE PLEDGOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR ANY STATE, AND
ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF SALE OR OTHER
REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF THE SECURED PARTY'S RIGHTS
HEREUNDER; (D) all rights (1) of redemption, appraisement, valuation, stay and
extension or moratorium, (2) to the marshaling of assets and (3) all other
rights the exercise of which would, directly or indirectly, prevent, delay or
inhibit the enforcement of any of the rights or remedies under any of the
Collateral Documents or the absolute sale of the Collateral, now or hereafter
in force under any Applicable Law, and the Pledgor, for itself and all who may
claim under it, insofar as it or they now or hereafter lawfully may, hereby
waive the benefit of all such laws and rights; (E) any claim based upon,
arising out of or in any way related to any of the matters referred to in
Section 1.03(a), (F) any claim that this Agreement should be strictly
construed against the Secured Party, and (G) ANY AND ALL OTHER DEFENSES,
WHETHER ARISING UNDER ANY STATUTE OR AT LAW OR IN EQUITY, THAT WOULD, BUT FOR
THIS CLAUSE (H) BE AVAILABLE TO THE PLEDGOR AS A DEFENSE AGAINST OR REDUCTION
OF ANY OR ALL OF ITS LIABILITIES AND OBLIGATIONS UNDER THIS AGREEMENT.
(ii) THE SECURED PARTY AND THE PLEDGOR EACH WAIVE THEIR RESPECTIVE RIGHTS
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THEY ARE BOTH PARTIES
AND THAT IN ANY WAY ARISES UNDER OR OUT OF OR IS RELATED TO OR CONNECTED WITH
THE COLLATERAL OR ANY OF THE COLLATERAL DOCUMENTS AND WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE.
(d) Upon final payment and performance in full of its obligations under
the Note, this Agreement shall terminate and the Secured Party shall, at the
Pledgor's request and expense, return to the Pledgor any Collateral, including
any Securities and Instrument Collateral, together with any moneys and other
properties held by the Secured Party hereunder.
12
<PAGE>
ARTICLE 6
DEFINITIONS
Section 6.01 Interpretation.
(a) Certain Terms Defined by Reference.
(i) All terms defined in Article 1, 8 or 9 of the
Uniform Commercial Code, as in effect on the date of this Agreement,
are used herein with the meanings therein given. In addition, the
terms, "collateral" and "security interest," which capitalized, have
the meanings specified in subsection (b) below.
(ii) Except in the case of "Agreement" and as
otherwise specified herein, all terms defined in the Note are used
herein with the meanings therein given.
(b) Other Defined Terms. For purposes of this Agreement:
"Agreement" means this Agreement.
"Agreement Date" means the date as of which this
Agreement is dated.
"AmeriKing Tennessee" means AmeriKing Tennessee
Corporation I, a Delaware
corporation.
"Applicable Law" means all applicable provisions of
all (a) constitutions, statutes, rules, regulations and order of
governmental bodies, (b) Governmental Approvals, and (c) orders,
decisions, judgments and decrees of all courts and arbitrators.
"Collateral" means, in each case whether now or
hereafter existing or now owned or hereafter acquired by Pledgor and
whether or not the same is subject to Article 8 or 9 of the Uniform
Commercial Code or constitutes Collateral by reason of one or more
than one of the following clauses, the following:
(a) all Securities and Instrument Collateral;
(b) all claims (i) to items referred to in this
definition of Collateral, (ii) under warranties relating to any of
the Collateral, and (iii) against third parties that in any way arise
under or out of or are related to or connected with any or all of the
Collateral; and
(c) all products and proceeds of such Collateral in
whatever form; provided, that, so long as no Event of Default shall
have occurred and be continuing, any income, increases or proceeds
received by Pledgor with respect to the Securities and Instrument
Collateral shall not constitute Collateral for the purposes of this
Agreement.
13
<PAGE>
"Contract" means an indenture, agreement (other than this Agreement),
other contractual restriction, lease, instrument, certificate of incorporation
or charter, or bylaw.
"Default" means any condition or event which with the giving of notice or
lapse of time or both would, unless cured or waived, become an Event of
Default.
"Event of Default" has the meaning ascribed to that term in Section 5 of
the Note.
"FNBB Stock Pledge Agreement" shall mean the Stock Pledge Agreement,
dated as of November 21, 1995, by and between Pledgor and The First National
Bank of Boston, as Agent.
"Governmental Approval" means an authorization, consent, approval,
license or exemption of, registration or filing with, or report or notice to,
a governmental unit.
"Lien" means any mortgage, lien, pledge, charge, lease constituting a
capitalized lease obligation, conditional sale or other title retention
agreement, security interest, attachment, levy or other encumbrance of any
kind, in any case whether consensual or non-consensual.
"Materially Adverse Effect" means, (a) with respect to any Person, a
materially adverse effect upon such Person's business, assets, liabilities,
financial condition, results of operations or business prospects, and (b) with
respect to any of the Collateral, or any category of it, a materially adverse
effect upon its value as Collateral.
"Note" means the Secured Promissory Note of AmeriKing Tennessee to the
Secured Party of even date herewith in the initial principal amount of
$6,920,700.00.
"Pledgor" shall mean National Restaurant Enterprises, Inc., a Delaware
corporation.
"QSC" means QSC, Inc., a Tennessee corporation.
"Representation and Warranty" means (a) each representation and warranty
made pursuant to or under (i) Article 2, or any other provision of this
Agreement or the Note or (ii) any amendment of or waiver or consent thereunder
and (b) each statement contained in any certificate, financial statement,
legal opinion or other instrument or document delivered by or on behalf of the
Pledgor pursuant to or in connection with this Agreement and the Note or any
such amendment, waiver or consent.
"Ro-Lank" means Ro-Lank, Inc., a Tennessee corporation.
14
<PAGE>
"Secured Obligations" means all obligations of Pledgor under the Note.
"Secured Party" means Burger King Corporation and its successors and
assigns.
"Securities and Instrument Collateral" means (a) all securities and
instruments listed on Schedule 2.01(c), and (b) all replacements and
substitutions for any collateral that constitutes Securities and Instrument
Collateral.
"Security Interest" means the mortgages, pledges
and assignments to the Secured Party of, the continuing security
interest of the Secured Party in, and the continuing lien of the
Secured Party upon, the Collateral intended to be effected by the
terms of this Agreement or any of the other Collateral Documents.
"Stock Dividends" means all stock dividends or
dividends or distributions in property other than cash or stock, on
or in respect of the instruments and securities listed on Schedule
2.01(c).
To the best knowledge: those facts and
circumstances known to the party making the representation, after
having made a good faith effort to ascertain the fact in question
pursuant to an inquiry directed to those officers, directors,
supervisors and advisors of the party as would be reasonably likely
to have information relating to the fact in question.
"Uniform Commercial Code" means the Uniform
Commercial Code as in effect from time to time in the State of
Florida.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to any Person, other than the Pledgor, shall be
deemed to include such Person's successors and assigns, (B) to the
Pledgor shall be deemed to include the Pledgor's successors, and (C)
to any Applicable Law or Contract defined or referred to herein shall
be deemed references to such Applicable Law or Contract as the same
may be amended or supplemented from time to time, or, in the case of
any such Contract, as the terms thereof may be waived or modified,
but only in the case of each such amendment, waiver or modification,
to the extent permitted by, and effected in accordance with, the
terms thereof.
(ii) The words "herein," "hereof," and "hereunder"
and words of similar import, when used in this Agreement, shall refer
to this Agreement as a whole and not to any provision of this
Agreement, and "Section," "subsection," "Schedule" and respective
references are to this Agreement unless otherwise specified.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized officers all
as of the day and year first written above.
PLEDGOR:
NATIONAL RESTAURANTS ENTERPRISES, INC.
By: /s/
___________________________________
Title: /s/
__________________________________
SECURED PARTY;
BURGER KING CORPORATION
By: /s/
___________________________________
Vice President
Attest: /s/
________________________________
Assistant Secretary
(Corporate Seal)
16
<PAGE>
SCHEDULE 2.01(c)
SCHEDULE OF INITIAL SECURITIES AND INSTRUMENT COLLATERAL
1) Certificate No. 1 representing 5 unencumbered shares of the Class A
Common Stock, par value $.01 share, of AmeriKing Tennessee
Corporation I, registered in the name of National Restaurant
Enterprises, Inc.
2) Certificate No. 1 representing 95 unencumbered shares of Class B
Common Stock, par value $.01 share, of AmeriKing Tennessee
Corporation I, registered in the name of National Restaurant
Enterprises, Inc.
3) Stock Powers endorsed in blank by Joel Aaseby, Secretary of National
Restaurant Enterprises, Inc.
17
Exhibit 10.14
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT is made as of November 21, 1995, by and
between NATIONAL RESTAURANT ENTERPRISES, INC., a Delaware corporation (the
"Borrower"), and THE FIRST NATIONAL BANK OF BOSTON, a national banking
association, as agent (hereinafter, in such capacity, the "Agent") for itself
and the other lending institutions (hereinafter, collectively, the "Banks")
which are or may become parties to an Amended and Restated Revolving Credit and
Term Loan Agreement dated as of November 30, 1994 (as amended and in effect from
time to time, the "Credit Agreement"), among the Borrower, NRE Holdings, Inc.
("Holdings"), the Banks and the Agent.
WHEREAS, the Borrower, Holdings, the Banks and the Agent have entered
into the Credit Agreement, pursuant to which the Banks, subject to the terms and
conditions contained therein, are providing certain financial accommodations to
the Borrower:
WHEREAS, the Borrower is the direct or indirect legal and beneficial
owner of all of the issued and outstanding shares of each class of the capital
stock of each of the corporations described on Annex A (the "Subsidiaries");
WHEREAS, it is a condition precedent to the Banks' continuing to make
loans or otherwise extending credit to the Borrower under the Credit Agreement
that the Borrower execute and deliver to the Agent, for the benefit of the Banks
and the Agent, a pledge agreement in substantially the form hereof:
WHEREAS, the Borrower wishes to grant pledges and security interests in
favor of the Agent, for the benefit of the Banks and the Agent, as herein
provided:
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Pledge of Stock, etc.
1.1 Pledge of Stock. The Borrower hereby pledges, assigns,
grants a security interest in, and, except to the limited extent provided in
Section 1.3, delivers to the Agent for the benefit of the Banks and the Agent,
all of the shares of capital stock of the Subsidiaries of every class other than
the Voting Stock, as more fully described on Annex A hereto, to be held by the
Agent, for the benefit of the Banks and the Agent, subject to the terms and
conditions hereinafter set forth. The certificates for such shares, accompanied
by stock powers or other appropriate instruments of assignment thereof duly
executed in blank by the Borrower, have, except to the limited extent provided
in Section 1.3, been delivered to the Agent.
1.2 Additional Stock. In case the Borrower shall acquire
any additional shares of the capital stock (other than the Voting Stock) of any
Subsidiary or
- 2 -
corporation which is the successor of any Subsidiary, or any securities
exchangeable for or convertible into shares of such capital stock of any class
of any Subsidiary, by purchase, stock dividend, stock split or otherwise, then
the Borrower shall forthwith deliver to and pledge such shares or other
securities to the Agent, for the benefit of the Banks and the Agent, under this
Agreement and, except to the limited extend provided in Section 1.3, shall
deliver to the Agent forthwith any certificates therefore, accompanied by stock
powers or other appropriate instruments of assignment duly executed by the
Borrower in blank. The Borrower agrees that the Agent may from time to time
attach as Annex A hereto an updated list of the shares of capital stock or
securities at the time pledged with the Agent hereunder.
1.3 Pledge to Burger King Corporation. The Agent hereby
acknowledges that the Borrower has pledged, assigned, granted a first priority
security interest in, and delivered to BKC, all of the shares of capital stock
of AmeriKing Tennessee, to secure the BKC Obligations pursuant to the BKC Pledge
Agreement. The Agent agrees that, until a Release Event has occurred, any sums
or other property paid or distributed upon or with respect to any of the Stock
of AmeriKing Tennessee which would be paid to the Agent pursuant to Section 4
hereof shall, if and to the extent required pursuant to the terms of the BKC
Pledge Agreement, to be paid to BKC. The Borrower agrees that upon the
occurrence of the Release Event the Agent shall have a first priority security
interest in all the shares of capital stock of AmeriKing Tennessee other than
the Voting Stock, and the Borrower shall deliver, or cause BKC to deliver, to
the Agent, for the benefit of the Agent and the Banks, all the shares of capital
stock of AmeriKing Tennessee, other than the Voting Stock.
2. Definitions. The term "Obligations" and all other capitalized
terms used herein without definition shall have the respective meanings provided
therefor in the Credit Agreement. Terms used herein and not defined in the
Credit Agreement or otherwise defined herein that are defined in the
Massachusetts UCC have such defined meanings herein, unless the context
otherwise indicated or requires, and the following terms shall have the
following meanings:
AmeriKing Tennessee. AmeriKing Tennessee Corporation I, a
Delaware corporation and wholly-owned Subsidiary of the Borrower.
BKC. Burger King Corporation, a Florida corporation with its
principal place of business at 17777 Old Cutler road, Miami, Florida, 33157.
BKC Intercreditor Letter. The intercreditor letter dated as of
November 21, 1995 between the Agent and BKC, which intercreditor letter shall be
in form and substance acceptable to the Agent.
BKC Lien. The security interest granted by the Borrower to BKC
on the capital stock of AmeriKing Tennessee pursuant to the BKC Pledge
Agreement.
BKC Obligations. The obligations of AmeriKing Tennessee to BKC
pursuant to the Secured Promissory Note from AmeriKing Tennessee to BKC dated as
of November 21, 1995 in the original principal amount of $6,920,700.
- 3 -
BKC Pledge Agreement. The Stock Pledge Agreement dated as of
November 21, 1995 between the Borrower and BKC, pursuant to which the Borrower
grants to BKC a first priority security interest in all of the shares of capital
stock of AmeriKing Tennessee.
Release Event. The earlier to occur of (a) the repayment in
full of the BKC Obligations and (b) the release by BKC of the BKC Lien.
Stock. Includes the shares of stock described in Annex A
attached hereto and any additional shares of stock at the time pledged with the
Agent hereunder, but does not include Voting Stock.
Stock Collateral. The property at any time pledged to the Agent
hereunder (whether described herein or not) and all income therefrom, increases
therein and proceeds thereof, including without limitation that included in Cash
Collateral, but excluding from the definition of "Stock Collateral" any income,
increases or proceeds received by the Borrower to the extent expressly permitted
by Section 6.
Voting Stock. Any stock or similar equity interest of a Person
pursuant to which the holders thereof have, at the time of determination, the
general voting power under ordinary circumstances to vote for the election of
directors, managers, trustees or general partners or such Person (irrespective
of whether or not at the time any other class or classes will have or might have
voting power by reason of a happening of any contingency).
3. Security for Obligations. This Agreement and the security
interest in and pledge of the Stock Collateral hereunder are made with and
granted to the Agent, for the benefit of the Banks and the Agent, as security
for the payment and performance in full of all the Obligations under the Credit
Agreement.
4. Liquidation, Recapitalization, etc. Any sums or other property
paid or distributed upon or with respect to any of the Stock, whether by
dividend or redemption or upon the liquidation or dissolution of the issuer
thereof or otherwise, shall, except to the limited extend provided in Section
Section 1.3 and 6, be paid over and delivered to the Agent to be held by the
Agent, for the benefit of the Banks and the Agent, as security for the payment
and performance in full of all of the Obligations. In case, pursuant to the
recapitalization or reclassi- fication of the capital of the issuer thereof or
pursuant to the reorganization thereof, any distribution of capital shall be
made on or in respect of any of the Stock or any property shall be distributed
upon or with respect to any of the Stock, the property so distributed shall,
except to the limited extend provided in Section 1.3. be delivered to the Agent,
for the benefit of the Banks and the Agent, to be held by it as security for the
Obligations. Except to the limited extent provided in Section Section 1.3 and
6, all sums of money and property paid or distributed in respect of the Stock,
whether as a dividend or upon such a liquidation, dissolution, recapitalization
or reclassification or otherwise, that are received by the Borrower shall, until
paid or delivered to the Agent, be held intrust for the Agent, for the benefit
of the Banks and the Agent, as security for the payment and performance in full
of all of the Obligations.
- 4 -
5. Warranty of Title: Authority. The Borrower hereby represents
and warrants that: (a) the Borrower has good and marketable title to, and is the
sole record and beneficial owner of, the Stock described in Section 1, subject
to no pledges, liens, security interests, charges, options, restrictions or
other encumbrances except the pledge and security interest created by this
Agreement and the BKC Lien, (b) all of the Stock described in Section 1 is
validly issued, fully paid and non- assessable, (c) the Borrower has full power,
authority and legal right to execute, deliver and perform its obligations under
this Agreement and to pledge and grant a security interest in all of the Stock
Collateral pursuant to this Agreement, and the execution, delivery and
performance hereof and the pledge of and granting of a security interest in the
Stock Collateral hereunder have been duly authorized by all necessary corporate
or other action and do not contravene any law, rule or regulation or any
provision of the Borrower's charter documents or by-laws or of any judgment,
decree or order of any tribunal or of any agreement or instrument to which the
Borrower is a party or by which it or any of its property is bound or affected
or constitute a default thereunder, and (d) the information set forth in Annex A
hereto relating to the Stock is true, correct and complete in all respects. The
Borrower covenants that it will defend the rights of the Banks and the Agent and
security interest of the Agent, for the benefit of the Banks and the Agent, in
such Stock against the claims and demands of all other persons whomsoever. The
Borrower further covenants that it will have the like title to and right to
pledge and grant a security interest in the Stock Collateral hereafter pledged
or in which a security interest is granted to the Agent hereunder and will
likewise defend the rights, pledge and security interest thereof and therein of
the Banks and the Agent.
6. Dividends, etc., Prior to Maturity. So long as no Event of
Default shall have occurred and be continuing, the Borrower shall be entitled to
receive all cash dividends paid in respect of the Stock and to give consents,
waivers and ratifications in respect of the Stock; provided, however, that no
consent, waiver and ratification given by the Borrower if the effect thereof
would in the reasonable judgment of the Majority Banks impair any of the Stock
Collateral or be inconsistent with or result in any violation of any of the
provisions of the Credit Agreement, the Notes or any of the other Loan
Documents. All such rights of the Borrower to receive cash dividends shall be
in accordance with Section 10.4 of the Credit Agreement. All such rights of the
Borrower to give consents, waivers and ratifications with respect to the Stock
shall, at the Agent's option, as evidenced by the Agent's notifying the Borrower
of such election, cease in case an Event of Default shall have occurred and be
continuing.
7. Remedies.
7.1 In General. If a Default or an Event of Default shall have
occurred and be continuing, the Agent shall thereafter have the following rights
and remedies (to the extent permitted by applicable law) in addition to the
rights and remedies of a secured party under the Massachusetts UCC, all such
rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively or concurrently, at such time or times as the Agent
deems expedient:
(a) if the Agent so elects and gives notice of such
election to the Borrower, the Agent may vote any or all shares of the Stock
(whether or not the same shall have been transferred into its name or the name
of its
-5-
nominee or nominees) for any lawful purpose, including, without
limitation, if the Agent so elects, for the liquidation of the assets of the
issuer thereof, and give all consents, waivers and ratifications in respect of
the Stock and otherwise act with respect thereto as though it were the outright
owner thereof (the Borrower hereby irrevocably constituting and appointing the
Agent the proxy and attorney-in-fact of the Borrower, with full power of
substitution, to do so);
(b) the Agent may demand, sue for, collect or make
any compromise or settlement the Agent deems suitable in respect of any Stock
Collateral;
(c) the Agent may sell, resell, assign and deliver,
or otherwise dispose of any or all of the Stock Collateral, for cash or credit
or both and upon such terms at such place or places, at such time or times and
to such entities or other persons as the Agent thinks expedient, all without
demand for performance by the Borrower or any notice or advertisement
whatsoever except as expressly provided herein or as may otherwise be required
by law;
(d) the Agent may cause all or any part of the Stock
held by it to be transferred into its name or the name of its nominee or
nominees; and
(e) the Agent may set off against the Obligations
any and all sums deposited with it or held by it.
7.2 Sale of Stock Collateral. In the event of any
disposition of the Stock Collateral as provided in clause (c) of Section 7.1,
the Agent shall give to the Borrower at least five (5) Business Days prior
written notice of the time and place of any public sale of the Stock Collateral
or of the time after which any private sale or any other intended disposition is
to be made. The Borrower hereby acknowledges that five (5) Business Days prior
written notice of such sale or sales shall be reasonable notice. The Agent may
enforce its rights hereunder without any other notice and without compliance
with any other condition precedent now or hereunder imposed by statute, rule of
law or otherwise (all of which are hereby expressly waived by the Borrower, to
the fullest extent permitted by law). The Agent may buy any part or all of the
Stock Collateral at any public sale and if any part or all of the Stock
Collateral is of a type customarily sold in a recognized market or is of the
type which is the subject of widely-distributed standard price quotations, the
Agent may buy at private sale and may make payments thereof by any means. The
Agent may apply the cash proceeds actually received from any sale or other
disposition to the reasonable expenses of retaking, holding, preparing for sale,
selling and the like, to reasonable attorneys' fees, travel and all other
expenses which may be incurred by the Agent in attempting to collect the
Obligations or to enforce this Agreement or in the prosecution or defense of any
action or proceeding related to the subject matter of this Agreement, and then
to the Obligations in the order set forth in such order of preference as the
Agent may determine after proper allowance for Obligations not then due. Only
after such applications, and after payment by the Agent of any amount required
by Section 9-504(1)(c) of the Massachusetts UCC, need the Agent account to the
Borrower for any surplus. To the extent that any of the Obligations are to be
-6-
paid or performed by a person other than the Borrower, the Borrower
waives and agrees not be assert any rights or privileges which it may have under
Section 9-112 of the Massachusetts UCC.
7.3 Registration of Stock. If the Agent shall determine to
exercise its right to sell any or all of the Stock pursuant to this Section 7,
and if in the opinion of counsel for the Agent it is necessary, or if in the
reasonable opinion of the Agent it is advisable, to have the Stock, or that
portion thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended (the "Securities Act"), the Borrower agrees to use its
best efforts to cause the issuer or issuers of the Stock contemplated to be
sold, to execute and deliver, and cause the directors and officers of such
issuer to execute and deliver, all at the Borrower's expense, all such
instruments and documents, and to do or cause to be done all such other acts and
things as may be necessary or, in the reasonable opinion of the Agent, advisable
to register such Stock under the provisions of the Securities Act and to cause
the registration statement relating thereto to become effective and to remain
effective for a period of 9 months from the date such registration statement
became effective, and to make all amendments thereto or to the related
prospectus or both that, in the reasonable opinion of the Agent, are necessary
or advisable, all in conformity with the requirements of the Securities Act and
the rules and regulations of the Securities and Exchange Commission applicable
thereto. The Borrower agrees to use its best efforts to cause such issuer or
issuers to comply with the provisions of the securities or "Blue Sky" laws of
any jurisdiction which the Agent shall designate and to cause such issuer or
issuers to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
7.4 Private Sales. The Borrower recognizes that the Agent
may be unable to effect a public sale of the Stock by reason of certain
prohibitions contained in the Securities Act, federal banking laws, and other
applicable laws, but may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers. The Borrower agrees that nay such
private sales may be at prices and other terms less favorable to the seller than
if sold at public sales and that such private sales shall not be reason thereof
be deemed not to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of the Stock for the period
of time necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act, or such other federal
banking or other applicable laws, even if the issuer would agree to do so.
Subject to the foregoing, the Agent agrees that any sale of the Stock shall be
made in a commercially reasonable manner, and the Borrower agrees to use its
best efforts to cause the issuer or issuers of the Stock contemplated to be
sold, to execute and deliver, and cause the directors and officers of such
issuer to execute and deliver, all at the Borrower's expense, all such
instruments and documents, and to do or cause to be done all such other acts and
things as may be necessary or, in the reasonable opinion of the Agent, advisable
to exempt such Stock from registration under the provisions of the Securities
Act, and to make all amendments to such instruments and documents which, in the
opinion of the Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules
-7-
and regulations of the Securities and Exchange Commission applicable
thereto. The Borrower further agrees to use its best efforts to cause such
issuer or issuers to comply with the provisions of the securities or "Blue Sky"
laws of any jurisdiction which the Agent shall designate and, if required, to
cause such issuer or issuers to make available to its security holders, as soon
as practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
7.5 Borrower's Agreements, etc. The Borrower further agrees
to do or cause to be done all such other acts and things as may be reasonably
necessary to make any sales of any portion or all of the Stock pursuant to this
Section 7 valid and binding and in compliance with any and all applicable laws
(including, without limitation, the Securities Act, the Securities Exchange Act
of 1934, as amended, the rules and regulations of the Securities and Exchange
Commission applicable thereto and all applicable state securities or "Blue Sky"
laws), regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at the Borrower's expense.
The Borrower further agrees that a breach of any of the covenants contained in
this Section 7 will cause irreparable injury to the Agent and the Banks, that
the Agent and the Banks have no adequate remedy at law in respect of such breach
and, as a consequence, agrees that each and every covenant contained in this
Section 7 shall be specifically enforceable against the Borrower by the Agent
and the Borrower hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants.
8. Marshalling. Neither the Agent nor any Bank shall be required
to marshal any present or future collateral security for (including but not
limited to this Agreement and the Stock Collateral) or other assurances of
payment of, the Obligations or any of them, or to resort to such collateral
security or other assurances of payment in any particular order. All of the
Agent's rights hereunder and of the Banks and the Agent in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that
it lawfully may, the Borrower hereby agrees that it will not invoke any law
relating to the marshalling of collateral that might cause delay in or impede
the enforcement of the Agent's rights under this Agreement or under any other
instrument evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
paymetn thereof is otherwise assured, and to the extent that it lawfully may the
Borrower hereby irrevocably waives the benefits of all such laws.
9. Borrower's Obligations Not Affected. The obligations of the
Borrower hereunder shall remain in full force and effect without regard to, and
shall not be impaired by (a) any exercise or nonexercise, or any waiver, by the
Agent or any Bank of any right, remedy, power or privilege under or in respect
of any of the Obligations or any security thereof (including this Agreement);
(b) any amendment to or modification of the Credit Agreement, the Note, the
other Loan Documents or any of the Obligations; (c) any amendment to or
modification of any instrument (other than this Agreement) securing any of the
Obligations, including, without limitation, any of the Security Documents; or
(d)the taking of additional security for, or any other assurances of payment of,
any of the
-8-
Obligations or the release or discharge or termination of any security or other
assurances of payment or performance for any of the Obligations; whether or not
the Borrower shall have notice or knowledge of any of the foregoing.
10. Transfer, etc., by Borrower. Without the prior written consent
of the Agent, the Borrower will not sell, assign, transfer or otherwise dispose
of, grant any option with respect to, or pledge or grant any security interest
in or otherwise encumber or restrict any of the Stock Collateral or any interest
therein, except for the pledge thereof and security interest therein provided
for in this Agreement and the BKC Pledge Agreement.
11. Further Assurances. The Borrower will do all such acts, and
will furnish to the Agent all such financing statements, certificates, legal
opinions and other documents and will obtain all such governmental consents and
corporate approvals and will do or cause to be done all such other things as the
Agent may reasonably request from time to time in order to give full effect to
this Agreement and to secure the rights of the Banks and the Agent hereunder,
all without any cost or expense to the Agent or any Bank. If the Agent so
elects, a photocopy of this Agreement may at any time and from time to time be
filed by the Agent as a financing statement in any recording office in any
jurisdiction.
12. Agent's Exoneration. Under no circumstances shall the Agent be
deemed to assume any responsibility for or obligation or duty with respect to
any part or all of the Stock Collateral of any nature of kind or any matter or
proceedings arising out of or relating thereto, other than (a) to exercise
reasonable care in the physical custody of the Stock Collateral which is in its
possession and (b) after a Default or an Event of Default shall have occurred
and be continuing to act in a commercially reasonable manner. Neither the Agent
nor any Bank shall be required to take any action of any kind to collect,
preserve or protect its or the Borrower's rights in the Stock Collateral or
against other parties thereto. The Agent's prior recourse to any part or all of
the Stock Collateral shall not constitute a condition of any demand, suit or
proceeding for payment or collection of any of the Obligations.
13. No Waiver, etc. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated except by a written instrument
expressly referring to this Agreement and to the provisions so modified or
limited, and executed by the Agent, with the consent of the Majority Banks, and
the Borrower. No act, failure or delay by the Agent shall constitute a wavier
of its rights and remedies hereunder or otherwise. No single or partial waiver
by the Agent of any default or right or remedy that it may have shall operate as
a waiver of any other default, right or remedy or of the same default, right or
remedy on a future occasion. The Borrower hereby waives presentment, notice of
dishonor and protest of all instruments, included in or evidencing any of the
Obligations or the Stock Collateral, and any and all other notices and demands
whatsoever (except as expressly provided herein or in the Credit Agreement).
14. Notice, etc. All notices, requests and other communications
hereunder shall be made in the manner set forth in Section 21 of the Credit
Agreement.
15. Termination. Upon final payment and performance in full of the
Obligations, this Agreement shall terminate and the Agent shall, at the
Borrower's request and expense,
-9-
return such Stock Collateral in the possession or control of the Agent as has
not theretofore been disposed of pursuant to the provisions hereof, together
with any moneys and other property at the time held by the Agent hereunder.
16. Overdue Amounts. Until paid, all amounts due and payable by the
Borrower hereunder shall be a debt secured by the Stock Collateral and shall
bear, whether before or after judgment, interest at the rate of interest for
overdue principal set forth in the Credit Agreement.
17. Governing Law: Consent to Jurisdiction. THIS AGREEMENT IS INTENDED
TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. The Borrower
agrees that any suit for the enforcement of this Agreement may be brought in the
courts of the Commonwealth of Massachusetts or any federal court sitting therein
and consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Borrower by mail at the address
specified in Section 21 of the Credit Agreement. The Borrower hereby waives any
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit is brought in an inconvenient court.
18. Waiver of Jury Trial. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Borrower waives
any right which it may have to claim or recover in any litigation referred to in
the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages. The Borrower (a)
certifies that neither the Agent or any Bank nor any representative, agent or
attorney of the Agent or any Bank has represented, expressly or otherwise, that
the Agent or any Bank would not, in the event of litigation, seek to enforce the
foregoing waivers and (b) acknowledges that, in entering into the Credit
Agreement and the other Loan Documents to which the Agent is a party, the Agent
and the Banks are relying upon, among other things, the waivers and
certifications contained in this Section 18.
19. Miscellaneous. The headings of each section of this Agreement are
for convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Borrower and its respective successors and assigns, and shall inure to the
benefit of the Agent and the Banks and their respective successors and assigns.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall be in no way
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein. The
borrower acknowledges receipt of a copy of this Agreement.
20. Intent of Parties. Notwithstanding the language of any provision of
this Agreement which might otherwise be construed to the contrary, the parties
hereto acknowledge and agree that the Agent shall not take any action or require
the Borrower to
-10-
make any acknowledgements, agreements, or take any actions, which would violate
the terms and conditions of the Intercreditor Agreement or the BKC Intercreditor
Letter.
-11-
IN WITNESS WHEREOF, intending to be legally bound, the Borrower and the
Agent have caused this Agreement to be executed as of the date first above
written.
NATIONAL RESTAURANT
ENTERPRISES, INC.
By: /S
Title:
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
By: /S
Title:
The undersigned Subsidiary hereby joins in the above Agreement for the
sole purpose of consenting to and being bound by the provisions of Section
Section 4.1.6 and 7 thereof, the undersigned hereby agreeing to cooperate fully
and in good faith the Agent and the Borrower in carrying out such provisions.
AMERIKING COLORADO
CORPORATION I
By: /S
Title:
AMERIKING TENNESSEE
CORPORATION I
By: /S
Title:
-11-
IN WITNESS WHEREOF, intending to be legally bound, the Borrower and the
Agent have caused this Agreement to be executed as of the date first above
written.
NATIONAL RESTAURANT
ENTERPRISES, INC.
By: /S
Title:
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
By: /S
Title:
The undersigned Subsidiary hereby joins in the above Agreement for the
sole purpose of consenting to and being bound by the provisions of Section
Section 4.1.6 and 7 thereof, the undersigned hereby agreeing to cooperate fully
and in good faith the Agent and the Borrower in carrying out such provisions.
AMERIKING COLORADO
CORPORATION I
By: /S
Title:
AMERIKING TENNESSEE
CORPORATION I
By: /S
Title:
NATIONAL RESTAURANT ENTERPRISES, INC.
NRE HOLDINGS, INC.
--------------------------------------
NOTE PURCHASE AGREEMENT
--------------------------------------
12.5% Senior Subordinated Notes due 2005
($15,000,000)
Detachable Common Stock Purchase Warrants
(Exercisable into
71.72 Shares of Class C Common Stock, $.01 par value)
Dated as of February 7, 1996
<PAGE>
This NOTE PURCHASE AGREEMENT, dated as of February 7, 1996
(this "Agreement"), is entered into among NRE HOLDINGS, INC., a Delaware
corporation ("Holdings"), with its chief executive office located at 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154, NATIONAL RESTAURANT
ENTERPRISES, INC., a Delaware corporation (the "Company"), with its chief
executive office located at 2215 Enterprise Drive, Suite 1502, Westchester,
Illinois 60154, and PMI MEZZANINE FUND, L.P., a Delaware limited partnership
("PMI"), with an office located at 610 Newport Center Drive, Suite 1100,
Newport Beach, California 92660.
1. Description of the Subordinated Notes and the Warrants.
1.1 Authorization of Financing.
(a) The Company has authorized the issuance and delivery to
PMI of the Company's senior subordinated promissory notes (herein,
together with any such notes that may be issued hereunder in
substitution or exchanged therefor, collectively called the
"Subordinated Notes" and individually called a "Subordinated Note"),
in the original aggregate principal amount of $15,000,000, to be
dated the date of issuance thereof, to mature on January 31, 2005, to
bear interest on the unpaid balances thereof from the date thereof
until the principal thereof shall become due and payable at the rate
of 12.5% per annum, based upon a 360 day year for actual days
elapsed, payable quarterly in arrears, until the entire principal
thereof shall become due and payable and on overdue principal,
premium, and interest at a rate of 14.5% per annum, based upon a 360
day year for actual days elapsed, and to be substantially in the form
of Exhibit 1.1(a); and
(b) Holdings has authorized the issuance and delivery to PMI
of Holdings' common stock purchase warrants (the "Warrants") for the
purchase of 71.72 shares of Holdings' Class C Common Stock, having
the powers, preferences, and rights, and the qualifications,
limitations, or restrictions set forth in the Second Amended and
Restated Certificate of Incorporation of Holdings attached hereto as
Exhibit 1.1(b)-1 (the "Holdings Certificate of Incorporation") or in
the By-Laws of Holdings attached hereto as Exhibit 1.1(b)-2 (the
"Holdings By-Laws"), such Warrants to have an exercise price of $.01
per share, and to be substantially in the form of Exhibit 1.1(b)-3.
1.2 Purchase and Sale of Purchaser Securities. Holdings and the
Company hereby agree to sell to PMI and, subject to the terms and conditions
herein set forth, PMI agrees to purchase from Holdings and the Company the
following Purchaser Securities:
(a) the Subordinated Notes, in the form of one or more
Subordinated Notes registered in the name of PMI's nominee, Atwell &
Co., in the principal amount and in the denominations set forth
opposite PMI's name in the Purchaser Schedule for an aggregate
purchase price of Fifteen Million Dollars ($15,000,000); and
<PAGE>
(b) the Warrants, in the form of one or more instruments
issued in the name of PMI's nominee, Atwell & Co., in the amount and
in the denominations set forth opposite PMI's name in the Purchaser
Schedule in consideration of the purchase by PMI of the Subordinated
Notes.
2. Definitions; Construction.
2.1 Definitions. For the purpose of this Agreement, the following
terms shall have the meanings specified with respect thereto below:
"Aaseby Sale Agreement" means those provisions of that certain
Employment Agreement, dated as of September 1, 1994, by and between the
Company and Mr. Joel Aaseby pertaining to the sale by the Company to Mr. Joel
Aaseby of the restaurant identified as BKC Restaurant #209.
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person becomes a Subsidiary of the Company or assumed in
connection with the acquisition of Assets from such Person, and not incurred
by such Person in connection with, or in anticipation of, such Person becoming
a Subsidiary of the Company or such acquisition.
"Acquisitions" means the AmeriKing Cincinnati Acquisition and the
AmeriKing Virginia Acquisition.
"Acquisition Documents" means the AmeriKing Cincinnati Acquisition
Documents and the AmeriKing Virginia Acquisition Documents.
"Affiliate" means, when used with respect to a specified Person,
another Person that directly or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified. PMI shall not, however, be deemed to be an Affiliate of Holdings or
the Company or any of their Affiliates.
"Agent" means FNBB and shall include any successor thereto under the
Credit Agreement. If any Refinancing Agreement is in effect with respect to
the Credit Agreement at any time, then "Agent" also shall mean the agent
defined in such Refinancing Agreement.
"Agreement" has the meaning ascribed thereto in the introduction
hereto.
"AmeriKing Cincinnati" means AmeriKing Cincinnati Corporation I, a
Delaware corporation and wholly-owned Subsidiary of the Company.
"AmeriKing Cincinnati Acquisition" means that certain transaction in
which AmeriKing Cincinnati is to purchase (a) certain of the Assets and
business of Houston, Inc. consisting of two (2) restaurants pursuant to the
AmeriKing\Houston Asset Purchase Agreement on the AmeriKing Cincinnati
Acquisition Closing Date, (b) certain of the Assets and business of Fifth &
Race, Inc.
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<PAGE>
consisting of one (1) restaurant pursuant to the AmeriKing\FRI Asset Purchase
Agreement on the AmeriKing Cincinnati Acquisition Closing Date, and (c)
certain of the Assets and business of Thirty-Forty, Inc. consisting of nine
(9) restaurants pursuant to the AmeriKing\TFI Asset Purchase Agreement on the
AmeriKing Cincinnati Acquisition Closing Date.
"AmeriKing Cincinnati Acquisition Closing Date" means the first date
on which the conditions set forth in the AmeriKing\Houston Asset Purchase
Agreement, the AmeriKing\FRI Asset Purchase Agreement, and the AmeriKing\TFI
Asset Purchase Agreement have been satisfied and the AmeriKing Cincinnati
Acquisition has occurred.
"AmeriKing Cincinnati Acquisition Documents" means the
AmeriKing\Houston Asset Purchase Agreement, the AmeriKing\FRI Asset Purchase
Agreement, the AmeriKing\TFI Asset Purchase Agreement, and related bills of
sale, instruments of assignment, leases, Franchise Agreements, and other
documents, instruments, and certificates delivered in connection with any of
the foregoing.
"AmeriKing Cincinnati By-Laws" means the By-Laws of AmeriKing
Cincinnati attached hereto as Exhibit A-1.
"AmeriKing Cincinnati Certificate of Incorporation" means the
Certificate of Incorporation of AmeriKing Cincinnati attached hereto as
Exhibit A-2.
"AmeriKing Colorado" means AmeriKing Colorado Corporation I, a
Delaware corporation and wholly-owned Subsidiary of the Company.
"AmeriKing Colorado Acquisition" means that certain transaction in
which AmeriKing Colorado purchased (a) certain of the Assets and business of
DMW, Inc. consisting of three (3) restaurants pursuant to the AmeriKing\DMW
Asset Purchase Agreement on July 5, 1995, and (b) certain of the Assets and
business of WSG, Inc. consisting of one (1) restaurant pursuant to the
AmeriKing\WSG Asset Purchase Agreement on July 5, 1995.
"AmeriKing\DMW Asset Purchase Agreement" means that certain Asset
Purchase Agreement, dated as of July 5, 1995, by and among DMW, Inc., Daniel
L. White, and AmeriKing Colorado.
"AmeriKing\FRI Asset Purchase Agreement" means that certain Asset
Purchase Agreement, dated as of November 6, 1995, by and among Fifth & Race,
Inc., James P. Borke, W. Curtis Smith, William T. Keller, and AmeriKing
Cincinnati, as amended by Amendment No. 1 dated on or prior to the Closing
Date, in each case, in the form delivered to PMI prior to the Closing Date.
"AmeriKing\Houston Asset Purchase Agreement" means that certain Asset
Purchase Agreement, dated as of November 6, 1995, by and among Houston, Inc.,
James P. Borke, W.
-3-
<PAGE>
Curtis Smith, William T. Keller, the Company, and AmeriKing Cincinnati, as
amended by Amendment No. 1 dated on or prior to the Closing Date, in each
case, in the form delivered to PMI prior to the Closing Date.
"AmeriKing Tennessee" means AmeriKing Tennessee Corporation I, a
Delaware corporation and wholly-owned Subsidiary of the Company.
"AmeriKing Tennessee Acquisition" means that certain transaction in
which AmeriKing Tennessee purchased (a) the outstanding capital Stock of QSC,
Inc. whose Assets consist of, among other items, eight (8) restaurants
pursuant to the BKC\QSC Stock Purchase Agreement on November 21, 1995, and (b)
the outstanding capital Stock of Ro-Lank, Inc., whose Assets consist of, among
other items, three (3) restaurants pursuant to the BKC\Ro-Lank Stock Purchase
Agreement on November 21, 1995.
"AmeriKing Tennessee Sellers" means, collectively, Ronny D Lankford,
Robert W. Lankford, Michael A. Reed, QSC, Inc., and Ro-Lank, Inc.
"AmeriKing\TFI Asset Purchase Agreement" means that certain Asset
Purchase Agreement, dated as of November 6, 1995, by and among Thirty-Forty
Inc., James P. Borke, W. Curtis Smith, and AmeriKing Cincinnati, as amended by
Amendment No. 1 dated on or prior to the Closing Date, in each case, in the
form delivered to PMI prior to the Closing Date.
"AmeriKing Virginia" means AmeriKing Virginia Corporation I, a
Delaware Corporation and wholly-owned Subsidiary of the Company.
"AmeriKing Virginia Acquisition" means that certain transaction in
which AmeriKing Virginia is to purchase certain of the Assets and business of
C&N Dining, Inc. and its Affiliates ("Virginia Sellers") consisting of
twenty-four (24) restaurants pursuant to the AmeriKing\Virginia Asset Purchase
Agreement on the AmeriKing Virginia Acquisition Closing Date.
"AmeriKing Virginia Acquisition Closing Date" means the first date on
which the conditions set forth in the AmeriKing\Virginia Asset Purchase
Agreement have been satisfied and the AmeriKing Virginia Acquisition has
occurred.
"AmeriKing\Virginia Acquisition Documents" means that certain
AmeriKing Virginia Asset Purchase Agreement and related bills of sale,
instruments of assignment, leases, Franchise Agreements, and other documents,
instruments and certificates delivered in connection with any of the
foregoing.
"AmeriKing Virginia Asset Purchase Agreement" means the Asset
Purchase Agreement, dated as of November 30, 1995, by and among C&N Dining,
Inc. and its Affiliates, and AmeriKing Virginia, as amended by Amendment No. 1
dated on or prior to the Closing Date, in each case in the form delivered to
PMI prior to the Closing Date.
-4-
<PAGE>
"AmeriKing Virginia By-Laws" means the By-Laws of AmeriKing Virginia
attached hereto as Exhibit A-3.
"AmeriKing Virginia Certificate of Incorporation" means the
Certificate of Incorporation of AmeriKing Virginia attached hereto as Exhibit
A-4.
"AmeriKing\WSG Asset Purchase Agreement" means that certain Asset
Purchase Agreement, dated as of July 5, 1995, by and among WSG, Inc., Daniel
L. White, Susan J. Wakeman, George Alaniz, Jr., and AmeriKing Colorado.
"Applicable Prepayment Premium" means, with respect to the
Subordinated Notes, an amount equal to the principal amount of the
Subordinated Notes being prepaid, times the following percentages, as
applicable: (a) from and after the Closing Date up to the second anniversary
of the Closing Date - 5.0%, (b) from and after the second anniversary of the
Closing Date up to the third anniversary of the Closing Date - 4%, (c) from
and after the third anniversary of the Closing Date up to the fourth
anniversary of the Closing Date - 3%, (d) from and after the fourth
anniversary of the Closing Date up to the fifth anniversary of the Closing
Date - 2%, and (c) from and after the fifth anniversary of the Closing Date -
0.0%.
"Asset" means any interest in any kind of property or asset, whether
real, personal, or mixed, and whether tangible or intangible.
"Asset Disposition" means any sale, disposition, conveyance,
transfer, or lease, directly or indirectly, of (a) any Stock of any Subsidiary
of Holdings or the Company; provided, however, that the issuance of Stock by a
Subsidiary shall not constitute an "Asset Disposition," or (b) any Assets of
Holdings or the Company or any of their Subsidiaries other than (i) any sale,
disposition, conveyance, transfer, or lease of Assets of the Company, or any
of its Subsidiaries, in any consecutive 12-month period, having, in the
aggregate, a fair market value of less than $2,500,000 (ii) sales or other
dispositions of inventory in the ordinary course of business consistent with
past practices, and (iii) dispositions of used, obsolete, or surplus equipment
no longer useful in the businesses of the Company or its Subsidiaries;
provided, however, that any Permitted Disposition shall not constitute an
Asset Disposition for purposes of Section 9.11 hereof.
"Bank Documents" means the Credit Agreement, the Bank Notes, and each
of the other Loan Documents (or Refinancing Agreements entered into in
connection with Refinancing Indebtedness in respect thereof).
"Bank Notes" means the promissory notes issued by the Company in
favor of the Banks pursuant to the Credit Agreement and shall include any note
or notes issued under any Refinancing Agreement in respect of the Credit
Agreement, as such promissory notes may be amended, supplemented, restated, or
otherwise modified, from time to time, in a manner that is not in violation of
Section 9.12 hereof.
-5-
<PAGE>
"Banks" means the `Banks' as that term is defined in the Credit
Agreement (or any comparable term of a Refinancing Agreement in respect
thereof).
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"BBI" means BancBoston Investments Inc., a Massachusetts corporation.
"BBI Subordinated Notes" means $600,000 principal amount of 6%
subordinated notes originally due March 31, 2005 that were issued by Holdings
to BBI pursuant to the Securities Purchase Agreement, as such notes are
amended by the BBI Subordinated Note Amendment, and as such notes may be
further amended, supplemented, restated, or otherwise modified, from time to
time, in a manner that is not in violation of Section 9.10(b) hereof.
"BBI Subordinated Notes Amendment" means that certain Amendment No. 1
to BBI Subordinated Notes, dated as of February 7, 1996, by and between
Holdings and BBI, which amendment, among other things, modifies the BBI
Subordinated Notes to provide that no scheduled repayments of principal shall
be due thereunder prior to August 31, 2006.
"BNB" means BNB Land Venture, Inc., an Illinois corporation.
"BKC" means Burger King Corporation, a Florida corporation.
"BKC Assignment" means that certain Assignment and Assumption
Agreement, dated as of November 21, 1995, by and among BKC, the AmeriKing
Tennessee Sellers, and AmeriKing Tennessee, pursuant to which BKC assigned all
of its rights and obligations under the BKC\QSC Stock Purchase Agreement and
the BKC\Ro-Lank Stock Purchase Agreement to AmeriKing Tennessee.
"BKC Note" means that certain promissory note issued by AmeriKing
Tennessee in favor of BKC in the original principal amount of $6,920,700 with
a final maturity of May 21, 1996.
"BKC\QSC Stock Purchase Agreement" means that certain Purchase
Agreement, dated
as of November 21, 1995, by and among Ronny D. Lankford, Robert V. Lankford,
Michael A.
Reed, and QSC, Inc., which Purchase Agreement was subject to the BKC Assignment.
"BKC Restaurant" means a quick service restaurant franchised by BKC
that is located in the United States, its territories, or Canada.
"BKC\Ro-Lank Stock Purchase Agreement" means that certain Purchase
Agreement, dated as of November 21, 1995, by and among Ronny D. Lankford,
Robert W. Lankford, and Ro-Lank, Inc., which Purchase Agreement was subject to
the BKC Assignment.
-6-
<PAGE>
"Business Day" means any day other than a Saturday, Sunday, or any
day that either is a legal holiday under the laws of the States of California
or Illinois, or the Commonwealth of Massachusetts or is a day on which banking
institutions located in such States or Commonwealth are authorized or required
by law or other governmental action to close.
"Call Triggering Event" means the occurrence of a Secondary Public
Offering.
"Call Triggering Event Date" means the date on which a proposed Call
Triggering Event is scheduled to occur.
"Capital Assets" means fixed assets, both tangible (such as land,
buildings, fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises and good will); provided, that Capital
Assets shall not include any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or less in accordance
with GAAP.
"Capital Expenditures" means amounts paid or indebtedness incurred by
Holdings, the Company, or any of their Subsidiaries in connection with the
purchase or lease by Holdings, the Company, or any of their Subsidiaries of
Capital Assets that would be required to be capitalized and shown on the
balance sheet of such Person in accordance with GAAP; provided, however, that
amounts paid or Indebtedness incurred by the Company in connection with any
Permitted Acquisitions (other than in connection with the development of
restaurants) shall not be included as Capital Expenditures.
"Capitalization Documents" means the Holdings Subordinated Debt
Documents, the Management Subscription Agreement, the Investor Subscription
Agreement, the Executive Subscription Agreement, the Stockholders Agreement,
the Company Certificate of Incorporation, the Holdings Certificate of
Incorporation, and the certificates of incorporation of Holdings'
Subsidiaries.
"Capitalized Leases" means leases under which Holdings, the Company,
or any of their Subsidiaries is the lessee or obligor, the discounted future
rental payment obligations under which are required to be capitalized on the
balance sheet of the lessee or obligor in accordance with GAAP, provided,
however, that for purposes of this Agreement all real estate leases (including
the FFCA Leases) respecting BKC Restaurants shall be considered operating
leases.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof,
(b) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Corporation ("S&P") or
-7-
<PAGE>
Moody's Investors Service, Inc. ("Moody's"), (or, if at any time neither such
rating service shall be rating such obligations, then from such other
nationally recognized rating services acceptable to the Required Holders), (c)
commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having the highest rating obtainable
from either S&P or Moody's (or, if at any time neither such rating service
shall be rating such obligations, then from such other nationally recognized
rating services acceptable to the Required Holders), (d) certificates of
deposit (domestic or eurodollar), bankers' acceptances, or time deposits
maturing within one year from the date of acquisition thereof issued by
commercial banks organized under the laws of the United States of America or
any state thereof or the District of Columbia, each having combined capital
and surplus of not less than $500,000,000 ("Qualifying Banks"), (e) repurchase
agreements and reverse repurchase agreements with Qualifying Banks, provided
that the terms of such agreements comply with the guidelines set forth in the
Federal Financial Institutions Examination Council Supervisory Policy --
Repurchase Agreements of Depository Institutions with Securities Dealers and
Others as adopted by the Comptroller of the Currency on October 31, 1985 (the
"Supervisory Policy"), and provided further that possession or control of the
underlying securities is established as provided in the Supervisory Policy,
(f) investments in money market funds or money market deposit accounts that
invest solely in Cash Equivalents described in clauses (a) through (e) above,
and (g) any other Investment permitted under Sections 10.3(a), (b), (c), or
(d) of the Credit Agreement (as in effect on the date hereof).
"CERCLA" has the meaning set forth in the definition of
"Environmental Laws."
"Change of Control" shall be deemed to have occurred if (a) the
Jordan Affiliates and MCIT shall own legally or beneficially less than forty
percent (40%) of the outstanding Voting Stock of Holdings; provided, however,
that, after the occurrence of a Public Offering Event, such percentage shall
be reduced to twenty-four percent (24%) of the outstanding Voting Stock of
Holdings, (b) the Jordan Company and its Affiliates shall fail to have less
than a majority of the directors on the Board of Directors of each of Holdings
and the Company, (c) Holdings shall own legally or beneficially less than one
hundred percent (100%) of the outstanding Voting Stock of the Company, (d) the
Company shall own legally or beneficially less than one hundred percent (100%)
of the outstanding Voting Stock of each of its Restricted Subsidiaries, or (e)
the Company shall legally or beneficially own less than eighty percent (80%)
of the outstanding Voting Stock of the Unrestricted Subsidiaries.
"Change of Control Event" means the occurrence of a Change of Control.
"Change of Control Event Date" means the date on which a proposed
Change of Control Event is scheduled to occur.
"Closing" has the meaning specified in Section 6.
"Closing Date" has the meaning specified in Section 6.
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"Closing Date Projections" has the meaning specified in Section 7.15.
"Closing Fee" has the meaning specified in Section 7.24.
"Code" means the Internal Revenue Code of 1986, or any successor
statute thereto, as the same may be amended from time to time.
"Commission" means the United States Securities and Exchange
Commission and any successor Federal agency having similar powers.
"Common Stock" means, depending on the context, a share of common
stock, $0.01 par value per share, of Holdings, the Company, or one of their
Subsidiaries.
"Company" has the meaning ascribed thereto in the preamble to this
Agreement.
"Company By-Laws" means the By-Laws of the Company attached hereto as
Exhibit C-1.
"Company Certificate of Incorporation" means the Certificate of
Incorporation of the Company attached hereto as Exhibit C-2.
"Compliance Certificate" shall mean a certificate substantially in
the form attached hereto as Exhibit C-3.
"Consolidated or consolidated" means, with reference to any term
defined herein, that term as applied to the accounts of Holdings and its
Subsidiaries or the Company and its Subsidiaries, as applicable, consolidated
in accordance with GAAP.
"Consolidated Cash Flow" means, with respect to any fiscal period, an
amount equal to the sum of (a) Consolidated Net Income for such fiscal period,
plus (b) depreciation and amortization for such period, plus (c) without
duplication, other noncash charges made in calculating Consolidated Net Income
for such period, plus (d) tax expense for such period, plus (e) Consolidated
Total Interest Expense paid or accrued during such period, plus (f) non-cash
expenses relating to Financial Accounting Standards Board Statements Nos. 106
and 109 deducted in the calculation of Consolidated Net Income for such
period, plus (g) the aggregate amount of non-capitalized transaction costs
incurred in connection with financings and acquisitions, (including financing
and refinancing fees), to the extent such costs were deducted in the
calculation of such Person's Consolidated Net Income, minus (h) Capital
Expenditures made in such period, minus (i) cash taxes paid in such period,
all as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (or net deficit) of any Person and its Subsidiaries, after deduction of
all expenses, taxes, and other proper charges, determined in accordance with
GAAP, after excluding therefrom (a) dividends paid or
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payable to the extent deducted from Consolidated Net Income, (b) without
duplication, all nonrecurring nonoperating income or expenses, including but
not limited to gains or losses realized upon the termination of pension plans,
upon the sale of Assets or the satisfaction of Indebtedness, and (c)
nonrecurring cash consolidation expenses of the Company and its Subsidiaries
pertaining to the Acquisitions; provided, however, that to the extent such
cash expenses exceed $250,000 in any Fiscal Year, they must have been approved
by PMI to be excluded from Consolidated Net Income.
"Consolidated Total Interest Expense" means, with respect to any
Person, for any fiscal period, the aggregate amount of interest expense in
respect of all Indebtedness (other than Indebtedness relating to Franchise
Agreements, licenses, Leases, or other agreements (exclusive of the BKC Note)
with BKC) of such Person and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP (including all non-cash
interest payments, the interest portion of any deferred payment obligation and
the interest component of Capitalized Leases, but excluding amortization of
deferred financing fees if such amortization otherwise would be included in
interest expense).
"Contractual Obligation" as applied to any Person, means any
provision of any security issued by that Person or of any Instrument or
undertaking to which it is a party or by which it or any of its Assets are
bound.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" has meanings correlative thereto.
"Credit Agreement" means that certain Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of February 7, 1996, by and
among Holdings, the Company, the Agent, and the Banks listed on the signature
pages thereof, as amended, supplemented, restated, or otherwise modified, from
time to time, in a manner that is not in violation of Section 9.12 hereof.
"Credit Parties" means and includes Holdings, the Company, AmeriKing
Virginia, and AmeriKing Cincinnati, individually and collectively.
"Debt Service Coverage Ratio" means, as at the date of determination
and with respect to the Company and its Subsidiaries, the ratio of (a) the
Consolidated Cash Flow of the Company and its Subsidiaries for the Reference
Period then ended, to (b) the Total Debt Service of the Company and its
Subsidiaries for such Reference Period.
"Default" means any of the events specified in Section 11,
irrespective of whether any requirement for the giving of notice or the lapse
of time has been satisfied in connection with such event.
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"Designated Observer" has the meaning specified in Section 8.9.
"Designated Representative" means PMI, or such other Significant
Holder from time to time designated by the Required Holders in a written
notice to the Company and the Agent as being the substitute Designated
Representative under this Agreement.
"Designated Senior Indebtedness" means Senior Indebtedness
outstanding under the Credit Agreement (or any Refinancing Agreement in
respect thereof).
"Distribution" means (a) the declaration or payment of any dividend
on or in respect of any shares of any class of capital Stock of a Person,
other than dividends payable solely in shares of common stock or Preferred
Stock of such Person, (b) the purchase, redemption, or other retirement of any
shares of any class of capital Stock of a Person, directly or indirectly,
through a Subsidiary of such Person or otherwise, (c) the return of capital by
a Person to its shareholders as such, or (d) any other distribution on or in
respect of any shares of any class of capital Stock of a Person.
"Dual-Use Establishment" means a single location at which more than
one business activity is conducted, but as to which the primary business is
the conduct of a BKC Restaurant.
"EBITDA" means, with respect to any fiscal period, an amount equal to
the sum of (a) Consolidated Net Income for such fiscal period, plus (b)
depreciation and amortization for such period, plus (c) without duplication,
other noncash charges made in calculating Consolidated Net Income for such
period plus (d) tax expense for such period, (e) Consolidated Total Interest
Expense paid or accrued during such period, plus (f) non-cash expenses
relating to Financial Accounting Standards Board Statements Nos. 106 and 109
deducted in the calculation of Consolidated Net Income for such period, plus
(g) the aggregate amount of non-capitalized transaction costs incurred in
connection with financings and acquisitions, (including financing and
refinancing fees), to the extent such costs were deducted in the calculation
of such Person's Consolidated Net Income, all as determined in accordance with
GAAP.
"environment" means ambient air, surface water, and groundwater
(including potable water, navigable water, and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" means any written accusation, allegation,
notice of violation, claim, demand, order, consent decree, directive, cost
recovery action, or other cause of action by, or on behalf of, any
Governmental Authority or any Person for damages, injunctive, or equitable
relief, personal injury (including sickness, disease, or death), Remedial
Action costs, tangible or intangible property damage, natural resource
damages, nuisance, pollution, any adverse effect on the environment caused by
any Hazardous Material, or for fines, penalties, or restrictions, resulting
from or based upon (a) the existence, or the continuation of the existence, of
a Release (including sudden or non-sudden, accidental or non-accidental
Releases), (b) exposure to any
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Hazardous Material, (c) the presence, use, handling, transportation, storage,
treatment, or disposal of any Hazardous Material, or (d) the violation or
alleged violation of any Environmental Law or Environmental Permit.
"Environmental Law" means any and all applicable present and future
treaties, statutes, common law, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices, or binding agreements issued,
promulgated, or entered into by any Governmental Authority, relating in any
way to the environment, preservation or reclamation of natural resources, the
management, Release or threatened Release of any Hazardous Material or to
health and safety matters, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. ss.ss. 6901 et seq., the Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 U.S.C. ss.ss.1251 et seq.,
the Clean Air Act of 1970, as amended, 42 U.S.C. ss.ss. 7401 et seq., the
Toxic Substances Control Act of 1976, 15 U.S.C. ss.ss. 2601 et seq., the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.ss. 651
et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. ss.ss.11001 et seq., the Safe Drinking Water Act of 1974, as amended,
42 U.S.C. ss.ss. 300(f) et seq., the Hazardous Materials Transportation Act,
49 U.S.C. ss.ss.1801 et seq., and any similar or implementing state or local
law, and all amendments or regulations promulgated thereunder.
"Environmental Permit" means any permit, approval, authorization,
certificate, license, variance, filing, or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same
may be amended from time to time.
"ERISA Affiliate" means any trade or business (whether incorporated)
that, together with Holdings or the Company, is treated as a single employee
under Section 414(b) or (c) of the Code, or, solely for purposes of Section
302 of ERISA and Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan,
(b) the adoption of any amendment to a Plan that would require the provision
of security pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA, (c) the existence with respect to any Plan of an "accumulated finding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether waived, (d) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan, (e) the incurrence of any liability under
Title IV of ERISA with respect to the termination of any Plan or the
withdrawal or partial withdrawal of Holdings, the Company or any ERISA
Affiliate from
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any Multiemployer Plan, (f) the receipt by Holdings, the Company, or any ERISA
Affiliate, or, to the knowledge of Holdings, the Company, or any ERISA
Affiliate, by a plan administrator of any Multiemployer Plan of any notice
from PBGC relating to the intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan, (g) the receipt by Holdings, the
Company, or any ERISA Affiliate of any notice concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA, and (h) the occurrence of a "prohibited transaction" with respect to
which Holdings or the Company reasonably could be expected to be liable.
"Event of Default" means any of the events specified in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor statute.
"Executive Subscription Agreement" means that certain Executive and
Advisor Subscription Agreement, dated as of September 1, 1994, by and between
Holdings and the parties listed on the signature pages thereto.
"Existing Credit Agreement" means that certain Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of November 30, 1994, as
amended, by and among Holdings, the Company, FNBB, as agent, and certain of
the Banks.
"FAC" means Franchise Acceptance Corporation Limited, a corporation
organized under the laws of Ireland.
"FAC Note" means that certain promissory note issued by AmeriKing
Colorado in favor of FAC in the original principal amount of $1,865,000 with a
final maturity of December 25, 2005.
"FFCA" means the FFCA Acquisition Corporation, a Delaware corporation.
"FFCA Franchisor Certificates" means those certain BKC Franchisor
Certificates executed by BKC with respect to the franchise, license, or area
development agreements by and between AmeriKing Virginia, AmeriKing Tennessee,
or the Company, as applicable, and BKC, as they may be amended, supplemented,
restated, or otherwise modified, from time to time, in a manner that is not in
violation of Section 9.10(b) hereof.
"FFCA Guaranty" means that certain Unconditional Guaranty of Payment
and Performance executed by the Company in favor of FFCA respecting the
obligations of AmeriKing Virginia and AmeriKing Tennessee with respect to the
FFCA Leases and the FFCA Sale\Leaseback Agreement, as they may be amended,
supplemented, restated, or otherwise modified, from time to time, in a manner
that is not in violation of Section 9.10(b) hereof.
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"FFCA Leases" means those certain lease agreements by and between
FFCA, as lessor, and AmeriKing Virginia, as lessee, for each of the premises
for which the "Lessee" on Exhibit A thereto is AmeriKing Virginia, and by and
between FFCA, as lessor, and AmeriKing Tennessee, as lessee, for each of the
premises for which the "Lessee" on Exhibit A thereto is AmeriKing Tennessee,
as they may be amended, supplemented, restated, or otherwise modified, from
time to time, in a manner that is not in violation of Section 9.10(b) hereof.
"FFCA Sale\Leaseback" means that certain sale and leaseback of the
real property acquired by AmeriKing Virginia and AmeriKing Tennessee in
connection with the AmeriKing Virginia Acquisition and the AmeriKing Tennessee
Acquisition, in each case pursuant to the FFCA Sale\Leaseback Documents.
"FFCA Sale\Leaseback Agreement" means that certain Sale-Leaseback
Agreement, dated as of February 7, 1996, by and among FFCA, AmeriKing
Virginia, and AmeriKing Tennessee, as it may be amended, supplemented,
restated, or otherwise modified, from time to time, in a manner that is not in
violation of Section 9.10(b) hereof.
"FFCA Sale\Leaseback Documents" means the FFCA Sale\Leaseback
Agreement, the FFCA Franchisor Certificates, the FFCA Guaranty, and the FFCA
Leases.
"Financial Officer" of any corporation means the chief financial
officer, principal accounting officer, treasurer, or controller of such
corporation.
"Fiscal Quarter" means a fiscal quarter as set forth in Schedule F-1.
"Fiscal Year" means a fiscal year as set forth in Schedule F-1.
"FNBB" means The First National Bank of Boston, a national banking
association.
"FNBB Warrants" means (a) the warrant issued to FNBB by Holdings, as
amended by the FNBB Warrant Amendment (First) and the FNBB Warrant Amendment
(Second), and (b) the warrant issued to BBI by Holdings, as amended by the
FNBB Warrant Amendment (Second).
"FNBB Warrant Amendment (First)" means the First Amendment to Common
Stock Purchase Warrant, dated as of November 30, 1994, by and between Holdings
and FNBB.
"FNBB Warrant Amendment (Second)" means (a) the Second Amendment to
Common Stock Purchase Warrant, dated as of February 7, 1996, between Holdings
and BBI, and (b) the First Amendment to Common Stock Purchase Warrant, dated
as of February 7, 1996, between Holdings and BBI.
"Franchise Agreements" means the several franchise agreements (a)
dated on or prior to the Closing Date, between the Company, AmeriKing
Colorado, AmeriKing Tennessee, AmeriKing Cincinnati, or AmeriKing Virginia, as
the case may be, and BKC, each in form and
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substance satisfactory to PMI, (b) dated after the Closing Date between the
Company and BKC, each in form and substance substantially similar to those
Franchise Agreements entered into between such parties on or prior to the
Closing Date, (c) dated after the Closing Date between any Restricted
Subsidiary and BKC, each in form and substance substantially similar to those
Franchise Agreements entered into between any other Restricted Subsidiary and
BKC on or prior to the Closing Date, and (d) dated after the Closing Date
between any Unrestricted Subsidiary and BKC, each in form and substance
substantially similar to those Franchise Agreements entered into between any
other Unrestricted Subsidiary and BKC on or prior to the Closing Date.
"GAAP" means (a) when used in Section 9.5, whether directly or
indirectly through reference to a capitalized term used therein, means (i)
principles that are consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, in effect on
January 1, 1996, and (ii) to the extent consistent with such principles, the
accounting practices of the Company reflected in its financial statements for
its Fiscal Year-ended 1995, and (b) when used other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as
in effect from time to time, and (ii) consistently applied with past financial
statements of the Company adopting the same principles; provided that in each
case referred to in this definition of "GAAP," a certified public accountant
would, insofar as the use of such accounting principles is pertinent, be in a
position to deliver an unqualified opinion (other than a qualification
regarding changes in GAAP) as to financial statements in which such principles
have been properly applied.
"Governmental Authority" means any Federal, state, local, or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Governmental Body" means any federal, state, local or foreign
Governmental Authority or regulatory body, any subdivision, agency, commission
or authority thereof or any quasi-governmental or private body exercising any
governmental regulatory authority thereunder and any Person directly or
indirectly owned by and subject to the control of any of the foregoing, or any
court, arbitrator or other judicial or quasi-judicial tribunal.
"Guarantee" has the meaning specified in Section 9.15.
"Guarantors" means AmeriKing Cincinnati and AmeriKing Virginia.
"Hazardous Materials" means all explosive or radioactive substances
or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid
or gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or PCB
containing materials or equipment, radon gas, infectious or medical wastes and
all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Holdings" has the meaning ascribed thereto in the introduction to
this Agreement.
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"Holdings By-Laws" has the meaning specified in Section 1.1(b).
"Holdings Certificate of Incorporation" has the meaning set forth in
Section 1.1(b); such certificate of incorporation to provide that the Holdings
Class A-1 Preferred Stock, the Holdings Class A-2 Preferred Stock, and the
Holdings Class B Preferred Stock shall not be mandatorily redeemable prior to
August 31, 2006.
"Holdings Class A Common Stock" means Common Stock of Holdings issued
as ordinary voting Class A Common Stock.
"Holdings Class B Common Stock" means Common Stock of Holdings issued
as a share of non-voting Class B Common Stock and convertible by its holder at
any time into Class A Common Stock in accordance with the provisions of the
Holdings Certificate of Incorporation.
"Holdings Class C Common Stock" means Common Stock of Holdings issued
as a share of non-voting Class C Common Stock and convertible by its holder
into Class A Common Stock in accordance with Holdings Certificate of
Incorporation.
"Holdings Class D Common Stock" means Common Stock issued as an
initially voting share of Class D Common Stock and convertible by its holder
into Class A Common Stock in accordance with the provisions of the Holdings
Certificate of Incorporation.
"Holdings Class A-1 Preferred Stock" means Preferred Stock issued as
a share of 6% Class A-1 PIK Preferred Stock.
"Holdings Class A-2 Preferred Stock" means Preferred Stock issued as
a share of 6% Class A-2 Cumulative Preferred Stock.
"Holdings Class B Preferred Stock" means Preferred Stock issued as a
share of 6% Class B Cumulative Preferred Stock.
"Holdings Preferred Stock" means the Holdings Class A-1 Preferred
Stock, the Holdings Class A-2 Preferred Stock, and the Holdings Class B
Preferred Stock.
"Holdings Subordinated Debt" means (a) the Indebtedness evidenced by
the MCIT Subordinated Notes, (b) the Indebtedness evidenced by Seller
Subordinated Notes, (c) the Indebtedness evidenced by BBI Subordinated Notes,
(d) any Three Year Junior Subordinated Notes, and (e) any note or note (of the
same series) issued pursuant to a payment-in-kind provision with respect to
any of the foregoing and relating to accrued and unpaid interest due
thereunder.
"Holdings Subordinated Debt Documents" means the documents or
instruments related to the Holdings Subordinated Debt (or any Refinancing
Agreement in respect thereof), including
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the MCIT Subordinated Notes, the Subordinated Pledge Agreement, the MCIT
Subordinated Notes Guaranty, the Management Subscription Agreement, the Seller
Subordinated Notes, the Securities Purchase Agreement, the BBI Subordinated
Notes, and any Three Year Junior Subordinated Notes.
"Indebtedness" means all obligations, contingent and otherwise, that
in accordance with GAAP should be classified upon the obligor's balance sheet
as liabilities, or to which reference should be made by footnotes thereto,
including in any event and whether so classified: (a) all debt and similar
monetary obligations, whether direct or indirect, (b) all liabilities secured
by any mortgage, pledge, security interest lien, charge, or other encumbrance
existing on property owned or acquired subject thereto, whether the liability
secured thereby shall have been assumed, and (c) all guarantees, endorsements
and other contingent obligations whether direct or indirect in respect of
indebtedness of others, including any obligation to supply funds to or in any
manner to invest in, directly or indirectly, the debtor, to purchase
indebtedness, or to assure the owner of indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the indebtedness held by such owner or
otherwise, and the obligations to reimburse the issuer in respect of any
letters of credit.
"Indemnified Liabilities" has the meaning specified in Section 13.2(a).
"Indemnitees" has the meaning specified in Section 13.2(c) hereof.
"Initial Acquisition" means that certain transaction in which the
Company purchased (a) certain of the Assets of BKC consisting of sixty-eight
(68) restaurants, (b) certain of the Assets and business of Jaro or his
Affiliates consisting of eleven (11) restaurants, and (c) certain of the
Assets and business of Osborn or his Affiliates consisting of three (3)
restaurants, in each case, on September 1, 1994 and pursuant to the Initial
Asset Purchase Agreements.
"Initial Asset Purchase Agreements" means those certain Asset
Purchase Agreements, each dated as of September 1, 1994, by and between (a)
BKC and the Company, (b) Jaro or his Affiliates and the Company, and (c)
Osborn or his Affiliates and the Company, respectively.
"Insolvency Proceeding" means (a) any case, action, or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up, or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshaling of Assets for creditors, or
other similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; in each case whether undertaken under
U.S. Federal (including the Bankruptcy Code), State, or foreign law.
"Institutional Lender" has the meaning specified in Section 13.4(b).
"Instrument" means any contract, agreement, indenture, mortgage,
document, or other writing (whether by formal agreement, letter, or otherwise)
under which any obligation is
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evidenced, assumed, or undertaken or any Lien (or right or interest therein)
is granted or perfected.
"Intercompany Management Agreement" means that certain Intercompany
Management Consulting Agreement, dated as of September 1, 1994, by and between
the Company and Holdings, as such agreement was amended by the Intercompany
Management Agreement Amendment, and as it may be further amended,
supplemented, restated, or otherwise modified, from time to time, in a manner
that is not in violation of Section 9.10(c) hereof.
"Intercompany Management Agreement Amendment" means that certain
Amendment No. 1 to Intercompany Management Consultant Agreement, dated as of
February 7, 1996, by and between Holdings and the Company.
"Interest Coverage Ratio" means, as at any date of determination and
with respect to the Company and its Subsidiaries, the ratio of (a) the sum of
the EBITDA of the Company and its Subsidiaries for the Reference Period then
ended, to (b) Consolidated Total Interest Expense of the Company and its
Subsidiaries for such Reference Period.
"Investments" means all expenditures made (other than Capital
Expenditures not incurred or made in connection with the acquisition or
development of restaurants) and all liabilities incurred (contingently or
otherwise) for, or in connection with, the direct or indirect purchase or
other acquisition of (a) Stock or other beneficial interest of, (b)
Indebtedness of, or (c) loans, advances, capital contributions or transfers of
property to, any Person. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any Investment
represented by a guaranty shall be taken at not less than the principal amount
of the obligations guaranteed and still outstanding, (b) there shall be
included as an Investment all interest accrued with respect to Indebtedness
constituting an Investment unless and until such interest is paid, (c) there
shall be deducted in respect of each such Investment any amount received as a
return of capital in cash (but only by repurchase, redemption, retirement,
repayment, liquidating dividend, or liquidating distribution), (d) there shall
not be deducted in respect of any Investment any amounts received as earnings
on such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid, and (e) there shall not be deducted from or added to, as
the case may be, the aggregate amount of Investments any decrease or increase,
as the case may be, in the value thereof.
"Investors" means MCIT, the Jordan Investors (as defined in the
Stockholders Agreement), the Management Stockholders (as defined in the
Stockholders Agreement), and the Executive and Advisors Stockholders (as
defined in the Stockholders Agreement).
"Investor Subscription Agreement" means that certain Jordan Investor
Subscription Agreement, dated as of September 1, 1994, by and among Holdings
and the Stockholders (as defined therein).
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"Jaro" means Lawrence E. Jaro, a natural person.
"Jaro Enterprises" means Jaro Enterprises, Inc., a Colorado
corporation.
"Jaro Loan Agreement" means that certain Revolving Credit Agreement,
dated as of September 1, 1994, by and between Jaro Enterprises or its
Affiliates and the Company providing the making of loans by the Company to
Jaro Enterprises or its Affiliates up to a maximum amount of $700,000.
"Jordan Affiliates" means Leucadia Investors, Inc., John W. Jordan
II, David W. Zalaznick, Jordan/Zalaznick Capital Company, John M. Camp Profit
Sharing Plan, James E. Jordan, Jr. Profit Sharing Plan and Trust, John W.
Jordan Revocable Trust, Jonathan F. Boucher, John R. Lowden, Adam E. Max, A.
Richard Caputo, Jr., John M. Camp, III, Paul R. Rodzevick, Paul Rodzevick
Profit Sharing Plan and Trust, James E. Jordan, Thomas H. Quinn, and JII
Partners, Inc.
"Jordan Company" means The Jordan Company, a New York general
partnership composed of the Jordan Affiliates.
"Jordan Principal" means, collectively, (a) each partner, executive,
or employee of Jordan Company, (b) any wholly-owned Subsidiary of any one (or
jointly of more than one of any) Person specified in clause (a), and (c) the
spouse or any immediate family members of any Person specified in clause (a)
or any trust solely for the benefit of any such Person or the spouse or any
immediate family member of such person.
"JZCC" means Jordan/Zalaznick Capital Company, a New York general
partnership.
"Leases" means the several leases (a) dated on or prior to the
Closing Date between (i) the Company, AmeriKing Colorado, AmeriKing Tennessee,
AmeriKing Cincinnati, or AmeriKing Virginia, as the case may be, and BKC, (ii)
the Company and the current lessors of the restaurants acquired from Jaro or
his Affiliates in the Initial Acquisition, (iii) the Company and the current
lessors of the restaurants acquired from Osborn in the Initial Acquisition,
(iv) the Company and the current lessors of the restaurants acquired from BNB
if such real property is not owned by BNB, (v) the Company and BNB as to those
restaurants acquired from BNB for which BNB or an Affiliate of BNB is the
owner of the real property, or such successor in interest to BNB, (vi)
AmeriKing Colorado and the current lessors of the restaurants acquired in the
AmeriKing Colorado Acquisition, (vii) AmeriKing Tennessee and the current
lessors of the restaurants acquired in the AmeriKing Tennessee Acquisition,
(viii) AmeriKing Cincinnati and the current lessors of the restaurants to be
acquired in the AmeriKing Cincinnati Acquisition, (ix) AmeriKing Virginia and
the current lessors of the restaurants to be acquired in the AmeriKing
Virginia Acquisition, (x) AmeriKing Virginia and AmeriKing Tennessee and FFCA,
and (xi) AmeriKing Virginia and certain of the Virginia Sellers of the
restaurants acquired in connection with the AmeriKing Virginia Acquisition,
all in form substantially similar to those delivered to PMI on
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or prior to the Closing Date, (b) dated after the Closing Date between the
Company and the owner of the real property that is the subject of such lease,
so long as the terms and conditions of such leases are in form and substance
substantially similar to those leases entered into by the Company on or prior
to the Closing Date, (c) dated after the Closing Date between any Restricted
Subsidiary and the owner of the real property that is the subject of such
lease, so long as the terms and conditions of such leases are in form and
substance substantially similar to those leases entered into by any Restricted
Subsidiary on or prior to the Closing Date, and (d) dated after the Closing
Date between any Unrestricted Subsidiary and the owner of the real property
that is the subject of such lease, so long as the terms and conditions of such
leases are in form and substance substantially similar to those leases entered
into by any Unrestricted Subsidiary on or prior to the Closing Date.
"Leverage Ratio" means, as at any date of determination, the ratio of
(a) Total Funded Indebtedness of the Company and its Subsidiaries outstanding
on such date, less cash and Cash Equivalents of the Company and its
Subsidiaries on such date, to (b) the EBITDA of the Company and its
Subsidiaries for the Reference Period then ended; provided, however, that when
calculating the Leverage Ratio for any period in which a Permitted Acquisition
occurred, the calculation of the Leverage Ratio shall be made on a Pro Forma
Basis.
"Lien" means any mortgage, deed of trust, pledge, security interest,
charge, encumbrance, lien, easement, or exception of any kind (including any
conditional sale or other title retention agreement and any agreement to give
any security interest).
"Loan Documents" has the meaning specified in the Credit Agreement,
as such Loan Documents may be amended, supplemented, restated, or otherwise
modified, from time to time, in a manner that is not in violation of Section
9.12 hereof.
"Loans" has the meaning specified in the Credit Agreement.
"Management Agreement" means that certain Management Consultant
Agreement, dated as of September 1, 1994, by and among TJC Management Corp.,
Holdings, and the Company, as such agreement was amended by the Management
Agreement Amendment, and as it may be further amended, supplemented, restated,
or otherwise modified, from time to time, in a manner that is not in violation
of Section 9.10(c) hereof.
"Management Agreement Amendment" means that certain Amendment No. 1 to
Management Consultant Agreement, dated as of February 7, 1996, by and among TJC
Management Corp., Holdings, and the Company.
"Management Individuals" means Messrs. Jaro, Osborn, Gary W. Hubert,
Joel D. Aaseby, Stahurski, and Scott Vasatka.
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"Management Subscription Agreement" means that certain Management
Subscription Agreement, dated as of September 1, 1994, by and between Holdings
and the Stockholders (as defined therein), as it may be amended, supplemented,
restated, or otherwise modified, from time to time, in a manner that is not in
violation of Sections 9.10(b) and 9.10(c) hereof.
"Mandatory Prepayment Date" means the Business Day specified by the
Required Holders, in compliance with the provisions hereof, as the date on
which all of the Indebtedness evidenced by the Subordinated Notes must be
prepaid pursuant to the Required Holders right to compel such prepayment.
"Mandatory Prepayment Notice" means a written notice substantially in
the form of the notice attached hereto as Exhibit M-1.
"Material Adverse Effect" means (a) in the case of Holdings, a
material adverse effect on the condition (financial or otherwise), business,
prospects, results of operations, or Assets of Holdings and its Subsidiaries,
taken as a whole; and (b) in the case of the Company, a material adverse
effect on the condition (financial or otherwise), business, prospects, results
of operations, or Assets of the Company and its Subsidiaries, taken as a
whole.
"MCIT" means MCIT PLC, a public company incorporated under the laws
of England.
"MCIT Subordinated Notes" means $11,000,000 principal amount of
12.75% subordinated notes originally due August 31, 2004 that were issued by
Holdings to MCIT pursuant to the Purchase Agreement, as such notes were
amended by the MCIT Subordinated Notes Amendment, and as they may be further
amended, supplemented, restated, or otherwise modified, from time to time, in
a manner that is not in violation of Section 9.10(b) hereof.
"MCIT Subordinated Notes Amendment" means that certain Amendment No.
1 to MCIT Subordinated Notes, dated as of February 7, 1996, among Holdings and
MCIT, which amendment, among other things, modifies the MCIT Subordinated
Notes to provide that no scheduled repayments of principal shall be due
thereunder prior to August 31, 2005.
"MCIT Subordinated Notes Guaranty" means that certain Amended and
Restated Deferred Limited Interest Guaranty, dated February 7, 1996, from the
Company to MCIT, in the form delivered to PMI on or prior to the Closing Date,
as such agreement may be further amended, supplemented, restated, or otherwise
modified, from time to time, in a manner that is not in violation of Section
9.10(b) hereof.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) in ERISA) maintained or contributed to for employees of
Holdings, the Company, any of their Subsidiaries, or any ERISA Affiliate.
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"Net Cash Proceeds" means the excess, if any, of (a) the gross cash
proceeds received by Holdings, the Company, or a Subsidiary thereof from the
sale or disposition of any property or Asset of Holdings, the Company, or such
Subsidiary, plus, as and when received, all cash payments received subsequent
to such sale or disposition representing (i) any deferred portion of the
purchase price therefor, or (ii) any cash proceeds from the sale or other
disposition of any Cash Equivalents received therefor, over (b) the sum of (i)
a reasonable reserve for any liabilities (including taxes) payable incident to
such sale or disposition, (ii) a reasonable reserve for the cost of
indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by Holdings, the Company, or such
Subsidiary in connection with such sale or disposition, (iii) the direct costs
and expenses incurred by Holdings, the Company, or such Subsidiary in
connection with such sale or disposition (including underwriting fees and
commissions), (iv) all payments made on any Indebtedness which is secured by
the Assets that are the subject of such Asset disposition and which is
required to be repaid out of the proceeds from such Asset disposition, and
(iv) a reasonable reserve for the cost of severance payments and other
non-recurring costs directly arising in connection with such sale or
disposition.
"Net Issuance Proceeds" means, in respect of any issuance of Stock,
cash proceeds received by Holdings, the Company, or any of their Subsidiaries
in connection therewith, net of reasonable out-of-pocket costs and expenses
(including, underwriting discounts and commissions) paid or incurred in
connection therewith, such costs and expenses to be consistent with standard
practices for similar issuances.
"Non-BKC Restaurant" means a quick service franchised restaurant
located in the United States, its territories, or Canada that is not a BKC
Restaurant.
"Non-Payment Blockage Period" means, with respect to any Non-Payment
Default Subordination Event, the period from and including the date of receipt
by the Designated Representative of a Non-Payment Default Subordination Notice
relating thereto until the first to occur of (a) the 180th day after receipt
of such Non-Payment Default Subordination Notice; provided, however, that if,
on or before such date, the Agent or the Required Banks have accelerated the
Designated Senior Indebtedness, then such period shall continue unless and
until Agent or the Required Banks, as applicable, rescind such acceleration in
writing, (b) the date on which the Required Banks shall have expressly waived
or acknowledged the cure of such NonPayment Default Subordination Event, in
each case in writing, or (c) the date on which the Required Banks shall
expressly waive the application of Section 10(b) in writing.
"Non-Payment Default Subordination Event" has the meaning specified
in Section 10(b).
"Non-Payment Default Subordination Notice" means a written notice
from or on behalf of the Agent (or a Representative under a Refinancing
Agreement in respect of the Credit Agreement) of the existence of a
Non-Payment Default Subordination Event and specifically designating such
notice as a "Non-Payment Default Subordination Notice."
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"Non-Payment Standstill Period" means, with respect to any
Non-Payment Default Subordination Event, the period from and including the
date of receipt by the Designated Representative of a Non-Payment Default
Subordination Notice relating thereto until the first to occur of (a) the 45th
day after receipt of such Non-Payment Default Subordination Notice; provided,
however, that if, on or before such date, the Agent or the Required Banks have
accelerated the Designated Senior Indebtedness, then such period shall
continue unless and until Agent or the Required Banks, as applicable, rescind
such acceleration in writing, (b) the date on which the Required Banks shall
have expressly waived or acknowledged the cure of such NonPayment Default
Subordination Event, in each case in writing, (c) the date on which there is
commenced, either by or against the Company, any Insolvency Proceeding, and
(d) the date on which the Required Banks shall waive the application of
Section 10(b) in writing.
"Offer Date" has the meaning specified in Section 9.11(c).
"Offered Price" has the meaning specified in Section 9.11(b).
"Officers' Certificate" means a certificate signed in the name of
Holdings or the Company, as appropriate under the circumstances, by the
President or the Chief Financial Officer (or comparable officer) of the
applicable Credit Party.
"Operating Lease" means any lease (other than a Capital Lease) by the
Company or its Subsidiaries of any Asset.
"Option" means the option of the Company or its assignee or designee
to purchase certain real property from BNB pursuant to Section 19 of the Asset
Purchase Agreement.
"Optional Prepayment Date" means the Business Day specified by the
Company, in compliance with the provisions hereof, as the date on which all or
a portion of the Indebtedness evidenced by the Subordinated Notes is to be
prepaid pursuant to the Company's right to elect to make such a prepayment.
"Optional Prepayment Notice" means a written notice substantially in
the form of the notice attached hereto as Exhibit O-1.
"Osborn" means William C. Osborn, a natural person.
"Payment Blockage Period" means, with respect to any Payment Default
Subordination Event, the period from and including the date of receipt by the
Designated Representative of a Payment Default Subordination Notice relating
thereto until the first to occur of (a) the 180th day after receipt of such
Payment Default Subordination Notice; provided, however, that if, on or before
such date, the Agent or the Required Banks have accelerated the Designated
Senior Indebtedness, then such period shall continue unless and until Agent or
the Required Banks, as applicable, rescind such acceleration in writing, (b)
the date on which the Required Banks shall
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have expressly waived or acknowledged the cure of such Payment Default
Subordination Event, in each case in writing, or (c) the date on which the
Required Banks shall expressly waive the application of Section 10(a) in
writing.
"Payment Default Subordination Event" has the meaning specified in
Section 10(a).
"Payment Default Subordination Notice" means a written notice from or
on behalf of the Agent (or a Representative under a Refinancing Agreement in
respect of the Credit Agreement) of the existence of a Payment Default
Subordination Event and specifically designating such notice as a "Payment
Default Subordination Notice."
"Payment Standstill Period" means, with respect to any Payment
Default Subordination Event, the period from and including the date of receipt
by the Designated Representative of a Payment Default Subordination Notice
relating thereto until the first to occur of (a) the 60th day after receipt of
such Payment Default Subordination Notice; provided, however, that if, on or
before such date, the Agent or the Required Banks have accelerated the
Designated Senior Indebtedness, then such period shall continue unless and
until Agent or the Required Banks, as applicable, rescind such acceleration in
writing, (b) the date on which the Required Banks shall have expressly waived
or acknowledged the cure of such Payment Default Subordination Event, in each
case in writing, (c) the date on which there is commenced, either by or
against the Company, any Insolvency Proceeding, and (d) the date on which the
Required Banks shall expressly waive the application of Section 10(a) in
writing.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PCB" has the meaning ascribed thereto in the definition of Hazardous
Materials.
"Permitted Acquisitions" means Permitted BKC Acquisitions and
Permitted Non-BKC Acquisitions.
"Permitted BKC Acquisitions" means one or more acquisitions of the
Stock, Assets, or businesses of BKC Restaurants or the development of one or
more BKC Restaurants.
"Permitted Dispositions" means (a) the assignment of the Option, so
long as at the time such assignee exercises the Option, the Company and such
assignee enter into a lease with terms no less favorable to the Company than
the terms of the lease being replaced as result of the exercise of the Option,
(b) so long as no Default or Event of Default has occurred or is continuing or
would result therefrom, the sale of the restaurant identified as BKC
Restaurant #209 to Mr. Joel Aaseby; provided, however, that such sale shall be
on terms and conditions substantially as set forth in the Aaseby Sale
Agreement, (c) so long as no Default or Event of Default has occurred or is
continuing or would result therefrom, the sale to BKC or its designee of not
more than twenty (20) of the BKC Restaurants acquired by the Company in the
Initial Acquisition and the Friedman Acquisition (as that term is defined in
the Credit Agreement); provided, however,
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that (i) the cash consideration for each restaurant sold must be at least
equal to 4.75 times the Restaurant Cash Flow for such restaurant, and (ii) all
cash proceeds of each such sale must be applied either to (A) the purchase,
within ninety (90) days of such sale, of a replacement BKC Restaurant from BKC
for a purchase price of not more than 4.75 times the Restaurant Cash Flow of
the restaurant purchased, (B) the repayment of Designated Senior Indebtedness,
or (C) the repayment of Indebtedness evidenced by the BKC Note in an amount
not to exceed $6,920,700 in the aggregate in the event such sale is to Bruce
Taylor or his designee, and (d) the FFCA Sale\Leaseback.
"Permitted Encumbrances" means the following types of Liens:
(a) Liens for taxes, assessments, or governmental charges or
claims the payment of which is not at the time required by Section
8.3;
(b) Statutory Liens of landlords and depository institutions
and Liens of carriers, warehousemen, mechanics, materialmen, and
other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith
by appropriate proceedings diligently pursued; provided, however,
that the applicable Credit Party shall have made such reserve or
other provisions therefor as may be required by GAAP;
(c) Liens (other than any Liens imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance, and other types
of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,
government contracts or permits, performance and return-of-money
bonds, and other similar obligations (exclusive of obligations for
the payment of borrowed money);
(d) Easements, rights-of-way, zoning, and similar
restrictions and other encumbrances affecting real property that do
not in any case materially interfere with the ordinary conduct of the
business of Holdings, the Company, or any of their Subsidiaries;
(e) Leases or subleases, not otherwise prohibited by this
Agreement, granted to others not interfering in any material respect
with the business of Holdings, the Company, or any of their
Subsidiaries;
(f) Liens arising from filing UCC financing statements
regarding Operating Leases;
(g) Any interest or title of a lessor under any lease
permitted by this Agreement (including any Lien granted by such
lessor on the Asset of such lessor) under which Holdings, the
Company, or any of their Subsidiaries is lessee;
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(h) Liens granted to the Agent, for the benefit of the
Banks, to secure Senior Indebtedness owed to the Banks or Liens for
the benefit of lenders, or a Representative thereof, that provide
permitted Refinancing Indebtedness in respect of thereof;
(i) Any attachment or judgment Lien not constituting an
Event of Default under Section 11.1(h) of this Agreement;
(j) Liens existing on the date hereof, that are set forth on
Schedule 4.5 attached hereto and renewals and extensions thereof;
(k) Liens in the nature of the subordination of the
leasehold interest of Holdings, the Company, or any of their
Subsidiaries in any real property to a mortgage or comparable Lien
upon such real property;
(l) Liens securing Acquired Indebtedness incurred pursuant
to Section 9.1(e) if such Liens secured such Acquired Indebtedness at
the time such Acquired Indebtedness becomes an obligation of
Holdings, the Company, or any of the Company's Subsidiaries, and such
Liens were not incurred in connection with, or in anticipation of,
such Acquired Indebtedness becoming an obligation of Holdings, the
Company, or one of the Company's Subsidiaries, provided that such
Liens do not extend to or cover any Assets of Holdings, the Company,
or any of the Company's Subsidiaries other than the Assets that
secured the Acquired Indebtedness;
(m) Liens securing Indebtedness that is incurred pursuant to
Section 9.1(f) solely on the equipment acquired or financed with the
proceeds of such Indebtedness or relating to such Capitalized Lease,
as the case may be, and securing only the Indebtedness incurred to
finance such property;
(n) Liens securing Refinancing Indebtedness to the extent
any such Lien replaces a Lien securing the Indebtedness so refinanced
and is limited to the Assets that were subject to the Lien securing
the Indebtedness so refinanced; provided, however, that in the case
of Refinancing Indebtedness incurred in order to refinance the
Indebtedness owing under and pursuant to the Credit Agreement, the
Liens may extend to any and all Assets of Holdings, the Company, or
any of the Company's Subsidiaries.
(o) Liens granted by Holdings in favor of MCIT in and to the
capital Stock of the Company under and pursuant to the terms of the
Subordinated Pledge Agreement;
(p) Liens in favor of BKC to the extent provided in
Franchise Agreements and Leases;
(q) encumbrances or restrictions on the restaurant
identified as BKC Restaurant #209, to the extent provided in the
Aaseby Sale Agreement;
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(r) Liens granted by AmeriKing Colorado in any or all of its
Assets in order to secure the FAC Note;
(s) Liens granted by the Company with respect to all of its
outstanding Stock of AmeriKing Tennessee in order to secure the BKC
Note; and
(t) Liens granted by Unrestricted Subsidiaries in order to
secure Indebtedness of Unrestricted Subsidiaries.
"Permitted Non-BKC Acquisitions" means one or more acquisitions of
the Stock, Assets, or businesses of Non-BKC Restaurants or the development of
one or more Non-BKC Restaurants.
"Permitted Preferred Stock" means and refers to (a) the Holdings
Preferred Stock, and (b) Preferred Stock issued by Holdings (and not by one or
more of its Subsidiaries) that is not Prohibited Preferred Stock.
"Permitted Recourse Liabilities" means (a) the guaranty obligation of
the Company and Holdings of certain obligations of AmeriKing Colorado to BKC
pursuant to a certain Guarantee, Indemnification and Acknowledgment dated
September 12, 1995, (b) the guaranty obligation of the Company of certain
obligations of AmeriKing Colorado to DMW, Inc. and WSG, Inc. pursuant to the
several Lease Assignment and Assumption Agreements dated as of September 12,
1995, (c) the guaranty obligation of the Company of certain obligations of
AmeriKing Tennessee pursuant to the FFCA Guaranty, and (d) guaranty
obligations of the Company and Holdings of the obligations of AmeriKing
Tennessee to BKC arising out of any Franchise Agreement or Lease between
AmeriKing Tennessee and BKC.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, or other organizations, irrespective of whether they are
legal entities, and Governmental Authorities and political subdivisions
thereof.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA maintained or contributed to by the
Company or any ERISA Affiliate and in respect of which the Company or any
ERISA Affiliate could have liability under Section 4069 of ERISA in the event
such plan has been or were to be terminated.
"PMI" has the meaning ascribed thereto in the introduction to this
Agreement.
"Preferred Stock" means, as applied to the capital Stock of any
Person, means the capital Stock of any class or classes (however designated)
that is preferred as to the payment of
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dividends, or as to the distribution of Assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over shares of capital
Stock of any other class of such Person.
"Primary Public Offering" means a Public Offering Event wherein the
only sellers of Stock of Holdings or the Company are (a) Holdings or the
Company, or (b) Purchaser (or any Transferee) with respect to the Warrants (or
the shares of Common Stock issuable upon the exercise thereof) and where all
of the Net Issuance Proceeds received by Holdings are contributed to the
capital of the Company.
"Pro Forma Basis" means, following a Permitted Acquisition (other
than Permitted Acquisitions in connection with the development of
restaurants), the Total Funded Indebtedness (or, in the case of Consolidated
Total Interest Expense, all Indebtedness) and EBITDA for the Fiscal Quarter in
which such Permitted Acquisition occurred and each of the three Fiscal
Quarters immediately following such Permitted Acquisition with reference to
the audited historical financial results of the Person or Assets so acquired
and the Company and its Subsidiaries for the applicable Test Period after
giving effect on a pro forma basis to such Permitted Acquisition and assuming
that such Permitted Acquisition had been consummated at the beginning of such
Test Period in the manner described in (a), (b), and (c) below:
(a) all Indebtedness (whether under this Agreement or
otherwise) and any other balance sheet adjustments incurred or made in
connection with the Permitted Acquisition shall be deemed to have been
incurred or made on the first day of the Test Period, and all Indebtedness of
the Person acquired or to be acquired in such Permitted Acquisition that was
or will have been repaid in connection with the consummation of the Permitted
Acquisition shall be deemed to have been repaid concurrently with the
incurrence of the Indebtedness incurred in connection with the Permitted
Acquisition;
(b) all Indebtedness assumed to have been incurred pursuant
to the preceding clause (i) shall be deemed to have borne interest at the sum
of (a) the arithmetic mean of (x) the Eurodollar Rate for Eurodollar Rate
Loans having and Interest Period of one month in effect on the first day of
the Test Period, and (y) the Eurodollar Rate for Eurodollar Rate Loans having
an Interest Period of one month in effect on the last day of the Test Period
plus (b) the Applicable Margin then in effect (after giving effect to the
Permitted Acquisition on a Pro Forma Basis) for Revolving Credit Loans (each
initially capitalized term used in this clause (b) that is not defined in this
Agreement shall have the meaning ascribed thereto in the Credit Agreement (as
in effect on the date hereof)); and
(c) other reasonable cost savings, expenses, and other
income statement or operating statement adjustments that are attributable to
the change in ownership or management resulting from such Permitted
Acquisition as may be approved by PMI in writing (which approval shall not be
unreasonably withheld) shall be deemed to have been realized on the first day
of the Test Period.
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"Pro Forma Balance Sheet" means a pro forma balance sheet of Holdings
dated as of the Closing Date and based upon Holdings's January 1, 1996
unaudited financial statement, which pro forma balance sheet shall (a) reflect
the effect of the transactions contemplated by the Acquisition Documents, the
Bank Documents, and the Transaction Documents, (b) contain a certificate of
Holdings, executed on its behalf by its Financial Officer, to the effect that
the pro forma balance sheet reflects such Financial Officer's good-faith
estimate as to the financial position of Holdings as of the Closing Date,
after giving effect to such transactions, and (c) be in form and substance
reasonably acceptable to PMI.
"Prohibited Preferred Stock" means and refers to any Preferred Stock
that by its terms is mandatorily redeemable or subject to any other payment
obligation (including any obligation to pay dividends, other than dividends of
Preferred Stock of the same class and series payable in kind or dividends of
Common Stock) on or before August 31, 2006, or, on or before August 31, 2006,
is redeemable at the option of the holder thereof for cash or Assets or
securities (other than distributions in kind of Preferred Stock of the same
class and series or of Common Stock) of Holdings or any of its Subsidiaries.
"Property" and "Properties" has the meanings set forth in
Section 4.15 hereof.
"Projections" means Holdings' and the Company's forecasted
consolidated (a) balance sheets, (b) statements of income, and (c) cash flow
statements, all prepared on a basis consistent with their historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
"Public Offering Event" means a firmly underwritten public offering
of the Stock of Holdings or the Company.
"Purchase Agreement" means that certain Amended and Restated Purchase
Agreement, dated as of February 7, 1996, by and among Holdings and MCIT
relating to the MCIT Subordinated Notes that were issued by Holdings to MCIT,
as such agreement may be amended, supplemented, restated, or otherwise
modified, from time to time, in a manner that is not in violation of Section
9.10(b) hereof.
"Purchaser" means PMI and also includes any Transferee of a
Purchaser Security.
"Purchaser Schedule" means Schedule P-1 attached hereto.
"Purchaser Securities" means the Warrants and the Subordinated Notes.
"Put Triggering Event" means (a) the occurrence of a Change of
Control, (b) a merger, reorganization, or consolidation, other than a merger,
reorganization, or consolidation that is permitted by Section 9.6, (c) the
sale or other disposition of all or substantially all of the Assets of
Holdings, the Company, and their Subsidiaries, taken as a whole, in one
transaction or a series
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of related transactions, (d) the occurrence of one or more events that give
rise to a mandatory prepayment obligation with respect to the MCIT
Subordinated Notes, the BBI Subordinated Notes, or the Seller Subordinated
Notes, or (e) the occurrence of a Secondary Public Offering.
"Put Triggering Event Date" means the date on which a proposed Put
Triggering Event is to scheduled to occur.
"Rate Protection Agreements" means interest rate cap agreements,
interest rate swap agreements, and other arrangements or agreements entered
into by Holdings or the Company designed to protect Holdings or the Company
against fluctuations in interest rates.
"Reference Period" means the period of four (4) consecutive Fiscal
Quarters (or such shorter period of two or three full consecutive Fiscal
Quarters as has elapsed since the Closing Date) most recently ended.
"Refinancing Agreements" means an agreement or agreements entered
into by Holdings, the Company, or any of their Subsidiaries pursuant to which
Holdings, the Company, or any of their Subsidiaries incur Refinancing
Indebtedness, provided that (a) if such Indebtedness is not evidenced by the
Bank Documents (or a Refinancing Agreement in respect thereof), no such
refinancing shall (i) shorten the average weighted maturity of the then
outstanding Indebtedness refinanced thereby, (ii) increase the amount of the
Indebtedness refinanced thereby; provided, however, that the foregoing shall
not be deemed to preclude a Refinancing Agreement from providing Refinancing
Indebtedness together with any other Indebtedness that could then be incurred
under Section 9.1, (iii) in the case of the Holdings Subordinated Debt,
increase the interest rate (in the case of a fixed rate of interest) or
interest rate margin (in the case of a floating rate of interest) or the
default interest rate (in the case of a fixed rate of interest) or interest
rate margin (in the case of a floating rate of interest), or any of them, in
the aggregate by more than two percent (2%) per annum higher than the interest
rate (in the case of a fixed rate of interest) or margin (in the case of a
floating rate of interest) originally in existence (so that, for example, (x)
a rate of 12% per annum could not be increased to more than 14% per annum, (y)
a rate of LIBOR plus 200 basis points could not be increased to more than
LIBOR plus 400 basis points, and (z) a default rate of Prime Rate plus 375
basis points could not be increased to more than Prime Rate plus 575 basis,
i.e., the combined aggregate increase in the non-default interest rate and
default interest rate (in the case of a fixed rate of interest) or in the
non-default interest rate margin and default interest rate margin (in the case
of a floating rate of interest) could not exceed 200 basis points), (iv)
provide that the Company would be prohibited from making a payment in respect
of the Subordinated Notes that the Company is contractually obligated to make,
or (v) if such Indebtedness (or any guaranty in respect thereof) is
subordinated in right of payment to the Subordinated Notes (whether
contractually or structurally), then the subordination terms and conditions of
the Refinancing Indebtedness must be at least as favorable to the holders of
the Subordinated Notes as those applicable to the Indebtedness being
refinanced, and (b) if such Indebtedness is evidenced by the Bank Documents
(or a Refinancing Agreement in respect thereof), no such refinancing shall be
made on terms and conditions that would be prohibited by
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Section 9.12, if the Indebtedness refinanced thereby was not being refinanced
but was being modified or amended.
"Refinancing Indebtedness" means Indebtedness of Holdings, the
Company, or any of their Subsidiaries incurred pursuant to any Refinancing
Agreement the proceeds of which are applied to refinance all or a portion of
Indebtedness at the time outstanding and permitted under Section 9.1. With
respect to any refinancing of Indebtedness under the Bank Documents,
Refinancing Indebtedness also may include any Indebtedness arising under
Section 9.1(d).
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating, or migrating of any Hazardous Material in,
into, onto, or through the environment.
"Remedial Action" means (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by
any Governmental Authority or voluntarily undertaken to (i) cleanup, remove,
treat, abate or in any other way address any Hazardous Material in the
environment, (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not migrate or endanger
or threaten to endanger public health, welfare or the environment, or (iii)
perform studies and investigations in connection with, or as a precondition
to, (i) or (ii) above.
"Representative" means the agent, trustee, or other appointed
representative of an issuee of Indebtedness.
"Required Bank Loans" has the meaning specified in Section 7.3 hereof.
"Required Banks" means the `Required Lenders' as that term is defined
in the Credit Agreement. If any Refinancing Agreement is in effect with
respect to the Credit Agreement at any time, then "Required Banks" also means
the lenders defined as the `Majority Lenders' or `Required Lenders' or a term
of similar import, so long as such term requires lenders holding not more than
66-2/3rds of the then aggregate unpaid principal amount of credit outstanding
under such Refinancing Agreement, or, if no such credit is then outstanding,
lenders then having not more than 66-2/3rds of the commitments under such
Refinancing Agreement.
"Required Holders" means, as of any date of determination, the
holders of at least a majority of the unpaid principal amount of the
Subordinated Notes then outstanding.
"Responsible Officer" of any corporation means any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Restaurant Cash Flow" means, for each restaurant, the EBITDA of such
restaurant for the period of the immediately preceding twelve (12) months,
plus, to the extent deducted in
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calculating such EBITDA, the aggregate amount of allocated general and
administrative expenses not directly associated with such restaurant during
such period calculated in accordance with the past practices of the Company.
"Restricted Junior Payment" means (a) any Distribution, or (b) any
payment or transfer of property by the Company or its Subsidiaries to Holdings
or other Affiliate of the Company or Holdings (other than the Company and its
Subsidiaries); provided, however, that payments made by the Company pursuant
to the MCIT Subordinated Notes Guaranty shall not be deemed to be a Restricted
Payment so long as such payment is not made in any manner in violation of the
subordination provisions thereof and all terms concerning subordination
contained therein are complied with in all respects.
"Restricted Subsidiary" shall mean any Subsidiary of the Company that
is not an Unrestricted Subsidiary.
"Revolving Facility" means the revolving credit facility provided for
under the Credit Agreement (or under a Refinancing Agreement in respect
thereof).
"Revolving Credit Commitment" means the commitments of the Banks with
respect to the Revolving Facility under the Credit Agreement (or under a
Refinancing Agreement in respect thereof).
"Revolving Loans" means the Loans made by the Banks to the Company
under the Revolving Facility.
"Sale/Leaseback" has the meaning specified in Section 9.7.
"Secondary Public Offering" means any Public Offering Event that is
not a Primary Public Offering.
"Securities Act" means the Securities Act of 1933, as amended, and
any successor statute.
"Securities Purchase Agreement" means that certain Securities
Purchase Agreement, dated as of November 30 1994, by and between Holdings and
BBI pursuant to which (a) the BBI Subordinated Notes were issued by Holdings
to BBI, and (b) BBI purchased 1,425 shares of Holdings Class A-1 Preferred
Stock and 475 shares of Holdings Class B Preferred Stock, as such agreement
was amended by the Securities Purchase Agreement Amendment, and as such
agreement may be further amended, supplemented, restated, or otherwise
modified, from time to time, a manner that is not in violation of Section
9.10(b) hereof.
"Securities Purchase Agreement Amendment" means that certain
Amendment No. 1 to Securities Purchase Agreement, dated as of February 7,
1996, among Holdings and BBI, which
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amendment, among other things, modifies the Securities Purchase Agreement to
provide that Section 10.2(c) thereof is eliminated.
"Seller Subordinated Notes" means $4,400,000 principal amount of
12.75% subordinated notes originally due August 31, 2004 that were issued by
Holdings pursuant to the Management Subscription Agreement, as such notes were
amended by the Seller Subordinated Notes Amendment, and such notes may be
further amended, supplemented, restated, or otherwise modified, from time to
time, in a manner that is not in violation of Section 9.10(b) hereof.
"Seller Subordinated Notes Amendment" means that certain Amendment
No. 1 to Seller Subordinated Notes, dated as of February 7, 1996, among
Holdings and each of the holders of the Seller Subordinated Notes, which
amendment, among other things, modifies the Seller Subordinated Notes to
provide that no scheduled repayments of principal shall be due thereunder
prior to August 31, 2005.
"Semi-Annual Meeting" has the meaning specified in Section 8.9.
"Senior Indebtedness" means all payment obligations (whether now
outstanding or hereafter incurred) of the Company in respect of (a) principal
(including reimbursement obligations in respect of letters of credit) under
the Credit Agreement or other Loan Documents (or a Refinancing Agreement
entered into with respect thereto) not exceeding $105,000,000, (b) interest
and premium, if any, on the outstanding Indebtedness referred to in clause (a)
above, (c) the fees (including commitment, agency, and letter of credit fees)
payable pursuant to the instruments or agreements evidencing or creating the
Indebtedness referred to in clause (a) above, (d) all other payment
obligations owing to the Banks under or pursuant to the Credit Agreement or
other Loan Documents (or to third Persons under comparable provisions of a
Refinancing Agreement entered into with respect thereto), (e) up to
$15,000,000 of additional Indebtedness of the Company incurred pursuant to
Section 9.1(d) and that is secured by a Lien, whether issued under the Credit
Agreement (or a Refinancing Agreement entered into with respect thereto), so
long as such Indebtedness is specifically designated as "Senior Indebtedness"
in the instrument or agreements evidencing or creating same and so long as the
Designated Representative receives notice of the creation of such Senior
Indebtedness at the time the Company first incurs same, and (f) post-petition
interest on the Indebtedness referred to in clauses (a) through (e) above
accruing subsequent to the commencement of a proceeding under the Bankruptcy
Code (whether such interest is allowed as a claim in such proceeding) Senior
Indebtedness also shall include any guaranties by Restricted Subsidiaries of
any payment obligations referred to in clauses (a) through (f) above. "Senior
Indebtedness" shall not include trade accounts payable, any obligation of the
Company that is not permitted by the terms of this Agreement, or any
obligation that itself is subordinated to any other obligation that
constitutes Senior Indebtedness.
"Significant Holder" means (a) PMI and any Affiliate of PMI, so long
as PMI or such Affiliate shall hold (or are committed under this Agreement to
purchase) any Subordinated Note,
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and (b) any other holder, and any Affiliate of such holder, so long as they
shall hold at least $5,000,000 in principal amount of the Subordinated Notes
outstanding.
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including
common stock, preferred stock, or any other "equity security" (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Commission under the Exchange Act).
"Stockholders Agreement" means that certain Stockholders Agreement,
dated as of September 1, 1994, by and among the Company, BBI, the Investors,
and Holdings, as amended by the Stockholders Agreement Amendment (First) and
the Stockholders Agreement Amendment (Second).
"Stockholders Agreement Amendment (First)" means that certain Consent
and Amendment No. 1 to the Stockholders Agreement, dated as of November 30,
1994, by and among the Company, BBI, the Investors, and Holdings.
"Stockholders Agreement Amendment (Second)" means that certain Waiver
and Amendment No. 2 to the Stockholders Agreement, dated on or prior to the
Closing Date, by and among the Company, FNBB, BBI, the Investors, PMI, and
Holdings.
"Subordinated Notes" has the meaning specified in Section 1.1(a).
"Subordinated Obligations" has the meaning specified in Section 10.
"Subordinated Pledge Agreement" means that certain Pledge Agreement,
dated as of September 1, 1994, from Holdings to MCIT individually and as agent
for itself and the other Noteholders (as defined in the Pledge Agreement).
"Subordinated Subsidiary Guaranty" means a Subordinated Guaranty,
dated as of the Closing Date, from the Guarantors and substantially in the
form of Exhibit S-1 attached hereto.
"Subsidiary" means any corporation, association, trust, or other
business entity of which the designated parent shall at any time own directly
or indirectly through a Subsidiary or Subsidiaries at least a majority (by
number of votes) of the outstanding Voting Stock.
"Tax Sharing Agreement" means that certain Amended and Restated Tax
Sharing Agreement, dated as of February 7, 1996, by and between Holdings, the
Company and their Subsidiaries.
"Term Loan A" has the meaning specified in the Credit Agreement (or
any loan incurred pursuant to a Refinancing Agreement in respect thereof).
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"Term Loan B" has the meaning specified in the Credit Agreement (or a
comparable term under a Refinancing Agreement in respect thereof).
"Test Period" means the period of all Fiscal Quarters (and any
portion of a Fiscal Quarter) prior to the date of a subject Permitted
Acquisition as set forth in the definition of Pro Forma Basis.
"Three Year Junior Subordinated Note" means any Non-Negotiable Three
Year Junior Subordinated Note issued by Holdings pursuant to the terms of the
Management Subscription Agreement.
"Total Debt Service" means, for any period with respect to the
Company and its Subsidiaries, all scheduled mandatory payments of principal on
Indebtedness of the Company and its Subsidiaries (other than Indebtedness
relating to Franchise Agreements, Leases, licenses, and other agreements with
BKC) made or required to be made in that period plus the Consolidated Total
Interest Expense of the Company and its Subsidiaries for that period.
"Total Funded Indebtedness" means all Indebtedness of the Company and
its Subsidiaries for borrowed money, purchase money Indebtedness, and
Capitalized Leases, determined on a consolidated basis in accordance with
GAAP; provided, that for purposes of calculating Indebtedness of the Company
under the Revolving Facility for any period, the amount shall be the daily
average outstanding amount of Revolving Loans for such period.
"Transaction Costs" means the fees, costs, and expenses paid or
payable by the Credit Parties or their Subsidiaries in connection with the
consummation of the Acquisitions and the transactions related thereto,
including the fees, costs, and expenses paid or payable by the Credit Parties
in connection with the incurrence of Indebtedness contemplated under this
Agreement and the Credit Agreement.
"Transaction Documents" means this Agreement, the Stockholders
Agreement, the Subordinated Notes, the Subordinated Subsidiary Guaranty, the
Warrants, and the VCOC Letter.
"Transfer" means the sale, pledge, assignment, or other transfer of
the Purchaser Securities, in whole or in part, and of the rights of the holder
thereof under the Purchaser Securities and this Agreement.
"Transferee" means any direct or indirect transferee of all or any
part of any Purchaser Securities permitted under Section 13.4(b) hereof.
"Unrestricted Subsidiary" means (a) AmeriKing Colorado (provided it
is in compliance with clauses (ii), (iii) and (iv) hereof), (b) AmeriKing
Tennessee (provided it is in compliance with clauses (ii), (iii) and (iv)
hereof), unless it is required to become a Restricted Subsidiary
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pursuant to Section 8.14 hereof, and (c) any other Subsidiary of the Company
that is formed or acquired after the Closing Date in connection with the
consummation of a Permitted Acquisition and that (i) is designated as being an
"Unrestricted Subsidiary" in a writing delivered by the Company to the
Designated Representative at the time of such formation or acquisition, (ii)
such Subsidiary has become a party to the Tax Sharing Agreement, (iii) all of
such Subsidiary's liabilities (other than Permitted Recourse Liabilities) are
non-recourse to the Company or any Restricted Subsidiary, and (iv) no Jordan
Principal owns any capital stock of such Subsidiary (except indirectly through
Holdings).
"VCOC Letter" means a letter agreement between the Company and PMI
that meets the Venture Capital Operating Company requirements and that is in
form and substance satisfactory to PMI.
"Voidable Transfer" has the meaning specified in Section 10.
"Voting Stock" means Stock or similar equity interest of a Person
pursuant to which the holders thereof have, at the time of determination, the
general voting power under ordinary circumstances to vote for the election of
directors (or individuals performing similar functions), managers, trustees,
or general partners of such Person (irrespective of whether at the time any
other class or classes will have or might have voting power by reason of the
happening of any contingency).
"Warrants" has the meaning specified in Section 1.1(b).
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
2.2 Accounting Principles. Where the character or amount of any Asset
or liability or item of income or expense is required to be determined or any
consolidation, combination, or other accounting computation is required to be
made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement..
2.3 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and
references to the singular include the plural, the part includes the whole,
the terms "include" and "including" are not limiting, and the term "or" has,
except where otherwise indicated, the inclusive meaning represented by the
phrase "and/or". The words "hereof," "herein," "hereby," "hereunder" and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision in this Agreement. Paragraph, section, subsection,
clause, exhibit, and schedule references are to this Agreement unless
otherwise specified. Any reference herein to this Agreement or the other
Transaction Documents
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includes any and all alterations, amendments, changes, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
3. Repayments and Prepayments.
3.1 Repayments. Any and all principal of the Subordinated Notes,
together with interest accrued thereon, automatically and unconditionally
shall be due and payable in full on January 31, 2005.
3.2 Optional Prepayments. The Subordinated Notes shall be subject to
prepayment, at the option of the Company, at any time and from time to time on
and after the Closing Date in whole or in part. To exercise such right of
prepayment, the Company must provide Purchaser with an Optional Prepayment
Notice at least fifteen (15), but not more than thirty (30), days prior to the
proposed Optional Prepayment Date which Optional Prepayment Notice shall
specify the portion of the principal amount of the Indebtedness evidenced by
the Subordinated Notes (which must be in a minimum aggregate amount of
$500,000, or the remaining unpaid balance, if less) to be prepaid. On the
Optional Prepayment Date specified, the Company shall prepay the portion of
the principal amount of the Indebtedness evidenced by the Subordinated Notes,
on a pro rata basis (as nearly as possible), that the Company has specified is
to be prepaid on such date, plus accrued interest on such principal amount to
the date of the prepayment, plus the Applicable Prepayment Premium multiplied
by the principal amount to be prepaid. Any prepayment shall be made by
cashiers check or by wire transfer of immediately available funds, in currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts, at such address or to such account, as
applicable, as shall be designated to the Company by Purchaser.
3.3 Other Prepayments. (a) In the case of any Put Triggering Event
occurring at any time, the Company, at the option of the Required Holders,
shall prepay the Subordinated Notes in whole or in part. In order to allow the
Required Holders an opportunity to determine whether to exercise such option,
the Company agrees to provide Purchaser with a written notice of the proposed
Put Triggering Event at least fifteen (15) days prior to the Put Triggering
Event Date, which notice shall provide Purchaser with reasonable detail
regarding the nature and terms of such proposed Put Triggering Event. To
exercise such right of prepayment, the Required Holders must provide the
Company with a Mandatory Prepayment Notice at least five (5) days prior to the
Put Triggering Event Date, which Mandatory Prepayment Notice shall specify the
portion of the principal amount of the Indebtedness evidenced by the
Subordinated Notes (which must be in a minimum amount of $500,000 or the
remaining unpaid balance, if less) to be prepaid. On the Mandatory Prepayment
Date specified, (a) the Company shall prepay the portion of the principal
amount of the Indebtedness evidenced by the Subordinated Notes, on a pro rata
basis (as nearly as possible), that the Required Holders have specified is to
be prepaid on such date, plus accrued interest on such principal amount to the
date of the prepayment, plus the Applicable Prepayment Premium multiplied by
the principal amount to be prepaid. If, for any reason, the proposed Put
Triggering Event does not occur, then the Subordinated Notes shall not be due
on the Mandatory
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Prepayment Date set forth in the Mandatory Prepayment Notice, but, instead,
each shall continue to be due and payable in accordance with their terms and
the terms of this Agreement as if the Company had never given Purchaser a
notice of a proposed Put Triggering Event.
(b) In the case of any Call Triggering Event occurring at any time,
the Company, at its option, may prepay the Subordinated Notes in whole or in
part. To exercise such right of prepayment, the Company must provide the
holders of the Subordinated Notes with an Optional Prepayment Notice at least
fifteen (15) days prior to the Call Triggering Event Date, which Optional
Prepayment Notice shall specify the portion of the principal amount of the
Indebtedness evidenced by the Subordinated Notes (which must be in a minimum
aggregate amount of $500,000 or the remaining unpaid balance, if less) to be
prepaid. On the Optional Prepayment Date specified the Company shall prepay
the portion of the principal amount of the Indebtedness evidenced by the
Subordinated Notes, on a pro rata basis (as nearly as possible), that the
Company has specified is to be prepaid on such date, plus accrued interest on
such principal amount to the date of the prepayment, plus (the provisions of
Section 3.1 notwithstanding) the Applicable Prepayment Premium multiplied by
the principal amount to be prepaid. Any prepayment shall be made by cashiers
check or by wire transfer of immediately available funds, in currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, at such address or to such account, as
applicable, as shall be designated to the Company by the holders. If, for any
reason, the proposed Call Triggering Event does not occur, then the
Subordinated Notes shall not be due on the Optional Prepayment Date set forth
in the Optional Prepayment Notice, but, instead, shall continue to be due and
payable in accordance with their terms and the terms of this Agreement as if
the Company had never given the holders a notice of a proposed Call Triggering
Event.
4. Representations and Warranties. Holdings and the Company each
represent and warrant to PMI that, as of the date hereof and as of the Closing
Date:
4.1 Organization, Powers, Good Standing, and Subsidiaries.
(a) Organization and Powers. Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite corporate power and authority, to own and
operate its Assets, to carry on its business as now conducted and proposed to
be conducted, to enter into this Agreement, to issue the Purchaser Securities
to be issued by it, to enter into the Transaction Documents, and to carry out
the transactions contemplated hereby and thereby. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority, to own
and operate its Assets, to carry on its business as now conducted and proposed
to be conducted, to enter into this Agreement, to issue the Purchaser
Securities to be issued by it, to enter into the Transaction Documents, and to
carry out the transactions contemplated hereby and thereby. The Guarantors are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware, and have all requisite corporate power and
authority, to own and operate their Assets, to carry on their
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business as now conducted and proposed to be conducted, to enter into the
Transaction Documents to which they are a parties, and to carry out the
transactions contemplated thereby.
(b) Good Standing. Holdings is in good standing wherever
necessary to carry on its present business and operations, except in
jurisdictions in which the failure to be in good standing has not had and
reasonably could not be expected to have a Material Adverse Effect. The
Company is in good standing wherever necessary to carry on its present
business and operations, except in jurisdictions in which the failure to be in
good standing has not had and reasonably could not be expected to have a
Material Adverse Effect. The Guarantors are in good standing wherever
necessary to carry on their present business and operations, except in
jurisdictions in which the failure to be in good standing has not had and
reasonably could not be expected to have a Material Adverse Effect.
(c) Subsidiaries. As of the Closing Date, Holdings has no
direct Subsidiaries other than the Company, and the Company has no
Subsidiaries other than as set forth on Schedule 4.1(c) attached hereto.
(d) Capitalization. As of the Closing Date and after giving
effect to the transactions contemplated hereby, the authorized capital Stock
of Holdings consists of (a) 2,500 shares of Holdings Class A Common Stock,
$.01 par value, of which 634.02 shares are outstanding and no shares are held
in its treasury, and of which (i) Jordan Affiliates and certain of their
Affiliates, are the record owner of 348.71 of such shares, and (ii) MCIT is
the record owner of 285.31 of such shares; (b) 1,000 shares of Holdings Class
B Common Stock, $.01 par value, of which no shares are issued and outstanding
and no shares are held in its treasury, and as to which the FNBB Warrant
entitles FNBB and its Affiliates to obtain 112.36 of such shares; (c) 1,000
shares of Holdings Class C Common Stock, $.01 par value, of which no shares
are issued and outstanding and no shares are held in its treasury, and as to
which the Warrants entitle Purchaser to obtain 71.72 of such shares; (d) 1,000
shares of Holdings Class D Common Stock, $.01 par value, of which 366 shares
are issued and outstanding and no shares are held in its treasury, and of
which the Management Individuals and certain of their Affiliates are the
record owners of 366 of such shares and as to which certain options held by
the Management Individuals entitle such Management Individuals to obtain 11.24
of such shares; (e) 7,375 shares of Holdings Class A-1 Preferred Stock, $.01
par value, of which 4,425 shares are issued and outstanding and no shares are
held in its treasury, and of which (i) MCIT is the record owner of 3,000 of
such shares, and (ii) BBI is the record owner of 1,425 of such shares; (f)
2,500 shares of Holdings A-2 Preferred Stock, $.01 par value, of which 1,200
shares are issued and outstanding and no shares are held in its treasury, and
of which (i) Jaro and his Affiliates are the record owner of 915 of such
shares, and (ii) Osborn and his Affiliates are the record owner of 285 of such
shares; and (g) 3,000 shares of Holdings Class B Preferred Stock, $.01 par
value, of which 1,875 shares are issued and outstanding and no shares are held
in its treasury, and of which (i) Jaro and his Affiliates are the owner of 305
of such shares, (ii) Osborn and his Affiliates are the record owner of 95 of
such shares, (iii) BBI is the record owner of 475 of such shares, (iv) the
Jordan Affiliates are the record owners of 500 of such shares, and (v) MCIT is
the record owner of 500 of such
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shares. All such outstanding shares have been validly issued and, as of the
Closing Date, are fully paid, nonassessable shares free of contractual
preemptive rights other than such rights as are contained in the Stockholders
Agreement. The issuance and sale of all such shares has been made in
compliance with all applicable federal and state securities laws. Other than
the FNBB Warrants, the Warrants, the options held by the Management
Individuals, and pursuant to the Holdings Certificate of Incorporation and the
Stockholders Agreement, there are no subscriptions, options, warrants, or
calls relating to any shares of Holdings' capital Stock, including any right
of conversion or exchange under any outstanding security or other instrument.
Other than pursuant to the Management Subscription Agreement, Holdings is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital Stock or any security convertible
into or exchangeable for any of its capital Stock.
As of the Closing Date and after giving effect to the
transactions contemplated hereby, the authorized capital Stock of the Company
consists of (a) 50 shares of Class A common Stock of which 50 shares are
issued and outstanding and no shares are held in its treasury, and of which
Holdings is the record owner of 100% of such shares, and (b) 950 shares of
Class B common Stock of which 950 shares are issued and outstanding and no
shares are held in its treasury, and of which Holdings is the record owner of
100% of such shares. All such outstanding shares have been validly issued and,
as of the Closing Date, are fully paid, nonassessable shares free of
contractual preemptive rights. The issuance and sale of all such shares have
been in compliance with all applicable federal and state securities laws.
Other than under the Company Certificate of Incorporation, there are no
subscriptions, options, warrants, or calls relating to any shares of the
Company's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. The Company is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
4.2 Authorization of Financing, etc.
(a) Authorization of Financing. The execution, delivery, and
performance of this Agreement, the other Transaction Documents to which it is
a party, and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action by
Holdings. The execution, delivery, and performance of this Agreement, the
other Transaction Documents to which it is a party, and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action by the Company. The execution, delivery, and
performance of the Transaction Documents to which they are parties, and the
consummation of the transactions contemplated thereby have been duly
authorized by all necessary corporate action by each Guarantor.
(b) No Conflict. Except as set forth on Schedule 4.2(b), the
execution, delivery, and performance by each of the Credit Parties of this
Agreement or any Transaction Document to which it is a party, the issuance,
delivery, and payment of the Subordinated Notes by the Company, and the
issuance and delivery of the Warrants by Holdings, and, in each case,
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the consummation of the transactions contemplated hereby and thereby, will not
(i) violate the Holdings Certificate of Incorporation, the Holdings By-Laws,
the Company Certificate of Incorporation, the Company By-Laws, the AmeriKing
Cincinnati Certificate of Incorporation, the AmeriKing Cincinnati By-Laws, the
AmeriKing Virginia Certificate of Incorporation, or the AmeriKing Virginia
By-Laws, (ii) violate any order, judgment, or decree of any court of other
agency of government binding on the Credit Parties or any Assets of the Credit
Parties except for violations which, individually or in the aggregate,
reasonably could not be expected to have a Material Adverse Effect on Holdings
or the Company, (iii) violate any provision of law applicable to the Credit
Parties except for violations which, individually or in the aggregate,
reasonably could not be expected to have a Material Adverse Effect on Holdings
or the Company, (iv) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any Contractual
Obligation of the Credit Parties or pursuant to which any of their Assets are
bound, other than conflicts, breaches, and defaults as to which waivers have
been obtained on or prior to the Closing Date or those which, individually or
in the aggregate, reasonably could not be expected to have a Material Adverse
Effect on Holdings or the Company, (v) result in or require the creation or
imposition of any Lien (other than Permitted Encumbrances) upon any of the
Credit Parties' Assets, or (vi) require any approval or consent of any Person
under any Contractual Obligation of the Credit Parties, except for such
approvals or consents as have been or will be obtained on or before the
Closing Date and except for such approvals or consents the failure to obtain
reasonably could not be expected to have a Material Adverse Effect on Holdings
or the Company.
(c) Governmental Consents. The execution, delivery, and
performance by the Credit Parties of the Transaction Documents to which they
are parties, the issuance, delivery, and payment of the Subordinated Notes by
the Company, the issuance and delivery of the Warrants by Holdings, and, in
each case, the consummation of the transactions contemplated hereby and
thereby, do not and will not require any registration or filing with, consent
or approval of, or notice to, or other action relating to, with or by, any
Governmental Authority except for filings, registrations, consents, approvals,
notices, and actions that have been or will be obtained or taken on or before
the Closing Date; and except for such filings, registrations, consents,
approvals, notices, and actions, the failure of which to obtain reasonably
could, individually or in the aggregate, not be expected to result in a
Material Adverse Effect.
(d) Due Execution and Delivery; Binding Obligations. The
Transaction Documents to which they are parties have been duly executed and
delivered by the Credit Parties. Each of this Agreement and the other
Transaction Documents to which Holdings is a party is the legally valid and
binding obligation of Holdings, enforceable against Holdings in accordance
with its respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally and subject to the availability of equitable remedies. Each
of this Agreement and the other Transaction Documents to which the Company is
a party is the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or
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limiting creditors' rights generally and subject to the availability of
equitable remedies. Each of the Transaction Documents to which the Guarantors
are parties is the legally valid and binding obligation of the Guarantors,
enforceable against the Guarantors in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally and
subject to the availability of equitable remedies.
(e) Valid Issuance of the Holdings Class C Common Stock. The
Holdings Class C Common Stock, when issued and delivered by Holdings pursuant
to the Warrants, will be duly and validly issued, fully paid and
non-assessable securities of Holdings, and no Person has any unwaived
preemptive rights to subscribe for any Stock of Holdings.
(f) Bank Documents and Bank Notes. The Company has the
corporate power and authority to enter into the Credit Agreement. The Bank
Documents constitute the legally valid and binding obligations of the Credit
Parties, enforceable in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally and subject to the
availability of equitable remedies.
4.3 Financial Condition.
(a)(i) PMI has been furnished with an unaudited consolidated
balance sheet of Holdings as of January 1, 1996, and a related unaudited
consolidated statement of income, cash flow, and changes in stockholders'
equity for the twelve-month period ended on said date. Except for the lack of
footnotes and subject to year-end audit adjustments, such financial statement
has been prepared in accordance with GAAP consistently applied, and presents
fairly the consolidated financial position of Holdings as of such date, and
the consolidated results of operations and changes in cash flows and
stockholders' equity for such period.
(ii) PMI has been furnished with the Pro Forma Balance Sheet of
Holdings dated as of the Closing Date and giving effect to the consummation of
the Acquisition. The Pro Forma Balance Sheet presents fairly the consolidated
financial position of Holdings as of such date after giving effect to the
consummation of the Acquisition.
(b) Since January 1, 1996, there has been no material
adverse change in the Assets, business, prospects, profits, or condition
(financial or otherwise) of Holdings as shown on the consolidated financial
statements of Holdings for the eleven month period then ended.
(c) Since January 1, 1996, (i) there have been no changes in
the business or Assets to be acquired in the AmeriKing Cincinnati Acquisition
that have been, either individually or in the aggregate, materially adverse,
and (ii) there have been no changes in the business or Assets to be acquired
in the AmeriKing Virginia Acquisition that have been, either individually or
in the aggregate, materially adverse.
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4.4 No Stock Payments. Since January 1, 1996, Holdings has not,
directly or indirectly, declared, ordered, paid, or made or set apart any sum
or Assets for any Distribution other than with respect to the Holdings
Preferred Stock.
4.5 Title to Properties; Liens. Holdings and the Company have good
and marketable title to their real property owned in fee and a valid leasehold
interest to their leased real property and valid title to or beneficial
ownership of all their other Assets reflected in the consolidated balance
sheets referred to in Section 4.3, except for Assets acquired or disposed of
prior to the Closing Date in the ordinary course of business, except for (a)
Permitted Encumbrances, (b) defects in title that have not had and reasonably
could not be expected to have a Material Adverse Effect, or (c) defects set
forth on Schedule 4.5 attached hereto. All such Assets are free and clear of
Liens other than Permitted Encumbrances and other than defects set forth on
Schedule 4.5 attached hereto. Holdings, the Company, and each of their
Subsidiaries have quiet enjoyment under all leases to which they are parties
and all of such leases are valid and enforceable in accordance with their
terms except as may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors' rights
generally, and no monetary or other material default exists under any of them
that reasonably could be expected to have a Material Adverse Effect.
4.6 Litigation; Adverse Facts. Except as set forth on Schedule 4.6,
there is no (a) action, suit, proceeding, or arbitration at law or in equity
or before or by any Governmental Authority pending, or to the knowledge of
Holdings or the Company, threatened against or affecting Holdings or the
Company, or any Asset of Holdings or the Company, that, if adversely
determined, reasonably could, individually or in the aggregate be expected to
result in a Material Adverse Effect, or (b) judgment, decree, injunction, or
order of any Governmental Body against Holdings or the Company with respect to
which any one of them is in default and where such default reasonably could be
expected to result in a Material Adverse Effect. Except as set forth on
Schedule 4.6, during the previous twelve (12) months, neither Holdings nor the
Company has received any notice of termination of any material contract,
lease, or other agreement or suffered any material damage, destruction, or
loss, (whether covered by insurance) or had any employee strike,
work-stoppage, slow-down, or lock-out or any substantial, non-frivolous threat
directed to it of any imminent strike, work-stoppage, slow-down, or lock-out,
any of which remain pending, that reasonably could be expected to have a
Material Adverse Effect after the date hereof. Schedule 4.6 contains a
complete listing of each material action, suit, proceeding, or arbitration
that Holdings or the Company has brought and that, as of the Closing Date, is
on-going.
4.7 Payment of Taxes. Except to the extent permitted by Section 8.3
and except as set forth on Schedule 4.7, (a) all tax returns and reports of
Holdings or the Company required to be filed by either of them have been duly
and timely filed, (b) all taxes, assessments, fees, and other governmental
charges upon Holdings or the Company, or upon their respective Assets, income,
and franchises that are due and payable have been paid when due and payable,
and (c) there is
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no actual or proposed tax assessment against them that, in any of the
foregoing cases, has had or reasonably could be expected to have a Material
Adverse Effect.
4.8 Performance. Neither Holdings nor the Company is in default in
the performance, observance, or fulfillment of any of the material
obligations, covenants, or conditions contained in any of its Contractual
Obligations and no condition exists that, with the giving of due notice or the
lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, have
not had and reasonably could not be expected to have a Material Adverse
Effect.
4.9 Governmental Regulation. None of Holdings, the Company, or any of
the Subsidiaries of the Company is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company," as
such terms are defined in the Public Utility Holding Company Act of 1935; nor
is it an "investment company," or an "affiliated company" or a "principal
underwriter" of an "investment company," as such terms are defined in the
Investment Company Act of 1940.
4.10 Employee Benefit Plans. Each of the Company and its ERISA
Affiliates is in compliance in all material respects with ERISA and the
provisions of the Code applicable to employee benefit plans and the
regulations and published interpretations thereunder, except to the extent
such noncompliance reasonably could not be expected to result in a Material
Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events, reasonably could
be expected to result in a Material Adverse Effect.
4.11 Certain Fees. Other than (a) the fees that are payable to the
Banks and the Agent pursuant to the Credit Agreement, (b) the Closing Fee that
is payable to PMI pursuant hereto, (c) a fee of $1,000,000 that is payable by
the Company to Jordan Company, and (d) a fee of $570,175 that is payable by
the Company to Valuefinder Group, Inc. (each of which fees are included in
Transaction Costs and are to be paid by the Company on or before the Closing
Date), no broker's or finders' fee or commission will be payable by Holdings
or the Company with respect to the offer, issue, and sale of the Subordinated
Notes, the Warrants, the consummation of the Acquisitions, or any of the other
transactions contemplated hereby or thereby.
4.12 Disclosure. No representation or warranty of Holdings or the
Company to PMI contained in this Agreement or any other document, certificate,
or written statement furnished to PMI by or on behalf of Holdings or the
Company for use in connection with the transactions contemplated by this
Agreement contains an untrue statement of a material fact or omits to state a
material fact (known to any such Person in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. There is no fact known to Holdings or the Company (other than matters of
a general economic or political nature) that has had or reasonably could be
expected to have a Material Adverse Effect that has not been disclosed herein
or in such
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other documents and statements furnished to PMI for use in the transaction
contemplated hereby. The Closing Date Projections that have been delivered to
PMI were prepared in good faith, there is a reasonable basis for such
projections, and such projections represent Holdings' and the Company's good
faith estimate of their future performance.
4.13 Licenses, Permits, Franchises, and Authorizations. Each of
Holdings, the Company, and their Subsidiaries has all required approvals,
licenses, franchises, or other permits with respect to its operations,
facilities and Properties, the absence of which, in the aggregate, reasonably
could be expected to result in a Material Adverse Effect.
4.14 Intangible Property. Each of Holdings, the Company, and their
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses, and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
4.15 Hazardous Materials. Except as set forth on Schedule 4.15
hereto, to the best of Holdings' and the Company's knowledge:
(a) each of Holdings, the Company, and the Subsidiaries of
the Company has obtained all Environmental Permits with respect to the
facilities and properties owned, leased, or operated by them (each, a
"Property" and collectively, the "Properties") and each of them is in
compliance with all Environmental Laws and all Environmental Permits, except
to the extent that failure to obtain any such Environmental Permits and any
noncompliance with Environmental Laws or Environmental Permits reasonably
could not be expected to result in a Material Adverse Effect;
(b) there have been no Releases or threatened Releases at,
from, under or proximate to the Properties or otherwise, which Releases or
threatened Releases reasonably could be expected to result in a Material
Adverse Effect;
(c) neither Holdings, the Company, or any Subsidiary of the
Company has received any notice of an Environmental Claim in connection with
(i) the Properties, or (ii) liabilities for environmental matters that
Holdings, the Company, or any such Subsidiary of the Company has retained or
assumed, in whole or in part, contractually, by operation of law, or otherwise
that reasonably could be expected to result in a Material Adverse Effect;
(d) Hazardous Materials have not been transported,
generated, treated, stored, or disposed of from, at, on, or under any of the
Properties in violation of, or in any manner or to a location that could give
rise to liability under, any Environmental Law, except to the extent that such
violations or liabilities reasonably could not be expected to result in a
Material Adverse Effect; and
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(e) there are no (i) underground or aboveground storage
tanks, (ii) PCBs in concentrations in excess of 50 parts per million, or (iii)
asbestos or asbestos-containing materials in friable condition present at any
of the Properties.
4.16 Margin Regulations. None of Holdings, the Company, nor any of
their Subsidiaries, owns or intends to acquire any "margin stock" within the
meaning of Regulation G or Regulation U.
4.17 Offering of Securities. None of Holdings, the Company, the
Jordan Affiliates, nor any agent acting on behalf of any of them has taken or
will take any action that (a) would cause the issuance of any of the Purchaser
Securities to be in violation of the provisions of section 5 of the Securities
Act, or (b) violates the provisions of any securities or blue sky law of any
applicable jurisdiction.
4.18 Solvency. No transfer of property is being made by Holdings or
the Company and no obligation is being incurred by Holdings or the Company in
connection with the transactions contemplated by the Transaction Documents
with the intent to hinder, delay, or defraud either their present or future
creditors.
4.19 Schedules of Partnerships. Schedule 4.19 sets forth a complete
and accurate listing of each partnership or joint venture arrangement to which
Holdings or the Company is a party as of the Closing Date as well as a
complete listing of the Indebtedness of such partnerships or joint ventures
for which Holdings or the Company is liable, whether jointly, jointly and
severally, directly, or contingently.
4.20 Insurance. Schedule 4.20 sets forth a true, complete, and
correct description of all material insurance maintained by Holdings or the
Company as of the date hereof and as of the Closing Date; such insurance is in
such amounts and covers such risks as is usually carried by companies engaged
in similar businesses and owning or leasing similar properties. All such
policies are in full force and effect, and all premiums have been duly paid.
4.21 Debt Instruments. Schedule 4.21 contains a complete list of all
loan agreements, promissory notes, letters of credit, security agreements, or
other financing documents (other than trade accounts payable and other than
agreements or instruments relative to Indebtedness involving $500,000, or
less) to which Holdings, the Company, or any of their Subsidiaries is a party
as the debtor, account party, guarantor, or co-obligor, as the case may be, or
by which Holdings, the Company, or any of their Subsidiaries or any of their
Assets (including equipment subject to any equipment lease), is bound,
together with a description of the term, interest rate, and amount owing in
respect thereof. There are no existing defaults by Holdings, the Company, or
their Subsidiaries under or with respect to any such debt instrument and no
event has occurred which (whether with notice, lapse of time, or both, or the
happening or occurrence of any other event) would constitute a default by
Holdings, the Company, or their Subsidiaries under or with respect to any such
debt instrument.
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4.22 No Amendments to Certain Documents. Neither the Company nor its
Subsidiaries has amended any of the Acquisition Documents in any material
respect. Each of the representations and warranties made by the Company and
its Subsidiaries in any of the Transaction Documents, the Loan Documents, and
the Acquisition Documents was true and correct in all material respects when
made and continues to be true and correct in all material respects on the
Closing Date, except to the extent that any of such representations and
warranties relate, by the express terms thereof, solely to a date falling
prior to the Closing Date, and except to the extent that any of such
representations and warranties may have been affected by the consummation of
the transactions contemplated and permitted or required by the Transaction
Documents, the Loan Documents, or the Acquisitions.
4.23 Representations Under Acquisition Documents. To the best of the
Company's knowledge, each of the representations and warranties of the sellers
contained in the Acquisition Documents are true and correct in all material
respects as of the Closing Date.
4.24 Special Purpose Holding Company. As of the Closing Date,
Holdings does not have any significant liabilities (other than liabilities
arising under the Holdings Subordinated Debt Documents, the Holdings
Certificate of Incorporation, the FNBB Warrants, the Warrants, the
Stockholders Agreement (including under the agreements and instruments that
are exhibits thereto), the Loan Documents, or this Agreement), own any
significant Assets (other than the capital Stock of the Company), or engage in
any other significant activity or business.
5. Representations of PMI.
(a) PMI represents to Holdings and the Company that PMI is an
"accredited investor" within the meaning of Regulation D under the Securities
Act, that PMI is acquiring the Subordinated Notes for the purpose of
investment and not with a view to the distribution thereof, that PMI has no
present intention of selling, negotiating, or otherwise disposing of the
Subordinated Notes; provided that the disposition of PMI's property shall at
all times be and remain within its control, that PMI is knowledgeable,
sophisticated, and experienced in business and financial matters, that PMI
previously has invested in securities similar to the Purchaser Securities, and
that it acknowledges that the Purchaser Securities have not been registered
under the Securities Act.
(b) PMI further represents and warrants that no portion of the funds
to be used by PMI to purchase the Subordinated Notes, as of the Closing Date,
are "plan assets", within the meaning of 29 CFR Section 2510.3-101, of an
"employee benefit plan," as defined in Section 3(3) of ERISA, subject to Part
4 of Title I of ERISA, or a "plan," as defined in Section 4975(e)(1) of the
Code, subject to Section 4975 of the Code.
6. Closing of Sale of Purchaser Securities. The purchase and delivery of the
Purchaser Securities to be purchased by Purchaser shall take place at the
offices of Mayer, Brown & Platt located in New York, New York, at a closing
(the "Closing") on or before February 7, 1996 (the
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actual date of the Closing is the "Closing Date"). At the Closing, the Company
will deliver to Purchaser the Subordinated Notes to be purchased by it and
Holdings will deliver to Purchaser the Warrants to be purchased or acquired by
it, against payment of the purchase price therefor, by transfer of immediately
available funds to such bank as Holdings and the Company may request in
writing at least one (1) Business Day prior to the Closing Date for credit to
such account or accounts as Holdings and the Company may specify in such
request. If at the Closing, Holdings or the Company shall fail to tender to
Purchaser any of the Purchaser Securities to be acquired by them as provided
above in this Section 6, or any of the conditions specified in Section 7 shall
not have been satisfied or waived by Purchaser, Purchaser shall, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other respective rights that it may have by reason of such
failure or such non-fulfillment.
7. Conditions for Closing. The obligation of PMI to purchase and pay for the
Purchaser Securities to be purchased by it at the Closing is subject to the
satisfaction, prior to or at the Closing, of the following conditions:
7.1 Opinions of Counsel. PMI shall have received from counsel for the
Credit Parties, an opinion or opinions substantially in the form set forth in
Exhibit 7.1 and covering such other matters incident to the transactions as
PMI reasonably may request, addressed to PMI, dated the Closing Date and
otherwise satisfactory in substance and form to PMI and its counsel. In
addition, the Credit Parties shall have issued a letter to such counsel
instructing them to render the foregoing opinions to PMI and, in reliance
thereupon, such counsel shall have delivered an original of its opinion letter
to PMI.
7.2 Representations and Warranties; No Default; No Adverse Change.
The representations and warranties of Holdings and the Company contained in
this Agreement shall be true, in all material respects, when made and on the
Closing Date, except as affected by the consummation of such transactions; and
there shall exist on the Closing Date and after giving effect to such
transactions, no Event of Default or Default. Holdings and the Company shall
have delivered to PMI an Officer's Certificate, dated the Closing Date, to all
such effects and to the further effects specified in Sections 7.3, 7.5, 7.6,
7.7, and 7.8.
7.3 Credit Agreement. Agent, the Banks, Holdings, and the Company
shall have executed and delivered the Credit Agreement, which shall be
reasonably satisfactory in form and substance to PMI. PMI shall have received
a true and correct copy of the Credit Agreement and the other Bank Documents,
the Credit Agreement and each of the other Bank Documents shall be in full
force and effect, and no material term or condition thereof shall have been
amended, modified, or waived except with the prior consent of PMI and, on the
Closing Date, each condition (other than the Closing hereunder) to the
obligation of each Bank to make the Loans thereunder shall have been satisfied
or waived and there shall exist no default or event of default under the
Credit Agreement. Concurrent with the Closing hereunder, the Company shall
have received the proceeds of Term Loan A and Term Loan B, and not less than
$2,000,000, nor more than $5,000,000, of Revolving Loans (the "Required Bank
Loans").
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7.4 Stockholders Agreement. Holdings shall have executed and
delivered to PMI a counterpart of the Stockholders Agreement Amendment
(Second), which shall be reasonably satisfactory in form and substance to PMI.
PMI shall have received a true and correct copy of the Stockholders Agreement,
as amended by the Stockholders Agreement Amendment (First) and the
Stockholders Agreement Amendment (Second), certified by a Secretary of
Holdings.
7.5 Purchase Permitted by Applicable Laws. The purchase and payment
for the Purchaser Securities by PMI shall not be prohibited by any applicable
law or governmental regulation (including Section 5 of the Securities Act or
Regulations G, T, U, or X of the Board) and shall not subject such PMI to any
tax, penalty, liability, or other onerous condition under or pursuant to any
applicable law or governmental regulation.
7.6 Compliance with Securities Laws. The offering, issuance, and sale
of the Purchaser Securities under this Agreement shall have complied with all
applicable requirements of Federal and State securities laws, and PMI shall
have received evidence of such compliance in form and substance satisfactory
to it.
7.7 Approvals and Consents. Holdings and the Company shall have
received all authorizations, consents, approvals, licenses, franchises,
permits, and certificates by or of all Governmental Bodies in each case,
necessary for the issuance of the Purchaser Securities, and the execution and
delivery of the Transaction Documents and all of them shall be in full force
and effect on the Closing Date, except for those the failure to obtain
reasonably could not be expected to result in a Material Adverse Effect.
7.8 Proceedings. All corporate proceedings taken by the Credit
Parties in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to PMI and its counsel, and PMI and its counsel shall have received
all such counterpart originals or certified or other copies of such documents
as they may reasonably request.
7.9 Purchases of Purchaser Securities. Concurrently with the Closing,
Holdings or the Company, as applicable, shall have issued and sold to PMI, and
PMI shall have purchased from Holdings and the Company, the Purchaser
Securities to be issued and sold to PMI in accordance with the provisions
hereof.
7.10 Certified Documents - Holdings. Holdings shall have delivered,
or shall have caused to be delivered, to PMI copies of the following
documents, duly certified, or the following certificates, as applicable:
(a) Resolutions of the Board of Directors of Holdings
authorizing (i) the execution, delivery, and performance of the Transaction
Documents to which it is a party, (ii) the consummation of the transactions
contemplated by the Transaction Documents to which it is a
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party, and (iii) all other actions to be taken by Holdings in connection with
the Transaction Documents to which it is a party, the Bank Documents, and the
Acquisition Documents;
(b) Certificates, signed by the Secretary or an Assistant
Secretary of Holdings, dated as of the Closing Date, as to (i) the incumbency,
and containing the specimen signature or signatures, of the Person or Persons
authorized to execute the Transaction Documents to which it is a party on
behalf of Holdings, together with evidence of the incumbency of such Secretary
or Assistant Secretary, and (ii) the authenticity of the Holdings Certificate
of Incorporation and the Holdings By-Laws; and
(c) A certificate of status or good standing of Holdings,
from the Secretary of State of Delaware, and of each state or other
jurisdiction in which Holdings is qualified to do business, dated within
thirty (30) days of the Closing Date.
7.11 Certified Documents - The Company. The Company shall have
delivered, or shall have caused to be delivered, to PMI copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) Resolutions of the Board of Directors of the Company
authorizing (i) the execution, delivery, and performance of the Transaction
Documents to which it is a party, (ii) the consummation of the transactions
contemplated by the Transaction Documents to which it is a party, and (iii)
all other actions to be taken by the Company in connection with the
Transaction Documents to which it is a party, the Bank Documents, and the
Acquisition Documents;
(b) Certificates, signed by the Secretary or an Assistant
Secretary of the Company, dated as of the Closing Date, as to (i) the
incumbency, and containing the specimen signature or signatures, of the Person
or Persons authorized to execute the Transaction Documents to which it is a
party on behalf of the Company, together with evidence of the incumbency of
such Secretary or Assistant Secretary, and (ii) the authenticity of the
Company Certificate of Incorporation and the Company By-Laws; and
(c) A certificate of status or good standing of the Company,
from the Secretary of State of Delaware, and of each state or other
jurisdiction in which the Company is qualified to do business, dated within
thirty (30) days of the Closing Date.
7.12 Certified Documents - Guarantors. The Company shall have caused
to be delivered to PMI copies of the following documents, duly certified, or
the following certificates, as applicable:
(a) Resolutions of the Board of Directors of each of
Guarantors authorizing (i) the execution, delivery, and performance of the
Transaction Documents to which they are parties, (ii) the consummation of the
transactions contemplated by the Transaction Documents to which they are
parties, and (iii) all other actions to be taken by the Guarantors in
connection
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with the Transaction Documents, the Bank Documents, and the Acquisition
Documents to which they are parties;
(b) Certificates, signed by the Secretary or an Assistant
Secretary of each of Guarantor, dated as of the Closing Date, as to (i) the
incumbency, and containing the specimen signature or signatures, of the Person
or Persons authorized to execute the Transaction Documents to which such
Guarantor is a party on behalf of such Guarantor, together with evidence of
the incumbency of such Secretary or Assistant Secretary, and (ii) the
authenticity of the certificate of incorporation of such Guarantor and the
by-laws of such Guarantor; and
(c) A certificate of status or good standing of each
Guarantor, from the Secretary of State of Delaware, and of each state or other
jurisdiction in which such Guarantor is qualified to do business, dated within
thirty (30) days of the Closing Date.
7.13 Insurance. The Company shall have furnished evidence
satisfactory to PMI that the Company has the insurance required by
Section 8.4.
7.14 Pro Forma Balance Sheet. PMI shall have received the Pro Forma
Balance Sheet.
7.15 Closing Date Projections. PMI shall have received a set of
projections, a copy of which shall be attached hereto as Schedule 7.15 (the
"Closing Date Projections"), as to the projected financial performance of
Holdings and the Company from the Closing Date (after giving effect to the
transactions contemplated by the Transaction Documents) through Fiscal Year
ended December 31, 2000. The Closing Date Projections shall be in form and
substance satisfactory to PMI and certified by a Responsible Officer of the
Company as being such officer's good faith estimate of the financial
performance of Holdings and the Company during such period.
7.16 VCOC Letter. Holdings and the Company shall have executed and
delivered to PMI a counterpart of the VCOC Letter.
7.17 Subordinated Subsidiary Guaranty. The Guarantors shall have
executed and delivered to PMI a counterpart of the Subordinated Subsidiary
Guaranty.
7.18 Expenses. Holdings and the Company shall have paid all of the
reasonable fees, costs, and expenses of Purchaser to the extent provided in
Section 13.2, including the reasonable legal fees of PMI 's special counsel
Brobeck, Phleger & Harrison LLP.
7.19 Acquisition Documents. Each of the Acquisition Documents shall
have been executed and delivered on terms and conditions and in form and
substance reasonably satisfactory to PMI, with no material amendments not
approved by PMI.
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7.20 Consents and Approvals. PMI shall have received evidence
satisfactory to it indicating that all material consents and approvals
necessary to complete the Acquisitions and the transactions contemplated
hereby have been obtained on or prior to the Closing Date, including all
material consents and approvals contemplated by the Acquisition Documents.
7.21 Solvency Certificate. PMI shall have received an officer's
certificate of the Company, dated as of the Closing Date, certifying that
Holdings, the Company, and each of the Subsidiaries of the Company are solvent
after giving effect to the consummation of the transactions contemplated
hereby, such certificate to be in form and substance satisfactory to PMI.
7.22 Use of Financing. PMI shall have received evidence satisfactory
to it that the proceeds of the sale of the Subordinated Notes and the proceeds
from the Required Bank Loans are being used and applied in accordance with the
provisions of Section 8.12 hereof.
7.23 Transaction Costs. PMI shall have received evidence satisfactory
to it that the Transaction Costs do not exceed $4,000,000.
7.24 Closing Fee. PMI shall have received payment, in immediately
available funds, of a closing fee in an amount equal to $225,000 (the "Closing
Fee").
7.25 FNBB Warrants. Holdings and BBI shall have executed and
delivered the FNBB Warrant Amendment (Second), which shall be reasonably
satisfactory in form and substance to PMI. PMI shall have received a true and
correct copy of the FNBB Warrants, as amended by the FNBB Warrant Amendment
(First) (in the case of the FNBB Warrant issued to FNBB) and the FNBB Warrant
Amendment (Second), certified by a Secretary of Holdings.
7.26 Purchase Agreement, MCIT Subordinated Notes, and MCIT
Subordinated Notes Guaranty. Holdings and MCIT shall have executed and
delivered the Purchase Agreement, the MCIT Subordinated Notes Amendment, and
the MCIT Subordinated Notes Guaranty, each of which shall be reasonably
satisfactory in form and substance to PMI. PMI shall have received a true and
correct copy of the Purchase Agreement, a copy of the MCIT Subordinated Notes
as amended by the MCIT Subordinated Notes Amendment, and a copy of the MCIT
Subordinated Notes Guaranty, each certified by a Secretary of Holdings.
7.27 Tax Sharing Agreement. Holdings, the Company, and each of their
Subsidiaries shall have executed and delivered the Tax Sharing Agreement,
which shall be reasonably satisfactory in form and substance to PMI. PMI shall
have received a true and correct copy of the Tax Sharing Agreement, certified
by a Secretary of Holdings.
7.28 Securities Purchase Agreement and BBI Subordinated Notes.
Holdings and BBI shall have executed and delivered the Securities Purchase
Agreement Amendment and the BBI Subordinated Notes Amendment, each of which
shall be reasonably satisfactory in form and
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substance to Purchaser. PMI shall have received a true and correct copy of the
Securities Purchase Agreement, as amended by the Securities Purchase Agreement
Amendment and a copy of the BBI Subordinated Notes as amended by the BBI
Subordinated Notes Amendment, each certified by a Secretary of Holdings.
7.29 Management Agreement. TJC Management Corp., Holdings, and the
Company shall have executed and delivered the Management Agreement Amendment,
which agreement shall be reasonably satisfactory in form and substance to PMI.
PMI shall have received a true and correct copy of the Management Agreement,
as amended by the Management Agreement Amendment, certified by a Secretary of
Holdings.
7.30 Intercompany Management Agreement. Holdings and the Company
shall have executed and delivered the Intercompany Management Agreement
Amendment, which agreement shall be reasonably satisfactory in form and
substance to PMI. PMI shall have received a true and correct copy of the
Intercompany Management Agreement, as amended by the Intercompany Management
Agreement Amendment, certified by a Secretary of Holdings.
7.31 Management Subscription Agreement and Seller Subordinated Notes.
Holdings and each of the holders of the Seller Subordinated Notes shall have
executed and delivered the Seller Subordinated Notes Amendment, which
agreement shall be reasonably satisfactory in form and substance to PMI. PMI
shall have received a true and correct copy of the Management Subscription
Agreement and a copy of the Seller Subordinated Notes as amended by the Seller
Subordinated Notes Amendment, each certified by a Secretary of Holdings.
8. Affirmative Covenants. Holdings and the Company, jointly and severally,
covenant and agree that, from and after the date of this Agreement, through
the Closing, and thereafter until payment in full of all of the Subordinated
Notes, they will perform all of the covenants in this Section 8.
8.1 Financial Statements and Other Reports. Holdings and the Company
will maintain, and cause each of its Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with
GAAP. Holdings and the Company will deliver, in duplicate, to Purchaser and to
any Transferee (in each case, so long as it continues to hold a Subordinated
Note):
(a) as soon as practicable, but in any event within 30 days
after the end of (i) each month in each Fiscal Year of the Company,
unaudited monthly consolidated and consolidating financial statements
of Holdings and its Subsidiaries for such month prepared in
accordance with GAAP, together with a certification by the principal
financial or accounting officer of the Company that the information
contained in such financial statements fairly presents the financial
condition of Holdings and its Subsidiaries as of the date thereof
(subject to year-end adjustments); and (ii) the first eleven months
in each
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Fiscal Year, and for the period from the beginning of then current
Fiscal Year to the end of such months, a comparison setting forth the
corresponding figures from the budgeted or projected figures set
forth in the Projections described in subsection (g) below for such
period, all in reasonable detail and being prepared in accordance
with GAAP;
(b) as soon as practicable and in any event within 45 days
after the end of (i) the first three Fiscal Quarters in each Fiscal
Year, consolidated balance sheets of Holdings and its Subsidiaries as
at the end of such period and for the year-to-date and the related
consolidated and consolidating statements of income and cash flows of
Holdings and its Subsidiaries for such Fiscal Quarter and for the
year-to-date and setting forth, in comparative form, the consolidated
figures for the comparable corresponding Fiscal Quarter of the
previous Fiscal Year; and (ii) the first three Fiscal Quarters in
each Fiscal Year, and for the period from the beginning of then
current Fiscal Year to the end of such Fiscal Quarter, a comparison
setting forth the corresponding figures from the budgeted or
projected figures set forth in the Projections described in
subsection (g) below for such period, all in reasonable detail and
being prepared in accordance with GAAP, together with a certification
by the chief financial or accounting officer of the Company that the
information contained in such financial statements fairly presents
the financial position of Holdings and its Subsidiaries as of the
date thereof (subject to year-end adjustments);
(c) as soon as practicable and in any event within 90 days
after the end of each Fiscal Year, (i) the consolidated balance sheet
of Holdings and its Subsidiaries as at the end of such Fiscal Year
and the related consolidated statements of income, stockholders'
equity, and cash flows of Holdings and its Subsidiaries for such
Fiscal Year, setting forth in each case in comparative form the
consolidated figures for the previous Fiscal Year, and the
corresponding figures from the budgeted or projected figures set
forth in the Projections described in subsection (g) below for such
Fiscal Year, all in reasonable detail and accompanied by a report
thereon of independent and certified public accountants of recognized
national standing, which report shall be unqualified as to going
concern and scope of audit and shall state that such consolidated
financial statements present fairly the financial position of
Holdings and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated
in conformity with GAAP applied on a basis consistent with prior
years (except as otherwise stated therein) and that the examination
by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted
auditing standards, and (ii) the unaudited consolidating balance
sheet of Holdings and its Subsidiaries as at the end of such Fiscal
Year, and the related unaudited consolidating statement of income and
unaudited consolidating statements of cash flow for such Fiscal Year,
each setting forth in comparative form the figures for the previous
Fiscal Year and all such consolidating statements to be in reasonable
detail, prepared by management in accordance with the past financial
practices of Holdings and its Subsidiaries, together with a
certification by the chief financial or accounting officer of the
Company that the information contained in
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such financial statements fairly presents the financial position of
Holdings and its Subsidiaries as of the date thereof;
(d) together with each delivery of financial statements of
Holdings and its Subsidiaries pursuant to subsections (b) and (c)
above, (i) an Officers' Certificate setting forth in reasonable
detail computations evidencing compliance with the covenants
contained in Section 9.5 and, if applicable, reconciliations to
reflect changes in GAAP since November 27, 1995, and stating that (x)
the information furnished in the calculations attached thereto was
true and correct as of the last day of the Fiscal Year or Fiscal
Quarter, as applicable, next preceding the date of such certificate,
(y) as of the date of such certificate, there exists no Default or
Event of Default or condition that would, with either or both the
giving of notice or the lapse of time, result in a Default or Event
of Default, and (z) the financial statements delivered herewith were
prepared in accordance with GAAP applied on a basis consistent with
prior periods (except, in the case of quarterly statements, for
provisions for footnotes and, in all cases, except as disclosed
therein), (ii) a copy of the compliance certificate (including the
detail regarding the calculation of the relevant covenants) delivered
to the Banks in respect of such accounting period pursuant to Section
9.4 of the Credit Agreement, and (iii) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end
of such accounting periods with the financial covenants contained in
Section 9.5 of this Agreement in the manner set forth in such
Compliance Certificate;
(e) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the
Commission or sent to the stockholders of Holdings or the Company;
(f) promptly (but in no event later than five (5) days) upon
any officer of Holdings or the Company obtaining knowledge (i) of any
condition or event that constitutes an Event of Default or Default or
that any holder of a Subordinated Note has given any notice or taken
any other action with respect to a claimed Default or Event of
Default under this Agreement or any holder of Senior Indebtedness (or
any Representative of such holder) has given any notice or taken any
other action with respect to a claimed "Event of Default" or
"Default," under and as defined in the Credit Agreement (or any
Refinancing Agreement in respect thereof), or (ii) that any Person
has given any notice to Holdings or the Company or any of their
Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in Section
11.1(b);
(g) as soon as they are available, but in any event not
later than the last day of each Fiscal Year, Projections for the next
Fiscal Year. Such Projections shall be in form and substance
consistent with Holdings' and the Company's past practices and shall
be certified by the chief financial or accounting officer of Holdings
and the Company as being such officer's good faith estimate of the
financial performance of Holdings and the Company during such period;
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(h) contemporaneously with the delivery thereof, copies of
all accountant's management letters delivered to Holdings, the
Company, or any of their Subsidiaries;
(i) promptly upon request of any Significant Holder, a copy
of each notice or report, together with the accompanying statement of
an officer of the Company, delivered to the Banks pursuant to Section
9.4(d) of the Credit Agreement (or pursuant to a comparable section
or sections of a Refinancing Agreement); and
(j) with reasonable promptness, such other information and
data with respect to Holdings, the Company, or any of their
Subsidiaries as from time to time may be reasonably requested by any
Significant Holder.
8.2 Corporate Existence, etc. Holdings and the Company will, and will
cause each of their Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and rights and franchises material to
the business of Holdings, the Company, or any such Subsidiary; provided,
however, that the foregoing shall not be deemed to prohibit any action
permitted under Section 9.3 or 9.6.
8.3 Payment of Taxes and Claims; Tax Consolidation.
(a) Holdings and the Company will, and will cause each of
their Subsidiaries to, duly and timely file all tax returns and
reports required to be filed in compliance with all applicable laws,
regulations, rules, and procedures and pay all taxes, assessments,
and other governmental charges imposed upon Holdings, the Company, or
any of their Subsidiaries or any of the Assets of Holdings, the
Company, or any of their Subsidiaries or in respect of any
franchises, business, income, or Assets of Holdings, the Company, or
any of their Subsidiaries before any material penalty or interest in
a material amount accrues thereon, and all claims (including claims
for labor, services, materials, and supplies) for sums material in
the aggregate that have become due and payable and that by law have
or may become a Lien (other than Permitted Encumbrances) upon any of
such Assets, prior to the time when any material penalty or fine
shall be incurred with respect thereto; provided, however, that no
such charge or claim need be paid if it is being contested in good
faith by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made
therefor.
(b) Holdings and the Company will not, nor will they permit
any of their Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any Person (other than Holdings,
the Company, and their Subsidiaries).
8.4 Maintenance of Properties; Insurance. Holdings and the Company
will maintain or cause to be maintained in good repair, working order, and
condition all material Assets used or useful in the business of Holdings, the
Company, and their Subsidiaries and from time to time
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will make or cause to be made all appropriate repairs, renewals, and
replacement thereof, ordinary wear and tear excepted. Holdings and the Company
will maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to their Assets and business and the Assets
and business of their Subsidiaries against loss or damage of the kinds, and of
such types and in such amounts, as shall be reasonably determined from time to
time by the board of directors of Holdings and the Company on a basis not
inconsistent with the customary practices of corporations of established
reputation engaged in the same or similar businesses and similarly situated.
8.5 Inspection. Holdings, the Company, and their Subsidiaries will
permit any authorized representatives designated in writing by a Significant
Holder to visit and inspect any of the Assets of Holdings, the Company, or any
of their Subsidiaries, including their respective financial and accounting
records, and to make copies and take extracts therefrom, and to discuss their
respective affairs, finances, and accounts with their respective officers and
independent and certified public accountants, all upon reasonable prior
written notice and at such reasonable times during business hours as often as
may be reasonably requested. Holdings and the Company, jointly and severally,
agree to pay all reasonable out-of-pocket costs and expenses incurred by such
Significant Holder in connection with an exercise of its rights pursuant to
this Section 8.5.
8.6 No Further Negative Pledges. Neither Holdings, the Company, nor
any of the Restricted Subsidiaries of the Company will enter into any
agreement (excluding this Agreement, the Credit Agreement, the Loan Documents,
and the Purchase Agreement) prohibiting the creation or assumption of any Lien
upon its Assets, whether now owned or hereafter acquired, other than
agreements with Persons prohibiting any such Lien on Assets in which such
Person has a prior security interest and which is permitted by Section 9.2.
8.7 Compliance with Laws, etc. Each of Holdings and the Company shall
comply, and shall cause each of their Subsidiaries to comply, in all material
respects, with all applicable laws, rules, regulations, and orders, and each
of Holdings and the Company shall duly observe, and shall cause each of their
Subsidiaries to duly observe, in all material respects, all valid requirements
of applicable Governmental Authorities and all applicable statutes, rules, and
regulations, including all applicable statutes, rules and regulations relating
to public and employee health and safety except where failure so to comply or
observe reasonably could not be expected to have a Material Adverse Effect.
8.8 Waiver of Stay, Extension, or Usury Laws; Intent to Limit Charges
to Maximum Lawful Rate. The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of any stay or
extension law or any usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of, or interest,
on the Subordinated Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Agreement; and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law
and
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covenants that it will not hinder, delay, or impede the execution of any power
herein granted to the holders of the Subordinated Notes, but will suffer and
permit the execution of every such power as though no such law had been
enacted. In no event shall the interest rate or rates payable under this
Agreement plus any other amounts paid or consideration received in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.
Holdings, the Company, and Purchaser, in executing this Agreement, intend
expressly and legally to agree upon the rate of interest and manner of payment
stated within it; provided, however, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto
as of the date of this Agreement, the Company is and shall be liable only for
the payment of such maximum as allowed by law, and payment received from the
Company in excess of such legal maximum, whenever received, shall be applied
to reduce the principal balance of the Subordinated Notes, on a pro rata
basis, to the extent of such excess.
8.9 Attendance at Board Meetings. Holdings and the Company agree to
hold a meeting of their respective Boards of Directors at least two times per
Fiscal Year and not less frequently than once per two hundred ten days (the
"Semi-Annual Meeting"). PMI shall be entitled to designate one (1) individual
(which such individual shall be identified to Holdings and the Company in a
writing signed by PMI and who shall be an officer or an employee of PMI, or
its Affiliates, unless Holdings and the Company shall have consented to a
non-officer, non-employee; herein, the "Designated Observer") who shall have
the right to attend all meetings of the Boards of Directors of Holdings and
the Company in a non-voting observer capacity; provided, however, that in the
case of telephonic meetings conducted in accordance with the Holdings By-Laws
or the Company By-Laws and applicable law, the Designated Observer shall be
given the opportunity to listen to such telephonic meetings; provided,
however, that the Designated Observer shall be given (a) at least ten (10)
days prior written notice of each SemiAnnual Meeting, and (b) all written
materials and other information provided by Holdings or the Company to their
directors in connection with such meetings. Holdings and the Company,
respectively, shall reimburse the Designated Observer for the reasonable
out-of-pocket expenses incurred by such individual in connection with
attendance at meetings of the Boards of Directors of Holdings and the Company,
as applicable. Holdings and the Company shall notify PMI, as promptly as
practicable, of the proposed taking of any material action by written consent
of their Boards of Directors in lieu of a meeting thereof and a copy of such
written consent shall be provided to the Designated Observer as soon as
practicable. The rights set forth in this Section 8.9 shall not be
transferable by PMI and only shall be available to PMI for so long as it holds
at least fifty percent (50%) of the outstanding principal amount of the
Subordinated Notes.
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8.10 Notice to Purchaser.
(a) Defaults. If any Person shall give any notice or take
any other action in respect of a claimed default (whether constituting an
Event of Default) under this Agreement or any other note, evidence of
Indebtedness, indenture, or other Contractual Obligation to which or with
respect to which Holdings, the Company, or any of the Company's Subsidiaries
is a party or obligor, whether as principal, guarantor, surety, or otherwise,
the Company shall forthwith give written notice thereof to Purchaser,
describing the notice of action and the nature of the claimed default.
(b) Environmental Events. The Company will promptly give
notice to Purchaser (i) of any violation of any Environmental Law that the
Company or any of its Subsidiaries reports in writing or is reportable by such
Person in writing (or for which any written report supplemental to any oral
report is made) to any federal, state, or local environmental agency, and (ii)
upon becoming aware thereof, of any inquiry, proceeding, investigation, or
other action. including a notice from any agency of potential environmental
liability, or any federal, state, or local environmental agency or board, that
reasonably could be expected to have a Material Adverse Effect on the Company.
(c) Notice of Litigation and Judgments. Each of Holdings and
the Company will, and will cause each of its Subsidiaries to, give notice to
Purchaser in writing within ten (10) Business Days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting Holdings, the Company, or any of their Subsidiaries or
to which Holdings, the Company, or any of their Subsidiaries is or becomes a
party involving an uninsured claim of more than $2,000,000 against Holdings,
the Company, or any of their Subsidiaries that reasonably could be expected to
have a Material Adverse Effect. Each of Holdings and the Company will, and
will cause each of its Subsidiaries to, give notice to Purchaser, in writing,
in form and detail satisfactory to Purchaser, within ten (10) Business Days of
any judgment not covered by insurance, final or otherwise, against the Company
or any of its Subsidiaries in an amount in excess of $1,000,000.
8.11 Margin Regulations. None of Holdings, the Company, or any of
their Subsidiaries will, directly or indirectly, use any of the proceeds of
the issue and sale of the Purchaser Securities or the Bank Notes for the
purpose, whether immediate, incidental, or ultimate, of maintaining,
purchasing, or carrying any stock that is currently a "margin stock" within
the meaning of Regulation G or U of the Board, or otherwise take or permit to
be taken any action that would result in the issuance of the Purchaser
Securities or the carrying out of any of the other transactions contemplated
hereby or thereby, being violative of Regulation G, U, T, or X, or any other
regulation of the Board. None of Holdings, the Company, or any of their
Subsidiaries owns or intends to acquire any "margin stock" within the meaning
of such Regulations G or U.
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8.12 Proceeds of Financing. The proceeds of the issuance and sale of
the Subordinated Notes shall be used by the Company, together with the
proceeds from the Required Bank Loans made by the Banks on the Closing Date,
to (a) pay, in full, the purchase consideration under the Acquisition
Documents for the Acquisitions, (b) refinance, in full, all of the
Indebtedness of the Company owing under the Existing Credit Agreement, and (c)
pay the Transaction Costs.
8.13 ERISA. Each of Holdings and the Company shall comply, and shall
cause each of their Subsidiaries to (a) comply in all material respects with
the applicable provisions of ERISA and the Code with respect to the Plans of
the Company, and (b) furnish to Purchaser (i) as soon as possible, and in any
event within 30 days after any Responsible Officer of Holdings or the Company
or any ERISA Affiliate either knows or has reason to know that any ERISA Event
has occurred that, alone or together with any other ERISA Events that have
occurred, reasonably could be expected to result in liability of Holdings or
the Company or any ERISA Affiliate to the PBGC in an aggregate amount
exceeding $1,000,000 or require payments exceeding $100,000 in any year, a
statement of a Financial Officer of Holdings or the Company setting forth
details as to such ERISA Event and the action, if any, that Holdings or the
Company proposes to take with respect thereto.
8.14 Reclassification of Subsidiary. In the event the Company
consummates a sale of certain of its restaurants to Bruce Taylor or his
designee in accordance with the definition of Permitted Disposition, the
proceeds thereof are used to repay the BKC Note, and within ninety (90) days
of such sale the capital represented by the repaid amount of the BKC Note has
not been replaced with other financing and the proceeds of such other
financing have not been distributed to AmeriKing Tennessee, AmeriKing
Tennessee shall become a Restricted Subsidiary and shall immediately execute
and deliver a joinder agreement to the Subordinated Subsidiary Guaranty.
9. Negative Covenants. Holdings and the Company, jointly and severally,
covenant and agree that, from and after the date of this Agreement, through
the Closing, and thereafter until payment in full of all of the Subordinated
Notes, they will perform all of the covenants in this Section 9.
9.1 Indebtedness. Holdings and the Company will not, and will not
permit any of their Subsidiaries to, directly or indirectly, create, incur,
assume, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
(a) Indebtedness created under or evidenced hereby or by the
Subordinated Notes and the other Transaction Documents;
(b) Indebtedness incurred under the Credit Agreement, in an
aggregate principal amount outstanding, at any time of determination, not to
exceed a principal amount of $105,000,000 less (i) the principal amount of all
repayments (other than amounts contemporaneously refinanced under a
Refinancing Agreement) actually made from time to time
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of the Term Loan A or the Term Loan B, and (ii) the principal amount of all
permanent reductions in the Revolving Credit Commitment under the Credit
Agreement;
(c) (i) Indebtedness of Holdings with respect to the
Holdings Subordinated Debt, (ii) Indebtedness of the Company created under the
MCIT Subordinated Notes Guaranty, and (iii) Indebtedness of the Guarantors
under a subordinated guaranty respecting the MCIT Subordinated Notes;
(d) Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15,000,000 at any
one time outstanding; provided, however, that the aggregate amount of all such
Indebtedness (including amounts deducted therefrom as a result of incurrence
of Indebtedness under Section 9.1(e) or (f)) shall not exceed $15,000,000;
(e) Acquired Indebtedness of the Company and its Restricted
Subsidiaries to the extent that, at the time of the incurrence thereof, such
Indebtedness then could have been incurred by the Company pursuant to
subsection (d) hereof; provided, however, that the amount of outstanding
Indebtedness incurred under this subsection (e) shall reduce, on a
dollar-for-dollar basis, the amount of Indebtedness that may be incurred under
subsection (d);
(f) (i) Indebtedness of the Company and its Restricted
Subsidiaries incurred solely for the purchase or financing of fixed assets and
paying the related acquisition costs; provided, however, that (x) if such
Indebtedness is to be secured by a Lien on such fixed assets, it shall be so
secured within thirty (30) days of the date of the completion of the
installation of such fixed assets, and (y) such Indebtedness shall not exceed
the fair market value of such fixed assets at the time of acquisition, plus
sales and excise taxes, installation and delivery charges and other related
expenses paid by or charged to the Company or its Restricted Subsidiaries in
connection with such acquisition, and (ii) Indebtedness of the Company and its
Restricted Subsidiaries represented by Capitalized Leases in respect of fixed
assets; provided, however, that the amount of Indebtedness incurred pursuant
to the foregoing clauses (i) and (ii) shall not exceed, at the time of the
incurrence thereof, the amount of Indebtedness that then could have been
incurred by the Company pursuant to subsection (d) hereof; provided further,
however, that the amount of outstanding Indebtedness incurred under this
subsection (f) shall reduce, on a dollar-for-dollar basis, the amount of
Indebtedness that may be incurred under subsection (d);
(g) Indebtedness of Holdings, the Company, or the Company's
Subsidiaries, as applicable, identified on Schedule 9.1(g) hereto;
(h) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft, or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is extinguished within two
(2) Business Days of its incurrence;
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(i) Refinancing Indebtedness incurred pursuant to any
Refinancing Agreement, in an aggregate principal amount outstanding not to
exceed the amount of the Indebtedness refinanced with the proceeds of such
Refinancing Indebtedness; provided, however, that with respect to any
refinancing of Indebtedness under the Bank Documents, Refinancing Indebtedness
also shall include Indebtedness arising from the funding of unused revolving
credit commitments permitted by Section 9.1(b).
(j) Indebtedness of Holdings or the Company incurred under
Rate Protection Agreements to the extent permitted by the Credit Agreement (as
in effect on the date hereof);
(k) current liabilities of Holdings, the Company, or their
Subsidiaries incurred in the ordinary course of business and not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit, except
for credit on an open account basis customarily extended and in fact extended
in connection with purchases of goods and services in the ordinary course of
business;
(l) Indebtedness of Holdings, the Company, or their
Subsidiaries in respect of taxes, assessments, governmental charges or levies,
and claims for labor, materials, and supplies to the extent that payment
therefor shall not at the time be required to be made in accordance with the
provisions of Section 8.3;
(m) Indebtedness of Holdings, the Company, or their
Subsidiaries in respect of judgments or awards that do not constitute an Event
of Default under Section 11.1(h) hereof;
(n) Indebtedness of Holdings, the Company, or their
Subsidiaries in respect of performance, surety, statutory, appeal, or similar
bonds obtained in the ordinary course of
business;
(o) Indebtedness of the Company and its Subsidiaries to BKC
arising under Franchise Agreements or Leases;
(p) Indebtedness of Holdings with respect to obligations of
the Company or its Subsidiaries owing to BKC under Franchise Agreements or
Leases;
(q) Indebtedness of the Company to Jaro Enterprises
consisting of earn-out payments relating to the sale of one restaurant to the
Company by Jaro Enterprises;
(r) Indebtedness of Holdings and the Company to TJC
Management Corp. arising under the Management Agreement;
(s) Indebtedness of Holdings and the Company owing to each
other under the Tax Sharing Agreement;
(t) Indebtedness of AmeriKing Tennessee evidenced by the BKC
Note;
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(u) Indebtedness of AmeriKing Colorado evidenced by the FAC
Note;
(v) Indebtedness resulting from collection or endorsement of
negotiable instruments for collection in the ordinary course of business;
(w) Indebtedness of Unrestricted Subsidiaries;
(x) guaranties by Holdings and Subsidiaries of the Company
of Indebtedness incurred under the Credit Agreement (and any Refinancing
Agreement in respect thereof) as well as the indemnities of Holdings and the
Company contained in the Bank Documents;
(y) contingent obligations with respect to customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset sales that are of a type, scope, and amount that are in
accordance with then current business practices of companies of established
reputation engaged in the same or similar business and similarly situated to
Holdings, the Company, and their Subsidiaries in connection with the sale of
similar Assets; and
(z) contingent obligations under indemnity arrangements set
forth in underwriting agreements with respect to a Public Offering Event.
Anything contained in this Section 9.1 to the contrary notwithstanding, in no
event shall (i) Holdings, the Company, or their Subsidiaries, after the
Closing Date, incur Indebtedness under subsection (d), (e), (f), or (w) of
this Section 9.1, if an Event of Default exists or would exist after giving
effect to the incurrence of such additional Indebtedness, or (ii) Holdings,
the Company, or the Company's Restricted Subsidiaries co-make, endorse,
guaranty, or otherwise become liable or have recourse with respect to any
Indebtedness or other liabilities of the Unrestricted Subsidiaries.
At the time of the delivery of each Officer's Certificate
pursuant to Section 8.1(d) hereof, the Company shall deliver to the holders of
the Subordinated Notes an Officers' Certificate setting forth the calculations
by which the Company has determined that the incurrence of such Indebtedness
pursuant to subsection (d), (e), (f), or (w) of this Section 9.1 is permitted.
9.2 Liens. Holdings and the Company will not, and will not permit any
of their Subsidiaries to, directly or indirectly, create, incur, assume, agree
to provide, or permit to exist any Lien, or file, execute, or agree to the
execution of any financing statement, on or with respect to any Asset
(including any document or instrument in respect of goods or accounts
receivable) of Holdings, the Company, or any of their Subsidiaries, whether
now owned or hereafter acquired, or any income or profits therefrom, except
for Permitted Encumbrances.
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9.3 Investments. Holdings and the Company will not, and will not
permit any of their respective Subsidiaries to, directly or indirectly, make
or own any Investment in any Person except:
(a) cash and Cash Equivalents;
(b) Investments existing as of the Closing Date and
identified on Schedule 9.3 hereto;
(c) Investments by Holdings, the Company, or the
Subsidiaries of the Company to the extent made in compliance with Section 9.6;
(d) Holdings, the Company, and the Subsidiaries of the
Company may acquire Investments in connection with Asset Dispositions made in
compliance with Section 9.11;
(e) Holdings, the Company, and the Subsidiaries of the
Company may make loans or advances to officers or employees of the Company or
its Subsidiaries in an aggregate principal amount outstanding at any one time
not to exceed $1,000,000;
(f) Investments by Holdings in Subsidiaries of Holdings
formed or acquired after the Closing Date other than Unrestricted
Subsidiaries, provided; however, that (a) PMI shall have given its prior
written approval of such Investment, (b) such Subsidiary shall have executed
and delivered a joinder agreement to become a party to the Subordinated
Subsidiary Guaranty, and (c) such Investments do not exceed, in the aggregate,
$5,000,000 outstanding at any one time.
(g) Investments by the Company in any of its Restricted
Subsidiaries; provided, however, that (a) such Restricted Subsidiary shall
have executed and delivered a joinder agreement to become a party to the
Subordinated Subsidiary Guaranty, and (b) such Investments do not exceed, in
the aggregate, $7,500,000 outstanding at any one time.
(h) Investments by the Company in any of its Unrestricted
Subsidiaries; provided, however, that such Investments in such Unrestricted
Subsidiaries shall not exceed, in the aggregate, $5,000,000 outstanding at any
one time;
(i) Investments by the Company in Jaro Enterprises or its
Affiliates pursuant to the terms of the Jaro Loan Agreement;
(j) Investments by Holdings or the Company made in
connection with any Indebtedness incurred in compliance with Section 9.1(r)
hereof;
(k) Investments by the Company consisting of Restricted
Junior Payments made in compliance with Section 9.4 hereof;
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(l) Investments by the Company in AmeriKing Tennessee,
provided (i) the aggregate amount of such Investment is not more than the
aggregate amount outstanding under the BKC Note at the time of such
Investment, (ii) such Investment is made simultaneously with a Permitted
Disposition to Bruce Taylor or his designee in accordance with the definition
of Permitted Disposition, and (iii) the proceeds of such Investment shall be
used solely to repay the BKC Note; and
(m) Investments by Unrestricted Subsidiaries in Persons
other than Holdings, the Company, or any Restricted Subsidiary.
9.4 Distributions and Restricted Junior Payments. Holdings will not
make any Distribution and the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, declare, order, pay, make, or set
apart any sum for any Restricted Junior Payment, except for:
(a) Restricted Junior Payments by the Company to Holdings required
under the Tax Sharing Agreement to permit Holdings to pay income, franchise,
and other taxes and governmental levies owed or payable by Holdings, provided
such dividends or payments shall not be made earlier than fifteen (15) days
prior to the date such payments are due and payable pursuant to the Tax
Sharing Agreement and Holdings agrees promptly to use the proceeds of such
Restricted Junior Payments solely to satisfy such obligations;
(b) Restricted Junior Payments by the Company to Holdings to permit
Holdings to pay director fees (not to exceed $75,000 in the aggregate in any
calendar year) and Holdings agrees promptly to use the proceeds of such
Restricted Junior Payments solely to satisfy such obligations;
(c) so long as no Default or Event of Default exists and is
continuing at the time of such payment or would result therefrom, Restricted
Junior Payments by the Company to Holdings to permit Holdings to (i) fund
indemnity payments required by the Holdings Certificate of Incorporation or
the Holdings By-Laws or director indemnity agreements existing on the date
hereof, (ii) pay filing, registration, and reporting fees and expenses, and
fees and expenses associated with state qualifications and other state,
federal, or regulatory compliance matters, (iii) comply with expense
reimbursement and indemnity provisions under the Intercompany Management
Agreement, and (iv) comply with expense reimbursement provisions under the
Capitalization Documents; provided, that dividends or payments permitted by
this clause (c) shall be made to Holdings no earlier than fifteen (15) days
prior to the date such payments are due and payable by Holdings and Holdings
agrees promptly to use the proceeds of such Restricted Junior Payments solely
to satisfy such obligations;
(d) so long as (w) no Default or Event of Default under Section
11.1(a)(i) or (ii) has occurred and is continuing or would result therefrom,
(x) no Default or Event of Default under Section 11.1(a)(iii) or Section
11.1(d) (only as a result of a breach of one or more of the
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provisions of Section 9.5 hereof) has occurred and is continuing or would
result therefrom, which Default or Event of Default has been the subject of a
notice by PMI to the Company, which notice specifies that the Company is not
permitted to make payments to Holdings pursuant to this Section 9.4(d), (y) so
long as no Payment Blockage Period or Non-Payment Blockage Period is in
effect, and (z) so long as no payment blockage is in effect under the
subordination agreement between BKC and PMI, Restricted Junior Payments by the
Company, to:
(i) Holdings in each Fiscal Year up to an aggregate amount
equal to (1) the amount of interest Holdings is required to pay with
respect to the MCIT Subordinated Notes and the Seller Subordinated
Notes in such Fiscal Year solely for the purpose of making such
interest payments, plus (2) an amount of interest, if any, not to
exceed six (6) months of accrued and unpaid interest that is in
arrears with respect to such Holdings Subordinated Debt solely for
the purpose of making such past due interest payments, with the
application of such payments to be in accordance with the terms of
the applicable Holdings Subordinated Debt Documents; provided,
however, the Company shall not be permitted to make any Restricted
Junior Payments in order to fund any increases in the rate of
interest on such Holdings Subordinated Debt occurring after the
Closing Date; provided further, however, that such Restricted Junior
Payments shall not be made earlier than fifteen (15) days prior to
the date such interest payments are due and payable by Holdings and
Holdings agrees promptly to use the proceeds of such Restricted
Junior Payments solely to satisfy such obligations;
(ii) TJC Management Corporation or Holdings consisting of
quarterly management fee payments in an aggregate annual amount equal
to the greater of (a) two and one-half percent (2 1/2%) of the
Company's EBITDA for such Fiscal Year, or (b) $500,000 per Fiscal
Year pursuant to the Management Agreement or the Intercompany
Management Agreement, as applicable, and indemnity payments required
to be made under the Management Agreement; provided, however, that
such Restricted Junior Payments shall not be made earlier than
fifteen (15) days prior to the date such payments are due and payable
pursuant to the terms of the Management Agreement or the Intercompany
Management Agreement, as the case may be; and
(iii) Holdings to enable Holdings to repurchase or redeem
Stock from individuals who have been members of the management of the
Company or its Subsidiaries and who have died, been terminated, or
have retired and who are not and were not employees, officers,
directors, or Affiliates of the Jordan Affiliates; provided, however,
that such Restricted Junior Payments shall not exceed, during the
term of this Agreement, the sum of $2,000,000, and Holdings agrees
promptly to use the proceeds thereof solely to consummate such
repurchases or redemptions;
(e) Restricted Junior Payments by (i) Subsidiaries of the Company to
the Company or to any Restricted Subsidiary, and (ii) Unrestricted
Subsidiaries to any other Subsidiary of the Company of which such Unrestricted
Subsidiary is a Subsidiary.
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At the time of the delivery of each Officer's Certificate pursuant to Section
8.1(d) hereof, Holdings and the Company shall deliver to the holders of the
Subordinated Notes an Officer's Certificate setting forth the computation by
which the amount available for Restricted Junior Payments was determined.
9.5 Financial Covenants.
(a) Interest Coverage Ratio. The Company will not, as of the end of
any Fiscal Quarter ending during any period described in the table set forth
below, permit the Interest Coverage Ratio for the Reference Period ending on
such date to be less than the ratio set forth opposite such period in such
table.
Fiscal Quarter Ending Ratio
--------------------- -----
Closing Date - December 30, 1996 1.70:1.00
March 31, 1997 - December 29, 1997 1.70:1:00
March 30, 1998 - December 28, 1998 1.90:1:00
March 29, 1999 - December 27, 1999 2.10:1.00
March 27, 2000 - December 25, 2000 2.50:1.00
March 26, 2001 - December 24, 2001 2.75:1:00
March 25, 2002 - thereafter 3.20:1.00
For purposes of calculating the Interest Coverage Ratio for Fiscal
Quarters ending on or before December 30, 1996, the following adjustments
shall be made: (a) EBITDA for each of the Fiscal Quarters ending June 30,
1995, October 2, 1995 and January 1, 1996 shall be deemed to be $6,250,000,
(b) Consolidated Total Interest Expense for each of the Fiscal Quarters ending
June 30, 1995, October 2, 1995 and January 1, 1996 shall be deemed to be
$2,627,000, and (c) EBITDA and Consolidated Total Interest Expense for the
Fiscal Quarter ending April 1, 1996 shall be calculated on a Pro Forma Basis
upon the assumption that the Test Period commences January 1, 1996.
(b) Leverage Ratio. The Company will not, as of the end of any Fiscal
Quarter ending during any period described in the table set forth below,
permit the Leverage Ratio for the Reference Period ending on such date to be
greater than the ratio set forth opposite such period in such table.
Fiscal Quarter Ending Ratio
--------------------- -----
March 31, 1997 - March 29, 1998 5.70:1.00
March 30, 1998 - March 28, 1999 5.20:1.00
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March 29, 1999 - March 26, 2000 4.60:1.00
March 27, 2000 - March 25, 2001 4.00:1.00
March 26, 2001 - March 24, 2002 3:50:1.00
March 25, 2002 - thereafter 2.90:1.00
(c) Debt Service Coverage Ratio. The Company will not, as of the end
of any Fiscal Quarter ending during any period described in the table set
forth below, permit the Debt Service Coverage Ratio for the Reference Period
ending on such date to be less than the ratio set forth opposite such period
in such table.
Fiscal Quarter Ending Ratio
--------------------- -----
March 31, 1997 .99:1.00
June 30, 1997 - March 30, 1998 .97:1.00
June 29, 1998 - March 29, 1999 .96:1.00
June 28, 1999 - thereafter .945:1.00
(d) Minimum EBITDA. The Company will not, as of the end of any Fiscal
Quarter ending during any period described in the table set forth below,
permit EBITDA for the Reference Period ending on such date, to be less than
the amount set forth opposite such period in such table;
Fiscal Quarter Ending Amount
--------------------- ------
April 1, 1996 $19,350
July 1, 1996 $19,125
September 30, 1996 $19,250
December 30, 1996 $18,700
March 31, 1997 - December 29, 1997 $17,950
March 30, 1998 - December 28, 1998 $18,400
March 29, 1999 - December 27, 1999 $18,860
March 27, 2000 - December 25, 2000 $19,333
March 26, 2001 - December 24, 2001 $19,820
March 25, 2002 - December 23, 2002 $20,315
March 24, 2003 - thereafter $20,825
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For purposes of calculating the EBITDA for Fiscal Quarters ending on
or before December 30, 1996, the following adjustments shall be made: (a)
EBITDA for each of the Fiscal Quarters ending June 30, 1995, October 2, 1995,
and January 1, 1996 shall be deemed to be $6,250,000, and (b) EBITDA for the
Fiscal Quarter ending April 1, 1996 shall be calculated on a Pro Forma Basis
upon the assumption that the Test Period commences January 1, 1996.
9.6 Restriction on Fundamental Changes. Holdings and the Company will
not, and will not permit any of their Subsidiaries to, enter into any
transaction of merger or consolidation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution) or convey, sell, lease,
transfer, or otherwise dispose of, in one transaction or a series of related
transactions, all or substantially all of their business or Assets, directly
or through the sale of capital Stock, or agree to or effect any Asset
acquisition or Stock acquisition (other than the acquisition of Assets in the
ordinary course of business consistent with past practices) except for:
(a) the merger or consolidation of one or more of the Subsidiaries of
the Company with and into its parent; provided, however, that the survivor of
such merger may not be an Unrestricted Subsidiary, unless the merger involves
only Unrestricted Subsidiaries, in which case the survivor may be an
Unrestricted Subsidiary;
(b) the merger or consolidation of two or more Subsidiaries of the
Company; provided, however, that the survivor of such merger may not be an
Unrestricted Subsidiary unless the merger involves only Unrestricted
Subsidiaries in which case the survivor may be an Unrestricted Subsidiary;
(c) the Acquisitions;
(d) Permitted Acquisitions where (i) no Default or Event of Default
has occurred or is continuing or would exist after giving effect thereto, (ii)
the Company has provided Purchaser with prior written notice of any such
proposed acquisition or development, (iii) the Company and its Subsidiaries do
not acquire or develop in any Fiscal Year that number of restaurants that
would exceed twenty percent (20%) of the number of restaurants owned by the
Company and its Subsidiaries at the end of the immediately preceding Fiscal
Year, provided, however, that for the period from the Closing Date until the
first day of the next Fiscal Year, those restaurants owned by AmeriKing
Virginia and AmeriKing Cincinnati as of the Closing Date shall be deemed to
have been owned by the Company and its Subsidiaries in the immediately
preceding Fiscal Year, (iv) the Company has demonstrated to Purchaser (based
on a pro forma Compliance Certificate) covenant compliance with Section 9.5
hereof on a Pro Forma Basis immediately prior to and after giving effect to
any such proposed acquisition or development, (v) any acquisition related
Indebtedness would not violate the restrictions on Indebtedness set forth in
Section 9.1 hereof, and (vi) immediately after giving effect to any such
acquisition or development, the total number of Non-BKC Restaurants does not
exceed ten (10) and the total number of Dual-Use Establishments does not
exceed ten percent (10%) of the total number of restaurants owned by the
Company and its Subsidiaries at the end of the immediately preceding Fiscal
Year. In the
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event any new Restricted Subsidiary of the Company is formed as a result of or
in connection with any such acquisition or development, then, at or prior to
the date of the consummation of such proposed acquisition or development, the
Transaction Documents shall be amended or supplemented as necessary to make
the terms and conditions of the Transaction Documents applicable to such
Subsidiary and such Subsidiary shall execute and deliver a joinder agreement
so as to become a party to the Subordinated Subsidiary Guaranty;
(e) Sale/Leasebacks permitted by Section 9.7; and
(f) Holdings, the Company, and their Subsidiaries may convey, sell,
transfer, or otherwise dispose of Assets in accordance with Section 9.11.
9.7 Sales and Lease-Backs. Holdings and the Company will not, and
will not permit any of their Subsidiaries to, directly or indirectly, become
or remain liable as lessee or as guarantor or other surety with respect to any
lease, whether an Operating Lease or a Capital Lease, of any Asset whether now
owned or hereafter acquired that Holdings, the Company, or any of their
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (a "Sale/Leaseback"), unless (a) the transaction is the FFCA
Sale/Leaseback, or (b) the Indebtedness, if any, incurred in connection with
such transaction is permitted under Section 9.1 hereof and the sale portion of
the transaction is effected in accordance with Section 9.11.
9.8 Transactions with Affiliates. Neither Holdings nor the Company
will, nor will they permit any Subsidiary of the Company to, enter into, or
cause, suffer, or permit to exist (a) any arrangement or contract with any of
its Affiliates of a nature customarily entered into by Persons which are
Affiliates of each other (including management or similar contracts or
arrangements relating to the allocation of revenues, taxes, expenses, or
otherwise) and requiring any payments to be made by Holdings, the Company, or
any Subsidiary of the Company to any of its Affiliate unless such arrangement
is fair and equitable to Holdings, the Company, or such Subsidiary, as
applicable, or (b) any other transaction, arrangement, or contract with any of
their Affiliate that would not be entered into by a prudent Person in the
position of Holdings, the Company, or such Subsidiary, as applicable, with, or
which is on terms that are less favorable than are obtainable from, any Person
which is not one of its Affiliates; provided, however, that the foregoing
restrictions shall not apply to (a) any transaction between (i) the Company
and any of its Restricted Subsidiaries, (ii) between any of the Restricted
Subsidiaries, (iii) between any of the Unrestricted Subsidiaries, or (iv)
between the Company and any of its Subsidiaries if permitted by Section 9.3
hereof, (b) Restricted Junior Payments permitted by Section 9.4 hereof, (c)
employment or compensation agreements or other arrangements with officers of
Holdings, the Company, or their Subsidiaries that are approved by a majority
of the disinterested members of the board of directors of Holdings, the
Company, or their Subsidiaries, as applicable, and (d) those agreements
described on Schedule 9.8 attached hereto.
9.9 Conduct of Business. Holdings and the Company will not, and will
not permit any of their Subsidiaries to, engage in any business other than (a)
the management and operation of
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BKC Restaurants, (b) the management and operation of Dual-Use Establishments
and Non-BKC Restaurants to the extent the acquisition or development thereof
is permitted hereunder, and (c) other lines of business reasonably incidental
or related thereto.
9.10 Amendments or Waivers of Certain Documents.
(a) Holdings and the Company will not, and will not permit their
Subsidiaries to amend their certificates or articles of incorporation or
by-laws in any manner that reasonably could be expected to be materially
adverse to the interests of Purchaser, without in each case obtaining the
prior written consent of the Required Holders to such amendment or waiver.
(b) Holdings and the Company covenant that they will not, and will
not permit their Subsidiaries to, enter into any amendment or modification of,
or waive, or consent to any waiver of, any of the provisions of, the Holdings
Subordinated Debt Documents, the FFCA Sale\Leaseback Documents, or the
Securities Purchase Agreement, if the terms and conditions of such amendment,
modification, waiver, or consent would be prohibited hereunder if the subject
Indebtedness was not being amended or modified, or a consent granted, but was
being refinanced.
(c) Neither Holdings nor the Company will consent to or agree to any
amendment, supplement, or other modification to the Tax Sharing Agreement, the
Management Agreement, the Management Subscription Agreement, or the
Intercompany Management Agreement which affects, in a manner adverse to
Holdings or the Company, the amount or timing of payments required to be made
by the Company or Holdings thereunder, or if such amendment, supplement, or
modification reasonably could be expected to adversely affect Purchaser's
rights or interests or adversely affect Holdings', the Company's, or any of
the Company's Subsidiaries' abilities to fulfill their obligations under the
Transaction Documents.
9.11 Limitation on Sale of Assets.
(a) Holdings will not dispose of any Assets other than (i)
the sale of inventory in the ordinary course of business, consistent with past
practices, (ii) the disposition of obsolete Assets (other than Stock) that are
no longer used or useful in current or planned business operations of
Holdings, and (iii) the disposition of Assets (other than Stock) in the
ordinary course of business.
(b) The Company will not, and will not permit any of its
Subsidiaries to, make any Asset Disposition, unless (i) fair market value (as
determined in good faith by the Board of Directors of the Company) is
received, (ii) at least 80% of the consideration received from such
disposition is in the form of cash or Cash Equivalents, and (iii) an amount
equal to 100% of the Net Cash Proceeds from such sale is applied: (w) to
prepay, repay, or purchase Senior Indebtedness, in each case within the time
periods established in, and in accordance with the terms of, the Credit
Agreement (or any Refinancing Agreement in respect thereof); (x) to
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purchase the Subordinated Notes at a purchase price (the "Offered Price")
equal to par, plus accrued interest to the purchase date, plus the Applicable
Prepayment Premium multiplied by the principal amount to be prepaid, unless
such remaining Net Cash Proceeds (after application of Net Cash Proceeds
pursuant to clauses (w) or (y) hereof) are less than $500,000 for any
particular Asset Disposition (in which event such Net Cash Proceeds are to be
carried forward for purposes of determining whether such a purchase is
required); (y) to reinvest in Assets directly related to the business of the
Company and its Subsidiaries within 360 days after the date of receipt of such
Net Cash Proceeds; or (z) any combination of the foregoing.
(c) If the Company shall determine to apply the Net Cash
Proceeds from an Asset Disposition to purchase Subordinated Notes, then within
60 days after the date of such determination which determination must be made
within 300 days after the date of an Asset Disposition, the Company shall send
by first-class mail, postage prepaid, to each holder of the Subordinated Notes
a notice stating:
(i) that the Company is offering to repurchase such holder's
Subordinated Notes at the Offered Price;
(ii) the date of the offer (the "Offer Date") which shall be
no earlier than 30 days nor later than 60 days from the date such
notice is mailed; and
(iii) the instructions a holder must follow in order to have
its Subordinated Notes purchased in accordance herewith.
(d) Holders electing to have Subordinated Notes purchased
will be required to surrender such Subordinated Notes to the Company at the
address specified in the notice at least five (5) Business Days prior to the
Offer Date. Holders will be entitled to withdraw their election if the Company
receives, not later than three (3) Business Days prior to the Offer Date, a
telegram, telex, facsimile transmission, or letter setting forth the name of
the holder, the principal amount of the Subordinated Notes delivered for
purchase by the holder as to which his or her election is to be withdrawn, and
a statement that such holder is withdrawing his election to have such
Subordinated Notes purchased. If the aggregate principal amount of
Subordinated Notes surrendered by holders exceeds the amount of the remaining
Net Cash Proceeds to be applied to the Subordinated Notes, the Company shall
select the Subordinated Notes to be purchased on a pro rata basis, with such
adjustments as may be deemed appropriate by the Company so that only
Subordinated Notes in denominations of $1,000, or integral multiples thereof,
shall be purchased. Holders whose Subordinated Notes are purchased only in
part will be issued new Subordinated Notes equal in principal amount to the
unpurchased portion of the Subordinated Notes surrendered.
9.12 Amendments to Bank Documents. Holdings and the Company covenant
that they will not, and will not permit their Subsidiaries to, enter into any
amendment or modification of, or waive, or consent to any waiver of, any of
the provisions of, the Bank Documents (or a
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Refinancing Agreement in respect thereof), without having obtained the prior
written consent of the Required Holders if the effect thereof would be to (a)
increase the amount thereof (except that the Credit Agreement (or any
Refinancing Agreement with respect thereto) may be amended to provide all or a
portion of the Indebtedness otherwise permitted under Section 9.1(b) or (d),
(b) shorten the average weighted maturity of the remaining scheduled payments
of principal of the Term Loan A or the Term Loan B (or any Refinancing
Indebtedness in respect thereof) by greater than 270 days, (c) extend the
maturity of Term Loan A by greater than two years or extend the maturity of
Term Loan B by greater than one year, (c) shorten the scheduled maturity date
of the Revolving Facility, (d) increase the interest rate (in the case of a
fixed rate of interest) or interest rate margin (in the case of a floating
rate of interest) or the default interest rate (in the case of a fixed rate of
interest) or default rate margin (in the case of a floating rate of interest),
or any of them, in the aggregate by more than three percent (3%) per annum
above the applicable interest rate (in the case of a fixed rate of interest)
or margin (in the case of a floating rate of interest) extant as of the date
hereof in the Credit Agreement (so that, for example, (i) a rate as of the
date hereof of 12% per annum could not be increased to more than 15% per annum
(except that the interest rate could be further increased to 17% per annum
(but not higher) if the Company was in default and the 2% incremental default
rate margin was applied), (ii) a rate as of the date hereof of LIBOR plus 200
basis points could not be increased to more than LIBOR plus 500 basis points,
and (iii) a default rate of Prime Rate plus 375 basis points could not be
increased to more than Prime Rate plus 675 basis points, i.e., the combined
aggregate increase in the non-default interest rate and default interest rate
(in the case of a fixed rate of interest) or in the non-default interest rate
margin and default interest rate margin (in the case of a floating rate of
interest) could not exceed 300 basis points), (f) cause Senior Indebtedness of
the Company to be assumed by, guaranteed by, co-made by, or otherwise become
the obligation of one or more Subsidiaries of Holdings or the Company unless
Section 9.15 is complied with, or (g) modify the Credit Agreement (or the
Refinancing Agreement in respect thereof) or other Bank Documents to add
additional financial covenants or events of default or to shorten or eliminate
existing cure periods respecting potential events of default, in each case, in
a manner, taken as a whole, that is materially more burdensome to Holdings,
the Company, and their Subsidiaries.
9.13 Preferred Stock. None of Holdings, the Company, or any of their
Subsidiaries shall issue or sell any Preferred Stock, other than Permitted
Preferred Stock; provided, however, that Holdings shall be entitled to issue
Prohibited Preferred Stock if Holdings could have incurred Indebtedness in an
amount equal to the amount of such Prohibited Preferred Stock and so long as,
thereafter, such Prohibited Preferred Stock is treated, for all purposes
hereunder, as if it were Indebtedness of Holdings.
9.14 Limitation on Issuance of Other Subordinated Indebtedness Senior
to the Subordinated Notes. Holdings and the Company shall not create, incur,
assume, permit to exist, guarantee, or in any other manner become liable with
respect to any Indebtedness, other than the Subordinated Notes, that is
contractually subordinate in right of payment to any Senior Indebtedness
unless such Indebtedness is otherwise permitted by the terms hereof and is
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Indebtedness that is pari passu with, or subordinate pursuant to provisions
substantially similar to those contained in Section 10 hereof in right of
payment to, the Subordinated Notes.
9.15 Guarantees of Indebtedness. (a) Holdings and the Company will
not (i) permit any of their Subsidiaries to guarantee or secure the payment of
any Indebtedness of the Company or Holdings, or (ii) pledge any intercompany
notes representing obligations of any Subsidiary of Holdings or the Company to
secure the payment of any Indebtedness of the Company or Holdings, unless, in
either case, the payment of the Subordinated Notes also is guaranteed in full
by such Subsidiary pursuant to a joinder to the Subordinated Subsidiary
Guaranty (if such Indebtedness is not Senior Indebtedness, such Subsidiary
shall execute and deliver a guaranty substantially in the form of the
Subordinated Subsidiary Guaranty except that such guarantee of the
Subordinated Notes shall not be subordinate in right of payment to such
Indebtedness); provided, however, that the foregoing shall not apply to the
MCIT Subordinated Notes Guaranty insofar as it is an obligation of the
Company.
(b) Every such joinder or guarantee shall provide by its terms that
the party executing it automatically shall be released and discharged (i) upon
the release or discharge of the guarantee of, or security for (or both such
guaranty and such security, if applicable), the payment of the Indebtedness
referred to subsection (a) above, except a discharge by or as a result of
payment under such guarantee or security, or (ii) upon any sale, exchange, or
transfer, to any Person not an Affiliate of Holdings or the Company, of
Holdings' or the Company's Stock in, or of all or substantially all the Assets
of, such Subsidiary which sale, exchange, or transfer does not result in a
breach of any provision of this Agreement to the extent that the guarantee of,
or security for (or both such guaranty and such security, if applicable) the
payment of Indebtedness referred to in subsection (a) are unconditionally
released and discharged at or prior to such time.
9.16 Upstream Limitations. The Company will not, nor will the Company
permit any of its Subsidiaries to enter into any agreement, contract, or
arrangement (other than the Transaction Documents and the Bank Documents (or
any Refinancing Agreement in respect thereof) restricting the ability of any
Restricted Subsidiary to pay or make dividends or distributions in cash or
kind, to make loans, advances, or other payments of whatsoever nature or to
make transfers or distributions of all or any part of its Assets to the
Company or to any Restricted Subsidiary of such Restricted Subsidiary.
9.17 Environmental Matters. Except as set forth in Schedule 4.15,
neither Holdings nor the Company will, and neither will permit any of its
Subsidiaries to:
(a) use any real property owned or leased by them or any
portion thereof for the handling, processing, storage, or disposal of
Hazardous Substances in violation of any Environmental Law the noncompliance
with which reasonably could be expected to have a Material Adverse Effect, (b)
cause or permit to be located on any such real property any underground tank
or other underground storage receptacle for Hazardous Substances in violation
of any Environmental Law the noncompliance with which reasonably could be
expected to have
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a Material Adverse Effect, (c) generate any Hazardous Substances on any such
real property in violation of any Environmental Law the noncompliance with
which reasonably could be expected to have a Material Adverse Effect, (d)
conduct any activity at such real property or use any such real property in
any manner so as to cause a release (i.e., releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing, or dumping) or threatened release of Hazardous Substances
on, upon or into such real property, or (e) otherwise conduct any activity at
such real property or use such real property in any manner that would violate
any Environmental Law or bring such Real Estate in violation of any
Environmental Law in each case if such violation reasonably could be expected
to have a Material Adverse Effect.
9.18 Prepayment. Other than pursuant to a Refinancing Agreement,
neither Holdings, the Company, nor any of their Subsidiaries shall voluntarily
prepay, redeem, purchase, or otherwise retire or acquire any of the Holdings
Subordinated Debt.
10. Subordination of the Subordinated Notes. Anything in this Agreement or the
Subordinated Notes to the contrary notwithstanding, Purchaser and each
Transferee of a Subordinated Note by its acceptance of a Subordinated Note
covenants and agrees that the Indebtedness incurred in connection with this
Agreement and the Subordinated Notes and any guarantee of payment with respect
thereto, including the payment of principal, premium, or interest on the
Subordinated Notes and any other Indebtedness, obligations or liabilities, now
existing or hereafter created, arising under or in connection with this
Agreement and the Subordinated Notes, including all expenses, fees, interest,
and other amounts now or hereafter payable hereunder or thereunder (all of the
foregoing, the "Subordinated Obligations") shall be subordinate and junior, to
the extent set forth below, and subject in right of payment to the prior
payment in full of all Senior Indebtedness.
The expression "payment in full" or "paid in full" or any
similar term or phrase when used in this Section 10 with respect to Senior
Indebtedness shall mean the payment in full of all such Senior Indebtedness in
cash, or, in the case of Senior Indebtedness consisting of contingent
obligations in respect of letters of credit or other reimbursement
obligations, the setting apart of cash sufficient to discharge such portion of
Senior Indebtedness in an account for the exclusive benefit of the holders
thereof, in which account such holders shall be granted by the Company a first
priority perfected security interest in a manner reasonably acceptable to such
holders.
(a) If (i) the Company shall default in any payment on any
Designated Senior Indebtedness when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by
declaration or acceleration or otherwise (a "Payment Default
Subordination Event"), (ii) the Designated Representative shall have
received a Payment Default Subordination Notice, and (iii) no Payment
Default Subordination Notice or NonPayment Default Subordination
Notice shall have been given within the 360-day period immediately
preceding the giving of such notice, then the Company shall not make
and
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no holder of the Subordinated Notes shall accept or receive any
direct or indirect payment (in cash, Assets, by set-off, or
otherwise) on account of the Subordinated Obligations during the
Payment Blockage Period; provided, however, that in the case of any
payment on or in respect of any Subordinated Obligation that would
(in the absence of any such Payment Default Subordination Notice)
have been due and payable on any date (a "Scheduled Payment Date")
during such Payment Blockage Period, the provisions of this
subsection (a) shall not prevent the making of such payment (a
"Scheduled Payment") on or after the date immediately following the
termination of such Payment Blockage Period. The foregoing provisions
of this subsection (a) to the contrary notwithstanding, the failure
by the Company to make a Scheduled Payment on a Scheduled Payment
Date during an Payment Blockage Period shall nevertheless constitute
an Event of Default. If the Designated Representative shall have
received a Payment Default Subordination Notice from or on behalf of
the Agent, then during the Payment Standstill Period the Holders of
the Subordinated Notes shall be prohibited from accelerating the
Indebtedness evidenced thereby and shall be prohibited from enforcing
any of their default remedies with respect thereto (including any
right to sue the Company or to file or participate in the filing of
an involuntary bankruptcy petition against the Company) until the
Payment Standstill Period shall cease to be in effect; provided,
however, that if a holder of a Subordinated Note had initiated an
enforcement action prior to the commencement of such Payment
Standstill Period at a time when such holder was entitled to do so,
then such holder shall not be prevented during such Payment
Standstill Period from taking those steps, but no others, with
respect to such pending enforcement action as are required by a
mandatory provision of law. Upon the termination of any Payment
Standstill Period, the holders of the Subordinated Notes may, at
their sole election, exercise any and all remedies (including the
acceleration of the maturity of the Subordinated Notes) available to
them under this Agreement or applicable law.
In the event that, notwithstanding the foregoing, the
Company shall make any payment to any holder of the Subordinated
Notes prohibited by the foregoing provisions of this subsection (a),
then and in such event such payment shall be segregated by such
holder and held in trust for the benefit of and immediately shall be
paid over to the Agent for application against the Senior
Indebtedness remaining unpaid until such Senior Indebtedness is paid
in full. Any Payment Default Subordination Notice shall be deemed
received by the Designated Representative upon the earlier of: (x)
the date of actual receipt by the Designated Representative of such
Payment Default Subordination Notice in writing, or (y) the date on
which the Agent shall have telephonically notified the Designated
Representative of the occurrence of a Payment Default Subordination
Event and indicated that it was sending a written Payment Default
Subordination Notice to the Designated Representative, which such
Payment Default Subordination Notice may be sent by messenger,
over-night courier service, telefacsimile, or certified mail return
receipt requested, but if such written Payment Default Subordination
Notice is not received by the Designated Representative within five
(5) Business Days of the date of the telephonic
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notice then such Payment Default Subordination Notice shall be deemed
never to have been given.
(b) Except under circumstances when the terms of subsections
(a) or (c) are applicable, if (i) the Company shall default under any
provision of the Credit Agreement (or a Refinancing Agreement in
respect thereof) (a "Non-Payment Default Subordination Event"), and
(ii) the Designated Representative shall have received a Non-Payment
Default Subordination Notice, and (iii) no Payment Default
Subordination Notice or NonPayment Default Subordination Notice shall
have been given within the 360-day period immediately preceding the
giving of such notice, then the Company shall not make and no holder
of the Subordinated Notes shall accept or receive any direct or
indirect payment (in cash, Assets, by set-off, or otherwise) on
account of the Subordinated Obligations during the Non-Payment
Blockage Period; provided, however, that in the case of any Scheduled
Payment on or in respect of any Subordinated Obligation that would
(in the absence of any such Non-Payment Default Subordination Notice)
have been due and payable on any Scheduled Payment Date during such
Non-Payment Blockage Period, the provisions of this subsection (b)
shall not prevent the making of such Scheduled Payment on or after
the date immediately following the termination of such Non-Payment
Blockage Period. The foregoing provisions of this subsection (b) to
the contrary notwithstanding, the failure by the Company to make a
Scheduled Payment on a Scheduled Payment Date during an Non-Payment
Blockage Period shall nevertheless constitute an Event of Default. If
the Designated Representative shall have received a Non-Payment
Default Subordination Notice from or on behalf of the Agent, then
during the Non-Payment Standstill Period the Holders of the
Subordinated Notes shall be prohibited from accelerating the
Indebtedness evidenced thereby and shall be prohibited from enforcing
any of their default remedies with respect thereto (including any
right to sue the Company or to file or participate in the filing of
an involuntary bankruptcy petition against the Company) until the
Non-Payment Standstill Period shall cease to be in effect; provided,
however, that if a holder of a Subordinated Note had initiated an
enforcement action prior to the commencement of such Non-Payment
Standstill Period at a time when such holder was entitled to do so,
then such holder shall not be prevented during such Non-Payment
Standstill Period from taking those steps, but no others, with
respect to such pending enforcement action as are required by a
mandatory provision of law. Upon the termination of any Non-Payment
Standstill Period, the holders of the Subordinated Notes may, at
their sole election, exercise any and all remedies (including the
acceleration of the maturity of the Subordinated Notes) available to
them under this Agreement or applicable law.
In the event that, notwithstanding the foregoing, the
Company shall make any payment to any holder of the Subordinated
Notes prohibited by the foregoing provisions of this subsection (b),
then and in such event such payment shall be segregated by such
holder and held in trust for the benefit of and immediately shall be
paid over to the Agent for application against the Senior
Indebtedness remaining unpaid until such Senior
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Indebtedness is paid in full. Any Non-Payment Default Subordination
Notice shall be deemed received by the Designated Representative upon
the earlier of: (x) the date of actual receipt by the Designated
Representative of such Non-Payment Default Subordination Notice in
writing, or (b) the date on which the Agent shall have telephonically
notified the Designated Representative of the occurrence of a
Non-Payment Default Subordination Event and indicated that it was
sending a written Non-Payment Default Subordination Notice to the
Designated Representative, which such Non-Payment Default
Subordination Notice may be sent by messenger, over-night courier
service, telefacsimile, or certified mail return receipt requested,
but if such written Non-Payment Default Subordination Notice is not
received by the Designated Representative within five (5) Business
Days of the date of the telephonic notice then such Non-Payment
Default Subordination Notice shall be deemed never to have been
given.
(c) In the event of the institution of any insolvency,
bankruptcy, liquidation, reorganization, or other similar
proceedings, or any receivership proceedings in connection therewith,
relative to the Company, and in the event of any proceedings for
voluntary liquidation, dissolution, or other winding up of the
Company, whether involving insolvency or bankruptcy proceedings, then
(i) all Senior Indebtedness shall first be paid in full before any
payment is made by or on behalf of the Company on the Subordinated
Obligations; (ii) any payment or distribution of any kind or
character, whether in cash, property or securities, by set-off or
otherwise, to which the holders of the Subordinated Notes would be
entitled but for the provisions of this subsection (c) shall be paid
or delivered by the Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver, a liquidating trustee,
or otherwise, directly to the Agent, to the extent necessary to make
payment in full of all Senior Indebtedness remaining unpaid;
provided, however, that no such delivery of stock or obligations that
are issued pursuant to reorganization, dissolution, or liquidation
proceedings shall be made to Agent, if such stock or obligations are
(x) authorized by any order or decree that effect is given to the
subordination of the Subordinated Notes to Senior Indebtedness, and
made by a court of competent jurisdiction in a reorganization
proceeding under any applicable bankruptcy or reorganization law, and
(y) subordinate and junior at least to the extent provided in this
Section 10 to the payment of all Senior Indebtedness then outstanding
and to the payment of any stock or obligations which are issued in
exchange or substitution for any Senior Indebtedness then
outstanding; provided further, however, that (1) the principal
payments with respect to such securities shall not begin earlier than
one year following the final maturity date of the Designated Senior
Indebtedness at the time outstanding, (2) such securities shall
contain covenants that are not materially more restrictive than the
covenants contained herein and shall not contain greater defaults
than are contained herein, and (3) such securities shall bear
interest at a rate per annum less than or equal to the overdue rate
applicable to past due amounts owed under the Subordinated Notes. In
the event that, notwithstanding the foregoing provisions of this
subsection (c) the holders of the Subordinated Notes shall have
received any such payment or distribution of any kind or character,
whether in cash, property or securities, by setoff or otherwise,
before
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all Senior Indebtedness is paid in full, then and in such event such
payment or distribution shall be segregated and held in trust for the
benefit of and immediately shall be paid over to the Agent for
application to the payment of all Senior Indebtedness remaining
unpaid until all such Senior Indebtedness shall have been paid in
full.
(d) If the holders of the Subordinated Notes do not file a
proper claim or proof of debt or other document or amendment thereof
in the form required in any proceeding under the Bankruptcy Code
prior to 30 days before the expiration of time to file such claim or
other document or amendment thereof, then the Agent shall have the
right (but not the obligation) in such proceeding, and hereby
irrevocably is appointed lawful attorney of the holders of the
Subordinated Notes for the purpose of enabling the Agent to demand,
sue for, collect, receive and give receipt for the payments and
distributions in respect of the Subordinated Indebtedness that are
made in such proceeding and that are required to be paid or delivered
to the holders of the Senior Indebtedness as provided in subsection
(c), and to file and prove all claims therefor and to execute and
deliver all documents in such proceeding in name of the holders of
the Subordinated Notes or otherwise in respect of such claims, as the
Agent reasonably may determine to be necessary or appropriate,
provided, that, the Agent shall act in a commercially reasonable
manner and shall notify the Designated Representative prior to
commencing the first of any such actions.
No right of any present or future holder of Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any non-compliance by the Company with the terms, provisions, and
covenants of this Agreement or the Subordinated Notes, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of the Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the holders of the
Subordinated Notes, without incurring responsibility and without impairing or
releasing the subordination provided in this Section 10 or the obligations to
the holders of the Senior Indebtedness, do any one or more of the following
(so long as such actions or omissions are not prohibited by Section 9.12): (a)
change the manner, place or terms of payment or extend the time of payment of,
or renew, amend, modify, or alter, any Senior Indebtedness or any instrument
evidencing the same or any agreement evidencing, governing, creating,
guaranteeing or securing any Senior Indebtedness; (b) sell, exchange, release,
or otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (c) release any Person liable in any manner for the
payment or collection of Senior Indebtedness; (d) fail or delay in the
perfection of Liens securing the Senior Indebtedness, and (e) exercise or
refrain from exercising any rights against the Company and any other Person.
The provisions of this Section 10 are for the purpose of defining the
relative rights of the holders of Senior Indebtedness on the one hand, and the
holders of the Subordinated Notes on
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the other hand, and nothing herein shall impair, as between the Company and
the holders of the Subordinated Notes, the obligation of the Company, which is
unconditional and absolute, to pay to the holders thereof the principal
thereof and premium, if any, and interest thereon in accordance with their
terms and the provisions hereof, nor shall anything herein prevent the holders
of the Subordinated Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder or under the Subordinated
Notes (including the right to demand payment and sue for performance hereof
and of the Subordinated Notes and to accelerate the maturity thereof as
provided in Section 11), subject to the rights, if any, of holders of Senior
Indebtedness under this Section 10. Upon payment in full of the Senior
Indebtedness, the holders of the Subordinated Notes shall be subrogated to the
rights of the holders of the Senior Indebtedness to receive payments or
distributions of Assets of the Company made on Senior Indebtedness (and any
security therefor) until the Subordinated Obligations shall be paid in full,
and, for the purposes of such subrogation, no payments to the holders of
Senior Indebtedness of any cash, Assets, Stock, or obligations to which the
holders of the Subordinated Notes would be entitled except for the provisions
of subsection (d) above shall, as between the Company, its creditors (other
than the holders of the Senior Indebtedness), and the holders of the
Subordinated Notes, be deemed to be a payment by the Company to or on account
of Senior Indebtedness.
If a claim is made upon any holder or holders of Senior Indebtedness
for repayment or recovery of any amount (a "Voidable Transfer") on account of
any Senior Indebtedness under any state or federal law, whether by reason of
preference, fraudulent conveyance, or otherwise and if such holder or holders
of Senior Indebtedness repay all or a portion of such amounts by reason of (a)
any judgment, decree, or order of any court or administrative body having
jurisdiction over such holder or holders, or (b) any settlement or compromise
of any claim effected by such holder or holders based upon the reasonable
advice of counsel, then, as to the amount that has been repaid, the provisions
of this Section 10 automatically shall be reinstated and restored and the
amount so repaid shall constitute Senior Indebtedness entitled to the benefits
of this Section 10 as if such Voidable Transfer never had been made. The
foregoing provisions of this Section 10 shall constitute a continuing offer to
all Persons who, in reliance upon such provisions, become holders of Senior
Indebtedness, and such provisions are made for the benefit of, and may be
enforced directly by, holders of Senior Indebtedness, who hereby are expressly
stated to be intended beneficiaries of this Section 10.
11. Events of Default.
11.1 Default; Acceleration. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or otherwise):
(a) (i) the Company fails to pay any installment of
principal of or premium on any Subordinated Note when due, whether at
stated maturity, by acceleration, by virtue of a required prepayment,
or otherwise, (ii) fails to pay any interest on any of the
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Subordinated Notes, or (iii) any other amount due under this
Agreement on the date when due, if, in any such case under clauses
(ii) and (iii), such payment is not made within five (5) Business
Days after the date when such payment was first due; or
(b) (i) with respect to the Bank Documents, Holdings, the
Company, or any of their Subsidiaries defaults in any payment of
principal of, or interest on, any other monetary obligation under the
Bank Documents, beyond any period of grace provided with respect
thereto, (ii) with respect to other than the Bank Documents,
Holdings, the Company, or any of the Restricted Subsidiaries defaults
in any payment of principal of, or interest on, any other obligation
for money borrowed or credit received or in respect of any
Capitalized Leases that in any case or in the aggregate is
outstanding in an amount of $2,500,000, or more (treating the Seller
Subordinated Notes as a single obligation and the MCIT Subordinated
Notes as a single obligation, in each case, without regard to how
many notes are issued or holders exist), beyond any period of grace
provided with respect thereto, or (iii) Holdings, the Company, or any
of their Subsidiaries (including the Unrestricted Subsidiaries)
defaults in the performance or observance of any other agreement,
term, or condition contained in any Bank Document or any agreement
under which any such obligation of the type described in clause (ii)
above is created (or if any other event of default thereunder or
under any such agreement shall occur and be continuing) and, as a
result thereof, the holder of such Indebtedness has caused such
Indebtedness to become due prior to its stated maturity; or
(c) any representation or warranty made in writing to
Purchaser by or on behalf of Holdings or the Company in this
Agreement or in any writing or instrument furnished in compliance
with this Agreement or otherwise furnished in connection with the
transactions contemplated by this Agreement shall be false when made
or deemed made, in any material respect; or
(d) Holdings or the Company defaults in the performance or
observance of any agreement contained in Section 8.1(f)(i), Section
8.2 (insofar as such section relates to maintenance of corporate
existence), or Section 9 (other than Sections 9.8, 9.9, and 9.17); or
(e) (i) Holdings or the Company defaults in the performance
or observance of Section 8.1(g) and any such default shall not have
been remedied within 30 days after the date on which notice thereof
(whether written, telephonic, or otherwise) was received by the
Company (regardless of the source of such notice, or (ii) Holdings or
the Company defaults in the performance or observance of any
agreement, term, or condition contained in this Agreement (other than
one described in clause (d), (c), or (e)(i) above) and any such
default shall not have been remedied within 30 days after the earlier
of (y) the date on which written notice thereof was received by the
Company (regardless of the source of such notice), or (z) knowledge
thereof by the Company; or
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(f) Holdings, the Company, or any of their Subsidiaries (i)
generally fails to pay, or admits in writing its inability to pay,
its debts as they become due, subject to applicable grace periods, if
any, whether at stated maturity or otherwise; (ii) voluntarily
liquidates, dissolves, or ceases to conduct its business in the
ordinary course; (iii) commences any Insolvency Proceeding with
respect to itself; (iv) makes an assignment for the benefit of
creditors; or (v) takes any affirmative action to effectuate or
authorize any of the foregoing (other than the discussion of the
advisability or inadvisability of authorizing the foregoing); or
(g) (i) any involuntary Insolvency Proceeding is commenced
or filed against Holdings, the Company, or any of their Subsidiaries,
or any writ, judgment, warrant of attachment, execution, or similar
process, is issued or levied against a substantial part of Holdings',
the Company's, or any of their Subsidiaries' Assets, and any such
proceeding or petition shall not be dismissed, or such writ,
judgment, warrant of attachment, execution, or similar process shall
not be released, vacated, or fully bonded within sixty (60) days
after commencement, filing, or levy; (ii) Holdings, the Company, or
any of their Subsidiaries admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for
relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; (iii) Holdings, the Company, or any of their
Subsidiaries acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial
portion of its Assets or business; (iv) Holdings, the Company, or any
of their Subsidiaries shall have an order for relief entered with
respect to it or shall consent to the entry of an order for relief in
an involuntary case commenced under any Bankruptcy Law, or shall
consent to the conversion of an involuntary case to a voluntary case
under any such law; or (v) Holdings, the Company, or any of their
Subsidiaries shall consent to the appointment of or taking possession
by a receiver, trustee, or other custodian for all or a substantial
part of its or their Assets; or
(h) (i) any money judgment, writ, or warrant of attachment,
or similar process involving an amount in excess of $1,000,000 in any
individual case or in excess of $1,000,000 in the aggregate
(exclusive of any amount which is fully covered by insurance (except
for customary deductible amounts) and with respect to which the
insurer has not disputed coverage) shall be entered or filed against
Holdings or any of its Assets and shall remain undischarged,
unvacated, unbonded, or unstayed for a period of 30 days or in any
event later than 5 days prior to the date of any proposed sale
thereunder, or (ii) any money judgment, writ, or warrant of
attachment, or similar process involving an amount in excess of
$2,000,000 in any individual case or in excess of $2,000,000 in the
aggregate (exclusive of any amount which is fully covered by
insurance (except for customary deductible amounts) and with respect
to which the insurer has not disputed coverage) shall be entered or
filed against the Company or any of its or Holdings' Subsidiaries, or
any of their respective Assets and shall remain undischarged,
unvacated, unbonded, or
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unstayed for a period of 30 days or in any event later than 5 days
prior to the date of any proposed sale thereunder; or
(i) the Unrestricted Subsidiaries shall at any time have
revenues of greater than 20% of the consolidated revenues of the
Company at such time; or
(j) (i) Leases or Franchise Agreements with respect to
restaurants representing more than twenty percent (20%) of Restaurant
Cash Flow shall have been terminated or expired without renewal
(determined in the aggregate over the term of this Agreement), or
(ii) at the time of any Lease or Franchise Agreement termination or
expiration, the Company fails to demonstrate, on a Pro Forma Basis,
compliance with Section 9.5 hereof after eliminating the results of
all such terminated or expired restaurants.
then, and in any such case (x) upon the occurrence of any Event of Default
described in subsection (f) or (g) of this Section 11.1, the unpaid principal
amount of and accrued interest on the Subordinated Notes automatically shall
become due and payable, (y) upon the occurrence and during the continuance of
any Event of Default under Section 11.1(a), any Significant Holder may, at its
option and in addition to any right, power, or remedy permitted by law or in
equity, by notice in writing to the Company, declare all of the Subordinated
Notes to be, and all of such Subordinated Notes shall thereupon be and become,
forthwith due and payable together with interest accrued thereon, without
presentment, demand, protest, or other notice of any kind, all of which are
hereby waived by the Company, and (z) upon the occurrence and during the
continuance of any other Event of Default, the Required Holders may, at its or
their option and in addition to any right, power, or remedy permitted by law
or in equity, by notice in writing to the Company, declare all of the
Subordinated Notes to be, and all of such Subordinated Notes shall thereupon
be and become, forthwith due and payable together with interest accrued
thereon, without presentment, demand, protest, or other notice of any kind,
all of which are hereby waived by the Company.
11.2 Rescission of Acceleration. In the event a declaration of
acceleration in respect of the Subordinated Notes because of an Event of
Default specified in Section 11.1(b) shall have occurred and be continuing,
such declaration of acceleration automatically shall be annulled if the
Indebtedness that is subject of such Event of Default has been discharged,
cured, waived, paid in full, or the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness, and written
notice of such discharge, cure, waiver, payment, or rescission, as the case
may be, shall have been given to Holdings or the Company, as applicable, by
the holders of such Indebtedness or a Representative of such holders, and no
other Default or Event of Default has occurred that has not been cured or
waived during such period. No rescission or annulment referred to above shall
affect any subsequent Default or any right, power, or remedy arising out of
such subsequent Default or Event of Default.
11.3 Other Remedies. Subject to the provisions of Section 10 hereof,
which provisions are for the benefit of holders of Senior Indebtedness and not
for the benefit of the Credit Parties,
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if any Default or Event of Default shall occur and be continuing, the holder
of any Subordinated Note may proceed to protect and enforce its rights under
this Agreement and such Subordinated Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by
suit in equity or by action at law, or both, whether for specific performance
of any covenant or other agreement contained in this Agreement or in aid of
the exercise of any power granted in this Agreement. No remedy conferred in
this Agreement upon Purchaser or any other holder of any Subordinated Note is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy conferred
herein or now or hereafter existing at law or in equity or by statute or
otherwise.
12. Judicial Proceedings.
12.1 Consent to Jurisdiction. Holdings and the Company irrevocably
submit to the non-exclusive jurisdiction of any New York State or Federal
court sitting in the City of New York over any suit, action, or proceeding
arising out of or relating to this Agreement, the other Transaction Documents,
or the Purchaser Securities, including any action at law or in equity, whether
sounding in tort or in contract, and whether related to any `workout,'
`troubled debt restructuring,' or otherwise. To the fullest extent they may
effectively do so under applicable law, Holdings and the Company irrevocably
waive and agree not to assert, by way of motion, as a defense, or otherwise,
any claim that they are not subject to the jurisdiction of any such court, any
objection that they may now or hereafter have to the laying of the venue of
any such suit, action, or proceeding brought in any such court, and any claim
that any such suit, action, or proceeding brought in any such court has been
brought in an inconvenient forum.
12.2 Enforcement of Judgments. Holdings and the Company agree, to the
fullest extent they may effectively do so under applicable law, that a
judgment in any suit, action, or proceeding of the nature referred to in
Section 12.1 brought in any such court shall be conclusive and binding upon
Holdings and the Company, as applicable, subject to rights of appeal, as the
case may be, and may be enforced in the courts of the United States of America
or the State of New York (or any other courts to the jurisdiction of which
Holdings or the Company is or may be subject) by a suit upon such judgment.
12.3 Waiver of Jury Trial. HOLDINGS, THE COMPANY, AND PURCHASER
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE TRANSACTION
DOCUMENTS, THE PURCHASER SECURITIES, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW OR STATUTORY CLAIMS. HOLDINGS, THE COMPANY, AND PURCHASER
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE
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EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
12.4 No Limitation on Service or Suit. Nothing in this Section 12
shall affect the right of Purchaser to serve process in any manner permitted
by law, or limit any right that the holders of any of the Subordinated Notes
or the other Purchaser Securities may have to bring proceedings against the
Company in the courts of any jurisdiction or to enforce in any lawful manner a
judgment obtained in one jurisdiction in any other jurisdiction.
13. Miscellaneous.
13.1 Payments. The Company agrees that, so long as Purchaser shall
hold any Subordinated Notes, it will make payments of principal of, and
interest and premium on, the Subordinated Notes which comply with the terms of
this Agreement, by wire transfer of immediately available funds for credit to
the account or accounts, as specified in the Purchaser Schedule attached
hereto, or to such other account or accounts in the United States as Purchaser
may designate in writing, notwithstanding any contrary provision herein or in
any Subordinated Note with respect to the place of payment. Purchaser agrees
that, before disposing of any Subordinated Note, Purchaser will make a
notation thereon (or on a schedule attached thereto) of all payments of
principal previously made thereon and of the date to which interest thereon
has been paid. The Company agrees to afford the benefits of this Section 13.1
to any institutional Transferee which has made the same agreements relating to
such Subordinated Notes as Purchaser has made in this Section 13.1.
13.2 Expenses and Indemnities.
(a) Holdings and the Company, jointly and severally, agree,
whether the transactions hereby contemplated shall be consummated, to pay the
reasonable legal fees of Purchaser's special counsel, Brobeck, Phleger &
Harrison LLP, incurred in connection with the negotiation and preparation of
this Agreement, the other Transaction Documents, and the respective Purchaser
Securities being acquired by Purchaser hereunder and in connection with the
transactions contemplated hereby and thereby and agree to reimburse Purchaser
for their reasonable out-of-pocket costs and expenses (exclusive of any
salaries or other overhead items) incurred in connection with the transactions
contemplated hereby. In addition, Holdings and the Company, jointly and
severally, agree to pay, and defend and save Purchaser harmless against
liability for the payment of, all actual out-of-pocket expenses (including
reasonable attorneys fees), in each case upon the presentation of reasonably
detailed statements, incurred with respect to the enforcement, attempted
enforcement, or workout of any provision of this Agreement, the Purchaser
Securities, or any of the other Transaction Documents, or any amendments or
waivers requested by Holdings or the Company (whether the same become
effective) under or in respect of any such agreement or instrument, and all
expenses incurred in connection with the preparation of such agreements and
instruments and all transfer taxes which may be payable in respect of the
execution and delivery of such agreements or instruments, or the issuance,
delivery, or purchase
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by Purchaser of any Purchaser Securities, and the reasonable fees and expenses
of counsel to Purchaser retained in connection with such agreements and
instruments, and the transactions hereby and thereby contemplated, including
the enforcement of any provision hereof or thereof, and any such amendments or
waivers and the costs and expenses of Purchaser incurred in connection with
any aspect of any bankruptcy case of Holdings, the Company, or any of their
Subsidiaries, whether voluntary or involuntary, and whether seeking
reorganization or liquidation.
(b) Holdings and the Company, jointly and severally, further
agree to indemnify, defend, and save harmless Purchaser and any Transferee and
each of their respective officers, directors, employees, and agents from and
against any and all actions, causes of action, suits, losses, liabilities, and
damages, and expenses (including reasonable attorneys fees and disbursements)
in connection therewith (the "Indemnified Liabilities") incurred by Purchaser
and any Transferee or any of their respective officers, directors, employees,
or agents as a result of, or arising out of, or relating to any of the
transactions contemplated hereby, including the matters that are the subject
of Section 8.6, except for any Indemnified Liabilities arising on account of
the gross negligence or willful misconduct of any Purchaser, any Transferee,
or any of their respective officers, directors, employees, or agents;
provided, however, that, if and to the extent such agreement to indemnify may
be unenforceable for any reason, Holdings and the Company each shall make the
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities that shall be permissible under applicable law. In
connection with any matter as to which Purchaser, any Transferees, and the
other above-specified indemnified parties are entitled to be indemnified
hereunder, Purchaser will endeavor to give written notice thereof in
reasonable detail to Holdings and the Company as soon as practicable, provided
that any failure to give such notice shall not vitiate or void the indemnities
provided for herein. The obligations of Holdings and the Company under this
Section 13.2 shall survive the transfer of any Purchaser Securities and
payment of any Subordinated Note.
(c) Section 13.2(b) notwithstanding, with respect to
Environmental Claims, defend and indemnify Purchaser and each of its
respective directors, officers, employees, agents, and Affiliates (each such
Person being called an "Indemnitee") against, and agrees to hold each
Indemnitee harmless from, any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses (including reasonable counsel fees,
charges, disbursements, consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses) of whatever kind or
nature arising out of, or in any way relating to, the violation of,
noncompliance with or liability under any Environmental Laws applicable to the
operations of Holdings or the Company or to the Properties, or any orders,
requirements, or demands of Governmental Authorities related thereto, except
to the extent that any of the foregoing are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from (i) the
gross negligence or wilful misconduct of the Indemnitee seeking
indemnification therefor, or (ii) the actions or omissions of any Indemnitee
at any time after such Indemnitee has assumed operation of or taken title to
any of the Properties. This indemnity shall continue in full force and effect
regardless of the termination of this Agreement and the other Transaction
Documents.
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13.3 Consent to Amendments. This Agreement may be amended and
Holdings and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if Holdings and
the Company shall have obtained the written consent to such amendment, action,
or omission to act, of the Required Holders, and each holder of any
Subordinated Note at the time or thereafter outstanding shall be bound by any
consent authorized by this Section 13.3, whether such Subordinated Note shall
have been marked to indicate such consent; provided, however, that anything in
this Section 13.3 to the contrary notwithstanding, without the written consent
of the holder or holders of all Subordinated Notes at the time outstanding, no
consent, amendment, or waiver to or under this Agreement shall amend, modify,
or waive this Section 13.3, extend the maturity of any Subordinated Note, or
reduce the rate or change the time of payment of interest or any premium, or
change the time, amount, or allocation of any required or optional
prepayments, or reduce the proportion of the principal amount of the
Subordinated Notes required with respect to any consent, amendment, or waiver,
or reduce the proportion of the principal amount of the Subordinated Notes
required to accelerate the Indebtedness under the Subordinated Notes. Holdings
and the Company promptly shall send copies of any amendment, consent, or
waiver (and any request for any such amendment, consent, or waiver) relating
to this Agreement or the Subordinated Notes to each holder of a Subordinated
Note and, to the extent practicable, shall consult with each Significant
Holder in connection with each such amendment, consent, or waiver. No course
of dealing between Holdings, the Company, or the holder of any Purchaser
Security nor any delay in exercising any rights hereunder or under any
Purchaser Security shall operate as a waiver of any rights of any holder of
such Purchaser Security.
13.4 Form, Registration, Transfer and Exchange of Notes; Lost
Notes.
(a) Generally. The Subordinated Notes are issuable as
registered notes only, each in denominations of at least $100,000 and
any larger integral multiple of $1,000. The Company shall keep at its
principal office a register in which the Company shall provide for
the registration of Subordinated Notes and of Transfers of
Subordinated Notes. Upon surrender for registration of Transfer of
any Subordinated Note at the principal office of the Company, the
Company shall, at its expense, execute and deliver one or more new
Subordinated Notes of like tenor and of a like aggregate principal
amount, which Subordinated Notes shall be registered in the name of
such Transferee or Transferees. At the option of the holder of any
Subordinated Note, such Subordinated Note may be exchanged for
Subordinated Notes of like tenor and of any authorized denominations,
of a like aggregate principal amount, upon surrender of the
Subordinated Note to be exchanged at the principal office of the
Company. Whenever any Subordinated Notes are so surrendered for
exchange, the Company shall, at its expense, execute and deliver the
Subordinated Notes which the holder making the exchange is entitled
to receive. Every Subordinated Note surrendered for registration of
Transfer or exchange shall be duly endorsed, or be accompanied by a
written instrument of transfer duly executed, by the holder of such
Subordinated Note or such holder's attorney duly authorized in
writing. Any Subordinated Note or Subordinated Notes issued in
exchange
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for any Subordinated Note or upon Transfer thereof shall carry the
rights to unpaid interest and interest to accrue which were carried
by the Subordinated Note so exchanged or transferred, so that neither
gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any
Subordinated Note and, in the case of any such loss, theft, or
destruction, upon receipt of an unsecured indemnity agreement, or
other indemnity reasonably satisfactory to the Company from such
holder, or in the case of any such mutilation, upon surrender and
cancellation of such Subordinated Note, the Company will make and
deliver a new Subordinated Note, of like tenor, in lieu of the lost,
stolen, destroyed, or mutilated Subordinated Note.
(b) Other Transfers. Any holder of a Subordinated Note may
make a Transfer to any Person provided that (i) such Transfer is made
in compliance with the Securities Act and any applicable state
securities laws, (ii) such holder of a Subordinated Note has provided
the Company with such information as to such Purchaser's compliance
with applicable securities laws as reasonably may be requested by the
Company, (iii) such Transfer is in compliance with subsection (a)
above, (iii) such Transfer shall be in a principal amount not less
than $1,000,000 (or such lesser amount as shall be the then
outstanding principal balance of the Subordinated Note), (iv) there
shall not be more than five (5) holders of Subordinated Notes at any
one time; treating a Person and each of its Affiliates as one Person
for purposes of the foregoing, and (v) such proposed Transferee is an
Institutional Lender that is not a direct competitor of the Company.
Clause (ii) of the preceding sentence shall not be deemed to require
such holder of a Subordinated Note to provide the Company with an
opinion of counsel regarding such compliance. The Company shall
cooperate in connection with any such Transfer including providing
such information to any holder of a Subordinated Note or such
holder's proposed Transferee as, in the reasonable opinion of counsel
to the transferor, may be necessary to satisfy the requirements of
Rule 144A of the Securities Act in connection with any Transfer to a
`Qualified Institutional Buyer' under such rule. Upon any Transfer,
the Transferee shall, to the extent of such Transfer, be entitled to
exercise the rights of Purchaser making such Transfer and shall
thereafter be deemed a "Purchaser" under this Agreement.
(c) Further Assurances. The Company shall, from time to time
at the request of a Purchaser, execute and deliver to such Purchaser
or to such party or parties as such Purchaser may designate, all
further instruments as may in such Purchaser's reasonable opinion be
necessary or advisable to give full force and effect to any Transfer
and shall provide to such Purchaser or to such party or parties as
such Purchaser may designate all such information as such Purchaser
reasonably may request.
13.5 Persons Deemed Owners; Participations. Prior to due presentment
for registration of Transfer, the Company may treat the Person in whose name
any Subordinated Note is registered as the owner and holder of such
Subordinated Note for the purpose of receiving payment of principal of, and
interest and premium, if any, on, such Subordinated Note and for all other
purposes whatsoever, whether such Subordinated Note shall be overdue, and the
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Company shall not be affected by notice to the contrary. Subject to the
preceding sentence, the holder of any Subordinated Note may from time to time
grant participations in all or any part of such Subordinated Note to any
Person on such terms and conditions as may be determined by such holder in its
sole and absolute discretion, but a holder of any such participation interest
shall not be a `Purchaser' for any purpose under this Agreement.
13.6 Survival of Representations and Warranties; Entire Agreement.
All representations and warranties contained herein shall be deemed made as of
the Closing Date and survive the closing under this Agreement and the purchase
and sale of the Purchaser Securities, the transfer by Purchaser of any
Purchaser Securities or portion thereof or interest therein and the payment of
any Subordinated Note, and may be relied upon by Purchaser or any Transferee
regardless of any investigation made at any time by or on behalf of Purchaser
or any Transferee; provided, however, that any Transferee shall be bound by
all waivers or other actions taken by its transferor prior to the date of such
Transfer. This Agreement, the Purchaser Securities, and the other Transaction
Documents embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings, if any, relating
to the subject matter hereof.
13.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) each of Holdings and the Company may not assign or
transfer its rights or obligations hereunder without the prior
written consent of all Purchasers; and
(b) the rights of sale, assignment, and transfer of the
Subordinated Notes are subject to Section 13.4.
13.8 Disclosure to Other Persons. (a) Holdings and the Company
acknowledge that the holder of any Purchaser Securities may deliver copies of
any financial statements and other documents delivered to such holder, and
disclose any other information disclosed to such holder, by or on behalf of
Holdings or the Company in connection with or pursuant to this Agreement to
(i) such holder's directors, officers, employees, agents, and professional
consultants, (ii) any other holder of any Purchaser Securities, (iii) any
Person to which such holder offers to sell such Purchaser Securities or any
part thereof, so long as such potential purchaser agrees, in writing, to
preserve the confidentiality of such information (except that such potential
purchaser may disclose such information in accordance with this Section 13.8);
provided, however, that such disclosure will not be made to any potential
purchaser which is known to be a direct competitor, or an affiliate of a
direct competitor, of the Company without the prior written consent of the
Company, (iv) any Person to which such holder sells or offers to sell a
participation in all or any part of such Purchaser Securities, so long as such
potential purchaser agrees, in writing, to preserve the confidentiality of
such information (except that such potential purchaser may disclose such
information in accordance with this Section 13.8); provided, however, that
such
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disclosure will not be made to any potential purchaser which is known to be a
direct competitor, or an affiliate of a direct competitor, of the Company
without the prior written consent of the Company, (v) any federal or state
regulatory authority having jurisdiction over such holder, (vi) the National
Association of Insurance Commissioners or any similar organization, or (vii)
any other Person to which such delivery or disclosure may be necessary or
advisable to avoid material prejudice (x) in compliance with any law, rule,
regulation, or order applicable to such holder, (y) in response to any
subpoena or other legal process, or (z) in connection with any litigation to
which such holder is a party. Nothing is this Section 13.8 shall be construed
to create or give rise to any fiduciary duty on the part of any holder to
Holdings or the Company.
(b) Purchaser agrees to keep confidential any information
delivered by the Company hereunder; provided, however, that subject to the
provisos contained in Section 13.8(a)(iii) and (iv) hereof, nothing herein
shall prevent any Purchaser from disclosing such information: (i) to any
Purchaser, (ii) to any Affiliate of, or investor in, any Purchaser or, any
actual or potential purchaser, participant, assignee, or transferee of any
Purchaser's rights under any Subordinated Note that agrees to be bound by this
Section 13.8, (iii) upon order of any court or administrative agency, (iv)
upon the request or demand of any regulatory agency or authority having
jurisdiction over such party, (v) which has been publicly disclosed, (vi)
which has been obtained from any Person that is not a party hereto or an
Affiliate of any such party, unless such Purchaser knows that such information
is required by such Person to be kept confidential, (vii) in connection with
the exercise of any remedy hereunder, (viii) to the independent and certified
public accountants for any Purchaser, (ix) as otherwise expressly contemplated
by this Agreement, (x) to counsel for and other advisors, accountants, and
auditors to any Purchaser, or (xi) as may be required by statute, decision, or
judicial or administrative order, rule, or regulation.
13.9 Notices. Unless otherwise provided in this Agreement, all
notices or demands by any party relating to this Agreement shall be in writing
and (except for financial statements and other informational documents which
may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid overnight courier service, telex,
telefacsimile, or telegram (with messenger delivery specified) to Holdings,
the Company, or Purchaser, as the case may be, at their respective addresses
set forth below:
IF TO HOLDINGS OR
THE COMPANY: NRE HOLDINGS, INC.
NATIONAL RESTAURANT ENTERPRISES, INC.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
Attn: Lawrence E. Jaro
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WITH COPIES TO: MAYER, BROWN & PLATT
1675 Broadway
New York, New York 10019-5820
Attn: James B. Carlson, Esq.
WITH COPIES TO: THE JORDAN COMPANY
9 West 57th Street, 40th Floor
New York, New York 10019
Attn: Mr. Richard Caputo, Jr.
IF TO PMI: PMI MEZZANINE FUND, L.P.
610 Newport Center Drive, Suite 1100
Newport Beach, California 92660
Attn: Mr. Mitchell S. Vance
WITH COPIES TO: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
The parties hereto may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing manner
given to the other parties hereto. All notices or demands sent in accordance
with this Section 13.9 shall be deemed received on the earlier of the date of
actual receipt or three (3) days after the deposit thereof in the mail, with
the courier service, or the time of the sending by means of telex,
telefacsimile, or telegram.
13.10 Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
13.11 Satisfaction Requirement. If any agreement, certificate, or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to any party, the determination of such satisfaction
shall be made by such party in its reasonable judgment exercised in good faith.
13.12 Governing Law. This Agreement and each of the Transaction
Documents (other than the Stockholders Agreement), and any suit, action, or
proceeding arising out of or relating to this Agreement and each of the
Transaction Documents (other than the Stockholders Agreement), including any
action at law or in equity, whether sounding in tort or in contract, and
whether related to any `workout,' `troubled debt restructuring,' or otherwise,
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of New York. This
Agreement and each of the Transaction Documents may not be changed orally, but
(subject to the provisions of Section 13.3) only by an agreement in writing
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signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
13.13 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
13.14 Telefacsimile Execution. Delivery of an executed counterpart of
the signature pages to this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of the signature
pages to this Agreement. Any party delivering an executed counterpart of the
signature pages to this Agreement by telefacsimile shall thereafter also
promptly deliver a manually executed counterpart of this Agreement but the
failure to deliver such manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in counterparts by their
respective officers thereunto duly authorized as of the date first written
above.
NRE HOLDINGS, INC.,
a Delaware corporation
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
NATIONAL RESTAURANT
ENTERPRISES, INC.,
a Delaware corporation
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
PMI MEZZANINE FUND, L.P.,
a Delaware limited partnership
By: Pacific Mezzanine Investors, LLC,
a Delaware limited liability
company, its General Partner
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page(s)
<C> <S>
1. Description of the Subordinated Notes and the Warrants................................................. 1
1.1 Authorization of Financing.................................................................. 1
1.2 Purchase and Sale of Purchaser Securities................................................... 1
2. Definitions; Construction.............................................................................. 2
2.1 Definitions................................................................................. 2
2.2 Accounting Principles....................................................................... 38
2.3 Construction................................................................................ 38
3. Repayments and Prepayments............................................................................. 38
3.1 Repayments.................................................................................. 38
3.2 Optional Prepayments........................................................................ 38
3.3 Other Prepayments........................................................................... 38
4. Representations and Warranties......................................................................... 40
4.1 Organization, Powers, Good Standing, and Subsidiaries....................................... 40
(a) Organization and Powers............................................................ 40
(b) Good Standing...................................................................... 40
(c) Subsidiaries....................................................................... 40
(d) Capitalization..................................................................... 40
4.2 Authorization of Financing, etc............................................................. 42
(a) Authorization of Financing......................................................... 42
(b) No Conflict........................................................................ 42
(c) Governmental Consents.............................................................. 43
(d) Due Execution and Delivery; Binding Obligations.................................... 43
(e) Valid Issuance of the Holdings Class C Common Stock................................ 43
(f) Bank Documents and Bank Notes...................................................... 43
4.3 Financial Condition......................................................................... 44
4.4 No Stock Payments........................................................................... 44
4.5 Title to Properties; Liens.................................................................. 44
4.6 Litigation; Adverse Facts.................................................................. 45
4.7 Payment of Taxes............................................................................ 45
4.8 Performance................................................................................. 45
4.9 Governmental Regulation..................................................................... 45
4.10 Employee Benefit Plans...................................................................... 46
4.11 Certain Fees................................................................................ 46
4.12 Disclosure.................................................................................. 46
4.13 Licenses, Permits, Franchises, and Authorizations........................................... 46
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4.14 Intangible Property......................................................................... 46
4.15 Hazardous Materials......................................................................... 47
4.16 Margin Regulations.......................................................................... 47
4.17 Offering of Securities...................................................................... 47
4.18 Solvency.................................................................................... 47
4.19 Schedules of Partnerships................................................................... 48
4.20 Insurance................................................................................... 48
4.21 Debt Instruments............................................................................ 48
5. Representations of PMI................................................................................. 49
6. Closing of Sale of Purchaser Securities................................................................ 49
7. Conditions for Closing................................................................................. 50
7.1 Opinions of Counsel......................................................................... 50
7.2 Representations and Warranties; No Default; No Adverse Change............................... 50
7.3 Credit Agreement............................................................................ 50
7.4 Stockholders Agreement...................................................................... 50
7.5 Purchase Permitted by Applicable Laws....................................................... 50
7.6 Compliance with Securities Laws............................................................. 51
7.7 Approvals and Consents...................................................................... 51
7.8 Proceedings................................................................................. 51
7.9 Purchases of Purchaser Securities........................................................... 51
7.10 Certified Documents - Holdings.............................................................. 51
7.11 Certified Documents - The Company........................................................... 52
7.12 Certified Documents - Guarantors............................................................ 52
7.13 Insurance................................................................................... 53
7.14 Pro Forma Balance Sheet..................................................................... 53
7.15 Closing Date Projections.................................................................... 53
7.16 VCOC Letter. .................................................................... 53
7.17 Subordinated Subsidiary Guaranty. ........................ 53
7.18 Expenses.................................................................................... 53
7.19 Acquisition Documents....................................................................... 53
7.20 Consents and Approvals...................................................................... 53
7.21 Solvency Certificate. ..................................................................... 53
7.22 Use of Financing............................................................................ 54
7.23 Transaction Costs........................................................................... 54
7.24 Closing Fee................................................................................. 54
7.25 FNBB Warrants............................................................................... 54
7.26 Purchase Agreement, MCIT Subordinated Notes, and MCIT
Subordinated Notes Guaranty................................................................. 54
7.27 Tax Sharing Agreement....................................................................... 54
7.28 Securities Purchase Agreement and BBI Subordinated Notes.................................... 54
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7.29 Management Agreement........................................................................ 54
7.30 Intercompany Management Agreement........................................................... 55
7.31 Management Subscription Agreement and Seller Subordinated Notes............................. 55
8. Affirmative Covenants.................................................................................. 55
8.1 Financial Statements and Other Reports...................................................... 55
8.2 Corporate Existence, etc.................................................................... 58
8.3 Payment of Taxes and Claims; Tax Consolidation.............................................. 58
8.4 Maintenance of Properties; Insurance........................................................ 58
8.5 Inspection.................................................................................. 59
8.6 No Further Negative Pledges................................................................. 59
8.7 Compliance with Laws, etc................................................................... 59
8.8 Waiver of Stay, Extension, or Usury Laws.................................................... 59
8.9 Attendance at Board Meetings................................................................ 60
8.10 Notice to Purchaser......................................................................... 61
8.11 Margin Regulations.......................................................................... 61
8.12 Proceeds of Financing....................................................................... 62
8.13 ERISA....................................................................................... 62
9. Negative Covenants..................................................................................... 62
9.1 Indebtedness................................................................................ 62
9.2 Liens....................................................................................... 65
9.3 Investments................................................................................. 66
9.4 Distributions and Restricted Junior Payments................................................ 67
9.5 Financial Covenants......................................................................... 69
9.6 Restriction on Fundamental Changes.......................................................... 71
9.7 Sales and Lease-Backs....................................................................... 72
9.8 Transactions with Affiliates................................................................ 72
9.9 Conduct of Business......................................................................... 73
9.10 Amendments or Waivers of Certain Documents.................................................. 73
9.11 Limitation on Sale of Assets................................................................ 74
9.12 Amendments to Bank Documents................................................................ 75
9.13 Preferred Stock............................................................................. 76
9.14 Limitation on Issuance of Other Subordinated Indebtedness Senior to
the Subordinated Notes...................................................................... 76
9.15 Guarantees of Indebtedness.................................................................. 76
9.17 Environmental Matters....................................................................... 77
9.18 Prepayment.................................................................................. 77
10. Subordination of the Subordinated Notes................................................................ 77
11. Events of Default...................................................................................... 83
11.1 Default; Acceleration...................................................................... 83
-iii-
<PAGE>
11.2 Rescission of Acceleration.................................................................. 86
11.3 Other Remedies.............................................................................. 86
12. Judicial Proceedings................................................................................... 87
12.1 Consent to Jurisdiction..................................................................... 87
12.2 Enforcement of Judgments.................................................................... 87
12.3 Waiver of Jury Trial........................................................................ 87
12.4 No Limitation on Service or Suit............................................................ 87
13. Miscellaneous.......................................................................................... 88
13.1 Payments.................................................................................... 88
13.2 Expenses.................................................................................... 88
13.3 Consent to Amendments....................................................................... 89
13.4 Form, Registration, Transfer and Exchange of Notes; Lost Notes.............................. 90
(a) Generally.......................................................................... 90
(b) Other Transfers.................................................................... 91
(c) Further Assurances................................................................. 91
13.5 Persons Deemed Owners; Participations....................................................... 91
13.6 Survival of Representations and Warranties; Entire Agreement................................ 92
13.7 Successors and Assigns...................................................................... 92
13.8 Disclosure to Other Persons................................................................. 92
13.9 Notices..................................................................................... 93
13.10 Descriptive Headings........................................................................ 94
13.11 Satisfaction Requirement.................................................................... 94
13.12 Governing Law............................................................................... 94
13.13 Counterparts................................................................................ 95
13.14 Telefacsimile Execution..................................................................... 95
</TABLE>
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<PAGE>
LIST OF EXHIBITS
Exhibit A-1 AmeriKing Cincinnati By-Laws
Exhibit A-2 AmeriKing Cincinnati Certificate of
Incorporation
Exhibit A-3 AmeriKing Virginia By-Laws
Exhibit A-4 AmeriKing Virginia Certificate of
Incorporation
Exhibit C-1 Company By-Laws
Exhibit C-2 Company Certificate of Incorporation
Exhibit C-3 Compliance Certificate
Exhibit M-1 Mandatory Prepayment Notice
Exhibit O-1 Optional Prepayment Notice
Exhibit S-1 Subordinated Subsidiary Guaranty
Exhibit 1.1(a) Subordinated Note
Exhibit 1.1(b)-1 Holdings Certificate of Incorporation
Exhibit 1.1(b)-2 Holdings By-Laws
Exhibit 1.1(b)-3 Warrants
Exhibit 7.1 Form of Opinion of Counsel to the Credit
Parties
-v-
<PAGE>
LIST OF SCHEDULES
Schedule F-1 Fiscal Quarter and Fiscal Year
Schedule P-1 Purchaser Schedule
Schedule 4.1(c) Subsidiaries
Schedule 4.2(b) Conflicts
Schedule 4.5 Permitted Liens
Schedule 4.6 Litigation
Schedule 4.7 Tax Liabilities
Schedule 4.15 Hazardous Material
Schedule 4.19 Partnerships
Schedule 4.20 Insurance
Schedule 4.21 Debt Instruments
Schedule 7.15 Closing Date Projections
Schedule 9.1(g) Indebtedness
Schedule 9.3 Investments
Schedule 9.8 Affiliate Transactions
-vi-
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT made as of the 7th day of February, 1996
between Burger King Corporation ("BKC"), NRE Holdings, Inc. ("Holdings"),
National Restaurant Enterprises, Inc. ("NRE"), AmeriKing Virginia Corporation
I, AmeriKing Colorado Corporation I, AmeriKing Tennessee Corporation I and
AmeriKing Cincinnati Corporation I, Lawrence E. Jaro, William Osborn and Gary
Hubert (each an "Obligor" and collectively, the "Obligors"), and PMI Mezzanine
Fund, L.P., a Delaware limited partnership (the "Subordinated Creditor").
WHEREAS, BKC has issued certain franchise agreements for Burger King
Restaurants (the "Franchise Agreements" and the "Restaurants", respectively)
to certain Obligors; and
WHEREAS, BKC has leased the premises on which the Restaurants are
located to certain Obligors pursuant to several Lease/Sublease Agreements (the
"Leases"); and
WHEREAS, NRE, Holdings, and Subordinated Creditor have entered into a
Note Purchase Agreement, dated as of February 7, 1996 (as the same may be
amended, supplemented, or otherwise modified or restated from time to time,
the "Note Purchase Agreement"), pursuant to which, among other things,
Subordinated Creditor is extending credit to NRE as evidenced by the
Subordinated Promissory Note, dated as of February 7th, 1996, in the aggregate
principal amount of $15,000,000, requiring quarterly interest payments at an
interest rate of 12.5% per annum, and having a scheduled maturity date of
February 7, 2005 (as the same may be amended, supplemented or otherwise
modified or replaced from time to time, the "Subordinated Note");
WHEREAS, BKC has required the execution and delivery of this
Agreement by the Obligors and Subordinated Creditor.
NOW, THEREFORE, the Obligors, BKC and the Subordinated Creditor
hereby agree:
1. BKC Senior Indebtedness. The term "BKC Senior Indebtedness" shall
mean all indebtedness, liabilities and other obligations of the Obligors to
BKC payable under the Franchise Agreements, the Leases or any other
indebtedness of the Obligors to BKC (including but not limited the $6,920,000
promissory note of AmeriKing Tennessee Corporation I in favor of BKC (the
"Tennessee Note")), whenever and however arising, whether primary or
secondary, absolute or contingent, and including charges and costs of
collection (including reasonable counsel fees); provided, however, that, for
purposes of this agreement, BKC
<PAGE>
Senior Indebtedness shall not exceed, in the aggregate, the Maximum
Subordination Amount.
2. Petition Date. The term "Petition Date" shall mean the
date on which any Obligor files a case under the Bankruptcy Code.
3. Maximum Subordination Amount. The term "Maximum Subordination
Amount" shall mean the amount equal to six (6) times the amount paid monthly
to BKC by the Obligors in the ordinary course for the last preceding calendar
month as to which the Obligors have paid BKC in full with respect to Senior
Indebtedness, plus the principal amount and accrued interest on any
outstanding notes issued by the Obligors in favor of BKC and its affiliates.
(By way of example, assuming no outstanding promissory notes such as the
Tennessee Note, if at March 30, 1996 the Obligors are obligated to and do pay
BKC $2,000,000 as payment in full royalty, advertising and rental payments,
the Maximum Subordinated Amount would be $12,000,000).
4. Subordination. Notwithstanding anything to the contrary contained
in the Subordinated Note, the Note Purchase Agreement, or any other agreement
between the Obligors to the Subordinated Creditor, including without
limitation any guarantees of such Obligors to the Subordinated Creditor,
payment of or on account of any obligation of the Obligors to the Subordinated
Creditor shall, on the terms and conditions hereof, be subordinated and
subject in right of payment to the prior payment in full of BKC Senior
Indebtedness, provided, however, that prior to the Petition Date, payments of
interest in the ordinary course and payments of principal (other than
voluntary prepayments but including repayment of the Subordinated Notes by
prepayment in full) may be made on account of the Subordinated Note in
accordance with the terms of the Note Purchase Agreement so long as no default
shall have occurred and be continuing in the payment when due of any of the
BKC Senior Indebtedness as to which the Subordinated Creditor shall have
received written notice from BKC, which notice shall be effective immediately
upon receipt but shall expire and cease to be effective for purposes of this
clause not later than 180 days thereafter. The Subordinated Creditor will
provide BKC 10 days prior written notice of its intent to accelerate as a
result of default in the Subordinated Note.
5. Insolvency Proceedings. In the event of any bankruptcy,
insolvency, reorganization, receivership, composition, assignment for benefit
of creditors, or other similar proceeding initiated by or against any Obligor
or any dissolution or winding up or total or partial liquidation or
reorganization of any Obligor, whether voluntary or involuntary (any of the
events just described in respect of the Obligors being hereinafter referred to
as a "Proceeding"), but subject to the prior rights of the
2
<PAGE>
holders of Senior Indebtedness (as defined in the Note Purchase Agreement) to
receive same as set forth in Section 10 of the Note Purchase Agreement as of
the date hereof, and upon payment or distribution of any assets of the
Obligors in any Proceeding, all BKC Senior Indebtedness shall first be paid in
full before the Subordinated Creditor shall receive or retain any assets so
paid or distributed in respect of any obligation of any Obligor to the
Subordinated Creditor; and, in connection with any such Proceeding any payment
or distribution of assets of any Obligor to which the Subordinated Creditor
would be entitled, except for the provisions hereof, shall be paid by the
Obligor or by any receiver, trustee, assignee for benefit of creditors, agent
or other person making such payments or distribution, or by the Subordinated
Creditor if received by it, to the then holder of BKC Senior Indebtedness to
the extent necesary to pay all BKC Senior Indebtedness in full (after giving
effect to any concurrent payment or distribution to or for the account of the
holders of BKC Senior Indebtedness or their representatives) before any
payment or distribution is made to Subordinated Creditor.
6. Subrogation. Subject to the payment in full of all BKC Senior
Indebtedness, without, in the case of this Section 6, reference to the Maximum
Subordination Amount, the Subordinated Creditor shall be subrogated to the
rights of the holder of BKC Senior Indebtedness to receive payments or
distributions of assets of any Obligor until the obligations of the Obligor to
the Subordinated Creditor shall be paid in full, and no payment or
distribution to or for the account of the holder of BKC Senior Indebtedness
which the Subordinated Creditor would be entitled to receive or retain except
for the provisions hereof shall, for the purposes of the subrogation provided
for hereby, as between any Obligor, its creditors (other than the holder of
BKC Senior Indebtedness), and the Subordinated Creditor, be deemed to be a
payment by the Obligor on account of BKC Senior Indebtedness, it being
understood that the provisions hereof are and are intended to be solely for
the purpose of defining the relative rights of the holder of BKC Senior
Indebtedness and the Subordinated Creditor, and that nothing contained herein
is intended to or shall impair, as between any Obligor, its creditors (other
than the holder of BKC Senior Indebtedness) and the Subordinated Creditor, the
obligation of the Obligor, which is unconditional and absolute, to pay to the
Subordinated Creditor the principal and interest of such Obligor's obligations
to the Subordinated Creditor as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of the Subordinated Creditor and other creditors of the Obligors (other
than the holder of the BKC Senior Indebtedness); nor shall anything herein
prevent the Subordinated Creditor from exercising all rights and remedies
under their agreements with the Obligors or otherwise permitted by applicable
3
<PAGE>
law, subject to the foregoing rights of the holder of BKC Senior Indebtedness
hereunder to receive prior payment in full of such BKC Senior Indebtedness. It
is expressly understood that the Subordinated Creditor shall not have any
right, title or interest in, under or to the Franchise Agreements or the
Leases (the "BKC Agreements"), and that the subrogation referenced above shall
be limited to the rights of payment of BKC under the BKC Senior Indebtedness.
7. No Waiver. No right of any present or future holder of, or trustee
for, any BKC Senior Indebtedness to enforce the subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
the Obligor with the terms, provisions, and covenants hereof, regardless of
any knowledge thereof any such holder may have or with which may such holder
may otherwise be charged.
8. Continuing Offer. The provisions hereof shall constitute a
continuing offer to BKC and to all other persons who, in reliance upon such
provisions become holders of or continue to hold BKC Senior Indebtedness, and
such provisions are made for the benefit of the holders of BKC Senior
Indebtedness, and such holders are hereby made obligees hereunder the same as
if their names were written herein as such, and they and/or each of them may
proceed to enforce such provisions.
9. Intercompany Indebtedness. The Obligors represent, jointly and
severally, that there are no outstanding intercompany loans between any of the
Obligors other than in the ordinary course of business consistent with past
practices, and covenant that in the event that any intercompany notes are
issued in the future, such notes will be subject to the subordination
provisions set forth herein.
10. Choice of Law; Jurisdiction and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
The parties hereto acknowledge and agree that the United States District Court
for the Southern District of Florida, or if such court lacks jurisdiction, the
11th Judicial Court (or its successor) in and for Dade County, Florida, shall
be the venue and exclusive proper forum in which to adjudicate any case or
controversy arising, either directly or indirectly, under or in connection
with this Agreement, the BKC Agreements, or related documentation and any
other agreement between BKC and any party hereto, and the parties further
agree that, in the event of litigation arising out of or in connection with
this Agreement, the BKC Agreements, or related documentation
4
<PAGE>
or any other agreement between BKC and any party hereto in these courts, they
will not contest or challenge the jurisdiction or venue of these courts.
Executed as of the date set forth above.
NATIONAL RESTAURANT ENTERPRISES, INC.
- --------------------------------------
By:
Title:
BURGER KING CORPORATION
- ---------------------------------------
By:
Title:
PMI MEZZANINE FUND, L.P.,
a Delaware limited partnership
By: Pacific Mezzanine Investors,
LLC, a Delaware limited
liability company, its General
Partner
- --------------------------------------
By:
Title:
AmeriKing Virginia Corporation I
- ---------------------------------
AmeriKing Colorado Corporation I
- ---------------------------------
AmeriKing Tennessee Corporation I
- ---------------------------------
5
<PAGE>
AmeriKing Cincinnati Corporation I
- ----------------------------------
Lawrence E. Jaro
- -------------------------------------
William Osborn
- -------------------------------------
Gary Hubert
6
LEASE
THIS LEASE is made as of February 7, 1996 (the "Effective Date"), by
and between FFCA ACQUISITION CORPORATION, a Delaware corporation ("Lessor"),
whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and
AMERIKING VIRGINIA CORPORATION I, a Delaware corporation ("Lessee"), whose
address is 2215 Enterprise Drive, Suite 1502, Westchester, Illinois 60154.
W I T N E S E T H :
THAT, in consideration of the mutual covenants and agreements herein
contained, Lessor and Lessee hereby covenant and agree as follows:
1. CERTAIN DEFINED TERMS. The following terms shall have the
following meanings for all purposes of this Lease:
"Annual Percentage Rental" means 8.5% of Lessee's Gross Sales for the
applicable Lease Year in excess of $.
"Assessed Fair Market Value" has the meaning set forth in Section 23.
"Bank of Boston Mortgage" means that certain Leasehold Credit Line
Deed of Trust, Assignment of Rents, Leases and Leasehold Interests and
Security Agreement dated as of the date of this Lease executed by Lessee for
the benefit of The First National Bank of Boston, as agent, encumbering
Lessee's interest in this Lease.
"Base Annual Rental" means $.
"Base Monthly Rental" means an amount equal to 1/12 of the applicable
Base Annual Rental.
"Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et
seq., as amended.
"Franchisor" means Burger King Corporation, a Florida corporation, or
its successor. "Gross Sales Fair Market Value" means Lessee's Gross Sales for
the 12 consecutive months preceding the delivery of the Option Notice or the
Put Notice, as applicable, multiplied by 8.5%, with the product thereof
divided by 10%.
<PAGE>
"Guarantor" means National Restaurant Enterprises, Inc., a Delaware
corporation, whose address is 2215 Enterprise Drive, Suite 1502, Westchester,
Illinois 60154.
"Guaranty" means that certain unconditional guaranty of payment and
performance dated as of the date of this Lease executed by Guarantor.
"Lease Term" shall have the meaning described in Section 3.
"Lease Year" means the 12-month period commencing on the first day of
the fiscal year of Lessee or any other 12-month period as may be approved in
writing by Lessor after the commencement of the Lease Term and each successive
12-month period thereafter.
"Lessee's Gross Sales" means all sums charged by Lessee and/or
Guarantor, in its capacity as franchisee with respect to the Premises, for
goods, merchandise or services sold at, from or away from the Premises,
including premiums and telephone orders; provided, however, Lessee's Gross
Sales shall not include (i) any federal, state, county or city sales or excise
tax, or other similar taxes collected by Lessee and/or Guarantor, in its
capacity as franchisee with respect to the Premises, from customers based upon
sales, (ii) cash received as payment in credit transactions where the
extension of credit itself has already been included in Lessee's Gross Sales
and (iii) any amounts received for not-for-profit sales of nonfood items
approved for use in connection with promotional campaigns, if any, by
Franchisor.
"Material Adverse Effect" means a material adverse effect on (i) the
condition (financial or otherwise), business, prospects, results of operations
or assets of Lessee and/or Guarantor, (ii) the Premises and/or (iii) the
ability of Lessee to operate the Premises consistent with the terms and
conditions of this Lease.
"Minimum Purchase Price" means $.
"Other Leases" means those certain leases dated as of the date of
this Lease executed by Lessee or Other Lessee pursuant to the Sale-Leaseback
Agreement, other than the Lease.
"Other Lessee" means AmeriKing Tennessee Corporation I, a Delaware
corporation.
"Premises" means the parcel or parcels of real estate located in ,
County, Virginia, legally described in Exhibit A attached hereto, all rights,
privileges and appurtenances associated therewith and all buildings, fixtures
and other improvements now or hereafter located thereon (whether or not
affixed to such real estate).
"Put Fair Market Value" has the meaning set forth in Section 24.E.
2
<PAGE>
"Quarterly Percentage Rental" means that portion of the Annual
Percentage Rental payable for each quarter or portion thereof after which
Lessee's Gross Sales for the applicable Lease Year exceeds $.
"Sale-Leaseback Agreement" means that certain Sale-Leaseback
Agreement dated as of the date of this Lease between Lessor and Lessee with
respect to the Premises.
"State" means the State of Virginia.
2. DEMISE OF PREMISES. In consideration of the rentals and other sums
to be paid by Lessee and of the other terms, covenants and conditions on
Lessee's part to be kept and performed, Lessor hereby leases to Lessee, and
Lessee hereby takes and hires, the Premises.
3. LEASE TERM. The Lease Term shall commence as of the Effective Date
and shall expire on February 29, 2016, unless terminated sooner as provided in
this Lease and as may be extended for two periods of five years each as set
forth in Section 28 below. The time period during which this Lease shall
actually be in effect is referred to herein as the "Lease Term."
4. RENTAL AND OTHER PAYMENTS. A. If the Effective Date is a date
other than the first day of the month, Lessee shall pay Lessor on the
Effective Date the Base Monthly Rental prorated on the basis of the ratio that
the number of days from the Effective Date through the last day in the month
containing the Effective Date bears to the number of days in such month.
Thereafter, on or before the first day of each succeeding calendar month,
Lessee shall pay Lessor in advance the Base Monthly Rental.
B. Commencing on the fifteenth day of the first month following the
end of the first quarter during which Annual Percentage Rental is due and
payable, and on or before the fifteenth day of each quarter for which
Quarterly Percentage Rental is due thereafter, Lessee shall pay Lessor the
Quarterly Percentage Rental, and contemporaneous with such payment Lessee
shall furnish to Lessor a written statement satisfactory to Lessor, which
Lessee shall warrant and certify to be true, complete and correct, setting
forth Lessee's Gross Sales for such quarter.
C. Within 30 days after the end of each Lease Year, Lessee shall
furnish to Lessor a written statement setting forth for that previous Lease
Year the Base Monthly Rental and the Quarterly Percentage Rental actually
paid, Lessee's Gross Sales and the Annual Percentage Rental payable. To the
extent that Lessee has not paid Quarterly Percentage Rental in an amount equal
to the Annual Percentage Rental due for that Lease Year, it shall pay Lessor
the deficiency at the time the written statement is filed.
For any partial year between the commencement of the Lease Term and
the beginning of the next Lease Year and the beginning of the last Lease Year
and the end of the Lease Term, calculation of the Base Annual Rental and the
Annual Percentage Rental shall be prorated on the basis of the ratio of the
number of days in such partial year to 365.
3
<PAGE>
D. All sums of money required to be paid by Lessee under this Lease
which are not specifically referred to as rent ("Additional Rental") shall be
considered rent although not specifically designated as such. Subject to the
limitations set forth in Section 24.A.(viii), as applicable, Lessor shall have
the same remedies for nonpayment of Additional Rental as those provided herein
for the nonpayment of Base Annual Rental.
5. REPRESENTATIONS AND WARRANTIES OF LESSOR. Lessor represents and
warrants to Lessee as follows:
A. Organization, Authority and Status of Lessor. (i) Lessor has
been duly organized and is validly existing and in good standing
under the laws of the State of Delaware. All necessary corporate
action has been taken to authorize the execution, delivery and
performance by Lessor of this Lease and the other documents,
instruments and agreements provided for herein. Lessor is not a
"foreign corporation" as such term is defined in the Internal
Revenue Code and the regulations promulgated thereunder. Lessor's
United States tax identification number is 86-0765661.
(ii) The person who has executed this Lease on behalf of Lessor
is duly authorized so to do.
B. Enforceability. This Lease constitutes the legal, valid and
binding obligation of Lessor, enforceable against Lessor in
accordance with its terms.
6. REPRESENTATIONS AND WARRANTIES OF LESSEE; COVENANTS.
A. Representations and Warranties. The representations and
warranties of Lessee contained in this Section are being made to induce Lessor
to enter into this Lease, and Lessor has relied, and will continue to rely,
upon such representations and warranties. Lessee represents and warrants to
Lessor as follows:
(i) Organization, Authority and Status of Lessee. (1) Lessee
has been duly organized or formed, is validly existing and in good
standing under the laws of its state of incorporation or formation
and is qualified as a foreign corporation, partnership or limited
liability company to do business in the State and in any jurisdiction
where the failure to qualify could reasonably be expected to have a
Material Adverse Effect. All necessary corporate, partnership or
limited liability company action has been taken to authorize the
execution, delivery and performance by Lessee of this Lease and of
the other documents, instruments and agreements provided for herein.
Lessee is not a "foreign corporation," "foreign partnership,"
"foreign trust" or "foreign estate," as those terms are defined in
the Internal Revenue Code and the regulations promulgated thereunder.
Lessee's United States tax identification number is correctly set
forth on the signature page of this Lease.
4
<PAGE>
(2) The persons who have executed this Lease on behalf of
Lessee are duly authorized to do so.
(ii) Enforceability. This Lease constitutes the legal, valid
and binding obligation of Lessee, enforceable against Lessee in
accordance with its terms.
(iii) Litigation. There are no suits, actions, proceedings
or investigations pending, or, to the best of its knowledge,
threatened, against or involving Lessee before any court, arbitrator
or administrative or governmental body which could reasonably be
expected to have a Material Adverse Effect.
(iv) Absence of Breaches or Defaults. Lessee is not, and the
execution, delivery and performance of this Lease and the documents,
instruments and agreements provided for herein will not result, in
any breach of or default under any other document, instrument or
agreement to which Lessee is a party or by which Lessee, the Premises
or any of Lessee's property is subject or bound, except as could not
reasonably be expected to have a Material Adverse Effect.
(v) Franchisor Provisions. Either Lessee or Guarantor has
entered into a franchise, license and/or area development agreement
with Franchisor for conduct of the business at the Premises. Such
franchise, license and/or area development agreement is valid,
binding and in full force and effect, permits Lessee or Guarantor to
operate a Franchisor's restaurant on the Premises and has a term
which will not expire prior to the scheduled expiration date set
forth in Schedule I to the Sale-Leaseback Agreement.
(vi) Licenses and Permits. Lessee has obtained all required
licenses and permits, both governmental and private, to use and
operate the Premises in the intended manner, except those the failure
of which to obtain would not have a Material Adverse Effect.
(vii) Financial Condition; Information Provided to Lessor.
The financial statements, all financial data and all other documents
and information heretofore delivered to Lessor by or with respect to
Lessee, Guarantor and/or the Premises in connection with this Lease
and/or relating to Lessee, Guarantor and/or the Premises are true,
correct and complete in all material respects, and there have been no
amendments to such financial statements, financial data and other
documents and information since the date such financial statements,
financial data, documents and other information were prepared or
delivered to Lessor, and no material adverse change has occurred to
any such financial statements, financial data, documents and other
information not disclosed in writing to Lessor.
(viii) Condition of Premises. As of the Effective Date, the
Premises, including the equipment located thereon, are of good
workmanship and materials, fully equipped and operational, in good
condition and repair, free from structural defects, clean, orderly
and sanitary, normal wear and tear excepted.
5
<PAGE>
(ix) True Lease. Lessee intends for this Lease to be a "true
lease" and not a financing lease, capital lease, mortgage, equitable
mortgage, deed of trust, trust agreement, security agreement or other
financing or trust arrangement, and the economic realities of this
Lease are those of a true lease. The term of this Lease, including
any term extensions provided for in this Lease, is less than the
remaining economic life of the Premises. The option to purchase
provided for in this Lease may be exercised only by Lessee paying the
greater of the fair market value of the Premises (as determined
pursuant to Section 23) and the Minimum Purchase Price, which payment
amount will not be nominal.
B. Covenants. Until all of the obligations of Lessee to Lessor under
this Lease are satisfied in full, Lessee covenants to Lessor as follows:
(i) Lessee shall remain in good standing under the laws of
the state of its incorporation or formation and qualified as a
foreign corporation, partnership or limited liability company to do
business in the State and in any jurisdiction where the failure to
qualify could reasonably be expected to have a Material Adverse
Effect;
(ii) Lessee shall obtain and maintain all licenses and
permits, both governmental and private, to use and operate the
Premises in the intended manner, except those the failure of which to
obtain and maintain would not have a Material Adverse Effect; and
(iii) Lessee stipulates and agrees not to challenge the
validity, enforceability or characterization of the lease of the
Premises as a true lease and further stipulates and agrees that
nothing contained in this Lease creates or is intended to create a
joint venture, partnership, equitable mortgage, trust, financing
device or arrangement, security interest or the like. Lessee shall
support the intent of the parties that the lease of the Premises
pursuant to this Lease is a true lease and does not create a joint
venture, partnership, equitable mortgage, trust, financing device or
arrangement, security interest or the like, if, and to the extent
that, any challenge occurs; provided, however, Lessee shall not be
required to bring any legal action to fulfill its obligations under
this sentence. Lessee waives any claim or defense based upon the
characterization of this Lease as anything other than a true lease.
7. GUARANTY. On or before the execution of this Lease, Lessee shall
cause Guarantor to execute and deliver to Lessor the Guaranty.
8. RENTALS TO BE NET TO LESSOR. The Base Annual Rental and the Annual
Percentage Rental payable hereunder shall be net to Lessor, so that this Lease
shall yield to Lessor the rentals specified during the Lease Term, and that
all costs, expenses and obligations of every kind and nature whatsoever
relating to the Premises shall be performed and paid by Lessee.
9. TAXES AND ASSESSMENTS. Lessee shall pay, prior to the earlier of
delinquency or the accrual of interest on the unpaid balance, all taxes and
assessments of every type or nature assessed against or imposed upon the
Premises during the Lease Term which affect in any manner the net
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return realized by Lessor under this Lease (collectively, the "Taxes"),
including, without limitation, the following:
A. All taxes and assessments upon the Premises or any part
thereof and upon any personal property, trade fixtures and
improvements located on the Premises, whether belonging to
Lessor or Lessee, or any tax or charge levied in lieu of such
taxes and assessments;
B. All taxes, charges, license fees and/or similar fees
imposed by reason of the use of the Premises by Lessee; and
C. All excise, transaction, privilege, license, sales, use
and other taxes upon the rental or other payments hereunder, the
leasehold estate of either party or the activities of either party
pursuant to this Lease.
All taxing authorities shall be instructed to send all tax and
assessment invoices to Lessor. After recording the information on such
invoices, Lessor shall forward such invoices to Lessee for payment within 20
days. Within 30 days after each tax and assessment payment is required by this
Section to be paid, Lessee shall provide Lessor with evidence satisfactory to
Lessor that such payment was made in a timely fashion. Lessee may in good
faith seek a refund, rebate or abatement of any tax levied in connection with
the Premises but only if Lessor has approved of the arrangements for paying
such tax prior to it becoming a lien on the Premises, which approval shall not
be unreasonably withheld or delayed.
10. UTILITIES. Lessee shall contract, in its own name, for and pay
when due all charges for the connection and use of water, gas, electricity,
telephone, garbage collection, sewer use and other utility services supplied
to the Premises during the Lease Term. Under no circumstances shall Lessor be
responsible for any interruption of any utility service except to the extent
of Lessor's gross negligence or willful misconduct.
11. INSURANCE. Throughout the Lease Term Lessee shall maintain at its
sole expense the following types and amounts of insurance (which may be
included under a blanket insurance policy if all the other terms hereof are
satisfied), in addition to such other insurance as Lessor may reasonably
require from time to time:
A. "All risks" property insurance against loss, damage or
destruction by fire and other casualty, including theft, vandalism
and malicious mischief, flood (if the Premises are in a location
designated by the Federal Secretary of Housing and Urban Development
as a flood hazard area), earthquake (if the Premises are in an area
subject to destructive earthquakes within recorded history), boiler
explosion (if there is any boiler upon the Premises), sprinkler
damage (if the Premises have a sprinkler system), all matters covered
by a standard extended coverage endorsement and such other risks as
Lessor may reasonably
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require, insuring the improvements at the Premises for not less than
100% of their full insurable replacement cost.
B. Comprehensive general liability and property damage
insurance, including a products liability clause, covering Lessor and
Lessee against bodily injury liability, property damage liability and
automobile bodily injury and property damage liability, including
without limitation any liability arising out of the ownership,
maintenance, repair, condition or operation of the Premises and, if
applicable, insurance covering Lessor and Lessee against liability
arising from the sale of liquor, beer or wine on the Premises. Such
insurance policy or policies shall contain a broad form contractual
liability endorsement under which the insurer agrees to insure
Lessee's obligations under Section 18 hereof to the extent insurable,
and a "severability of interest" clause or endorsement which
precludes the insurer from denying the claim of either Lessee or
Lessor because of the negligence or other acts of the other shall be
in amounts of not less than $1,000,000.00 per injury and occurrence
with respect to any insured liability, whether for personal injury or
property damage, or such higher limits as Lessor may reasonably
require from time to time, and shall be in form and substance
satisfactory to Lessor.
C. State Worker's Compensation insurance in the statutorily
mandated limits, employer's liability insurance with limits not less
than $500,000 or such greater amount as Lessor may from time to time
require and such other insurance as may be necessary to comply with
applicable laws.
D. Business interruption insurance equal to 100% of the
Base Annual Rental and Annual Percentage Rental for a period of
not less than 12 months.
All insurance policies shall:
(i) Provide for a waiver of subrogation by the
insurer as to claims against Lessor, its employees and
agents;
(ii) Provide that such insurance cannot be cancelled,
invalidated or suspended on account of the conduct of
Lessee, its officers, directors, employees or agents;
(iii) Provide that any "no other insurance" clause in
the insurance policy shall exclude any policies of
insurance maintained by Lessor and that the insurance
policy shall not be brought into contribution with
insurance maintained by Lessor;
(iv) Contain a standard without contribution mortgage
clause endorsement in favor of any lender designated by
Lessor;
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(v) Provide that the policy of insurance shall not
be terminated, cancelled or substantially modified without
at least 30 days' prior written notice to Lessor and to any
lender covered by any standard mortgage clause endorsement;
(vi) Provide that the insurer shall not have the
option to restore the Premises if Lessor elects to terminate
this Lease in accordance with the terms hereof; and
(vii) Be issued by insurance companies licensed to
do business in the state in which the Premises is located
and which are rated A-:XV or better by Best's Insurance
Guide or are otherwise approved by Lessor.
It is expressly understood and agreed that the foregoing minimum
limits of insurance coverage shall not limit the liability of Lessee for its
acts or omissions as provided in this Lease. All insurance policies (with the
exception of worker's compensation insurance to the extent not available under
statutory law) shall designate Lessor and any mortgagee of Lessor as
additional insureds as their interests may appear and shall be payable as set
forth in Section 20 hereof. All such policies shall be written as primary
policies, with deductibles not to exceed 10% of the amount of coverage. Any
other policies, including any policy now or hereafter carried by Lessor, shall
serve as excess coverage. Following the expiration of policies that are in
effect as of the Effective Date, Lessee shall procure policies for all
insurance for periods of not less than one year and shall provide to Lessor
and any lender designated by Lessor certificates of insurance or, upon
Lessor's request, duplicate originals of insurance policies evidencing that
insurance satisfying the requirements of this Lease is in effect at all times.
12. TAX AND INSURANCE IMPOUND. Upon the occurrence of an Event of
Default, Lessor may require Lessee to pay to Lessor sums which will provide an
impound account (which shall not be deemed a trust fund) for paying up to the
next one year of taxes, assessments and/or insurance premiums. Upon such
requirement, Lessor will estimate the amounts needed for such purposes and
will notify Lessee to pay the same to Lessor in equal monthly installments, as
nearly as practicable, in addition to all other sums due under this Lease.
Should additional funds be required at any time, Lessee shall pay the same to
Lessor on demand. Lessee shall advise Lessor of all taxes and insurance bills
which are due and shall cooperate fully with Lessor in assuring that the same
are paid. Lessor may deposit all impounded funds in accounts insured by any
Federal or State agency and may commingle such funds with other funds and
accounts of Lessor. Interest or other gains from such funds, if any, shall be
the sole property of Lessor. In the event of any default by Lessee, Lessor may
apply all impounded funds against any sums due from Lessee to Lessor. Lessor
shall give to Lessee an annual accounting showing all credits and debits to
and from such impounded funds received from Lessee.
13. PAYMENT OF RENTAL AND OTHER SUMS. All rental and other sums which
Lessee is required to pay hereunder shall be the unconditional obligation of
Lessee and shall be payable in full when due without any setoff, abatement,
deferment, deduction or counterclaim whatsoever. Upon
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execution of this Lease, Lessee shall establish arrangements whereby payments
of the Base Monthly Rental and impound payments, if any, are transferred by
wire or other means directly from Lessee's bank account to such account as
Lessor may designate. Any delinquent payment (that is, any payment not made
within five calendar days after the date when due) shall, in addition to any
other remedy of Lessor, incur a late charge of 10% (which late charge is
intended to compensate Lessor for the cost of handling and processing such
delinquent payment and should not be considered interest) and bear interest at
the rate of 18% per annum (the "Default Rate"), which interest rate shall
accrue from the date such payment was due, but in no event shall Lessee be
obligated to pay a sum of late charge and interest higher than the maximum
legal rate then in effect.
14. USE. Lessee shall use the Premises solely for the operation of a
restaurant in accordance with a franchise, license and/or area development
agreement with Franchisor and for no other purpose. Lessee shall occupy the
Premises promptly following the Effective Date and, except as set forth below,
Lessee shall at all times during the Lease Term diligently operate its
business on the Premises. Lessee may cease diligent operation of business for
a period not to exceed 90 days and may do so only once within any five-year
period during the Lease Term. If Lessee does discontinue operation pursuant to
this Section, Lessee shall (i) give written notice to Lessor 60 days prior to
the day Lessee intends to cease operation, (ii) provide adequate protection
and maintenance of the Premises during any period of vacancy and (iii) pay all
costs necessary to restore the Premises to their condition on the day
operation of the business ceased at such time as the Premises are reopened for
Lessee's business operations or other substituted use approved by Lessor as
contemplated below. Notwithstanding anything herein to the contrary, Lessee
shall pay monthly as the Base Annual Rental and the Annual Percentage Rental
during any period in which Lessee discontinues operation an amount equal to
the mean average of the sum of the Base Annual Rental and the Annual
Percentage Rental for the same months in the two Lease Years immediately
preceding such period.
Lessee shall not, by itself or through any assignment, sublease or
other type of transfer, convert the Premises to an alternative use during the
Lease Term without Lessor's consent, which consent shall not be unreasonably
withheld or delayed. Lessor may consider any or all of the following in
determining whether to grant its consent, without being deemed to be
unreasonable: (i) whether the rental paid to Lessor would be equal to or
greater than the anticipated rental assuming continued existing use, (ii)
whether the proposed rental to be paid to Lessor is reasonable considering the
converted use of the Premises and the customary rental prevailing in the
community for such use, (iii) whether the converted use will be consistent
with the highest and best use of the Premises, and (iv) whether the converted
use will increase Lessor's risks or decrease the value of the Premises.
15. COMPLIANCE WITH LAWS, RESTRICTIONS, COVENANTS AND ENCUMBRANCES.
A. Lessee's use and occupation of the Premises, and the condition thereof,
shall, at Lessee's sole cost and expense, comply fully with (i) all applicable
statutes, regulations, rules, ordinances, codes, licenses, permits, orders and
approvals of any governmental agencies, departments, commissions, bureaus,
boards or instrumentalities of the United States, the state in which the
Premises are located and all political subdivisions thereof, including,
without limitation, all health, building, fire, safety and other codes,
ordinances and requirements and all applicable standards of the National Board
of Fire
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Underwriters; provided, however, Lessee shall have the right to contest the
application of the foregoing in good faith provided the business being
conducted will not be in imminent danger of cessation and the Premises will
not be in imminent danger of being sold, forfeited or lost by reason of such
contest; and (ii) all restrictions, covenants and encumbrances of record with
respect to the Premises.
B. Lessee will not permit any act or condition to exist on or about
the Premises which will increase any insurance rate thereon, except when such
acts are required in the normal course of its business, and Lessee shall pay
for such increase.
C. Without limiting the generality of the other provisions of this
Section, Lessee agrees that it shall be responsible for complying in all
respects with the Americans with Disabilities Act of 1990, as such act may be
amended from time to time, and all regulations promulgated thereunder
(collectively, the "ADA"), as it affects the Premises, including, but not
limited to, making required "readily achievable" changes to remove any
architectural or communications barriers, and providing auxiliary aides and
services within the Premises. Lessee further agrees that any and all
alterations made to the Premises during the Lease Term will comply with the
requirements of the ADA. All plans for alterations which must be submitted to
Lessor under the provisions of Section 17 must include a statement from a
licensed Architect or Engineer certifying that they have reviewed the plans,
and that the plans comply with all applicable provisions of the ADA. Any
subsequent approval or consent to the plans by the Lessor shall not be deemed
to be a representation of Lessor's part that the plans comply with the ADA,
which obligation shall remain with Lessee. Lessee agrees that it will defend,
indemnify and hold harmless Lessor and Lessor's shareholders, directors,
officers, agents, attorneys and employees from and against any and all claims,
demands, causes of action, suits, proceedings, liabilities, damages (including
consequential and punitive damages), losses, costs and expenses, including
attorneys' fees, caused by, incurred or resulting from Lessee's failure to
comply with its obligations under this Section.
D. Without limiting the generality of the other provisions of this
Section, Lessee shall (i) comply with all Environmental Laws (as defined
below) applicable to the operation or use of the Premises, (ii) cause all
other persons occupying or using the Premises to comply with all such
Environmental Laws (provided Lessee shall only be required to use commercially
reasonable efforts with respect to persons who are not employed by or
affiliated with Lessee), (iii) obtain and renew all governmental permits,
licenses and authorizations required under any Environmental Law, and (iv)
provide Lessor with prompt written notice of any actual, threatened or claimed
release of a Hazardous Material (as such term is defined below) on the
Premises and of any claim, notice, investigation or action relating to the
Premises and any Environmental Law. Lessee covenants and agrees not to use,
generate, release, manage, treat, manufacture, store or dispose of, on, under
or about, or transport to or from (any of the foregoing hereinafter a "Use")
the Premises any Hazardous Materials, other than De Minimis Amounts (as such
term is defined below). In the event Lessee breaches any of the foregoing
covenants, in addition to any and all other rights and remedies of Lessor,
Lessor at its option may either (i) require Lessee to immediately upon demand
analyze, remove, abate and/or otherwise remedy all such Hazardous Materials
using licensed contractors
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approved by Lessor or (ii) perform, without further notice to Lessee, or cause
to be performed such analysis, removal, abatement and/or remedial work for and
at the sole expense of Lessee. For purposes of this Section, (1) the term
"Hazardous Materials" shall include but not be limited to asbestos, urea
formaldehyde, polychlorinated biphenyls, oil, petroleum products, pesticides,
radioactive materials, hazardous wastes, toxic substances and any other
related or dangerous, toxic or hazardous chemical, material or substance
regulated by or defined as hazardous or as a pollutant or contaminant in, or
the Use of or exposure to which is prohibited, limited, governed or regulated
by, any Environmental Law; (2) the term "De Minimis Amounts" shall mean, with
respect to any given level of Hazardous Materials, that level or quantity of
Hazardous Materials in any form or combination of forms which (i) does not
constitute a violation of any Environmental Law and (ii) is customarily
employed in, or associated with, similar businesses located in the county in
which the Premises is located; and (3) the term "Environmental Laws" shall
mean any federal, state or local statute, law, rule, regulation, ordinance,
code, policy or rule of common law now or hereafter in effect and in each case
as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials.
E. In addition to the other requirements of this Section, Lessee
shall, at all times throughout the Lease Term, comply, and cause Guarantor to
comply, with all federal, state or local statutes, laws, rules, regulations,
ordinances, codes, policies or rules of common law now or hereafter in effect
and in each case as amended, and any judicial or administrative interpretation
thereof, including any judicial order, consent, decree or judgment, applicable
to Lessee and Guarantor, except as could not reasonably be expected to have a
Material Adverse Effect.
16. CONDITION OF PREMISES; MAINTENANCE. Lessee has inspected, or had
the opportunity to inspect, the Premises and hereby accepts the Premises "AS
IS" and "WHERE IS" with no representation or warranty of Lessor as to the
condition thereof. The Premises shall be kept in good, clean, sanitary and
working condition, and Lessee shall at all times at its own expense maintain,
repair and replace, as necessary, the Premises, consistent with the franchise,
license and/or area development agreement with Franchisor, ordinary wear and
tear excepted.
17. WASTE; ALTERATIONS AND IMPROVEMENTS. Lessee shall not commit
actual or constructive waste upon the Premises. Lessee shall not alter the
exterior, structural, plumbing or electrical elements of the Premises in any
manner without the consent of Lessor, which consent shall not be unreasonably
withheld or conditioned; provided, however, Lessee may undertake nonstructural
alterations to the Premises costing less than $35,000 without Lessor's
consent. If Lessor consents to the making of any such alterations for which
its consent is required, the same shall be made by Lessee at Lessee's sole
expense by a licensed contractor and according to plans and specifications
approved by Lessor and subject to such other conditions as Lessor shall
reasonably require. Any work at any time commenced by Lessee on the Premises
shall be prosecuted diligently to completion, shall be of good workmanship and
materials and shall comply fully with all the terms of this Lease. Upon
completion of any alterations, Lessee shall promptly provide Lessor, at
Lessor's request, with evidence of full payment to all laborers and
materialmen contributing to the alterations and any other
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documents or information reasonably requested by Lessor. In addition, upon
completion of any alterations for which Lessor's consent is required, Lessee
shall provide Lessor with an architect's certificate certifying the
alterations to have been completed in conformity with the plans and
specifications, and a certificate of occupancy or other applicable notice from
municipalities as required. Lessee shall execute and file or record, as
appropriate, a "Notice of Non-Responsibility," or any equivalent notice
permitted under applicable law in the state where the Premises is located. Any
addition to or alteration of the Premises shall be deemed a part of the
Premises and belong to Lessor, and Lessee shall execute and deliver to Lessor
such instruments as Lessor may require to evidence the ownership by Lessor of
such addition or alteration.
18. INDEMNIFICATION. Except for the gross negligence or willful
misconduct of Lessor, Lessee shall indemnify, protect, defend and hold
harmless Lessor and Lessor's shareholders, directors, officers, agents,
lenders, attorneys and employees from and against any and all claims, demands,
causes of action, suits, proceedings, liabilities, damages (including
consequential and punitive damages), losses, costs and expenses, including
Lessor's attorneys' fees, caused by, incurred in or resulting from its
operations of or relating in any manner to the Premises, whether relating to
their original design or construction, latent defects, alteration,
maintenance, use by Lessee or any person thereon, supervision or otherwise, or
from any breach of, default under or failure to perform any term or provision
of this Lease by Lessee, its officers, employees, agents or other persons. It
is expressly understood and agreed that Lessee's obligations under this
Section shall survive the expiration or earlier termination of this Lease for
any reason.
19. QUIET ENJOYMENT. So long as no Event of Default has occurred,
Lessee shall have, subject and subordinate to Lessor's rights herein, the
right to the peaceful and quiet occupancy of the Premises.
20. CONDEMNATION OR DESTRUCTION. A. In case of a taking of all or any
part of the Premises or the commencement of any proceedings or negotiations
which might result in a taking for any public or quasi-public purpose by any
lawful power or authority by exercise of the right of condemnation or eminent
domain or by agreement between Lessor, Lessee and those authorized to exercise
such right ("Taking"), Lessee will promptly give written notice thereof to
Lessor, generally describing the nature and extent of such Taking and
including copies of any documents or notices received in connection therewith.
B. In case of a Taking of the whole of the Premises, other than for
temporary use ("Total Taking"), this Lease shall terminate as of the date of
such Total Taking and all rentals, sums of money and other charges provided to
be paid by Lessee shall be apportioned and paid to the date of such Total
Taking; provided, however, in the event of a Total Taking, if the net award or
payment, after deducting all costs, fees and expenses incident to the
collection thereof (the "Net Amount"), for such Total Taking is less than the
Minimum Purchase Price, Lessee shall pay to Lessor within 10 days of Lessor's
receipt of the Net Amount an amount equal to the difference between the
Minimum Purchase Price and the Net Amount, if any. Total Taking shall include
a taking of substantially all the Premises if, in the sole determination of
Lessor, the remainder of the Premises is not useable and cannot be
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made useable for the purposes provided herein. Lessor shall be entitled to
receive the entire award or payment in connection with any taking of the
Premises without deduction for any estate vested in Lessee by this Lease.
Lessee hereby expressly assigns to Lessor all of its right, title and interest
in and to every such award or payment and agrees that Lessee shall not be
entitled to any award or payment for the value of Lessee's leasehold interest
in the Lease. Lessee shall be entitled to claim and receive any award or
payment from the condemning authority expressly granted for the taking of
Lessee's personal property, the interruption of its business and moving
expenses, but only if such claim or award does not adversely affect or
interfere with the prosecution of Lessor's claim for the Taking. Lessee shall
promptly send Lessor copies of all correspondence and pleadings relating to
any such claim.
C. In case of a temporary use of all or any part of the Premises by a
Taking ("Temporary Taking"), this Lease shall remain in full force and effect
without any reduction of Base Annual Rental, Additional Rental or any other
sum payable hereunder. Except as provided below, Lessee shall be entitled to
the entire award for a Temporary Taking, whether paid by damages, rent or
otherwise, unless the period of occupation and use by the condemning
authorities shall extend beyond the date of expiration of this Lease, in which
case the award made for such Taking shall be apportioned between Lessor and
Lessee as of the date of such expiration. At the termination of any such
Temporary Taking, Lessee will, at its own cost and expense and pursuant to the
terms of Section 17 above, promptly commence and complete the restoration of
the Premises; provided, however, Lessee shall not be required to restore the
Premises if the term of this Lease shall expire prior to, or within one year
after, the date of termination of the Temporary Taking, and in such event
Lessor shall be entitled to recover all damages and awards arising out of the
failure of the condemning authority to repair and restore the Premises at the
expiration of such Temporary Taking.
D. In the event of a Taking of less than all of the Premises for
other than a temporary use ("Partial Taking") or of damage or destruction to
all or any part of the Premises, all awards, compensation or damages shall be
paid to Lessor, and Lessor shall have the option to (i) terminate this Lease
by notifying Lessee within 60 days after Lessee gives Lessor notice of such
damage or destruction or that title has vested in the taking authority or (ii)
continue this Lease in effect, which election may be evidenced by either a
notice from Lessor to Lessee or Lessor's failure to notify Lessee that Lessor
has elected to terminate this Lease within such 60-day period. Lessee shall
have a period of 60 days after Lessor's notice that it has elected to
terminate this Lease during which to elect to continue this Lease on the terms
herein provided. If Lessee does not elect to continue this Lease or shall fail
during such 60-day period to notify Lessor of Lessee's intent to continue this
Lease, then this Lease shall terminate as of the last day of the month during
which such period expired. Lessee shall then immediately vacate and surrender
the Premises, all obligations of either party hereunder shall cease as of the
date of termination (provided, however, Lessee's obligations to Lessor under
Section 18 and Lessee's obligations to pay Base Annual Rental, Additional
Rental and all other sums (whether payable to Lessor or a third-party)
accruing under this Lease prior to the date of termination shall survive such
termination) and Lessor may retain all such awards, compensation or damages.
If Lessor elects not to terminate this Lease, or if Lessor elects to terminate
this Lease but Lessee elects to continue this Lease, then this Lease shall
continue in full force and effect on the following terms: (i)
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all Base Annual Rental, Additional Rental and other sums and obligations due
under this Lease shall continue unabated, and (ii) Lessee shall promptly
commence and diligently prosecute restoration of the Premises to the same
condition, as nearly as practicable, as prior to such partial condemnation,
damage or destruction as approved by Lessor. Lessor shall promptly make
available in installments as restoration progresses an amount up to but not
exceeding the amount of any award, compensation or damages received by Lessor,
upon request of Lessee accompanied by evidence reasonably satisfactory to
Lessor that such amount has been paid or is due and payable and is properly a
part of such costs and that Lessee has complied with the terms of Section 17
above in connection with the restoration. Lessor shall be entitled to keep any
portion of such award, compensation or damages which may be in excess of the
cost of restoration, and Lessee shall bear all additional costs, fees and
expenses of such restoration in excess of the amount of any such award,
compensation or damages.
E. Notwithstanding the foregoing, if at the time of any Taking or at
any time thereafter Lessee shall be in default under this Lease and such
default shall be continuing, Lessor is hereby authorized and empowered but
shall not be obligated, in the name and on behalf of Lessee and otherwise, to
file and prosecute Lessee's claim, if any, for an award on account of any
Taking and to collect such award and apply the same, after deducting all
costs, fees and expenses incident to the collection thereof, to the curing of
such default and any other then existing default under this Lease.
21. INSPECTION. A. Lessor and its authorized representatives shall
have the right, upon giving reasonable prior notice, to enter the Premises or
any part thereof and inspect the same and make photographic or other evidence
concerning Lessee's compliance with the terms of this Lease; provided,
however, Lessee shall have the right to have its representatives present at
any time during such inspections (unless reasonably impractical because of an
emergency with respect to the Premises). Except for the gross negligence or
willful misconduct of Lessee, Lessor hereby waives any tort claim against
Lessee occasioned by Lessor's inspection of the Premises. Lessee hereby waives
any claim for damages for any injury or inconvenience to or interference with
Lessee's business, any loss of occupancy or quiet enjoyment of the Premises
and any other loss occasioned by such entry.
B. Lessee shall keep and maintain at the Premises full, complete and
appropriate books of account and records of Lessee's Gross Sales and business
relating to the Premises in accordance with generally accepted accounting
principles consistently applied. The books and records of Lessee's Gross Sales
shall at all times be open for inspection by Lessor, its auditors or other
authorized representatives and shall show Lessee's Gross Sales, claimed
exclusions therefrom, inventories and receipts of merchandise at the Premises
and daily receipts from all sales and other transactions on or from the
Premises. All Lessee's Gross Sales shall be recorded at the time of sale and
in the presence of the customer and shall be recorded in a cash register or
registers with a cumulative total. Lessee further agrees to keep on the
Premises or at its principal office for at least three (3) years following the
end of each Lease Year all records with respect to the gross income, sales and
occupancy tax returns with respect to such Lease Year and all pertinent
original sales records. Pertinent original sales records shall include (i)
daily dated cash register tapes including tapes from temporary registers; (ii)
serially numbered sales slips; (iii) the original records of all telephone
orders at and to the
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Premises; and (iv) such other sales records, if any, which would normally be
examined by an independent accountant pursuant to accepted auditing standards
in performing an audit of Lessee's Gross Sales. At its option, Lessor may at
any time, upon five days' prior notice to Lessee, cause a complete audit
(including a physical inventory) to be made by an auditor selected by Lessor
of the entire records and operations of Lessee relating to the Premises for
the period covered by any statement issued or required to be issued by Lessee.
Lessee shall make available for Lessor's auditor at Lessee's address for
notices, within five days following Lessor's notice requiring such audit, all
of the books, source documents, accounts, pertinent sales records and income,
sales and occupancy tax reports of Lessee which such auditor deems necessary
or desirable for the purpose of making an audit or, at Lessor's request,
Lessee shall mail copies of all records and documents to Lessor or Lessor's
auditor. If an audit or examination by Lessor of Lessee's records of Lessee's
Gross Sales and Annual Percentage Rental computation discloses that Annual
Percentage Rental has been underpaid, Lessee shall immediately pay Lessor all
delinquent Annual Percentage Rental, together with interest thereon at the
rate set forth in Section 13 above. If any statement of Lessee's Gross Sales
previously made by Lessee to Lessor shall be found to be more than 10% less
than the amount of Lessee's Gross Sales made by Lessee as shown by such audit,
Lessee shall immediately pay the cost of such audit; otherwise the cost of
such audit shall be paid by Lessor. A second occurrence of an audit which
shall disclose an understatement of Lessee's Gross Sales of 10% or more for
any Lease Year during the Lease Term shall automatically, without notice to
Lessee, constitute an Event of Default under this Lease, and shall entitle
Lessor to exercise any and all remedies set forth in Section 24 of this Lease.
C. Lessee may dispute the results of any audit performed pursuant to
the preceding subsection B. by giving notice of such dispute to Lessor within
20 days after receipt of the results of such audit by Lessee. If Lessee
disputes such audit, Lessee shall cause a complete audit to be performed by an
auditor selected by Lessee of such records and operation. If the results of
the audit performed by the auditor selected by Lessee is within 10% of the
results of the audit performed by Lessor's auditor, then the results of
Lessor's auditor shall govern. If the results of the audit performed by the
auditor selected by Lessee is more than 10% different than the results of the
audit performed by Lessor's audit, then the dispute between Lessor and Lessee
shall be submitted to Coopers & Lybrand, or its successor, for resolution,
which shall be binding on the parties. The cost of all audits requested by
Lessee and the fees and expenses imposed by Coopers & Lybrand, or its
successor, pursuant to this subsection shall be paid by Lessee.
22. FRANCHISOR REQUIREMENTS. In addition to the requirements set
forth in this Lease, Lessee in its use, occupancy and maintenance of the
Premises shall comply with all requirements of its franchise, license and/or
area development agreement with Franchisor, except as would not have a
Material Adverse Effect. Lessee hereby consents to Lessor providing
information it obtains to Franchisor and to Lessor obtaining from Franchisor
information which Franchisor receives relating to Lessee's operation of its
business on the Premises, subject to the terms of any then effective
confidentiality agreement which may exist between or among Franchisor,
Guarantor and/or Lessee a copy of which is provided by Lessee to Lessor.
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23. OPTION TO PURCHASE PREMISES. A. Lessee shall have the option
during the 90 days immediately preceding the tenth, fifteenth and twentieth
anniversaries of the Effective Date and during the 90-day period immediately
preceding the end of the first and second optional extension terms set forth
in Section 28 of this Lease (as applicable, the "Window") to give Lessor
notice (the "Option Notice") of Lessee's election to purchase the Premises for
the greater of (i) the Gross Sales Fair Market Value, (ii) the Assessed Fair
Market Value and (iii) the Minimum Purchase Price (the "Option Purchase
Price"). The closing of such purchase must occur during the first 90 days (the
"Purchase Period") following the end of the applicable Window.
For purposes of determining the "Assessed Fair Market Value" of the
Premises, within 90 days of Lessor's receipt of the Option Notice, Lessor
shall, at Lessee's sole expense, retain an independent MAI appraiser to
prepare an appraisal of the fair market value of the Premises including any
additions or renovations thereto. In determining such fair market value of the
Premises, the appraiser shall utilize the cost, income and sales comparison
approaches to value. In utilizing the income approach, the appraiser shall
determine the "leased fee" value of the Premises, which shall be arrived at by
considering (i) the income that would be produced by this Lease through the
end of the fully extended Lease Term (including, without limitation, income
that could be reasonably expected to be produced from the payment of Annual
Percentage Rental), and (ii) any other factors relating to such approach which
the appraiser shall deem relevant in his sole discretion. The highest amount
which results from the calculation of each of the cost approach, the income
approach and the sales comparison approach, all as determined in accordance
with the provisions of this Section, shall constitute the "Assessed Fair
Market Value" of the Premises for purposes of this Section, subject to the
remaining provisions of this paragraph. If within 20 days after being notified
of the result of such appraisal Lessee elects to reject that appraisal, then
the first appraisal shall become null and void and Lessor shall nominate to
Lessee a list of not less than three independent MAI appraisers who are
experienced with appraising property similar to the Premises, and Lessee shall
select one such appraiser. Within 60 days of such selection, Lessor shall
retain such appraiser to prepare an appraisal of the Premises in the same
manner described above, and the determination of such appraiser as to the fair
market value of the Premises shall constitute the "Assessed Fair Market Value"
of the Premises for purposes of this Section. Within 20 days after the results
of that appraisal have been delivered to Lessee, Lessee shall notify Lessor
whether Lessee elects to consummate its option to purchase the Premises for
the Option Purchase Price. If such notice is not received by Lessor within
such 20-day period, the option for such time period shall lapse and this Lease
shall remain in full force and effect.
B. Upon exercise of this option, Lessor and Lessee shall open an
escrow account with a recognized title insurance or trust company selected by
Lessor. Such escrow shall be subject to the standard escrow instructions of
the escrow agent, to the extent they are not inconsistent herewith. At or
before the close of escrow, Lessor shall deliver to the escrow agent its
special warranty deed conveying to Lessee all of Lessor's right, title and
interest in the Premises free and clear of all liens and encumbrances except
liens for taxes and assessments and easements, covenants and restrictions of
record which were attached to the Premises as of the date hereof, which have
attached during the Lease Term through Lessee's action or inaction, as the
case may be, which have been granted by
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Lessor in lieu of a taking by the power of eminent domain or the like, which
have been approved by Lessee or which do not materially adversely affect the
use of the Premises as a restaurant. In the event Lessor is unable to convey
title as required, Lessee shall have the right to accept such title as Lessor
can convey or elect not to consummate its exercise of the option, in which
case the option for such time period shall lapse and this Lease shall remain
in full force and effect. Both Lessor and Lessee agree to execute a purchase
agreement, escrow instructions and such other instruments as may be necessary
or appropriate to consummate the sale of the Premises in the manner herein
provided. All cost of exercise of the option, including, but not limited to,
escrow fees, title insurance fees, recording costs or fees, attorneys' fees
(including those of Lessor), appraisal fees, stamp taxes and transfer fees
shall be borne by Lessee. Lessee shall continue to pay and perform all of its
obligations under this Lease until the close of escrow which in no event shall
occur after the date of the expiration of the Lease Term or the expiration of
any extension thereof. The purchase price paid by Lessee in exercising this
option shall be paid to Lessor or to such person or entity as Lessor may
direct at closing in immediately available funds. Lessee shall not have the
right to exercise this option or consummate the exercise thereof if at the
time of exercise or consummation it shall be in default of any of the terms
and conditions of this Lease or if any condition shall exist which upon the
giving of notice or the passage of time, or both, would constitute a default
by Lessee under this Lease.
C. The failure of Lessee to consummate the purchase of the Premises
prior to the end of the Purchase Period as contemplated herein shall not
release Lessee from its obligations under this Lease, and this Lease shall
remain in full force and effect until the expiration of the Lease Term or
applicable extension period. The closing date shall be extended for a
reasonable period of time to permit Lessor to cure title defects or to
authorize satisfy its obligations under this Section or to permit either party
to cure any other defects or defaults, provided each party is diligently
seeking to cure or satisfy such obligation, defect or default and Lessee
continues to perform its obligation hereunder.
D. Lessee may not sell, assign, transfer, hypothecate or otherwise
dispose of the option granted herein or any interest therein, except in
conjunction with a permitted assignment of Lessee's entire interest herein and
then only to the assignee thereof. Any attempted assignment of this option
which is contrary to the terms of this paragraph shall be deemed to be a
default under this Lease and the option granted herein shall be void.
24. DEFAULT, REMEDIES AND MEASURE OF DAMAGES. A. Each of the
following shall be deemed an event of default by Lessee (each, an "Event of
Default"):
(i) If any material representation or warranty of Lessee
herein or in the Sale- Leaseback Agreement was false as of the
Effective Date or if Lessee renders any false statement or account;
(ii) If any rent or other monetary sum due hereunder is
not paid within five days after the date when due;
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(iii) If Lessee or any Guarantor becomes insolvent within
the meaning of the Code, files or notifies Lessor that it intends to
file a petition under the Code, initiates a proceeding under any
similar law or statute relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts (collectively,
hereinafter, an "Action"), becomes the subject of either a petition
under the Code or an Action, or is not generally paying its debts as
the same become due;
(iv) If Lessee vacates or abandons the Premises;
(v) If Lessee fails to observe or perform any of the
covenants, conditions, or obligations of this Lease;
(vi) If Franchisor notifies Lessee of any breach or default
under the franchise, license and/or area development agreement with
Franchisor for the Premises and Lessee fails to cure such breach or
default within the applicable grace or cure periods, or if such
franchise, license and/or area development agreement otherwise
terminates or expires;
(vii) If there is a material breach or default under the
Guaranty;
(viii) If there is an "Event of Default" as defined in any
of the Other Leases. Notwithstanding the preceding sentence, the
occurrence of an "Event of Default" under any of the Other Leases
shall not constitute an Event of Default under this Lease unless:
(1) such an "Event of Default", together with all
other "Events of Default" under the Other Leases and Events
of Default under this Lease, is based upon the failure of
Lessee or Other Lessee to pay as and when due Base Annual
Rental, Quarterly Percentage Rental and/or Taxes (as such
terms are defined in the applicable Leases) and advances by
Lessor to maintain the insurance required by Section 11 of
the Leases in an aggregate amount in excess of $150,000; and
(2) the aggregate amount of all claims arising out
of "Events of Default" under the Other Leases, together with
Events of Default under this Lease, other than those in
subsection (1) above, by Lessor against Lessee and Other
Lessee (including as a result of the failure of Lessee or
Other Lessee to consummate the purchase of any "Premises"
which is then the subject of any "Put Notice") exceeds
$2,000,000 (as such terms in quotations are defined in the
corresponding Leases).
B. If any Event of Default occurs pursuant to subsection A.(ii)
above, Lessor shall not be entitled to exercise its remedies set forth in
subsection D. below unless and until Lessor shall have given Lessee notice
thereof and a period of five days from the delivery of such notice shall have
elapsed without such Event of Default being cured.
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C. If any such event described in subsection A. above does not
involve the payment of any rent or other monetary sum, is not willful or
intentional, does not place any rights or property of Lessor in immediate
jeopardy and is within the reasonable power of Lessee to cure within 30 days
after receipt of notice thereof, all as determined by Lessor in its reasonable
discretion, then such event shall not constitute an Event of Default
hereunder, except as set forth in Section 21 and unless otherwise expressly
provided herein, unless and until Lessor shall have given Lessee notice
thereof and a period of 30 days shall have elapsed, during which period Lessee
may correct or cure such event, upon failure of which an Event of Default
shall be deemed to have occurred hereunder without further notice or demand of
any kind. If such event cannot reasonably be cured within such 30-day period,
as determined by Lessor in its reasonable discretion, and Lessee is diligently
pursuing a cure of such event, then Lessee shall have a reasonable period to
cure such event, which shall in no event exceed 90 days after receiving notice
of the event from Lessor.
D. As a material inducement to Lessor executing this Lease, upon the
occurrence of any Event of Default, and with or without any notice or demand,
except the notice required under certain circumstances by subsections B. and
C. above, as applicable, or such other notice as may be required by statute
and cannot be waived by Lessee (all other notices being hereby waived), Lessor
shall be entitled to exercise, at its option, concurrently, successively or in
any combination, all remedies available at law or in equity, including without
limitation any one or more of the following:
(i) To terminate this Lease, whereupon Lessee's right to
possession of the Premises shall cease and this Lease, except as to
Lessee's liability, shall be terminated;
(ii) To reenter and take possession of the Premises, any or
all personal property or fixtures of Lessee upon the Premises and, to
the extent permissible, all franchises, licenses, area development
agreements, permits and other rights or privileges of Lessee
pertaining to the use and operation of the Premises and to expel
Lessee and those claiming under or through Lessee, without being
deemed guilty in any manner of trespass or becoming liable for any
loss or damage resulting therefrom, without resort to legal or
judicial process, procedure or action. No notice from Lessor
hereunder or under a forcible entry and detainer statute or similar
law shall constitute an election by Lessor to terminate this Lease
unless such notice specifically so states. If Lessee shall, after an
Event of Default, voluntarily give up possession of the Premises to
Lessor, deliver to Lessor or its agents the keys to the Premises, or
both, such actions shall be deemed to be in compliance with Lessor's
rights and the acceptance thereof by Lessor or its agents shall not
be deemed to constitute a termination of the Lease. Lessor reserves
the right following any reentry and/or reletting to exercise its
right to terminate this Lease by giving Lessee written notice
thereof, in which event this Lease will terminate as specified in
said notice;
(iii) To seize all personal property or fixtures upon the
Premises which Lessee owns or in which it has an interest, subject to
the terms and conditions of Lessor's landlord's lien and/or security
interest as set forth in Section 31, and to dispose thereof in
accordance with the laws prevailing at the time and place of such
seizure or to remove all or any portion
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of such property and cause the same to be stored in a public
warehouse or elsewhere at Lessee's sole expense, without becoming
liable for any loss or damage resulting therefrom and without
resorting to legal or judicial process, procedure or action;
(iv) To bring an action against Lessee for any damages
sustained by Lessor or any equitable relief available to Lessor;
(v) To relet the Premises or any part thereof for such term
or terms (including a term which extends beyond the original term of
this Lease), at such rentals and upon such other terms as Lessor, in
its sole discretion, may determine, with all proceeds received from
such reletting being applied to the rental and other sums due from
Lessee in such order as Lessor may, in it sole discretion, determine,
which other sums include, without limitation, all repossession costs,
brokerage commissions, attorneys' fees and expenses, employee
expenses, alteration, remodeling and repair costs and expenses of
preparing for such reletting. Except to the extent required by
applicable law, Lessor shall have no obligation to relet the Premises
or any part thereof and shall in no event be liable for refusal or
failure to relet the Premises or any part thereof, or, in the event
of any such reletting, for refusal or failure to collect any rent due
upon such reletting, and no such refusal or failure shall operate to
relieve Lessee of any liability under this Lease or otherwise to
affect any such liability. Lessor reserves the right following any
reentry and/or reletting to exercise its right to terminate this
Lease by giving Lessee written notice thereof, in which event this
Lease will terminate as specified in said notice;
(vi) To accelerate and recover from Lessee all rent and
other monetary sums due and owing and scheduled to become due and
owing under this Lease both before and after the date of such breach
for the entire original scheduled term of this Lease;
(vii) To recover from Lessee all reasonable costs and
expenses, including attorneys' fees, court costs, expert witness
fees, costs of tests and analyses, travel and accommodation expenses,
deposition and trial transcripts, copies and other similar
out-of-pocket costs and fees, paid or incurred by Lessor as a result
of such breach, regardless of whether or not legal proceedings are
actually commenced;
(viii) To immediately or at any time thereafter, and with or
without notice, at Lessor's sole option but without any obligation to
do so, correct such Event of Default and charge Lessee all costs and
expenses incurred by Lessor therein. Any sum or sums so paid by
Lessor, together with interest at the then existing maximum legal
rate, but not higher than 18% per annum, shall be deemed to be
additional rent hereunder and shall be immediately due from Lessee to
Lessor. Any such acts by Lessor in correcting any Event of Default
hereunder shall not be deemed to cure said Event of Default or
constitute any waiver of Lessor's right to exercise any or all
remedies set forth herein;
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(ix) To immediately or at any time thereafter, and with or
without notice, except as required herein, set off any money of
Lessee held by Lessor under this Lease against any sum owing by
Lessee or any Guarantor hereunder; and/or
(x) To enforce, and Lessee does hereby consent to such
enforcement, notwithstanding the laws of the State to the contrary,
all of Lessor's self-help remedies available at law or in equity
without Lessor resorting to any legal or judicial process, procedure
or action.
E. Upon the occurrence of an Event of Default, Lessor shall the
right, but not the obligation, to notify Lessee (the "Put Notice") of Lessee's
obligation to purchase the Premises for the greater of (i) the Gross Sales
Fair Market Value, (ii) the Put Fair Market Value and (iii) the Minimum
Purchase Price. The closing of such purchase shall occur within five days of
Lessee's receipt of the last of the appraisals ordered as contemplated by this
subsection (the "Put Purchase Period").
For purposes of determining the "Put Fair Market Value" of the
Premises, within five days of Lessor's receipt of the Put Notice, Lessor
shall, at Lessee's sole expense, retain an independent MAI appraiser to
prepare an appraisal of the fair market value of the Premises, including any
additions or renovations thereto. In determining the fair market value of the
Premises, the appraiser shall utilize the cost, income and sales comparison
approaches to value. In utilizing the income approach, the appraiser shall
determine the "leased fee" value of the Premises, which shall be arrived at by
considering (i) the income that would be produced by this Lease through the
end of the fully extended Lease Term (including, without limitation, income
that could be reasonably expected to be produced from the payment of Annual
Percentage Rental), and (ii) any other factors relating to such approach which
the appraiser shall deem relevant in his sole discretion. The highest amount
which results from the calculation of each of the cost approach, the income
approach and the sales comparison approach, all as determined in accordance
with the provisions of this subsection, shall constitute the "Put Fair Market
Value" of the Premises for purposes of this subsection. If within five days
after being notified of the result of such appraisal Lessee elects to reject
that appraisal, then the first appraisal shall become null and void and Lessor
shall nominate to Lessee a list of not less than three independent MAI
appraisers who are experienced with appraising property similar to the
Premises, and Lessee shall select one such appraiser. Within five days of such
selection, Lessor shall retain such appraiser to prepare an appraisal of the
Premises in the same manner described above and the results of such appraisal
shall be the "Put Fair Market Value" of the Premises for purposes of such
subsection.
Upon delivery of the Put Notice, Lessor and Lessee shall open an
escrow account with a recognized title insurance or trust company selected by
Lessor. Such escrow shall be subject to the standard escrow instructions of
the escrow agent, to the extent they are not inconsistent herewith. Before the
end of the Put Purchase Period, Lessor shall deliver to the escrow agent a
deed conveying to Lessee, without warranties, all of Lessor's right, title and
interest in the Premises, provided the Premises shall be conveyed free and
clear of all mortgage liens granted by Lessor. Both Lessor and Lessee agree to
execute a purchase agreement, escrow instructions and such other instruments
as may
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be necessary or appropriate to consummate the sale of the Premises in the
manner herein provided. All costs of the conveyance of the Premises to Lessee
pursuant to this subsection shall be borne by Lessee, including, without
limitation, attorneys' fees (including those of Lessor), appraisal fees, stamp
taxes, transfer taxes, recording costs or fees and escrow fees. The purchase
price paid by Lessee pursuant to this subsection shall be paid to Lessor or to
such person or entity as Lessor may direct in immediately available funds.
Lessee shall pay Base Annual Rental and Quarterly Percentage Rental and
otherwise satisfy its obligations under this Lease during the Put Purchase
Period. Base Annual Rental and Quarterly Percentage Rental shall be prorated
as of the day of the closing of Lessee's purchase of the Premises. All
obligations of Lessee which expressly survive the expiration or earlier
termination of this Lease, including, without limitation, the indemnity set
forth in Section 18, shall survive Lessee's purchase of the Premises pursuant
to this subsection.
During the pendency of the Put Purchase Period, Lessor may only
exercise the remedies described in subsections A.(ii), (iii) (but not with
respect to dispositions of personal property or fixtures), (vii), (viii), (ix)
and (x) above. If Lessee should fail to consummate the purchase of the
Premises during the Purchase Period, such suspension of Lessor's remedies
shall cease and be of no further force and effect. The failure of Lessee to
consummate the purchase of the Premises during the Put Purchase Period as
contemplated herein shall not release Lessee from its obligations under this
Lease.
Upon the consummation of the purchase of the Premises by Lessee
pursuant to this subsection, Lessee shall promptly provide Guarantor with a
release of Guarantor's obligations under the Guaranty except to the extent
contemplated by the last sentence of Section 7 of the Guaranty and with
respect to the obligations of Lessee under this Lease which arise prior to the
consummation of the purchase but which expressly survive the expiration or
earlier termination of this Lease.
25. MORTGAGE, SUBORDINATION, NONDISTURBANCE AND ATTORNMENT. Lessor's
interest in this Lease and/or the Premises shall not be subordinate to any
encumbrances placed upon the Premises by or resulting from any act of Lessee,
and nothing herein contained shall be construed to require such subordination
by Lessor. Lessee shall keep the Premises free from any liens for work
performed, materials furnished or obligations incurred by Lessee. NOTICE IS
HEREBY GIVEN THAT, EXCEPT FOR THE BANK OF BOSTON MORTGAGE, LESSEE IS NOT
AUTHORIZED TO PLACE OR ALLOW TO BE PLACED ANY LIEN, MORTGAGE, DEED OF TRUST OR
ENCUMBRANCE OF ANY KIND UPON ALL OR ANY PART OF THE PREMISES OR LESSEE'S
LEASEHOLD INTEREST THEREIN, AND ANY SUCH PURPORTED TRANSACTION SHALL BE VOID.
FURTHERMORE, ANY SUCH PURPORTED TRANSACTION SHALL BE DEEMED A TORTIOUS
INTERFERENCE WITH LESSOR'S RELATIONSHIP WITH LESSEE AND LESSOR'S FEE OWNERSHIP
OF THE PREMISES.
This Lease at all times shall automatically be subordinate to the
lien of any and all ground leases, mortgages and trust deeds now or hereafter
placed upon the Premises by Lessor, and Lessee covenants and agrees to execute
and deliver, upon demand, such further instruments subordinating this Lease to
the lien of any or all such ground leases, mortgages or trust deeds as shall
be desired by
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Lessor, or any present or proposed mortgagees or trustees under trust deeds,
upon the condition that Lessee shall have the right to remain in possession of
the Premises under the terms of this Lease, notwithstanding any default in any
or all such mortgages or trust deeds, or after foreclosure thereof, so long as
Lessee is not in default under any of the covenants, conditions and agreements
contained in this Lease.
If any mortgagee or trustee elects to have this Lease and the
interest of Lessee hereunder be superior to any such interest or right and
evidences such election by notice given to Lessee, then this Lease and the
interest of Lessee hereunder shall be deemed superior to any such mortgage or
trust deed, whether this Lease was executed before or after such mortgage or
trust deed, and in that event such mortgagee or trustee shall have the same
rights with respect to this Lease as if it had been executed and delivered
prior to the execution and delivery of the mortgage or trust deed and has been
assigned to such mortgagee or trustee.
Although the foregoing provisions shall be self-operative and no
future instrument of subordination shall be required, upon request by Lessor,
Lessee shall execute and deliver whatever instruments may be required for such
purposes, and, in the event Lessee fails so to do within 10 days after demand,
Lessee does hereby make, constitute and irrevocably appoint Lessor as its
agent and attorney-in-fact and in its name, place and stead so to do, which
appointment shall be deemed coupled with an interest.
In the event any collateral assignee or purchaser at a foreclosure
sale acquires title to the Premises pursuant to the exercise of any remedy
provided for in the collateral assignment, mortgage or trust deed or
otherwise, Lessee shall attorn to such purchaser and recognize such purchaser
as Lessor under this Lease, which shall continue in full force and effect as a
direct lease between such purchaser and Lessee. The foregoing provision shall
be self operative and effective without the execution of any further
instruments.
Lessee shall give written notice to any lender of Lessor having a
recorded lien upon the Premises or any part thereof of which Lessee has been
notified of any breach or default by Lessor of any of its obligations under
this Lease and give such lender at least 60 days beyond any notice period to
which Lessor might be entitled to cure such default before Lessee may exercise
any remedy with respect thereto. Upon request by Lessor, Lessee shall also
provide Lessee's most recent audited financial statements to Lessor or any
such lender and certify the continuing accuracy of such financial statements
in such manner as Lessor or such lender may request.
26. ESTOPPEL CERTIFICATE. A. At any time, and from time to time,
Lessee agrees, promptly and in no event later than 20 days after a request
from Lessor, to execute, acknowledge and deliver to Lessor or any present or
proposed mortgagee or purchaser designated by Lessor a certificate in the form
supplied by Lessor, certifying: (i) that Lessee has accepted the Premises (or,
if Lessee has not done so, that Lessee has not accepted the Premises, and
specifying the reasons therefor); (ii) that this Lease is in full force and
effect and has not been modified (or, if modified, setting forth all
modifications), or, if this Lease is not in full force and effect, the
certificate shall so specify the
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reasons therefor; (iii) the commencement and expiration dates of the Lease
Term and the terms of any extension options of Lessee; (iv) the date to which
the rentals have been paid under this Lease and the amount thereof then
payable; (v) whether there are then any existing defaults by Lessor in the
performance of its obligations under this Lease, and, if there are any such
defaults, specifying the nature and extent thereof; (vi) that no notice has
been received by Lessee of any default under this Lease which has not been
cured, except as to defaults specified in the certificate; (vii) the capacity
of the person executing such certificate, and that such person is duly
authorized to execute the same on behalf of Lessee; and (viii) any other
information reasonably requested by Lessor, or its present or proposed
purchaser or mortgagee.
B. If Lessee shall fail or refuse to sign a certificate in accordance
with the provisions of this Section within 10 days following a request by
Lessor, Lessee irrevocably constitutes and appoints Lessor as its
attorney-in-fact to execute and deliver the certificate to any such third
party, it being stipulated that such power of attorney is coupled with an
interest and is irrevocable and binding.
27. ASSIGNMENT. Lessor shall have the right to sell or convey the
Premises subject to this Lease or to assign its right, title and interest as
Lessor under this Lease in whole or in part. In the event of any such sale or
assignment other than a security assignment, Lessee shall attorn to such
purchaser or assignee, and, provided any such grantee or assignee
unconditionally assumes Lessor's liabilities accruing under this Lease
subsequent to such assignment or sale, Lessor shall be relieved, from and
after the date of such transfer or conveyance, of liability for the
performance of any obligation of Lessor contained herein, except for
obligations or liabilities accrued prior to such assignment or sale.
A major consideration for Lessor's execution of this Lease is
Lessor's anticipation of receiving substantial percentage rentals from
Lessee's contemplated use of the Premises. Furthermore, Lessee acknowledges
that Lessor has relied both on the business experience and creditworthiness of
Lessee and upon the particular purposes for which Lessee intends to use the
Premises in entering into this Lease. Lessee shall not, without the consent of
Lessor (i) assign, transfer, convey, pledge or mortgage this Lease or any
interest therein, whether by operation of law or otherwise; (ii) assign,
transfer, convey, pledge or mortgage any interest in Lessee, whether by
operation of law or otherwise, including, without limitation, dissolution of
Lessee or, if Lessee is a corporation, a transfer (by one or more
transactions) of a majority of the voting stock of Lessee, or, if Lessee is a
partnership, a transfer of the controlling interest in Lessee (including the
admission of new partners or withdrawal of existing partners having a
controlling interest), regardless of whether the transfer is made by one or
more transactions, or whether one or more persons hold the controlling
interest prior to the transfer or afterwards; or (iii) sublet all or any part
of the Premises. It is expressly agreed that Lessor may withhold or condition
such consent based upon such matters as Lessor may in its reasonable
discretion determine, including, without limitation, the experience and
creditworthiness of the assignee, the assumption by the assignee of all of
Lessee's obligations hereunder by undertakings enforceable by Lessor, payment
to Lessor of any rentals owing under a sublease which are in excess of the
rentals owing hereunder, the transfer to such assignee of all necessary
licenses and franchises to continue operating the Premises for the purposes
herein provided and receipt of such
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representations and warranties from such assignee as Lessor may request,
including such matters as its organization, existence, good standing and
finances and other matters, whether or not similar in kind. At the time of any
such assignment which is approved by Lessor, the assignee shall assume all of
the obligations of Lessee under this Lease pursuant to Lessor's standard form
of assumption agreement. No such assignment or subletting shall relieve Lessee
or any Guarantor of its obligations respecting this Lease. Any purported
transfer, conveyance, pledge or mortgage in violation of this paragraph shall
be voidable at the sole option of Lessor. Lessor hereby consents to any
assignment of Lessee's interest under this Lease to Franchisor.
28. OPTION TO EXTEND. Lessee, provided it is not in default beyond
the expiration of any applicable grace period hereunder at the time of
exercise or at the expiration of the Lease Term or, if applicable, the first
extension of the Lease Term, and provided that the franchise and/or area
development agreement with Franchisor is extended for a period of not less
than the applicable extension period, shall have the option to continue this
Lease in effect for up to two additional successive periods of five years each
in accordance with its original terms and provisions except that the Base
Annual Rental shall be the greater of (i) the annual fair market rental value
of the Property (to be determined as set forth below) and (ii) the Base Annual
Rental in effect at the expiration of the Lease Term or the first extension of
the Lease Term, as applicable
Lessee shall exercise such extension option by giving notice to
Lessor of Lessee's intention to do so not more than 270 days or less than 180
days prior to the expiration of the Lease Term or the first extension of the
Lease Term, and upon receipt of such notice Lessor shall within 90 days, at
Lessee's expense, cause an appraisal of the fair market rental value of the
Premises to be made by an independent MAI appraiser. If within 20 days after
being notified of the result of such appraisal Lessee elects to reject that
appraisal, then Lessor shall nominate to Lessee a list of not less than three
independent MAI appraisers who are experienced with appraising property
similar to the Premises, and Lessee shall select one such appraiser. Within 60
days of such selection an appraisal shall be made of the Premises by that
appraiser, and, within 20 days after the results of that appraisal shall have
been delivered to Lessee, Lessee shall notify Lessor of Lessee's election to
exercise its option to extend this Lease and shall pay the rental so
established above which shall be absolutely net to Lessor as provided in
Section 8 hereof. If such notice of exercise is not received by Lessor within
the 20-day period, then this Lease shall terminate on the last day of the
Lease Term or, if applicable, the last day of the first extension of the Lease
Term.
29. NOTICES. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this Lease shall
be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express
overnight delivery service or (iv) certified or registered mail, return
receipt requested, and shall be deemed to have been delivered upon (a)
receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c)
the next business day, if delivered by express overnight delivery service, or
(d) the third business day following the day of deposit of such notice with
the United States Postal Service, if sent by certified or registered mail,
return receipt requested. Notices shall be provided to the parties and
addresses (or facsimile numbers, as applicable) specified below:
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<PAGE>
If to Lessee: 2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
Attention: Lawrence E. Jaro and Joel Aaseby
Telephone: (708) 947-2150
Telecopy: (708) 947-2161
with a copy to: A. Richard Caputo, Jr.
The Jordan Company
9 West 57th Street
40th Floor
New York, NY 10019
Telephone: (212) 572-0823
Telecopy: (212) 755-5263
If to Lessor: Dennis L. Ruben, Esq.
Senior Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above.
30. HOLDING OVER. If Lessee remains in possession of the Premises
after the expiration of the term hereof, Lessee, at Lessor's option and within
Lessor's sole discretion, may be deemed a tenant on a month-to-month basis and
shall continue to pay rentals and other sums in the amounts herein provided,
except that the Base Monthly Rental shall be automatically doubled, and to
comply with all the terms of this Lease, provided that nothing herein nor the
acceptance of rent by Lessor shall be deemed a consent to such holding over.
Lessee shall defend, indemnify, protect and hold Lessor harmless from and
against any and all claims, losses and liabilities for damages resulting from
Lessee's failure to surrender possession upon the expiration of the Lease
Term, including, without limitation, any claims made by any succeeding lessee.
31. LANDLORD'S LIEN/SECURITY INTEREST. Lessee agrees that Lessor
shall have a landlord's lien, and additionally hereby separately grants to
Lessor a first and prior security interest, in, on and against all personal
property, appliances, furniture and equipment of Lessee from time to time
situated on the Premises, which lien and security interest shall secure the
payment of all rental and other charges payable by Lessee to Lessor under the
terms hereof and all other obligations of Lessee to Lessor under this Lease.
Lessee further agrees to execute and deliver to Lessor from time to time such
financing statements and other documents as Lessor may then deem appropriate
or necessary
27
<PAGE>
to perfect and maintain said lien and security interest, and expressly
acknowledges and agrees that, in addition to any and all other rights and
remedies of Lessor whether hereunder or at law or in equity, in the event of
any default of Lessee hereunder, Lessor shall have any and all rights and
remedies granted a secured party under the Uniform Commercial Code then in
effect in the State in which the Premises are located. If Lessee shall fail
for any reason to execute any such financing statement or document within 10
days after Lessor's request therefor, Lessor shall have the right to execute
the same as attorney-in-fact of Lessee, coupled with an interest, for, and on
behalf of, and in the name of Lessee. Lessee covenants to promptly notify
Lessor of any changes in Lessee's name and/or organizational structure which
may necessitate the execution and filing of additional financing statements
(provided, however, the foregoing shall not be construed as Lessor's consent
to such changes). Notwithstanding the foregoing, Lessor agrees that, upon
Lessee's request, Lessor will without charge subordinate its landlord's lien
and security interest in any personal property owned by Lessee to the purchase
money security interest of any unaffiliated lender.
32. REMOVAL OF LESSEE'S PROPERTY. At the expiration of the term of
this Lease, and if Lessee is not then in breach hereof, Lessee may remove from
the Premises all personal property belonging to Lessee. Lessee shall repair
any damage caused by such removal and shall leave the Premises broom clean and
in good and working condition and repair inside and out. Any property of
Lessee left on the Premises on the tenth day following the expiration of the
Lease Term shall automatically and immediately become the property of Lessor.
33. FINANCIAL STATEMENTS. Within 45 days after the end of each fiscal
quarter and within 120 days after the end of each fiscal year of Lessee,
Lessee shall deliver to Lessor (i) complete financial statements of Lessee, or
consolidated statements of Guarantor, including a balance sheet, profit and
loss statement, statement of changes in financial condition and all other
related schedules for the fiscal period then ended; and (ii) income statements
for the business at the Premises. All such financial statements shall be
prepared in accordance with generally accepted accounting principles,
consistently applied from period to period, and shall be certified to be
accurate and complete by Lessee (or the Treasurer or other appropriate officer
of Lessee). Lessee and Guarantor understand that Lessor is relying upon such
financial statements, and Lessee and Guarantor, by executing the Guaranty,
represent that such reliance is reasonable. In the event that Lessee's
property and business at the Premises are ordinarily consolidated with other
business for financial statement purposes, such financial statements shall be
prepared on a consolidated basis showing separately the sales, profits and
losses. The financial statements delivered to Lessor need not be audited, but
Lessee shall deliver to Lessor copies of any audited financial statements of
Lessee and Guarantor which may be prepared, as soon as they are available.
34. FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
lockouts, acts of God, enemy or hostile governmental action, civil commotion,
fire or other casualty beyond the control of the party obligated to perform
shall excuse the performance by such party for a period equal to any such
prevention, delay or stoppage, except the obligations imposed with regard to
rental and other monies to be paid by Lessee pursuant to this Lease.
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<PAGE>
35. DOCUMENT REVIEW. In the event Lessee makes any request upon
Lessor requiring Lessor or its attorneys to review and/or prepare (or cause to
be reviewed and/or prepared) any document or documents in connection with or
arising out of or as a result of this Lease, then, except as expressly stated
elsewhere herein, Lessee shall reimburse Lessor or its designee promptly upon
Lessor's demand therefor a reasonable processing and review fee for each such
request.
36. TIME IS OF THE ESSENCE. Time is of the essence with respect to
each and every provision of this Lease in which time is a factor.
37. LESSOR'S LIABILITY. Notwithstanding anything to the contrary
provided in this Lease, it is specifically understood and agreed, such
agreement being a primary consideration for the execution of this Lease by
Lessor, that (i) there shall be absolutely no personal liability on the part
of Lessor, its successors or assigns and its officers, directors, employees
and agents to Lessee with respect to any of the terms, covenants and
conditions of this Lease, (ii) Lessee waives all claims, demands and causes of
action against Lessor's officers, directors, employees and agents in the event
of any breach by Lessor of any of the terms, covenants and conditions of this
Lease to be performed by Lessor, and (iii) Lessee shall look solely to the
Premises for the satisfaction of each and every remedy of Lessee in the event
of any breach by Lessor of any of the terms, covenants and conditions of this
Lease to be performed by Lessor, or any other matter in connection with this
Lease or the Premises, such exculpation of liability to be absolute and
without any exception whatsoever.
38. CONSENT OF LESSOR. Unless specified otherwise herein, Lessor's
consent to any request of Lessee may be conditioned or withheld in Lessor's
sole discretion. Lessor shall have no liability for damages resulting from
Lessor's failure to give any consent, approval or instruction reserved to
Lessor, Lessee's sole remedy in any such event being an action for injunctive
relief.
39. WAIVER AND AMENDMENT. No provision of this Lease shall be deemed
waived or amended except by a written instrument unambiguously setting forth
the matter waived or amended and signed by the party against which enforcement
of such waiver or amendment is sought. Waiver of any matter shall not be
deemed a waiver of the same or any other matter on any future occasion. No
acceptance by Lessor of an amount less than the monthly rent and other
payments stipulated to be due under this Lease shall be deemed to be other
than a payment on account of the earliest such rent or other payments then due
or in arrears nor shall any endorsement or statement on any check or letter
accompanying any such payment be deemed a waiver of Lessor's right to collect
any unpaid amounts or an accord and satisfaction.
40. SUCCESSORS BOUND. Except as otherwise specifically provided
herein, the terms, covenants and conditions contained in this Lease shall bind
and inure to the benefit of the respective heirs, successors, executors,
administrators and assigns of each of the parties hereto.
41. NO MERGER. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not result in a merger of
Lessor's and Lessee's estates, and shall, at the
29
<PAGE>
option of Lessor, either terminate any or all existing subleases or
subtenancies, or operate as an assignment to Lessor of any or all of such
subleases or subtenancies.
42. CAPTIONS. Captions are used throughout this Lease for convenience
of reference only and shall not be considered in any manner in the
construction or interpretation hereof.
43. SEVERABILITY. The provisions of this Lease shall be deemed
severable. If any part of this Lease shall be held unenforceable by any court
of competent jurisdiction, the remainder shall remain in full force and
effect, and such unenforceable provision shall be reformed by such court so as
to give maximum legal effect to the intention of the parties as expressed
therein.
44. CHARACTERIZATION. A. It is the intent of the parties hereto that
the business relationship created by this Lease and any related documents is
solely that of a long-term commercial lease between landlord and tenant and
has been entered into by both parties in reliance upon the economic and legal
bargains contained herein. Neither the provision set forth herein for the
computation of the Annual Percentage Rental nor any one or more of the
agreements contained herein is intended, nor shall the same be deemed or
construed, to create a partnership between Lessor and Lessee, to make them
joint venturers, to make Lessee an agent, legal representative, partner,
subsidiary or employee of Lessor or to make Lessor in any way responsible for
the debts, obligations or losses of Lessee. Lessee acknowledges that Lessor
(or any partner of Lessor) and Franchisor are not affiliates, agents, partners
or joint venturers, nor do they have any other legal, representative or
fiduciary relationship.
B. Lessor and Lessee acknowledge and warrant to each other that each
has been represented by independent counsel and has executed this Lease after
being fully advised by said counsel as to its effect and significance. This
Lease shall be interpreted and construed in a fair and impartial manner
without regard to such factors as the party which prepared the instrument, the
relative bargaining powers of the parties or the domicile of any party.
Whenever in this Lease any words of obligation or duty are used, such words or
expressions shall have the same force and effect as though made in the form of
a covenant.
45. EASEMENTS. During the Lease Term Lessor shall have the right to
grant utility easements on, over, under and above the Premises without the
prior consent of Lessee, provided that such easements will not materially
interfere with Lessee's long-term use of the Premises. To the extent
reasonably required by Lessee, Lessor shall not unreasonably withhold its
agreement to grant easements on, over, under and above the Premises to
facilitate the use and operation of the Premises.
46. BANKRUPTCY. A. As a material inducement to Lessor executing this
Lease, Lessee acknowledges and agrees that Lessor is relying upon (i) the
financial condition and specific operating experience of Lessee and Lessee's
obligation to use the Premises specifically in accordance with a franchise,
license and/or area development agreement with Franchisor, (ii) Lessee's
timely performance of all of its obligations under this Lease notwithstanding
the entry of an order for relief under the Code for Lessee and (iii) all
defaults under the Lease being cured promptly and the Lease
30
<PAGE>
being assumed within 60 days of any order for relief entered under the Code
for Lessee, or the Lease being rejected within such 60 day period and the
Premises surrendered to Lessor.
Accordingly, in consideration of the mutual covenants contained in
this Lease and for other good and valuable consideration, Lessee hereby agrees
that:
(i) All obligations that accrue under this Lease (including
the obligation to pay rent) from and after the date that an Action is
commenced shall be timely performed exactly as provided in this
Lease, and any failure to so perform shall be harmful and prejudicial
to Lessor;
(ii) Any and all rents that accrue from and after the date
that an Action is commenced and that are not paid as required by this
Lease shall, in the amount of such rents, constitute administrative
expense claims allowable under the Code with priority of payment at
least equal to that of any other actual and necessary expenses
incurred after the commencement of the Action;
(iii) Any extension of the time period within which the
Lessee may assume or reject the Lease without an obligation to cause
all obligations under the Lease to be performed as and when required
under the Lease shall be harmful and prejudicial to Lessor;
(iv) Any time period designated as the period within which
the Lessee must cure all defaults and compensate Lessor for all
pecuniary losses which extends beyond the date of assumption of the
Lease shall be harmful and prejudicial to Lessor;
(v) Any assignment of the Lease must result in all terms and
conditions of the Lease being assumed by the assignee without
alteration or amendment, and any assignment which results in an
amendment or alteration of the terms and conditions of the Lease
without the express written consent of Lessor shall be harmful and
prejudicial to Lessor;
(vi) Any proposed assignment of the Lease to an assignee:
(a) that will not use the Premises specifically in accordance with a
franchise, license and/or area development agreement with Franchisor,
(b) that does not possess financial condition, operating performance
and experience characteristics equal to or better than the financial
condition, operating performance and experience of Lessee as of the
Effective Date, or (c) that does not provide guarantors of the Lease
obligations with financial condition equal to or better than the
financial condition of the original guarantors of the Lease as of the
Effective Date shall be harmful and prejudicial to Lessor;
(vii) The rejection (or deemed rejection) of the Lease for
any reason whatsoever shall constitute cause for immediate relief
from the automatic stay provisions of the Code, and Lessee stipulates
that such automatic stay shall be lifted immediately and possession
of the
31
<PAGE>
Premises will be delivered to Lessor immediately without the
necessity of any further action by Lessor.
B. No provision of this Lease shall be deemed a waiver of Lessor's
rights or remedies under the Code or applicable law to oppose any assumption
and/or assignment of this Lease, to require timely performance of Lessee's
obligations under this Lease or to regain possession of the Premises as a
result of the failure of Lessee to comply with the terms and conditions of
this Lease or the Code.
C. Notwithstanding anything in this Lease to the contrary, all
amounts payable by Lessee to or on behalf of Lessor under this Lease, whether
or not expressly denominated as such, shall constitute "rent" for the purposes
of the Code.
D. For purposes of this Section addressing the rights and obligations
of Lessor and Lessee in the event that an Action is commenced, the term
"Lessee" shall include Lessee's successor in bankruptcy, whether a trustee,
Lessee as debtor in possession or other responsible person.
47. NO OFFER. No contractual or other rights shall exist between
Lessor and Lessee with respect to the Premises until both have executed and
delivered this Lease, notwithstanding that deposits may have been received by
Lessor and notwithstanding that Lessor may have delivered to Lessee an
unexecuted copy of this Lease. The submission of this Lease to Lessee shall be
for examination purposes only, and does not and shall not constitute a
reservation of or an option for Lessee to lease or otherwise create any
interest on the part of Lessee in the Premises.
48. OTHER DOCUMENTS. Each of the parties agrees to sign such other
and further documents as may be necessary or appropriate to carry out the
intentions expressed in this Lease.
49. ATTORNEYS' FEES. In the event of any judicial or other
adversarial proceeding between the parties concerning this Lease, to the
extent permitted by law, the prevailing party shall be entitled to recover all
of its reasonable attorneys' fees and other costs in addition to any other
relief to which it may be entitled. In addition, Lessor shall, upon demand, be
entitled to all attorneys' fees and all other costs incurred in the
preparation and service of any notice or demand hereunder as a result of an
Event of Default, whether or not a legal action is subsequently commenced.
50. ENTIRE AGREEMENT. This Lease, and any other instruments or
agreements referred to herein, constitute the entire agreement between the
parties with respect to the subject matter hereof, and there are no other
representations, warranties or agreements except as herein provided. Without
limiting the foregoing, Lessee specifically acknowledges that neither Lessor
nor any agent, officer, employee or representative of Lessor has made any
representation or warranty regarding the projected level of Lessee's Gross
Sales or the projected profitability of the business to be conducted on the
Premises. Furthermore, Lessee acknowledges that Lessor did not prepare or
assist in the preparation of any of the projected figures used by Lessee in
analyzing the economic viability and feasibility of the business to be
conducted by Lessee at the Premises.
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<PAGE>
51. FORUM SELECTION; JURISDICTION; VENUE; CHOICE OF LAW. Lessee
acknowledges that this Lease was substantially negotiated in the State of
Arizona, the executed Lease was delivered in the State of Arizona, all
payments under the Lease will be delivered in the State of Arizona and there
are substantial contacts between the parties and the transactions contemplated
herein and the State of Arizona. For purposes of any action or proceeding
arising out of this Lease, the parties hereto expressly submit to the
jurisdiction of all federal and state courts located in the State of Arizona.
Lessee consents that it may be served with any process or paper by registered
mail or by personal service within or without the State of Arizona in
accordance with applicable law. Furthermore, Lessee waives and agrees not to
assert in any such action, suit or proceeding that it is not personally
subject to the jurisdiction of such courts, that the action, suit or
proceeding is brought in an inconvenient forum or that venue of the action,
suit or proceeding is improper. The creation of this Lease and the rights and
remedies of Lessor with respect to the Premises, as provided herein and by the
laws of the state in which the Premises are located, shall be governed by and
construed in accordance with the internal laws of the state in which the
Premises are located without regard to principles of conflict of law. With
respect to other provisions of this Lease, this Lease shall be governed by the
internal laws of the State of Arizona. Nothing contained in this Section shall
limit or restrict the right of Lessor to commence any proceeding in the
federal or state courts located in the state in which the Premises are located
to the extent Lessor deems such proceeding necessary or advisable to exercise
remedies available under this Lease.
52. COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall be deemed an original.
53. JOINT AND SEVERAL LIABILITY. If Lessee consists of more than one
individual or entity, each such individual and/or entity shall be jointly and
severally liable for all obligations of Lessee under this Lease.
54. MEMORANDUM OF LEASE. Concurrently with the execution of this
Lease, Lessor and Lessee are executing Lessor's standard form memorandum of
lease in recordable form, indicating the names and addresses of Lessor and
Lessee, a description of the Premises, the Lease Term and the terms of any
options to extend the Lease Term, or purchase the Premises, but omitting rent
and such other terms of this Lease as Lessor may not desire to disclose to the
public. Further, upon Lessor's request, Lessee agrees to execute and
acknowledge a termination of lease and/or quitclaim deed in recordable form to
be held by Lessor until the expiration or sooner termination of the Lease
Term.
55. NO BROKERAGE. Lessor and Lessee represent and warrant to each
other that they have had no conversation or negotiations with any broker
concerning the leasing of the Premises. Each of Lessor and Lessee agrees to
protect, indemnify, save and keep harmless the other against and from all
liabilities, claims, losses, costs, damages and expenses, including attorneys'
fees, arising out of, resulting from or in connection with its breach of the
foregoing warranty and representation.
56. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES. LESSOR AND LESSEE HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY
33
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WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL
ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT
TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE
RELATIONSHIP OF LESSOR AND LESSEE, LESSEE'S USE OR OCCUPANCY OF THE PREMISES
AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY.
THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY
JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
FURTHERMORE, LESSEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT
DAMAGES FROM LESSOR WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY LESSEE AGAINST LESSOR OR
ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS LEASE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER
BY LESSEE OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL
AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN
ESSENTIAL ASPECT OF THEIR BARGAIN.
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<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have signed and sealed this
Memorandum as of the date first above written.
[SEAL] LESSEE:
AMERIKING VIRGINIA
CORPORATION I, a Delaware corporation
ATTEST:
By _____________________________ By _____________________________
Printed Name ___________________ Printed Name ___________________
Its ____________________________ Its ____________________________
Lessee's Tax Identification Number:
54-1787064
- -------------------------------
[SEAL] LESSOR:
FFCA ACQUISITION CORPORATION, a
Delaware corporation
ATTEST:
By _____________________________ By _____________________________
Printed Name ___________________ Printed Name ___________________
Its ____________________________ Its ____________________________
35
<PAGE>
STATE OF NEW YORK ]
] SS.
COUNTY OF NEW YORK ]
The foregoing instrument was acknowledged before me on
February , 1996 by , and
, of AmeriKing Virginia
Corporation I, a Delaware corporation, on behalf of the corporation.
----------------------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF NEW YORK ]
] SS.
COUNTY OF NEW YORK ]
The foregoing instrument was acknowledged before me on
February , 1996 by , ,
and , of FFCA Acquisition
Corporation, a Delaware corporation, on behalf of the corporation.
-----------------------------------------
Notary Public
My Commission Expires:
- ----------------------
36
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EXHIBIT A
LEGAL DESCRIPTION
SALE-LEASEBACK AGREEMENT
THIS SALE-LEASEBACK AGREEMENT (this "Agreement") is made as of
February 7, 1996, by and among FFCA ACQUISITION CORPORATION, a Delaware
corporation ("Buyer"), whose address is 17207 North Perimeter Drive,
Scottsdale, Arizona 85255, AMERIKING VIRGINIA CORPORATION I, a Delaware
corporation ("AmerKing Virginia"), whose address is 2215 Enterprise Drive,
Suite 1502, Westchester, Illinois 60154, and AMERIKING TENNESSEE CORPORATION
I, a Delaware corporation ("AmerKing Tennessee"), whose address is 2215
Enterprise Drive, Suite 1502, Westchester, Illinois 60154 (AmerKing Virginia
and AmerKing Tennessee are referred to collectively as "Seller").
PRELIMINARY STATEMENT:
Unless otherwise expressly provided herein, all defined terms used in
this Agreement shall have the meanings set forth in Section 1. Seller owns or
has an option or right to purchase the Premises. Buyer desires to purchase the
Premises and lease the same to Seller pursuant to the Leases.
AGREEMENT:
In consideration of the mutual covenants and provisions of this
Agreement, the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings
for all purposes of this Agreement:
"Closing" shall have the meaning set forth in Section 5.
"Closing Date" means the date specified as the closing date in
Section 5.
"Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et
seq., as amended.
"Commitment" means that certain Commitment Letter dated January 3,
1996 between Buyer and Seller with respect to the transaction described in
this Agreement, and any amendments or supplements thereto.
"Counsel" means legal counsel to Seller and Guarantor licensed in the
state(s) in which (i) the Premises are located, (ii) Seller and/or Guarantor
are incorporated or formed and (iii) Seller and/or
<PAGE>
Guarantor maintain principal places of business or reside, as selected by
Seller and Guarantor, as the case may be, and approved by Buyer.
"Environmental Condition" means any condition with respect to soil,
surface waters, groundwaters, land, stream sediments, surface or subsurface
strata, ambient air and any environmental medium, including, without
limitation, Hazardous Materials, comprising or surrounding the Premises,
whether or not yet discovered, which could or does result in any damage, loss,
cost, expense, claim, demand, order or liability to or against Seller or Buyer
by any third party (including, without limitation, any government entity),
including, without limitation, any condition resulting from the operation of
Seller's business and/or the operation of the business of any other property
owner or operator in the vicinity of the Premises and/or any activity or
operation formerly conducted by any person or entity on or off the Premises.
"Environmental Laws" means all applicable present and future
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, agreements and
similar items, of or with any and all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United States, states
and political subdivisions thereof and all applicable judicial and
administrative and regulatory decrees, judgments and orders relating to the
protection of human health or the environment, including, without limitation:
(i) all requirements, including, without limitation, those
pertaining to reporting, licensing, permitting, investigation and
remediation of emissions, discharges, Releases or Threatened Releases
of Hazardous Materials into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials; and
(ii) all requirements pertaining to the protection of the
health and safety of employees or the public.
"Environmental Reports" means those certain Phase I and Phase II
environmental reports, as applicable, prepared by ENSR Consulting and
Engineering for the Premises as contemplated by Section 11.F.
"Fee" means an underwriting, site assessment, valuation and
processing fee equal to $159,522. Seller paid Buyer $100,000 toward the Fee at
the time of Seller's execution of the Commitment; the balance of the Fee will
be paid by Seller to Buyer at the Closing.
"Franchisor" means Burger King Corporation, a Florida corporation, or
its successor.
"Guarantor" means National Restaurant Enterprises, Inc., a Delaware
corporation.
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"Guaranties" means an unconditional guaranty of payment and
performance in the form attached hereto as Exhibit C to be executed by
Guarantor for each of the Premises.
"Hazardous Materials" means (a) any toxic substance or hazardous
waste, substance or related material, or any pollutant or contaminant; (b)
radon gas, asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment which contains
dielectric fluid containing levels of polychlorinated biphenyls in excess of
federal, state or local safety guidelines, whichever are more stringent, or
any petroleum product; (c) any substance, gas, material or chemical which is
or may be defined as or included in the definition of "hazardous substances,"
"toxic substances," "hazardous materials," hazardous wastes" or words of
similar import under any federal, state or local statute, law, code or
ordinance or under the regulations adopted or guidelines promulgated pursuant
thereto, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections
9601 et seq.; the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Sections 1801 et seq.; the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Sections 6901 et seq.; and the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Sections 1251 et seq.; and (d) any other
chemical, material, gas or substance the exposure to or release of which is or
may be prohibited, limited or regulated by any governmental or
quasi-governmental entity or authority that asserts or may assert jurisdiction
over the Premises or the operations or activity at the Premises, or any
chemical, material, gas or substance that does or may pose a hazard to the
health and/or safety of the occupants of the Premises or the owners and/or
occupants of property adjacent to or surrounding the Premises.
"Leases" means the lease agreements between Buyer, as lessor, and
AmerKing Virginia, as lessee, for each of the Premises for which the "Lessee"
on Exhibit A is AmerKing Virginia, and between Buyer, as lessor, and AmerKing
Tennessee, as lessee, for each of the Premises for which the "Lessee" on
Exhibit A is AmerKing Tennessee, each substantially in the form attached
hereto as Exhibit B.
"Material Adverse Effect" means a material adverse effect on (i) the
condition (financial or otherwise), business, prospects, results of operations
or assets of AmerKing Virginia, AmerKing Tennessee and/or Guarantor, (ii) a
Premises and/or (iii) the ability of AmerKing Virginia or AmerKing Tennessee,
as applicable, to operate a Premises consistent with the terms and conditions
of the corresponding Lease.
"Non-Foreign Seller Certificate" means the certificate delivered by,
or caused to be delivered by, AmerKing Virginia or AmerKing Tennessee, as
applicable, prior to or on the Closing Date in the form attached hereto as
Exhibit D.
"Operative Documents" means this Agreement, the Leases, the
Guaranties and all other documents executed and delivered by Seller pursuant
to this Agreement.
"Permitted Exceptions" means those exceptions to title approved in
writing by Buyer pursuant to Section 11.
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"Premises" means, individually or collectively, the real property
located at the addresses listed in Exhibit A attached hereto, all rights,
privileges and appurtenances associated therewith and all buildings, fixtures
and other improvements now located thereon (whether or not affixed to such
real estate).
"Purchase Price" means the amount specified in Section 3.
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping into soil, surface waters, groundwaters, land, stream sediments,
surface or subsurface strata, ambient air or any other environmental medium
comprising or surrounding the Premises.
"State" means the State of North Carolina, Tennessee or Virginia, as
applicable.
"Threatened Release" means a substantial likelihood of a Release
which requires action to prevent or mitigate damage to the soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface strata,
ambient air or any other environmental medium comprising or surrounding the
Premises which may result from such Release.
"Title Company" means the title insurance company described in
Section 6.
2. TRANSACTION. On the terms and subject to the conditions set forth
herein, Seller shall sell, or cause to be conveyed, and Buyer shall purchase
the Premises, Buyer shall lease the Premises to AmerKing Virginia and AmerKing
Tennessee, respectively, pursuant to the Leases, and Guarantor shall execute
the Guaranties. The sale and purchase of the Premises pursuant to this
Agreement and the lease of the Premises to AmerKing Virginia and AmerKing
Tennessee, respectively, pursuant to the Leases are not severable and shall be
considered a single integrated transaction.
3. PURCHASE PRICE. The purchase price to be paid by Buyer to Seller
or as directed by Seller for the Premises (collectively for all of the
Premises, the "Purchase Price") shall be $16,032,000, allocated among the
Premises as set forth on the attached Exhibit A. The Purchase Price shall be
paid at the Closing in cash or its equivalent subject to any prorations and
adjustments required by this Agreement.
4. UNDERWRITING, SITE ASSESSMENT, VALUATION AND PROCESSING FEE. The
portion of the Fee paid to Buyer at the time of Seller's execution of the
Commitment was deemed fully earned upon Buyer's receipt of such payment and is
nonrefundable. The balance of the Fee paid at the Closing shall be deemed
fully earned upon Buyer's receipt and will be nonrefundable at that time. At
the Closing, the Fee shall be applied by Buyer in payment of (i) the customary
fees and expenses of Buyer's attorneys and (ii) Buyer's in-house site
inspection and valuation costs and fees. Buyer agrees that in no event shall
the sum of the preceding items (i) and (ii) exceed the amount of the Fee. The
balance of the Fee remaining after payment of such fees, expenses and costs
constitutes Buyer's underwriting, site assessment, valuation and processing
fee. In the event the transaction set forth in
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this Agreement fails to close due to a breach or default by Seller under this
Agreement, Buyer shall retain the portion of the Fee paid to Buyer at the time
of Seller's execution of the Commitment as liquidated damages.
5. CLOSING DATE. The purchase and sale of the Premises shall be
closed (the "Closing") within 30 days following the satisfaction of all of the
terms and conditions contained herein, but in no event shall the date of the
Closing be extended beyond February 15, 1996 (the "Closing Date"), and any
such extension shall not be effective unless approved by Buyer in its sole
discretion.
6. CLOSING. Buyer has ordered a title insurance commitment from
Lawyers Title Insurance Corporation ("Title Company") for each of the
Premises. Prior to the Closing Date, the parties hereto shall deposit with
Title Company those Closing documents which will be recorded or filed, as
applicable, in the appropriate governmental offices (the "Recorded
Documents"), and moneys necessary to comply with their obligations under this
Agreement. Title Company shall not cause the Recorded Documents to be recorded
or filed, as applicable, and the moneys deposited by or on behalf of Seller
and/or Buyer with Title Company to be disbursed, unless and until it has
received written instructions from Buyer and Seller to do so. Except for the
fees, expenses and costs to be paid from the Fee by Buyer pursuant to Section
4, all costs of such transaction shall be borne by Seller, or Seller shall
cause such costs to be paid by one or more of the entities with whom Seller
has contracted to purchase the Premises (the "C&N Entities"), including,
without limitation, the cost of title insurance, the attorneys' fees of
Seller, extraordinary attorneys' fees of Buyer (due to extended document
negotiations and/or revisions and/or extraordinary closing issues), the cost
of the survey, stamp taxes, transfer fees and escrow and recording fees. All
real and personal property and other applicable taxes and assessments and
other charges relating to the Premises which are due and payable on or prior
to the Closing Date, as well as such taxes and assessments due and payable
subsequent to the Closing Date but which Title Company requires to be paid at
Closing as a condition to the issuance of the title insurance policy described
in Section 11.D, shall be paid by Seller at or prior to the Closing; and all
other taxes and assessments shall be paid by Seller in its capacity as lessee
under the Leases in accordance with the terms of the Leases. The Closing
documents shall be dated as of the Closing Date.
At the Closing:
(i) Seller and Buyer shall execute and deliver, or cause to
be executed and delivered, the Closing documents (provided Seller and
Buyer shall only deliver to Title Company the Recorded Documents);
(ii) Seller shall wire transfer, or cause to be wire
transferred to Title Company, the Closing costs it is obligated to
pay as contemplated by this Agreement and as set forth on the
Settlement Statement to be prepared by Title Company and approved by
Seller and Buyer for the Closing (the "Settlement Statement"), or
such costs shall be offset against the Purchase Price; and
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(iii) Buyer shall wire transfer the Purchase Price to
Title Company.
At the direction of Seller and Buyer, Title Company shall disburse the
foregoing funds to the appropriate entities and persons set forth on the
Settlement Statement and record and file, as applicable, the Recorded
Documents. Title Company is authorized, in the event any conflicting demand is
made upon it concerning these instructions, at its election, to hold any
documents and/or funds deposited hereunder until an action shall be brought in
a court of competent jurisdiction to determine the rights of Seller and Buyer
or to interplead such documents and/or funds in an action brought in any such
court. Deposit by Title Company of such documents and/or funds, after
deducting therefrom its charges and expenses and attorneys' fees incurred in
connection with any such action, shall relieve Title Company of all further
liability and responsibility for such documents and funds. Title Company's
receipt of this Agreement shall be deemed to constitute conclusive evidence of
Title Company's agreement to be bound by the terms and conditions of this
Agreement pertaining to Title Company.
7. REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
warranties of Buyer contained in this Section are being made to induce Seller
to enter into this Agreement and consummate the transactions contemplated
herein, and Seller has relied, and will continue to rely, upon such
representations and warranties. Buyer represents and warrants to Seller as
follows:
A. Organization of Buyer. Buyer has been duly formed, is
validly existing and has taken all necessary action to authorize the
execution, delivery and performance by Buyer of this Agreement.
B. Authority of Buyer. The person who has executed this
Agreement on behalf of Buyer is duly authorized so to do.
C. Enforceability. Upon execution by Buyer, this Agreement
shall constitute the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
All representations and warranties of Buyer made in this Agreement
shall be and will remain true and complete as of the Closing Date as if made
and restated in full as of such date.
8. REPRESENTATIONS AND WARRANTIES OF SELLER. The representations and
warranties of Seller contained in this Section are being made to induce Buyer
to enter into this Agreement and consummate the transactions contemplated
herein, and Buyer has relied, and will continue to rely, upon such
representations and warranties. Each of AmerKing Virginia and AmerKing
Tennessee represents and warrants to Buyer as follows:
A. Information and Financial Statements. AmerKing Virginia
and AmerKing Tennessee have delivered to Buyer projected financial
statements with respect to their operation of the Premises subsequent
to Closing, and Guarantor has delivered to Buyer
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financial statements for 1994 which were audited and unaudited
financial statements for the interim quarterly periods and certain
other information concerning Guarantor. The financial statements and
other information delivered by Seller and Guarantor are true, correct
and complete in all material respects; and no material adverse change
has occurred with respect to any such financial statements and other
information provided to Buyer since the date such financial
statements and other information were prepared or delivered to Buyer.
Seller understands that Buyer is relying upon such financial
statements and information and Seller represents that such reliance
is reasonable. Guarantor's audited financial statements (other than
interims) were prepared in accordance with generally accepted
accounting principles consistently applied and accurately reflect, as
of the date of this Agreement and the Closing Date, the financial
condition of Guarantor.
B. Organization and Authority of Seller. (i) Each of
AmerKing Virginia and AmerKing Tennessee is a corporation duly
organized or formed, validly existing and in good standing under the
laws of its state of incorporation or formation, and qualified as a
foreign corporation to do business in the States and in any
jurisdiction where the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect. All necessary corporate
action has been taken to authorize the execution, delivery and
performance of this Agreement and of the other documents, instruments
and agreements provided for herein.
(ii) The persons who have executed this Agreement on behalf
of Seller are duly authorized so to do.
C. Enforceability of Documents. Upon execution by AmerKing
Virginia and AmerKing Tennessee, respectively, or Guarantor, this
Agreement and the other documents, instruments and agreements to be
executed in connection with this Agreement, shall constitute the
legal, valid and binding obligations of AmerKing Virginia, AmerKing
Tennessee and Guarantor, respectively, enforceable against AmerKing
Virginia, AmerKing Tennessee and Guarantor in accordance with their
respective terms.
D. Litigation. There are no suits, actions, proceedings or
investigations pending or, to the best knowledge of AmerKing Virginia
and AmerKing Tennessee, after due inquiry, threatened, against or
involving AmerKing Virginia, AmerKing Tennessee, Guarantor or the
Premises before any court, arbitrator, or administrative or
governmental body which are reasonably likely to have a Material
Adverse Effect.
E. Absence of Breaches or Defaults. AmerKing Virginia,
AmerKing Tennessee and/or Guarantor are not, and the authorization,
execution, delivery and performance of this Agreement and the
documents, instruments and agreements provided for herein will not
result in any breach or default under any other document, instrument
or agreement to which AmerKing Virginia, AmerKing Tennessee and/or
Guarantor are a party or by which AmerKing Virginia, AmerKing
Tennessee, Guarantor, the Premises or any of the property of AmerKing
Virginia, AmerKing Tennessee or Guarantor is subject or bound, except
as could
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not reasonably be expected to have a Material Adverse Effect. The
authorization, execution, delivery and performance of this Agreement
and the documents, instruments and agreements provided for herein
will not violate any applicable law, statute, regulation, rule,
ordinance, code, rule or order, except as would not have a Material
Adverse Effect.
F. Franchisor Provisions. On or before the Closing Date,
AmerKing Virginia, AmerKing Tennessee or Guarantor, as applicable,
will have entered into a franchise, license and/or area development
agreement with Franchisor for the conduct of business at each of the
Premises. Such franchise, license and/or area development agreements
will be in full force and effect, will permit AmerKing Virginia or
AmerKing Tennessee, as applicable, to operate a Franchisor's
restaurant on each of the Premises and each will have a term which
will not expire prior to the date set forth on the attached Schedule
I.
G. Utilities. At the Closing Date, the Premises will be
served by ample public utilities to permit full utilization of the
Premises for their intended purpose and, to the best knowledge of
Seller, after due inquiry, all utility connection fees and use
charges will have been paid in full.
H. Intended Use and Zoning; Compliance With Laws. Seller
intends to use each of the Premises, or cause each of the Premises to
be used, solely for the operation of a restaurant pursuant to a
franchise, license and/or area development agreement with Franchisor,
and related ingress, egress and parking, and for no other purposes;
provided, however, with respect to the Premises located at 100 Market
Street, Emporia, Virginia (Burger King Store Number 6600), such
Premises may, in addition to being operated as a Burger King
restaurant, also be used as a Citgo station. Such intended use will
not violate any zoning or other governmental requirement applicable
to the Premises. The Premises comply fully with all applicable
statutes, regulations, rules, ordinances, codes, licenses, permits,
orders and approvals of any governmental agencies, departments,
commissions, bureaus, boards or instrumentalities of the United
States, the State and all political subdivisions thereof, including,
without limitation, all health, building, fire, safety and other
codes, ordinances and requirements, all applicable standards of the
National Board of Fire Underwriters and the Americans With
Disabilities Act of 1990.
I. Area Development; Wetlands. No condemnation or eminent
domain proceedings affecting the Premises have been commenced or, to
the best of Seller's knowledge, after due inquiry, are contemplated.
To the best of Seller's knowledge, after due inquiry, the area where
the Premises are located has not been declared blighted by any
governmental authority. To the best of Seller's knowledge, after due
inquiry, the Premises and/or the real property bordering the Premises
are not designated by any applicable federal, state and/or local
governmental authority as wetlands.
J. Licenses and Permits; Access. On or prior to the Closing
Date, Seller shall have all required licenses and permits, both
governmental and private, to use and operate the
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Premises and the equipment located thereon in the intended manner,
except to the extent that the failure to obtain such licenses or
permits could not reasonably be expected to have a Material Adverse
Effect. There are adequate rights of access to public roads and ways
available to the Premises to permit full utilization of the Premises
for their intended purpose and all such public roads and ways have
been completed and dedicated to public use, except as would not have
a Material Adverse Effect.
K. Environmental. Seller is familiar with the present use of
the Premises and based upon the Environmental Reports Seller has
become familiar with the prior uses of the Premises. To the best of
Seller's knowledge, after due inquiry, except as disclosed in the
Environmental Reports and/or which could not reasonably be expected
to have a Material Adverse Effect, no Hazardous Materials have been
used, handled, manufactured, generated, produced, stored, treated,
processed, transferred or disposed of at or on the Premises, except
in compliance with all applicable Environmental Laws. To the best of
Seller's knowledge, after due inquiry, no Release or Threatened
Release has occurred at or on the Premises except as disclosed in the
Environmental Reports and/or which could not reasonably be expected
to have a Material Adverse Effect. To the best of Seller's knowledge,
after due inquiry, the activities, operations and business undertaken
on, at or about the Premises, including, but not limited to, any past
or ongoing alterations or improvements at the Premises, are and have
been at all times, in compliance with all Environmental Laws, except
as disclosed in the Environmental Reports or which could not
reasonably be expected to have a Material Adverse Effect. To the best
of Seller's knowledge, after due inquiry, no further action is
required to remedy any Environmental Condition or violation of, or to
be in full compliance with, any Environmental Laws, and no lien has
been imposed on the Premises in any federal, state or local
governmental or quasi-governmental entity in connection with any
Environmental Condition, the violation or threatened violation of any
Environmental Laws or the presence of any Hazardous Materials on or
off the Premises, except as disclosed in the Environmental Reports
and/or which could not reasonably be expected to have a Material
Adverse Effect.
Except as disclosed in the Environmental Reports and/or
which would not have a Material Adverse Effect, there is no pending
or, to the best of Seller's knowledge, after due inquiry, threatened
litigation or proceeding before any court, administrative agency or
governmental body in which any person or entity alleges the violation
or threatened violation of any Environmental Laws or the presence,
Release, Threatened Release or placement on or at the Premises of any
Hazardous Materials, or of any facts which would give rise to any
such action, nor has Seller (a) received any notice (and Seller has
no actual or constructive knowledge) that any governmental or
quasi-governmental authority or any employee or agent thereof has
determined, threatens to determine or requires an investigation to
determine that there has been a violation of any Environmental Laws
at, on or in connection with the Premises or that there exists a
presence, Release, Threatened Release or placement of any Hazardous
Materials on or at the Premises, or the use, handling, manufacturing,
generation, production, storage, treatment, processing,
transportation or disposal of any Hazardous
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Materials at or on the Premises; (b) received any notice under the
citizen suit provision of any Environmental Law in connection with
the Premises or any facilities, operations or activities conducted
thereon, or any business conducted in connection therewith; or (c)
received any request for inspection, request for information, notice,
demand, administrative inquiry or any formal or informal complaint or
claim with respect to or in connection with the violation or
threatened violation of any Environmental Laws or existence of
Hazardous Materials relating to the Premises or any facilities,
operations or activities conducted thereon or any business conducted
in connection therewith.
L. Title to Premises. Title to each of the Premises is
vested in AmerKing Virginia or AmerKing Tennessee, as applicable, or
AmerKing Virginia or AmerKing Tennessee, as applicable, has an option
or right to acquire the Premises. Upon Closing, title to the Premises
shall be vested in Buyer, free and clear of all liens, encumbrances,
charges and security interests of any nature whatsoever, except the
Permitted Exceptions.
M. No Reliance. Seller acknowledges that Buyer is not
affiliated with, and has no business relationship with, Franchisor,
other than landlord/tenant and/or creditor/debtor relationships
unrelated to the transaction set forth in this Agreement, that Buyer
did not prepare or assist in the preparation of any of the projected
financial figures used by Seller in analyzing the economic viability
and feasibility of the transaction contemplated by this Agreement,
and that, other than this Agreement, Seller has not relied on any
report or statement by Buyer in entering into this Agreement.
All representations and warranties of Seller made in this Agreement are made
only as of the Closing Date, although Buyer shall be entitled to rely on the
accuracy and completeness of such representations and warranties subsequent to
the Closing.
9. COVENANT AND AGREEMENT OF SELLER. From the date of the Commitment
through the Closing Date, Seller shall, at all reasonable times, (i) provide
Buyer and Buyer's officers, employees, agents, advisors, attorneys,
accountants, architects, and engineers with access to the Premises, all
drawings, plans, and specifications for the Premises in possession of Seller,
all engineering reports relating to the Premises in the possession of Seller,
the files and correspondence relating to the Premises, and the financial books
and records, including lists of delinquencies, relating to the ownership,
operation, and maintenance of the Premises, and (ii) allow such persons to
make such inspections, tests, copies, and verifications as Buyer considers
necessary.
10. TRANSACTION CHARACTERIZATION. A. It is the intent of the parties
that the conveyance of the Premises to Buyer be an absolute conveyance in
effect as well as form, and the instruments of conveyance to be delivered at
Closing are not intended to serve or operate as a mortgage, equitable
mortgage, deed of trust, security agreement, trust conveyance or financing or
trust arrangement of any kind, nor as a preference or fraudulent conveyance
against any creditors of AmerKing Virginia and AmerKing Tennessee. After the
execution and delivery of the general warranty deeds described in Section 11,
AmerKing Virginia and AmerKing Tennessee will have no legal or equitable
interest or any other claim or interest in the Premises other than as set
forth in the Leases. Furthermore, the
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parties intend for the Leases to be true leases and not a transaction creating
a financing lease, capital lease, equitable mortgage, mortgage, deed of trust,
security interest or other financing arrangement, and the economic realities
of the Leases are those of true leases. Notwithstanding the existence of the
Leases, neither party shall contest the validity, enforceability or
characterization of the sale and purchase of the Premises by Buyer pursuant to
this Agreement as an absolute conveyance, and both parties shall support the
intent expressed herein that the purchase of the Premises by Buyer pursuant to
this Agreement provides for an absolute conveyance and does not create a joint
venture, partnership, equitable mortgage, trust, financing device or
arrangement, security interest or the like, if, and to the extent that, any
challenge occurs.
B. This Agreement is a contract to extend a financial accommodation
(as such term is used in the Code) for the benefit of AmerKing Virginia and
AmerKing Tennessee and may not be assumed over the objection of Buyer in the
event AmerKing Virginia or AmerKing Tennessee becomes a debtor or debtor in
possession in any bankruptcy proceeding. The financial accommodation made
through this Agreement is Buyer's acquisition of the Premises for the purpose
of leasing such Premises to AmerKing Virginia and AmerKing Tennessee,
respectively, pursuant to true leases.
11. CONDITIONS OF CLOSING. The obligation of Buyer to consummate the
transaction contemplated by this Agreement is subject to the fulfillment or
waiver of each of the following conditions:
A. Title; Assignment of Representations and Warranties.
AmerKing Virginia and AmerKing Tennessee, respectively, shall convey,
or cause to be conveyed, each of the Premises to Buyer by a special
warranty deed, free of all liens, encumbrances, restrictions,
encroachments and easements, except as otherwise specifically
provided herein or agreed to in writing by Buyer ("Permitted
Exceptions"). If Buyer acquires the Premises from a person or entity
other than AmerKing Virginia or AmerKing Tennessee, AmerKing Virginia
or AmerKing Tennessee shall, at Buyer's election, assign to Buyer by
an assignment satisfactory in form and substance to Buyer (including,
without limitation, all required consents) all representations,
warranties, covenants, indemnities and agreements made by such person
or entity to AmerKing Virginia or AmerKing Tennessee under the
agreement pursuant to which AmerKing Virginia or AmerKing Tennessee
shall cause the Premises to be conveyed to Buyer.
B. Condition of Premises. Prior to the Closing Date Buyer
shall have inspected and approved the Premises.
C. Guaranties. Seller shall cause to be delivered to Buyer
the Guaranties executed by Guarantor.
D. Evidence of Title. Buyer shall have received a
preliminary title report and irrevocable commitment to insure title
by means of an ALTA extended coverage policy of title
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insurance (or its equivalent, in the event such form is not issued in
the jurisdiction where the Premises are located) issued by Title
Company showing good and marketable title in AmerKing Virginia or
AmerKing Tennessee, as applicable, committing to insure Buyer's fee
simple ownership in each of the Premises subject only to Permitted
Exceptions and containing such endorsements as Buyer may reasonably
require, including, without limitation, a mechanics lien endorsement.
E. Survey. Buyer shall have received a current ALTA survey
of each of the Premises, the form and substance of which shall be
satisfactory to Buyer in its reasonable discretion.
F. Environmental. Buyer shall have received a Phase I
environmental report with respect to each of the Premises (and a
Phase II environmental report, if necessary, as determined by Buyer
in its reasonable discretion), the form, substance and conclusions of
which shall be satisfactory to Buyer in its reasonable discretion.
G. Compliance With Representations, Warranties and
Covenants; Certification. (i) All obligations of Seller under this
Agreement shall have been fully performed and complied with, and no
event shall have occurred or condition shall exist which, would upon
the Closing Date, or, upon the giving of notice and/or passage of
time, constitute a breach or default hereunder or under the Leases,
the Guaranties, the franchise, license and/or area development
agreements with Franchisor (following the delivery of a notice to
Lessee of such breach or default and the failure of Lessee to cure
such breach or default during the applicable cure period), or any
other agreement between or among Buyer, AmerKing Virginia, AmerKing
Tennessee or Franchisor pertaining to the subject matter hereof other
than in each case which could not reasonably be expected to have a
Material Adverse Effect. No event shall have occurred or condition
shall exist or information shall have been disclosed by AmerKing
Virginia or AmerKing Tennessee or discovered by Buyer which has had
or could reasonably be expected to have a Material Adverse Effect or
which could materially effect Buyer's willingness to consummate the
transaction contemplated by this Agreement, as determined by Buyer in
its reasonable discretion.
(ii) Each of AmerKing Virginia, AmerKing Tennessee and
Guarantor shall have delivered to Buyer a certificate dated as of the
Closing Date certifying that (a) all representations and warranties
of AmerKing Virginia and AmerKing Tennessee under this Agreement are
true, correct and complete as of such date, (b) AmerKing Virginia and
AmerKing Tennessee have performed all of their obligations under this
Agreement required to be performed on or prior to the Closing Date,
and (c) all documents and information required to be delivered to
Buyer by AmerKing Virginia, AmerKing Tennessee and Guarantor under
this Agreement, including, without limitation, the franchise, license
and/or area development agreements and financial statements, are
true, correct and complete as of such date, and that there have been
no amendments to such documents or material changes to such
information not disclosed in writing to Buyer.
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H. Proof of Insurance. Seller shall have delivered to Buyer
evidence satisfactory to Buyer in its reasonable discretion showing
that all insurance policies required by the Leases are in full force
and effect.
I. Opinion of Counsel to Seller and Guarantor. AmerKing
Virginia, AmerKing Tennessee and Guarantor shall have caused Counsel
to prepare and deliver one or more opinions substantially in the form
attached hereto as Exhibit E.
J. Franchise Agreement. Buyer shall have received a
certificate from Franchisor substantially in the form attached hereto
as Exhibit F.
K. Closing Documents. At or prior to the Closing Date,
Buyer, AmerKing Virginia and/or AmerKing Tennessee, as may be
appropriate, shall execute and deliver or cause to be executed and
delivered to Title Company or Buyer, as may be appropriate, all
documents required to be delivered by this Agreement, and such other
documents, payments, instruments and certificates, as Buyer may
require in form reasonably acceptable to Buyer, including, without
limitation, the following:
(i) Special Warranty Deeds;
(ii) Leases;
(iii) Memoranda of Lease;
(iv) Guaranties;
(v) Franchisor's Certificate;
(vi) Proof of Insurance;
(vii) Opinion(s) of Counsel to Seller and Guarantor;
(viii) Certificate of Seller and Guarantor;
(ix) Non-Foreign Seller Certificates; and
(x) UCC-1 Financing Statements.
Upon fulfillment or waiver of all of the above conditions, Buyer shall deposit
funds necessary to close this transaction with the Title Company and this
transaction shall close in accordance with the terms and conditions of this
Agreement.
12. BREACH AND REMEDIES. A. Each of the following shall be deemed a
breach of this Agreement by Seller:
(i) If any material representation or warranty of AmerKing
Virginia and/or AmerKing Tennessee is false when made at Closing
Date;
(ii) If AmerKing Virginia and/or AmerKing Tennessee fails to
keep or perform any of the terms or provisions of this Agreement or
if any condition precedent is not satisfied by AmerKing Virginia
and/or AmerKing Tennessee at or prior to the Closing Date; or
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(iii) If AmerKing Virginia, AmerKing Tennessee or Guarantor
is or becomes insolvent within the meaning of the Code, files or
notifies Buyer that it intends to file a petition under the Code,
initiates a proceeding under any similar law or statute relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of
debts (collectively, an "Action"), becomes the subject of either a
petition under the Code or an Action, or is not generally paying its
debts as the same become due.
B. In the event of any breach, Buyer shall be entitled to exercise,
at its option, concurrently, successively or in any combination, all remedies
available at law or in equity, including without limitation any one or more of
the following:
(i) To terminate this Agreement by giving written notice to
AmerKing Virginia and/or AmerKing Tennessee in which case neither
party shall have any further obligation or liability, except such
liabilities as AmerKing Virginia and/or AmerKing Tennessee may have
for such breach;
(ii) To proceed with the Closing and direct Title Company,
on or prior to the Closing Date, to apply such portion of the
Purchase Price as Buyer may deem necessary to cure any such breach;
(iii) To bring an action for damages against AmerKing
Virginia and/or AmerKing Tennessee, which, in the event Buyer
proceeds to close, may include an amount equal to the difference
between the value of the Premises as conveyed to Buyer and the value
the Premises would have had if all material representations and
warranties of AmerKing Virginia and AmerKing Tennessee were true and
AmerKing Virginia and AmerKing Tennessee had complied with all of its
obligations;
(iv) To bring an action to require AmerKing Virginia and/or
AmerKing Tennessee specifically to perform its obligations hereunder;
and/or
(v) To recover from AmerKing Virginia and/or AmerKing
Tennessee all expenses, including attorneys' fees, paid or incurred
by Buyer as a result of such breach.
13. ASSIGNMENTS. A. Buyer may assign in whole or in part its rights
under this Agreement and the Operative Documents as contemplated by the Lease,
provided that, the assignee unconditionally assumes Buyer's liabilities under
the Operative Documents assigned accruing subsequent to such assignment.
B. AmerKing Virginia and AmerKing Tennessee shall not, without the
prior written consent of Buyer, which consent may be withheld in Buyer's sole
discretion, sell, assign, transfer, mortgage, convey, encumber or grant any
easements or other rights or interests of any kind in the Premises, any of
AmerKing Virginia's or AmerKing Tennessee's rights under this Agreement or any
interest in AmerKing Virginia or AmerKing Tennessee, whether voluntarily,
involuntarily or by
14
<PAGE>
operation of law or otherwise, including, without limitation, by merger,
consolidation, dissolution or a transfer, except, subsequent to the Closing,
as expressly permitted by the Leases; provided, however, Seller may grant a
leasehold mortgage on Seller's leasehold interests under each Lease to The
First National Bank of Boston pursuant to a form of leasehold mortgage
approved by Buyer prior to the Closing, which approval shall not be
unreasonably withheld or delayed.
14. INDEMNITY. AmerKing Virginia and AmerKing Tennessee agree to
indemnify, protect, hold harmless and defend Buyer and its directors,
officers, shareholders, employees, successors, assigns, agents, contractors,
subcontractors, experts, licensees, affiliates, lessees, mortgagees, trustees
and invitees, as applicable (collectively, the "Indemnified Parties"), from
and against any and all losses, costs, claims, liabilities, damages and
expenses, including, without limitation, Buyer's reasonable attorneys' fees
and consequential damages, arising as the result of an Environmental Condition
and/or a breach, as of the Closing Date, of any of the representations and
warranties of AmerKing Virginia, AmerKing Tennessee and/or Guarantor expressly
set forth in any of the Operative Documents. Without limiting the generality
of the foregoing, such indemnity shall include, without limitation, any
damages incurred with respect to any engineering, governmental inspection and
attorneys' fees and expenses that the Indemnified Parties may incur by reason
of any Environmental Condition and/or any representation or warranty set forth
in Section 8.L being false, or by reason of any investigation or claim of any
governmental agency in connection therewith.
15. MISCELLANEOUS PROVISIONS.
A. Notices. All notices, consents, approvals or other
instruments required or permitted to be given by either party
pursuant to this Agreement shall be in writing and given by (i) hand
delivery, (ii) facsimile, (iii) express overnight delivery service or
(iv) certified or registered mail, return receipt requested, and
shall be deemed to have been delivered upon (a) receipt, if hand
delivered, (b) transmission, if delivered by facsimile, (c) the next
business day, if delivered by express overnight delivery service, or
(d) the third business day following the day of deposit of such
notice with the United States Postal Service, if sent by certified or
registered mail, return receipt requested. Notices shall be provided
to the parties and addresses (or facsimile numbers, as applicable)
specified below:
If to AmerKing Virginia or AmerKing Tennessee:
2215 Enterprise Drive
Suite 1502
Westchester, Illinois 60154
Attention: Lawrence E. Jaro and Joel Aaseby
Telephone: (708) 947-2150
Telecopy: (708) 947-2161
15
<PAGE>
with a copy to: A. Richard Caputo, Jr.
The Jordan Company
9 West 57th Street
40th Floor
New York, New York 10019
Telephone: (212) 572-0823
Telecopy: (212) 755-5263
If to Buyer: Dennis L. Ruben, Esq.
Senior Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
B. Risk of Loss. Seller shall assume the risk of loss,
damage or destruction of the Premises or any part thereof prior to
the Closing Date.
C. Condemnation. Prior to the Closing, in the event of a
taking of all or any part of the Premises, Buyer at its sole option
shall have the right to either (i) receive the proceeds of any
condemnation award and proceed to close this transaction or (ii)
terminate this Agreement.
D. Real Estate Commission. Buyer and Seller represent and
warrant to each other that they have dealt with no real estate
broker, agent, finder or other intermediary in connection with the
transactions contemplated by this Agreement. Buyer and Seller shall
indemnify and hold each other harmless from and against any costs,
claims or expenses, including attorneys' fees, arising out of the
breach of their respective representations and warranties contained
within this Section.
E. Waiver and Amendment. No provisions of this Agreement
shall be deemed waived or amended except by a written instrument
unambiguously setting forth the matter waived or amended and signed
by the party against which enforcement of such waiver or amendment is
sought. Waiver of any matter shall not be deemed a waiver of the same
or any other matter on any future occasion.
F. Captions. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in any
manner in the construction or interpretation hereof.
16
<PAGE>
G. Buyer's Liability. Notwithstanding anything to the
contrary provided in this Agreement, it is specifically understood
and agreed, such agreement being a primary consideration for the
execution of this Agreement by Seller and Buyer, that (i) there shall
be absolutely no personal liability on the part of any shareholder,
director, officer or employee of Buyer and Seller, with respect to
any of the terms, covenants and conditions of this Agreement, (ii)
Seller and Buyer each waives all claims, demands and causes of action
against the officers, directors, employees and agents of the other in
the event of any breach by the other of any of the terms, covenants
and conditions of this Agreement to be performed by Seller or Buyer,
as applicable, and (iii) Seller and Buyer shall look solely to the
assets of the other for the satisfaction of each and every remedy of
Seller and Buyer, as applicable, in the event of any breach by the
other of any of the terms, covenants and conditions of this Agreement
to be performed by Seller and Buyer, as applicable, such exculpation
of liability to be absolute and without any exception whatsoever;
provided, however, the foregoing shall not limit any claims, demands
and causes of action Buyer may have against the shareholders,
directors, officers and employees of Seller as a result of fraud or
intentional misconduct on the part of Seller and/or its shareholders,
directors, officers and employees.
H. Severability. The provisions of this Agreement shall be
deemed severable. If any part of this Agreement shall be held
unenforceable, the remainder shall remain in full force and effect,
and such unenforceable provision shall be reformed by such court so
as to give maximum legal effect to the intention of the parties as
expressed therein.
I. Construction Generally. This is an agreement between
parties who are experienced in sophisticated and complex matters
similar to the transaction contemplated by this Agreement and is
entered into by both parties in reliance upon the economic and legal
bargains contained herein and shall be interpreted and construed in a
fair and impartial manner without regard to such factors as the party
which prepared the instrument, the relative bargaining powers of the
parties or the domicile of any party. Seller and Buyer were each
represented by legal counsel competent in advising them of their
obligations and liabilities hereunder.
J. Other Documents. Each of the parties agrees to sign such
other and further documents as may be appropriate to carry out the
intentions expressed in this Agreement.
K. Attorneys' Fees. In the event of any judicial or other
adversarial proceeding between the parties concerning this Agreement,
the prevailing party shall be entitled to recover all of its
attorneys' fees and other costs in addition to any other relief to
which it may be entitled.
L. Entire Agreement. This Agreement, together with any other
certificates, instruments or agreements to be delivered hereunder,
constitute the entire agreement between the parties with respect to
the subject matter hereof, and there are no other representations,
warranties or agreements, written or oral, between Seller and Buyer
with respect to the
17
<PAGE>
subject matter of this Agreement. Notwithstanding anything in this
Agreement to the contrary, upon the execution and delivery of this
Agreement by Seller and Buyer the Commitment shall be deemed null and
void and of no further force and effect and the terms and conditions
of this Agreement shall control notwithstanding that such terms are
inconsistent with or vary from those set forth in the Commitment.
M. Recording. At the election of Buyer, this Agreement may
be recorded in the appropriate governmental office so as to impart
constructive notice of the terms and provisions hereof.
N. Forum Selection; Jurisdiction; Venue; Choice of Law.
Seller acknowledges that this Agreement was substantially negotiated
in the State of Arizona, the Agreement was signed by Buyer in the
State of Arizona and delivered by Seller in the State of Arizona, all
payments under the Leases will be delivered in the State of Arizona
and there are substantial contacts between the parties and the
transactions contemplated herein and the State of Arizona. For
purposes of any action or proceeding arising out of this Agreement,
the parties hereto hereby expressly submit to the jurisdiction of all
federal and state courts located in the State of Arizona and Seller
consents that it may be served with any process or paper by
registered mail or by personal service within or without the State of
Arizona in accordance with applicable law. Furthermore, Seller waives
and agrees not to assert in any such action, suit or proceeding that
it is not personally subject to the jurisdiction of such courts, that
the action, suit or proceeding is brought in an inconvenient forum or
that venue of the action, suit or proceeding is improper. It is the
intent of the parties hereto that all provisions of this Agreement
shall be governed by and construed under the laws of the State of
Arizona. To the extent that a court of competent jurisdiction finds
Arizona law inapplicable with respect to any provisions hereof, then,
as to those provisions only, the law of the State shall be deemed to
apply. Nothing contained in this Section shall limit or restrict the
right of Buyer to commence any proceeding in the federal or the state
courts located in the State to the extent Buyer deems such proceeding
necessary or advisable to exercise remedies available under the
Agreement.
O. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original.
P. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of Seller and Buyer and their respective
successors and permitted assigns, including, without limitation, any
United States trustee, any debtor-in-possession or any trustee
appointed from a private panel.
Q. Survival. Except for the conditions of Closing set forth
in Sections 3 and 11, which shall be satisfied or waived as of the
Closing Date, all obligations and indemnities of Seller and Buyer set
forth in this Agreement shall survive the Closing.
18
<PAGE>
R. Waiver of Jury Trial and Punitive, Consequential, Special
and Indirect Damages. BUYER AND SELLER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY
WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE RELATIONSHIP
OF BUYER AND SELLER, SELLER'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY
REMEDY. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY
HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL
ASPECT OF THEIR BARGAIN. FURTHERMORE, SELLER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK
PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM BUYER WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM BROUGHT BY SELLER AGAINST BUYER OR ITS
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED
HERETO. THE WAIVER BY SELLER OF ANY RIGHT IT MAY HAVE TO SEEK
PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN
NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR
BARGAIN.
19
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have entered into this Agreement
as of the date first above written.
BUYER:
FFCA ACQUISITION CORPORATION, a
Delaware corporation
By
-----------------------------------
Printed Name
-------------------------
Its
----------------------------------
SELLER:
ATTEST: AMERIKING VIRGINIA CORPORATION
I, a Delaware corporation
By By
--------------------------------- -----------------------------------
Printed Name Printed Name
----------------------- -------------------------
Its Its
-------------------------------- ----------------------------------
ATTEST: AMERIKING TENNESSEE
CORPORATION I, a Delaware corporation
By By
--------------------------------- -----------------------------------
Printed Name Printed Name
----------------------- -------------------------
Its Its
-------------------------------- ----------------------------------
20
<PAGE>
STATE OF NEW YORK ]
] SS.
COUNTY OF NEW YORK ]
The foregoing instrument was acknowledged before me on February ,
1996 by , of FFCA Acquisition Corporation, a Delaware
corporation, on behalf of the corporation.
---------------------------------
Notary Public
My Commission Expires:
- ---------------------------------
STATE OF NEW YORK ]
] SS.
COUNTY OF NEW YORK ]
The foregoing instrument was acknowledged before me on February ,
1996 by , and , of Ameriking Virginia
Corporation I, a Delaware corporation, on behalf of the corporation.
---------------------------------
Notary Public
My Commission Expires:
- ---------------------------------
21
<PAGE>
STATE OF NEW YORK ]
] SS.
COUNTY OF NEW YORK ]
The foregoing instrument was acknowledged before me on February ,
1996 by , and , of Ameriking Tennessee
Corporation I, a Delaware corporation, on behalf of the corporation.
---------------------------------
Notary Public
My Commission Expires:
- ---------------------------------
22
<PAGE>
EXHIBIT A
ADDRESSES OF PREMISES; DESIGNATION OF LESSEE;
PURCHASE PRICE ALLOCATION
<PAGE>
EXHIBIT B
FORM OF LEASE
<PAGE>
EXHIBIT C
FORM OF GUARANTY
<PAGE>
EXHIBIT D
NON-FOREIGN SELLER CERTIFICATE
<PAGE>
EXHIBIT E
FORM OF OPINION
<PAGE>
EXHIBIT F
FORM OF FRANCHISOR CERTIFICATE
<PAGE>
SCHEDULE I
FRANCHISE AGREEMENT EXPIRATION DATES
<PAGE>
FRANCHISE AGREEMENT (individual)
CONTENTS
PAGE
INTRODUCTION ................................................. 1
1 FRANCHISE GRANT: TERM AND LOCATION ........................... 1
2. FRANCHISE FEE ................................................ 2
3. FRANCHISEE REPRESENTATIONS ................................... 2
4. FRANCHISEE ASSOCIATION AND ADVISORY COUNCIL .................. 3
5. STANDARDS AND UNIFORMITY OF OPERATION ........................ 3
A. M.O.D. Manual ................................. 4
B. Franchised Restaurant ........................ 4
1. Repair and Maintenance ............... 4
2. Current Image ......................... 5
C. Signs ........................................ 5
D. Equipment ..................................... 6
E. Vending Machines, Etc ........................ 6
F. Menu and Service ............................. 6
G. Hours of Operation ........................... 6
H. Uniforms ...................................... 7
I. Advertising and Promotional Materials ......... 7
J. Right of Entry and Inspection ................ 7
K. Interference with Employment Relations
of Others ..................................... 7
6. SERVICES AVAILABLE TO FRANCHISEE ............................. 7
7. THE FRANCHISED RESTAURANT ..................................... 9
8. TRAINING ..................................................... 9
9. ROYALTY AND ADVERTISING CONTRIBUTION ......................... 10
A. Royalty ...................................... 10
B. Advertising, Sales Promotion and Public
Relations .................................... 10
C. Gross Sales .................................. 11
D. Late Charge .................................. 12
E. Payment ...................................... 12
i
<PAGE>
FRANCHISE AGREEMENT (individual)
CONTENTS (continued)
Page
F. Audit of Advertising Contributions ......... 12
10. ACCOUNTING PROCEDURES: RIGHT OF AUDIT ..................... 13
A. Accounting ................................ 13
B. Annual Financial Statements ................ 13
C. Audits of FRANCHISEE ....................... 13
D. Release of Financial Information ........... 14
11. LIMITATIONS OF FRANCHISE .................................. 14
A. Trademarks, Trade Names, Service Marks
and Trade Secrets ................ 14
B. Independent Contractor ........................ 15
12. UNFAIR COMPETITION ........................................ 15
13. INSURANCE: INDEMNIFICATION ................................ 16
14. TAXES ..................................................... 17
15. ASSIGNMENT AND TRANSFER: CONDITIONS
AND LIMITATIONS ........................................ 18
16. RIGHT OF FIRST REFUSAL .................................... 24
17. OPTION TO OBTAIN SUCCESSOR FRANCHISE AGREEMENT ............. 25
18. DEFAULT AND EFFECT OF TERMINATION ......................... 27
A. Default .................................. 27
B. Effect of Termination ..................... 30
19. RESTRICTIVE COVENANT ..................................... 31
20. RESOLUTION OF DEVELOPMENT DISPUTES ........................ 31
A. Non-Binding Mediation ...................... 31
B. Binding Dispute Resolution ................. 32
ii
CAPITAL PRINTING SYSTEMS]
<PAGE>
FRANCHISE AGREEMENT (individual)
CONTENTS (continued)
Page
C. Modification of Procedures ................ 32
D. Institution of Legal Proceedings ........... 32
21. MISCELLANEOUS: GENERAL CONDITIONS ......................... 32
A. Interpretation ............................ 32
B. Non-Waiver ................................ 32
C. Governing Law, Forum and Compliance ....... 33
D. Severability .............................. 33
E. Notices ................................... 34
F. Liability of Multiple Franchisees .......... 34
G. Modification .............................. 34
H. Binding Effect ............................ 34
I. Survival ................................... 34
J. Attorneys' Fees ............................ 35
K. Entire Agreement .......................... 35
EXECUTION ........................................ 35
iii
<PAGE>
RESTAURANT #
-----------------------
ADDRESS
----------------------------
---------------------------------
<PAGE>
BURGER KINGS* RESTAURANT
FRANCHISE AGREEMENT
THIS AGREEMENT is made as of the ________ day of _______________________
19__, by and between BURGER KING CORPORATION, a Florida corporation ("BKC")
and
__________________________________________ _________________("FRANCHISEE").
INTRODUCTION
A. BKC is the exclusive licensee of certain trademarks and
service marks, including BURGER KING and HOME OF THE WHOPPER, which are
registered or pending with the United States Patent and Trademark Office, and
is the owner or exclusive licensee of other marks authorized for use in Burger
King Restaurants (the "Burger King Marks").
B. BKC is engaged in the business of operating and granting
franchises to operate Burger King Restaurants using uniform standards, product
specifications and operating procedures (the "Burger King System") and the
Burger King Marks.
C. FRANCHISEE desires to acquire a franchise to operate a
Burger King Restaurant at the location for the entire Term specified in this
Agreement. FRANCHISEE acknowledges that FRANCHISEE has received a copy of the
Uniform Franchise Offering Circular of BKC and has had a full and adequate
opportunity to be thoroughly advised of the terms and conditions of this
Agreement by financial and legal counsel of FRANCHISEE'S own choosing at least
Ten (10) business days, excluding weekends and Federal holidays ("Business
Days") prior to its execution, and is entering into this Agreement after
having made an independent investigation of BKC's operations and not upon any
representation as to profits and/or sales volume which FRANCHISEE might be
expected to realize, nor upon any representations or promises by BKC which are
not contained in this Agreement.
In consideration of the mutual covenants contained in this Agreement,
the parties agree as follows:
1. FRANCHISE GRANT: TERM AND LOCATION
BKC grants to FRANCHISEE and FRANCHISEE accepts a franchise for a
period of Twenty (20) years to use the Burger King System and the Burger King
Marks only in the operation of a Burger King Restaurant at
____________________________________ more fully described in Exhibit "A" (the
"Franchised Restaurant"), (the term "Franchised Restaurant" includes the real
estate described on Exhibit "A" (the "Premises") and all "Improvements"
constructed thereon wherever the context permits or requires). The term of
this Agreement commences on the date the Franchised Restaurant opens for
business (the "Commencement Date") and shall expire Twenty (20) years
thereafter (the "Term") unless sooner terminated in accordance with the
provisions of this Agreement. FRANCHISEE agrees to operate the Franchised
Restaurant at the specified location for the entire Twenty (20) year Term.
FRANCHISEE accepts this franchise with the full and complete understanding
that the franchise grant contains no promise or assurance of renewal. The sole
and entire conditions under which FRANCHISEE will have the opportunity of
obtaining a Successor Burger King Franchise Agreement at expiration are those
set forth herein in Paragraph 17. This franchise is
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
1
<PAGE>
for the specified location only and does not in any way grant or imply any
area, market or territorial rights proprietary to FRANCHISEE.
2. FRANCHISE FEE
FRANCHISEE acknowledges that the grant of this franchise constitutes
the consideration for the payment by FRANCHISEE to BKC of Forty Thousand
($40,000.00) Dollars, and that this sum shall be fully earned by BKC upon the
execution and delivery of this Agreement.
3. FRANCHISEE REPRESENTATIONS
FRANCHISEE acknowledges its understanding of BKC's franchising policy
of requiring all individuals who have any interest in the Franchised
Restaurant, whether directly, beneficially or contingently, to be named in and
be a party to the Franchise Agreement. If FRANCHISEE consists of more than one
individual, the group must include an Operating Partner who, throughout the
Term of the Agreement, lives in the locality of the Franchised Restaurant. The
Operating Partner must have a minimum Fifty (50%) percent unencumbered equity
ownership (including profits) and a minimum Fifty (50%) percent controlling
interest through any voting apparatus in the Franchised Restaurant and must
devote his full time and best efforts to the day-to-day operation of the
Franchised Restaurant with no operational or management commitments in other
businesses (except other Burger King Restaurants operated under franchises
granted to such person by BKC). FRANCHISEE agrees that it has not avoided and
will not hereafter, directly or indirectly, avoid the financial interest
requirements and the direct operation requirements set forth above through
entry into a management agreement, consulting agreement or any other such
artificial device or arrangement. FRANCHISEE agrees to furnish BKC with such
evidence as BKC may request from time to time for the purpose of assuring BKC
that FRANCHISEE'S efforts and equity interest remain as represented in this
Agreement.
4. FRANCHISEE ASSOCIATION AND ADVISORY COUNCIL
BKC shall, on a periodic basis, consult with representatives of an
independent association whose membership is comprised of at least Fifty One
percent (51%) of all Burger King franchise-owned and operated restaurants in
the U.S.A. (the "Franchisee Association") relative to those matters expressly
described in Paragraphs 5.B, 6, 8, 9 and 20.C of this Agreement. The
representatives of the Franchisee Association shall be referred to herein as
the "Franchisee Advisory Council". Membership by a Franchisee in the
Franchisee Association shall be voluntary.
FRANCHISEE agrees that BKC may consult with and consider the advice of
the Franchisee Advisory Council.
For purposes of this Franchise Agreement, to qualify as the
"Franchisee Association," the association must have been formed for the
primary purpose of representing the rights of franchisees, and membership in
such association must be limited solely to Burger King franchisees, or
officers, directors, partners or shareholders of Burger King franchisees, who
in either case are not owned or controlled by BKC or its parent, or any
subsidiary or affiliate of BKC.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
2
<PAGE>
BKC shall not prohibit nor restrict FRANCHISEE from associating with
other franchisees, nor from forming, joining or participating in any
franchisee trade association (the "Activities"). BKC shall not retaliate
against FRANCHISEE because FRANCHISEE engages in the Activities. BKC's
exercise and enforcement of its rights under any franchise agreement or the
law shall not, by itself, constitute a breach of BKC's responsibilities under
the preceding sentence.
5. STANDARDS AND UNIFORMITY OF OPERATION
BKC shall establish, and cause approved suppliers to the Burger King
System to reasonably comply with, product, service and equipment
specifications as established by BKC from time to time.
Suggestions from FRANCHISEE for improving elements of the Burger King
System, such as products, equipment, uniforms, restaurant facilities, service
format and Advertising, are encouraged and may or may not be considered by BKC
when adopting or modifying standards, specifications and procedures for the
Burger King System. FRANCHISEE acknowledges that any such suggestions made by
FRANCHISEE hereunder shall become the exclusive property of BKC. BKC shall
have no obligation to utilize suggestions and no obligation to provide
compensation for any suggestion. FRANCHISEE may not utilize any such
suggestions in the Franchised Restaurant without the prior written consent of
BKC.
A. M.O.D. Manual
FRANCHISEE acknowledges and agrees that prompt adoption of and
adherence to BKC's comprehensive restaurant format and operating system,
including a standardized design, decor, equipment system, color scheme and
style of building and signage, uniform standards, specifications and
procedures of operation, quality and uniformity of product and services
offered and the provisions of the Manual of Operating Data (the "MOD Manual"),
as amended from time to time, are reasonable, necessary and essential to the
image and success of all Burger King Restaurants (the "Burger King Restaurant
System"). The MOD Manual contains the official mandatory restaurant operating
standards, specifications and procedures prescribed from time to time by BKC
for the operation of a Burger King Restaurant. The MOD Manual shall be kept at
the Franchised Restaurant at all times and all changes or additions made by
BKC shall be inserted upon receipt. In the event of any conflict between the
MOD Manual kept at the Franchised Restaurant and the master copy maintained by
BKC in Miami, Florida (or such other place as may be designated by BKC) the
master copy shall control.
FRANCHISEE agrees that changes in the standards, specifications and
procedures may become necessary and desirable from time to time and agrees to
accept and comply with such modifications, revisions and additions to the MOD
Manual which BKC in the good faith exercise of its judgment believes to be
desirable and reasonably necessary. The material and information set forth in
the MOD Manual is confidential and proprietary to BKC and is to be used by
FRANCHISEE only in connection with the operation of the Franchised Restaurant
and other franchised Burger King Restaurants.
The MOD Manual and other specifications, standards and operating procedures
communicated in writing to FRANCHISEE shall be deemed a part of this
Agreement.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
3
<PAGE>
B. Franchised Restaurant
The Franchised Restaurant will be constructed and improved in the
manner authorized and approved by BKC, and the appearance of the Franchised
Restaurant will not thereafter be altered except as may be approved in writing
by BKC.
1. Repair and Maintenance. FRANCHISEE shall, at its expense,
continuously throughout the Term of this Agreement maintain the Franchised
Restaurant in good condition and repair in accordance with BKC's then current
repair and maintenance standards. During the seventh and seventeenth years of
the Term, FRANCHISEE shall provide to BKC such evidence as BKC deems
satisfactory, in BKC's reasonable discretion, that the Franchised Restaurant
is in good condition and repair and that the Franchised Restaurant is in
compliance with BKC's then current repair and maintenance standards for Burger
King Restaurants.
2. Current Image. FRANCHISEE shall, improve, alter and remodel
the Franchised Restaurant to bring it into conformance with the national and
local plans, specifications and/or other standards for new or remodeled Burger
King Restaurants as may hereafter be reasonably changed and defined from time
to time by BKC ("Current Image") in accordance with the following timetable:
(i) During the tenth year of the Term, FRANCHISEE shall
remodel, improve and alter the exterior of the Franchised Restaurant to
conform with the Current Image in effect on the ninth anniversary of the date
of this Agreement.
(ii) BKC and the Franchisee Advisory Council shall meet
annually to discuss and establish the components of Current Image for the
Franchised Restaurant. The Current Image as established by BKC and the
Franchisee Advisory Council, from time to time, shall be binding upon
FRANCHISEE. If BKC and the Franchisee Advisory Council do not agree on the
Current Image, BKC and the Franchisee Association shall settle the matter by
Arbitration by a sole arbitrator in accordance with the then current
non-administered arbitration rules of the Center for Public Resources. The
arbitration shall be governed by the United States Arbitration Act (U.S.A.A.),
and judgment upon the decision rendered by the arbitrator shall be binding on
FRANCHISEE and BKC and except as provided in Section 10(a) of the U.S.A.A.,
shall not be appealable in any forum. The decision may be entered by any court
having jurisdiction thereof. The place of arbitration shall be Miami, Florida.
Failure of the Franchisee to comply with the terms of this Paragraph 5.B
shall be deemed a material default of this Agreement.
C. Signs
The Burger King Marks will only be erected and displayed in the manner
and at such locations as are approved and authorized by BKC, in writing.
FRANCHISEE agrees to maintain and display signs reflecting the Current Image
of Burger King Restaurants and shall not place additional signs or posters at
the Franchised Restaurant without the prior written consent of BKC. Only signs
from sources approved by BKC may be utilized at the Franchised Restaurant.
FRANCHISEE shall discontinue the use of and destroy such signs as are declared
obsolete by BKC within the reasonable time specified by BKC. Such signs are
fundamental to the Burger King Restaurant System and FRANCHISEE hereby grants
to BKC the right to enter the Franchised
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Restaurant to remove and destroy unapproved or obsolete signs in the event
that FRANCHISEE has failed to do so within thirty (30) days after the written
request of BKC.
D. Equipment
Only equipment approved by BKC which meets the criteria and
performance standards of the Burger King Restaurant System may be used in the
Franchised Restaurant. The equipment shall be maintained in a condition that
meets operational standards specified in the MOD Manual and, as equipment
becomes obsolete or inoperable, FRANCHISEE will replace the equipment with the
types and kinds of equipment as are then approved for use in Burger King
Restaurants. If BKC determines that additional or replacement equipment is
needed because of a change in menu items or method of preparation and service
or because of health or safety considerations, FRANCHISEE will install the
additional equipment or replacement equipment within the reasonable time
specified by BKC. Prior to mandating the use of a new or additional piece of
equipment, BKC shall use reasonable efforts to field test the proposed new
equipment.
E. Vending Machines, Etc.
Public telephones, newspaper racks, juke boxes, cigarette, gum and
candy machines, rides, lottery ticket terminals, video games or any other
games, or vending or amusement machines will not be installed on the
Franchised Restaurant without the prior written approval of BKC. In the event
such items are installed on the Franchised Restaurant, then all sums received
by FRANCHISEE in connection with these items shall be included within "Gross
Sales" as defined herein.
F. Menu and Service
All menu items which BKC may deem appropriate to take full advantage
of the potential market and achieve standardization in the Burger King
Restaurant System will be served, and no items which are not set forth in the
MOD Manual or otherwise authorized and approved by BKC in writing will be
served. FRANCHISEE shall only sell the approved menu items at retail to
consumers from and through the Franchised Restaurant and shall not sell such
items for redistribution or resale. FRANCHISEE shall adhere to all
specifications contained in the MOD Manual or as otherwise prescribed by BKC
as to ingredients, methods of preparation and service, weight and dimensions
of products served, and standards of cleanliness, health and sanitation. All
food, drink and other items will be served and sold in packaging that meets
BKC's specifications. Only food, supplies, paper products and packaging from
sources approved by BKC shall be used in the Franchised Restaurant.
G. Hours of Operation
The Franchised Restaurant shall be open for business at a minimum from
7:00 A.M. to 11:00 P.M., Seven (7) days a week, Fifty-Two (52) weeks a year,
unless otherwise authorized or directed by BKC or unless prohibited by
applicable law. The Franchised Restaurant may be closed on Thanksgiving Day
and/or Christmas Day if a majority of the Burger King Restaurants in the
market area (A.D.I.) in which the Franchised Restaurant is located elect to
close on the holiday.
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H. Uniforms
All employees shall only wear uniforms of such design and color as are from
time to time specified by BKC.
I. Advertising and Promotional Materials
Only those advertising and promotional materials or items which are
authorized by BKC in writing prior to use shall be used, sold or distributed,
and no display or use of the Burger King Marks shall be made without the prior
written approval of BKC. All materials on which the Burger King Marks are used
must include the designation (R) or such other designation as BKC may specify.
J. Right of Entry and Inspection
BKC shall have the unrestricted right to enter the Franchised
Restaurant to conduct such activities as it deems necessary to ascertain
FRANCHISEE'S compliance with this Agreement. The inspections may be conducted
without prior notice at any time when FRANCHISEE or one of his employees is at
the Franchised Restaurant. The inspections will be performed in a manner which
minimizes interference with the operation of the Franchised Restaurant.
K. Interference with Employment Relations of Others
Neither BKC nor FRANCHISEE will attempt, directly or indirectly, to
entice or induce, or attempt to entice or induce any employee of the other or
of another Franchisee of BKC to leave such employment, or employ such employee
within Six (6) months after his or her termination of employment with such
employer, except with the prior written consent of such employer.
6. SERVICES AVAILABLE TO FRANCHISEE
BKC agrees to provide the following services to FRANCHISEE and to use
reasonable efforts to provide them in a manner reasonably designed for the
Burger King System, including the use of technology deemed by BKC to be
competitive in the quick service restaurant industry. Prior to making material
changes to the content of, and manner by which, the following items or
services are delivered to FRANCHISEE, BKC shall consult with the Franchisee
Advisory Council to receive input as to the proposed change. The content of
and manner by which the following services are to be delivered by BKC shall be
within BKC's sole reasonable discretion:
A. A reproducible copy of either (i) the standard architectural
building plans and specifications for current approved free-standing buildings
or double drive-thru buildings, or (ii) such other standard approved
restaurant facility, whichever is applicable. Any modifications of the
standard plans and specifications, whether requested or required by planning
and zoning boards, building codes or otherwise, must be approved in writing by
BKC and are to be paid for by FRANCHISEE.
B. A pre-opening training program conducted at BKC training
facilities and certified Burger King Restaurants.
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C. Pre-opening and opening assistance by personnel of BKC at the
Franchised Restaurant for a period of time as BKC deems appropriate under the
circumstances. BKC may, in its reasonable discretion, consider the following
factors: the experience of the FRANCHISEE, the type of facility being
operated, whether the assistance is for a new opening or the reopening after a
transfer of ownership of an already operating restaurant,the prior Burger King
System experience of FRANCHISEE'S management, the projected volume of the
restaurant, as estimated by FRANCHISEE, and any other factors that BKC deems
appropriate for consideration.
D. Opening promotion program. A portion of FRANCHISEE'S Advertising
and sales promotion payment shall be available to implement grand opening
promotions conducted after the Franchised Restaurant opens, in accordance with
company policy at the time of opening (Exhibit "B"). Any additional costs
incurred in implementing the program shall be FRANCHISEE's responsibility.
E. BKC's MOD Manual, in an approved format a copy of which will
be loaned to FRANCHISEE for the Term of this Agreement.
F. Such merchandising, marketing and advertising research data and
advice as may be developed from time to time by BKC and deemed by it to be
helpful in the operation of a Burger King Restaurant.
G. Standardized accounting, cost control and inventory control systems.
H. Communication of new developments, techniques and improvements of
BKC in food preparation, equipment, food products, packaging, service and
restaurant management which are relevant to the operation of a Burger King
Restaurant.
I. Such ongoing support as BKC deems reasonably necessary to continue
to communicate and advise FRANCHISEE as to the Burger King System including
the operation of the Franchised Restaurant.
7. THE FRANCHISED RESTAURANT
During the Term of this Agreement the Franchised Restaurant shall be
used exclusively for the purpose of operating a franchised Burger King
Restaurant.
In the event the Franchised Restaurant shall be damaged or destroyed
by fire or other casualty, or be required to be repaired or reconstructed by
any governmental authority, FRANCHISEE shall, at its own expense, repair or
reconstruct the Franchised Restaurant within a reasonable time under the
circumstances. The minimum acceptable appearance for the restored Franchised
Restaurant will be that which existed just prior to the casualty; however,
every effort should be made to have the restored Franchised Restaurant reflect
the then Current image, design and specifications of Burger King restaurants.
If the Franchised Restaurant is substantially destroyed by fire or other
casualty, FRANCHISEE may, with BKC agreement, terminate this agreement in lieu
of FRANCHISEE reconstructing the Franchised Restaurant.
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8. TRAINING
The Franchised Restaurant shall not open unless the Operating Partner
and a designated restaurant manager have successfully completed BKC's training
program in Miami, Florida or at such other locations as may be specified by
BKC (the "Initial Training"). FRANCHISEE shall train the designated restaurant
manager pursuant to BKC's then current "in-restaurant" operations training and
certification program. BKC may, in its sole discretion, waive the Initial
Training requirement for the designated restaurant manager.
BKC shall provide, and the Operating Partner shall attend, continuing
operations training programs from time to time as may be directed by BKC to
re-enforce operational standards ("Continuing Operations Training"). The
required frequency, duration and subject matter of the Continuing Operations
Training shall be specified by BKC (the Initial Training and Continuing
Operations Training programs are hereinafter collectively referred to as
Training Programs), in its sole discretion, however. BKC and the Franchisee
Advisory Council shall periodically review the Training Programs and BKC will
consult with the Franchisee Advisory Council prior to making any material
changes to the Training Programs. Such programs may be in Miami, Florida, or
at such other locations as may be specified by BKC.
There shall be no charge for the Operating Partner to participate in
the Training Programs and no charge for the designated restaurant manager to
participate in the Initial Training. FRANCHISEE shall be responsible for all
travel and living expenses (including compensation of and worker's
compensation insurance) for the Operating Partner and the manager while
enrolled in any BKC Training Program and any other personal expenses.
FRANCHISEE shall implement a training program for Franchised
Restaurant employees in accordance with training standards and procedures
prescribed by BKC and shall staff the Franchised Restaurant at all times
during the Term of this Agreement with a sufficient number of trained
employees including at least One (1) manager who has, within Six (6) months
after becoming manager, successfully completed BKC's training program for
restaurant managers at an accredited location to ensure that the Burger King
operational standards are met. Requests for exemption from the manager
training requirement will be considered on an individual basis and will be
granted only in those situations where the employees have prior operational
management experience in a Burger King Restaurant and demonstrate to BKC a
thorough knowledge and understanding of the Burger King System.
9. ROYALTY AND ADVERTISING CONTRIBUTION
A. Royalty
FRANCHISEE agrees to pay to BKC a royalty of 3.5% of Gross Sales
("Royalty") for the use of the Burger King System and the Burger King Marks.
Royalties shall be paid monthly by the Tenth (10th) day of each month based
upon Gross Sales for the preceding month.
B. Advertising, Sales Promotion and Public Relations
(i) FRANCHISEE shall pay to BKC an amount equal to four (4%) percent of
FRANCHISEE'S monthly Gross Sales by the Tenth (10th) day of each month based
upon FRANCHISEE'S Gross Sales for the preceding month (the "Advertising
Contribution"). This sum,
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less direct administrative expenses, will be used for (a) market research
expenditures directly related to the development and evaluation of the
effectiveness of Advertising and sales promotions, (b) creative, production
and other costs incurred in connection with the development of Advertising,
sales promotions and public relations (as limited by paragraph (vi) below),
both in the market area of the Franchised Restaurant, as reasonably defined
from time to time by BKC, and on a national basis and (c) various methods of
delivering the Advertising or promotional message, including without
limitation, television, radio, outdoor and print ("Media"). The allocation of
the Advertising Contribution between national, regional and local expenditures
shall made by BKC in its sole business judgment.
(ii) Periodically, but no less frequently than once per year, BKC shall
meet with the Franchisee Advisory Council to discuss and attempt to establish
(a) the types of Media to be used by BKC (the "Media Mix") and (b) the
percentage of the total annual Advertising Contribution to be expended on Media
(the "Media Spending Goal").
(iii) If BKC and the Franchisee Advisory Council are unable to mutually
establish the Media Spending Goal, BKC shall, subject to the limitation set
forth in paragraph (v) below, have the right, in its sole business judgment,
to establish the Media Spending Goal.
(iv) If BKC and the Franchisee Advisory Council are unable to agree on
the Media Mix, BKC shall have the right, in its sole business judgment, to
establish the Media Mix. If BKC unilaterally establishes the Media Mix as
provided above, BKC shall in no event spend more than ten (10%) percent of the
prior fiscal year's national Media expenditures for new Media channels and any
such new Media channel(s) must be accessible to no less than two-thirds (2/3)
of the then established areas of dominant influence ("ADI's") in the United
States.
(v) BKC shall use reasonable efforts to meet the Media Spending Goal,
subject to circumstances beyond its control; provided, however, that BKC shall
spend no less than sixty-five (65%) percent of the total annual Advertising
Contribution on Media.
(vi) The annual expenditure on public relations shall not exceed
one-half of one percent of the total annual Advertising Contribution.
(vii) Certain Advertising funds shall be allocated for approved grand
opening promotions in accordance with current company policy, a copy of which
is attached as Exhibit "B".
C. Gross Sales
The term "Gross Sales" as used in this Agreement includes all sums
charged by FRANCHISEE for goods, merchandise or services sold at or from the
Franchised Restaurant, including all premiums unless exempted by BKC. The sale
of Burger King products away from the Franchised Restaurant is not authorized;
however, should any such sales be approved in the future, they will be
included within the definition of Gross Sales. Gross Sales excludes any
federal, state, county or city tax, excise tax, or other similar taxes
collected by FRANCHISEE from customers based upon sales, and cash received as
payment in credit transactions where the extension of credit itself has
already been included in the figure upon which the Royalty and Advertising
Contribution is computed.
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D. Late Charge
Any Royalty and Advertising and sales promotion Contribution not paid
when due shall bear a late charge at the maximum rate allowed by Florida law
or, if no maximum rate relating to this transaction is in effect in the State
of Florida, 18% per annum. Nothing in this Agreement shall be construed to
mean that FRANCHISEE is to pay, or has contracted to pay, any sum in excess of
that which may lawfully be charged or contracted for under any applicable law.
The intention of the parties is to conform strictly to applicable usury laws
and it is agreed that if an excess is inadvertently collected it shall be
applied to reduce the amount owed under Paragraphs 9.A and 9.B above.
E. Payment
All payments required to be made to BKC under this Agreement shall be
made in Miami, Florida, or at such addresses and to such parties as BKC may
designate in writing from time to time.
F. Audit of Advertising Contributions
Not more than once annually, the Franchisee Association shall have the
right, following reasonable notice to BKC, to audit BKC's fiscal year-end
results with regard to the income and expenditures of the Advertising
Contribution received by BKC for Burger King restaurants located in the U.S.A.
The audit shall be conducted in accordance with the criteria established by
BKC following consultation with the Franchisee Advisory Council. The audit
shall be at the sole cost of the Franchisee Association unless (i) the audit
discloses a misappropriation of funds or (ii) a discrepancy resulting from an
accounting error, which is in excess of three percent (3%) of the total annual
Advertising Contribution received by BKC, in either of which events BKC shall
reimburse the Franchisee Association for the reasonable costs of the audit.
Only records of the past two fiscal years will be produced for the audit. The
results of the audit will be made available, on request, to FRANCHISEE.
FRANCHISEE shall have no independent right to audit, provided however, if no
Franchisee Association exists, franchisees owning collectively at least thirty
(30%) percent or more of all Burger King franchisee-owned and operated
restaurants in the U.S.A. shall have the right to audit under the same terms
and conditions set forth in this paragraph 9.F.
10. ACCOUNTING PROCEDURES: RIGHT OF AUDIT
A. Accounting
FRANCHISEE agrees to keep true, accurate and complete records of his
business in such form as BKC now or hereafter may require and to furnish BKC
with a monthly and fiscal year to date profit and loss statement in the format
prescribed by BKC. FRANCHISEE shall also submit to BKC quarterly balance
sheets, the first of which shall be for the period ending Three (3) months
after the Franchised Restaurant opens. All profit and loss statements and
balance sheets should be prepared in accordance with generally accepted
accounting principles and shall be submitted to BKC within Twenty-Five (25)
days after the end of the period covered by the report. In addition,
FRANCHISEE shall retain for a period of at least Twenty-Four (24) months and
upon request submit to BKC copies of all state sales tax returns and all
supporting data and
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records relating to sales made at or from the Franchised Restaurant and such
other records as BKC may reasonably request from time to time.
B. Annual Financial Statements
Within One Hundred Twenty (120) days after the close of each fiscal
year, FRANCHISEE shall submit a full disclosure of all persons with any
interest in the Franchised Restaurant and a complete annual financial
statement for the Franchised Restaurant, which statement, if requested by BKC,
shall be certified by a Certified Public Accountant.
C. Audits of FRANCHISEE
FRANCHISEE agrees that BKC or its representatives, at BKC's expense,
shall, at all reasonable times, have the right to examine or audit the books,
records, state sales tax returns or accounts of FRANCHISEE. BKC shall
similarly have the right to examine or audit the books, records, state sales
tax returns or accounts of any and all persons or entities who are guarantors,
who have personal liability, or who have joint and severable liability under
this Agreement in those instances in which FRANCHISEE has failed to make
payments of the Royalty or Advertising fees in a timely fashion or has
otherwise defaulted under this Agreement. In the event the audit discloses an
understatement of Gross Sales which exceeds Five (5%) percent for any period
or periods, FRANCHISEE shall, within Fifteen (15) days after the receipt of
the audit report, pay BKC the Royalty of Three and one-half percent (3.5 %)
and the Advertising fee of Four percent (4%) of the amount of each
understatement plus the late charge identified in Paragraph 9.D of this
Agreement from the date such payments were originally due, plus FRANCHISEE
shall reimburse BKC for all costs of the audit including travel, lodging and
wages, reasonably incurred.
D. Release of Financial Information
Except as otherwise provided in any lease between BKC or any of its
affiliates and FRANCHISEE, BKC shall not release to third parties financial or
operational information specifically relating to FRANCHISEE and/or the
Franchised Restaurant without the consent of FRANCHISEE unless otherwise
required by judicial or administrative order. If BKC is required to disclose
such information, BKC shall use reasonable efforts to give FRANCHISEE notice
thereof. Notwithstanding the foregoing however, BKC may release general
financial or operational information relating to the Burger King System
compiled in whole or in part from FRANCHISEE and/or the Franchised Restaurant
so long as FRANCHISEE and/or the Franchised Restaurant are not specifically
identified.
11. LIMITATIONS OF FRANCHISE
A. Trademarks, Trade Names, Service Marks and Trade Secrets
(1) FRANCHISEE acknowledges that ownership of all right, title and
interest to the Burger King System and the Burger King Marks are and shall
remain vested solely in BKC and/or Burger King Brands, Inc. ("BKB"), and
FRANCHISEE disclaims any right or interest therein or the good will derived
therefrom. FRANCHISEE agrees that all materials loaned or otherwise made
available to him and all disclosures made to FRANCHISEE and not to the general
public by or at the direction of BKC at any time before or during the Term of
this Agreement relating to
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the Burger King System, including, without limitation, the MOD Manual in its
entirety, financial information, marketing strategy and marketing programs are
to be considered trade secrets of BKC for purposes of this Agreement and shall
be kept confidential and used by FRANCHISEE only in connection with the
operation of the Franchised Restaurant and other franchised Burger King
Restaurants. FRANCHISEE agrees not to divulge any of the trade secrets to any
person other than his employees and then only to the extent necessary for the
operation of the Franchised Restaurant and, specifically, that FRANCHISEE will
not, nor permit anyone to, reproduce, copy or exhibit any portion of the MOD
Manual or any other trade secrets of BKC.
(2) FRANCHISEE will not, directly or indirectly, at any time
during the Term of this Agreement or thereafter, do or cause to be done any
act or thing disputing, attacking or in any way impairing or tending to impair
BKC's or BKB's right, title or interest in the Burger King Mark or the Burger
King System. FRANCHISEE shall immediately notify BKC of all infringements or
limitations of the Burger King Marks which come to his attention or challenges
to FRANCHISEE's use of any of the Burger King Marks, and BKC shall exercise
absolute discretion in deciding what action, if any, should be taken.
FRANCHISEE agrees to cooperate in the prosecution of any action to prevent the
infringement, limitation, illegal use or misuse of the Burger King Marks and
agrees to be named as a party in any such action if so requested by BKC. BKC
agrees to bear the legal expenses incident to FRANCHISEE's participation in
such action, except for fees, expenses and other costs of FRANCHISEE'S
personal legal counsel if FRANCHISEE elects to be represented by counsel of
his own choosing.
(3) In the adoption of a corporate or partnership name,
FRANCHISEE shall not use any of the Burger King Marks, any variations or
abbreviations, or any words confusingly similar to the Burger King Marks.
B. Independent Contractor
FRANCHISEE is an independent contractor and is not an agent, partner,
joint venturer, joint employer, or employee of BKC, and no fiduciary
relationship between the parties exists. FRANCHISEE shall be the sole and
exclusive employer of its employees with the sole right to hire, discipline,
discharge, and establish wages, hours, benefits, employment policies, and
other terms and conditions of employment for its employees without
consultation with or approval by BKC. BKC shall have no control over the terms
and conditions of employment of FRANCHISEE's employees. FRANCHISEE shall have
no right to bind or obligate BKC in any way nor shall he represent that he has
any right to do so.
In all public records and in FRANCHISEE's relationship with other
persons, on stationery, business forms and checks FRANCHISEE shall indicate
independent ownership of the Franchised Restaurant and that it is operated
under a Franchise granted by BKC.
FRANCHISEE shall exhibit at the Franchised Restaurant, in such places
as may be designated by BKC, a notification that the Franchised Restaurant is
operated by an independent operator and not by BKC.
12. UNFAIR COMPETITION
FRANCHISEE acknowledges the uniqueness of the Burger King System and
that BKC is making its knowledge, know-how and expertise available to him for
the purpose of operating the
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Franchised Restaurant. FRANCHISEE agrees that it would be an unfair method of
competition for FRANCHISEE to use or duplicate or to allow others to use or
duplicate any of the knowledge, know-how and expertise received from BKC for
any use other than for the operation of franchised Burger King Restaurants.
FRANCHISEE, therefore, warrants that during the Term of this Agreement, he
will utilize his best and continuing efforts to promote and develop the
business at the Franchised Restaurant and during the Term hereof and at all
times thereafter will not directly or indirectly engage in the operation of
any restaurant, other than the Franchised Restaurant and other Burger King
Restaurants franchised from BKC, which utilizes or duplicates the Burger King
System, any trade secrets of BKC, the Burger King Marks or the present or any
former Burger King Current Image.
13. INSURANCE: INDEMNIFICATION
A. FRANCHISEE agrees to carry at his expense during the Term of this
Agreement Comprehensive General Liability insurance, including Products
Liability and Broad Form Contractual Liability, in an amount of not less than
ONE MILLION ($1,000,000.00) DOLLARS per occurrence for bodily injury and FIVE
HUNDRED THOUSAND ($500,000.00) DOLLARS per occurrence for property damage, or
in such increased amounts as BKC may reasonably request from time to time
during the Term of this Agreement. Each policy will name BKC and its
subsidiaries, its affiliated and parent companies as additional insured, will
provide that the policy cannot be cancelled without Thirty (30) days prior
written notice to BKC, will insure against the liability of BKC for both its
and FRANCHISEE'S acts or omissions, and will insure the contractual liability
of FRANCHISEE under Paragraph 13.C. Additionally, FRANCHISEE agrees to carry,
at FRANCHISEE'S expense, umbrella coverage in an amount of ONE MILLION
($1,000,000.00) DOLLARS over the basic Comprehensive General Liability
insurance per restaurant except that if FRANCHISEE owns more than ten (10)
Burger King Restaurants, the umbrella coverage applicable to all such
restaurants need not exceed TEN MILLION ($ 10,000,000) DOLLARS. The insurance
afforded by the policy or policies respecting liability shall not be limited
in any way by reason of any insurance which may be maintained by BKC. Prior to
the Commencement Date, FRANCHISEE shall furnish to BKC Certificates of
Insurance reflecting that the insurance coverage is in effect pursuant to the
terms of this Agreement. All policies shall be renewed, and a
renewal Certificate of Insurance mailed to BKC in Miami, Florida, or at such
other location as may be specified by BKC prior to the expiration date of the
policies. This obligation of FRANCHISEE to maintain insurance is separate and
distinct from its obligation to indemnify BKC under the provisions of
paragraph 13C and shall not be affected by reason of the negligence of or a
claim of negligence against BKC.
B. FRANCHISEE agrees to secure and pay premiums on a Worker's
Compensation Policy covering himself and all his employees, as required by law.
C. FRANCHISEE is responsible for all losses or damages and contractual
liabilities to third persons arising out of or in connection with possession,
ownership or operation of the Franchised Restaurant, and for all claims or
demands for damages to property or for injury, illness or death of persons
directly or indirectly resulting therefrom. FRANCHISEE agrees to defend,
indemnify and save BKC and its subsidiaries, its affiliated and parent
companies harmless of, from and with respect to any such claims, demands,
losses, obligations, costs, expenses, liabilities, debts or damages. This
obligation to indemnify and defend BKC shall apply even in the event of the
negligence of or claim of negligence against BKC and regardless of whether the
negligence or claim of negligence against BKC is as a result of the acts or
omissions
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of BKC or that of the FRANCHISEE. However, the obligation of the FRANCHISEE to
indemnify BKC for its own negligence shall be limited to an amount equal to
the amount of insurance set forth in Paragraph 13.A. BKC's right to indemnity
under this Agreement shall arise and be valid notwithstanding that joint or
concurrent liability may be imposed on BKC by statute, ordinance, regulation
or other law. The indemnification of BKC by FRANCHISEE for FRANCHISEE'S own
negligence, acts or omissions, shall not be limited by the amount of insurance
required under Paragraph 13.A. This indemnity obligation shall include, but
not be limited to, claims related to the employment of FRANCHISEE'S employees.
This obligation of FRANCHISEE to indemnify and defend BKC is separate and
distinct from its obligation to maintain insurance under the provisions of
paragraph 13.A.
BKC shall notify FRANCHISEE of any claims, and FRANCHISEE shall be
given the opportunity to assume the defense of the matter; however, BKC shall
have the right to participate in the defense of any claim or action against it
which is assumed by FRANCHISEE, at BKC's own cost and expense. If FRANCHISEE
fails to assume the defense, BKC may defend the action in the manner it deems
appropriate, and FRANCHISEE shall pay to BKC all costs, including attorneys'
fees, incurred by BKC in effecting such defense, in addition to any sum which
BKC may pay by reason of any settlement or judgment against BKC. No settlement
of any claim against BKC shall be made by FRANCHISEE which is in excess of the
amount of insurance referred to in Paragraph 13.A or which would subject BKC
to liability in any amount not covered by such insurance without the prior
written consent of BKC. Any final judicial determination of the negligence of
BKC in an amount in excess of the policy limits of insurance required under
Paragraph 13.A shall be the responsibility of BKC.
14. TAXES
FRANCHISEE shall pay when due all taxes levied or assessed in
connection with the possession, ownership or operation of the Franchised
Restaurant or in connection with amounts paid or received under this
Agreement, including without limitation any sales, use or other ad valorem
taxes (other than any tax that is measured by or related to the net income of
BKC or to its corporate status in a state). If any such tax shall be paid by
BKC, FRANCHISEE shall promptly reimburse BKC the amount paid. In the event of
any bona fide dispute as to the liability for a tax assessed against
FRANCHISEE, FRANCHISEE may contest the validity or the amount of the tax in
accordance with procedures of the taxing authority. FRANCHISEE shall not
permit a tax sale or seizure against the Franchised Restaurant or equipment.
15. ASSIGNMENT AND TRANSFER: CONDITIONS AND LIMITATIONS
A. This Agreement and the franchise grant are personal to FRANCHISEE,
and FRANCHISEE shall not sell, assign or transfer this Agreement or any right
of ownership interest in the franchise granted, nor permit any such assignment
or transfer to occur directly, indirectly or contingently by agreement or
operation of law without the prior written consent of an officer of BKC.
B. FRANCHISEE shall not pledge, mortgage, hypothecate, give as
security for an obligation or in any manner encumber this Agreement or the
franchise granted herein except with the express written consent of BKC given
in connection with the execution of BKC's then current third party
intercreditor agreement. FRANCHISEE shall pay BKC a transfer fee of Two
EXHIBIT "A"
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WITHOUT NOTICE
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Thousand ($2,000) Dollars for the costs and expenses incurred by BKC in
connection with facilitating the execution of the intercreditor agreement.
C. In the event of the death or incapacity of FRANCHISEE or, if this
Agreement has been assigned to a Corporation, the death of an owner of Voting
Common Stock, BKC shall consent to a transfer of decedent's interest to his
heirs, surviving spouse, or partner or shareholder owning at least Twenty-Five
percent (25%) of the Voting Common Stock (if a corporation)(collectively and
individually an "Heir"), subject to the following conditions:
(1) The Heir must complete and be approved through BKC's
standard franchisee selection process including satisfactorily demonstrating
to BKC that the heir meets the financial, character, and managerial criteria,
as well as equity ownership and such other criteria and conditions BKC shall
then be applying in considering applications for new franchises.
(2) The Heir shall have successfully completed BKC's training
for new Franchisees.
(3) The Heir shall agree, in writing, to assume liability for
and to perform all the terms and conditions of this Agreement to the same
extent as the original franchisee.
(4) If the Heir is not approved or there is no heir, the
estate of the deceased shall use its best efforts to sell the Franchised
Restaurant to an acceptable party within Twenty-Four (24) months from the date
of FRANCHISEE's death or incapacity, and BKC shall have an option, but not the
obligation, to operate and/or manage the Franchised Restaurant for the account
of FRANCHISEE's estate until the deceased or incapacitated FRANCHISEE's
interest is transferred to another party acceptable to BKC. Should BKC elect
to operate and/or manage the Franchised Restaurant, BKC shall make a complete
accounting and shall forward the net income from the operation to FRANCHISEE's
estate, less expenses and a reasonable management fee. If the conveyance of
the Franchised Restaurant to a party acceptable to BKC has not taken place
within the Twenty-Four (24)-month period, BKC shall have the option to
purchase the Franchised Restaurant at fair market value.
D. With the prior written consent of BKC, FRANCHISEE may assign this
Agreement to a corporation (the "Corporation"). BKC may impose reasonable
conditions on the assignment, including without limitation:
(1) The assignment to the Corporation will not relieve
FRANCHISEE of personal liability to BKC for the performance of all obligations
under this Franchise Agreement.
(2) For the purpose of determining compliance with this
Agreement, BKC shall have the right at any time to examine and approve the
form and content of the articles or certificate of incorporation and by-laws
of the Corporation (the "Governing Instruments").
(3) The Corporation shall issue Voting Common Stock and may
issue either Non-Voting Common Stock or Non-Voting Preferred Stock. The
Corporation may not issue both Non-Voting Common Stock and Non-Voting
Preferred Stock. As used herein, the term "NonVoting Stock" refers to the
Non-Voting Common Stock or the Non-Voting Preferred Stock and the term "Stock"
refers collectively to Voting Common Stock and Non-Voting Stock.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
15
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(4) FRANCHISEE shall own One Hundred (100%) percent of the
outstanding shares of Voting Common Stock. The Operating Partner must remain
the owner of not less than Fifty (50%) percent of the outstanding shares of
Voting Common Stock after any transfer or issuance of shares of the Corporation.
(5) Shares of Non-Voting Stock may be issued to, owned and
held only by the spouse and/or children of the FRANCHISEE ("Immediate Family
Member") and key employees of FRANCHISEE's franchised Burger King
Restaurant(s). Prior to the issuance of any and all Stock, FRANCHISEE shall take
all steps reasonably necessary to comply with applicable state and federal
laws and regulations including any applicable disclosure requirements.
(6) A Corporation issuing Non-Voting Stock shall adopt and use
the provisions set forth in BKC's "Guidelines For The Preparation Of Corporate
Governing Instruments" (the "Guidelines"), receipt of a copy of which is
hereby acknowledged by FRANCHISEE.
(7) Neither the governing instruments nor any other agreement
shall grant to owners of shares of Non-Voting Stock the ability to prevent the
approval of an action otherwise approved by the owners of all the shares of
Voting Common Stock.
(8) FRANCHISEE shall cause the Corporation to comply with the
provisions of this Agreement, including the Guidelines and the governing
instruments. If the Corporation fails or is unable to comply with these
provisions, including but not limited to the provisions limiting the voting
rights of owners of shares of Stock, the provisions limiting the number of
owners of Voting Common Stock, the provisions limiting the payment of dividends
and the provisions requiring redemption or repurchase of shares of Stock, then
the FRANCHISEE shall take action to cause substantial compliance, which action
may include the purchase by FRANCHISEE of shares of Non-Voting Stock and, if
FRANCHISEE fails or is unable to cause substantial compliance, then BKC may
declare FRANCHISEE and the Corporation in default under this Franchise
Agreement and any other Franchise Agreement similarly affected by FRANCHISEE's
failure or inability.
(9) immediate Family Members and key employees shall not be
required to become personally liable for the performance of the terms and
conditions of the Franchise Agreement as a result of their ownership of shares
of Non-Voting Stock.
(10) Under the provisions set forth in the Guidelines, the
governing instruments shall require that the Corporation shall redeem
Non-Voting Stock at such time as the holder ceases to be a key employee or an
Immediate Family Member.
(11) No shares of Stock may be pledged, mortgaged,
hypothecated, given as security for an obligation or in any manner encumbered.
(12) Any sale, transfer, assignment or issuance of shares of
Voting Common Stock shall be subject to BKC's approval. In the case of an
acquisition of additional shares by the Operating Partner, this requirement
shall be satisfied by BKC being given written notice describing the
transaction within seven (7) days following the transfer or issuance. At no
time shall the Corporation have more than five (5) holders of shares of Voting
Common Stock unless otherwise authorized in writing by the Chief Executive
Officer of BKC. Notwithstanding the
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
16
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foregoing, BKC may, in the exercise of its reasonable discretion, permit more
than five holders of shares of Voting Common Stock upon Compliance with each
of the following conditions:
(a) The additional holder ("Additional Holder") is an
Immediate Family Member of an individual, original franchisee ("Original
Franchisee"). No more than one Additional Holder shall be permitted per
Original Franchisee.
(b) The Additional Holder is approved as a Burger King
Franchisee in accordance with then current BKC standards for approving new
franchisees.
(c) The Additional Holder agrees, in writing, to assume
liability and to perform all the terms and conditions of the Franchise
Agreement to the same extent as the Original Franchisee.
In no event shall there be more than five (5) Additional Holders nor at any
time shall the combined total of Original Franchisees and Additional Holders
exceed ten (10).
(13) The Corporation shall not engage in any business activity other
than that which is directly related to the ownership and operation of
FRANCHISEE's franchised Burger King Restaurant(s).
(14) The governing instruments of the Corporation shall reflect the
limitation in the number of shareholders of Voting Common Stock and that the
issuance and transfers of shares of Voting Common Stock are restricted and may
be issued or transferred only with the written consent of BKC.
(15) All Stock certificates shall include the following legend:
THE OWNERSHIP AND TRANSFER OF THIS STOCK IS SUBJECT TO THE TERMS AND
CONDITIONS OF THE ARTICLES OF INCORPORATION, THE BY-LAWS OF THIS CORPORATION
AND OF A FRANCHISE AGREEMENT WITH BURGER KING CORPORATION. REFERENCE IS MADE
TO SUCH FRANCHISE AGREEMENT AND THE PROVISIONS OF THE ARTICLES OF
INCORPORATION AND BY-LAWS OF THIS CORPORATION, COPIES OF WHICH ARE ON FILE
WITH THE RECORDS OF THE CORPORATION.
(16) FRANCHISEE shall comply with the requirements of Paragraph
11.A(3) of this Agreement in the adoption of any corporate name.
E. If more than one (1) individual comprises the FRANCHISEE, the
assignment, in whole or in part, by any such individual (the "Individual
Seller") of his ownership interest in the Franchised Restaurant (or if this
Agreement has been assigned to a Corporation or other entity pursuant to
Paragraph 15.D herein, the assignment of his stock or other security of the
Corporation or other entity) shall be subject to the prior written consent of
BKC, which consent will not be unreasonably withheld upon compliance with the
conditions required by BKC on the assignment. BKC shall use reasonable efforts
to provide consent to the assignment to FRANCHISEE, or communicate notice of
disapproval, within Ninety (90) days (for transactions involving less than ten
(10) restaurants the time frame shall be Sixty (60) days) of receipt by BKC
of FRANCHISEE'S notice of assignment and the furnishing of all reasonably
requested information. Conditions on the assignment may include but are not
limited to the following:
EXHIBIT "A"
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WITHOUT NOTICE
17
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(1) For the purpose of determining compliance with this
Agreement, BKC shall have the right at any time to examine and approve the
form and content of the governing instruments.
(2) All obligations of FRANCHISEE to BKC, whether arising
under this Agreement or otherwise, must be satisfied at the time of transfer.
(3) Prospective purchaser must complete and be approved
through BKC's standard franchisee selection process including satisfactorily
demonstrating to BKC that he meets the financial, character, managerial,
equity ownership and such other criteria and conditions as BKC shall then be
applying in considering applications for new franchises.
(4) Prospective purchaser shall have satisfactorily completed
BKC's training for new franchisees.
(5) Approval by BKC of the terms of the contract of sale which
impact the sufficiency of cash flow from the business after payment of debt
service to provide for, among other things, any needed remodeling of the
Franchised Restaurant.
(6) FRANCHISEE seller shall pay BKC an assignment fee of Two
Thousand ($2,000.00) Dollars for the costs and expenses incurred by BKC in
connection with the transfer of the first Burger King Restaurant involved in
the transaction and Five Hundred (500.00) Dollars for each additional Burger
King Restaurant involved in the same transaction. In the event the prospective
purchaser is not an existing approved Burger King Franchisee, FRANCHISEE
seller shall pay BKC a New Franchisee Training Fee of Two Thousand ($2,000.00)
Dollars in connection with the transfer of the first Burger King Restaurant
involved in the transaction.
(7) Execution by FRANCHISEE seller of a general release of BKC
in a form satisfactory to BKC.
F. If BKC does not accept the offer to purchase the Franchised
Restaurant as provided in Paragraph 16, FRANCHISEE may conclude the sale to
the purchaser who made the offer provided BKC's consent to the assignment be
first obtained, which consent will not be unreasonably withhold upon
compliance with the conditions imposed by BKC on the assignment. The
conditions on the assignment may include, but are not limited to, the
conditions set forth in Paragraph E above. BKC shall use reasonable efforts to
provide consent of the assignment to FRANCHISEE, or communicate notice of
disapproval, within Ninety (90) days (for transactions involving less than ten
(10) restaurants the time frame shall be Sixty (60) days) of receipt by BKC of
FRANCHISEE'S notice of assignment and the furnishing of all reasonably
requested information.
G. In the event of a transfer, sale, assignment, merger or
consolidation by FRANCHISEE of all interest in this Agreement, the Franchised
Restaurant, or a transfer of all or part of an Individual Seller's interest in
the Franchised Restaurant (or all or part of the stock if FRANCHISEE is a
corporation as defined in paragraph 15.D above), the FRANCHISEE or Individual
Seller (hereinafter "Transferor") shall remain personally liable for all
Royalty, Advertising Contribution and other payments which come due during the
periods of time hereinafter described. in accordance with the following
criteria:
EXHIBIT "A"
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WITHOUT NOTICE
18
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(1) If Transferor has transferred Transferor's interest
pursuant to a contract of sale which provides that installment payments of the
purchase price are to be made to the Transferor or Transferor's designee,
liability will continue for the longer of (i) twelve (12) months from date of
assignment, or (ii) such time as the payments are to be made, including any
extensions, provided, however, that after the first anniversary of such
transfer, the liability of the Transferor shall be limited to the total amount
of the original installment payments to be made under the contract for sale or
other instrument evidencing the debt. In the event the holder of the note or
other evidence of debt deems the obligation satisfied, Transferor will
simultaneously be released from liability to BKC under this Agreement for
Royalty and Advertising payments. Any contract for sale which provides for
installment payments of the purchase price shall provide that such payments
are subordinate to the payment of Royalty and Advertising Contributions called
for in this Agreement and that the note or other evidence of the obligation
shall not be assignable by the holder or payee.
(2) If the Transferor has transferred Transferor's interest
pursuant to a contract of sale which provides for cash payment in full, upon
transfer, of the entire purchase price, the Transferor's liability shall
continue for a period of twelve (12) months from the date of the tranfer, and
shall be limited to the amount of Royalty fees and Advertising fees which
accrued during such period and are not paid by Transferee. Upon payment of
such amounts, Transferor shall be automatically released from any continuing
liability under this Agreement for Royalty and Advertising payments.
H. Following a transfer of Transferor's interest, in the event BKC
seeks to enforce continuing liability pursuant to Paragraph 15.G of this
Agreement against a transferor, the immediately preceding Transferor of an
interest in the franchise will be afforded an opportunity to cure the default
and the right to reassume the position of franchisee under the terms of this
Franchise Agreement provided all of the following conditions have been met:
(1) At the time of transfer, the Transferor must have been in
good standing with BKC in accordance with the operational expansion criteria
then in effect for Franchise Approval;
(2) At the time of proposed re-entry, the Transferor must be
in good standing and be able to satisfy BKC's then current Franchise Approval
Criteria and Expansion Approval Criteria and deliver to BKC appropriate
application forms and such other documents and agreements as BKC may
reasonably require evidencing the assumption by Transferor of the rights and
obligations under the remaining term of the Franchise Agreement.
(3) At the time of re-entry, BKC shall be paid, in full, all
sums past due and owing under this Franchise Agreement and any agreement
related to the Franchised Restaurant, as well as any past due sums related to
products or supplies sold by BKC for use in the Franchised Restaurant including
without limitation, any pre- and post-petition amounts due from any franchisee
with regard to the Franchised Restaurant which is the subject of a proceeding
under the United States Bankruptcy Code or any similar law affecting the
rights of creditors generally.
(4) Transferor must take possession of and acquire control and
dominion over substantially all of the tangible real and personal property
associated with the operation of the Franchised Restaurant.
EXHIBIT "A"
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WITHOUT NOTICE
19
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I. During the period of time in which Transferor remains liable
pursuant to Paragraph 15.G above, BKC shall use reasonable efforts to send
simultaneous copies of notices of default under this Franchise Agreement to
Transferor. Transferor shall use reasonable efforts to send simultaneous
copies of notices of default under any installment payment due to Transferor
from Transferee. Failure of either party to provide copies of the notices of
default shall not be an event of default under the terms of this Franchise
Agreement. Transferor shall be afforded the same opportunity to cure as is set
forth in the Notice of Default.
J. In addition, FRANCHISEE agrees that, prior to acquiring any other
Burger King Restaurant franchise which may be offered to him for sale or which
he may offer to purchase, such franchise will first be offered to BKC on the
same terms, conditions and price in accordance with Paragraph 16.
16. RIGHT OF FIRST REFUSAL
A. In the event FRANCHISEE receives an acceptable bona fide offer from
a third party to purchase the Franchised Restaurant or any portion thereof or
interest therein, FRANCHISEE shall give BKC written notice setting forth the
name and address of the prospective purchaser, the price and terms of the
offer together with a franchisee application completed by the prospective
purchaser, a copy of the Purchase and Sale Agreement, executed by both
FRANCHISEE and purchaser, and all exhibits, copies of any real estate purchase
agreement or agreements, proposed security agreements and related promissory
notes, assignment documents, title insurance commitment and any other
information that BKC may request in order to evaluate the offer. BKC shall
then have the prior option to purchase FRANCHISEE'S interest covered by the
offer at the price and upon the same terms of the offer. If the consideration
is not money, the purchase price shall be cash equal to the fair market value
of the consideration. BKC shall have Twenty (20) Business Days after receipt
of FRANCHISEE'S notice of offer and the furnishing of all reasonably requested
information within which to notify FRANCHISEE of its intent to accept or
reject the offer. Silence on the part of BKC shall constitute rejection. If
the proposed sale includes assets of FRANCHISEE not related to the operation
of franchised Burger King Restaurants, BKC may, at its option, elect to
purchase only the assets related to the operation of franchised Burger King
Restaurants and an equitable purchase price shall be allocated to each asset
included in the proposed sale. This right of first refusal shall apply to any
transfer, conveyance, assignment,,consolidation. merger or any other
transaction in which legal or beneficial ownership of the franchise granted by
this Agreement is vested in other than the individual FRANCHISEE. If this
Agreement has been assigned to a Corporation in accordance with Paragraph 15
of this Agreement, then this right of first refusal shall also apply if Voting
Common Stock in the Corporation is sold, assigned or transferred to
individuals or entities other than those approved by BKC as owners of the
Voting Common Stock.
B. The election by BKC not to exercise its right of first refusal as to
any offer shall not affect its right of first refusal as to any subsequent
offer.
C. Any sale, attempted sale, assignment or other transfer of the
franchise grant other than a transfer pursuant to Paragraph 15.C or 15.D
effected without first giving BKC the right of first refusal described above
shall be void and of no force and effect. If this Agreement has been assigned
to a Corporation in accordance with Paragraph 15 of this Agreement, any sale,
attempted sale, assignment or other transfer of Voting Common Stock in the
Corporation to individuals or entities other than those approved by BKC as
owners of Voting Common Stock
EXHIBIT "A"
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WITHOUT NOTICE
20
<PAGE>
of such Corporation without first giving BKC the right of first refusal
described above shall be void and of no force and effect.
17. OPTION TO OBTAIN SUCCESSOR FRANCHISE AGREEMENT
FRANCHISEE shall have, exercisable on the expiration date of the Term
of this Agreement, an option to obtain a Successor Burger King Restaurant
Franchise Agreement ("Successor Franchise Agreement") for a term of Twenty
(20) years, provided that:
A. FRANCHISEE has given BKC written notice ("Notice") of its intention
to exercise its Option to Obtain a Successor Franchise Agreement during the
fourth year prior to the expiration of the Term of this Agreement.
B. FRANCHISEE, at the time of the Notice and at the time of the
expiration of the Term of this Agreement, is not in default of and has
substantially complied with the terms and conditions of this Agreement
consistently and throughout its Term, including but not limited to the
following:
(1) FRANCHISEE has operated the Franchised Restaurant in
accordance with the terms and conditions of this Agreement, including, but not
limited to, operating the Franchised Restaurant in compliance with the
operating standards and specifications established from time to time by BKC as
to quality of service, cleanliness, health and sanitation;
(2) FRANCHISEE has satisfied, in a timely fashion, all
financial obligations in accordance with the terms and conditions of this
Agreement;
(3) FRANCHISEE has maintained, improved, altered, replaced and
remodeled the Franchised Restaurant, including, without limitation the
Premises, Improvements, signs and equipment, throughout the Term of this
Agreement in accordance with the terms and conditions of this Agreement.
(4) FRANCHISEE shall have completed, not more then three (3)
years and not less than three (3) months prior to the expiration of the Term
of this Agreement, the improvements, alterations, remodeling or rebuilding of
the interior and exterior of the Franchised Restaurant so as to reflect the
then Current Image of Burger King Restaurants, pursuant to such plans and
specifications as BKC reasonably approves.
(5) Execution by FRANCHISEE of a general release of BKC in a
form satisfactory to BKC.
C. Within One Hundred and Twenty (120) days after receipt of the
Notice, BKC shall advise FRANCHISEE in writing if FRANCHISEE is not eligible
to obtain a Successor Franchise Agreement, specifying the reasons for such
ineligibility and identifying whether such deficiencies are capable of cure.
Between the date of the Notice and the expiration date of the Term of this
Agreement, if any act, circumstance or omission causes FRANCHISEE to become
ineligible to obtain a Successor Franchise Agreement then BKC shall advise
FRANCHISEE in writing thereof, specifying the deficiency and identifying a
cure period if applicable.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
21
<PAGE>
D. FRANCHISEE has the right to remain in possession of the Franchised
Restaurant for the term of the Successor Franchise Agreement.
E. FRANCHISEE shall execute the then current form of Successor
Franchise Agreement, which may differ as to Royalty and Advertising
Contributions, as well as other terms and conditions. FRANCHISEE shall, upon
execution of the Successor Franchise Agreement, pay to BKC the then current
Franchise Fee.
18. DEFAULT AND EFFECT OF TERMINATION
A. Default
If an act of default hereunder is committed by FRANCHISEE, and
FRANCHISEE fails to cure the default after any required notice and within the
cure period applicable, BKC may, at its option and without prejudice to any
other rights or remedies provided for hereunder or by law, terminate the
Franchise Agreement by written notice or otherwise. The applicable cure period
shall be as described below but, if a cure period is not specifically
mentioned, it shall be Thirty (30) days. In some cases, as identified below,
no cure period is allowed and no notice may be required. If any applicable law
or rule requires a longer notice period or a longer cure period than that
provided herein, then the period required under the law or rule shall be
substituted for the requirements herein. The following are material acts of
default and shall be good cause for termination:
(1) FRANCHISEE fails to operate the Franchised Restaurant in
accordance with the operating standards and specifications established from
time to time by BKC as to service, cleanliness, health and sanitation.
FRANCHISEE shall have Five (5) days after notification to cure the default.
(2) FRANCHISEE sells any product which does not conform to
BKC's specifications. FRANCHISEE shall have Five (5) days after notification
to cure the default.
(3) FRANCHISEE fails to sell products designated by BKC.
FRANCHISEE shall have Five (5) days after notification to cure the default,
provided, however, if for reasons beyond the control of FRANCHISEE, FRANCHISEE
is unable to obtain such products within the cure period, the default cure
period shall be extended for a reasonable period of time provided FRANCHISEE
initiates and actively pursues substantial and continuing action within the
cure period to cure such default.
(4) FRANCHISEE sells products not approved by BKC. FRANCHISEE
shall have Five (5) days after notification to cure the default.
(5) FRANCHISEE uses equipment, uniforms or decor not approved
by BKC.
(6) FRANCHISEE fails to maintain the Franchised Restaurant in
good condition and repair, or fails to make all improvements, alterations or
remodelings as may be determined by BKC to be reasonably necessary to reflect
the Current Image as provided in Paragraph 5.B, as and when required.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
22
<PAGE>
(7) FRANCHISEE fails to pay when due any Royalty or Advertising
and sales promotion Contribution required to be paid under this Agreement.
FRANCHISEE shall have Ten (10) days after notification to cure the
delinquency.
(8) FRANCHISEE (i) fails to submit any information required by
Paragraph 10 above ("Accounting Procedures") or (ii) knowingly submits a
financial statement which under states Gross Sales. If the act of default set
forth in (ii) occurs, BKC shall have the right to immediately terminate this
Agreement without notice and FRANCHISEE shall have no right to cure.
(9) FRANCHISEE abandons the franchise relationship without the
prior consent of BKC at any time during the Term of this Agreement. The
cessation of operation of the Franchised Restaurant on the Premises other than
with the consent of BKC, whether the Premises remain vacant or a converted to
another use, shall be considered abandonment of the franchise relationship,
provided, however, that the Franchised Restaurant shall not be deemed
abandoned if the cessation is due to circumstances beyond FRANCHISEE's
reasonable control (such as lack of electrical power, weather conditions,
earthquakes, strikes and the like) and FRANCHISEE diligently undertakes to
resume operations after the reason for such cessation has been abated.
(10) FRANCHISEE ceases to occupy the Franchised Restaurant. If
the loss of possession is the result of governmental exercise of eminent
domain, FRANCHISEE may, with BKC's consent and subject to availability,
relocate to other premises in the same market area for the balance of the term
of this Agreement.
(11) FRANCHISEE (if FRANCHISEE consists of more than one
person, the Operating Partner or the partnership, and if the franchise has
been assigned to a Corporation, the Corporation) files a petition or
application seeking any type of relief under the Bankruptcy Code or any state
insolvency or similar law, or someone files a petition or application seeking
to have FRANCHISEE adjudicated a bankrupt, or seeking other relief against
FRANCHISEE under the Bankruptcy Code or any state insolvency or similar law
and the petitioner application is not dismissed within Ninety (90) days after
it is filed. Subject to the applicable law, the Franchise shall terminate
without notice or cure period upon the occurrence of this act of default as if
that date were the expiration date and FRANCHISEE expressly and knowingly
waives any rights that he may have under the provisions of the Bankruptcy Code
and consents to the termination of this Agreement or any other relief which
may be sought in a Complaint filed by BKC to lift the provisions of the
automatic stay of the Bankruptcy Code. Additionally, FRANCHISEE agrees not to
seek an Injunctive Order from any court in any jurisdiction relating to
insolvency, reorganization or arrangement proceedings which would have the
effect of staying or enjoining this provision.
(12) FRANCHISEE admits in writing his inability to pay his
debts as they mature or makes an assignment for the benefit of creditors, or a
receiver (permanent or temporary) for any part of his property is appointed by
a court of competent authority. If this act of default shall occur, BKC shall
have the right to immediately terminate this Agreement without notice or cure
period.
(13) A final judgment against FRANCHISEE remains unsatisfied
of record for Thirty (30) days (unless a supersede as or other appeal bond has
been filed) or if a levy of
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
23
<PAGE>
execution is made upon the franchise granted by this Agreement or upon any
property used in the Franchised Restaurant, and it is not discharged within
Five (5) days of said levying.
(14) Conviction of FRANCHISEE or, if this Agreement has been
assigned to a Corporation, conviction of the Corporation or an officer,
director or shareholder of the Corporation in a court of competent
jurisdiction of an indictable offense punishable by a term of imprisonment in
excess of One (1) year. If this act of default shall occur, BKC shall have the
right to terminate this Agreement, such termination to be effective upon
notice to FRANCHISEE but with no opportunity to cure.
(15) FRANCHISEE uses or duplicates the Burger King System or
engages in unfair competition in violation of Paragraph 12 or discloses any
trade secrets of BKC in violation of Paragraph 11.A(1). If this act of default
shall occur, BKC shall have the right to terminate this Agreement, such
termination to be effective upon notice to FRANCHISEE but with no opportunity
to cure.
(16) FRANCHISEE denies BKC the right to inspect the Franchised
Restaurant or to audit the sales and accounting records of the Franchised
Restaurant.
(17) Conduct by FRANCHISEE which is deleterious or reflects
unfavorably on FRANCHISEE or the Burger King Restaurant System by exhibiting a
reckless disregard for the physical and mental well being of employees,
customers, BKC representatives or the public at large including, but limited
to, battery, assault, sexual harassment or other forms of threatening,
outrageous or unacceptable behavior.
(18) Failure by FRANCHISEE to maintain a responsible credit
rating by failing to make prompt payment of undisputed bills, invoices and
statements from suppliers of goods and services to the Franchised Restaurant.
(19) The sale, assignment, merger or transfer of any interest
of FRANCHISEE in this Agreement in violation of Paragraphs 3, 15 or 16 and, if
this Agreement has been assigned to a Corporation, the creation, sale,
assignment, or transfer of the stock of the Corporation, in violation of
Paragraphs 3, 15 or 16.
(20) FRANCHISEE, without the written consent of BKC, enters
into a management agreement or consulting arrangement relating to the
Franchised Restaurant.
(21) Failure to restore the Franchised Restaurant after damage
or destruction as provided in Paragraph 7.
(22) The knowing and intentional submission by FRANCHISEE of a
franchise application and/or management commitment form which contains any
false or misleading material statements or omits any material fact. If this
act of default shall occur, BKC shall have the right to terminate this
Agreement, such termination to be effective upon notice to FRANCHISEE but with
no opportunity to cure.
(23) Repeated breaches of provisions of this Agreement.
(24) The acquisition of an interest in a business in violation
of Paragraph 19.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
24
<PAGE>
(25) Failure by FRANCHISEE to comply with any other provisions
of this Agreement.
The failure of BKC to terminate this Agreement upon the occurrence of
one or more events of default will not constitute a waiver or otherwise affect
the right of BKC to terminate this Agreement because of a continuing or
subsequent failure to cure one or more of the aforesaid events of default or
any other default.
B. Effect of Termination
(1) Upon termination or expiration of this Agreement,
FRANCHISEE's right to use the Burger King Marks and the Burger King System
shall terminate. FRANCHISEE shall not thereafter identify himself as a Burger
King franchisee or publicly identify himself as a former Burger King
franchisee or use any of BKC's trade secrets, promotional materials, the
Burger King Marks or any mark confusingly similar, nor shall FRANCHISEE
disclose any of BKC's trade secrets. Upon termination or expiration of this
Agreement, FRANCHISEE will immediately return to BKC the MOD Manual loaned to
him, together with all other material containing trade secrets.
(2) FRANCHISEE grants to BKC, upon termination or expiration
of this Agreement, the option to purchase all usable paper goods, containers
and printed menus bearing the Burger King Marks at FRANCHISEE's cost, and to
purchase the restaurant equipment. furniture, fixtures and signs at fair market
value.
(3) If the parties do not enter into a Successor Franchise
Agreement, FRANCHISEE agrees to immediately upon termination or expiration of
this Agreement, make such removals or changes in signs and the building as BKC
shall request, so as to effectively distinguish the building an premises from
its former appearance and from any other Burger King Restaurant. In the event
FRANCHISEE fails to make the changes, FRANCHISEE consents to BKC entering the
building and premises to make non-structural changes at FRANCHISEE's expense.
(4) In the event of termination for any default of FRANCHISEE,
any damage suffered by BKC shall be a lien in favor of BKC against the
personal property, machinery, fixtures and equipment owned by FRANCHISEE on
the premises at the time of default.
(5) The foregoing shall be in addition to any other rights and
remedies of BKC that exist under statute, regulation or common law.
19. RESTRICTIVE COVENANT
FRANCHISEE covenants and agrees that during the Term of this Agreement
he will not own, operate or have any interest in any hamburger business except
other franchised Burger King Restaurants. FRANCHISEE further covenants and
agrees that for a period of One (1) year after any sale, assignment, transfer,
termination or expiration of this Agreement, FRANCHISEE will not own, operate
or have any interest in any fast-food business, except other franchised Burger
King Restaurants, either at or within Two (2) miles of the Franchised
Restaurant.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
25
<PAGE>
20. RESOLUTION OF DEVELOPMENT DISPUTES
A. Non-Binding Mediation
BKC and FRANCHISEE agree that they shall attempt to resolve any
dispute ("Development Dispute") that arises out of a decision by BKC to
develop or authorize development of a new restaurant ("Development Decision"),
by negotiation between FRANCHISEE and representatives of BKC who have
authority to settle the Development Dispute. The BKC representative shall be
at a higher level of management than the person with direct responsibility for
the initial Development Decision. If the matter has not been resolved within
Thirty (30) days of referral of the Development Dispute to the BKC
representative for negotiation, BKC and FRANCHISEE shall attempt to settle the
Development Dispute by non-binding mediation. The mediation procedure to be
followed by the parties shall be set forth in BKC's then current Procedures
for Resolving Development Disputes (the "Procedures").
B. Binding Dispute Resolution
The Procedures shall also set forth a binding dispute resolution
process which may be initiated pursuant to the Procedures at the sole election
of FRANCHISEE in the event the dispute is not resolved through the mediation
process. Subject to modifications made pursuant to the following paragraph,
the Procedures shall remain valid and enforceable by FRANCHISEE and BKC for
the term of this Agreement.
C. Modification of Procedures
The terms and conditions of the Procedures shall not be materially
modified by BKC without the express written approval of the Franchisee
Advisory Council.
D. Institution of Legal Proceedings
FRANCHISEE shall not institute any legal or administrative proceeding
for claims arising out of a Development Decision without first attempting to
resolve the Development Dispute through negotiation and non-binding mediation.
If the Development Dispute has not been resolved through negotiation or
mediation pursuant to paragraphs 20.A and FRANCHISEE has not timely elected
the optional binding dispute resolution pursuant to 20.B above, either party
may initiate litigation.
21. MISCELLANEOUS: GENERAL CONDITIONS
A. Interpretation
The Introduction shall be considered a part of this Agreement.
Paragraph captions are used only for convenience and are in no way to be
construed as part of this Agreement or as a limitation of the scope of the
particular paragraphs to which they refer. Words of any gender used in this
Agreement shall include any other gender, and words in the singular shall
include the plural, where the context requires.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
26
<PAGE>
B. Non-Waiver
The failure of BKC to exercise any right or option given to it under
this Agreement, or to insist upon strict compliance by FRANCHISEE with the
terms and conditions of this Agreement shall not constitute a waiver of any
terms or conditions of this Agreement with respect to any other or subsequent
breach, nor a waiver by BKC of its right at any time thereafter to require
exact and strict compliance with the terms and conditions of this Agreement.
The rights or remedies set forth in this Agreement are in addition to any
other rights or remedies which may be granted by law.
C. Governing Law, Forum and Compliance
(1) This Agreement shall become valid when executed and
accepted by BKC. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida.
(2) FRANCHISEE and BKC acknowledge and agree that the U.S.
District Court for the Southern District of Florida, or if such court lacks
jurisdiction, the 11th Judicial Circuit (or its successor) in and for Dade
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising, either directly or indirectly,
under or in connection with this Franchise Agreement except to the extent
otherwise provided in this Agreement and the parties further agree that, in
the event of litigation arising out of or in connection with this Agreement in
these courts, they will not contest or challenge the jurisdiction or venue of
these courts.
(3) Anything in this Agreement to the contrary
notwithstanding, FRANCHISEE shall conduct his business in a lawful manner and
faithfully comply with applicable laws or regulations of the United States and
the state, city or other political subdivision in which the Franchised
Restaurant is located.
D. Severability
BKC and FRANCHISEE agree that if any provision of this Agreement may
be construed in two ways, one of which would render the provision illegal or
otherwise voidable or unenforceable and the other of which would render the
provision valid and enforceable, such provision shall have the meaning which
renders it valid and enforceable. The language of all provisions of this
Agreement shall be construed according to its fair meaning and not strictly
against BKC or FRANCHISEE. It is the desire and intent of BKC and FRANCHISEE
that the provisions of this Agreement be enforced to the fullest extent, and
should any provision be invalid or unenforceable under Florida law, but valid
under the laws of the state where the Franchised Restaurant is located, the
provision shall be governed by the law of that state. In the event any court
shall determine that any provision in this Agreement is not enforceable as
written, BKC and FRANCHISEE agree that the provision shall be amended so that
it is enforceable to the fullest extent permissible under the laws of the
jurisdiction in which enforcement is sought. The provisions of this Agreement
are severable and this Agreement shall be interpreted and enforced as if all
completely invalid or unenforceable provisions were not contained in the
Agreement, and partially valid and enforceable provisions shall be enforced to
the extent that they are valid and enforceable.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
27
<PAGE>
E. Notices
(1) All notices to BKC shall be in writing and shall be
delivered or sent by registered or certified mail, postage fully prepaid,
addressed to it at its offices at P.O. Box 020783, Miami, Florida 33102-0783,
Attention: General Counsel, or at such other address as BKC shall from to time
designate in writing.
(2) All notices to FRANCHISEE shall be in writing and shall be
hand delivered or sent by registered or certified mail or telegraph, addressed
to FRANCHISEE at the Franchised Restaurant or FRANCHISEE'S last designated in
writing mailing address.
(3) Notices shall be deemed delivered on the earlier of actual
receipt or the Third (3rd) day after being deposited in the U.S. Mail.
F. Liability of Multiple Franchisees
If FRANCHISEE consists of more than one person, each partner's
liability and obligation under this Agreement shall be joint and several.
G. Modification
This Agreement may only be modified or amended by a written document
executed by BKC and FRANCHISEE.
H. Binding Effect
This Agreement shall be binding upon the parties, their heirs,
executors, personal representatives, successors or assigns.
I. Survival
Any provisions of this Agreement which impose an obligation after
termination or expiration of this Agreement shall survive the termination or
expiration of this Agreement and be binding on the parties.
J. Attorney's Fees
In any litigation to enforce the terms of this Agreement, all costs
and all attorney's fees (including those incurred on appeal) incurred as a
result of the legal action shall be paid to the prevailing party by the other
party.
K. Entire Agreement
This Agreement, together with the Franchise Application, Management
Commitment Form, Capitalization Plan and Target Reservation Agreement
submitted by FRANCHISEE to BKC upon which BKC is relying in granting this
franchise, constitute the entire agreement of the parties and supersedes all
prior negotiations, commitments, representations and undertakings of the
parties with respect to the subject matter of this Agreement.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
28
<PAGE>
WITNESS: BURGER KING CORPORATION
By:
- ---------------------------- --------------------------------
Vice President
Attest:
- ---------------------------- ----------------------------
Assistant Secretary
(Corporate Seal)
WITNESS: FRANCHISEE:
- ---------------------------- -----------------------------------
- ---------------------------- -----------------------------------
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
29
<PAGE>
EXHIBIT "A"
[LEGAL DESCRIPTION]
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
30
<PAGE>
EXHIBIT "B"
BURGER KING MARKETING ACCOUNT
NEW RESTAURANT MARKETING ACCOUNT
EFFECTIVE DATE JUNE 1, 1991 FOR NEW RESTAURANT OPENINGS
A new Restaurant Marketing Account will be established for each new
restaurant in the Burger King USA system. Its purpose shall be to reimburse
the franchisee/manager for Advertising and promotion expenses incurred in
executing a marketing program for a new restaurant.
Burger King Corporation through its Marketing Account shall contribute
$2,500 to the New Restaurant Marketing Account. The $2,500 New Restaurant
Marketing Account will be charged to the National Marketing Fund in the
quarter in which the restaurant opens.
The Account may not be used to promote another restaurant and
expenditures from the Account must be for Advertising or promotion. Examples
of expenditures which would not qualify for payment from the Account are:
1 . Food cost related to redemption of promotion coupons.
2 . Hourly or management labor provided by restaurant employees.
3 . Permanent decor items.
4 . Membership fees.
5 . Donations, unless publicity results are documented.
6. WHOPPER cards.
These are examples and not meant to be all inclusive.
The franchisee/manager will submit a new Restaurant Marketing plan for
approval by the Franchise Manager. An approved plan must be on file prior to
any restaurant activities, since no reimbursements will be made until the
approved plan has been received. The New Restaurant Marketing program must be
completed within 210 days (seven months) of the restaurant's opening day. If
an approved New Restaurant Marketing program is not conducted within the 210
day period, all monies will revert to the National Marketing Fund on the 211th
day. Two additional months will be allowed to present reimbursement requests
to Marketing Account Administration. The expenses must be for Advertising or
promotion which occurred during the prescribed seven month period. Any
balances remaining at the end of the nine month period will revert to the
National Marketing Fund.
Request for reimbursement along with copies of all invoices must be
forwarded on the prescribed form. Marketing Account Administration will
reimburse the restaurant for qualifying expenditures. The Franchise Manager
shall have the responsibility of screening invoices submitted by the
franchisee/manager and rejecting those which do not qualify as Advertising or
promotion and/or which do not constitute a normal New Restaurant Marketing
Account expense.
31
<PAGE>
BURGER KING CORPORATION
GUIDELINES FOR PREPARATION OF
CORPORATE GOVERNING INSTRUMENTS
The Burger King(R) Restaurant Franchise Agreement (the "Agreement")
provides, at Paragraph 15.D that the Franchisee may, with the prior written
consent of Burger King Corporation ("BKC") assign the Agreement to a
corporation (the "Corporation") so long as certain reasonable BKC conditions,
including but not limited to those set forth in the Agreement are met. The
Agreement also provides, at Paragraph 15.D(6) that if the Corporation wishes
to issue either Non-Voting Common Stock or Non-Voting Preferred Stock (it may
not issue both), articles or certificate of incorporation and the by-laws of
the Corporation (herein the "governing instruments") must contain at least the
provisions set forth in these Guidelines For Preparation Of Corporate
Governing Instruments.
Before setting forth the required provisions, a note of CAUTION is in
order. The issuance of stock to family members and key employees may involve
and invoke security registration and sales laws, "blue sky" disclosure laws,
wage and hour laws and numerous other federal, state and local laws and
regulations. A Franchisee should not, under any circumstances, issue, sell or
give away Voting or NonVoting Stock of any sort without first discussing the
matter in depth with an attorney and following his or her instructions
carefully.
The required provisions have been divided into those which relate to
Non-Voting Common Stock and those which relate to Non-Voting Preferred Stock.
Under Paragraph 15.D(3) of the Agreement, the Corporation may not issue both
Non-Voting Common Stock and Non-Voting Preferred Stock.
It should also be noted that Paragraph 11.A.(3) of the Agreement
requires that in the adoption of a corporate or partnership name, the
Franchisee may not use any of the Burger King Marks, or any variation,
abbreviation, or words confusingly similar to the Burger King Marks.
Provisions Regarding Non-Voting Common Stock
A. The aggregate number of authorized shares of stock of the
Corporation shall be (corporation will insert number) of which (a) (insert
number) shall be designated shares of Voting Common Stock of the par value of
(insert number) per share (the "Voting Common Stock"), and (b) (insert number)
shall be designated shares of Non-Voting Common Stock of the par value of
(insert number) per share.
B. So long as the Corporation is the assignee of any Burger King
Franchise, the relative rights, preferences and limitations of the Voting
Common Stock and the Non-Voting Common Stock are as follows:
1. Voting Common Stock
(a) Voting Common Stock shall only be issued to and held by those
natural persons who are approved as franchisees by Burger King Corporation. No
more than five natural persons may hold shares of Voting Common Stock.
Notwithstanding the foregoing, BKC may, in the exercise of its reasonable
discretion, permit more than five holders of shares of Voting Common Stock
upon compliance with each of the following conditions:
(a) The additional holder ("Additional Holder") is an Immediate
Family Member of an individual, original franchisee ("Original Franchisee").
No more than one Additional Holder shall be permitted per Original Franchisee.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
1
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(b) The Additional Holder is approved as a Burger King
Franchisee in accordance with then current BKC standards for approving new
franchisees.
(c) The Additional Holder agrees, in writing, to assume
liability and to perform all the terms and conditions of the Franchise
Agreement to the same extent as the Original Franchisee.
In no event shall there be more than five (5) Additional Holders nor at any
time shall the combined total of Original Franchisees and Additional Holders
exceed ten (10). If a holder of shares of Voting Common Stock is not a
natural person approved as a franchisee by Burger King Corporation, the shares
of Voting Common Stock shall be deemed to be shares of Non-Voting Stock until
they are repurchased pursuant to Section 3.
(b) The holders of shares of Voting Common Stock shall be entitled to
receive, out of the funds of the Corporation legally available for such
purpose, dividends as and when declared by the Board of Directors.
(c) In the event of any liquidation, dissolution or distribution of
the assets of the Corporation the holders of shares of the Voting Common Stock
together with holders of the Non-Voting Common Stock (whose rights are limited
as set forth in Section 2(d)) shall be entitled to share ratably in the
distribution of all remaining assets of the Corporation available for
distribution.
2. Non-Voting Common Stock
(a) Non-Voting Common Stock shall only be issued to and held by either
(1) a member of the immediate family (which consists of the spouse and
children) of the holder of shares of Voting Common Stock, or (2) a "key
employee" of the Corporation.
(b) The aggregate number of outstanding Shares of Non-Voting Common
Stock shall not exceed 25% of the sum of (a) the aggregate number of
outstanding shares of Voting Common Stock and (b) the aggregate number of
outstanding shares of Non-Voting Common Stock.
(c) Except as specifically required by applicable law, holders of
Non-Voting Common Stock shall not have the right to vote. If the holders of
shares of Non-Voting Common Stock have the right to vote on an action under
applicable law, they shall vote as a single class with the holders of shares
of Voting Common Stock.
(d) In the event of any liquidation, dissolution or distribution of
the assets of the Corporation the holders of shares of Non-Voting Common Stock
together with the holders of the shares of Voting Common Stock shall be
entitled to share ratably in the distribution of all remaining assets of the
Corporation available for distribution, except that no holder of shares of
Non-Voting Common Stock may receive, in its capacity as a holder of shares of
Non-Voting Common Stock, any interest in the Burger King Franchise other than
an interest in the proceeds of any disposition thereof.
(e) Except as set forth in Section 2(c) and 2(d), the holders of
shares of Non-Voting Common Stock shall have all the rights and privileges of
holders of shares of Voting Common Stock.
3. Repurchase
To the extent permitted by law, the Corporation shall repurchase
shares of Non-Voting Common Stock at such time as the holder thereof ceases to
be a key employee of the Corporation or a member of the immediate family of a
holder of Voting Common Stock and shall repurchase shares of Voting Common
Stock at such time as the holder thereof ceases to be a person meeting the
requirements hereunder of a holder of shares of Voting Common Stock, for an
amount per share (corporation will insert an applicable pricing mechanism)
provided, however, that such amount per share shall not exceed: (i) the
aggregate of
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
2
<PAGE>
net income and net losses reported to the Internal Revenue Service less taxes
paid or payable, dividends previously paid, declared or accrued and prior
redemptions and repurchases of shares of capital stock of the Corporation,
divided by (ii) the total number of shares of Voting Common Stock and
Non-Voting Common Stock outstanding immediately prior to such proposed
repurchase.
Provisions Regarding Non-Voting Preferred Stock
A. The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is (corporation will insert number),
to be divided into two classes consisting of (insert number) shares of a class
designated "Preferred Stock", of the par value of (insert number) per share,
and (insert number) shares of a class designated "Common Stock", of the par
value of (insert number) per share.
B. So long as the Corporation is the assignee of any Burger King
Franchise, the relative rights, preferences and limitations of the shares of
each class are as follows:
1. Preferred Stock
The Preferred Stock may be issued from time to time in one or more
series, with such designation or title, in such number of shares and with the
relative rights and preferences (a) as may be fixed by resolution of the Board
of Directors without further action by shareholders, (b) as may be fixed by
the shareholders, or (c) as set forth below; provided, however, that in no
event will holders of outstanding shares of Preferred Stock have rights more
extensive than the following:
(a) Holders of shares of Preferred Stock shall be either (1) a member
of the immediate family (which consists of the spouse and children) of the
holders of the shares of Common Stock or (2) a "key employee" of the
Corporation.
(b) Shares of Preferred Stock shall not be convertible into shares of
Common Stock.
(c) Except with respect to amendments to this instrument which
adversely affect the relative rights and preferences of holders of shares of
Preferred Stock, for any action on which the holders of shares of Preferred
Stock are entitled to vote under applicable law, the holders of outstanding
shares of Preferred Stock so entitled to vote shall vote, for these purposes
only, with the holders of outstanding shares of Common Stock, and the maximum
vote which all such holders of shares of Preferred Stock shall have is 25% of
the aggregate number of outstanding shares of Preferred Stock and Common
Stock, taken as a whole, entitled to vote on such action.
(d) Upon liquidation, dissolution or distribution of the assets of the
Corporation, the holders of all outstanding shares of Preferred Stock shall
not be entitled to receive more than 25% of the proceeds upon such
liquidation, dissolution or distribution; provided, however, that in no event
will the holders of shares of Preferred Stock be entitled to receive upon
liquidation, dissolution or distribution of assets any interest in the Burger
King Franchise other than an interest in the proceeds from any disposition
thereof.
2. Common Stock
(a) Common Stock shall only be issued to and held by those natural
persons who are approved as franchisees by Burger King Corporation. No more
than five natural persons may hold shares of Common Stock. If a holder of
shares of Common Stock is not a natural person approved by Burger King
Corporation, the shares of Common Stock so held shall be subject to repurchase
pursuant to Section 3.
(b) Subject to the prior payment or provision therefor of dividends on
the Preferred Stock, the holders of shares of Common Stock shall be entitled
to receive out of the funds of the Corporation legally available for such
purpose dividends as and when declared by the Board of Directors.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
3
<PAGE>
(c) In the event of any liquidation, dissolution or distribution of
the assets of the Corporation and after satisfaction of the preferential
requirements of the Preferred Stock, the holders of shares of Common Stock
shall be entitled to share ratably in the distribution of all remaining assets
of the Corporation available for distribution.
3. Redemption and Repurchase
(a) To the extent permitted by law, the Corporation shall redeem
shares of Preferred Stock for (corporation will insert an applicable
redemption price or pricing mechanism) at such time as the holder thereof
ceases to be a key employee of the Corporation or a member of the immediate
family of a holder of Voting Common Stock; provided, however, that the amount
per share to be paid upon such redemption shall not exceed 25% times (i) the
aggregate of net income and net losses previously reported by the Corporation
to the Internal Revenue Service, less taxes paid or payable with respect to
such reported net income less the sum of dividends paid, declared or accrued
and prior redemption and repurchases of shares of Preferred Stock and Common
Stock, divided by (ii) the total number of shares of Preferred Stock
outstanding at such time, including the shares to be redeemed.
(b) To the extent permitted by law, the Corporation shall repurchase
shares of Common Stock at such time as the holder thereof ceases to be a
person approved by Burger King Corporation as a franchisee, for an amount per
share (corporation will insert applicable pricing mechanism); provided,
however, that such amount per share shall not exceed: (i) the aggregate of net
income and net losses previously reported by the Corporation to the Internal
Revenue Service less taxes paid or payable with respect to such reported net
income, less the sum of amounts paid or payable for dividends previously paid,
declared or accrued and prior redemptions and repurchases of shares of capital
stock of the Corporation, and amounts which may be payable preferentially to
holders of all outstanding shares of Preferred Stock under Sections 1 and
3(a), divided by (ii) the total number of shares of Common Stock outstanding
immediately prior to such proposed repurchase.
EXHIBIT "A"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
4
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LEASOR EXPIRATION EXPIRATION
- ----------------------------------------- ---------------------- ------ ---------- ----------
<S> <C> <C> <C> <C>
BURGER KING CORPORATION
106 18459 South Halsted Street Glenwood, IL BKC 2/28/01 2/28/01
128 4848 West 87th Street Burbank, IL BKC 12/30/13 12/30/13
147 590 Roosevelt Road Glen Ellyn, IL BKC 4/29/05 4/29/05
189 103 North Laskin Avenue Joliet, IL BKC 9/1/14 9/1/14
207 2700 South Kedzie Avenue Chicago, IL BKC 9/1/14 9/1/14
209 176 East Butterfield Road Elmhurst, IL BKC 1/9/11 1/9/11
213 6701 West Roosevelt Road Benwyn, IL BKC 6/30/96 6/30/96
240 803 River Oaks Drive Calumet City, IL BKC 7/19/11 7/19/11
244 3728 South Archer Avenue Chicago, IL BKC 6/22/14 6/22/14
267 7938 Calumet Avenue Munster, IN BKC 9/1/14 9/1/14
305 10170 West Grand Avenue Franklin Park, IL BKC 9/1/14 9/1/14
381 10341 South Cicero Avenue Oak Lawn, IL BKC 4/29/04 4/29/04
540 9236 Indianapolis Boulevard Highland, IN BKC 9/1/14 9/1/14
720 715 North Hobart Road Hobart, IN BKC 10/30/05 10/30/05
1047 807 Lincoln Way Valpariso, IN BKC 9/22/00 9/22/00
1099 1 South 722 Summit Avenue Oakbrook Terrace, IL BKC 9/1/14 9/1/14
1103 7140 West 159th Street Orland Park, IL BKC 4/29/12 4/29/12
1116 415 W. Schusale Road Carol Stream, IL BKC 9/13/12 9/13/12
1118 2607 West Lincoln Highway Merrillville, IN BKC 5/29/12 5/29/12
1143 7205 Archer Avenue Summit, IL BKC 2/27/02 2/27/02
1170 6930 South Route 83 Willowbrook, IL BKC 9/22/00 9/22/00
1176 18240 South Kedzie Avenue Hazelcrest, IL BKC 8/30/13 8/30/13
1216 3219 Chicago Road S. Chicago Heights, IL BKC 9/1/14 9/1/14
1217 18156 South Torrance Avenue Lansing, IL BKC 4/12/13 4/12/13
1249 12701 South Ashland Avenue Calumet Park, IL BKC 12/30/03 12/30/03
1254 200 West 162nd Street South Holland, IL BKC 9/1/14 9/1/14
1334 500 South State Street Chicago, IL BKC 9/1/14 9/1/14
1345 1201 East Ridge Road Griffith, IN BKC 5/11/99 5/11/99
1355 1048 Sibley Boulevard Dolton, IN BKC 3/4/14 3/4/14
1397 14340 South Cicero Avenue Midlothian, IL BKC 9/22/00 9/22/00
1413 7432 South Kostner Avenue, Ford City
Shopping Center Chicago, IL BKC 5/31/96 5/31/96
1470 400 East Case Street Joliet, IL BKC 9/1/14 9/1/14
1500 2074 SouthLake Mall Merrillville, IN BKC 7/27/05 7/27/05
1645 417 North Bolingbrook Drive Bolingbrook, IL BKC 8/30/11 8/30/11
1660 5820 Calumet Avenue Hammond, IN BKC 9/1/14 9/1/14
1786 200 West Monroe Chicago, IL BKC 6/13/01 6/13/01
1819 2 East Chicago Chicago, IL BKC 7/30/06 7/30/06
1825 340 North Independence Romeoville, IL BKC 9/1/14 9/1/14
1866 113 West Roosevelt Road Maywood, IL BKC 1/7/07 1/7/07
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ----------------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BURGER KING CORPORATION
106 18459 South Halsted Street 9/21/62 33.6 2,350 82 Y N
128 4848 West 87th Street 1/15/64 32.2 2,610 72 Y N
147 590 Roosevelt Road 9/24/64 31.5 2,227 72 Y N
189 103 North Laskin Avenue 8/10/65 30.7 2,750 72 Y N
207 2700 South Kedzie Avenue 11/30/65 30.4 2,965 82 Y N
209 176 East Butterfield Road 11/23/65 30.4 2,250 76 Y Y
213 6701 West Roosevelt Road 11/17/65 30.4 2,458 74 Y N
240 803 River Oaks Drive 7/21/66 29.7 2,310 80 Y N
244 3728 South Archer Avenue 6/24/66 29.8 2,793 72 Y N
267 7938 Calumet Avenue 11/29/66 29.4 3,287 92 Y N
305 10170 West Grand Avenue 6/9/67 28.8 2,469 72 Y N
381 10341 South Cicero Avenue 5/2/68 27.9 2,420 72 Y N
540 9236 Indianapolis Boulevard 5/30/69 26.9 3,525 94 Y Y
720 715 North Hobart Road 10/30/70 25.4 3,452 102 Y N
1047 807 Lincoln Way 9/21/71 24.5 3,239 109 Y N
1099 1 South 722 Summit Avenue 3/3/72 24.1 4,370 108 Y N
1103 7140 West 159th Street 5/24/72 23.9 2,980 83 Y N
1116 415 W. Schusale Road 9/21/72 23.5 2,360 72 Y N
1118 2607 West Lincoln Highway 5/31/72 23.9 2,865 104 Y Y
1143 7205 Archer Avenue 1/10/73 23.2 3,568 108 Y N
1170 6930 South Route 83 10/27/72 23.4 2,980 80 Y N
1176 18240 South Kedzie Avenue 3/17/73 23.1 2,640 80 Y N
1216 3219 Chicago Road 5/31/73 22.9 2,790 72 Y Y
1217 18156 South Torrance Avenue 4/14/73 23.0 2,672 72 Y N
1249 12701 South Ashland Avenue 5/10/73 22.9 2,368 108 Y N
1254 200 West 162nd Street 8/20/73 22.6 2,654 70 Y N
1334 500 South State Street 3/21/74 22.0 9,400 108 N N
1345 1201 East Ridge Road 5/13/74 21.9 3,061 75 Y N
1355 1048 Sibley Boulevard 3/6/74 22.1 2,930 70 Y N
1397 14340 South Cicero Avenue 8/9/74 21.7 2,927 88 Y N
1413 7432 South Kostner Avenue, Ford City
Shopping Center 6/16/74 21.8 2,925 108 Y N
1470 400 East Case Street 12/30/74 21.3 3,022 78 Y N
1500 2074 SouthLake Mall 11/29/74 21.4 3,960 92 N N
1645 417 North Bolingbrook Drive 9/1/76 19.6 3,000 68 Y Y
1660 5820 Calumet Avenue 9/1/76 19.6 3,152 120 Y N
1786 200 West Monroe 10/4/76 19.5 5,676 260 Y N
1819 2 East Chicago 12/14/76 19.3 3,674 136 N N
1825 340 North Independence 12/21/76 19.3 3,151 108 Y N
1866 113 West Roosevelt Road 5/5/77 18.9 3,200 99 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LEASOR EXPIRATION EXPIRATION
- --------------------------------- ------------------- ------ ---------- ----------
<S> <C> <C> <C> <C>
2016 500 South Racine Chicago, IL BKC 4/23/97 4/23/97
2120 24 South Michigan Avenue Chicago, IL BKC 9/20/97 9/20/97
2130 20 Starrybrook Sauk Village, IL BKC 12/31/08 12/31/08
2196 6465 West Diversey Chicago, IL BKC 8/30/03 8/30/03
2672 340 South Neltnor West Chicago, IL BKC 6/11/10 6/11/10
2727 2595 Willow Creek Road Portage, IN BKC 12/25/11 12/25/11
3021 6904 Kennedy Avenue Hammond, IN BKC 6/29/10 6/29/10
3273 2921 Calumet Avenue Valpariso, IN BKC 11/1/11 11/1/11
3507 225 North Michigan Avenue Chicago, IL BKC 3/30/02 3/30/02
3695 621 West Chicago Avenue Chicago, IL BKC 9/1/14 9/1/14
3821 105 West 61st Avenue Merrillville, IN BKC 7/30/13 7/30/13
4136 5520 West 159th Street Oak Forest, IL BKC 9/1/14 9/1/14
4205 14601 LaGrange Road Orland Park, IL BKC 9/1/14 9/1/14
4293 5100 West Cermak Road Cicero, IL BKC 9/22/00 9/22/00
4462 1850 Southlake Mall Merrillville, IN BKC 5/30/05 5/30/05
4584 2505 West Jefferson Street Joliet, IL BKC 9/1/14 9/1/14
4594 4420 West 211th Street Malleson, IL BKC 9/22/00 9/22/00
4730 112 South State Street Chicago, IL BKC 9/29/04 9/29/04
5157 194 West Joe Orr Road Chicago Heights, IL BKC 9/2/11 9/2/11
5194 1616 North Larkin Crest Hill, IL BKC 9/2/11 9/2/11
5330 28 East Jackson Boulevard Chicago, IL BKC 4/23/07 4/23/07
5735 2110 West Galena Boulevard Aurora, IL BKC 9/22/00 9/22/00
5983 16791 Torrence Avenue Lansing, IL BKC 5/29/13 5/29/13
5984 2147 South Oak Park Avenue Berwyn, IL BKC 5/29/13 5/29/13
5986 2501 West Cermak Road Chicago, IL BKC 5/29/13 5/29/13
6185 7843 Indianapolis Boulevard Hammond, IL BKC 9/1/14 9/1/14
7045 600 South Newport Road Pontiac, IL BKC 3/28/11 3/28/11
7403 Woodfield Mall - Space D-312 Schaumburg, IL BKC 6/23/01 6/24/01
7545 7279 West 159th Street Orland Hills, IL BKC 9/1/14 9/1/14
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- --------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
2016 500 South Racine 4/25/77 18.9 6,223 278 N N
2120 24 South Michigan Avenue 9/22/77 18.5 9,506 378 N N
2130 20 Starrybrook 1/2/78 18.3 2,919 108 Y N
2196 6465 West Diversey 12/9/77 18.3 3,915 174 N N
2672 340 South Neltnor 6/13/80 15.8 3,537 125 Y Y
2727 2595 Willow Creek Road 12/27/79 16.3 3,577 96 Y Y
3021 6904 Kennedy Avenue 11/20/80 15.4 2,756 90 Y N
3273 2921 Calumet Avenue 11/3/81 14.4 3,074 91 Y N
3507 225 North Michigan Avenue 8/6/82 13.7 4,990 185 N N
3695 621 West Chicago Avenue 5/15/83 12.9 2,300 84 Y N
3821 105 West 61st Avenue 8/1/83 12.7 2,700 110 Y N
4136 5520 West 159th Street 7/28/84 11.7 2,700 86 Y Y
4205 14601 LaGrange Road 11/19/84 11.4 2,664 86 Y N
4293 5100 West Cermak Road 12/21/84 11.3 2,725 76 Y N
4462 1850 Southlake Mall 5/20/85 10.9 2,701 85 Y N
4584 2505 West Jefferson Street 7/26/85 10.7 3,260 80 Y N
4594 4420 West 211th Street 9/10/85 10.6 7,548 115 Y N
4730 112 South State Street 9/7/85 10.6 4,800 218 N N
5157 194 West Joe Orr Road 8/7/86 9.7 3,480 98 Y N
5194 1616 North Larkin 9/4/86 9.6 3,480 76 Y Y
5330 28 East Jackson Boulevard 4/24/87 8.9 3,000 103 N N
5735 2110 West Galena Boulevard 12/7/87 8.3 2,730 96 Y N
5983 16791 Torrence Avenue 5/31/88 7.8 2,230 86 Y N
5984 2147 South Oak Park Avenue 5/31/88 7.8 2,530 120 Y N
5986 2501 West Cermak Road 5/31/88 7.8 2,530 130 Y N
6185 7843 Indianapolis Boulevard 11/18/88 7.4 2,530 74 Y N
7045 600 South Newport Road 3/18/91 5.0 2,820 153 Y Y
7403 Woodfield Mall - Space D-312 6/24/92 3.8 3,001 92 N N
7545 7279 West 159th Street 11/12/92 3.4 3,468 93 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- -------------------------------------- --------------------- ------------------- ---------- ----------
<S> <C> <C> <C> <C>
FRIEDMAN
522 860 Elmhurst Road Des Plaines, IL BKC 5/10/99 5/15/99
1083 1540 E. Northwest Highway Palatine, IL BKC 11/30/14 1/8/06
1202 4330 North Harlem Avenue Norride, IL BKC 2/27/03 2/27/03
1232 1323 W. Irving Park Road Chicago, Il BKC 9/27/03 9/27/03
1455 1401 W. Fullerton Chicago, IL BKC 11/9/11 11/9/11
1512 2344 West Chicago Avenue Chicago, IL BKC 9/23/13 9/23/13
1763 925 Ogden Avenue Naperville, IL BKC 2/26/08 2/28/08
1848 2121 Bloomingdale Glendale Heights, IL BKC 9/11/12 9/11/12
2461 2360 West Higgins Road Hoffman Estates, IL BKC 5/29/09 5/29/09
2400 1540 Butterfield Road Downers Grove, IL BKC 5/29/09 5/29/09
2854 2499 W. Lawrence Avenue Chicago, IL BKC 6/29/09 6/29/09
2760 4423 Fox Valley Center Drive Aurora, IL BKC 2/28/08 2/28/08
2776 620 West North Avenue Elmhurst, IL BKC 9/15/12 9/15/12
2790 3456 Douglas Avenue Racine, WI BKC 8/28/11 5/27/10
3011 2001 Busse Highway Elk Grove Village, IL BKC 11/4/10 11/4/10
3043 111 West Irving Park Road Bensenville, IL BKC 9/15/12 9/15/12
3309 84 Stratford Square Drive Bloomingdale, WI BKC 9/22/00 9/22/00
4104 7620 120th Avenue, Box 8 Kenosha, WI BNB Land Venture, I 11/30/14 7/3/04
4137 1550 West North Avenue Melrose Park, IL BKC 8/14/09 8/14/09
4676 5400 Durand Avenue Racine, WI BKC 9/29/10 9/29/10
5042 9532 South Roberts Road Hickory Hills, IL BKC 6/3/11 6/3/11
5363 2 South 51 Route 59 Warrenville, IL BKC 2/28/08 2/28/08
5597 11124 W. 31st Street Westchester, IL BNB Land Venture, I 11/30/14 9/13/07
5751 2497 West Golf Road Center Hoffman Estates, IL BKC 2/28/08 2/28/08
5618 10550 Avenue B Chicago, IL BNB Land Venture, I 11/30/14 2/26/06
5875 1931 North Mannheim Road Melrose Park, IL BKC 8/29/11 8/29/11
6358 6400 W. Irving Park Road, Dunning
Square Shopping Center Chicago, IL BKC 4/22/09 4/22/09
6374 Danada West Shopping Center,
2020 Naperville Road Wheaton, IL BKC 9/21/13 9/21/13
6408 2191 W. Roosevelt Road Wheaton, IL BKC 9/23/13 9/23/13
6432 840 Army Trail Road Carol Stream, IL BKC 7/30/09 7/30/09
6858 170 Countryside Plaza Countryside, IL BKC 1/30/08 1/30/08
7112 2701 N. Western Avenue Chicago, IL BNB Land Venture, I 11/30/14 4/13/11
7266 13770 S. Avenue "O" Chicago, IL Whopp Shop Develop 4/11/12 4/12/12
7288 2834 W. Irving Park Road Chicago, IL BNB Land Venture, I 11/30/14 2/7/12
7560 13348 Washington Avenue Mount Pleasant, WI BNB Land Venture, I 11/30/14 9/9/12
7673 1750 N. Harlem Avenue Elmwood Park, IL BNB Land Venture, I 11/30/14 8/9/13
7674 2000 W. 47th Chicago, IL BNB Land Venture, I 11/30/14 5/26/13
8133 75 W. Northwest Highway Palatine, IL BNB Land Venture, I 11/30/14 5/25/14
8247 1144 Boughton Bolingbrook, IL BNB Land Venture, I 11/30/14 7/21/14
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- -------------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FRIEDMAN
522 860 Elmhurst Road 5/16/69 26.9 2,730 72 Y N
1083 1540 E. Northwest Highway 1/6/72 24.3 3,002 108 Y N
1202 4330 North Harlem Avenue 2/9/73 23.2 3,048 108 Y N
1232 1323 W. Irving Park Road 9/29/73 22.5 3,257 114 Y N
1455 1401 W. Fullerton 10/6/74 21.5 2,800 105 Y Y
1512 2344 West Chicago Avenue 4/17/75 21.0 3,250 127 Y N
1763 925 Ogden Avenue 8/26/76 19.6 3,697 108 Y Y
1848 2121 Bloomingdale 12/23/76 19.3 3,416 130 Y Y
2461 2360 West Higgins Road 5/31/79 16.8 3,500 80 Y N
2400 1540 Butterfield Road 5/31/79 16.8 3,134 112 Y Y
2854 2499 W. Lawrence Avenue 11/17/79 16.4 3,860 133 Y N
2760 4423 Fox Valley Center Drive 1/22/80 16.2 3,493 100 Y Y
2776 620 West North Avenue 12/9/80 15.3 3,005 92 Y N
2790 3456 Douglas Avenue 5/27/80 15.9 3,097 93 Y Y
3011 2001 Busse Highway 11/6/80 15.4 3,326 96 Y N
3043 111 West Irving Park Road 12/8/80 15.3 3,009 96 Y N
3309 84 Stratford Square Drive 1/6/82 14.2 3,033 92 Y N
4104 7620 120th Avenue, Box 8 7/3/84 11.8 2,700 90 Y N
4137 1550 West North Avenue 8/16/84 11.6 2,700 88 Y N
4676 5400 Durand Avenue 9/18/85 10.5 2,757 92 Y N
5042 9532 South Roberts Road 6/5/86 9.6 3,480 104 Y N
5363 2 South 51 Route 59 2/18/87 9.1 3,480 92 Y Y
5597 11124 W. 31st Street 9/13/67 8.6 1,940 84 Y N
5751 2497 West Golf Road Center 11/27/87 8.4 3,280 80 Y N
5618 10550 Avenue B 2/26/88 8.1 1,940 80 Y N
5875 1931 North Mannheim Road 4/19/88 8.0 2,530 70 Y N
6358 6400 W. Irving Park Road, Dunning
Square Shopping Center 4/24/89 6.9 2,775 84 Y N
6374 Danada West Shopping Center,
2020 Naperville Road 5/22/89 6.9 2,775 96 Y Y
6408 2191 W. Roosevelt Road 10/15/89 6.5 2,775 66 Y N
6432 840 Army Trail Road 8/1/89 6.7 2,775 96 Y Y
6858 170 Countryside Plaza 4/9/90 6.0 2,820 100 Y Y
7112 2701 N. Western Avenue 4/13/91 5.0 2,820 70 Y N
7266 13770 S. Avenue "O" 4/12/92 4.0 2,820 87 Y N
7288 2834 W. Irving Park Road 2/7/92 4.2 2,820 84 Y N
7560 13348 Washington Avenue 9/9/92 3.6 2,820 97 Y Y
7673 1750 N. Harlem Avenue 8/9/93 2.6 2,820 58 Y N
7674 2000 W. 47th 5/26/93 2.9 2,820 76 Y N
8133 75 W. Northwest Highway 5/25/94 1.9 2,820 83 Y N
8247 1144 Boughton 7/21/94 1.7 2,820 78 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- ----------------------------------------- ----------------- ---------------------- ---------- ----------
<S> <C> <C> <C> <C>
Management Colorado
838 800 15th Street Denver, CO Bansbach Family 3/1/04 3/1/04
2771 1010 West Colfax Denver, CO BKC 2/14/00 2/14/00
4575 1201 16th Street, #311, The Shops at
Tabor Center Denver, CO Tabor Center Associa 4/30/00 4/30/00
4979 92 Wadsworth Boulevard Lakewood, CO Lawrence E. Jaro 3/5/06 3/5/06
5338 3914 Highway 119 Longmont, CO Burger Avenue Invest 12/31/08 12/11/08
5379 600 Broadway Denver, CO Lawrence E. Jaro 1/8/07 1/9/97
7407 7120 East 49th Avenue Commerce City, CO Sapp Brothers Truck 3/1/97 3/1/97
7671 5050 Factory Shops Boulevard, Retail
Space No. F-10 Castle Rock, CO Castle Rock Factory 1/31/96 12/15/97
MANAGEMENT TEXAS
577 3780 College Street Beaumont, TX Donald F. O'Brien, Jr. 12/25/08 12/25/08
3051 605 North Main Street Vidor, TX Morgan Guaranty Tru 2/4/01 2/5/01
3387 501 16th Street Orange, TX BKX Limited Partners 4/18/02 4/19/02
3859 3610 Highway 365 Nederland, TX BKC 4/10/03 4/11/03
4443 1550 I-10 Highway East Beaumont, TX ETEX Investments, In 2/9/05 2/10/05
5094 3301 Twin City Port Arthur, TX Donald F. O'Brien, Jr. 3/31/06 5/12/06
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ----------------------------------------- -------- ----- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management Colorado
838 800 15th Street 9/1/73 22.6 4,320 134 N N
2771 1010 West Colfax 2/14/80 16.1 3,359 128 Y N
4575 1201 16th Street, #311, The Shops at
Tabor Center 4/16/85 11.0 925 Food Court N N
4979 92 Wadsworth Boulevard 3/5/86 10.1 3,206 86 Y N
5338 3914 Highway 119 12/11/86 9.3 3,900 122 Y N
5379 600 Broadway 1/9/97 9.2 3,530 100 Y N
7407 7120 East 49th Avenue 5/11/92 3.9 330 Kiosk N N
7671 5050 Factory Shops Boulevard, Retail
Space No. F-10 12/15/92 3.3 680 Food Court N N
MANAGEMENT TEXAS
577 3780 College Street 1/31/70 26.2 2,750 75 Y N
3051 605 North Main Street 2/5/81 15.2 3,400 85 Y Y
3387 501 16th Street 4/19/82 14.0 3,400 82 Y Y
3859 3610 Highway 365 4/11/83 13.0 2,881 85 Y Y
4443 1550 I-10 Highway East 2/10/85 11.1 2,800 90 Y Y
5094 3301 Twin City 5/12/16 9.9 2,281 88 Y Y
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- ------------------------------- -------------------- ---------------------------- ---------- ----------
<S> <C> <C> <C> <C>
NEW RESTAURANTS
9151 1652 Cardinal Drive West Beaumont, TX Darby Oil Co., Inc. 3/22/15 8/16/15
9466 10A East Northbrook Drive Dwight, IL Becker Amoco 12/14/00 2/5/06
9486 340 West 167th Street Harvey, IL CNL American Prope 2/9/16 2/9/16
BKC/AMOCO
7096 10359 W. Roosevelt Road Westchester, IL BKC 8/30/11 8/30/11
7616 185 West North Avenue West Chicago, IL BKC 1/30/13 1/30/13
WHITE
2942 2708 11th Avenue Greeley, CO Morgan Guaranty Tru 5/22/00 5/20/00
4361 102 East 29th Street Loveland, CO White II Investments 1/24/05 1/24/05
4690 1250 South Hover Street Longmont, CO Longs Peak BK 9/19/05 9/19/05
7885 2000 North Mail Street Longmont, CO White III Investment, 7/5/13 7/5/13 7/5/93
9334 2393 West Eisenhower Blvd. Loveland, CO White I Investment, L 9/30/15 9/30/15
CHATTANOOGA
2586 380 Battlefield Parkway Fort Oglethorpe, GA U.S. Rest. Properties 7/3/99 7/5/99
2657 6404 Ringgold Road Chattanooga, TN U.S. Rest. Properties 9/9/99 9/11/99
2769 905 South Wall Street Calhoun, GA BKC 1/31/16 1/31/16
2995 4417 Highway 58 Chattanooga, TN U.S. Rest. Properties 10/1/00 10/3/00
3351 676 Signal Mountain Road Chattanooga, TN BKC 1/31/16 1/31/16
3964 5018 Hixson Pike Hixson, TN BKC 1/31/16 1/31/16
4196 5001 Brainerd Road Chattanooga, TN Ralph E. Manning 10/12/04 10/14/04
4445 6925 Lee Highway Chattanooga, TN BK Limited P'ship III 4/26/05 4/30/05
4959 1445 25th Street Cleveland, TN Evelyn Little Clowers 4/20/06 4/22/06
5355 2119 East 23rd Street Chattanooga, TN Bernard Mollod 1/13/07 1/15/07
5673 2635 Decatur Pike Athans, TN FFCA 3/17/08 3/19/08
SMITH
1851 7958 U.S. 42 Florence, KY BKC 9/30/11 9/30/11
2394 512 Ohio Pike Cincinnati, OH Louis Hirsh 6/21/98 12/22/98
2729 544 Clifty Drive Madison, IN Curtis James Investm 12/11/07 12/11/07
3330 337 Terry Lane Crescent Springs, KY Robert Wesdorp 10/22/01 12/23/01
3756 3100 Dixie Highway Erlanger, KY BK Limited P'ship II 7/5/03 7/3/03
4556 812 Eastgate S. Drive Cincinnati, OH Curtis James Investm 7/1/05 7/2/05
5435 316 Philadelphia Street Covington, KY Curtis James Investm 3/1/07 3/2/07
6186 830 Green Boulevard Aurora, IN Curtis James Investm 10/19/08 10/20/08
6489 14 Carothers Road Newport, KY Curtis James Investm 6/19/09 6/19/09
7751 4868 Houston Road Florence, KY Curtis James Investm 5/1/13 5/25/11
7917 501 Race Street Cincinnati, OH F & R Limited Partner 8/2/03 7/1/03
8483 418 Market Square Maysville, KY Curtis James Investm 10/10/14 10/10/14
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NEW RESTAURANTS
9151 1652 Cardinal Drive West 8/16/95 0.6 2,450 75 Y N
9466 10A East Northbrook Drive 2/5/96 0.2 2,000 60 Y N
9486 340 West 167th Street 2/9/96 0.1 3,039 78 Y N
BKC/AMOCO
7096 10359 W. Roosevelt Road 8/30/91 4.6 2,000 30 Y N
7616 185 West North Avenue 1/30/93 3.2 2,000 30 Y N
WHITE
2942 2708 11th Avenue 5/20/80 15.9 3,000 86 Y N
4361 102 East 29th Street 1/24/85 11.2 2,700 85 Y N
4690 1250 South Hover Street 9/19/85 10.5 2,700 85 Y Y
7885 2000 North Mail Street 7/5/93 2.7 2,400 84 Y Y
9334 2393 West Eisenhower Blvd. 9/30/95 0.5 2,400 84 Y N
CHATTANOOGA
2586 380 Battlefield Parkway 7/4/79 18.8 3,000 86 Y Y
2657 6404 Ringgold Road 9/10/79 16.6 3,000 86 Y Y
2769 905 South Wall Street 1/22/80 16.2 3,005 92 Y Y
2995 4417 Highway 58 10/2/80 15.5 3,000 92 Y Y
3351 676 Signal Mountain Road 9/29/83 12.5 3,400 98 Y Y
3964 5018 Hixson Pike 2/23/84 12.1 2,700 84 Y Y
4196 5001 Brainerd Road 10/13/84 11.5 2,700 84 Y Y
4445 6925 Lee Highway 4/29/85 10.9 2,800 87 Y Y
4959 1445 25th Street 4/21/86 10.0 2,700 87 Y Y
5355 2119 East 23rd Street 1/14/87 9.2 3,400 98 Y Y
5673 2635 Decatur Pike 3/18/88 8.0 3,464 93 Y Y
SMITH
1851 7958 U.S. 42 1/12/77 19.2 3,600 112 Y N
2394 512 Ohio Pike 12/22/78 17.3 2,800 90 Y N
2729 544 Clifty Drive 12/11/80 15.3 3,056 78 Y N
3330 337 Terry Lane 12/23/81 14.3 2,700 86 Y N
3756 3100 Dixie Highway 7/5/83 12.8 2,500 79 Y N
4556 812 Eastgate S. Drive 7/2/85 10.8 2,600 108 Y N
5435 316 Philadelphia Street 3/2/87 9.1 2,750 92 Y N
6186 830 Green Boulevard 10/20/88 7.5 2,753 93 Y N
6489 14 Carothers Road 6/19/89 6.8 2,753 82 Y N
7751 4868 Houston Road 5/25/93 2.9 3,915 103 Y N
7917 501 Race Street 8/2/93 2.7 4,060 108 N N
8483 418 Market Square 10/10/94 1.5 2,650 92 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- ------------------------------------------- ------------------ -------------------- ---------- ----------
<S> <C> <C> <C> <C>
C&M DINING
298 3106 Jefferson Avenue Newport News, VA Virentco Monthly 6/7/05
1003 10721 Jefferson Avenue Newport News, VA Virentco Monthly 7/2/05
2756 1545 Richmond Road Williamsburg, VA FFCA 1/31/16 2/5/00
3211 1480 Weldon Road Roanoke Rapids, NC BKC 5/21/01 5/21/01
3853 200 West Mercury Boulevard Hampton, VA FFCA 1/31/16 8/30/03
4390 1620 South Military Highway Chesapeake, VA FFCA 1/31/16 1/19/05
4973 221 Fox Hill Road Hampton, VA United Dominion 8/28/05 4/7/06
5311 713 North Battlefield Blvd. Chesapeake, VA FFCA 1/31/16 12/19/06
5314 6546 Richmond Road Williamsburg, VA FFCA 1/31/16 11/25/06
5423 2208 Cunningham Drive Hampton, VA FFCA 1/31/16 3/2/07
6001 1601 South Military Highway Chesapeake, VA FFCA 1/31/16 6/4/08
6142 730 South Battlefield Blvd. Chesapeake, VA FFCA 1/31/16 9/21/08
6450 US Highway 17, York River Crossing
S.C. Hayes, VA FFCA 1/31/16 7/12/09
6458 5269 John Taylor Highway Williamsburg, VA FFCA 1/31/16 6/5/09
6600 100 Market Drive Emporia, VA FFCA 1/31/16 12/18/09
7048 1901 Pocahontas Trail Williamsburg, VA FFCA 1/31/16 12/26/10
7313 901 Roanoke Avenue Roanoke Rapids, NC FFCA 1/31/16 4/27/12
7531 5320 James Madison Parkway King George, VA FFCA 1/31/16 11/9/12
7584 11321 Pole Place Midlothian, VA FFCA 1/31/16 12/15/12
7609 8801 Staples Mill Road Richmond, VA FFCA 1/31/16 2/16/13
7699 900 Bland Avenue Newport News, VA Peninsula Airport Co 1/12/98 1/12/96
7923 Route 2 Box 175 Doswell, VA FFCA 1/31/16 5/24/13
9219 10097 Brook Road Glen Allen, VA FFCA 1/31/16 8/26/15
9220 Route 1, Box 40B Garysburg, NC FFCA 1/31/16 8/31/15
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ------------------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
C&M DINING
298 3106 Jefferson Avenue 8/2/65 30.9 2,200 50 Y N
1003 10721 Jefferson Avenue 7/2/65 30.8 2,200 50 Y N
2756 1545 Richmond Road 2/5/80 16.2 4,093 122 Y N
3211 1480 Weldon Road 5/21/81 14.9 2,500 87 Y Y
3853 200 West Mercury Boulevard 8/30/83 12.6 2,719 84 Y Y
4390 1620 South Military Highway 1/19/85 11.2 3,824 91 Y Y
4973 221 Fox Hill Road 4/7/86 10.0 3,305 87 Y N
5311 713 North Battlefield Blvd. 12/19/86 9.3 3,919 101 Y N
5314 6546 Richmond Road 11/25/86 9.4 3,910 102 Y N
5423 2208 Cunningham Drive 3/2/87 9.1 3,603 84 Y N
6001 1601 South Military Highway 6/4/88 7.8 3,873 86 Y N
6142 730 South Battlefield Blvd. 9/21/88 7.5 3,476 84 Y Y
6450 US Highway 17, York River Crossing
S.C. 7/12/89 6.7 3,920 114 Y N
6458 5269 John Taylor Highway 6/5/89 6.8 3,700 94 Y N
6600 100 Market Drive 12/18/89 6.3 4,951 102 Y N
7048 1901 Pocahontas Trail 12/26/90 5.3 3,173 92 Y N
7313 901 Roanoke Avenue 4/27/92 3.9 3,574 88 Y N
7531 5320 James Madison Parkway 11/9/92 3.4 3,873 128 Y N
7584 11321 Pole Place 12/15/92 3.3 3,640 86 Y N
7609 8801 Staples Mill Road 2/16/93 3.1 3,583 88 Y N
7699 900 Bland Avenue 1/12/93 3.2 NA 30 N N
7923 Route 2 Box 175 5/24/93 2.9 4,345 108 Y N
9219 10097 Brook Road 8/28/95 0.6 3,940 84 Y Y
9220 Route 1, Box 40B 8/31/95 0.6 3,094 74 Y N
</TABLE>
<PAGE>
LEASE / SUBLEASE
CONTENTS
I. PROPERTY LEASED 1
1.1 Demise 1
1.2 Erection of Building 1
1.3 Covenant of Quiet Enjoyment 1
II. TERM 1
2.1 Term 1
2.2 Possession 2
2.3 Holdover 2
2.4 End of Term 2
III. CONSIDERATION 2
3.1 Rent 2
3.2 Percentage Rental 3
(a) Percentage Rental 3
(b) Gross Sales 3
3.3 Financial Reports 3
(a) Monthly Accounting 3
(b) Quarterly Accounting 3
(c) Annual Accounting 4
(d) Financial Statements 4
(e) Records and Audit 5
(f) Release of Financial Information 5
3.4 Additional Charges 5
3.5 Alternative Method of Payment 6
3.6 Late Charges 6
IV. INSURANCE 6
4.1 Coverage 6
4.2 Policies 7
4.3 Adjusting; Proceeds 7
4.4 Joint Efforts 7
4.5 Waiver of Subrogation 7
4.6 Cancellation of Insurance 8
4.7 Loss and Damage 8
V. THE PREMISES 8
5.1 Use and Services 8
5.2 Repairs and Maintenance 8
5.3 Alterations 9
5.4 Liens 10
<PAGE>
5.5 Signs 10
5.6 Inspection 10
5.7 License and Laws 10
5.8 Damage or Destruction 10
5.9 Warranties: Disclaimer 11
5.10 Contracts 12
VI. TAXES AND OTHER CHARGES 12
6.1 Payment 12
6.2 Contests 12
6.3 Limitation; Substitution 13
6.4 Escrow Funds 13
VII. INDEMNIFICATION 13
VIII. ENFORCEMENT 14
8.1 Default 14
8.2 Cure by Lessor 14
8.3 Lessor's Remedies 15
8.4 Acceleration 15
8.5 Suits 16
8.6 Waiver 16
8.7 Proof of Claim 16
8.8 Injunction 16
8.9 Independent Rights 16
8.10 Non-Waiver 16
8.11 Waiver of Exemption from Distress 16
8.12 Franchise Agreement 17
IX. NO RENT ABATEMENT 17
X. CONDEMNATION 17
10.1 Entire Award 17
10.2 Substantial Taking 17
10.3 Partial Taking 17
10.4 Easements 18
10.5 Lessee's Independent Award 18
XI. SUBORDINATION 18
XII. ASSIGNMENT 18
12.1 By Lessor 18
12.2 By Lessee 19
12.3 Assumption by Assignee 19
XIII. ADDITIONAL PROPERTY 19
13.1 Purchase of Additional Property 19
13.2 Lease of Additional Property 21
<PAGE>
XIV. ESTOPPEL CERTIFICATE 23
XV. HAZARDOUS SUBSTANCES 23
15.1 Compliance With Laws 23
15.2 Notices to Lessor 23
15.3 Removal and Disposal 24
15.4 Environmental Audits by Lessor 24
(a) Rights of Lessor 24
(b) Conduct of Audit 24
(c) Submission to Governmental Agency 25
15.5 Remediation 25
(a) By Lessee 25
(b) By Lessor 25
(c) Actions and Proceedings 25
15.6 Remediation by Third Parties 25
15.7 Lease Expiration 26
15.8 Indemnification by Lessee 26
XVI. MISCELLANEOUS 26
16.1 Arbitration 26
16.2 Notices 26
16.3 Address for Payments 26
16.4 Construction 27
16.5 Successors 27
16.6 Recording 27
16.7 Counterparts 27
16.8 No Agency 27
16.9 Time of the Essence 27
16.10 Binding Effect 27
16.11 Headings 27
16.12 Joint and Several Liability 27
16.13 Definitions 27
EXECUTION 28
<PAGE>
LEASE/SUBLEASE AGREEMENT
THIS AGREEMENT (the "Lease"), is made this _________________ day of
_____________________, 199 ___ (the "lease date"), by and between BURGER KING
CORPORATION, a Florida corporation, ("Lessor"), and * ("Lessee"), whose
address is *. (The terms "Lessor" and "Lessee" shall mean respectively
"Sublessor" and "Sublessee" whenever the context requires or permits it.)
In consideration of the covenants contained in this Agreement, the parties
agree as follows:
I.
PROPERTY LEASED
[Section] 1.1 DEMISE. Lessor leases to Lessee and Lessee leases from Lessor
the following property (the "land") along with the Burger King* Restaurant
(the "building") and other improvements to be constructed on it (collectively
called "the premises").
Legal Description: See Exhibit "A" attached hereto and made a part hereof.
Commonly described as: BURGER KING (Registered Trademark) Restaurant #*
Subject to any and all reservations, restrictions, easements, rights of way,
limitations and conditions of record, if any.
[Section] 1.2 ERECTION OF BUILDING. Commencement of this Lease is conditioned
on the completion of the building in accordance with plans and specifications
prepared by Lessor's architect. Lessor has agreed to construct or contract for
the construction of the building promptly and to complete or contract to
complete it as promptly as conditions will permit, but in any event before one
hundred eighty (180) days from the lease date; provided, however, that this
period shall be extended by any time lost in construction due to delays caused
by strike, lockout, acts of God, shortage of materials, or other conditions
beyond the control of Lessor. In the event the building is not completed
within one (1) year from the date of this Lease, this Lease may be terminated
at the option of either party, on fifteen (15) days' notice to the other
party.
[Section] 1.3 COVENANT OF QUIET ENJOYMENT. The Lessor promises, subject to
Lessee's performance of all of the terms and conditions of the Lease, that
Lessee shall be entitled to the quiet and peaceful enjoyment and undisturbed
possession of the premises for the term of this Lease.
II.
TERM
[Section] 2.1 TERM. The term of this Lease (the "term") shall commence on the
earliest of the following dates (the "commencement date"):
(a) the date 10 days following date of the issuance of a Certificate of
Occupancy for the premises by appropriate governmental authorities; or
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
1
<PAGE>
(b) the date 10 days following date of certification by Lessor's
architect that the land has been improved and the building constructed is
substantially in conformance with the plans and specifications; or
(c) the date Lessee opens for business.
The term of this Lease shall expire at midnight on the day preceding the 20th
anniversary of the commencement date (the "original term expiration date")
unless sooner terminated as provided in this Lease. The commencement date
shall be designated by the parties in a form capable of being recorded among
the public records of the county where the premises are located.
[Section] 2.2 POSSESSION. Possession of the premises shall be delivered to the
Lessee on the commencement date.
[SECTION] 2.3 HOLDOVER. Any holdover at the expiration of the term with the
written consent of Lessor shall be on a month to month basis, which tenancy
may be terminated by Lessor giving Lessee not less than fifteen (15) days
notice. During such holdover tenancy, Lessee agrees to pay Lessor on a monthly
basis all increased rentals and other charges that would have been due under
this Lease and agrees to continue to be bound by all of the terms of this
Lease which are applicable at that time. In the event Lessee holds over
without consent of Lessor, the rent during any holdover period shall be double
the average rent that was due during the last year of the Lease term.
[Section] 2.4 END OF TERM.
(a)[SECTION] Fixtures and Personalty. At the expiration or earlier
termination of this Lease, any fixtures, as defined in Section 16.13 of this
Lease, located on the premises and not already owned by Lessor shall become the
property of the Lessor. If, at that time, Lessee has fully complied with Lease
terms and conditions, Lessor hereby waives any right to claim any personalty
owned or leased by Lessee and located on the premises. The personalty may then
be removed by Lessee or the lessor of such personalty provided that the
premises are restored to their original condition. Any such personalty not
removed within fifteen (15) days after the Lease expiration or termination
shall be deemed abandoned and become the property of Lessor.
(b) Joint Inspection. During a period no earlier than three (3) weeks
and no later than one (1) week prior to the end of the term, Lessor and Lessee
shall conduct a joint inspection of the premises and Lessor shall make a list
of any items of repair and maintenance which may be needed to put the premises
in good condition and repair. If the items on such list cannot be completed by
Lessee by the end of the term, then Lessee shall pay to Lessor by the end of
the term the reasonable cost of such repairs as estimated by Lessor. Lessee's
obligation to make such payment shall survive the termination of this Lease.
Any failure by the parties to conduct the joint inspection shall not
constitute a waiver of Lessee's obligations under this Section 2.4 and Section
5.2 of this Lease.
III.
CONSIDERATION
[Section] 3.1 RENT. Lessee agrees to pay and Lessor agrees to accept a
guaranteed minimum annual rental as indicated in the schedule below, for each
year of the term of this Lease (such being hereinafter referred to as
"guaranteed minimum annual rental"), the guaranteed minimum annual rental to
be payable in
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
2
<PAGE>
monthly installments in advance on the first day of each month during the term
of this Lease as indicated in the "Rent Data Schedule". The first monthly
installment shall be due on the commencement date. If this Lease shall
commence on any day other than the first day of a calendar month, the monthly
installment for the first and last month of the Lease term shall be prorated.
RENT DATA SCHEDULE
Guaranteed Minimum Monthly
Lease Year* Annual Rental Installment
*
*The term "Lease Year" shall mean the first consecutive twelve (12) month
period beginning on the commencement date of the Lease and each succeeding
twelve (12) month period thereafter, whether fiscal or annual.
[Section] 3.2 PERCENTAGE RENTAL.
(a) Percentage Rental. Lessee agrees that it will pay Lessor a
percentage rental being an amount by which eight and one-half percent (8-1/2%)
of Lessee's gross sales at the premises for each lease year exceeds the
guaranteed minimum annual rental.
(b) Gross Sales. The term "Gross Sales" as used in this Agreement
includes all sums charged for goods, merchandise or services sold at or from
the premises including all promotional items or premiums unless exempted by
Lessor. The sale of Burger King products away from the premises is not
authorized; however, should any such sales be approved in the future, they
will be included within the definition of Gross Sales. Gross Sales excludes
any federal, state, county or city sales tax, excise tax, or other similar
taxes collected by Lessee from customers based upon sales, and cash received
as payment in credit transactions where the extension of credit itself has
already been included in the figure upon which any previous monthly percentage
rent has been computed.
[Section] 3.3 FINANCIAL REPORTS
(a) Monthly Accounting. Beginning with the tenth (1Oth) day of the
month following the calendar month in which this Lease begins, and monthly
thereafter, the Lessee shall deliver to Lessor a statement in writing on a
form furnished by the Lessor, setting forth all of the Gross Sales for the
preceding month.
(b) Quarterly Accounting. Beginning with the tenth (10th) day of the
month following the first three months of the Lease Term and quarterly
thereafter, Lessee shall deliver to Lessor a statement in writing, setting
forth Gross Sales for the preceding three (3) months of the Lease term, and
simultaneously upon submission of such statement, Lessee shall pay to the
Lessor an amount equal to eight and one-half (8-1/2%) percent of all Gross
Sales, less the guaranteed minimum annual
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
3
<PAGE>
rental paid by Lessee for the quarterly period in question. Should this Lease
commence on other than the first day of a month, the first quarterly period
shall include that period of time between the commencement date and the first
day of the next succeeding month.
(c) Annual Accounting. Within thirty (30) days following each full year of
this Lease, the Lessee agrees to deliver to Lessor a statement prepared by a
Certified Public Accountant and sworn to by Lessee showing the sales made upon
the demised premises during the preceding year. Should the sum of eight and
one-half (8-1/2%) percent of the annual Gross Sales exceed the guaranteed
minimum annual rental payable for the same period together with the rent paid
quarterly, Lessee agrees that at the time of the submission of such annual
statement it will pay to Lessor as additional rent the sum which is in excess
of the previous quarterly payments. Should the sum of eight and one-half
(8-1/2%) percent of annual Gross Sales be less than the annual rent payable
for the same period covered by such statement, together with the said
quarterly rental payments made, any excess of the amount so paid over the
amount due shall be allowed as a credit to Lessee on the rental payment or
payments next accruing; providing that in no event shall Lessee ever become
liable to pay less than the guaranteed minimum annual rental.
(d) Financial Statements. During the term of this Lease, Lessee and any other
persons or entities who are guarantors, who have personal liability, or who
have joint and several liability under this Lease ("Guarantors") shall deliver
to Lessor the following financial statements:
As to Lessee:
(i) Within ninety (90) days after the end of each fiscal year of
Lessee, balance sheets as of the end of such year and
statements of income and of changes in financial condition
for such year;
(ii) Within twenty-five (25) days after the end of each fiscal
quarter of Lessee, balance sheets as of the end of such
quarter, and statements of income and changes in financial
condition for such fiscal quarter and for the current fiscal
year to the end of such fiscal quarter;
(iii) Within twenty (20) days after the end of each or any month,
statements of income for Lessee for such month, provided
Lessor has requested same, in writing, prior to the end of
the preceding month;
As to Guarantor:
(iv) Within ninety (90) days after the end of each fiscal year of
Guarantors, a personal net worth statement and a copy of the
most recent federal income tax return filed as to each
individual Guarantor;
(v) Within twenty (20) days after request by Lessor, such
additional financial and/or operational information as is
deemed necessary by Lessor;
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
4
<PAGE>
As to Lessee and Guarantors:
(vi) The balance sheets and financial statements referred to in
subparagraphs (i), (ii), (iii), (iv) and (v) above shall be
prepared in accordance with generally accepted accounting
principles consistently applied (except as noted), and be
accompanied by certificates of the Lessee and each Guarantor
or the chief financial officer of the Lessee and each
Guarantor, as the case may be, stating that such financial
statements have been prepared in accordance with generally
accepted accounting principles consistently applied (except
as noted) and fairly present the financial condition of the
Lessee or each Guarantor at the date thereof and for the
periods covered thereby.
(vii) If requested by Lessor, the balance sheets and financial
statements referred to above shall be certified by a
Certified Public Accountant.
(e) Records and Audit. Lessee agrees to keep true, accurate and complete
records of the business conducted at the premises in such form as Lessor
now or hereafter may require. Lessee shall retain for a period of at least
twenty-four (24) months and upon request submit to Lessor copies of all
state sales tax returns and all supporting data and records relating to
sales made from the business operated at the premises and such other
records as Lessor may reasonably request from time to time. Lessee agrees
that Lessor or its representatives, at Lessor's expense, shall at all
reasonable times have the right to examine or audit the books, records,
state sales tax returns or accounts of Lessee. Lessor shall similarly have
the right to examine or audit the books, records, state sales tax returns
or accounts of any and all Guarantors. In the event the audit discloses an
understatement of Gross Sales which exceeds five (5%) percent for any
period or periods, Lessee shall, within fifteen (15) days after the
receipt of the audit report, pay Lessor the Eight and one-half (8 1/2)
percentage rental of the amount of each understatement plus the late
charge identified in Section 3.6 of this Lease from the date such payments
were originally due, plus Lessee shall reimburse Lessor for all costs of
the audit including travel, lodging and wages, reasonably incurred.
(f) Release of Financial Information. Lessee and Guarantors give permission
to Lessor to release to Lessor's landlord, lenders or prospective landlord
or lenders and/or any prospective purchaser of all or part of Lessor's
interest in the premises and/or the Lease, any financial and operational
information relating to Lessee, Guarantors and/or the business operated at
the premises.
[Section] 3.4 ADDITIONAL CHARGES. Lessee and Lessor agree that the rent
accruing under this Lease shall be net to Lessor and that all taxes, costs,
common area maintenance fees, expenses and charges of every kind and nature
("additional charges") relating to the premises (except the taxes of Lessor
referred to in Section 6.3 and any payments for interest or principal under any
mortgage relating to the premises) which may arise or become due during the
term or any extension of this Lease, shall be paid by Lessee, and that Lessee
shall indemnify and save harmless Lessor from and against them. All additional
charges which Lessee assumes or agrees to pay under any provisions of this
Lease, together with all interest and penalties that may accrue on these
additional charges in the event Lessee fails to pay them, as well as all other
damages, costs and expenses, including, without limitation, reasonable
attorneys' fees and other legal and court costs which Lessor may incur in
enforcing this Lease, and any and all other sums which may become due by
reason of Lessee's default or failure to comply with its obligations under
this Lease, shall be deemed to be additional rent. In the event of
non-payment, Lessor shall have all the rights and remedies as provided in the
case of non-payment of rent.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
5
<PAGE>
[Section] 3.5 ALTERNATIVE METHOD OF PAYMENT. Lessor or its assigns, mortgagee
or designated agent, may, at its/their option, require payment of (i) the
guaranteed minimum annual rental established in Section 3.1 of the Lease,
and/or (ii) the monthly escrow sum described in Section 6.4 of the Lease
and/or (iii) if applicable, any common area maintenance or similar charge
assessed pursuant to the Lease and/or (iv) any additional charges due pursuant
to Section 3.4 of this Lease by making direct monthly withdrawals in the
appropriate amount(s) from Lessee's bank account. In the event that this
option is exercised, Lessee agrees to execute and deliver to its bank and to
Lessor those documents necessary to authorize such withdrawals and to make
payment or deposit as directed by Lessor. Lessee further agrees that it will
not thereafter terminate such authorization so long as this Lease is in
effect. Lessee also agrees that in the event that a direct monthly withdrawal
program is not available at the bank at which Lessee then does its business,
it will take all reasonable and necessary steps to establish an account at a
bank which does have such a program.
[Section] 3.6 LATE CHARGES. All rent, additional charges and any other charges
shall be paid to Lessor without notice or demand and without abatement,
deduction or set-off, except as otherwise expressly provided in this Lease.
All payments not paid when due shall bear interest at the maximum rate allowed
by Florida law. In the event such interest rate shall be void or unenforceable
under the laws of the jurisdiction where the premises are located, the highest
rate of interest permitted within such jurisdiction shall be charged.
IV.
INSURANCE
[Section] 4.1 COVERAGE. During the term, Lessee, at its own cost and expense,
shall:
(a) Keep the premises and the fixtures and personalty on it insured with
an all risk property insurance policy in an amount sufficient to cover the
cost of replacement (without deduction for depreciation). Such replacement
cost shall be determined from time to time at the request of Lessor, but
not more frequently than once in any twelve (12) consecutive calendar
months. Replacement cost shall be determined by one of the insurers or, at
the option of Lessor, by an appraiser, architect or contractor who is
mutually and reasonably acceptable to Lessor and Lessee, and whom shall be
retained and paid by Lessee.
(b) Provide and keep in force comprehensive or commercial general
liability insurance against claims for bodily injury, death or property
damage occurring on, in or about the premises or the adjoining streets and
property, in limits of not less than $1,000,000 per occurrence for bodily
injury, not less than $500,000 per occurrence for property damage, or in
such other amounts as Lessor may reasonably request. The policy shall name
Lessor as an additional insured.
(c) Provide and keep in force plate glass insurance covering the glass in
the premises, unless waived by Lessor.
(d) If requested by Lessor, provide and keep in force rent insurance
(and/or, as the case may require, use and occupancy insurance) in an
amount not less than the then current guaranteed minimum annual rental
plus the estimated annual taxes, water charges, sewer rents, common area
maintenance and other assessments and the annual premiums for the
insurance required by this Article.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
6
<PAGE>
(e) If requested by Lessor or any mortgagee, provide and keep in force
insurance for such other insurable hazards in such amounts as similarly
situated premises are then commonly insured.
[Section] 4.2 POLICIES. All insurance required by Lessor and provided by
Lessee shall be carried in favor of Lessor and Lessee, as their respective
interests may appear, and any underlying lessor, fee owner, affiliate
corporation, trustee, mortgagee or other person designated by Lessor. If
requested by Lessor, insurance against fire or other casualty shall provide
that the proceeds of any loss shall be payable to the mortgagee under a
standard mortgagee clause. Any rent insurance or use and occupancy insurance
carried by Lessee shall provide that, in the event of loss or damage to the
premises, the proceeds shall be payable to Lessor to be held by Lessor as
security for the payment of the rent and additional charges due under this
lease until the premises are restored. All insurance shall be obtained from
companies licensed to do business in the state in which the premises are
located and which have a rating by Best's Rating Guide of at least "A" as to
financial strength and "X(10)" as to financial size. Lessee shall procure
policies for all insurance for periods of not less than one year and shall
deliver to Lessor all policies or certificates of insurance with evidence of
payment of all premiums. Lessee shall procure renewals of these policies from
time to time before their respective expiration dates. All insurance policies
shall be non-assessable and shall require thirty (30) days notice by
registered mail to Lessor of any cancellation or change affecting Lessor's
coverage under the policies. All property damage and business interruption
policies of Lessee shall contain a waiver of any subrogation rights which
Lessee's insurers may have against Lessor, even if the loss suffered is caused
by the act, omission or negligence of Lessor.
[Section] 4.3 ADJUSTING; PROCEEDS. Claims for loss due to damage to the
premises under any policies provided for in this Lease shall be adjusted with
the insurance companies:
(a) by Lessee in the case of any particular casualty resulting in
` damage or destruction not exceeding $10,000, or
(b) by Lessor and Lessee, in the case of any particular casualty
resulting in damage or destruction exceeding $10,000 in the
aggregate. Subject to the rights of any mortgagee, the proceeds of any
insurance shall be payable as follows:
(1) With respect to any loss not exceeding $10,000 in the
aggregate, proceeds shall be paid to Lessee, who shall hold
them in trust for the purpose of paying the costs of repair
and restoration; and
(2) With respect to losses exceeding $10,000 in the aggregate,
the proceeds shall be paid to Lessor and shall be applied to
pay the costs of repair and restoration.
[Section] 4.4 JOINT EFFORTS. Lessee and Lessor shall cooperate in attempts to
collect any insurance proceeds that may be due in the event of loss, and
Lessee shall execute and deliver to Lessor such proofs of loss and other
instruments which may be required for the purpose of recovering these
proceeds.
[Section] 4.5 WAIVER OF SUBROGATION. Lessee agrees to look solely to the
proceeds of his own insurer for indemnity against exposure for loss of
property or business interruption. Lessee warrants that its property and
business interruption insurers shall have no rights against Lessor by virtue
of assignment, subrogation, loan agreement or otherwise.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
7
<PAGE>
[Section] 4.6 CANCELLATION OF INSURANCE. If any insurance policy covering the
premises or any part of it is cancelled or is threatened by the insurer to be
cancelled, or if the coverage thereunder is reduced in any way by the insurer
for any reason, and if Lessee fails to remedy the condition giving rise to
cancellation, threatened cancellation, or reduction of coverage within 48
hours after notice thereof by Lessor, Lessor may, at its option, either (i)
reenter the premises forthwith by leaving upon the premises a notice in
writing of its intention to do so (in which case the provisions of paragraph
VIII shall apply) or (ii) enter the premises and remedy the condition giving
rise to such cancellation, threatened cancellation or reduction, and Lessee
shall forthwith pay the cost thereof to Lessor (which cost may be collected by
Lessor as rent) and Lessor shall not be liable for any damage or injury caused
to any property of Lessee or of others located on the premises as a result of
any such entry.
[Section] 4.7 LOSS AND DAMAGE. Lessor shall not be liable for any death or
injury occurring on the premises, nor for the loss of or damage to any of the
personalty or other property of Lessee or of others by theft or otherwise,
from any cause whatsoever. Without limiting the generality of the foregoing,
Lessor shall not be liable for any injury or damage to persons or property
resulting from fire, explosion, falling plaster, steam, dampness, gas,
electricity, water, rain, snow, or leaks from any part of the premises or from
the pipes, appliances or plumbing works or from the roof, street or subsurface
or from any other place by any other cause whatsoever. Lessor shall not be
liable for any such damage caused by other persons or occupants of adjacent
property, or the public, or caused by operations in construction of any
private, public or quasi-public work. All of the personalty or any other
property of Lessee kept or stored on the premises shall be kept or stored at
the risk of Lessee.
V.
THE PREMISES
[Section] 5.1 USE AND SERVICES. During the term of this Lease, Lessee shall
continuously operate a Burger King Restaurant on the premises in accordance
with the terms of the Burger King Franchise Agreement entered into by Lessee
contemporaneously with this Lease (the "Franchise Agreement"), unless Lessee
is prevented from doing so due to acts of God or other causes beyond Lessee's
control. The premises shall not be used for any other purpose. Lessee shall
not use in connection with the operation of or as additional parking for its
business on the premises any property other than the premises, except in
accordance with the provisions of Article XIII of this Lease.
Except as may be otherwise specifically provided by the terms of this Lease or
the Franchise Agreement, Lessor shall not be required to furnish to Lessee any
facilities or services of any kind whatsoever, such as, but not limited to
water, sewer, steam, heat, gas, hot water, electricity, light and power.
[Section] 5.2 REPAIRS AND MAINTENANCE. Lessee shall, at all times during the
term, at its own cost and expense, put, keep and maintain the premises and all
fixtures and personalty located on it in good order and condition, and subject
to all applicable terms of paragraphs Section 5.3 and Section 5.8, shall make
all necessary and desirable repairs, restorations and replacements thereof,
structural and nonstructural, foreseen or unforeseen (hereinafter collectively
called "repairs"), and shall use all reasonable precaution to prevent waste,
damage or injury. Lessee shall also put, keep and maintain in good repair and
free from dirt, snow, ice, rubbish and other obstructions or encumbrances, the
sidewalks, parking areas, yards, plantings, gutters and curbs in front of and
adjacent to the premises.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
8
<PAGE>
In the event that Lessee fails or neglects to make all necessary repairs or
fulfill its other obligations as set forth above, Lessor or its agents may
enter the premises for the purpose of making such repairs or fulfilling those
obligations. All costs and expenses incurred as a consequence of Lessor's
action shall be repaid by Lessee to Lessor within 1 5 days after Lessee
receives copies of receipts showing payment by Lessor for such repairs or
other obligations. These receipts shall be prima facie evidence of the payment
of the charges paid by Lessor. Except in the case of emergency, Lessor shall
give Lessee ten (10) days notice before taking any such action.
[Section] 5.3 ALTERATIONS. Lessee agrees that it will at its own cost and
expense make such reasonable alterations to the interior or exterior of the
premises as may reasonably be requested by Lessor from time to time in order
to modify the appearance of the building to reflect the then current image of
Burger King Restaurants.
Lessee shall not at any time make any alteration, change, addition or
improvement (hereinafter collectively called "alterations") in or to the
interior or exterior of the premises without the prior written consent of
Lessor. In the event consent is given:
(a) the alterations shall be performed in a first class workmanlike
manner at Lessee's sole expense, and shall not weaken or impair the
structural strength or lessen the value of the premises, or change
the purpose for which the premises may be used;
(b) the alterations shall be made according to plans and
specifications therefor, which shall be first submitted to and
approved in writing by Lessor;
(c) before the commencement of work on any alterations, such plans
and specifications shall be approved by all governmental authorities
having jurisdiction and any public utility company having an interest
in the alterations;
(d) before the commencement of any alterations, Lessee shall pay the
amount of any increase in premiums on insurance policies for
endorsements covering the risk during work on the alterations, and
workmen's compensation insurance covering all persons employed in
connection with that work.
(e) if the estimated cost of the alteration exceeds $5,000.00, Lessee
shall furnish to Lessor a surety bond of a company acceptable to
Lessor, in an amount equal to the estimated cost of such work, or
other security satisfactory to Lessor, guaranteeing the completion of
such work, free and clear of all liens and encumbrances.
(f) before the commencement of any alterations which involve a
contract for labor, services, materials, or supplies in excess of
$5,000.00, Lessee shall deliver to Lessor, where permitted by law,
either (1) a duplicate original of the contract, if in writing, which
shall provide that no lien or claim against the premises or the
equipment on it shall be created or filed as a result of performance
of work under the contract or (2) a written waiver by the architect,
engineer, contractor, subcontractor, materialman, mechanic, or other
person contracting to furnish such labor, services, materials or
supplies, of all lien rights which he or it might otherwise have
against the premises or Lessor's interest in it.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
9
<PAGE>
All buildings, additions, improvements, fixtures and appurtenances in or on
the premises at the commencement date and those which may be erected, affixed
or installed in or on the premises during the term are deemed to be and shall
immediately become part of the premises and the sole property of Lessor. All
personalty installed by Lessee (except signs, trademarks and other insignia of
Lessor) shall remain the property of Lessee.
[Section] 5.4 LIENS. Should Lessee cause any alterations or repairs to be made
to the premises, or cause any labor to be performed or material to be
furnished, neither Lessor nor the premises shall under any circumstances be
liable for the payment of any expense incurred, and all such alterations and
repairs shall be made and performed at Lessee's expense. If, because of any
act or omission of Lessee, any mechanic's or other lien, charge, claim or
order for the payment of money shall be filed against the premises or against
Lessor, Lessee shall, at its own cost and expense, cause it to be cancelled
and discharged of record or bonded within fifteen (15) days after notice of
filing thereof. In the event that the Lessee fails to cause any such
mechanics' or other lien, charge or order to be cancelled and discharged or
bonded, then, in addition to any other right or remedy of the Lessor, the
Lessor may, at its option, cancel or discharge it by paying the amount claimed
to be due into Court or directly to any claimant and the amount so paid by
Lessor and all costs and expenses including attorneys' fees incurred for the
cancellation or discharge of such lien shall be due from the Lessee to the
Lessor as an additional charge payable on demand.
[Section] 5.5 SIGNS. Lessee shall not place any signs or symbols on any
portion of the premises without the prior written approval of Lessor.
[Section] 5.6 INSPECTION. Fee owner, Lessor or their representatives shall
have the right to enter the premises at reasonable hours of any business day
to ascertain if the premises are in proper repair and condition.
[Section] 5.7 LICENSE AND LAWS. The Lessee shall, at its own cost and expense,
obtain all necessary licenses and/or permits which may be required for the
conduct of its business; and Lessee shall, at its own cost and expense,
promptly observe and comply with all present and future laws, ordinances,
requirements, orders, directions, rules and regulations (referred to generally
as "regulations") of governmental authorities having or claiming jurisdiction
over the premises or the conduct of Lessee's business. By way of example, and
not limitation, compliance with governmental regulations shall include, but
not be limited to, the following: (i) alterations and/or additions to the
premises if required under the Americans with Disabilities Act of 1990 and
(ii) testing, remediation or abatement of environmental conditions (defined as
conditions affecting the air, soil, ground water and improvements) affecting
the premises or property adjacent to or near the premises, if so required by
governmental authority. Lessee may contest in good faith, after notice to
Lessor, by appropriate proceedings conducted promptly at Lessee's own expense,
in Lessee's name (and/or whenever necessary and with Lessor's consent, in
Lessor's name), the validity or enforcement of any such regulation; provided
that (i) such contest or any associated deferment of payment does not subject
Lessor to a fine or other criminal liability, or subject the premises to any
encumbrance, (ii) Lessee diligently prosecutes such contest to a final
determination by the governing authority, and (iii) Lessee furnishes Lessor
with any security that Lessor may reasonably request in connection with such
contest.
[Section] 5.8 DAMAGE OR DESTRUCTION. If, during the term, the premises or the
personalty or fixtures on it are destroyed or damaged in whole or in part by
fire or other cause, Lessee shall give Lessor immediate notice, and Lessee, at
its own cost and expense, shall cause the prompt repair, replacement and
rebuilding of same ("restoration"), subject to paragraphs Section 5.2 and
Section 5.3 of this Lease. The restored
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
10
<PAGE>
building, personalty or fixtures shall reflect the then current image of
Burger King Restaurants and conform to the then current design and
specifications of Lessor. Lessor shall in no event be called upon to repair,
replace or rebuild any such buildings, fixtures or personalty, nor to pay any
of the costs or expenses thereof beyond or in excess of any insurance
proceeds, as provided in this Lease.
All insurance proceeds received by Lessor or by any Insurance Trustee on
account of such damage or destruction, less the actual cost, fees and
expenses, if any, incurred in connection with adjustment of the loss, shall be
applied by Lessor to pay or reimburse Lessee for the payment of the cost of
the restoration, including the cost of temporary repairs or for the protection
of property pending the completion of permanent restoration, and shall be paid
out from time to time as restoration progresses upon the written request of
Lessee, accompanied by evidence satisfactory to Lessor that:
(a) (1) the sum then requested either has been paid by Lessee or is justly due
to contractors, subcontractors, materialmen, or other persons who have
rendered services or furnished materials for the restoration pursuant to a
certificate or claim for payment ("certificate"), and that the sum then
requested does not exceed the amount of the services and materials
described in the certificate;
(2) except for the amount, if any, stated in the certificate to be due for
services or materials, there is no outstanding indebtedness known to the
persons signing such certificate, after due inquiry, which is then due for
labor, wages, materials, supplies, or services in connection with the
restoration;
(3) the cost of the restoration required to be done does not exceed the
insurance proceeds, and
(b) that there have not been filed against the premises any vendor's,
contractor's, mechanic's, laborer's or materialman's statutory or similar
lien ("liens") which has not been discharged of record, except those that
will be discharged upon payment of the sum requested in the certificate,
or bonded or contested in accordance with paragraph 5.4.
Upon compliance with the above provisions, Lessor or the Insurance Trustee
shall, out of such insurance proceeds and such other funds as may have
been made available, pay or cause to be paid to Lessee or its designee,
the respective amounts due.
If the insurance proceeds and other funds deposited with Lessor or the
Insurance Trustee, less the actual cost, fees and expenses, if any,
incurred in connection with the adjustment of the loss, are insufficient
to pay the entire cost of the restoration, Lessee will pay the deficiency.
At least ten (10) days before the commencement of restoration, Lessee
shall notify Lessor of its intention to restore the premises. During
restoration, this Lease shall not terminate, nor shall the rental and
other charges payable under this Lease be abated or be affected in any
manner.
[Section] 5.9 WARRANTIES; DISCLAIMER. Lessor shall provide Lessee with the
benefit of any warranties provided by the building contractor. Lessor
expressly disclaims any other warranty, either express or implied, and Lessee
acknowledges that neither Lessor nor its agents have made any representations
or promises with respect to the premises except as expressly set forth in this
Lease, and no rights, easements or licenses are acquired by Lessee by
implication or otherwise except as expressly set forth herein. The taking of
possession of the premises by Lessee shall be conclusive evidence that the
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
11
<PAGE>
Lessee has accepted the premises "AS IS", including any latent or patent
defects. Lessee acknowledges that Lessee is relying on its own independent
inspection. Lessor agrees to cooperate with and assist Lessee in asserting
claims against contractors or others providing work and/or services to the
premises.
[Section] 5.10 CONTRACTS. Lessee shall not without Lessor's consent enter into
any service contract or agreement relating to the furnishing of any services
to the premises or the occupants of it unless such contract or agreement shall
by its terms be terminable on no more than thirty (30) days notice or shall
expressly provide that it shall not become binding on Lessor in the event that
this Lease is terminated or expires. Lessee shall furnish Lessor with copies
of all service contracts or agreements affecting the premises that are now in
existence or that are subsequently entered into.
VI.
TAXES AND OTHER CHARGES
[Section] 6.1 PAYMENT.
(a) In the event Lessor elects, at its sole option, to pay the taxes,
assessments, charges for public utilities, excises, levies, licenses, permit
fees or other governmental impositions and charges of any kind and nature
whatsoever ("charges") which are payable in connection with the ownership,
occupancy or possession of the premises, Lessee shall reimburse Lessor within
fifteen (15) days after Lessee receives an invoice for the payment of such
charges,
(b) In the event Lessor elects not to pay the charges as set forth in
the preceding paragraph, Lessee shall pay on or before the last day on which
payment may be made without penalty or interest, all charges which may be
assessed, imposed, or become due and payable in connection with the ownership,
occupancy or possession of the premises or the fixtures or personalty on it,
or any charges which may be imposed in lieu of, or as a substitution for, any
such charges. At any time after the time for payment of each charge, upon
Lessor's request, Lessee shall exhibit to Lessor satisfactory evidence of
payment. All charges assessed or imposed for the fiscal periods in which the
term of this Lease commences and terminates shall be apportioned.
[Section] 6.2 CONTESTS. Lessee has the right to promptly contest or review any
of the Charges by appropriate proceedings ("proceedings") at its own expense,
and if necessary, with the prior written consent of Lessor, in the name of
Lessor. Lessee may defer payment of a contested charge only if, before
instituting any proceedings, Lessee furnishes to Lessor security satisfactory
to Lessor and sufficient to cover the amount of each contested charge, with
interest and penalties for the period which the proceedings may be expected to
take. Notwithstanding the furnishing of security (other than a cash deposit),
Lessee shall promptly pay each contested charge if, at any time, the premises
or any part of it are in danger of being sold, forfeited or otherwise lost or
Lessor becomes subject to criminal or any other liability for such
non-payment; provided that in that event, if Lessee has made a cash deposit to
Lessor, Lessor may pay each contested charge out of the deposit. When any
contested charge is paid or cancelled, any balance of any cash deposit not so
applied shall be repaid to Lessee without interest. All proceedings shall be
begun as soon as possible after the imposition or assessment of any contested
item and shall be diligently prosecuted to final adjudication. If there is any
refund with respect to any contested charge based on a payment by Lessee,
Lessee shall be entitled to it to the extent of such payment.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
12
<PAGE>
[Section] 6.3 LIMITATION; SUBSTITUTION. Nothing contained in this Lease shall
be construed to require Lessee to pay any inheritance, estate, succession,
transfer, gift, franchise, corporation, income or profit tax, or capital levy
that is or may be imposed upon Lessor, its successors or assigns; provided,
however, that if at any time during the term of this Lease the methods of
taxation prevailing at the commencement date are altered so that in lieu of or
as a substitute for the whole or any part of the taxes, assessments, levies,
impositions or charges (collectively "assessments") now levied, assessed or
imposed ("imposed") on real estate and improvements thereon, there is imposed
(1) an assessment made wholly or partially as a capital levy, or
(2) an assessment measured by or based in whole or in part on the premises, or
(3) a license fee measured by the rent payable by Lessee under this Lease,
then to the extent that such assessments or portion thereof would be payable
if the premises were the only asset of Lessor subject to the assessments,
Lessee shall pay these assessments in the same manner as provided in this
Lease for payment of real estate taxes.
[Section] 6.4 ESCROW FUNDS. If, during the term of this Lease, Lessor or any
mortgagee requests Lessee to provide an escrow fund for payment of real estate
taxes, Lessee agrees that upon such request it will promptly deposit with
Lessor or its designated mortgagee, for each month or portion thereof since
the due date of the previous tax bill, one-twelfth (1/12) of the latest year's
tax obligation (the "monthly escrow sum"), and that it will continue to
deposit the monthly escrow sum on the first day of each subsequent month, so
that as each installment of real estate taxes becomes due and payable, Lessee
will have deposited a sum sufficient to pay it. All of these deposits (the
"escrow funds") shall be received and held in trust; provided, however, that
unless otherwise required by law, Lessor or its designated mortgagee shall not
be required to maintain the escrow funds in a segregated account nor invest
them in interest bearing accounts or securities nor pay any interest on them.
When the real estate taxes become due and payable, Lessor or its mortgagee
shall promptly pay them from the escrow funds and shall promptly forward to
Lessee receipts or other satisfactory evidence of payment. In the event that
the amount of the real estate taxes assessed or imposed against the premises
has not been fixed at the time when any monthly escrow sum is due, the monthly
escrow sum shall be one-twelfth (1/12) of the amount of real estate taxes
assessed or imposed against the premises for the preceding year, subject to
adjustment when the actual amount of the real estate taxes is ascertained. If
required by Lessor or any mortgagee, the provisions of this paragraph shall be
applicable to any additional charges due under this Lease.
VII.
INDEMNIFICATION
Lessee shall indemnify, defend with counsel reasonably acceptable to Lessor
and save Lessor harmless from and against all costs, expenses, liabilities,
losses, damages, injunctions, suits, actions, fines, penalties, claims and
demands of every kind or nature, including reasonable attorneys' fees, by or
on behalf of any person, party or governmental authority whatsoever arising
out of (a) any failure or alleged failure by Lessee to perform any of its
obligations under this Lease, (b) any accident, injury or damage which occurs
in or about the premises, however occurring, (c) any matter arising out of the
condition, occupation, maintenance, alteration, repair, use or operation of
the premises or any part of it, (d) the
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
13
<PAGE>
contest or challenge by Lessee of any imposed tax, assessment, or other
charges, or (e) any other matter arising from or relating to Lessee's
occupation of the premises.
VIII.
ENFORCEMENT
[Section] 8.1 DEFAULT. Each of the following events is a default and a breach
of this Lease by Lessee:
(a) If Lessee files any proceeding under the United States Bankruptcy
Code, any other federal or state bankruptcy, reorganization,
receivership, insolvency or other similar law affecting the rights of
creditors generally, or for dissolution under the laws of the United
States or of any state, or voluntarily takes advantage of any such law
or act or is dissolved or makes an assignment for the benefit of
creditors;
(b) If involuntary proceedings under the United States Bankruptcy
Code, any other federal or state bankruptcy, reorganization,
receivership, insolvency or other similar law or for the dissolution
of a corporation are instituted against Lessee or if a receiver or
trustee is appointed of all or substantially all of the property of
Lessee and such proceedings are not dismissed or such receivership or
trusteeship vacated within ninety (90) days after such institution or
appointment;
(c) If Lessee vacates, abandons or ceases doing business on the
premises or indicates its intention to do so;
(d) If this Lease or the estate of Lessee hereunder is transferred to
any other person or party, except in a manner permitted by the terms
of this Lease;
(e) If Lessee fails to pay Lessor any rent, additional or other charge
when it becomes due and payable and fails to make such payment within
ten (10) days after notice thereof by Lessor to Lessee;
(f) If Lessee fails to perform any of its nonmonetary obligations
under this Lease and such non-performance continues for a period
within which performance is required to be made by specific provision
of this Lease or, if no such period is provided, for a period of
thirty (30) days after notice thereof by Lessor to Lessee; or, if such
performance cannot be reasonably had within such thirty day period,
Lessee has not in good faith commenced such performance within such
thirty day period or has not diligently proceeded therewith to
completion;
(g) If the Lessee or any agent of Lessee falsifies any report required
to be furnished to Lessor pursuant to the terms of this Lease and
fails to notify Lessor of such falsification within sixty (60) days of
submission of such report.
In the event of a default under this paragraph, Lessor shall have such
remedies as are provided under this Lease and/or under applicable law.
[Section] 8-2 CURE BY LESSOR. After expiration of the applicable period of
notice, or without notice in the event of any emergency, Lessor at its
option may, but shall not be obligated to, make any payment required of Lessee
or perform any obligation of Lessee, and the amount Lessor pays, or the cost
of its performance, together with interest thereon at the highest legal rate
permitted, shall be deemed to be
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
14
<PAGE>
an additional charge payable by Lessee on demand. Lessor shall have the right
to enter the premises for the purpose of correcting or remedying any default,
but neither any expenditure nor any such performance by Lessor shall be deemed
to waive or release Lessee's default or the right of Lessor to take such
action as may be otherwise permissible in the case of default. The Lessor
shall have no liability to the Lessee for any loss or damages resulting from
any such action by the Lessor, and entry by the Lessor under the provisions of
Article V or VIII shall not constitute breach of the covenant for quiet
enjoyment or an eviction.
[Section] 8.3 LESSOR'S REMEDIES. If Lessee is in default under this Lease,
Lessor may, at its option, in addition to such other remedies as may be
available under applicable law:
(a) terminate this Lease and Lessee's right of possession, and retake
possession for Lessor's account. In such event, Lessor may repair and alter
the premises in any manner as Lessor deems reasonably necessary or advisable.
All expenses of every nature which Lessor may incur such as (by way of
illustration and not limitation) those for attorneys' fees, brokerage,
advertising, and refurbishing the premises, shall become immediately due and
payable by Lessee to Lessor; or
(b) terminate Lessee's right of possession, but not this Lease, retake
possession of the premises for the Lessee's account, repair and alter the
premises in any manner as Lessor deems reasonably necessary or advisable, and
relet the premises or any part of it, as the agent of Lessee, for the whole or
any part of the remainder of the term or for a longer period, and Lessor may
grant concessions or free rent or charge a higher rental than that reserved in
this Lease. Out of any rent collected or received from subtenants or as a
result of such letting or reletting, Lessor shall first pay to itself all
expenses of every nature which Lessor may incur such as (by way of
illustration and not limitation) those for attorneys' fees, brokerage,
advertising, and refurbishing the premises in good order or preparing them for
reletting; and second, Lessor shall pay to itself any balance remaining on
account of the liability of Lessee for the sum equal to all rent, additional
rent and other charges due from Lessee through the original term expiration
date. Should Lessor, pursuant to this paragraph, not collect rent which, after
deductions is sufficient to fully pay to Lessor a sum equal to all rent,
additional rent and other charges payable through the original term expiration
date, the balance or deficiency shall, at the election of Lessor, be paid by
Lessee on the first of each month; or
(c) stand by and do nothing, and hold the Lessee liable for all rent,
additional rent and other charges payable under this Lease through the
original term expiration date.
If Lessor does not notify Lessee which remedy it is pursuing, or if
Lessor's notice to Lessee does not expressly state that Lessor is exercising
its remedies under Section 8.3(a) or Section 8.3(c), then it shall be deemed
that Lessor is pursuing the remedy set forth in Section 8.3(b). If Lessor
exercises option (a) or (b) above, Lessee agrees to immediately peacefully
surrender the premises to Lessor, and if Lessee refuses to do so, Lessor may
without further notice reenter the premises either by force or otherwise and
dispossess Lessee by summary proceedings or otherwise, as well as the legal
representative(s) of Lessee and/or other occupant(s) of the premises, and remove
their effects.
[Section] 8.4 ACCELERATION. If Lessor exercises the remedies in Section 8.3(b)
or (c) of this Lease, Lessee shall immediately pay to Lessor as damages for
loss of the bargain caused by Lessee's default, and not as a penalty, in
addition to any other damages, an aggregate sum which represents the present
value of the full amount of the rent, additional rent and all other charges
payable by Lessee hereunder that would have accrued for the balance of the
term. If Lessor exercises the remedy in Section 8.3(b) of
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
15
<PAGE>
this Lease, Lessor shall account to Lessee at the original term expiration
date for amounts actually collected by Lessor as a result of a reletting, net
of amounts to be paid to Lessor under Section 8.3(b) of this Lease.
[Section] 8.5 SUITS. Suit or suits for the recovery of the deficiency or
damage or for any installment or installments of rent, additional rent or any
other charge due under this Lease may be brought by Lessor at any time or, at
Lessor's election, from time to time, and nothing in this Lease shall be
deemed to require Lessor to wait until the original term expiration date to
bring suit.
[Section] 8.6 WAIVER. Lessee hereby expressly waives service of any notice of
intention to reenter. Lessee hereby waives any and all rights to recover or to
regain possession of the premises or to reinstate or to redeem this Lease as
permitted or provided by any statute, law or decision now or hereafter in
force and effect. No receipt of moneys by Lessor from Lessee after the
cancellation or termination of the Lease shall reinstate, continue or extend
the Lease, or affect any prior notice given to Lessee or operate as a waiver
of the right of Lessor to enforce the payment of rent and additional rent then
due or subsequently falling due, or operate as a waiver of the right of Lessor
to recover possession of the premises by suit, action, proceeding or other
remedy, and any and all moneys so collected shall be deemed to be payments on
account of the use and occupancy of the premises, or at the election of the
Lessor, on account of Lessee's liability under this Lease.
[Section] 8.7 PROOF OF CLAIM. Nothing in this Article shall limit or prejudice
the right of Lessor to prove and obtain as liquidated damages in any
bankruptcy, insolvency, receivership, reorganization or dissolution proceeding
an amount equal to the maximum allowed by any statute or rule of law governing
such proceeding, whether or not such amount is greater, equal to or less than
the amount of the damages referred to in any of the preceding sections.
[Section] 8.8 INJUNCTION. In the event of a breach or a threatened breach by
Lessee of any of its Lease obligations, Lessor shall have the right to enjoin
and restrain the breach and to invoke any remedy allowed by law or in equity,
in addition to other remedies provided in this Lease.
[Section] 8.9 INDEPENDENT RIGHTS. The rights and remedies of Lessor are
distinct, separate and cumulative, and no one of them, whether or not
exercised by Lessor, shall be deemed to be to the exclusion of any of the
others.
[Section] 8.10 NON-WAIVER. The failure of Lessor to insist upon strict
performance of any of Lessee's obligations under this Lease shall not be
deemed a waiver of any rights or remedies that Lessor may have and shall not
be deemed a waiver of any subsequent breach or default by Lessee. The exercise
of any of the Lessor's options under the Lease "shall not be deemed to be the
exclusive remedy of Lessor."
[Section] 8.11 WAIVER OF EXEMPTION FROM DISTRESS. Lessee agrees that
notwithstanding anything contained in any statute, enactment or other law of
the state in which the premises are located or of any other jurisdiction, none
of the personalty located on the premises shall be exempt from levy for
distress for rent in arrears, and that if Lessee makes any claim for such an
exemption, this agreement may be pleaded as an estoppel against Lessee in any
appropriate action.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
16
<PAGE>
[Section] 8.12 FRANCHISE AGREEMENT. Notwithstanding anything in this Lease to
the contrary, this Lease is conditioned upon the faithful performance by
Lessee of the Franchise Agreement, and a default in the terms of the Franchise
Agreement shall be a default of this Lease.
IX.
NO RENT ABATEMENT
Unless specifically provided in this Lease, no abatement, diminution, or
reduction of rent, additional rent, charges or other compensation shall be
claimed by or allowed to Lessee, or any persons claiming under Lessee, under
any circumstances, whether for inconvenience, discomfort, interruption of
business, or otherwise.
X.
CONDEMNATION
[Section] 10.1 ENTIRE AWARD. In the event that the premises or any part of it
is taken in condemnation proceedings or by exercise of any right of eminent
domain (or by settlement agreement in lieu thereof between Lessor and those
authorized to exercise such right), Lessor shall be entitled to collect the
entire amount of any award made without deduction for any estate vested in or
owned by Lessee, subject only to the rights of any mortgagee and to Lessee's
rights as set forth in this Lease. Lessee agrees to execute any and all
documents that may be required to facilitate collection by Lessor of any and
all such awards. Lessee shall have no right to participate in any condemnation
proceedings or agreement except for the purposes described in 10.5.
[Section] 10.2 SUBSTANTIAL TAKING. If at any time during the Lease term, the
whole or substantially all of the premises is taken or condemned, this Lease
shall terminate and expire on the date on which title vests in the condemning
authority, upon which the rent provided to be paid by Lessee shall be
apportioned and paid to that date, and Lessee shall have no claim against
Lessor for the unexpired term of this Lease or for damage or for any other
reason whatsoever. For the purposes of this Section, "substantially all of the
premises" shall be deemed to have been taken if, in the sole opinion of
Lessor, the portion of the premises not taken cannot be repaired or
reconstructed in such a way that, by using only the amount of the net award
available from the taking, there remains a complete, rentable structure
capable of producing a proportionately fair and reasonable net annual income
after payment of all operating expenses, rent, additional rent and all other
charges payable by Lessee, and after performance by the Lessee of all its
obligations under this Lease.
[Section] 10.3 PARTIAL TAKING In the event of a partial taking (any taking
which is not "substantial"), this Lease shall not terminate, and Lessee shall
promptly proceed to restore the remainder of the building on the land (if
affected by the taking) to a complete, independent and self-contained
architectural unit, usable for the purposes contemplated by this Lease, and
Lessor shall pay to Lessee, subject to the same provisions and limitations
specified herein with respect to insurance proceeds, the cost of restoration,
which payment shall in no event exceed a sum equal to the amount of any
separate award made for such restoration. Any deficiency will be paid by
Lessee. Such restoration shall be subject to and shall be performed in
accordance with the provisions of Paragraph Section 5.3, except that any
surety bond shall be in the amount, if any, by which the estimated cost
of the work exceeds said separate award for the restoration. In the event
that there is no separate award for restoration, the amount shall be fixed
and settled by mutual agreement or by arbitration as provided in this Lease.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
17
<PAGE>
If this Lease does not terminate as provided in Section 10.2, and the taking
results in the loss of parking spaces, driveways or accesses which are not or
cannot be relocated or replaced elsewhere on the premises, the guaranteed
minimum annual rental after the date of taking shall be the lesser of (a) the
guaranteed minimum annual rental payable by Lessee immediately prior to the
taking, reduced by 12.5% of any portion of the award or awards recovered by
Lessor which are not applied to the reduction of any mortgage to which this
Lease is subject and subordinate or are not otherwise applied to Lessee's cost
of demolition, repair and restoration or (b) the guaranteed minimum annual
rent payable by Lessee immediately prior to the taking reduced in direct
proportion to the area of the premises taken. For example: if prior to the
taking the area of the premises is 30,000 square feet and the guaranteed
minimum annual rental is $100,000.00, upon the taking of 750 square feet, the
guaranteed minimum annual rental will be reduced by three (3%) percent,
resulting in a new guaranteed minimum annual rental of $97,000.00.
[Section] 10.4 EASEMENTS. If the taking is (i) of any existing appurtenant
easement, or (ii) by easement rather than by fee, then the Lessee shall not be
entitled to any reduction in guaranteed annual minimum rental unless such
taking results in (i) receipt of an award by Lessor and (ii) the deprivation
of use of the easement area by Lessee for parking, driveways or access. In
such case, Lessee's guaranteed annual minimum rental shall be reduced in
accordance with the calculation for a taking of the fee set forth in Section
10.3 above.
[Section]10.5 LESSEE'S INDEPENDENT AWARD. Nothing in this article shall
preclude Lessee from pursuing any independent action permitted by law or from
participating in the condemnation proceedings, but only for the purpose of
securing an independent award for loss of business or damage to personalty.
XI.
SUBORDINATION
This Lease shall be fully subordinate to any mortgage and/or collateral
assignment of lease against the premises which the fee owner, Lessor and/or
their assigns has or subsequently obtains upon the premises. This Lease shall
be fully subordinate and subject to any senior lease now, or hereafter
affecting the promises. In the event Lessor transfers all or a part of its
interest in the premises to a third party and enters into a lease with said
third party (with Lessor as tenant) then this Lease shall be fully subordinate
to said lease between such third party and Lessor.
The Lessee hereby grants a power of attorney to the Lessor with full power to
act as its attorney in fact and to execute on behalf of the Lessee any and all
documents that may be required by a mortgagee and/or assignee evidencing the
Lessee's full subordination of the Lessee's interest to any mortgage and/or
collateral assignment of lease that may be entered into by Lessor, the fee
owner or their assigns. Lessee hereby agrees to execute, without charging
Lessor, any and all documents that it is requested to execute to evidence this
subordination. However, Lessee shall not be required to execute any promissory
notes or other evidences of indebtedness which would create any personal
liability on behalf of Lessee.
XII.
ASSIGNMENT
[Section] 12.1 BY LESSOR. This Lease shall be fully assignable by the Lessor or
its assigns.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
18
<PAGE>
[Section] 12.2 BY LESSEE. Neither Lessee, nor Lessee's successors or assigns,
shall (unless expressly permitted in this Lease) assign, mortgage, give as
security, pledge or encumber this Lease, in whole or in part, by operation of
law or otherwise, or sublet the premises, in whole or in part, or permit the
premises or any portion of it to be used or occupied by others, or enter into
a management contract or other arrangement whereby the premises shall be
managed and operated by anyone other than the owner of Lessee's leasehold
estate, without the prior consent in writing of Lessor in each instance. If
this Lease is assigned or transferred, or if all or any part of the premises
is sublet or occupied by anybody other than Lessee, Lessor may collect rent
from the assignee, transferee, subtenant or occupant, and apply the net amount
collected to the rent reserved in this Lease, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of any covenant
or condition of this Lease, or the acceptance of the assignee, transferee,
subtenant or occupant as lessee, or a release of Lessee from the performance
or further performance by Lessee of its obligations under this Lease, and
Lessee shall continue to be liable for all its obligations under this Lease.
The consent by Lessor to an assignment, mortgage, pledge, encumbrance,
transfer, management contract or subletting shall not in any way be construed
to relieve Lessee from obtaining the express consent in writing of Lessor in
each instance to any subsequent similar action that the Lessee may intend to
take. Providing Lessee remains liable for all its obligations under this
Lease, Lessor shall consent to an assignment of this Lease to an individual,
partnership or corporation to which the Franchise Agreement has been assigned.
[Section] 12.3 ASSUMPTION BY ASSIGNEE. An assignment made with Lessor's consent
or as otherwise permitted shall not be effective until Lessee delivers to
Lessor an executed counterpart of such assignment containing an agreement, in
recordable form, executed by the assignor and the proposed assignee, in which
the assignee assumes the performance of the obligations of the assignor under
this Lease to the original term expiration date.
XIII
ADDITIONAL PROPERTY
[Section] 13.1 PURCHASE OF ADDITIONAL PROPERTY. In the event Lessee (for
purposes of this Article, if Lessee is a group of more than one person, the
term "Lessee" shall mean any member of the Lessee group) or any corporation,
partnership or other entity in which Lessee has an interest or any member of
Lessee's immediate family (Lessee or such other person or entity shall
hereinafter be referred to as "Vendee") acquires the right to purchase
property which, in the sole opinion of Lessor, is capable of being used either
as additional parking or for any other purpose connected with the operation of
the premises (the "Additional Property"), Lessor shall have an option to
assume Vendee's right to purchase such Additional Property without cost or
charge to Lessor for such option. The granting of this option by Vendee to
Lessor is in partial consideration for the making of this Lease by Lessor,
Vendee agrees to submit to Lessor (i) a copy of the purchase or option
contract within ten (10) days after final execution thereof and (ii) all other
relevant documents within a reasonable period of time in advance of the
scheduled closing date. Lessor shall have twenty (20) days after its receipt
of the purchase or option contract and any and all relevant documents within
which to notify Vendee of Lessor's intention to accept or reject Lessor's
option. If Vendee's rights to purchase such Additional Property are not
assignable, or if Vendee purchases the Additional Property without previously
granting Lessor the option to acquire the Additional Property, Lessor shall
have the additional option to purchase the Additional Property from Vendee, at
Vendee's purchase price, under the terms of Lessor's then standard contract
for the purchase of real property which shall be executed by Vendee and Lessor
upon Lessor's exercise of this additional option. The granting of this
additional option by Vendee to Lessor is in partial
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
19
<PAGE>
consideration for the making of this Lease by Lessor. Vendee agrees to submit
to Lessor a copy of the purchase agreement and all other relevant documents
within fifteen (15) days after Vendee acquires the Additional Property, and
Lessor shall have thirty (30) days thereafter within which to notify Vendee of
its intention to accept or reject this additional option.
In the event Lessor acquires the Additional Property from Vendee as set forth
above, Vendee and Lessor agree to amend this Lease to include the Additional
Property and to increase the rent and other charges payable by Lessee for its
use of the Additional Property. The rent for the Additional Property shall be
calculated by Lessor in accordance with its then current formula for the
calculation of "BKL" lease rentals.
In the event (i) Lessor fails to exercise its options to purchase the
Additional Property as set forth above, or (ii) Lessor has not received notice
from Vendee that Vendee has purchased the Additional Property, then at such
time as (a) Lessor becomes aware of the acquisition by Vendee of the
Additional Property or (b) this Lease expires or is terminated, whichever is
earlier, Lessor shall have a third option to acquire the Additional Property
by purchasing it for its then fair market value or three (3) times Vendee's
purchase price, whichever is less, under the terms of Lessor's then standard
contract for the purchase of real property, to be executed by Vendee and
Lessor upon the exercise by Lessor of this third option. The granting of this
third option by Vendee to Lessor is in partial consideration for the making of
this Lease by Lessor. Lessor must notify Vendee of its election to exercise
this third option within thirty (30) days after (A) the date on which Lessor
receives notice of Vendee's acquisition of the Additional Property or (B) the
expiration or termination of this Lease, whichever is earlier. Should Lessor
and Vendee be unable to agree upon a purchase price within thirty (30) days
after Vendee is notified by Lessor that Lessor desires to exercise this third
option, Lessor and Vendee shall within ten (10) days following the end of
said thirty (30) day period separately hire disinterested, qualified real
estate appraisers who are authorized to appraise property in the county where
the Additional Property is located and who are members of The Society of Real
Estate Appraisers, The American Institute of Real Estate Appraisers or The
American Society of Appraisers. If either Lessor or Vendee fails to appoint an
appraiser within ten (10) days after being notified of the appraiser retained
by the other party, the single appraiser hired shall determine the fair market
value of the Additional Property. If both parties select an appraiser, the two
appraisers shall meet and attempt to agree on a fair market value of the
Additional Property. If they are unable to agree on the value within fifteen
(15) days after the second appraiser was appointed, they shall select a third
appraiser who shall determine the fair market value. Lessor and Vendee shall
be responsible for the fee charged by the respective appraisers they selected
and shall split the cost of the third appraiser. If after being informed of
the fair market value of the Additional Property, Lessor indicates that the
purchase price is unacceptable, it may rescind its election to purchase the
Additional Property, upon notice to Vendee within twenty (20) days after being
informed of the fair market value of the Additional Property, but must pay the
total cost of the appraisal.
In the event Lessor acquires the Additional Property from Vendee under any of
the above options, Vendee shall furnish to Lessor evidence that he has good
and marketable title to the Additional Property, and title shall be conveyed
to Lessor in fee simple, free and clear of any liens, encumbrances,
restrictions or violations of any local, state or federal laws, orders, rules
or regulations upon payment of the purchase price. Closing shall be within
ninety (90) days after determination of the purchase price, subject to any
extension permitted under the terms of Lessor's then standard contract for the
sale of real property.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
20
<PAGE>
Vendee hereby expressly covenants and agrees that, in the event that Vendee
acquires Additional Property without complying with the terms and provisions
of this Section 13.1, Lessor shall have the absolute and unrestricted option
to purchase any such Additional Property, upon the terms and conditions set
forth above with respect to the third option to purchase, at any time during
the term of this Lease and for thirty (30) days after the expiration or
termination of this Lease. If, during such thirty (30) period, Lessor
discovers that Vendee has acquired Additional Property without complying with
the terms and provisions of this Section 13.1, then notwithstanding the
expiration or termination of this Lease, Vendee hereby further expressly
covenants and agrees that Vendee shall execute any and all relevant documents
in order to transfer fee title to said Additional Property to Lessor in
accordance with the terms and provisions of this Section 13.1. The granting of
this final option by Vendee to Lessor is in partial consideration for the
making of this Lease by Lessor.
[Section] 13.2 LEASE OF ADDITIONAL PROPERTY. In the event Vendee acquires the
right to lease, sublease or license, have an easement across or over, or any
other right of any kind, save and except by purchase, to use or occupy the
Additional Property (the "Occupancy Right") from any person other than Lessor,
Vendee shall give Lessor written notice thereof, which notice shall set forth
or be accompanied by a copy of the proposed lease, sublease, license
agreement, easement agreement or other use or occupancy agreement (the
"Additional Property Lease") and which notice shall be delivered to Lessor
prior to the execution of any Additional Property Lease. The Additional
Property Lease shall set forth (a) all terms and conditions of the Occupancy
Right, including, without limitation, the rent, additional rent, and other
consideration payable under the Additional Property Lease, and the term and
any options to extend the term; (b) the extent to which the tenant under the
Additional Property Lease may make alterations and/or improvements; (c) any
broker or other agent who was involved in the acquisition of the Occupancy
Right; (d) a description of the Additional Property; (e) its proposed use; and
(f) the name and address of the proposed landlord. Lessor may, within thirty
(30) days after receipt of such written notice from Vendee accompanied by or
containing all of the items set forth above, in its sole and absolute
discretion, choose to enter into the Additional Property Lease, as tenant; in
such event, Lessor and Vendee agree to amend this Lease to include the
Additional Property and to increase the rent and other charges payable by
Lessee for its use of the Additional Property. The rent for the Additional
Property shall be calculated by Lessor in accordance with its then current
formula for the calculation of "BKL" lease rentals. During said thirty (30)
day period, Vendee shall not, in any event whatsoever, execute, or cause
anyone else to execute on Vendee's behalf or otherwise, the Additional
Property Lease. If Lessor chooses not to enter into the Additional Property
Lease, then Vendee may choose to enter into the Additional Property Lease, as
tenant; in such event, the following paragraph shall be incorporated into the
Additional Property Lease in its entirety:
"Notwithstanding anything to the contrary set forth herein, Landlord and
Tenant hereby covenant and agree that Tenant may, at any time during the
term hereof and without Landlord's consent, assign this Lease to Burger
King Corporation or its designee (collectively, "BKC"). The Tenant
covenants that, notwithstanding any such assignment to BKC, and
notwithstanding the acceptance of rent and/or additional rent by Landlord
from BKC, the Tenant shall, during the term hereof, remain fully liable
for the payment of the rent and the additional rent hereunder and for the
performance and observance of all other obligations of this Lease on the
part of Tenant to be performed or observed. Additionally, (i) in the event
of any default by Tenant hereunder which default has not been cured prior
to the expiration of any grace, notice or cure period; or (ii) at such
time as any lease between BKC, as landlord, and Tenant, as tenant, expires
or is terminated, then, in any such event, BKC shall have the option, but
shall be under no obligation to exercise said option, exercisable within
thirty (30) days after the end of any grace, notice or cure period, or the
expiration
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
21
<PAGE>
or termination of any such lease, to assume this Lease from Tenant by
written notice to Tenant and Landlord and at no cost or charge to BKC. In
order to effectuate this provision, Landlord agrees that, if Tenant is in
default hereunder, Landlord shall give written notice thereof to BKC at
17777 Old Cutler Road, P.O. Box 520783, GMF, Miami, Florida 33152
Attention: General Counsel and Landlord further agrees that Landlord shall
be obligated to send said notice to BKC whether or not this Lease provides
for written notice of default to be sent to the Tenant. The parties hereto
acknowledge and agree that BKC may, in its sole and absolute discretion,
cure any default by Tenant hereunder, but BKC shall be under no obligation
to do so and BKC's decision to cure or not to cure any default by the
Tenant shall not be a condition precedent to BKC's assumption of this
Lease. Landlord and Tenant hereby agree to execute and provide such
documents (including, without limitation, a copy of this Lease, certified
by Landlord and Tenant to be a true and correct copy, and an estoppel
certificate from Landlord) and other assurances (including, without
limitation, Tenant's guarantee to cure all existing defaults hereunder
prior to the effective date of said assumption by BKC) reasonably required
by BKC to give full force and effect to this provision." [The words
"Landlord", "Tenant" and "Lease" in the foregoing paragraph shall be
changed to "Licensor", "Licensee" and "License", respectively, if Vendee
is entering into a license agreement and similar modifications (but only
as to form, not substance) may be made to the foregoing paragraph where
required in the case of a sublease, an easement agreement or any other
type of use or occupancy agreement.]
Upon the execution and delivery of the Additional Property Lease by Vendee and
the proposed landlord, Vendee shall deliver a duplicate original of the fully
executed Additional Property Lease and any and all other documents relating to
the Additional Property Lease to Lessor.
Vendee hereby expressly covenants and agrees that, in the event that Vendee
enters into an Additional Property Lease without complying with the terms and
provisions of this Section 13.2, Lessor shall have the absolute and
unrestricted right to have said Additional Property Lease assigned to Lessor,
upon the terms and conditions set forth in this Section 13.2, at any time
during the term or any extensions of the term of the Additional Property
Lease. If Lessor is not notified of the existence of an Additional Property
Lease during the term hereof, Lessor shall have thirty (30) days after the
expiration or termination of this Lease to investigate whether such an
Additional Property Lease exists. If, during such thirty (30) day period,
Lessor discovers that an Additional Property Lease exists, then
notwithstanding the expiration or termination of this Lease, Vendee hereby
further expressly covenants and agrees that Vendee shall execute any and all
relevant documents in order to assign said Additional Property Lease to
Lessor. After the Additional Property Lease has been assigned to Lessor (if
said assignment occurs prior to the expiration or termination of this Lease),
Vendee and Lessor agree to amend this Lease to include the Additional
Property. The rent and other charges for the Additional Property shall be
calculated by Lessor in accordance with its then current formula for the
calculation of "BKL" lease rentals.
For purposes of this Article, notice to the Lessee in the manner indicated in
Section 14.2 shall be deemed to be notice to Vendee. The terms and provisions
of this Article shall survive the expiration or termination of this Lease.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
22
<PAGE>
XIV.
ESTOPPEL CERTIFICATE
Lessee shall from time to time, within five (5) days after being requested to
do so by the Lessor, execute, enseal, acknowledge and deliver to the Lessor
(or, at Lessor's request, to any existing or prospective purchaser,
transferee, assignee or mortgagee of any or all of the premises, any interest
therein or any of Lessor's rights under this Lease) an instrument in
recordable form;
(i) certifying (a) that the Lease is unmodified and in full force and
effect (or, if there has been any modification thereof, that it is in full
force and effect as so modified, stating therein the nature of such
modification); (b) as to the dates to which the guaranteed minimum annual
rental, percentage rental and additional charges arising hereunder have been
paid; (c) as to the amount of any prepaid rent or any credit due to Lessee
hereunder; (d) that the Lessee has accepted possession of the premises, and
the date on which the term commenced; (e) as to whether, to the best
knowledge, information and belief of the signer of such certificate, the
Lessor or the Lessee is then in default in performing any of its obligations
under the Lease (and, if so, specifying the nature of each such default); and
(f) as to any other fact or condition reasonably requested by the Lessor or
such other addressee; and
(ii) acknowledging and agreeing that any statement contained in such
certificate may be relied upon by Lessor and any such other addressee.
XV.
HAZARDOUS SUBSTANCES
[Section] 15.1 COMPLIANCE WITH LAWS. Lessee shall at all times, at its own
cost and expense, comply with all federal, state and local laws, ordinances,
regulations and standards ("Hazardous Substance Laws") relating to the use,
analysis, production, storage, sale, disposal or transportation of any
hazardous materials, including oil or petroleum products or their derivatives,
solvents, PCB's, explosive substances, asbestos, radioactive materials or
waste, and any other toxic, ignitable, reactive, corrosive, contaminating or
pollution materials ("hazardous substances") which are now or in the future
subject to any governmental regulation. Such compliance shall include any
cleanup, removal, remedial action, testing or monitoring (including medical
monitoring) which may be required under Hazardous Substance Laws, Court order
or by any governmental or regulatory agency.
[Section] 15.2 NOTICES TO LESSOR.
(a) Except with respect to any substance described in Section 15.2(c)
below, Lessee shall give written notice to Lessor within three (3) business
days after the date on which Lessee learns or first has reason to believe
that:
(1) There has or will come to be located on or about the
premises any hazardous substance, the production,
transportation, storage, use or handling of which
requires a permit or license from any federal, state
or local governmental agency.
(2) Any release, discharge or emission of any hazardous
substance has occurred on or about the premises,
including the migration of any hazardous substance to
or from adjoining or nearby properties.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
23
<PAGE>
(3) Any (i) enforcement, cleanup, removal, remediation,
testing, monitoring or other governmental or
regulatory action has been threatened or commenced
against Lessee with respect to the premises pursuant
to any Hazardous Substances Laws; or (ii) any claim
has been made or threatened by any person or entity
against
Lessee or the premises on account of any alleged loss
or injury claimed to result from the alleged presence
or release on or from the premises of any hazardous
substance; or (iii) any report, notice, or complaint
has been made to or filed with any governmental agency
concerning the presence, migration, use or disposal of
any hazardous substances on or from the premises. Any
such notice shall be accompanied by copies of any such
claim, report, complaint, notice, warning or other
communication that is in the possession of or is
reasonably available to the Lessee.
(b) Any notice required under this Section 15.2 shall be accompanied
by (i) a copy of all permits, licenses, proofs of disclosure to governmental
agencies pertaining to hazardous substances that have not previously been
furnished to Lessor and (ii) copies of any Material Safety Data Sheets
pertaining to such substances that are required by applicable law to be kept
at the premises.
(c) The notice provisions of this Article XV shall not apply to
materials that are lawfully discharged from the premises or lawfully used on
the premises in the ordinary course of Lessee's business.
[Section] 15.3 REMOVAL AND DISPOSAL. Except for materials that are lawfully
discharged from the premises or lawfully used on the premises in the ordinary
course of Lessee's business, Lessee shall cause any hazardous substances to be
removed from the premises solely by duly licensed hazardous substances
transporters to duly licensed facilities for final disposal to the extent
required by and in accordance with applicable Hazardous Substances Laws, and
shall deliver to Lessor copies of any hazardous waste manifest reflecting the
lawful transport and disposal of such substances.
[Section] 15.4 ENVIRONMENTAL AUDITS BY LESSOR.
(a) Rights of Lessor. Lessor may, but shall not be required to, engage
such independent contractors as Lessor determines to be appropriate to perform
from time to time any audit, including environmental sampling and testing, of
(i) the premises, the surrounding soil and any adjacent areas, and any
groundwater located under or adjacent to the premises and/or any adjoining
property, (ii) Lessee's compliance with all Hazardous Substances Laws and the
provisions of this Lease, and (iii) the provisions made by Lessee for carrying
out any remedial action that may be required by this Lease (collectively an
"environmental audit"). All costs and expenses incurred by Lessor in
connection with any such environmental audit shall be paid by Lessor, except
that if any such environmental audit shows that Lessee has failed to comply
with the provisions of this Article XV, then such costs and expenses shall be
paid by Lessee to Lessor as additional charges pursuant to Section 3.4 of this
Lease.
(b) Conduct of Audit. Each environmental audit shall be conducted (i)
only after advance notice thereof has been provided to Lessee at least
twenty-four (24) hours prior to the date of such audit, and (ii) in a manner
reasonably designed to minimize any interference with the conduct of Lessee's
business on the premises. Lessor shall repair any damages to the premises or
to Lessee's personal property caused by any environmental audit conducted by
or on behalf of Lessor.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
24
<PAGE>
(c) Submission to Governmental Agency. Notwithstanding any other
provision of this Lease to the contrary, to the extent required by law, Lessor
shall be entitled to submit the results of any environmental audit to any
federal, state or local governmental agency having jurisdiction over (a) the
premises or (b) hazardous substances with respect to the premises.
[Section] 15.5 REMEDIATION.
(a) By Lessee. If any environmental audit of the premises (whether
conducted by Lessor, Lessee or any third party) shall recommend the cleanup,
abatement, removal, disposal, monitoring or further testing, including medical
monitoring or testing (collectively "remediation") of or for any hazardous
substances found on or about the premises, then Lessor shall provide Lessee
with a copy of such environmental audit and Lessee shall promptly commence
such remediation.
(b) By Lessor.
If, within thirty (30) days after receiving a copy of such
environmental audit and such written statement, Lessee fails either (i) to
complete such remediation, or (ii) with respect to any remediation which
cannot be completed within such thirty-day period, fails to proceed with
reasonable diligence to complete such remediation as promptly as practicable,
then the Lessor shall be entitled to provide a copy of the environmental audit
to any federal, state, or local governmental agency having jurisdiction over
the premises or hazardous substances.
Notwithstanding any other provision of the Lease to the contrary, if
any environmental audit reveals a situation which, in Lessor's sole opinion,
constitutes an emergency, then Lessor shall have the right, but not the
obligation, to carry out any remediation recommended by such audit or if
required by any federal, state or local governmental agency having
jurisdiction over the premises. If Lessee is responsible for conducting such
remediation, Lessor shall have the right to recover all of the costs and
expenses thereof from Lessee as additional charges pursuant to Section 3.4 of
this Lease.
(c) Actions and Proceedings. Except in emergencies or as otherwise
required by law, Lessee shall not perform any remediation in response to the
presence or release of any hazardous substances on or about the premises
without first giving written notice to Lessor. Lessee shall not enter into any
settlement agreement, consent decree or other compromise with respect to any
claims relating to any hazardous substances in any way connected with the
premises without first notifying Lessor of Lessee's intention to do so and
affording Lessor the opportunity to participate in any such proceedings.
[Section] 15.6 REMEDIATION BY THIRD PARTIES.
(a) If Lessee receives a request from a third party to enter the
premises for the purposes of remediation of hazardous substances, then Lessee
shall so notify Lessor in accordance with the provisions of Section 15.2
above.
(b) Lessor, in its sole discretion, shall determine if the request
should be honored and, if so, under what conditions.
(c) If Lessor determines that the request should be honored, then
Lessee shall cooperate with such remediation so long as the third party agrees
to comply with the provisions of Section 15.4(b) above and with any other
reasonable conditions requested by Lessee.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
25
<PAGE>
(d) Lessee agrees to sign any documentation reasonably required by
Lessor and/or any such third party in order to effectuate the provisions of
this Section 15.6.
[Section] 15.7 LEASE EXPIRATION. Upon the expiration or earlier termination of
the term of this Lease, Lessee shall (i) cause all hazardous substances
previously owned, stored or used by Lessee to be removed from the premises and
disposed of in accordance with applicable Hazardous Substances Laws; (ii)
remove any aboveground or underground storage tanks or other containers
installed or used by Lessee to store any hazardous substances on the premises,
and repair any damage to the premises caused by such removal; (iii) cause any
soil or other portion of the premises which has become contaminated by any
hazardous substances stored or used by Lessee on the premises to be
decontaminated, detoxified or otherwise remediated in accordance with the
requirements of any governmental authorities having jurisdiction over the
premises; and (iv) surrender possession of the premises to Lessor free of
contamination attributable to hazardous substances generated or used by Lessee
in or on the premises during the term of this Lease.
[Section] 15.8 INDEMNIFICATION BY LESSEE. Lessee shall indemnify, defend with
counsel reasonably acceptable to Lessor, and hold Lessor free and harmless
from any and all liabilities, damages, claims, penalties, fines, settlements,
causes of action, costs or expense, including reasonable attorneys' fees,
environmental consultant and laboratory fees and the costs and expense of
investigating and defending any claims or proceedings, resulting from or
attributable to (i) the presence, disposal, migration, release or threatened
release of any hazardous substance that is on, from or affecting the premises
including the soil, water, vegetation, buildings, personal property, persons,
or otherwise; (ii) any bodily injury (including wrongful death) or property
damage (real or personal) arising out of or relating to such hazardous
substances); (iii) any lawsuits or administrative order relating to such
hazardous substances); or any violation of any laws applicable to any
hazardous substance for which Lessee is responsible under this lease. Lessee's
indemnification obligations under this Section shall survive the expiration or
earlier termination of this Lease.
XVI.
MISCELLANEOUS
[Section] 16.1 ARBITRATION. In the event of arbitration under Section 10.3 of
this Lease, the arbitration shall be held in the City of Miami, Florida, in
accordance with the rules of the American Arbitration Association requiring
the appointment of three (3) arbitrators.
[Section] 16.2 NOTICES. Every notice, approval, consent or other communication
authorized or required by this Lease shall be effective if given in writing
and if hand delivered or sent by United States Registered or Certified Mail,
Return Receipt Requested, with postage prepaid, and addressed directly to
Lessor at its offices at P.0. Box 520783, General Mail Facility, Miami,
Florida 33152, and to Lessee at the premises, or at such other address as
either party shall from time to time designate in writing. Every notice shall
be deemed to be effective upon delivery, if delivered, or on the second
business day after mailing, if mailed.
[Section] 16.3 ADDRESS FOR PAYMENTS. All payments to the Lessor shall be made
at the following address unless otherwise notified in writing by Lessor: Burger
King Corporation, Dept. Number 210325, Miami, Florida 33121-0325.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
26
<PAGE>
[Section] 16.4 CONSTRUCTION. In the event that any of the provisions of this
Lease shall by court order be held invalid or in contravention of any of the
laws of the United States or of any state having jurisdiction over the subject
matter or of any dispute arising under it, such invalidation shall not serve
to affect the remaining portion of this Lease. To the extent permitted by the
laws of the state where the premises are located, this Lease shall be governed
by and construed in accordance with the laws of the State of Florida.
[Section] 16.5 SUCCESSORS. This contract shall bind Lessor and Lessee and
their successors, heirs, assigns, administrators, and legal representatives,
as the case may be.
[Section] 16.6 RECORDING. Lessee shall upon request of Lessor execute a short
form of this Lease on a written document witnessed and acknowledged in a form
capable of being recorded in the public records of the county where the
premises are located. Lessee shall not record this Lease without prior written
consent of Lessor.
[Section] 16.7 COUNTERPARTS. This agreement is being executed simultaneously in
counterparts, any one of which shall be deemed an original.
[Section]16.8 NO AGENCY. The parties hereto agree that the business
relationship created by this Lease is solely that of Lessor and Lessee.
Nothing contained in this Lease shall make Lessee an agent, legal
representative, partner, subsidiary, joint venturer or employee of Lessor.
Lessee shall have no right or power to, and shall not bind or obligate Lessor
in any way, manner or thing whatsoever, nor represent that it has any right to
do so.
[Section] 16.9 TIME OF THE ESSENCE. Time shall be of the essence in every part
of this Lease.
[Section] 16.10 BINDING EFFECT. This agreement shall become immediately
binding on the parties to this Lease on the date the last party signs it,
notwithstanding that the term of this Lease shall commence upon a future date.
[Section] 16.11 HEADINGS. The table of contents preceding this Lease and the
headings of the paragraphs and subparagraphs are inserted solely for the
convenience of reference and shall not constitute a part of this Lease, nor
limit, define or describe the scope or intent of this Lease.
[Section] 16.12 JOINT AND SEVERAL LIABILITY. If Lessee consists of more than
one person, each individual's liability under this Lease shall be joint and
several.
[Section] 16.13 DEFINITIONS.
(a) The term "Lessor" as used in this Lease shall mean the owner in fee of
the premises for the time being, or the owner of the leasehold estate
created by an underlying lease, or the mortgagee of the fee or of such
underlying lease in possession for the time being, so that in the event of
any sale or sales of the premises, or of the making of any such underlying
lease, or of any transfer or assignment or other conveyance of such
underlying lease and the leasehold estate created by it, the seller,
lessor, transferor or assignor shall be and is hereby entirely freed and
relieved of all agreements, covenants and obligations of Lessor herein and
it shall be deemed and construed without further agreement between the
parties or their successors in interest or between the parties and the
purchaser, lessee, transferee or assignee on any such sale, leasing,
transfer or assignment
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
27
<PAGE>
that such purchaser, lessee, transferee or assignee has assumed and agreed to
carry out any and all agreements, covenants and obligations of Lessor under
this Lease.
(b) The term "Lessee" shall mean the lessee named in this Lease, and
from and after any valid assignment or sublease of Lessee's interest in this
Lease pursuant to its provisions, the assignee or sublessee of this Lease.
(c) The term "mortgage" shall mean any mortgage, security interest,
charge, deed of trust, or other similar encumbrance resulting from the
financing or refinancing of the premises.
(d) The term "mortgagee" shall include any individual, firm,
partnership, corporation, joint venture, investment trust bank or institution,
or other business group or association lending funds to Lessor upon the
security of the premises demised by this Lease whether or not such mortgage is
recorded, or upon Lessor's independent covenant not to otherwise encumber this
Lease or the premises.
(e) The term "fixture(s)" as used in this Lease means such items of
personalty which have been (i) installed by Lessor and/or (ii) so affixed to
the premises that removal would cause, in Lessor's sole opinion, material
damage to the premises. By way of example, and not limitation, fixtures
include the following: heating, ventilating and air conditioning systems,
water heaters or softeners, core-drilled tables and seating, walk-in boxes,
walk-in freezers, and toilet fixtures consisting of the lavatories and water
closets.
The Lessor and Lessee have respectively signed this Lease as of the
date indicated on the first page of this Lease.
ATTEST: BURGER KING CORPORATION
By:
- -------------------------- ----------------------------------
Title:
-------------------------------
LESSOR
(Corporate Seal)
Witnesses for Lessee:
- -------------------------- ---------------------------
*
- -------------------------- ----------------------------
*
LESSEE
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
28
<PAGE>
STATE OF FLORIDA
COUNTY OF DADE
BEFORE ME, the undersigned authority, personally appeared _____________
________________ and _________________________ to me well known and known to
me to be the individuals described in and who executed the foregoing
instrument as Vice President and Assistant Secretary of BURGER KING
CORPORATION, a Florida corporation, and severally acknowledged to and before
me that they executed such instrument as such Vice President and Assistant
Secretary respectively of said corporation and that the seal affixed to the
foregoing instrument is the corporate seal of said corporation, and that it
was affixed to said instrument by due and regular corporate authority, and
that said instrument is the free act and deed of said corporation.
WITNESS my hand and official seal this _______ day of ___________, 19____.
_____________________
(SEAL) Notary Public
My Commission Expires:
STATE OF
COUNTY OF
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared *, to me known and known to me to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and
considerations therein expressed.
WITNESS my hand and official seal this ________ day of ____________,
19___.
------------------------
(SEAL) Notary Public
My Commission Expires:
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
29
<PAGE>
EXHIBIT "A" #
30
<PAGE>
ADDENDUM TO THAT LEASE/SUBLEASE
DATED THE ______ DAY OF ______________, 19___,
BETWEEN BURGER KING CORPORATION, AS LESSOR, AND
___________________,AS LESSEE
In the event of any conflicts between the terms of the Lease/Sublease
and the terms of this Addendum, the terms of this Addendum shall control.
[DELETE ITEMS #1 AND #2 IF A PURCHASE PROPERTY]
1. The Lessee acknowledges that the premises are subject to a certain
Lease dated ________________ (the "Master Lease") between ___________,
as landlord, and Burger King Corporation, as tenant, a true and correct
copy being attached hereto as Exhibit "B".
2. Except as otherwise provided below, the obligations and restrictions
imposed upon Lessor, as tenant under the Master Lease, shall be binding
upon Lessee herein. In the event the obligations and restrictions
imposed on Lessee under the foregoing Lease/Sublease conflict with the
obligations and restrictions imposed upon Lessor, as tenant under the
Master Lease, then the more burdensome and restrictive of such
obligations and restrictions shall prevail and be binding upon the
Lessee herein.
3. Lessee acknowledges that it takes this Lease/Sublease subject to any
and all reservations, restrictions, easements, rights of way,
limitations and conditions of record.
4. Except as modified or amended in this Addendum, all other terms and
conditions contained in the Lease/Sublease remain in full force and
effect.
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
31
<PAGE>
The Lessor and Lessee have respectively signed this Addendum as of the
date indicated on the first page of the foregoing attached Lease/Sublease.
Attest: BURGER KING CORPORATION
-------------------------
By:
----------------------------
Title:
-------------------------
WITNESSES:
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
EXHIBIT "G"
SAMPLE - SUBJECT TO CHANGE
WITHOUT NOTICE
32
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LEASOR EXPIRATION EXPIRATION
- ----------------------------------------- ---------------------- ------ ---------- ----------
<S> <C> <C> <C> <C>
BURGER KING CORPORATION
106 18459 South Halsted Street Glenwood, IL BKC 2/28/01 2/28/01
128 4848 West 87th Street Burbank, IL BKC 12/30/13 12/30/13
147 590 Roosevelt Road Glen Ellyn, IL BKC 4/29/05 4/29/05
189 103 North Laskin Avenue Joliet, IL BKC 9/1/14 9/1/14
207 2700 South Kedzie Avenue Chicago, IL BKC 9/1/14 9/1/14
209 176 East Butterfield Road Elmhurst, IL BKC 1/9/11 1/9/11
213 6701 West Roosevelt Road Benwyn, IL BKC 6/30/96 6/30/96
240 803 River Oaks Drive Calumet City, IL BKC 7/19/11 7/19/11
244 3728 South Archer Avenue Chicago, IL BKC 6/22/14 6/22/14
267 7938 Calumet Avenue Munster, IN BKC 9/1/14 9/1/14
305 10170 West Grand Avenue Franklin Park, IL BKC 9/1/14 9/1/14
381 10341 South Cicero Avenue Oak Lawn, IL BKC 4/29/04 4/29/04
540 9236 Indianapolis Boulevard Highland, IN BKC 9/1/14 9/1/14
720 715 North Hobart Road Hobart, IN BKC 10/30/05 10/30/05
1047 807 Lincoln Way Valpariso, IN BKC 9/22/00 9/22/00
1099 1 South 722 Summit Avenue Oakbrook Terrace, IL BKC 9/1/14 9/1/14
1103 7140 West 159th Street Orland Park, IL BKC 4/29/12 4/29/12
1116 415 W. Schusale Road Carol Stream, IL BKC 9/13/12 9/13/12
1118 2607 West Lincoln Highway Merrillville, IN BKC 5/29/12 5/29/12
1143 7205 Archer Avenue Summit, IL BKC 2/27/02 2/27/02
1170 6930 South Route 83 Willowbrook, IL BKC 9/22/00 9/22/00
1176 18240 South Kedzie Avenue Hazelcrest, IL BKC 8/30/13 8/30/13
1216 3219 Chicago Road S. Chicago Heights, IL BKC 9/1/14 9/1/14
1217 18156 South Torrance Avenue Lansing, IL BKC 4/12/13 4/12/13
1249 12701 South Ashland Avenue Calumet Park, IL BKC 12/30/03 12/30/03
1254 200 West 162nd Street South Holland, IL BKC 9/1/14 9/1/14
1334 500 South State Street Chicago, IL BKC 9/1/14 9/1/14
1345 1201 East Ridge Road Griffith, IN BKC 5/11/99 5/11/99
1355 1048 Sibley Boulevard Dolton, IN BKC 3/4/14 3/4/14
1397 14340 South Cicero Avenue Midlothian, IL BKC 9/22/00 9/22/00
1413 7432 South Kostner Avenue, Ford City
Shopping Center Chicago, IL BKC 5/31/96 5/31/96
1470 400 East Case Street Joliet, IL BKC 9/1/14 9/1/14
1500 2074 SouthLake Mall Merrillville, IN BKC 7/27/05 7/27/05
1645 417 North Bolingbrook Drive Bolingbrook, IL BKC 8/30/11 8/30/11
1660 5820 Calumet Avenue Hammond, IN BKC 9/1/14 9/1/14
1786 200 West Monroe Chicago, IL BKC 6/13/01 6/13/01
1819 2 East Chicago Chicago, IL BKC 7/30/06 7/30/06
1825 340 North Independence Romeoville, IL BKC 9/1/14 9/1/14
1866 113 West Roosevelt Road Maywood, IL BKC 1/7/07 1/7/07
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ----------------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BURGER KING CORPORATION
106 18459 South Halsted Street 9/21/62 33.6 2,350 82 Y N
128 4848 West 87th Street 1/15/64 32.2 2,610 72 Y N
147 590 Roosevelt Road 9/24/64 31.5 2,227 72 Y N
189 103 North Laskin Avenue 8/10/65 30.7 2,750 72 Y N
207 2700 South Kedzie Avenue 11/30/65 30.4 2,965 82 Y N
209 176 East Butterfield Road 11/23/65 30.4 2,250 76 Y Y
213 6701 West Roosevelt Road 11/17/65 30.4 2,458 74 Y N
240 803 River Oaks Drive 7/21/66 29.7 2,310 80 Y N
244 3728 South Archer Avenue 6/24/66 29.8 2,793 72 Y N
267 7938 Calumet Avenue 11/29/66 29.4 3,287 92 Y N
305 10170 West Grand Avenue 6/9/67 28.8 2,469 72 Y N
381 10341 South Cicero Avenue 5/2/68 27.9 2,420 72 Y N
540 9236 Indianapolis Boulevard 5/30/69 26.9 3,525 94 Y Y
720 715 North Hobart Road 10/30/70 25.4 3,452 102 Y N
1047 807 Lincoln Way 9/21/71 24.5 3,239 109 Y N
1099 1 South 722 Summit Avenue 3/3/72 24.1 4,370 108 Y N
1103 7140 West 159th Street 5/24/72 23.9 2,980 83 Y N
1116 415 W. Schusale Road 9/21/72 23.5 2,360 72 Y N
1118 2607 West Lincoln Highway 5/31/72 23.9 2,865 104 Y Y
1143 7205 Archer Avenue 1/10/73 23.2 3,568 108 Y N
1170 6930 South Route 83 10/27/72 23.4 2,980 80 Y N
1176 18240 South Kedzie Avenue 3/17/73 23.1 2,640 80 Y N
1216 3219 Chicago Road 5/31/73 22.9 2,790 72 Y Y
1217 18156 South Torrance Avenue 4/14/73 23.0 2,672 72 Y N
1249 12701 South Ashland Avenue 5/10/73 22.9 2,368 108 Y N
1254 200 West 162nd Street 8/20/73 22.6 2,654 70 Y N
1334 500 South State Street 3/21/74 22.0 9,400 108 N N
1345 1201 East Ridge Road 5/13/74 21.9 3,061 75 Y N
1355 1048 Sibley Boulevard 3/6/74 22.1 2,930 70 Y N
1397 14340 South Cicero Avenue 8/9/74 21.7 2,927 88 Y N
1413 7432 South Kostner Avenue, Ford City
Shopping Center 6/16/74 21.8 2,925 108 Y N
1470 400 East Case Street 12/30/74 21.3 3,022 78 Y N
1500 2074 SouthLake Mall 11/29/74 21.4 3,960 92 N N
1645 417 North Bolingbrook Drive 9/1/76 19.6 3,000 68 Y Y
1660 5820 Calumet Avenue 9/1/76 19.6 3,152 120 Y N
1786 200 West Monroe 10/4/76 19.5 5,676 260 Y N
1819 2 East Chicago 12/14/76 19.3 3,674 136 N N
1825 340 North Independence 12/21/76 19.3 3,151 108 Y N
1866 113 West Roosevelt Road 5/5/77 18.9 3,200 99 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LEASOR EXPIRATION EXPIRATION
- --------------------------------- ------------------- ------ ---------- ----------
<S> <C> <C> <C> <C>
2016 500 South Racine Chicago, IL BKC 4/23/97 4/23/97
2120 24 South Michigan Avenue Chicago, IL BKC 9/20/97 9/20/97
2130 20 Starrybrook Sauk Village, IL BKC 12/31/08 12/31/08
2196 6465 West Diversey Chicago, IL BKC 8/30/03 8/30/03
2672 340 South Neltnor West Chicago, IL BKC 6/11/10 6/11/10
2727 2595 Willow Creek Road Portage, IN BKC 12/25/11 12/25/11
3021 6904 Kennedy Avenue Hammond, IN BKC 6/29/10 6/29/10
3273 2921 Calumet Avenue Valpariso, IN BKC 11/1/11 11/1/11
3507 225 North Michigan Avenue Chicago, IL BKC 3/30/02 3/30/02
3695 621 West Chicago Avenue Chicago, IL BKC 9/1/14 9/1/14
3821 105 West 61st Avenue Merrillville, IN BKC 7/30/13 7/30/13
4136 5520 West 159th Street Oak Forest, IL BKC 9/1/14 9/1/14
4205 14601 LaGrange Road Orland Park, IL BKC 9/1/14 9/1/14
4293 5100 West Cermak Road Cicero, IL BKC 9/22/00 9/22/00
4462 1850 Southlake Mall Merrillville, IN BKC 5/30/05 5/30/05
4584 2505 West Jefferson Street Joliet, IL BKC 9/1/14 9/1/14
4594 4420 West 211th Street Malleson, IL BKC 9/22/00 9/22/00
4730 112 South State Street Chicago, IL BKC 9/29/04 9/29/04
5157 194 West Joe Orr Road Chicago Heights, IL BKC 9/2/11 9/2/11
5194 1616 North Larkin Crest Hill, IL BKC 9/2/11 9/2/11
5330 28 East Jackson Boulevard Chicago, IL BKC 4/23/07 4/23/07
5735 2110 West Galena Boulevard Aurora, IL BKC 9/22/00 9/22/00
5983 16791 Torrence Avenue Lansing, IL BKC 5/29/13 5/29/13
5984 2147 South Oak Park Avenue Berwyn, IL BKC 5/29/13 5/29/13
5986 2501 West Cermak Road Chicago, IL BKC 5/29/13 5/29/13
6185 7843 Indianapolis Boulevard Hammond, IL BKC 9/1/14 9/1/14
7045 600 South Newport Road Pontiac, IL BKC 3/28/11 3/28/11
7403 Woodfield Mall - Space D-312 Schaumburg, IL BKC 6/23/01 6/24/01
7545 7279 West 159th Street Orland Hills, IL BKC 9/1/14 9/1/14
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- --------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
2016 500 South Racine 4/25/77 18.9 6,223 278 N N
2120 24 South Michigan Avenue 9/22/77 18.5 9,506 378 N N
2130 20 Starrybrook 1/2/78 18.3 2,919 108 Y N
2196 6465 West Diversey 12/9/77 18.3 3,915 174 N N
2672 340 South Neltnor 6/13/80 15.8 3,537 125 Y Y
2727 2595 Willow Creek Road 12/27/79 16.3 3,577 96 Y Y
3021 6904 Kennedy Avenue 11/20/80 15.4 2,756 90 Y N
3273 2921 Calumet Avenue 11/3/81 14.4 3,074 91 Y N
3507 225 North Michigan Avenue 8/6/82 13.7 4,990 185 N N
3695 621 West Chicago Avenue 5/15/83 12.9 2,300 84 Y N
3821 105 West 61st Avenue 8/1/83 12.7 2,700 110 Y N
4136 5520 West 159th Street 7/28/84 11.7 2,700 86 Y Y
4205 14601 LaGrange Road 11/19/84 11.4 2,664 86 Y N
4293 5100 West Cermak Road 12/21/84 11.3 2,725 76 Y N
4462 1850 Southlake Mall 5/20/85 10.9 2,701 85 Y N
4584 2505 West Jefferson Street 7/26/85 10.7 3,260 80 Y N
4594 4420 West 211th Street 9/10/85 10.6 7,548 115 Y N
4730 112 South State Street 9/7/85 10.6 4,800 218 N N
5157 194 West Joe Orr Road 8/7/86 9.7 3,480 98 Y N
5194 1616 North Larkin 9/4/86 9.6 3,480 76 Y Y
5330 28 East Jackson Boulevard 4/24/87 8.9 3,000 103 N N
5735 2110 West Galena Boulevard 12/7/87 8.3 2,730 96 Y N
5983 16791 Torrence Avenue 5/31/88 7.8 2,230 86 Y N
5984 2147 South Oak Park Avenue 5/31/88 7.8 2,530 120 Y N
5986 2501 West Cermak Road 5/31/88 7.8 2,530 130 Y N
6185 7843 Indianapolis Boulevard 11/18/88 7.4 2,530 74 Y N
7045 600 South Newport Road 3/18/91 5.0 2,820 153 Y Y
7403 Woodfield Mall - Space D-312 6/24/92 3.8 3,001 92 N N
7545 7279 West 159th Street 11/12/92 3.4 3,468 93 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- -------------------------------------- --------------------- ------------------- ---------- ----------
<S> <C> <C> <C> <C>
FRIEDMAN
522 860 Elmhurst Road Des Plaines, IL BKC 5/10/99 5/15/99
1083 1540 E. Northwest Highway Palatine, IL BKC 11/30/14 1/8/06
1202 4330 North Harlem Avenue Norride, IL BKC 2/27/03 2/27/03
1232 1323 W. Irving Park Road Chicago, Il BKC 9/27/03 9/27/03
1455 1401 W. Fullerton Chicago, IL BKC 11/9/11 11/9/11
1512 2344 West Chicago Avenue Chicago, IL BKC 9/23/13 9/23/13
1763 925 Ogden Avenue Naperville, IL BKC 2/26/08 2/28/08
1848 2121 Bloomingdale Glendale Heights, IL BKC 9/11/12 9/11/12
2461 2360 West Higgins Road Hoffman Estates, IL BKC 5/29/09 5/29/09
2400 1540 Butterfield Road Downers Grove, IL BKC 5/29/09 5/29/09
2854 2499 W. Lawrence Avenue Chicago, IL BKC 6/29/09 6/29/09
2760 4423 Fox Valley Center Drive Aurora, IL BKC 2/28/08 2/28/08
2776 620 West North Avenue Elmhurst, IL BKC 9/15/12 9/15/12
2790 3456 Douglas Avenue Racine, WI BKC 8/28/11 5/27/10
3011 2001 Busse Highway Elk Grove Village, IL BKC 11/4/10 11/4/10
3043 111 West Irving Park Road Bensenville, IL BKC 9/15/12 9/15/12
3309 84 Stratford Square Drive Bloomingdale, WI BKC 9/22/00 9/22/00
4104 7620 120th Avenue, Box 8 Kenosha, WI BNB Land Venture, I 11/30/14 7/3/04
4137 1550 West North Avenue Melrose Park, IL BKC 8/14/09 8/14/09
4676 5400 Durand Avenue Racine, WI BKC 9/29/10 9/29/10
5042 9532 South Roberts Road Hickory Hills, IL BKC 6/3/11 6/3/11
5363 2 South 51 Route 59 Warrenville, IL BKC 2/28/08 2/28/08
5597 11124 W. 31st Street Westchester, IL BNB Land Venture, I 11/30/14 9/13/07
5751 2497 West Golf Road Center Hoffman Estates, IL BKC 2/28/08 2/28/08
5618 10550 Avenue B Chicago, IL BNB Land Venture, I 11/30/14 2/26/06
5875 1931 North Mannheim Road Melrose Park, IL BKC 8/29/11 8/29/11
6358 6400 W. Irving Park Road, Dunning
Square Shopping Center Chicago, IL BKC 4/22/09 4/22/09
6374 Danada West Shopping Center,
2020 Naperville Road Wheaton, IL BKC 9/21/13 9/21/13
6408 2191 W. Roosevelt Road Wheaton, IL BKC 9/23/13 9/23/13
6432 840 Army Trail Road Carol Stream, IL BKC 7/30/09 7/30/09
6858 170 Countryside Plaza Countryside, IL BKC 1/30/08 1/30/08
7112 2701 N. Western Avenue Chicago, IL BNB Land Venture, I 11/30/14 4/13/11
7266 13770 S. Avenue "O" Chicago, IL Whopp Shop Develop 4/11/12 4/12/12
7288 2834 W. Irving Park Road Chicago, IL BNB Land Venture, I 11/30/14 2/7/12
7560 13348 Washington Avenue Mount Pleasant, WI BNB Land Venture, I 11/30/14 9/9/12
7673 1750 N. Harlem Avenue Elmwood Park, IL BNB Land Venture, I 11/30/14 8/9/13
7674 2000 W. 47th Chicago, IL BNB Land Venture, I 11/30/14 5/26/13
8133 75 W. Northwest Highway Palatine, IL BNB Land Venture, I 11/30/14 5/25/14
8247 1144 Boughton Bolingbrook, IL BNB Land Venture, I 11/30/14 7/21/14
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- -------------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FRIEDMAN
522 860 Elmhurst Road 5/16/69 26.9 2,730 72 Y N
1083 1540 E. Northwest Highway 1/6/72 24.3 3,002 108 Y N
1202 4330 North Harlem Avenue 2/9/73 23.2 3,048 108 Y N
1232 1323 W. Irving Park Road 9/29/73 22.5 3,257 114 Y N
1455 1401 W. Fullerton 10/6/74 21.5 2,800 105 Y Y
1512 2344 West Chicago Avenue 4/17/75 21.0 3,250 127 Y N
1763 925 Ogden Avenue 8/26/76 19.6 3,697 108 Y Y
1848 2121 Bloomingdale 12/23/76 19.3 3,416 130 Y Y
2461 2360 West Higgins Road 5/31/79 16.8 3,500 80 Y N
2400 1540 Butterfield Road 5/31/79 16.8 3,134 112 Y Y
2854 2499 W. Lawrence Avenue 11/17/79 16.4 3,860 133 Y N
2760 4423 Fox Valley Center Drive 1/22/80 16.2 3,493 100 Y Y
2776 620 West North Avenue 12/9/80 15.3 3,005 92 Y N
2790 3456 Douglas Avenue 5/27/80 15.9 3,097 93 Y Y
3011 2001 Busse Highway 11/6/80 15.4 3,326 96 Y N
3043 111 West Irving Park Road 12/8/80 15.3 3,009 96 Y N
3309 84 Stratford Square Drive 1/6/82 14.2 3,033 92 Y N
4104 7620 120th Avenue, Box 8 7/3/84 11.8 2,700 90 Y N
4137 1550 West North Avenue 8/16/84 11.6 2,700 88 Y N
4676 5400 Durand Avenue 9/18/85 10.5 2,757 92 Y N
5042 9532 South Roberts Road 6/5/86 9.6 3,480 104 Y N
5363 2 South 51 Route 59 2/18/87 9.1 3,480 92 Y Y
5597 11124 W. 31st Street 9/13/67 8.6 1,940 84 Y N
5751 2497 West Golf Road Center 11/27/87 8.4 3,280 80 Y N
5618 10550 Avenue B 2/26/88 8.1 1,940 80 Y N
5875 1931 North Mannheim Road 4/19/88 8.0 2,530 70 Y N
6358 6400 W. Irving Park Road, Dunning
Square Shopping Center 4/24/89 6.9 2,775 84 Y N
6374 Danada West Shopping Center,
2020 Naperville Road 5/22/89 6.9 2,775 96 Y Y
6408 2191 W. Roosevelt Road 10/15/89 6.5 2,775 66 Y N
6432 840 Army Trail Road 8/1/89 6.7 2,775 96 Y Y
6858 170 Countryside Plaza 4/9/90 6.0 2,820 100 Y Y
7112 2701 N. Western Avenue 4/13/91 5.0 2,820 70 Y N
7266 13770 S. Avenue "O" 4/12/92 4.0 2,820 87 Y N
7288 2834 W. Irving Park Road 2/7/92 4.2 2,820 84 Y N
7560 13348 Washington Avenue 9/9/92 3.6 2,820 97 Y Y
7673 1750 N. Harlem Avenue 8/9/93 2.6 2,820 58 Y N
7674 2000 W. 47th 5/26/93 2.9 2,820 76 Y N
8133 75 W. Northwest Highway 5/25/94 1.9 2,820 83 Y N
8247 1144 Boughton 7/21/94 1.7 2,820 78 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- ----------------------------------------- ----------------- ---------------------- ---------- ----------
<S> <C> <C> <C> <C>
Management Colorado
838 800 15th Street Denver, CO Bansbach Family 3/1/04 3/1/04
2771 1010 West Colfax Denver, CO BKC 2/14/00 2/14/00
4575 1201 16th Street, #311, The Shops at
Tabor Center Denver, CO Tabor Center Associa 4/30/00 4/30/00
4979 92 Wadsworth Boulevard Lakewood, CO Lawrence E. Jaro 3/5/06 3/5/06
5338 3914 Highway 119 Longmont, CO Burger Avenue Invest 12/31/08 12/11/08
5379 600 Broadway Denver, CO Lawrence E. Jaro 1/8/07 1/9/97
7407 7120 East 49th Avenue Commerce City, CO Sapp Brothers Truck 3/1/97 3/1/97
7671 5050 Factory Shops Boulevard, Retail
Space No. F-10 Castle Rock, CO Castle Rock Factory 1/31/96 12/15/97
MANAGEMENT TEXAS
577 3780 College Street Beaumont, TX Donald F. O'Brien, Jr. 12/25/08 12/25/08
3051 605 North Main Street Vidor, TX Morgan Guaranty Tru 2/4/01 2/5/01
3387 501 16th Street Orange, TX BKX Limited Partners 4/18/02 4/19/02
3859 3610 Highway 365 Nederland, TX BKC 4/10/03 4/11/03
4443 1550 I-10 Highway East Beaumont, TX ETEX Investments, In 2/9/05 2/10/05
5094 3301 Twin City Port Arthur, TX Donald F. O'Brien, Jr. 3/31/06 5/12/06
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ----------------------------------------- -------- ----- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management Colorado
838 800 15th Street 9/1/73 22.6 4,320 134 N N
2771 1010 West Colfax 2/14/80 16.1 3,359 128 Y N
4575 1201 16th Street, #311, The Shops at
Tabor Center 4/16/85 11.0 925 Food Court N N
4979 92 Wadsworth Boulevard 3/5/86 10.1 3,206 86 Y N
5338 3914 Highway 119 12/11/86 9.3 3,900 122 Y N
5379 600 Broadway 1/9/97 9.2 3,530 100 Y N
7407 7120 East 49th Avenue 5/11/92 3.9 330 Kiosk N N
7671 5050 Factory Shops Boulevard, Retail
Space No. F-10 12/15/92 3.3 680 Food Court N N
MANAGEMENT TEXAS
577 3780 College Street 1/31/70 26.2 2,750 75 Y N
3051 605 North Main Street 2/5/81 15.2 3,400 85 Y Y
3387 501 16th Street 4/19/82 14.0 3,400 82 Y Y
3859 3610 Highway 365 4/11/83 13.0 2,881 85 Y Y
4443 1550 I-10 Highway East 2/10/85 11.1 2,800 90 Y Y
5094 3301 Twin City 5/12/16 9.9 2,281 88 Y Y
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- ------------------------------- -------------------- ---------------------------- ---------- ----------
<S> <C> <C> <C> <C>
NEW RESTAURANTS
9151 1652 Cardinal Drive West Beaumont, TX Darby Oil Co., Inc. 3/22/15 8/16/15
9466 10A East Northbrook Drive Dwight, IL Becker Amoco 12/14/00 2/5/06
9486 340 West 167th Street Harvey, IL CNL American Prope 2/9/16 2/9/16
BKC/AMOCO
7096 10359 W. Roosevelt Road Westchester, IL BKC 8/30/11 8/30/11
7616 185 West North Avenue West Chicago, IL BKC 1/30/13 1/30/13
WHITE
2942 2708 11th Avenue Greeley, CO Morgan Guaranty Tru 5/22/00 5/20/00
4361 102 East 29th Street Loveland, CO White II Investments 1/24/05 1/24/05
4690 1250 South Hover Street Longmont, CO Longs Peak BK 9/19/05 9/19/05
7885 2000 North Mail Street Longmont, CO White III Investment, 7/5/13 7/5/13 7/5/93
9334 2393 West Eisenhower Blvd. Loveland, CO White I Investment, L 9/30/15 9/30/15
CHATTANOOGA
2586 380 Battlefield Parkway Fort Oglethorpe, GA U.S. Rest. Properties 7/3/99 7/5/99
2657 6404 Ringgold Road Chattanooga, TN U.S. Rest. Properties 9/9/99 9/11/99
2769 905 South Wall Street Calhoun, GA BKC 1/31/16 1/31/16
2995 4417 Highway 58 Chattanooga, TN U.S. Rest. Properties 10/1/00 10/3/00
3351 676 Signal Mountain Road Chattanooga, TN BKC 1/31/16 1/31/16
3964 5018 Hixson Pike Hixson, TN BKC 1/31/16 1/31/16
4196 5001 Brainerd Road Chattanooga, TN Ralph E. Manning 10/12/04 10/14/04
4445 6925 Lee Highway Chattanooga, TN BK Limited P'ship III 4/26/05 4/30/05
4959 1445 25th Street Cleveland, TN Evelyn Little Clowers 4/20/06 4/22/06
5355 2119 East 23rd Street Chattanooga, TN Bernard Mollod 1/13/07 1/15/07
5673 2635 Decatur Pike Athans, TN FFCA 3/17/08 3/19/08
SMITH
1851 7958 U.S. 42 Florence, KY BKC 9/30/11 9/30/11
2394 512 Ohio Pike Cincinnati, OH Louis Hirsh 6/21/98 12/22/98
2729 544 Clifty Drive Madison, IN Curtis James Investm 12/11/07 12/11/07
3330 337 Terry Lane Crescent Springs, KY Robert Wesdorp 10/22/01 12/23/01
3756 3100 Dixie Highway Erlanger, KY BK Limited P'ship II 7/5/03 7/3/03
4556 812 Eastgate S. Drive Cincinnati, OH Curtis James Investm 7/1/05 7/2/05
5435 316 Philadelphia Street Covington, KY Curtis James Investm 3/1/07 3/2/07
6186 830 Green Boulevard Aurora, IN Curtis James Investm 10/19/08 10/20/08
6489 14 Carothers Road Newport, KY Curtis James Investm 6/19/09 6/19/09
7751 4868 Houston Road Florence, KY Curtis James Investm 5/1/13 5/25/11
7917 501 Race Street Cincinnati, OH F & R Limited Partner 8/2/03 7/1/03
8483 418 Market Square Maysville, KY Curtis James Investm 10/10/14 10/10/14
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NEW RESTAURANTS
9151 1652 Cardinal Drive West 8/16/95 0.6 2,450 75 Y N
9466 10A East Northbrook Drive 2/5/96 0.2 2,000 60 Y N
9486 340 West 167th Street 2/9/96 0.1 3,039 78 Y N
BKC/AMOCO
7096 10359 W. Roosevelt Road 8/30/91 4.6 2,000 30 Y N
7616 185 West North Avenue 1/30/93 3.2 2,000 30 Y N
WHITE
2942 2708 11th Avenue 5/20/80 15.9 3,000 86 Y N
4361 102 East 29th Street 1/24/85 11.2 2,700 85 Y N
4690 1250 South Hover Street 9/19/85 10.5 2,700 85 Y Y
7885 2000 North Mail Street 7/5/93 2.7 2,400 84 Y Y
9334 2393 West Eisenhower Blvd. 9/30/95 0.5 2,400 84 Y N
CHATTANOOGA
2586 380 Battlefield Parkway 7/4/79 18.8 3,000 86 Y Y
2657 6404 Ringgold Road 9/10/79 16.6 3,000 86 Y Y
2769 905 South Wall Street 1/22/80 16.2 3,005 92 Y Y
2995 4417 Highway 58 10/2/80 15.5 3,000 92 Y Y
3351 676 Signal Mountain Road 9/29/83 12.5 3,400 98 Y Y
3964 5018 Hixson Pike 2/23/84 12.1 2,700 84 Y Y
4196 5001 Brainerd Road 10/13/84 11.5 2,700 84 Y Y
4445 6925 Lee Highway 4/29/85 10.9 2,800 87 Y Y
4959 1445 25th Street 4/21/86 10.0 2,700 87 Y Y
5355 2119 East 23rd Street 1/14/87 9.2 3,400 98 Y Y
5673 2635 Decatur Pike 3/18/88 8.0 3,464 93 Y Y
SMITH
1851 7958 U.S. 42 1/12/77 19.2 3,600 112 Y N
2394 512 Ohio Pike 12/22/78 17.3 2,800 90 Y N
2729 544 Clifty Drive 12/11/80 15.3 3,056 78 Y N
3330 337 Terry Lane 12/23/81 14.3 2,700 86 Y N
3756 3100 Dixie Highway 7/5/83 12.8 2,500 79 Y N
4556 812 Eastgate S. Drive 7/2/85 10.8 2,600 108 Y N
5435 316 Philadelphia Street 3/2/87 9.1 2,750 92 Y N
6186 830 Green Boulevard 10/20/88 7.5 2,753 93 Y N
6489 14 Carothers Road 6/19/89 6.8 2,753 82 Y N
7751 4868 Houston Road 5/25/93 2.9 3,915 103 Y N
7917 501 Race Street 8/2/93 2.7 4,060 108 N N
8483 418 Market Square 10/10/94 1.5 2,650 92 Y N
</TABLE>
<PAGE>
NATIONAL RESTAURANT ENTERPRISES, INC.
SUMMARY RESTAURANT PROFILES
<TABLE>
<CAPTION>
LEASE FRANCHISE
REST. # ADDRESS LOCATION LESSOR EXPIRATION EXPIRATION
- ------------------------------------------- ------------------ -------------------- ---------- ----------
<S> <C> <C> <C> <C>
C&M DINING
298 3106 Jefferson Avenue Newport News, VA Virentco Monthly 6/7/05
1003 10721 Jefferson Avenue Newport News, VA Virentco Monthly 7/2/05
2756 1545 Richmond Road Williamsburg, VA FFCA 1/31/16 2/5/00
3211 1480 Weldon Road Roanoke Rapids, NC BKC 5/21/01 5/21/01
3853 200 West Mercury Boulevard Hampton, VA FFCA 1/31/16 8/30/03
4390 1620 South Military Highway Chesapeake, VA FFCA 1/31/16 1/19/05
4973 221 Fox Hill Road Hampton, VA United Dominion 8/28/05 4/7/06
5311 713 North Battlefield Blvd. Chesapeake, VA FFCA 1/31/16 12/19/06
5314 6546 Richmond Road Williamsburg, VA FFCA 1/31/16 11/25/06
5423 2208 Cunningham Drive Hampton, VA FFCA 1/31/16 3/2/07
6001 1601 South Military Highway Chesapeake, VA FFCA 1/31/16 6/4/08
6142 730 South Battlefield Blvd. Chesapeake, VA FFCA 1/31/16 9/21/08
6450 US Highway 17, York River Crossing
S.C. Hayes, VA FFCA 1/31/16 7/12/09
6458 5269 John Taylor Highway Williamsburg, VA FFCA 1/31/16 6/5/09
6600 100 Market Drive Emporia, VA FFCA 1/31/16 12/18/09
7048 1901 Pocahontas Trail Williamsburg, VA FFCA 1/31/16 12/26/10
7313 901 Roanoke Avenue Roanoke Rapids, NC FFCA 1/31/16 4/27/12
7531 5320 James Madison Parkway King George, VA FFCA 1/31/16 11/9/12
7584 11321 Pole Place Midlothian, VA FFCA 1/31/16 12/15/12
7609 8801 Staples Mill Road Richmond, VA FFCA 1/31/16 2/16/13
7699 900 Bland Avenue Newport News, VA Peninsula Airport Co 1/12/98 1/12/96
7923 Route 2 Box 175 Doswell, VA FFCA 1/31/16 5/24/13
9219 10097 Brook Road Glen Allen, VA FFCA 1/31/16 8/26/15
9220 Route 1, Box 40B Garysburg, NC FFCA 1/31/16 8/31/15
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BUILDING
DATE YEARS (SQ. SEATING DRIVE-THRU PLAYGROUND
REST. # ADDRESS OPENED OLD FT.) CAPACITY (Y/N) (Y/N)
- ------------------------------------------- -------- ----- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
C&M DINING
298 3106 Jefferson Avenue 8/2/65 30.9 2,200 50 Y N
1003 10721 Jefferson Avenue 7/2/65 30.8 2,200 50 Y N
2756 1545 Richmond Road 2/5/80 16.2 4,093 122 Y N
3211 1480 Weldon Road 5/21/81 14.9 2,500 87 Y Y
3853 200 West Mercury Boulevard 8/30/83 12.6 2,719 84 Y Y
4390 1620 South Military Highway 1/19/85 11.2 3,824 91 Y Y
4973 221 Fox Hill Road 4/7/86 10.0 3,305 87 Y N
5311 713 North Battlefield Blvd. 12/19/86 9.3 3,919 101 Y N
5314 6546 Richmond Road 11/25/86 9.4 3,910 102 Y N
5423 2208 Cunningham Drive 3/2/87 9.1 3,603 84 Y N
6001 1601 South Military Highway 6/4/88 7.8 3,873 86 Y N
6142 730 South Battlefield Blvd. 9/21/88 7.5 3,476 84 Y Y
6450 US Highway 17, York River Crossing
S.C. 7/12/89 6.7 3,920 114 Y N
6458 5269 John Taylor Highway 6/5/89 6.8 3,700 94 Y N
6600 100 Market Drive 12/18/89 6.3 4,951 102 Y N
7048 1901 Pocahontas Trail 12/26/90 5.3 3,173 92 Y N
7313 901 Roanoke Avenue 4/27/92 3.9 3,574 88 Y N
7531 5320 James Madison Parkway 11/9/92 3.4 3,873 128 Y N
7584 11321 Pole Place 12/15/92 3.3 3,640 86 Y N
7609 8801 Staples Mill Road 2/16/93 3.1 3,583 88 Y N
7699 900 Bland Avenue 1/12/93 3.2 NA 30 N N
7923 Route 2 Box 175 5/24/93 2.9 4,345 108 Y N
9219 10097 Brook Road 8/28/95 0.6 3,940 84 Y Y
9220 Route 1, Box 40B 8/31/95 0.6 3,094 74 Y N
</TABLE>
GUARANTEE, INDEMNIFICATION, AND ACKNOWLEDGMENT
As an inducement to BURGER KING CORPORATION ("BKC") to execute the
Burger King Franchise Agreement (Entity) between BKC and
__________________________________ ("FRANCHISEE") dated __________, 19____
(the "Agreement"), the undersigned Owners, jointly and severally, hereby
unconditionally guarantee to BKC and its successors and assigns that all of
FRANCHISEE's obligations under the Agreement, will be punctually paid and
performed.
Upon demand by BKC, the undersigned Owners will immediately make each
payment required of FRANCHISEE under the Agreement. The undersigned hereby
waive any right to require BKC to: (a) proceed against FRANCHISEE for any
payment required under the Agreement; (b) proceed against or exhaust any
security from FRANCHISEE; or (c) pursue or exhaust any remedy, including any
legal or equitable relief, against FRANCHISEE. Without affecting the
obligations of the undersigned Owners under this Guarantee, BKC may, without
notice to the undersigned, extend, modify, or release any indebtedness or
obligation of FRANCHISEE, or settle, adjust, or compromise any claims against
FRANCHISEE. The undersigned Owners waive notice of amendment of the Agreement
and notice of demand for payment by FRANCHISEE, and agree to be bound by any
and all such amendments and changes to the Agreement.
The undersigned Owners hereby agree to defend, indemnify, and save
BKC and its officers, directors, agents, employees, attorneys and accountants,
its subsidiaries, affiliated and parent companies harmless of, from and with
respect to any and all claims, damages, losses, obligations, costs, expenses,
liabilities, or debts any of them may incur (including, but not limited to,
reasonable attorneys' fees) resulting from, consisting of, or arising out of
or in connection with any failure by FRANCHISEE to perform any obligation of
FRANCHISEE under the Agreement, any amendment thereto, or any other agreement
by FRANCHISEE referred to therein.
The undersigned Owners hereby acknowledge and agree to be
individually bound by the provisions of the Agreement, including but not
limited to the provisions of Section 10 and 18 of the Franchise Agreement.
In the event any of the undersigned Owners transfers his/her interest
in FRANCHISEE in accordance with the Agreement, such Owner's obligations and
liabilities under this Guarantee shall terminate on the latter of: (i) one (1)
year from the effective date of the transfer; or (ii) the term under which the
Owner is receiving any payments or consideration under a purchase money note
or other similar instrument relative to such transfer. Unless terminated as to
any Owner, pursuant to the terms of the Agreement, this Guarantee shall
terminate upon the termination or expiration of the Agreement, except that all
obligations and liabilities of the undersigned Owners which arose from events
which occurred on or before the effective date of such termination shall
remain in full force and effect until satisfied or discharged by the
undersigned, and all covenants which by their terms continue in force after
the expiration or termination of the Agreement shall remain in force according
to their terms. Upon the death of an individual Owner, the estate of such
Owner shall be bound by this Guarantee, but only for defaults and obligations
hereunder existing at the time of death; and the obligations of the other
Owners will continue in full force and effect.
Unless specifically state otherwise, the terms used in this Guarantee
shall have the same meaning as in the Agreement and shall be interpreted and
construed in accordance with Section 19 of the
SAMPLE-SUBJECT TO CHANGE EXHIBIT" K"
WITHOUT NOTICE
1
<PAGE>
Agreement. This Guarantee shall be interpreted and construed under the laws of
the State of Florida. In the event of any conflict of law, the laws of Florida
shall prevail, without regard to the application of Florida Conflict of Law
rules. The undersigned Owners and BKC acknowledge and agree that the U.S.
District Court for the Southern District of Florida, or if such court lacks
jurisdiction, the 11th Judicial Circuit (or its successor) in and for Dade
County Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly,
under or in connection with this Guarantee and/or the Agreement and the
parties further agree that, in the event of litigation arising out of or in
connection with this Guarantee and/or the Agreement in these courts, they will
not contest or challenge the jurisdiction or venue of these courts.
All notices to BKC under this Guarantee shall be in writing and shall
be delivered or sent by registered or certified mail, postage fully paid,
addressed to it at its offices at P.O. Box 020783, General Mail Facility,
Miami, Florida 33102-0783, Attention: General Counsel, or at such other
address as BKC shall from time to time designate in writing.
All notices to the undersigned Owners shall be in writing and shall
be hand delivered or sent by registered, express or certified mail or
telegraph to the following addresses:
NAME ADDRESS
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
Notices shall be deemed delivered on the earlier of actual receipt or
the Third (3rd) day after being deposited in the U.S. Mail.
IN WITNESS WHEREOF, each of the undersigned Owners has signed this
Guarantee as the date of the Agreement.
OWNERS
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
SAMPLE-SUBJECT TO CHANGE EXHIBIT" K"
WITHOUT NOTICE
2
GUARANTEE, INDEMNIFICATION AND ACKNOWLEDGMENT
[ALTERNATE PARAGRAPHS - USE EITHER PARAGRAPH 1 OR 2 AS APPLICABLE]
[1] THE UNDERSIGNED ARE "OWNERS" OF _____________________________ ("LESSEE")
WHICH IS ON EVEN DATE HEREWITH ENTERING INTO A CERTAIN ASSIGNMENT OF
LEASE/SUBLEASE AGREEMENT ("AGREEMENT") WITH BURGER KING CORPORATION ("BKC") FOR
THE PREMISES DESCRIBED ON EXHIBIT "A" HERETO. AS AN INDUCEMENT TO BKC TO ENTER
INTO THE AGREEMENT, THE UNDERSIGNED OWNERS, JOINTLY AND SEVERALLY, HEREBY
UNCONDITIONALLY GUARANTEE TO BKC AND ITS SUCCESSORS AND ASSIGNS THAT ALL OF
LESSEE'S OBLIGATIONS UNDER THE AGREEMENT, WILL BE PUNCTUALLY PAID AND PERFORMED.
THE TERM "OWNERS" SHALL HAVE THE SAME MEANING ASCRIBED TO IT UNDER THE FRANCHISE
AGREEMENT ALSO BEING ENTERED INTO BY BKC AND LESSEE FOR THE PREMISES.
[2] THE UNDERSIGNED ARE "OWNERS" OF _________________________________________
("LESSEE") WHICH IS ON EVEN DATE HEREWITH ENTERING INTO A CERTAIN
LEASE/SUBLEASE AGREEMENT ("AGREEMENT") WITH BURGER KING CORPORATION ("BKC")
FOR THE PREMISES DESCRIBED ON EXHIBIT "A" HERETO. AS AN INDUCEMENT TO BKC TO
ENTER INTO THE AGREEMENT, THE UNDERSIGNED OWNERS, JOINTLY AND SEVERALLY,
HEREBY UNCONDITIONALLY GUARANTEE TO BKC AND ITS SUCCESSORS AND ASSIGNS THAT
ALL OF LESSEE'S OBLIGATIONS UNDER THE AGREEMENT, WILL BE PUNCTUALLY PAID AND
PERFORMED. THE TERM "OWNERS" SHALL HAVE THE SAME MEANING ASCRIBED TO IT UNDER
THE FRANCHISE AGREEMENT ALSO BEING ENTERED INTO BY BKC AND LESSEE FOR THE
PREMISES.
Upon demand by BKC, the undersigned Owners will immediately make each
payment required of LESSEE under the Agreement. The undersigned hereby waive
any right to require BKC to: (a) proceed against LESSEE for any payment
required under the Agreement; (b) proceed against or exhaust any security from
LESSEE; or (c) pursue or exhaust any remedy, including any legal or equitable
relief, against LESSEE. Without affecting the obligations of the undersigned
Owners under this Guarantee, BKC may, without notice to the undersigned,
extend, modify, or release any indebtedness or obligation of LESSEE, or
settle, adjust, or compromise any claims against LESSEE. The undersigned
Owners waive notice of amendment of the Agreement and notice of demand for
payment by LESSEE, and agree to be bound by any and all such amendments and
changes to the Agreement.
The undersigned Owners hereby agree to defend, indemnify and save BKC
and its officers, directors, agents, employees, attorneys and accountants, its
subsidiaries, affiliated and parent companies harmless of, from and with
respect to any and all claims, losses, obligations, costs, expenses,
liabilities, debts or damages any of them may incur (including, but not
limited to, reasonable attorneys' fees) resulting from, consisting of, or
arising out of or in connection with any failure by LESSEE to perform any
obligation of LESSEE under the Agreement, any amendment thereto, or any other
agreement by LESSEE referred to therein.
The undersigned Owners hereby acknowledge and agree to be
individually bound by the provisions of the Agreement.
In the event any of the undersigned Owners transfers his/her interest
in LESSEE in accordance
SAMPLE-SUBJECT TO CHANGE EXHIBIT "K"
WITHOUT NOTICE
<PAGE>
with the Agreement, such Owner's obligations and liabilities under this
Guarantee shall continue for the entire term of the Agreement, in accordance
with Sections 12.2 and 12.3 of the Agreement. No such transfer of any Owner's
interest shall be deemed a waiver of any covenant or condition of the
Agreement, or a release of such Owner from the performance or further
performance of its obligations under this Guarantee and such Owner shall
continue to be liable for all its obligations under this Guarantee. This
Guarantee shall terminate upon the termination or expiration of the Agreement,
except that all obligations and liabilities of the undersigned Owners which
arose from events which occurred on or before the effective date of such
termination shall remain in full force and effect until satisfied or
discharged by the undersigned, and all covenants which by their terms continue
in force after the expiration or termination of the Agreement shall remain in
force according to their terms. Upon the death of an individual Owner, the
estate of such Owner shall be bound by this Guarantee, but only for defaults
and obligations hereunder existing at the time of death; and the obligations
of the other Owners will continue in full force and effect.
Unless specifically stated otherwise, the terms used in this
Guarantee shall have the same meaning as in the Agreement and shall be
interpreted and construed in accordance with the Agreement. This Guarantee
shall be interpreted and construed under the laws of the State of Florida. In
the event of any conflict of law, the laws of Florida shall prevail, without
regard to the application of Florida Conflict of Law rules. The undersigned
Owners and BKC acknowledge and agree that the U.S. District Court for the
Southern District of Florida, or if such court lacks jurisdiction, the 11th
Judicial Circuit (or its successor) in and for Dade County Florida, shall be
the venue and exclusive proper forum in which to adjudicate any case or
controversy arising either, directly or indirectly, under or in connection
with this Guarantee and/or the Agreement and the parties further agree that,
in the event of litigation arising out of or in connection with this Guarantee
and/or the Agreement in these courts, they will not contest or challenge the
jurisdiction or venue of these courts.
All notices to BKC under this Guarantee shall be in writing and shall
be delivered or sent by registered or certified mail, postage fully paid,
addressed to it at its offices at P.O. Box 020783, General Mail Facility,
Miami, Florida 33102-0783, Attention: General Counsel, or at such other
address as BKC shall from time to time designate in writing.
All notices to the undersigned Owners shall be in writing and shall
be hand delivered or sent by registered, express or certified mail or
telegraph to the following addresses:
NAME ADDRESS
- ------------------------------ -----------------------------------
- ------------------------------ -----------------------------------
- ------------------------------ -----------------------------------
Notices shall be deemed delivered on the earlier of actual receipt or
the Third (3rd) day after being deposited in the U.S. Mail.
SAMPLE-SUBJECT TO CHANGE EXHIBIT "K"
WITHOUT NOTICE
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Owners has signed this
Guarantee as the [DATE OF THE ASSIGN OF LEASE/SUBLEASE AGREEMENT] OR [DATE OF
THE BURGER KING LEASE/SUBLEASE AGREEMENT].
OWNERS
----------------------
----------------------
----------------------
----------------------
----------------------
SAMPLE-SUBJECT TO CHANGE EXHIBIT "K"
WITHOUT NOTICE
<PAGE>
EXHIBIT "E"
CAPITAL IMPROVEMENTS
BKC and BUYER acknowledge that the capital improvements (the "Capital
Improvements") are to be made according to this schedule.
BUYER shall, within thirty six (36) months from the date of the Closing, make
Capital Improvements to the Restaurants in an amount totaling no less than Two
Million Two Hundred and Fifty Thousand Dollars ($2,250,000.00) but shall not
be required to spend any more than Seven Hundred and Fifty Thousand Dollars
($750,000.00) during each of the first two twelve (12) month periods following
the Closing.
All Capital Improvements are to be completed within three (3) years from the
Closing Date. BKC agrees to review all plans submitted to it by BUYER for said
Capital Improvements within Twenty (20) days of submission. In the event that
BKC does not approve or disapprove changes reasonably necessary within said
Twenty (20) day period, BUYER shall have its time frames increased by One (1)
extra day for each day in which BKC delays its response.
<PAGE>
[Burger King Corporation Letterhead]
October 26, 1995 BY FEDERAL EXPRESS
Mr. Lawrence Jaro, CEO
National Restaurant Enterprises, Inc. d/b/a AmeriKing
2215 Enterprise Drive
Suite 1502
Westchester, IL 60154
RE: PURCHASE OF BURGER KING(R) RESTAURANTS IN CHATTANOOGA, TN
Dear Larry:
This letter summarizes the principal terms of the agreement between Burger
King Corporation ("BKC") and National Restaurant Enterprises, Inc., d/b/a
AmeriKing, Inc. ("NRE") concerning the purchase of the eleven Burger King(R)
Restaurants identified on Exhibit 1 to this letter (the "Restaurants").
The Restaurants are currently owned by QSC, Inc. and Ro-Lank, Inc. (the
"Corporations"), corporations owned by Lankford, Lankford and Reed (the
"Stockholders") (the Corporations and the Stockholders are collectively the
"Current Owners"), as specified on Exhibit 1. The Current Owners have entered
into agreements (the "Agreements") to sell all of the stock of the
Corporations (the "Stock") and the building and improvements of BK #4959 in
Cleveland, Tennessee (the "Leasehold Improvements") to a third party.
Pursuant to its Franchise Agreements with the Current Owners, BKC has
exercised its right of first refusal with respect to the Agreements for
purposes of causing the conveyance of the Stock and Leasehold Improvements to
NRE or a subsidiary of NRE approved by BKC (the "Purchaser"), by assignment of
BKC's rights under the Agreements. By executing this letter, NRE agrees to
accept the assignment and to cause the Purchaser to acquire the Stock and
Leasehold Improvements, subject to and in accordance with the terms and
conditions set forth in the Agreements, including agreement between the
Purchaser and the Stockholders with respect to the purchase price allocation
(which allocation shall be at least as favorable to the Stockholders as the
purchase price allocation provided to NRE), and the disposition of BK #4195,
and Purchaser's receipt of required consent from its lenders, which Purchaser
will use its best efforts to obtain on or prior to the Closing. Any such
assignment will require the consent of the Current Owners, and there can be no
assurance that the Current Owners will give their consent to the assignment.
The purchase price to be paid by the Purchaser for the Stock and Leasehold
Improvements, and for retirement of certain liabilities of the Corporation,
will be approximately $8.1 million (not
<PAGE>
Mr. Lawrence Jaro
October 26, 1995
Page 3
including the option price for the purchase of the real estate underlying BK
#4195) ("Purchase Price"), as more particularly set forth in the Agreements.
Closing of the sale of the Stock and Leasehold Improvements to the Purchaser
(the "Closing") will occur by November 15, 1995, or as otherwise agreed. BKC
will have the right (but not the obligation), exercisable at any time on or
before March 1, 1996, to require NRE to sell the Restaurants to BKC or its
designee for an amount equal to the Purchase Price plus any capital investment
made by NRE in the Restaurants.
BKC currently leases the real estate underlying BK #2769, #3351, and #3964
(the "BKL Properties:) pursuant to Lease/Sublease Agreements with the Current
Owners. Within 30 days after Closing, BKC and NRE (or a subsidiary of NRE
approved by BKC) will enter into new 30-year Franchise Agreements and
Lease/Sublease Agreements with respect to these Restaurants and the BKL
Properties. The new base rents for these Restaurants are set forth on Exhibit
2.
BKC has provided you with a list of capital upgrades that it requires to be
made to the Restaurants, at an estimated cost of $2 million, and BKC will
contribute $550,000 to the cost of the capital upgrades in the form of a BKL
assist. NRE agrees to make a capital investment in the Restaurants of at least
1 1/2 times the amount contributed by BKC within 12 months after the Closing.
Within 30 days of the Closing, NRE will conduct a walk-through of the
Restaurants to determine the scope of work. BKC and NRE will have 30 days
thereafter to agree upon the scope of work. NRE acknowledges that the
Restaurants will have to be brought into compliance with BKC's current image
standards. NRE agrees to complete those upgrades to the Restaurants within 24
months after the Closing, except that NRE will not be required to complete any
upgrades with respect to BK #2585, #2657 and #2995 (the "Stetson Restaurants")
until such time that NRE has negotiated lease extensions for these
Restaurants. However, NRE will immediately bring the Stetson "Restaurants into
compliance with BKC's current repair and maintenance standards and remove
obsolete playground equipment. NRE agrees to use its best efforts to obtain
lease extensions from the landlord, and further agrees to complete the
required capital upgrades to the Stetson Restaurants within 12 months after
obtaining the lease extensions.
If requested by NRE, BKC will provide bridge financing for up to 85% of the
Purchase Price, with the interest rate and other terms to be agreed upon by
the parties. Such bridge financing will be for a period of 90 days, but will
by its terms automatically be extended for an additional 90 days unless NRE
failed to use its best efforts to consummate the Taylor Transaction (as
described below). The loan extended by BKC will be secured by a pledge of all
of the outstanding capital stock of the Corporations and by a guaranty from
the designated "Owners" and NRE's Franchise Agreements with BKC.
NRE has been engaged in negotiations with Bruce Taylor and his affiliates
(collectively "Taylor") to sell to Taylor a number of Burger King Restaurants
in the Chicago ADI. In consideration of the agreements reflected in this
letter, NRE agrees to use its best efforts to negotiate a final purchase and
sale agreement with Taylor, and to close such purchase and sale within 180
days after the Closing under the parameters described in this letter (the
"Taylor Transaction"). The Burger King Restaurants in the Chicago ADI to be
sold to Taylor must generate annual restaurant
<PAGE>
Mr. Lawrence Jaro
October 26, 1995
Page 5
level pre-G&A cash flow equal to or greater than $1.75 million, and the
purchase price for such Restaurants shall be a multiple of such cash flow not
to exceed 4.75.
NRE has advised BKC that it is negotiating to acquire approximately 12 Burger
King(R) restaurants owned by Curtis Smith alone or with others (the "Smith
Restaurants"), and approximately 24 Burger King(R) restaurants owned by C&N
Dining, Inc. and located in Virginia and North Carolina (the "Virginia
Restaurants"). Subject to NRE having closed on the purchase of the Stock and
the Leasehold Improvements, and subject to NRE's continuing performance of its
undertakings with respect to the Taylor Transaction and subject to the other
terms and conditions in this paragraph, BKC agrees that it will waive its
right of first refusal with respect to any purchase and sale agreements
negotiated by NRE to acquire the Smith Restaurants and the Virginia
Restaurants, provided that the closings of any such purchases occur on or
before September 30, 1996. BKC's waiver of its rights of first refusal for the
Smith Restaurants and the Virginia Restaurants does not constitute franchise
approval. NRE will be required to submit all necessary franchise applications
and supporting documentation, and satisfy all of BKC's standard requirements
for franchise approval, including legal, operational, financial and credit
requirements.
BKC has previously provided you or your counsel with copies of the Agreements,
the schedules and exhibits thereto, financial information, leases, title
policies, surveys and other real estate documentation, tax returns, contracts
and other materials and information relating to the Corporations and the
Restaurants. By executing this letter, NRE acknowledges that the decision to
proceed with this transaction has been made in the exercise of its own
independent business judgment, without reliance on BKC or any representatives
of BKC.
Please sign below if the foregoing accurately represents the agreements
between NRE and BKC.
Very truly yours,
BURGER KING CORPORATION UNDERSTOOD AND AGREED:
National Restaurant Enterprises, Inc.
d/b/a AmeriKing
/s/ Candido Rodriquez
Candido Rodriquez
Vice President, Commercial Finance By:_________________________________
Lawrence Jaro, CEO
Date:_______________________________
H:\giles\jaro
cc: Colin Heggie
David Fitzjohn
Tom Mueller
<PAGE>
Exhibit 1
LANKFORD/LANKFORD/REED RESTAURANTS
QSC, Inc.
BK# Street Address City
- --- -------------- ----
2585 380 Battlefield Parkway Ft. Oglethorpe, GA
2769 905 South Wall Street Calhoun, GA
3904 5010 Hixon Pike Hixson, TN
4195 5001 Brainerd Road Chattanooga, TN
4445 6925 Lee Highway Chattanooga, TN
4959 1445 25th Street Cleveland, TN
5355 2119 East 23rd Street Chattanooga, TN
5873 2635 Decatur Pike Athens, TN
Ro-Lank, Inc.
BK# Street Address City
- --- -------------- ----
2657 6404 Ringgold Road Chattanooga, TN
2995 4417 Highway 58 Chattanooga, TN
3351 676 Signal Mountain Road Chattanooga, TN
<PAGE>
Mr. Lawrence Jaro
October 26, 1995
Page 3
Exhibit 2
LANKFORD/LANKFORD/REED RESTAURANTS
.
QSC, Inc.
<TABLE>
<CAPTION>
Base Percent Franchise
BK# Street Address City Rent Rent Exp. Date
- --- -------------- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
2585 380 Battlefield Parkway Ft. Oglethorpe, GA (A) 55,347 8.5% 07/04/99
2769 905 South Wall Street Calhoun, GA (B) 77,743 8.5% TBD
3964 5018 Hixon Pike Hixson, TN (C) 72,590 8.5% TBD
4195 5001 Brainerd Road Chattanooga, TN (C) 60,000 7.5% 10/13/04
4445 6925 Lee Highway Chattanooga, TN (C) 69,780 8.5% 4/29/05
4959 1445 25th Street Cleveland, TN (C) 4/21/06
5355 2119 East 23rd Street Chattanooga, TN (C) 84,959 6.0% 01/14/07
5873 2635 Decatur Pike Athens, TN (C) 03/18/08
</TABLE>
Ro-Lank, Inc.
<TABLE>
<CAPTION>
Base Percent Franchise
BK# Street Address City Rent Rent Exp. Date
- --- -------------- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
2657 6404 Ringgold Road Chattanooga, TN (A) 55,795 8.5% 09/10/99
2995 4417 Highway 58 Chattanooga, TN (A) 56,735 8.5% 10/02/00
3351 676 Signal Mountain Road Chattanooga, TN (B) 78,528 8.5% TBD
</TABLE>
(A) = Leased from US Restaurant Properties
(B) = BKLs. BKC will issue a new 20 year lease with the above
rents for each location.
(C) = Third party lease assumed from QSC or Ro-Lank, or real estate purchased.
NATIONAL RESTAURANT ENTERPRISES, INC.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
February 7, 1996
Mark Giresi
Senior Vice President and General Counsel
Burger King Corporation
Post Office Box 020783
Miami, Florida 33102-0783
Re: National Restaurant Enterprises, Inc. d/b/a AmeriKing Corporation
Dear Mr. Giresi:
In connection with the approval by Burger King Corporation ("BKC") of
the acquisitions of certain restaurants by AmeriKing Virginia Corporation I,
AmeriKing Cincinnati Corporation I (the "Restaurants") and related financing,
as set forth in our Distribution Plans and related materials filed with you
(collectively, the "Transaction"), set forth below is the agreement of
National Restaurant Enterprises, Inc. ("AmeriKing") and its subsidiaries
(AmeriKing and its subsidiaries are collectively referred to herein as
AmeriKing) with you in consideration for your approval of our Transaction:
1. AmeriKing agrees to use its good faith best efforts, to replace the
subdebt owed by AmeriKing to PMI Mezzanine Fund, L.P. in the original
principal amount of $15,000,000 (the "Subdebt") with equity capital
on or before eighteen (18) months following the date of this letter.
2. AmeriKing acknowledges and agrees that BKC will not approve the
acquisition by AmeriKing of any additional restaurants until
AmeriKing has performed its obligations as set forth in paragraph 1
above and further complied with BKC's capitalization standards, as
determined by BKC in its discretion; provided, however, nothing
contained herein shall prohibit AmeriKing from developing or BKC from
approving restaurants for development by AmeriKing.
3. On or before April 7, 1996, AmeriKing and BKC shall mutually agree
with regard to the scope of work involved in upgrading each of the
Restaurants to bring the Restaurants into compliance with BKC's
current image and repair and maintenance standards. Upon agreement by
the parties of the scope of work, AmeriKing shall have eighteen (18)
months to complete such upgrades. The failure to complete the
upgrades shall constitute a material default under the applicable
franchise agreements and leases for the Restaurants.
<PAGE>
Mark Giresi
Burger King Corporation
February 7, 1996
Page 2
4. AmeriKing agrees to allow the testing of new products in all of its
restaurants upon the reasonable request of BKC. In conjunction with
such testing, AmeriKing agrees to share with BKC any data accumulated
regarding such tests and consents to BKC using such as it sees fit.
5. AmeriKing agrees to provide electronically to BKC any product mix
data accumulated by AmeriKing upon the reasonable request of BKC.
AmeriKing will use its best efforts to find a mutually acceptable
format to transmit such data at AmeriKing's cost.
6. AmeriKing hereby agrees that there will be no waiver of successor
fees (other than the three successor fees on the BKL properties) with
regard to the AmeriKing Tennessee transaction.
7. With regard to AmeriKing's obligations to BKC in connection with the
proposed transaction with Bruce Taylor (the "Taylor Transaction"),
AmeriKing agrees to use its best efforts to be prepared to consummate
the Taylor Transaction by March 31, 1996 and to use the proceeds
thereof to repay the AmeriKing Tennessee note to BKC (the "Tennessee
Note"); provided, however, that if Mr. Taylor is unable to consummate
the Taylor Transaction by March 31, 1996, BKC hereby agrees to extend
the maturity date of the Tennessee Note to May 21, 1996; provided,
further, that the maturity date of the Tennessee Note shall not
extend beyond May 21, 1996 and AmeriKing agrees to draw down on its
revolving credit facility, if necessary, to repay the Tennessee Note
on May 21, 1996. Repayment of the Tennessee Note shall not affect
AmeriKing's obligation to consummate the Taylor Transaction.
If you are in agreement with the foregoing, please acknowledge your
agreement by executing a copy of this letter and forwarding the originally
execute copy to me at the above address. Thank you for your cooperation in
this matter.
Very truly yours,
NATIONAL RESTAURANT ENTERPRISES, INC.
- ---------------------------------------
By:
<PAGE>
Mark Giresi
Burger King Corporation
February 7, 1996
Page 3
ACKNOWLEDGED AND AGREED
this ____ day of February, 1996:
BURGER KING CORPORATION
- --------------------------------------
By: Mark Giresi
Senior Vice President and General
Counsel
Execution Copy
NAPARLO DEVELOPMENT AGREEMENT
February 7, 1996
C&N Dining, Inc.
123 Samuel Sharpe
Williamsburg, VA 23185
Attention: Joseph J. Naparlo
Dear Jay:
In connection with the sale of certain Burger King Corporation
("BKC") restaurants by you and your affiliates (the "Sellers") pursuant to the
terms of the Purchase and Sale Agreement, dated as of November 30, 1995 (the
"Purchase Agreement"), between the Sellers and AmeriKing Virginia Corporation
I ("AVCI"), you have identified the sites set forth on Annex A hereto (the
"Sites") as properties with the potential for development as BKC restaurants.
AVCI desires to engage you and your affiliates, as consultants, in
connection with AVCI's development of the real estate at the Sites and other
properties in Virginia and North Carolina. By your execution and delivery of
this letter agreement (the "Agreement"), you hereby agree to use your best
efforts to (i) assign to AVCI or its affiliates all of your right, title and
interest in the real estate at the Sites, other than any interest you may have
in the Sites which arises out of any applicable BKC Target Reservation
Agreement, which we hereby acknowledge and agree is nonassignable, (the
"Properties"), (ii) obtain, including from third parties in connection with
dual use Sites, sufficient approvals, consents and assignments (the
"Approvals"), in each case sufficient to permit the development and operation
by AVCI of a BKC restaurant at the Sites, and (iii) assist AVCI in
identifying, obtaining title to and developing any other properties in
Virginia and North Carolina that have potential for development as BKC
restaurants.
As consideration for your engagement hereunder, AVCI will pay you (i)
a consultant's fee of $200,000 over a one year period to be paid in monthly
installments in arrears of $16,666.67 and (ii) a developer's fee of $40,000
for each property as described above that is developed by you or your
affiliates, payable upon the opening of a BKC restaurant by AVCI on such
property. In the event that you elect to terminate your efforts to acquire any
of the Properties, you shall give AVCI 90 days notice of such termination, and
AVCI shall thereupon have 90 days to pay you any consulting fees that accrued
but remained unpaid up to the date
<PAGE>
of your termination. In the event that BKC prohibits AVCI or its affiliates
from acting as a franchisee with respect to any Site or other property, AVCI
agrees (i) to pay your documented expenses in connection with your efforts to
develop the Properties and obtain the Approvals for each such Site and (ii)
that your activities pursuant to your engagement hereunder with respect to
such Sites shall not be deemed to constitute a breach of your obligations
pursuant to Section 4.9 of the Purchase Agreement.
<PAGE>
Please acknowledge your agreement with the terms and conditions set
forth in this Agreement by executing the Agreement where indicated below.
AMERIKING VIRGINIA CORPORATION I
--------------------------------
By:
Title:
ACKNOWLEDGED AND AGREED:
- -----------------------
Joseph J. Naparlo
EXHIBIT C-1
MANAGEMENT CONSULTING AGREEMENT
THIS MANAGEMENT CONSULTING AGREEMENT ("Agreement"), is executed as of
the 1st day of September, 1994, by and among TJC MANAGEMENT CORPORATION, a
Delaware corporation (the "Consultant"), and NRE HOLDINGS, INC., a Delaware
corporation (the "Company") and National Restaurant Enterprises, Inc., a
Delaware corporation (the "Company") and a wholly owned subsidiary
("Subsidiary") of the Company.
W I T N E S S E T H:
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses and financial
advice to the Company; and
WHEREAS, the Company desires to retain Consultant to provide
business and financial advice to the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its
subsidiaries (whether now existing or hereafter acquired), in connection with
their financial and business affairs, their relationships with their lenders,
stockholders and other third-party associates or affiliates, and the expansion
of their businesses. The term of this Agreement shall commence the date hereof
and continue until September 1, 2004, unless extended, or sooner terminated,
as provided in paragraph 3 below. The Consultant's personnel shall be
reasonably available to the Company's managers, auditors and other personnel
for consultation and advice, subject to Consultant's reasonable convenience
and scheduling. Services may be rendered at the Consultant's offices or at
such other locations selected by the Consultant as the Company and the
Consultant shall from time to time agree.
2.(a) The Company shall pay the Consultant a management fee equal to
on a per annum basis the higher of (i) $300,000 or (ii) 0.35% of the sales of
the Company's wholly-owned subsidiaries, including, but not limited to the
sales of National Restaurant Enterprises, Inc. ("NRE"), for the fiscal year.
The Company shall pay the Consultant such management fee in quarterly
<PAGE>
installments equal to the higher of (i) $75,000 or (ii) .35% of sales for the
fiscal quarter on each of March 31, June 30, September 30 and December 31 of
each year, commencing December 31, 1994, provided that such fee payable on
December 31, 1994 shall accrue from the date of this Agreement at the annual
rate of $300,000 per annum. The management fee will be recalculated, as set
forth in clauses (i) and (ii) above, promptly and as soon as practicable, as
of the beginning of each fiscal quarter.
(b) In addition to the above quarterly payments, the Company shall
pay to the Consultant, (i) an investment banking and sponsorship fee of up to
two percent (2%) of the aggregate consideration paid (including
non-competition, earnout, contingent purchase price, incentive arrangements
and similar payments) by the Company in connection with the acquisition by the
Company or to the Company in connection with the sale by the Company of all or
substantially all of the outstanding capital stock, warrants, options or other
rights to acquire or sell capital stock, or all or substantially all of the
business or assets of another individual, corporation, partnership or other
business entity (a "Transaction"), including, but not limited to, any
Transaction negotiated for the Company involving any affiliate of the Company
or the Consultant, including, but not limited to, any Transaction involving
National Restaurant Enterprises, Inc., The Jordan Company, Mezzanine Capital &
Income Trust 2001 PLC, Jordan/Zalaznick Capital Company or any affiliates of
any of the foregoing (collectively, the "Jordan Affiliates"); and (ii) a
financial consulting fee not to exceed one percent (1%) of the amount obtained
or made available pursuant to any debt, equity or other financing (including
without limitation, any refinancing) by the Company with the assistance of
Consultant, including, but not limited to, any financing obtained for the
Company from one or more of the Jordan Affiliates. Notwithstanding the
foregoing, if the Consultant renders services to the Company outside the
ordinary course of business, the Company shall pay an additional amount equal
to the value of such extraordinary services rendered by the Consultant.
3. In lieu of the investment banking and sponsorship fee set forth in
Section 1(b)(ii), the Company shall pay the Consultant (i) a fee of $820,000
upon the closing of the purchase by NRE of 68 Burger King restaurants from
Burger King Corporation under a Purchase and Sale Agreement, dated September
1, 1994, among the Company, NRE and Burger King, and (ii) a fee of $740,000
upon the closing of the purchase by NRE of 39 Burger King restaurants from Mr.
Sheldon Friedman pursuant to a letter of intent, dated August 11, 1994, among
the Company, NRE and Mr. Friedman.
-2-
<PAGE>
4. The Company shall reimburse Consultant for out-of-pocket expenses
(including, without limitation, an allocable amount of the Consultant's
overhead expenses, as determined by the Consultant in its sole discretion)
incurred by the Consultant and its personnel in performing services hereunder
to the Company and its subsidiaries upon the Consultant's rendering of a
statement therefor, together with supporting data as the Company shall
reasonably require.
5. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 3, (a) if and to the extent expressly prohibited
by the provisions of any credit, stock, financing or other agreements or
instruments binding upon the Company, its subsidiaries or properties, (b) if
the Company has not paid interest on any interest payment date or has
postponed or not made any principal payments with respect to any of their
indebtedness on any scheduled payment dates, or (c) if the Company has not
paid dividends on any dividend payment date as set forth in its certificate of
incorporation or as declared by its Board of Directors, or has postponed or
not made any redemptions on any redemption date as set forth in its
certificate of incorporation or any certificate of designation with respect to
its preferred stock, if any. Any payments otherwise owed hereunder, which are
not made for any of the above-mentioned reasons, shall not be cancelled but
rather shall accrue, and shall be payable by the Company promptly when, and to
the extent, that the Company is no longer prohibited from making such payments
and when the Company has become current with respect to such principal or
interest payments, has become current with respect to such dividends and has
made such redemptions with respect to such preferred stock, if any. Any
payment required hereunder which is not paid when due shall bear interest at
the rate of ten percent (10%) per annum. This Section 5 will not, in any
event, restrict or limit the Company's obligations under Section 4, 9 and 10,
which will be absolute and not subject to set-off.
6. This Agreement shall be automatically renewed for successive
one-year terms starting September 1, 2004 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (i)
substantially all of the stock or substantially all of the assets of the
Company are sold to any entity unaffiliated with the Consultant and/or a
majority of the Company's stockholders immediately prior to such sale, (ii)
the Company is merged or consolidated into another entity unaffiliated with
the Consultant and/or a majority of the Company's stockholders immediately
prior to such merger and the
-3-
<PAGE>
Company is not the survivor of such transaction or (iii) a public offering of
at least 25 percent of the common stock of the Company has commenced.
7. The Consultant shall have no liability to the Company on account
of (i) any advice which it renders to the Company, provided the Consultant
believed in good faith that such advice was useful or beneficial to the
Company at the time it was rendered, or (ii) the Consultant's inability to
obtain financing or achieve other results desired by the Company or
Consultant's failure to render services to the Company at any particular time
or from time to time, or (iii) the failure of any transaction to meet the
financial, operating or other expectations of the Company. The Company's sole
remedy for any claim under this Agreement shall be termination of this
Agreement.
8. Notwithstanding anything contained in this Agreement to the
contrary, the Company agrees and acknowledges that the Consultant, the Jordan
Affiliates and their shareholders, employees, directors and affiliates intend
to engage and participate in acquisitions and business transactions outside of
the scope of the relationship created by this Agreement and neither the
Consultant, any of the Jordan Affiliates nor any of their shareholders,
employees, directors or affiliates shall be under any obligation whatsoever to
make such acquisitions, business transactions or other opportunities through
the Company or offer such acquisitions, business transactions or other
opportunities to the Company.
9. The Company will, to the fullest extent permitted by applicable
law, indemnify and hold harmless the Consultant, its affiliates and
associates, each of the Jordan Affiliates, and each of the respective owners,
partners, officers, directors, employees and agents of each of the foregoing,
from and against any loss, liability, damage, claim or expenses (including the
fees and expenses of counsel) arising as a result or in connection with this
Agreement, the Consultant's services hereunder or other activities on behalf
of the Company and its subsidiaries.
10. Any payments paid by the Company under this Agreement shall not
be subject to set-off and shall be increased by the amount, if any, of any
taxes (other than income taxes) or other governmental charges levied in
respect of such payments, so that the Consultant is made whole for such taxes
or charges.
11. a. This Agreement sets forth the entire understanding of the
parties with respect to the Consultant's rendering of services to the Company.
This Agreement may not be modified, waived, terminated or amended except
expressly by an instrument in writing signed by the Consultant and the
Company.
-4-
<PAGE>
b. This Agreement may be assigned by either party hereto
without the consent of the other party, provided, however, such assignment
shall not relieve such party from its obligations hereunder. Any assignment of
this Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and assigns.
c. In the event that any provision of this Agreement shall
be held to be void or unenforceable in whole or in part, the remaining
provisions of this Agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.
d. Except as otherwise specifically provided herein, notice
given hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as
such party may hereinafter specify by written notice to the other party.
e. Subsidiary will be jointly and severally liable and
obligated hereunder with respect to each obligation, responsibility and
liability of the Company, as if a direct obligation of the Subsidiary.
f. No waiver by either party of any breach of any provision
of this Agreement shall be deemed a continuing waiver or a waiver of any
preceding or succeeding breach of such provision or of any other provision
herein contained.
g. The Consultant and its personnel shall, for
purposes of this Agreement, be independent contractors with
respect to the Company.
h. This Agreement shall be governed by the internal
laws (and not the law of conflicts) of the State of New York.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
TJC MANAGEMENT CORPORATION
By:__________________________
Name:
Title:
NRE HOLDINGS, INC.
By:__________________________
Name:
Title:
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:___________________________
Name:
Title:
-6-
AMENDMENT NO. 1
TO
MANAGEMENT CONSULTING AGREEMENT
THIS AMENDMENT NO. 1 TO MANAGEMENT CONSULTING AGREEMENT (This
"Amendment No. 1"), dated as of January 31, 1996, is made by and among TJC
Management Corporation, a Delaware corporation (the "Consultant"), NRE
Holdings, Inc., a Delaware corporation (the "Company"), and National
Restaurant Enterprises, Inc., a Delaware corporation, and a wholly-owned
subsidiary of Holdings ("NRE").
W I T N E S S E T H:
WHEREAS, the Consultant, the Company, and NRE are parties to a
Management Consulting Agreement, dated September 1, 1994 (the "Management
Consulting Agreement");
WHEREAS, the Consultant continues to have and or have access to
personnel who are highly skilled in the field of rendering advice to
businesses and financial advice to the Company;
WHEREAS, the Company continues to desire to retain the Consultant and
to provide business and financial advice to the Company;
WHEREAS, concurrent with the date hereof, the Company and NRE are
entering into a Second Amended and Restated Revolving Credit and Term Loan
Agreement with The First National Bank of Boston and the other lending
institutions listed on Schedule 1 thereto, with The First National Bank of
Boston acting as agent for itself and such other lending institutions (as in
effect as of the date hereof, the "Credit Agreement"); and
WHEREAS, as a condition to the closing of the Credit Agreement,
Consultant is required to amend certain provisions of the Management
Consulting Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency which are hereby acknowledged, the parties agree that,
from and after the date hereof, the Management Consulting Agreement be, and
hereby is, amended as follows:
A G R E E M E N T:
<PAGE>
SECTION 1. Amendment. Effective as of the date hereof, Section 2.(a)
of the Management Consulting Agreement shall be deleted in its entirety and
replaced with the following:
2.(a) The Company shall pay the Consultant an annual
management fee equal to the higher of (i) $500,000 or (ii)
2.5% of the EBITDA (as defined in the Credit Agreement) of
the Company's and NRE's wholly-owned subsidiaries, up to an
amount not to exceed $600,000 minus any amounts paid
pursuant to Section 10.4(b) of the Credit Agreement in any
fiscal year prior to the fiscal year ending December 31,
1999. The Company shall pay the Consultant such management
fee in quarterly installments equal to the higher of (i)
$125,000 or (ii) 2.5% of EBITDA for the fiscal quarter on
each of March 31, June 30, September 30 and December 31 of
each year, commencing on December 31, 1995. The management
fee will be recalculated, as set forth in clauses (i) and
(ii) above, promptly and as soon as practicable, as of the
beginning of each fiscal quarter.
SECTION 2. Effect of this Amendment No. 1 on the Other Terms of the
Management Consulting Agreement. Except as expressly amended and modified
herein, all other terms of the Management Consulting Agreement shall remain in
full force and effect as originally made and entered into by the parties
thereto.
SECTION 3. Governing Law. This Amendment No. 1 shall be governed by
and construed in accordance with the laws of the State of New York (excluding
provisions relating to choice of law).
SECTION 4. Necessary Documents. The parties hereto agree to execute
or cause to be executed at any time, any and all other documents or
instruments necessary to carry out the terms of this Agreement.
SECTION 5. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument, and
all signatures need not appear on any one counterpart.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first written above.
TJC MANAGEMENT CORPORATION
By:______________________________
Name:
Title:
NRE HOLDINGS, INC.
By:______________________________
Name:
Title:
NATIONAL RESTAURANT ENTERPRISES, INC.
By:______________________________
Name:
Title:
-3-
EXHIBIT I-3
INTERCOMPANY MANAGEMENT CONSULTING AGREEMENT
THIS MANAGEMENT CONSULTING AGREEMENT ("Agreement"), is executed as of
the 31st day of August, 1994, between NATIONAL RESTAURANT ENTERPRISES, INC., a
Delaware corporation (the "Company"), and NRE HOLDINGS, INC., a Delaware
corporation ("Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant has and/or has access to personnel who are
highly skilled in the field of rendering advice to businesses such as the
Company; and
WHEREAS, the Company desires to retain Consultant to provide
business and financial advice to the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto do hereby agree
as follows:
1. The Company hereby retains the Consultant, through the
Consultant's own personnel or through personnel available to the Consultant,
to render consulting services from time to time to the Company and its
subsidiaries (whether now existing or hereafter acquired), in connection with
their financial and business affairs, their relationships with their lenders,
stockholders and other third-party associates or affiliates, and the expansion
of their businesses. The term of this Agreement shall commence the date hereof
and continue until August 31, 2004, unless extended, or sooner terminated, as
provided in paragraph 4 below. The Consultant's personnel shall be reasonably
available to the Company's managers, auditors and other personnel for
consultation and advice, subject to Consultant's reasonable convenience and
scheduling. Services may be rendered at the Consultant's offices or at such
other locations selected by the Consultant as the Company and the Consultant
shall from time to time agree. This Agreement will be subject to all franchise
and other rules, regulations and requirements of The Burger King Corporation.
2. The Company shall pay the Consultant an annual fee as shall be
agreed to by the parties (and, in the event of no agreement by the parties,
the amount paid in the immediately preceding year), in each case payable in
quarterly installments
<PAGE>
on the 30th day of March, June, September and December of each year, starting
September 30, 1994.
3. Out-of-pocket expenses (including, without limitation, an
allocable amount of the Consultant's overhead expenses, as determined by the
Consultant in its sole discretion) incurred by the Consultant and its
personnel in performing services hereunder to the Company and its subsidiaries
shall be promptly reimbursed to it by the Company upon the Consultant's
rendering of a statement therefor, together with supporting data as the
Company shall reasonably require.
4. Notwithstanding the foregoing, the Company shall not be required
to pay the fees under Section 3 (without limiting the obligation for payment
of the fees, reimbursements and payments provided under Sections 7 and 8 of
this Agreement which shall be due and payable in all events), (a) if and to
the extent expressly prohibited by the provisions of any credit, stock,
financing or other agreements or instruments binding upon the Company, its
subsidiaries or properties, (b) if the Company has not paid interest on any
interest payment date or has postponed or not made any principal payments with
respect to any of their indebtedness on any scheduled payment dates, or (c) if
the Company has not paid dividends on any dividend payment date as set forth
in its certificate of incorporation or as declared by its Board of Directors,
or has postponed or not made any redemptions on any redemption date as set
forth in its certificate of incorporation or any certificate of designation
with respect to its preferred stock, if any. Any payments otherwise owed
hereunder, which are not made for any of the above-mentioned reasons, shall
not be cancelled but rather shall accrue, and shall be payable by the Company
promptly when, and to the extent, that the Company is no longer prohibited
from making such payments and when the Company has become current with respect
to such principal or interest payments, has become current with respect to
such dividends and has made such redemptions with respect to such preferred
stock, if any. Any payment required hereunder which is not paid when due shall
bear interest at the rate of ten percent (10%) per annum.
5. This Agreement shall be automatically renewed for successive
one-year terms starting September 1, 2004 unless either party hereto, within
sixty (60) days prior to the scheduled renewal date, notifies the other party
as to its election to terminate this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated by not less than ninety (90) days' prior
written notice from the Company to the Consultant at any time after (i)
substantially all of the stock or substantially all of the assets of the
Company are sold to any entity unaffiliated with the Consultant and/or a
majority of the Company's stockholders immediately prior to such sale, (ii)
the
-2-
<PAGE>
Company is merged or consolidated into another entity unaffiliated with the
Consultant and/or a majority of the Company's stockholders immediately prior
to such merger and the Company is not the survivor of such transaction or
(iii) a public offering of at least 25 percent the common stock of the Company
has commenced.
6. The Consultant shall have no liability to the Company on account
of (i) any advice which it renders to the Company, provided the Consultant
believed in good faith that such advice was useful or beneficial to the
Company at the time it was rendered, or (ii) the Consultant's inability to
obtain financing or achieve other results desired by the Company or
Consultant's failure to render services to the Company at any particular time
or from time to time, or (iii) the failure of any Transaction to meet the
financial, operating or other expectations of the Company. The Company's sole
remedy for any claim under this Agreement shall be termination of this
Agreement.
7. The Company will, to the fullest extent permitted by applicable
law, indemnify and hold harmless the Consultant, its affiliates and
associates, and each of the respective owners, partners, officers, directors,
employees and agents of each of the foregoing, from and against any loss,
liability, damage, claim or expenses (including the fees and expenses of
counsel) arising as a result or in connection with this Agreement, the
Consultant's services hereunder or other activities on behalf of the Company
and its subsidiaries.
8. The amount of any payments paid by the Company under this
Agreement shall be increased by the amount, if any, of any taxes (other than
income taxes) or other governmental charges levied in respect of such
payments, so that the Consultant is made whole for such taxes or charges.
9. a. This Agreement sets forth the entire understanding
of the parties with respect to the Consultant's rendering of
services to the Company. This Agreement may not be modified,
waived, terminated or amended except expressly by an instrument
in writing signed by the Consultant and the Company.
b. This Agreement may not be assigned by the Company without
the consent of the Consultant, but may be assigned by the Consultant to any
affiliate of the Consultant, as the term "affiliate" is used in the federal
securities laws, and may be assigned or pledged by the Consultant to any
financial institution or other lender. Any permitted assignment of this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
-3-
<PAGE>
c. In the event that any provision of this Agreement shall
be held to be void or unenforceable in whole or in part, the remaining
provisions of this Agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.
d. Except as otherwise specifically provided herein, notice
given hereunder shall be deemed sufficient if delivered personally or sent by
registered or certified mail to the address of the party for whom intended at
the principal executive offices of such party, or at such other address as
such party may hereinafter specify by written notice to the other party.
e. No waiver by any party of any breach of any provision of
this Agreement shall be deemed a continuing waiver or a waiver of any
preceding or succeeding breach of such provision or of any other provision
herein contained.
f. The Consultant and its personnel shall, for
purposes of this Agreement, be independent contractors with
respect to the Company.
g. This Agreement shall be governed by the internal
laws (and not the law of conflicts) of the State of New York.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
NATIONAL RESTAURANT
ENTERPRISES, INC.
By
-----------------------------
Name:
Title:
NRE HOLDINGS, INC.
By
----------------------------
Name:
Title:
-5-
AMENDED AND RESTATED TAX SHARING AGREEMENT
THIS Agreement is made and entered into this 7th day of February,
1996, by and among NRE Holdings, Inc., a Delaware corporation (the "Company"),
National Restaurant Enterprises, Inc. (the "Enterprises"), AmeriKing Virginia
Corporation I ("AVCI"), AmeriKing Cincinnati Corporation I ("ACCI"), AmeriKing
Colorado Corporation I ("Colorado"), and AmeriKing Tennessee Corporation I
("ATCI, together with Enterprises, ACCI, AVCI, and Colorado, the
"Subsidiaries").
WITNESSETH:
WHEREAS, the Company and Enterprises are parties to a Tax Sharing
Agreement, dated as of August 31, 1994 (the "Existing Tax Sharing Agreement");
WHEREAS, the Company directly owns the stock of the
Subsidiaries which represents 100 percent of the vote and value of the
Subsidiaries and may, therefore, continue to include the income and expense of
the Subsidiaries in the Company's consolidated federal income tax returns;
WHEREAS, the parties hereto continue to desire to consolidate such
returns upon the terms and conditions herein set forth;
WHEREAS, concurrent with the date hereof, the Company and Enterprises
are entering into a Second Amended and Restated Revolving Credit and Term Loan
Agreement with The First National Bank of Boston and the other lending
institutions listed on Schedule 1 thereto, with The First National Bank of
Boston acting as agent for itself and such other lending institutions (the
"Credit Agreement"); and
WHEREAS, as a condition to the closing of the Credit Agreement, the
Company and the Subsidiaries are required to amend and restate the Existing
Tax Sharing Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency which are hereby acknowledged, the parties hereto
agree that, from and after the date hereof, the Existing Tax
<PAGE>
Sharing Agreement be, and hereby is, amended and restated in its entirety to
read as provided as follows:
1. Filing and Preparation of Future Returns. The Subsidiaries agree to consent
to joining with the Company (the Company and any other corporation that is a
member of an affiliated group (within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), of which the Company
is the common parent being herein referred to as the "Group") in the filing of
the consolidated federal income tax returns for any taxable year for which a
consolidated return can be filed and each taxable year thereafter, in
accordance with applicable income tax laws and regulations. The Company agrees
that it will prepare and file in a timely manner all federal income tax
returns required to be filed on behalf of the Company and its consolidated
Subsidiaries and will pay the taxes shown to be due thereon.
2. Estimated Tax Payments: Tax Benefit Reimbursements.
(a) On or before the 10th business day prior to the due date of any
estimated tax payment on account of the consolidated tax liability of the
Group for a taxable year, the Subsidiaries shall pay to the Company an amount
equal to such Subsidiary's separate return tax liability as defined in
Treasury Regulations ss. 1.1552-1(a)(2)(ii) (the "Separate Return Tax
Liability") multiplied by a fraction the numerator of which equals one and the
denominator of which equals the total number of estimated tax payments to be
made on account of the consolidated tax liability of the Group for such
taxable year. If the estimated tax payment of the Group is based upon the
prior taxable year's consolidated tax liability, the Subsidiary's payment
under this Paragraph 2(a) shall be determined by using its Separate Return Tax
Liability for such prior year, and if such estimated tax payment is based upon
the current year's tax liability, the Subsidiary's payment under this
Paragraph 2(a) shall be determined by using its estimated separate return tax
liability for such current year.
(b) In the event that the sum of any estimated payments made by the
Subsidiaries in a taxable year under Paragraph 2(a) exceeds a Subsidiary's
final Separate Return Tax Liability for such taxable year, the Company shall
pay to the Subsidiary the amount of such excess on or before 15 business days
after the date the consolidated federal income tax return of the Group is
filed for such taxable year. In the event that the final Separate Return Tax
Liability of a Subsidiary for a taxable year exceeds the sum of any payments
based on estimated amounts made by the Subsidiary under Paragraph 2(a) for
such taxable year, the Subsidiary shall pay such excess to the Company on or
before the date 15 business days prior to the due date for the filing of the
consolidated federal income tax return to which such excess relates.
(c) In addition to any amounts which may be payable by the Company to
a Subsidiary under Paragraph 2(b), the Company shall also reimburse the
Subsidiary for the amount by which the Group's income taxes are reduced in any
taxable year as a result of the consolidation of the
2
<PAGE>
Subsidiary in the Group's income tax return, such reimbursement to be made on
or before 15 business days after the date of the filing of the Group's
consolidated federal income tax return for such taxable year. Any loss or
credit utilized by the Group pursuant to this Paragraph 2(c) shall not be
available for purposes of calculating the Separate Return Tax Liability of a
member.
In the event the computation of a Subsidiary's income tax liability
under Paragraph 2(a) above shall reflect that the Subsidiary incurred a loss
for any year that is not utilized by the Group, and that the Subsidiary would
have been due a Federal income tax refund as a result of certain loss
carryback provisions of the Code or any other provisions of the Code, then the
Company shall pay to the Subsidiary an amount equal to the actual income tax
refund attributable to the Subsidiary within 15 business days after the date
received by the Company.
(d) Notwithstanding anything in this Agreement, the 1986, or
regulations promulgated thereunder to the contrary, the Company shall
determine the order in which losses incurred by the Subsidiary reduce the
Group's income taxes for purposes of Paragraph 2(c) hereof. The losses of the
Subsidiary that do not reduce the taxable income of the Group shall be carried
forward and the Subsidiary shall be reimbursed for such losses pursuant to
Paragraph 2(c) for the taxable year in which such Losses result in a reduction
of the Group's income taxes.
(e) Any payments or reimbursements hereunder shall be computed by the
independent public accountants of the Company, in accordance with generally
accepted accounting principles and applicable tax laws, rules and regulations.
3. Adjustments to Liability. The Company and the Subsidiaries agree
that in the event there should be any factual circumstance, or any
application, either retroactively or prospectively, of any federal income tax
laws or revision of the federal income tax laws, which results in a
redetermination of the Separate Return Tax Liability of the Subsidiary, the
payment under Paragraph 2 shall be adjusted to account for such
redeterminations. It is intended that the adjustment referred to in this
paragraph shall relate to those items which are given recognition in the
Group's consolidated tax returns or are approved or adjusted by the Internal
Revenue Service in their audit of said returns, and which therefore have been
recognized or given effect by the computation of the consolidated income tax
of the Group and the income tax computed on the separate return basis of each
Subsidiary. All payments made pursuant to this paragraph shall be made on or
before 15 business days after the date of the final "determination" within the
meaning of Section 1313(a) of the Code, that gives rise to such adjustment.
4. Other Taxes. In the event there shall be imposed on either the
Company or the Subsidiaries any foreign, federal, state or local tax to which
principles of consolidated taxation may be applied and practical, each of the
Company and the Subsidiaries agree that this Agreement shall also be
applicable with respect to such taxes. For purposes of this Agreement, the
term taxes shall include, but is not limited to, all net income, capital
gains, gross income, gross receipts, sales, use, transfer, franchise, profits,
license, capital, payroll, excise, value added or other taxes and any related
interest or governmental charge.
3
<PAGE>
5. Additional Subsidiaries. If at any time after the date upon which
this Agreement is executed, any party to this Agreement acquires or creates
one or more subsidiary corporations that are includible corporations of the
Group, either the Company or the Subsidiaries shall cause such subsidiary
corporation to be subject to this Agreement and all references to either Group
or a Subsidiaries herein shall thereafter be interpreted to refer to the
Company, the Subsidiaries and such subsidiary or subsidiaries, or to the
Subsidiaries and such subsidiary or subsidiaries, respectfully. The parties
hereto agree that this Agreement shall only govern the allocation of income
taxes among the Company and the Subsidiaries for each taxable year, or
portions thereof, in which the Subsidiaries are included in a consolidated
income tax return filed by the Company and that neither party to this
Agreement shall have any rights or obligations under this Agreement to the
other party to this Agreement subsequent to such party's disaffiliation from
the Group, as defined in the Code.
6. Successors and Assigns. This Agreement shall be binding on and
inure to the benefit of any successor, by merger, acquisition of assets or
otherwise, to either of the parties hereto (including but not limited to any
successor of the Company or the Subsidiaries succeeding to the tax attributes
of each under Section 381 of the Code), to the same extent as if such
successor had been an original party to this Agreement.
7. Termination. This Agreement shall continue in effect until
terminated by written agreement between all the parties hereto.
8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes and cancels any and all such previous written or oral agreements
between the parties hereto.
9. Governing Law. This Agreement shall be governed by the internal
laws of the state of New York.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
NRE HOLDINGS, INC.
By____________________________
Name:
Title:
NATIONAL RESTAURANT ENTERPRISES,
INC.
By____________________________
Name:
Title:
AMERIKING COLORADO CORPORATION I
By____________________________
Name:
Title:
AMERIKING TENNESSEE CORPORATION I
By____________________________
Name:
Title:
5
<PAGE>
AMERIKING VIRGINIA CORPORATION I
By____________________________
Name:
Title:
AMERIKING CINCINNATI CORPORATION I
By____________________________
Name:
Title:
6
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of September 1, 1994, by and between
Lawrence Jaro (the "Executive") and National Restaurant Enterprises, Inc., a
Delaware corporation (the "Company") and a wholly-owned subsidiary of NRE
Holdings, Inc., a Delaware corporation ("Parent");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of
the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and
conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's
noninterference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)), (a) as a member of the office of the president
responsible for, among other things, business development and future
restaurant acquisitions of the Company and to undertake such duties and
responsibilities as may be reasonably assigned to Executive from time to time
by the Chairman, Chief Executive Officer or the Board of Directors of the
Company or the Parent, and (b) as a Co-Managing Owner of Parent and the
Company as provided by The Burger King Corporation franchise entity form of
ownership guidelines, the Burger King Uniform Franchise Offering Circular
(December 31, 1993), as amended, and any other franchise and other regulations
and requirements, from time to time in effect (the "Burger King Regulations")
of the Burger King Corporation.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform his
obligations hereunder faithfully and to the best of his ability at the
principal executive offices of the Company, under the direction of the
Chairman, Chief Executive Officer and Board of Directors of the Company, and
shall abide by the rules,
<PAGE>
customs and usages from time to time established by the Company
and the Parent.
(b) During the Term of Employment, the Executive shall devote all of
his business time, energy and skill as may be reasonably necessary for the
performance of his duties, responsibilities and obligations hereunder (except
for vacation periods and reasonable periods of illness or other incapacity),
consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any Burger King
Regulations or any laws, ordinances, regulations or rules of any governmental,
regulatory or administrative body, agent or authority, any court or judicial
authority, or any public, private or industry regulatory authority. Executive
shall act in good faith in accordance with all Burger King Regulations and
laws, ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or
any public, private or industry regulatory authority to the extent the
Executive knows or has reasonable notice of such Burger King regulations,
laws, ordinances, regulations or rules.
(d) During the term of his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area. In addition, Executive will
promptly take all actions necessary or desirable to identify an on-site,
managing director for purposes of the Burger King Regulations for the Burger
King restaurants sold to the Company on September 1, 1994, and obtain all
appropriate approvals and authorizations under the Burger King Regulations for
that managing director.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), the Term of Employment shall end on the date of such
earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of
Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified by a
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<PAGE>
competent medical physician, his duties hereunder for a
continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the
following:
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(i) Executive's conviction of a serious felony or a crime
involving embezzlement, conversion of property or moral turpitude;
(ii) a final, non-appealable finding of Executive's fraud,
embezzlement or conversion of property; (iii) a final non-appealable
finding of Executive's breach of any of his fiduciary duties to the
Company or its stockholders or making of a willful misrepresentation
or omission which breach, misrepresentation or omission might
reasonably be expected to materially adversely affect the business,
properties, assets, condition (financial or other) or prospects of
the Company, provided, that, the Executive has been given notice and
30 days from such notice fails to cure the breach, misrepresentation
or omission; (iv) Executive's willful and continual neglect or
failure to discharge his duties, responsibilities or obligations
prescribed by this Agreement or any other agreement between the
Executive and the Company, provided, that, the Executive has been
given notice and 30 days from such notice fails to cure the neglect
or failure; (v) Executive's habitual drunkenness or substance abuse,
which materially interferes with Executive's ability to discharge his
duties, responsibilities and obligations prescribed by this
Agreement, provided that Executive has been given notice and 30 days
from such notice fails to cure such drunkenness or abuse; (vi)
Executive's material and knowing violation of any obligations imposed
upon Executive, personally, as opposed to upon the Company, whether
as a stockholder or otherwise, under this Agreement, the Purchase and
Sale Agreement, dated September 1, 1994, by and among the Company,
the Parent and Burger King Corporation, the Franchise Agreement,
dated September 1, 1994, by and among the Company, Parent and Burger
King Corporation, the Certificate of Incorporation or By-Laws of the
Company, provided, that the Executive has been given notice and 90
days from such notice fails to cure the violation; or (vii)
Executive's personal (as opposed to the Company's) material and
knowing failure, to observe or comply with Burger King Regulations
whether as an officer, stockholder or otherwise, in any material
respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business,
operations, conditions, franchises, other business relationships or
properties; provided, that the Executive has been given notice and 90
days from such notice fails to cure the failure.
(e) In the event Executive's employment is terminated
pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the Company
will pay to Executive (or his estate or representative) the full
amounts to which he would be
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entitled under Section 4(a) for the period from
effectiveness of termination through the first anniversary
of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no amounts
owing by the Company to Executive under this Agreement from and after
such termination, except for accrued, but unused vacation pay and
sick pay which shall be paid to the Executive in accordance with
Company practices; and
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable in two installments,
half payable upon the effectiveness of termination and half payable
upon the last day of such period.
Termination of the Term of Employment will not terminate Sections 7, 8, 10
through 21, or any other provisions not associated specifically with the Term
of Employment.
In the event of Termination and the Company is obligated to make payments
pursuant to this Section 3(e), the Company's payment obligations under this
Section 3(e) will be mitigated and reduced to the extent of Executive's
compensation under alternative employment during the period for which payments
are owed by the Company pursuant to this Section 3(e).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
(g) Notwithstanding the foregoing, if Executive is a Managing Owner
in respect of the Company for purposes of the Burger King Regulations, then
the foregoing termination rights will be subject to either (i) the Company
identifying and obtaining another Managing Owner, for purposes of the Burger
King Regulations, if the Company shall then have no other Managing Owner prior
to or concurrently with such termination, (ii) compliance with the Burger King
Regulations, or (iii) the prior approval of Burger King Corporation.
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4. Compensation. During the Term of Employment, the
Company shall pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $215,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 60% of his annual base
compensation based on Executive's performance as determined and approved by
the Board of Directors, in its sole discretion. Such bonus will be at the full
discretion of the Board of Directors, and may not be paid at all. Executive
acknowledges that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid within thirty days
after the issuance of audited financial statements for the Company. The Board
of Directors in their sole discretion may establish a higher bonus level based
on the performance of Executive.
(c) During the Term of Employment the Executive shall receive an
automobile allowance of $800 per month and reimbursements for automobile
insurance, repairs, maintenance and business-related fuel not to exceed $6,000
per annum.
(d) A one time bonus of $151,250 payable upon the closing of the
Company's acquisition of franchises and other assets, rights and obligations
to certain Burger King restaurants in the Chicago area.
(e) A one time bonus ("Friedman Closing Bonus") of $101,250 payable
upon the closing of the purchase by the Company, or an affiliate of the
Company, of 39 Burger King restaurants from Sheldon Friedman. Such bonus shall
be paid on the date of such closing.
5. Reimbursement of Expenses
(a) Upon the execution of this Agreement and the closing of the
Company's acquisition of franchises and other assets, rights and obligations
to 68 Burger King restaurants in the Chicago area, the Company will reimburse
the Executive for all of his reasonable out of pocket expenses, including
reasonable accounting fees and reasonable attorney fees, incurred in
connection with this Agreement and the related transactions; provided, that
the aggregate reimbursement for reasonable accounting fees paid to the
Executive and William Osborn shall not exceed $20,000.
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(b) During the Term of Employment, the Company shall reimburse
Executive for documented travel, entertainment and other expenses reasonably
incurred by Executive in connection with the performance of his duties
hereunder and, in each case, in accordance with the rules, customs and usages
promulgated by the Company from time to time in effect.
6. Benefits
During the Term of Employment, the Executive shall be entitled to
perquisites and benefits (including health, short and long term disability,
pension and life insurance benefits consistent with past practice, or as
increased from time to time) established from time to time, by the Board of
Directors for executives of the Company.
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided,
however, that any Confidential Information may be disclosed to officers,
representatives, employees and agents of the Company who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9). Executive shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Company, except as required
in his normal course of employment by the Company. Executive shall use his
best efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure
is required by applicable law, the Executive shall provide the Company with
prompt notice of such requirement, prior to making any disclosure, so that the
Company may seek an appropriate protective order. At the request of the
Company, Executive agrees to deliver to the Company, at any time during the
Term of Employment, or thereafter, all Confidential Information which he may
possess or control. Executive agrees that all Confidential Information of the
Company (whether now or hereafter existing) conceived, discovered or made by
him during the Term of Employment exclusively belongs to the Company (and not
to Executive). Executive will promptly disclose such Confidential
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Information to the Company and perform all actions reasonably requested by the
Company to establish and confirm such exclusive ownership.
(b) The terms of this Section 7 shall survive the termination of this
Agreement regardless of who terminates this Agreement, or the reasons
therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the
opportunity to have special knowledge of the Company and its Confidential
Information and the capabilities of individuals employed by or affiliated with
the Company and that interference in these relationships would cause
irreparable injury to the Company. In consideration of this Agreement,
Executive covenants and agrees that:
(i) From the date hereof until the later to occur of five
years from the date hereof, or the first anniversary of expiration on
termination of the Term of Employment (the "Restricted Period"),
Executive will not, without the express written approval of the Board
of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder,
lender, director, officer, employee, joint venturer, investor,
lessor, supplier, agent, representative or other participant, in any
business which competes, directly or indirectly, with the Business in
the Market ("Competitive Business") without regard to (A) whether the
Competitive Business has its office, manufacturing or other business
facilities within or without the Market, (B) whether any of the
activities of the Executive referred to above occur or are performed
within or without the Market or (C) whether the Executive resides, or
reports to an office, within or without the Market; provided,
however, that (x) the Executive may, anywhere in the Market, directly
or indirectly, in one or a series of transactions, own, invest or
acquire an interest in up to five percent (5%) of the capital stock
of a corporation whose capital stock is traded publicly, or that (y)
Executive may accept employment with a successor company to the
Company.
(ii) During the Restricted Period (which shall not include
any period of violation of this Agreement by Executive or period
which is required for litigation to enforce the rights hereunder),
Executive will not without the express prior written approval of the
Board of Directors of the Company (A) directly or indirectly, in one
or a
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series of transactions, recruit, solicit or otherwise induce or
influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person which
has a business relationship with the Company or had a business
relationship with the Company within the twenty-four (24) month
period preceding the date of the incident in question, to
discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (B) employ or seek to employ or
cause any Competitive Business to employ or seek to employ any person
or agent who is then (or was at any time within six (6) months prior
to the date the Executive or the Competitive Business employs or
seeks to employ such person) employed or retained by the Company.
Notwithstanding the foregoing, nothing herein shall prevent the
Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is not a
Competitive Business.
(b) Upon a final, non-appealable finding that the Executive has
breached his obligations in any material respect under this Section 8, the
Company, in addition to pursuing all available remedies under this Agreement,
at law or otherwise, and without limiting its right to pursue the same shall
cease all payments to the Executive under this Agreement or any other
agreement.
9. Definitions
"Burger King Regulations" is defined in Section 1.
"Business" means (a) the construction, development, operations,
ownership and promotion of Burger King restaurants or (b) any similar or
incidental business conducted, or engaged in, by the Company prior to the date
hereof or at any time during the Term of Employment.
"Cause" is defined in Section 3(d).
"Companies" means Parent and its successors or any of its direct or
indirect subsidiaries (including the Company), now or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" is defined in Section 8(a)(i).
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"Confidential Information" means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, "know-how",
trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulae, improvements or other proprietary or intellectual property of the
Company, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that
becomes generally available to the public other than as a result of a
disclosure by the Executive not permissible hereunder.
"Executive" means Lawrence Jaro or his estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted
by or engaged in by the Company prior to the date hereof or is conducted or
engaged in, or for which a restaurant site is in development, by the Company
at any time during the Term of Employment.
"Restricted Period" is defined in Section 8(a)(i).
"Term of Employment" is defined in Section 3(a).
10. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such other addressee or address as shall be set
forth in a notice given in the same manner):
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If to Executive: Lawrence Jaro
2250 West Cherry Hills Farm Drive
Englewood, Colorado 80110
with a copy to:
Vinton, Slivka & Panasci, P.C.
1600 Stout Street
Suite 1100
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: c/o Jordan Industries, Inc.
Arbor Lake Centre, Suite 300
1751 Lake Cook Road
Deerfield, IL 60015
Any such notices shall be deemed to be given on the date personally delivered
or such return receipt is issued.
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
(ii) Executive is not subject to any covenants, agreements or restrictions,
including without limitation any covenants, agreements or restrictions arising
out of Executive's prior employment or the Burger King Regulations which would
be breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of the Burger King Regulations in
any material respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business, operations,
conditions, franchises, or other business relationships or properties.
12. Other Matters
(a) Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Company's stockholders, directors, officers or lenders will
have any obligations or liabilities in respect of this Agreement and the
subject matter hereof.
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(b) The Company and the Parent agree and acknowledge that the Company
and the Parent, so long as the Executive or William Osborn is an employee of
the Company or Parent, shall not pay (i) a management fee to TJC Management
Corporation pursuant to the Management Consulting Agreement, dated as of
September 1, 1994, by and among the Company, the Parent and TJC Management
Corporation or (ii) director's fees to Jordan Directors (as defined in the
Stockholders Agreement, dated as of September 1, 1994, by and among the Parent
and the Parent's stockholders listed on the signature pages thereto) such that
the sum of (i) and (ii) would exceed $600,000 per annum.
13. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions
hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any
court determines that any provision of Section 8 or any other provision hereof
is unenforceable because of the power to reduce the scope or duration of such
provision, as the case may be and, in its reduced form, such provision shall
then be enforceable.
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any other breach of such other party. Each of the parties (and third
party beneficiaries) to this Agreement will be entitled to enforce its rights
under this breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions
of Sections 7 and 8 of this Agreement and that any party (and third party
beneficiaries) may in its sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary
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injunctions and permanent injunctions in order to enforce or prevent any
violations of the provisions of this Agreement. In the event either party
takes legal action to enforce any of the terms or provisions of this
Agreement, the nonprevailing party shall pay the successful party's costs and
expenses, including but not limited to, reasonable attorneys' fees, incurred
in such action.
16. Assignment; Third Parties
Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of,
Executive's agreements set forth in Sections 7 and 8.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
Agreements, understandings and commitments with respect to such subject
matter.
18. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE PARTIES
HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT
BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY
TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE
ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH
PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS
AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF
THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN
THIS SECTION 11(G) SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION
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UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
19. Arbitration
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING
TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE,
SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN
RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE
SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER
STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER
INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR STATE
COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO,
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. SECTIONS
1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD.
20. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
21. Counterparts
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
---------------------------------------
Name: Lawrence Jaro
NATIONAL RESTAURANT ENTERPRISES, INC.
By
-------------------------------------
Name:
Title:
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EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of September 1, 1994, by and between William
Osborn (the "Executive") and National Restaurant Enterprises, Inc., a Delaware
corporation (the "Company") and a wholly-owned subsidiary of NRE Holdings,
Inc., a Delaware corporation ("Parent");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of
the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and
conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's
noninterference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)), (a) as a member of the office of president
responsible for, among other things, administration and operations of the
Company and to undertake such duties and responsibilities as may be reasonably
assigned to Executive from time to time by the Chairman, Chief Executive
Officer or the Board of Directors of the Company or the Parent, and (b) as a
Co-Managing Owner of Parent and the Company as provided by The Burger King
Corporation franchise entity form of ownership guidelines, the Burger King
Uniform Franchise Offering Circular (December 31, 1993), as amended, and any
other franchise and other regulations and requirements, from time to time in
effect (the "Burger King Regulations") of the Burger King Corporation.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform his
obligations hereunder faithfully and to the best of his ability at the
principal executive offices of the Company, under the direction of the
Chairman, Chief Executive Officer and Board of Directors of the Company, and
shall abide by the rules,
<PAGE>
customs and usages from time to time established by the Company
and the Parent.
(b) During the Term of Employment, the Executive shall devote all of
his business time, energy and skill as may be reasonably necessary for the
performance of his duties, responsibilities and obligations hereunder (except
for vacation periods and reasonable periods of illness or other incapacity),
consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any Burger King
Regulations or any laws, ordinances, regulations or rules of any governmental,
regulatory or administrative body, agent or authority, any court or judicial
authority, or any public, private or industry regulatory authority. Executive
shall act in good faith in accordance with all Burger King Regulations and
laws, ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or
any public, private or industry regulatory authority to the extent the
Executive knows or has reasonable notice of such Burger King regulations,
laws, ordinances, regulations or rules.
(d) During the term of his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area. In addition, Executive will
promptly take all actions necessary or desirable to identify an on-site,
managing director for purposes of the Burger King Regulations for the Burger
King restaurants sold to the Company on September 1, 1994, and obtain all
appropriate approvals and authorizations under the Burger King Regulations for
that managing director.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), the Term of Employment shall end on the date of such
earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of
Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified by a
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competent medical physician, his duties hereunder for a
continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the
following:
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(i) Executive's conviction of a serious felony or a crime
involving embezzlement, conversion of property or moral turpitude;
(ii) a final, non-appealable finding of Executive's fraud,
embezzlement or conversion of property; (iii) a final non-appealable
finding of Executive's breach of any of his fiduciary duties to the
Company or its stockholders or making of a willful misrepresentation
or omission which breach, misrepresentation or omission might
reasonably be expected to materially adversely affect the business,
properties, assets, condition (financial or other) or prospects of
the Company, provided, that, the Executive has been given notice and
30 days from such notice fails to cure the breach, misrepresentation
or omission; (iv) Executive's willful and continual neglect or
failure to discharge his duties, responsibilities or obligations
prescribed by this Agreement or any other agreement between the
Executive and the Company, provided, that, the Executive has been
given notice and 30 days from such notice fails to cure the neglect
or failure; (v) Executive's habitual drunkenness or substance abuse,
which materially interferes with Executive's ability to discharge his
duties, responsibilities and obligations prescribed by this
Agreement, provided that Executive has been given notice and 30 days
from such notice fails to cure such drunkenness or abuse; (vi)
Executive's material and knowing violation of any obligations imposed
upon Executive, personally, as opposed to upon the Company, whether
as a stockholder or otherwise, under this Agreement, the Purchase and
Sale Agreement, dated September 1, 1994, by and among the Company,
the Parent and Burger King Corporation, the Franchise Agreement,
dated September 1, 1994, by and among the Company, Parent and Burger
King Corporation, the Certificate of Incorporation or By-Laws of the
Company, provided, that the Executive has been given notice and 90
days from such notice fails to cure the violation; or (vii)
Executive's personal (as opposed to the Company's) material and
knowing failure, to observe or comply with Burger King Regulations
whether as an officer, stockholder or otherwise, in any material
respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business,
operations, conditions, franchises, other business relationships or
properties; provided, that the Executive has been given notice and 90
days from such notice fails to cure the failure.
(e) In the event Executive's employment is terminated
pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the Company
will pay to Executive (or his estate or representative) the full
amounts to which he would be
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entitled under Section 4(a) for the period from
effectiveness of termination through the first anniversary
of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no amounts
owing by the Company to Executive under this Agreement from and after
such termination, except for accrued, but unused vacation pay and
sick pay which shall be paid to the Executive in accordance with
Company practices; and
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable in two installments,
half payable upon the effectiveness of termination and half payable
upon the last day of such period.
Termination of the Term of Employment will not terminate Sections 7, 8, 10
through 21, or any other provisions not associated specifically with the Term
of Employment.
In the event of Termination and the Company is obligated to make payments
pursuant to this Section 3(e), the Company's payment obligations under this
Section 3(e) will be mitigated and reduced to the extent of Executive's
compensation under alternative employment during the period for which payments
are owed by the Company pursuant to this Section 3(e).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
(g) Notwithstanding the foregoing, if Executive is a Managing Owner
in respect of the Company for purposes of the Burger King Regulations, then
the foregoing termination rights will be subject to either (i) the Company
identifying and obtaining another Managing Owner, for purposes of the Burger
King Regulations, if the Company shall then have no other Managing Owner prior
to or concurrently with such termination, (ii) compliance with the Burger King
Regulations, or (iii) the prior approval of Burger King Corporation.
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4. Compensation. During the Term of Employment, the
Company shall pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $215,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 60% of his annual base
compensation based on Executive's performance as determined and approved by
the Board of Directors, in its sole discretion. Such bonus will be at the full
discretion of the Board of Directors, and may not be paid at all. Executive
acknowledges that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid within thirty days
after the issuance of audited financial statements for the Company. The Board
of Directors in their sole discretion may establish a higher bonus level based
on the performance of Executive.
(c) During the Term of Employment the Executive shall receive an
automobile allowance of $800 per month and reimbursements for automobile
insurance, repairs, maintenance and business-related fuel not to exceed $6,000
per annum.
(d) A one time bonus of $151,250 payable upon the closing of the
Company's acquisition of franchises and other assets, rights and obligations
to certain Burger King restaurants in the Chicago area.
(e) A one time bonus ("Friedman Closing Bonus") of $101,250 payable
upon the closing of the purchase by the Company or an affiliate of 39 Burger
King restaurants from Sheldon Friedman. Such bonus will be paid in cash on the
date of such closing.
(f) During the Term of Employment, the Company will purchase and pay
the premium payments for a life insurance policy in an amount up to $1 million
(such amount to be determined by the Executive) on the life of the Executive
for the benefit of beneficiaries designated by the Executive; provided that
the premium payments on such life insurance policy are less than $10,000 per
annum.
5. Reimbursement of Expenses
(a) Upon the execution of this Agreement and the closing of
the Company's acquisition of franchises and other assets, rights
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and obligations to 68 Burger King restaurants in the Chicago area, the Company
will reimburse the Executive for all of his reasonable out of pocket expenses,
including reasonable accounting fees and reasonable attorney fees, incurred in
connection with this Agreement and the related transactions; provided, that
the aggregate reimbursement for reasonable accounting fees paid to the
Executive and Lawrence Jaro shall not exceed $20,000.
(b) During the Term of Employment, the Company shall reimburse
Executive for documented travel, entertainment and other expenses reasonably
incurred by Executive in connection with the performance of his duties
hereunder and, in each case, in accordance with the rules, customs and usages
promulgated by the Company from time to time in effect.
6. Benefits
During the Term of Employment, the Executive shall be entitled to
perquisites and benefits (including health, short and long term disability,
pension and life insurance benefits consistent with past practice, or as
increased from time to time) established from time to time, by the Board of
Directors for executives of the Company. In addition, the Company will
purchase and pay the premium payments for a life insurance policy in an amount
up to $1 million (amount to be determined by the Executive) on the life of the
Executive for the benefit of beneficiaries designated by the Executive;
provided that the premium payments are less than $10,000 per annum.
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided,
however, that any Confidential Information may be disclosed to officers,
representatives, employees and agents of the Company who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9). Executive shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Company, except as required
in his normal course of employment by the Company. Executive shall use his
best efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep
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confidential any Confidential Information if and to the extent disclosure of
any thereof is specifically required by law; provided, however, that in the
event disclosure is required by applicable law, the Executive shall provide
the Company with prompt notice of such requirement, prior to making any
disclosure, so that the Company may seek an appropriate protective order. At
the request of the Company, Executive agrees to deliver to the Company, at any
time during the Term of Employment, or thereafter, all Confidential
Information which he may possess or control. Executive agrees that all
Confidential Information of the Company (whether now or hereafter existing)
conceived, discovered or made by him during the Term of Employment exclusively
belongs to the Company (and not to Executive). Executive will promptly
disclose such Confidential Information to the Company and perform all actions
reasonably requested by the Company to establish and confirm such exclusive
ownership.
(b) The terms of this Section 7 shall survive the termination of this
Agreement regardless of who terminates this Agreement, or the reasons
therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the
opportunity to have special knowledge of the Company and its Confidential
Information and the capabilities of individuals employed by or affiliated with
the Company and that interference in these relationships would cause
irreparable injury to the Company. In consideration of this Agreement,
Executive covenants and agrees that:
(i) From the date hereof until the later to occur of five
years from the date hereof, or the first anniversary of expiration on
termination of the Term of Employment (the "Restricted Period"),
Executive will not, without the express written approval of the Board
of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder,
lender, director, officer, employee, joint venturer, investor,
lessor, supplier, agent, representative or other participant, in any
business which competes, directly or indirectly, with the Business in
the Market ("Competitive Business") without regard to (A) whether the
Competitive Business has its office, manufacturing or other business
facilities within or without the Market, (B) whether any of the
activities of the Executive referred to above occur or are performed
within or without the Market or (C) whether the Executive resides, or
reports to an office,
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within or without the Market; provided, however, that (x) the
Executive may, anywhere in the Market, directly or indirectly, in one
or a series of transactions, own, invest or acquire an interest in up
to five percent (5%) of the capital stock of a corporation whose
capital stock is traded publicly, or that (y) Executive may accept
employment with a successor company to the Company.
(ii) During the Restricted Period (which shall not include
any period of violation of this Agreement by Executive or period
which is required for litigation to enforce the rights hereunder),
Executive will not without the express prior written approval of the
Board of Directors of the Company (A) directly or indirectly, in one
or a series of transactions, recruit, solicit or otherwise induce or
influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person which
has a business relationship with the Company or had a business
relationship with the Company within the twenty-four (24) month
period preceding the date of the incident in question, to
discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (B) employ or seek to employ or
cause any Competitive Business to employ or seek to employ any person
or agent who is then (or was at any time within six (6) months prior
to the date the Executive or the Competitive Business employs or
seeks to employ such person) employed or retained by the Company.
Notwithstanding the foregoing, nothing herein shall prevent the
Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is not a
Competitive Business.
(b) Upon a final, non-appealable finding that the Executive has
breached his obligations in any material respect under this Section 8, the
Company, in addition to pursuing all available remedies under this Agreement,
at law or otherwise, and without limiting its right to pursue the same shall
cease all payments to the Executive under this Agreement or any other
agreement.
9. Definitions
"Burger King Regulations" is defined in Section 1.
"Business" means (a) the construction, development, operations,
ownership and promotion of Burger King restaurants or (b) any similar or
incidental business conducted, or engaged in,
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by the Company prior to the date hereof or at any time during the
Term of Employment.
"Cause" is defined in Section 3(d).
"Companies" means Parent and its successors or any of its direct or
indirect subsidiaries (including the Company), now or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" is defined in Section 8(a)(i).
"Confidential Information" means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, "know-how",
trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulae, improvements or other proprietary or intellectual property of the
Company, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that
becomes generally available to the public other than as a result of a
disclosure by the Executive not permissible hereunder.
"Executive" means William Osborn or his estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted
by or engaged in by the Company prior to the date hereof or is conducted or
engaged in, or for which a restaurant site is in development, by the Company
at any time during the Term of Employment.
"Restricted Period" is defined in Section 8(a)(i).
"Term of Employment" is defined in Section 3(a).
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10. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such other addressee or address as shall be set
forth in a notice given in the same manner):
If to Executive: William Osborn
3204 Shore Road
Fort Collins, CO 80524
with a copy to:
c/o Vinton, Slivka & Panasci, P.C.
1600 Stout Street
Suite 1100
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: c/o Jordan Industries, Inc.
Arbor Lake Centre, Suite 300
1751 Lake Cook Road
Deerfield, Illinois 60015
Any such notices shall be deemed to be given on the date personally delivered
or such return receipt is issued.
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
(ii) Executive is not subject to any covenants, agreements or restrictions,
including without limitation any covenants, agreements or restrictions arising
out of Executive's prior employment or the Burger King Regulations which would
be breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of the Burger King Regulations in
any material respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business, operations,
conditions, franchises, or other business relationships or properties.
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12. Other Matters
(a) Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Company's stockholders, directors, officers or lenders will
have any obligations or liabilities in respect of this Agreement and the
subject matter hereof.
(b) The Company and the Parent agree and acknowledge that the Company
and the Parent,so long as the Executive or Lawrence Jaro is an employee of the
Company or the Parent, shall not pay (i) a management fee to TJC Management
Corporation pursuant to the Management Consulting Agreement, dated as of
September 1, 1994, by and among the Company, Parent and TJC Management
Corporation or (ii) director's fees to Jordan Directors (as defined in the
Stockholders Agreement, dated as of September 1, 1994, by and among the Parent
and the Parent's stockholders listed on the signature pages thereto) such that
the sum of (i) and (ii) would exceed $600,000 per annum.
13. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions
hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any
court determines that any provision of Section 8 or any other provision hereof
is unenforceable because of the power to reduce the scope or duration of such
provision, as the case may be and, in its reduced form, such provision shall
then be enforceable.
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any other breach of such other party. Each of the parties (and third
party beneficiaries) to this Agreement will be entitled to enforce its rights
under this
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breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of
Sections 7 and 8 of this Agreement and that any party (and third party
beneficiaries) may in its sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions in order to enforce or prevent any violations of the provisions of
this Agreement. In the event either party takes legal action to enforce any of
the terms or provisions of this Agreement, the nonprevailing party shall pay
the successful party's costs and expenses, including but not limited to,
reasonable attorneys' fees, incurred in such action.
16. Assignment; Third Parties
Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of,
Executive's agreements set forth in Sections 7 and 8.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
Agreements, understandings and commitments with respect to such subject
matter.
18. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE PARTIES
HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT
BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY
TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE
ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH
PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS
AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES
PERSONAL SERVICE OF
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PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF
SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH
IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF
ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION
11(G) SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED
IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE
SAME IN ANY OTHER APPROPRIATE JURISDICTION.
19. Arbitration
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING
TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE,
SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN
RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE
SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER
STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER
INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR STATE
COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO,
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. SECTIONS
1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD.
20. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
21. Counterparts
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
-----------------------------------------
Name: William Osborn
NATIONAL RESTAURANT ENTERPRISES, INC.
By: _____________________________________
Name:
Title:
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EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of September 1, 1994, by and between Gary
Hubert (the "Executive") and National Restaurant Enterprises, Inc., a Delaware
corporation (the "Company") and a wholly-owned subsidiary of NRE Holdings,
Inc., a Delaware corporation ("Parent");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of
the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and
conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's
noninterference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)), (a) as a Senior Vice President, responsible for
operations of the Company to undertake such duties and responsibilities as may
be reasonably assigned to Executive from time to time by the Chairman, Chief
Executive Officer or the Board of Directors of the Company or the Parent, and
(b) Managing Director of Parent and the Company as provided by The Burger King
Corporation franchise entity form of ownership guidelines, the Burger King
Uniform Franchise Offering Circular (December 31, 1993), as amended, and any
other franchise and other regulations and requirements, from time to time in
effect (the "Burger King Regulations") of the Burger King Corporation.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform his
obligations hereunder faithfully and to the best of his ability at the
principal executive offices of the Company, under the direction of the
Chairman, Chief Executive Officer and Board of Directors of the Company, and
shall abide by the rules, customs and usages from time to time established by
the Company and the Parent.
<PAGE>
(b) During the Term of Employment, the Executive shall devote all of
his business time, energy and skill as may be reasonably necessary for the
performance of his duties, responsibilities and obligations hereunder (except
for vacation periods and reasonable periods of illness or other incapacity),
consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any Burger King
Regulations or any laws, ordinances, regulations or rules of any governmental,
regulatory or administrative body, agent or authority, any court or judicial
authority, or any public, private or industry regulatory authority. Executive
shall act in good faith in accordance with all Burger King Regulations and
laws, ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or
any public, private or industry regulatory authority to the extent the
Executive knows or has reasonable notice of such Burger King regulations,
laws, ordinances, regulations or rules.
(d) During the term of his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), the Term of Employment shall end on the date of such
earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of
Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses (i)
through (iii) or no reason, such that this Agreement, subject to the
provisions of Section 3(e), shall be construed as terminable at will
by the Company.
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Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the
following:
(i) Executive's conviction of a serious felony or a crime
involving embezzlement, conversion of property or moral turpitude;
(ii) a final, non-appealable finding of Executive's fraud,
embezzlement or conversion of property; (iii) a final non-appealable
finding of Executive's breach of any of his fiduciary duties to the
Company or its stockholders or making of a willful misrepresentation
or omission which breach, misrepresentation or omission might
reasonably be expected to materially adversely affect the business,
properties, assets, condition (financial or other)
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or prospects of the Company, provided, that, the Executive has been
given notice and 30 days from such notice fails to cure the breach,
misrepresentation or omission; (iv) Executive's willful and continual
neglect or failure to discharge his duties, responsibilities or
obligations prescribed by this Agreement or any other agreement
between the Executive and the Company, provided, that, the Executive
has been given notice and 30 days from such notice fails to cure the
neglect or failure; (v) Executive's habitual drunkenness or substance
abuse, which materially interferes with Executive's ability to
discharge his duties, responsibilities and obligations prescribed by
this Agreement, provided that Executive has been given notice and 30
days from such notice fails to cure such drunkenness or abuse; (vi)
Executive's material and knowing violation of any obligations imposed
upon Executive, personally, as opposed to upon the Company, whether
as a stockholder or otherwise, under this Agreement, the Purchase and
Sale Agreement, dated September 1, 1994, by and among the Company,
the Parent and Burger King Corporation, the Franchise Agreement,
dated September 1, 1994, by and among the Company, Parent and Burger
King Corporation, Purchase the Certificate of Incorporation or
By-Laws of the Company, provided, that the Executive has been given
notice and 90 days from such notice fails to cure the violation; or
(vii) Executive's personal (as opposed to the Company's) material and
knowing failure, to observe or comply with Burger King Regulations
whether as an officer, stockholder or otherwise, in any material
respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business,
operations, conditions, franchises, other business relationships or
properties; provided, that the Executive has been given notice and 90
days from such notice fails to cure the failure.
(e) In the event Executive's employment is terminated
pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the Company
will pay to Executive (or his estate or representative) the full
amounts to which he would be entitled under Section 4(a) for the
period from effectiveness of termination through the first
anniversary of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no amounts
owing by the Company to Executive under this Agreement from and after
such termination, except for accrued, but unused vacation pay and
sick pay which shall be paid to the Executive in accordance with
Company practices; and
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(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable in two installments,
half payable upon the effectiveness of termination and half payable
upon the last day of such period.
Termination of the Term of Employment will not terminate Sections 7, 8, 10
through 21, or any other provisions not associated specifically with the Term
of Employment.
In the event of Termination and the Company is obligated to make payments
pursuant to this Section 3(e), the Company's payment obligations under this
Section 3(e) will be mitigated and reduced to the extent of Executive's
compensation under alternative employment during the period for which payments
are owed by the Company pursuant to this Section 3(e).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
4. Compensation. During the Term of Employment, the
Company shall pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $215,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 60% of his annual base
compensation based on Executive's performance as determined and approved by
the Board of Directors, in its sole discretion. Such bonus will be at the full
discretion of the Board of Directors, and may not be paid at all. Executive
acknowledges that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid within thirty days
after the issuance of audited financial statements for the Company. The Board
of Directors in their sole
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discretion may establish a higher bonus level based on the
performance of Executive.
(c) During the Term of Employment the Executive shall receive an
automobile allowance of $800 per month and reimbursements for automobile
insurance, repairs, maintenance and business-related fuel not to exceed $6,000
per annum.
(d) A one time bonus of $30,000 payable upon the closing of the
Company's acquisition of franchises and other assets, rights and obligations
to certain Burger King restaurants in the Chicago area.
(e) A one time bonus ("Friedman Closing Bonus") of $25,000 payable
upon the closing of the purchase by the Company, or an affiliate of the
Company, of 39 Burger King restaurants from Sheldon Friedman. Such bonus will
be paid in cash on the date of such closing.
5. Reimbursement of Expenses
(a) Upon the execution of this Agreement and the closing of the
Company's acquisition of franchises and other assets, rights and obligations
to 68 Burger King restaurants in the Chicago area, the Company will reimburse
the Executive for all his reasonable out of pocket expenses, including
reasonable attorney and accountants fees, incurred in connection with this
Agreement and the related transactions.
(b) The Company shall reimburse the Executive for documented expenses
up to a maximum of $15,000, incurred in relocating to the Chicago area.
(c) During the Term of Employment, the Company shall reimburse
Executive for documented travel, entertainment and other expenses reasonably
incurred by Executive in connection with the performance of his duties
hereunder and, in each case, in accordance with the rules, customs and usages
promulgated by the Company from time to time in effect.
6. Benefits
During the Term of Employment, the Executive shall be entitled to
perquisites and benefits (including health, short and long term disability,
pension and life insurance benefits consistent with past practice, or as
increased from time to time) established from time to time, by the Board of
Directors for executives of the Company.
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<PAGE>
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided,
however, that any Confidential Information may be disclosed to officers,
representatives, employees and agents of the Company who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9). Executive shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Company, except as required
in his normal course of employment by the Company. Executive shall use his
best efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure
is required by applicable law, the Executive shall provide the Company with
prompt notice of such requirement, prior to making any disclosure, so that the
Company may seek an appropriate protective order. At the request of the
Company, Executive agrees to deliver to the Company, at any time during the
Term of Employment, or thereafter, all Confidential Information which he may
possess or control. Executive agrees that all Confidential Information of the
Company (whether now or hereafter existing) conceived, discovered or made by
him during the Term of Employment exclusively belongs to the Company (and not
to Executive). Executive will promptly disclose such Confidential Information
to the Company and perform all actions reasonably requested by the Company to
establish and confirm such exclusive ownership.
(b) The terms of this Section 7 shall survive the termination of this
Agreement regardless of who terminates this Agreement, or the reasons
therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the
opportunity to have special knowledge of the Company and its Confidential
Information and the capabilities of individuals employed by or affiliated with
the Company and that interference in these relationships would cause
irreparable
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injury to the Company. In consideration of this Agreement,
Executive covenants and agrees that:
(i) From the date hereof until the later to occur of five
years from the date hereof, or the first anniversary of expiration on
termination of the Term of Employment (the "Restricted Period"),
Executive will not, without the express written approval of the Board
of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder,
lender, director, officer, employee, joint venturer, investor,
lessor, supplier, agent, representative or other participant, in any
business which competes, directly or indirectly, with the Business in
the Market ("Competitive Business") without regard to (A) whether the
Competitive Business has its office, manufacturing or other business
facilities within or without the Market, (B) whether any of the
activities of the Executive referred to above occur or are performed
within or without the Market or (C) whether the Executive resides, or
reports to an office, within or without the Market; provided,
however, that (x) the Executive may, anywhere in the Market, directly
or indirectly, in one or a series of transactions, own, invest or
acquire an interest in up to five percent (5%) of the capital stock
of a corporation whose capital stock is traded publicly, or that (y)
Executive may accept employment with a successor company to the
Company.
(ii) During the Restricted Period (which shall not include
any period of violation of this Agreement by Executive or period
which is required for litigation to enforce the rights hereunder),
Executive will not without the express prior written approval of the
Board of Directors of the Company (A) directly or indirectly, in one
or a series of transactions, recruit, solicit or otherwise induce or
influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person which
has a business relationship with the Company or had a business
relationship with the Company within the twenty-four (24) month
period preceding the date of the incident in question, to
discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (B) employ or seek to employ or
cause any Competitive Business to employ or seek to employ any person
or agent who is then (or was at any time within six (6) months prior
to the date the Executive or the Competitive Business employs or
seeks to employ such person) employed or retained by the Company.
Notwithstanding the foregoing,
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nothing herein shall prevent the Executive from providing a letter of
recommendation to an employee with respect to a future employment
opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is not a
Competitive Business.
(b) Upon a final, non-appealable finding that the Executive has
breached his obligations in any material respect under this Section 8, the
Company, in addition to pursuing all available remedies under this Agreement,
at law or otherwise, and without limiting its right to pursue the same shall
cease all payments to the Executive under this Agreement or any other
agreement.
9. Definitions
"Burger King Regulations" is defined in Section 1.
"Business" means (a) the construction, development, operations,
ownership and promotion of Burger King restaurants or (b) any similar or
incidental business conducted, or engaged in, by the Company prior to the date
hereof or at any time during the Term of Employment.
"Cause" is defined in Section 3(d).
"Companies" means Parent and its successors or any of its direct or
indirect subsidiaries (including the Company), now or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" is defined in Section 8(a)(i).
"Confidential Information" means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, "know-how",
trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulae, improvements or other proprietary or intellectual property of the
Company, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence
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<PAGE>
thereof. The term "Confidential Information" does not include, and there shall
be no obligation hereunder with respect to, information that becomes generally
available to the public other than as a result of a disclosure by the
Executive not permissible hereunder.
"Executive" means Gary Hubert or his estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted
by or engaged in by the Company prior to the date hereof or is conducted or
engaged in, or for which a restaurant site is in development, by the Company
at any time during the Term of Employment.
"Restricted Period" is defined in Section 8(a)(i).
"Term of Employment" is defined in Section 3(a).
10. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such other addressee or address as shall be set
forth in a notice given in the same manner):
If to Executive: Gary Hubert
1579 Fairway Drive, #301
Naperville, Illinois 60363
with a copy to:
Vinton, Slivka & Panasci, P.C.
1600 Stout Street
Suite 1100
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: c/o Jordan Industries, Inc.
Arbor Lake Centre, Suite 300
1751 Lake Cook Road
Deerfield, IL 60015
Any such notices shall be deemed to be given on the date personally delivered
or such return receipt is issued.
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<PAGE>
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
(ii) Executive is not subject to any covenants, agreements or restrictions,
including without limitation any covenants, agreements or restrictions arising
out of Executive's prior employment or the Burger King Regulations which would
be breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of the Burger King Regulations in
any material respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business, operations,
conditions, franchises, or other business relationships or properties.
12. Other Matters
Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Company's stockholders, directors, officers or lenders will
have any obligations or liabilities in respect of this Agreement and the
subject matter hereof.
13. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions
hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any
court determines that any provision of Section 8 or any other provision hereof
is unenforceable because of the power to reduce the scope or duration of such
provision, as the case may be and, in its reduced form, such provision shall
then be enforceable.
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<PAGE>
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any other breach of such other party. Each of the parties (and third
party beneficiaries) to this Agreement will be entitled to enforce its rights
under this breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions
of Sections 7 and 8 of this Agreement and that any party (and third party
beneficiaries) may in its sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions in order to enforce or prevent any violations of the provisions of
this Agreement. In the event either party takes legal action to enforce any of
the terms or provisions of this Agreement, the nonprevailing party shall pay
the successful party's costs and expenses, including but not limited to,
reasonable attorneys' fees, incurred in such action.
16. Assignment; Third Parties
Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. The parties agree and acknowledge that each of the
Companies and the stockholders and investors therein are intended to be third
party beneficiaries of, and have rights and interests in respect of,
Executive's agreements set forth in Sections 7 and 8.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
Agreements, understandings and commitments with respect to such subject
matter.
18. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE
EVENT OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY
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<PAGE>
WOULD BE IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES,
AND THAT, IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW
OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE
RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE
WILL BE PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED UPON FORUM
NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT
A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR
CERTIFIED MAIL TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS
OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE UNITED STATES.
THE CHOICE OF FORUM SET FORTH IN THIS SECTION 11(G) SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE JURISDICTION.
19. Arbitration
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING
TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE,
SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN
RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE
SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER
STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER
INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR STATE
COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED EXCLUSIVELY PURSUANT TO,
ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN
CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE STATE OF
ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO
SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES,
SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. SECTIONS
1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD.
20. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
21. Counterparts
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
Name: Gary Hubert
NATIONAL RESTAURANT ENTERPRISES, INC.
By _____________________________________
Name:
Title:
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EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of September 1, 1994, by and
between Joel Aaseby (the "Executive") and National Restaurant
Enterprises, Inc., a Delaware corporation (the "Company") and a
wholly-owned subsidiary of NRE Holdings, Inc., a Delaware
corporation ("Parent");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of
the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and
conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's non-
interference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive,
and Executive agrees to accept such employment, during the Term
of Employment (as defined in Section 3(a)), (a) as Vice
President, Controller of the Company to undertake such duties and
responsibilities as may be reasonably assigned to Executive from
time to time by the Chairman, Chief Executive Officer or the
Board of Directors of the Company or the Parent.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall
perform his obligations hereunder faithfully and to the best of
his ability at the principal executive offices of the Company,
under the direction of the Chairman, Chief Executive Officer and
Board of Directors of the Company, and shall abide by the rules,
customs and usages from time to time established by the Company
and the Parent.
(b) During the Term of Employment, the Executive shall
devote all of his business time, energy and skill as may be
reasonably necessary for the performance of his duties,
responsibilities and obligations hereunder (except for vacation
periods and reasonable periods of illness or other incapacity),
consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to
follow any directive or to perform any act which would violate
any of the Burger King Corporation franchise entity form of
ownership guidelines, the Burger King Uniform Franchise Offering
Circular (December 31, 1993), as amended, and any other franchise
and other regulations and requirements, from time to time in
effect (the "Burger King Regulations") of the Burger King
Corporation, or any laws, ordinances, regulations or rules of any
governmental, regulatory or administrative body, agent or
authority, any court or judicial authority, or any public,
private or industry regulatory authority. Executive shall act in
good faith in accordance with all Burger King Regulations and
laws, ordinances, regulations or rules of any governmental,
regulatory or administrative body, agent or authority, any court
or judicial authority, or any public, private or industry
regulatory authority to the extent the Executive knows or has
reasonable notice of such Burger King regulations, laws,
ordinances, regulations or rules.
(d) During the term of his employment, the Executive shall
live in the Chicago area and generally perform his duties under
this Agreement from the Company's offices in the Chicago area.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date
hereof and shall continue for a term of five years. Should the
Executive's employment by the Company be earlier terminated
pursuant to Section 3(b) or by the Executive pursuant to Section
3(c), the Term of Employment shall end on the date of such
earlier termination.
(b) Subject to the payments contemplated by Section 3(e),
Term of Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not
perform, in the view of the Company and as certified by a
competent medical physician, his duties hereunder for a
continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses
(i) through (iii) or no reason, such that this Agreement,
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subject to the provisions of Section 3(e), shall be
construed as terminable at will by the Company.
Executive acknowledges that no representations or promises
have been made concerning the grounds for termination or the
future operation of the Company's business, and that nothing
contained herein or otherwise stated by or on behalf of the
Company modifies or amends the right of the Company to terminate
Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the
Executive of notice specifying such termination and the reasons
therefor.
(c) Subject to the payments contemplated by Section 3(e),
the Term of Employment may be terminated at any time by the
Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not
perform, in the view of the Company, and as certified by a
competent medical physician, his duties hereunder for a
continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other
than such a reduction which affects all of the Company's
senior executives on a substantially equal or proportionate
basis) or the Company's willful, material violation of its
obligations under this Agreement, in each case, after
30 days' prior written notice to the Company and its Board
of Directors and the Company's failure thereafter to cure
such reduction or violation; or
(iv) voluntarily or for any reason or no reason not
referred to in clauses (i) through (iii) in each case, after
120 days' prior written notice to the Company and its Board
of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean
any of the following:
(i) Executive's conviction of a serious felony or a
crime involving embezzlement, conversion of property or
moral turpitude; (ii) a final, non-appealable finding of
Executive's fraud, embezzlement or conversion of property;
(iii) a final non-appealable finding of Executive's breach
of any of his fiduciary duties to the Company or its
stockholders or making of a willful misrepresentation or
omission which breach, misrepresentation or omission might
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reasonably be expected to materially adversely affect the
business, properties, assets, condition (financial or other)
or prospects of the Company, provided, that, the Executive
has been given notice and 30 days from such notice fails to
cure the breach, misrepresentation or omission; (iv)
Executive's willful and continual neglect or failure to
discharge his duties, responsibilities or obligations
prescribed by this Agreement or any other agreement between
the Executive and the Company, provided, that, the Executive
has been given notice and 30 days from such notice fails to
cure the neglect or failure; (v) Executive's habitual
drunkenness or substance abuse, which materially interferes
with Executive's ability to discharge his duties,
responsibilities and obligations prescribed by this
Agreement, provided that Executive has been given notice and
30 days from such notice fails to cure such drunkenness or
abuse; (vi) Executive's material and knowing violation of
any obligations imposed upon Executive, personally, as
opposed to upon the Company, whether as a stockholder or
otherwise, under this Agreement, the Purchase and Sale
Agreement, dated September 1, 1994, by and among the
Company, the Parent and Burger King Corporation, the
Certificate of Incorporation or By-Laws of the Company,
provided, that the Executive has been given notice and 90
days from such notice fails to cure the violation; or
(vii) Executive's personal (as opposed to the Company's)
material and knowing failure, to observe or comply with
Burger King Regulations whether as an officer, stockholder
or otherwise, in any material respect or in any manner which
might reasonably have a material adverse effect in respect
of the Company's ongoing business, operations, conditions,
franchises, other business relationships or properties;
provided, that the Executive has been given notice and
90 days from such notice fails to cure the failure.
(e) In the event Executive's employment is terminated
pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the
Company will pay to Executive (or his estate or
representative) the full amounts to which he would be
entitled under Section 4(a) for the period from
effectiveness of termination through the first anniversary
of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no
amounts owing by the Company to Executive under this
Agreement from and after such termination, except for
accrued, but unused vacation pay and sick pay which shall be
paid to the Executive in accordance with Company practices;
and
-4-
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will
pay the Executive the full amounts to which he would be
entitled under Section 4(a) for the period from
effectiveness of termination through the fifth anniversary
of this Agreement, payable in two installments, half payable
upon the effectiveness of termination and half payable upon
the last day of such period.
Termination of the Term of Employment will not terminate Sections
7, 8, 10 through 21, or any other provisions not associated
specifically with the Term of Employment.
In the event of Termination and the Company is obligated to make
payments pursuant to this Section 3(e), the Company's payment
obligations under this Section 3(e) will be mitigated and reduced
to the extent of Executive's compensation under alternative
employment during the period for which payments are owed by the
Company pursuant to this Section 3(e).
(f) If Termination of the Term of Employment occurs for any
reason, including a failure of the Company to renew this
Agreement after the initial five year Term of Employment and
other than under Section 3(c)(iv) during the initial five year
Term of Employment, the Executive shall have the option for 540
days from the effectiveness of the termination to purchase from
the Company Restaurant No. 209 (the "Restaurant"). The Executive
shall provide 180 days' advance written notice for the exercise
of this purchase option. The purchase price for the Restaurant
shall be the higher of: (i) the sum of (a) $500,000 and (b) the
cost of material improvements and capital expenditures in respect
of the Restaurant and (c) appreciation on the sum of clause (a)
and (b) calculated at 3% per annum or (ii) the fair market value
of the restaurant calculated as an amount equal to 3.65
multiplied by the restaurant contribution to the earnings of the
Company prior to the allocation of administrative and overhead
expenses, in each case, measured at the closing of the purchase,
over the preceding 12 full months. The Executive agrees to
purchase the Restaurant under this option for cash on an "as is,
where is" basis with the Company having no further obligations to
the Executive with respect to the Restaurant after the closing of
the purchase of the Restaurant, and the purchase otherwise shall
be on such other terms and subject to such agreements and
documents as the Company deems reasonably acceptable. The
foregoing purchase option will survive until 540 days after
termination of Executive's Employment with the Company.
(g) Upon the conclusion of the original five year term of
this Agreement ("Original Term") and upon each succeeding
anniversary of this Agreement, the Executive's Term of Employment
will be automatically renewed for another year; provided that
neither the Company nor the Executive terminates this Agreement
-5-
pursuant to Section 3 during the Original Term; and provided
further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least
120 days before the anniversary of this Agreement. Pursuant to
such termination notice, this Agreement will terminate upon the
succeeding anniversary.
4. Compensation. During the Term of Employment, the
Company shall pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in
bimonthly installments, a base salary at a rate of $110,000 per
annum, as increased, on an annual basis to reflect the increase
in the United States Government cost of living index for the
Chicago, Illinois area. Notwithstanding the minimum increase set
forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation of up to 40% of his annual
base compensation based on Executive's performance as determined
and approved by the Board of Directors, in its sole discretion.
Such bonus will be at the full discretion of the Board of
Directors, and may not be paid at all. Executive acknowledges
that no such bonuses have been agreed upon or promised. If the
Board of Directors decides to pay a bonus, it is to be paid
within thirty days after the issuance of audited financial
statements for the Company. The Board of Directors in their sole
discretion may establish a higher bonus level based on the
performance of Executive.
(c) During the Term of Employment the Executive shall
receive an automobile allowance of $500 per month and
reimbursements for automobile insurance, repairs, maintenance and
business-related fuel not to exceed $6,000 per annum.
(d) A one time transaction bonus of $10,000 payable upon
the closing of the Company's acquisition of franchises and other
assets, rights and obligations to certain Burger King restaurants
in the Chicago area.
(e) A one time bonus ("Friedman Closing Bonus") of $5,000
payable upon the closing of the purchase by the Company, or an
affiliate of the Company, of 39 Burger King restaurants from
Sheldon Friedman. Such bonus will be paid in cash on the date of
such closing.
5. Reimbursement of Expenses
(a) Upon the execution of this Agreement and the closing of
the Company's acquisition of franchises and other assets, rights
and obligations to 68 Burger King restaurants in the Chicago
-6-
area, the Company will reimburse the Executive for all his
reasonable out of pocket expenses, including reasonable attorney
and accountants fees, incurred in connection with this Agreement
and the related transactions.
(b) The Company will reimburse the Executive for documented
out of pocket expenses, up to a maximum of $2,500, the Executive
incurred in connection with his previous efforts to purchase the
Restaurant.
(c) During the Term of Employment, the Company shall
reimburse Executive for documented travel, entertainment and
other expenses reasonably incurred by Executive in connection
with the performance of his duties hereunder and, in each case,
in accordance with the rules, customs and usages promulgated by
the Company from time to time in effect.
6. Benefits
During the Term of Employment, the Executive shall be
entitled to perquisites and benefits (including health, short and
long term disability, pension and life insurance benefits
consistent with past practice, or as increased from time to time)
established from time to time, by the Board of Directors for
executives of the Company.
7. Confidential Information
(a) During and after the Term of Employment, Executive will
not, directly or indirectly in one or a series of transactions,
disclose to any person, or use or otherwise exploit for the
Executive's own benefit or for the benefit of anyone other than
the Company, any Confidential Information (as defined in
Section 9), whether prepared by Executive or not; provided,
however, that any Confidential Information may be disclosed to
officers, representatives, employees and agents of the Company
who need to know such Confidential Information in order to
perform the services or conduct the operations required or
expected of them in the Business (as defined in Section 9).
Executive shall use his best efforts to prevent the removal of
any Confidential Information from the premises of the Company,
except as required in his normal course of employment by the
Company. Executive shall use his best efforts to cause all
persons or entities to whom any Confidential Information shall be
disclosed by him hereunder to observe the terms and conditions
set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep
confidential any Confidential Information if and to the extent
disclosure of any thereof is specifically required by law;
provided, however, that in the event disclosure is required by
applicable law, the Executive shall provide the Company with
-7-
prompt notice of such requirement, prior to making any
disclosure, so that the Company may seek an appropriate
protective order. At the request of the Company, Executive
agrees to deliver to the Company, at any time during the Term of
Employment, or thereafter, all Confidential Information which he
may possess or control. Executive agrees that all Confidential
Information of the Company (whether now or hereafter existing)
conceived, discovered or made by him during the Term of
Employment exclusively belongs to the Company (and not to
Executive). Executive will promptly disclose such Confidential
Information to the Company and perform all actions reasonably
requested by the Company to establish and confirm such exclusive
ownership.
(b) The terms of this Section 7 shall survive the
termination of this Agreement regardless of who terminates this
Agreement, or the reasons therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided
give him the opportunity to have special knowledge of the Company
and its Confidential Information and the capabilities of
individuals employed by or affiliated with the Company and that
interference in these relationships would cause irreparable
injury to the Company. In consideration of this Agreement,
Executive covenants and agrees that:
(i) From the date hereof until the later to occur of
five years from the date hereof, or the first anniversary of
expiration on termination of the Term of Employment (the
"Restricted Period"), Executive will not, without the
express written approval of the Board of Directors of the
Company, anywhere in the Market, directly or indirectly, in
one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise
engage or participate in, whether as a proprietor, partner,
stockholder, lender, director, officer, employee, joint
venturer, investor, lessor, supplier, agent, representative
or other participant, in any business which competes,
directly or indirectly, with the Business in the Market
("Competitive Business") without regard to (A) whether the
Competitive Business has its office, manufacturing or other
business facilities within or without the Market, (B)
whether any of the activities of the Executive referred to
above occur or are performed within or without the Market or
(C) whether the Executive resides, or reports to an office,
within or without the Market; provided, however, that (x)
the Executive may, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, invest
or acquire an interest in up to five percent (5%) of the
-8-
capital stock of a corporation whose capital stock is traded
publicly, or that (y) Executive may accept employment with a
successor company to the Company.
(ii) During the Restricted Period (which shall not
include any period of violation of this Agreement by
Executive or period which is required for litigation to
enforce the rights hereunder), Executive will not without
the express prior written approval of the Board of Directors
of the Company (A) directly or indirectly, in one or a
series of transactions, recruit, solicit or otherwise induce
or influence any proprietor, partner, stockholder, lender,
director, officer, employee, sales agent, joint venturer,
investor, lessor, supplier, customer, agent, representative
or any other person which has a business relationship with
the Company or had a business relationship with the Company
within the twenty-four (24) month period preceding the date
of the incident in question, to discontinue, reduce or
modify such employment, agency or business relationship with
the Company, or (B) employ or seek to employ or cause any
Competitive Business to employ or seek to employ any person
or agent who is then (or was at any time within six (6)
months prior to the date the Executive or the Competitive
Business employs or seeks to employ such person) employed or
retained by the Company. Notwithstanding the foregoing,
nothing herein shall prevent the Executive from providing a
letter of recommendation to an employee with respect to a
future employment opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is
not a Competitive Business. In addition, should Executive
purchase the Restaurant, then his ownership, operation and
management of the Restaurant will not be considered a
violation of this Section 7 or Section 8.
(b) Upon a final, non-appealable finding that the Executive
has breached his obligations in any material respect under this
Section 8, the Company, in addition to pursuing all available
remedies under this Agreement, at law or otherwise, and without
limiting its right to pursue the same shall cease all payments to
the Executive under this Agreement or any other agreement.
9. Definitions
"Burger King Regulations" is defined in Section 1.
"Business" means (a) the construction, development,
operations, ownership and promotion of Burger King restaurants or
(b) any similar or incidental business conducted, or engaged in,
-9-
by the Company prior to the date hereof or at any time during the
Term of Employment.
"Cause" is defined in Section 3(d).
"Companies" means Parent and its successors or any of its
direct or indirect subsidiaries (including the Company), now or
hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" is defined in Section 8(a)(i).
"Confidential Information" means any confidential
information including, without limitation, any study, data,
calculations, software storage media or other compilation of
information, patent, patent application, copyright, trademark,
trade name, service mark, service name, "know-how", trade
secrets, customer lists, details of client or consultant
contracts, pricing policies, operational methods, marketing plans
or strategies, product development techniques or plans, business
acquisition plans or any portion or phase of any scientific or
technical information, ideas, discoveries, designs, computer
programs (including source of object codes), processes,
procedures, formulae, improvements or other proprietary or
intellectual property of the Company, whether or not in written
or tangible form, and whether or not registered, and including
all files, records, manuals, books, catalogues, memoranda, notes,
summaries, plans, reports, records, documents and other evidence
thereof. The term "Confidential Information" does not include,
and there shall be no obligation hereunder with respect to,
information that becomes generally available to the public other
than as a result of a disclosure by the Executive not permissible
hereunder.
"Executive" means Joel Aaseby or his estate, if deceased.
"Market" means any county in the United States of America
and each similar jurisdiction in any other country in which the
Business was conducted by or engaged in by the Company prior to
the date hereof or is conducted or engaged in, or for which a
restaurant site is in development, by the Company at any time
during the Term of Employment.
"Restricted Period" is defined in Section 8(a)(i).
"Term of Employment" is defined in Section 3(a).
-10-
10. Notice
Any notice, request, demand or other communication required
or permitted to be given under this Agreement shall be given in
writing and if delivered personally, or sent by certified or
registered mail, return receipt requested, as follows (or to such
other addressee or address as shall be set forth in a notice
given in the same manner):
If to Executive: Joel Aaseby
706 Spring
Elmhurst, Illinois 60126
with a copy to:
Vinton, Slivka & Panasci, P.C.
1600 Stout Street
Suite 1100
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: c/o Jordan Industries, Inc.
Arbor Lake Centre, Suite 300
1751 Lake Cook Road
Deerfield, IL 60015
Any such notices shall be deemed to be given on the date
personally delivered or such return receipt is issued.
11. Executive's Representation
Executive hereby warrants and represents to the Company
that: (i) Executive has carefully reviewed this Agreement and
has consulted with such advisors as Executive considers
appropriate in connection with this Agreement, (ii) Executive is
not subject to any covenants, agreements or restrictions,
including without limitation any covenants, agreements or
restrictions arising out of Executive's prior employment or the
Burger King Regulations which would be breached or violated by
Executive's execution of this Agreement or by Executive's
performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of the Burger King
Regulations in any material respect or in any manner which might
reasonably have a material adverse effect in respect of the
Company's ongoing business, operations, conditions, franchises,
or other business relationships or properties.
-11-
12. Other Matters
Executive agrees and acknowledges that the obligations owed
to Executive under this Agreement are solely the obligations of
the Company, and that none of the Company's stockholders,
directors, officers or lenders will have any obligations or
liabilities in respect of this Agreement and the subject matter
hereof.
13. Validity
If, for any reason, any provision hereof shall be determined
to be invalid or unenforceable, the validity and effect of the
other provisions hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other
provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been
contained herein. If any court determines that any provision of
Section 8 or any other provision hereof is unenforceable because
of the power to reduce the scope or duration of such provision,
as the case may be and, in its reduced form, such provision shall
then be enforceable.
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any
provision of this Agreement by the other party shall not operate
or be construed as a waiver of any other breach of such other
party. Each of the parties (and third party beneficiaries) to
this Agreement will be entitled to enforce its rights under this
breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for
any breach of the provisions of Sections 7 and 8 of this
Agreement and that any party (and third party beneficiaries) may
in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive
relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions in order to enforce or
prevent any violations of the provisions of this Agreement. In
the event either party takes legal action to enforce any of the
terms or provisions of this Agreement, the nonprevailing party
-12-
shall pay the successful party's costs and expenses, including
but not limited to, reasonable attorneys' fees, incurred in such
action.
16. Assignment; Third Parties
Neither the Executive nor the Company may assign, transfer,
pledge, hypothecate, encumber or otherwise dispose of this
Agreement or any of his or its respective rights or obligations
hereunder, without the prior written consent of the other. The
parties agree and acknowledge that each of the Companies and the
stockholders and investors therein are intended to be third party
beneficiaries of, and have rights and interests in respect of,
Executive's agreements set forth in Sections 7 and 8.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an
agreement in writing agreed to by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of
the subject matter of this Agreement, and supersedes and replaces
all prior Agreements, understandings and commitments with respect
to such subject matter.
18. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE
EVENT OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY
WOULD BE IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY
MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL
BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE
APPROPRIATE. EACH PARTY AGREES THAT JURISDICTION AND VENUE WILL
BE PROPER IN CHICAGO, ILLINOIS AND WAIVES ANY OBJECTIONS BASED
UPON FORUM NON CONVENIENS. EACH PARTY WAIVES PERSONAL SERVICE OF
PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN
ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER
PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO THE PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT, OR AS
OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF ILLINOIS OR THE
UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS SECTION
11(G) SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
-13-
19. Arbitration
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT
RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT
OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE SECURITIES ACT,
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER STATE
OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE
RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED,
OR FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND
RESOLVED EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE WITH
THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN CHICAGO,
ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE LAW OF THE
STATE OF ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND
CONCLUSIONS OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL,
CONCLUSIVE AND BINDING ON THE PARTIES, SUBJECT TO CONFIRMATION,
MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. SECTION 1 ET SEQ. ANY
FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A COURT OF
RECORD.
20. Further Action
Executive and the Company agree to perform any further acts
and to execute and deliver any documents which may be reasonable
to carry out the provisions hereof.
21. Counterparts
This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have set their hands
as of the day and year first written above.
EXECUTIVE:
--------------------------------
Name: Joel Aaseby
NATIONAL RESTAURANT ENTERPRISES, INC.
By
---------------------------------
Name:
Title:
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EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of September 1, 1994, by and between Scott
Vasatka (the "Executive") and National Restaurant Enterprises, Inc., a
Delaware corporation (the "Company") and a wholly-owned subsidiary of NRE
Holdings, Inc., a Delaware corporation ("Parent");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of
the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and
conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's
noninterference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3(a)), (a) as Vice President, Human Resources of the
Company to undertake such duties and responsibilities as may be reasonably
assigned to Executive from time to time by the Chairman, Chief Executive
Officer and the Board of Directors of the Company or the Parent.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform his
obligations hereunder faithfully and to the best of his ability at the
principal executive offices of the Company, under the direction of the
Chairman, Chief Executive Officer and Board of Directors of the Company, and
shall abide by the rules, customs and usages from time to time established by
the Company and the Parent.
(b) During the Term of Employment, the Executive shall devote all of
his business time, energy and skill as may be reasonably necessary for the
performance of his duties, responsibilities and obligations hereunder (except
for vacation
<PAGE>
periods and reasonable periods of illness or other incapacity), consistent
with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any
directive or to perform any act which would violate any of the Burger King
Corporation franchise entity form of ownership guidelines, the Burger King
Uniform Franchise Offering Circular (December 31, 1993), as amended, and any
other franchise and other regulations and requirements, from time to time in
effect (the "Burger King Regulations") of the Burger King Corporation, or any
laws, ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or
any public, private or industry regulatory authority. Executive shall act in
good faith in accordance with all Burger King Regulations and laws,
ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or
any public, private or industry regulatory authority to the extent the
Executive knows or has reasonable notice of such Burger King regulations,
laws, ordinances, regulations or rules.
(d) During the term of his employment, the Executive shall live in
the Chicago area and generally perform his duties under this Agreement from
the Company's offices in the Chicago area.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and
shall continue for a term of five years. Should the Executive's employment by
the Company be earlier terminated pursuant to Section 3(b) or by the Executive
pursuant to Section 3(c), the Term of Employment shall end on the date of such
earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of
Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) for Cause (as defined in Section 3(c));
(iv) for any other reason not referred to in clauses
(i) through (iii) or no reason, such that this Agreement,
-2-
<PAGE>
subject to the provisions of Section 3(e), shall be
construed as terminable at will by the Company.
Executive acknowledges that no representations or promises have been
made concerning the grounds for termination or the future operation of the
Company's business, and that nothing contained herein or otherwise stated by
or on behalf of the Company modifies or amends the right of the Company to
terminate Executive at any time, with or without Cause. Termination shall
become effective upon the delivery by the Company to the Executive of notice
specifying such termination and the reasons therefor.
(c) Subject to the payments contemplated by Section 3(e), the Term of
Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental
disability the Executive is unable to perform, and does not perform,
in the view of the Company, and as certified by a competent medical
physician, his duties hereunder for a continuous period of 180 days;
(iii) as a result of material reduction in Executive's
authority, perquisites, position or responsibilities (other than such
a reduction which affects all of the Company's senior executives on a
substantially equal or proportionate basis) or the Company's willful,
material violation of its obligations under this Agreement, in each
case, after 30 days' prior written notice to the Company and its
Board of Directors and the Company's failure thereafter to cure such
reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred
to in clauses (i) through (iii) in each case, after 120 days' prior
written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the
following:
(i) Executive's conviction of a serious felony or a crime
involving embezzlement, conversion of property or moral turpitude;
(ii) a final, non-appealable finding of Executive's fraud,
embezzlement or conversion of property; (iii) a final non-appealable
finding of Executive's breach of any of his fiduciary duties to the
Company or its stockholders or making of a willful misrepresentation
or omission which breach, misrepresentation or omission might
-3-
<PAGE>
reasonably be expected to materially adversely affect the business,
properties, assets, condition (financial or other) or prospects of
the Company, provided, that, the Executive has been given notice and
30 days from such notice fails to cure the breach, misrepresentation
or omission; (iv) Executive's willful and continual neglect or
failure to discharge his duties, responsibilities or obligations
prescribed by this Agreement or any other agreement between the
Executive and the Company, provided, that, the Executive has been
given notice and 30 days from such notice fails to cure the neglect
or failure; (v) Executive's habitual drunkenness or substance abuse,
which materially interferes with Executive's ability to discharge his
duties, responsibilities and obligations prescribed by this
Agreement, provided that Executive has been given notice and 30 days
from such notice fails to cure such drunkenness or abuse; (vi)
Executive's material and knowing violation of any obligations imposed
upon Executive, personally, as opposed to upon the Company, whether
as a stockholder or otherwise, under this Agreement, the Purchase and
Sale Agreement, dated September 1, 1994, by and among the Company,
the Parent and Burger King Corporation, the Franchise Agreement,
dated September 1, 1994, by and among the Company, Parent and Burger
King Corporation, the Certificate of Incorporation or By-Laws of the
Company, provided, that the Executive has been given notice and 90
days from such notice fails to cure the violation; or (vii)
Executive's personal (as opposed to the Company's) material and
knowing failure, to observe or comply with Burger King Regulations
whether as an officer, stockholder or otherwise, in any material
respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business,
operations, conditions, franchises, other business relationships or
properties; provided, that the Executive has been given notice and 90
days from such notice fails to cure the failure.
(e) In the event Executive's employment is terminated
pursuant to
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the Company
will pay to Executive (or his estate or representative) the full
amounts to which he would be entitled under Section 4(a) for the
period from effectiveness of termination through the first
anniversary of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no amounts
owing by the Company to Executive under this Agreement from and after
such termination, except for accrued, but unused vacation pay and
sick pay which shall be
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paid to the Executive in accordance with Company practices;
and
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination through
the fifth anniversary of this Agreement, payable in two installments,
half payable upon the effectiveness of termination and half payable
upon the last day of such period.
Termination of the Term of Employment will not terminate Sections 7, 8, 10
through 21, or any other provisions not associated specifically with the Term
of Employment.
In the event of Termination and the Company is obligated to make payments
pursuant to this Section 3(e), the Company's payment obligations under this
Section 3(e) will be mitigated and reduced to the extent of Executive's
compensation under alternative employment during the period for which payments
are owed by the Company pursuant to this Section 3(e).
(f) Upon the conclusion of the original five year term of this
Agreement ("Original Term") and upon each succeeding anniversary of this
Agreement, the Executive's Term of Employment will be automatically renewed
for another year; provided that neither the Company nor the Executive
terminates this Agreement pursuant to Section 3 during the Original Term; and
provided further that after such Original Term neither the Company nor the
Executive provides notice of termination to the other at least 120 days before
the anniversary of this Agreement. Pursuant to such termination notice, this
Agreement will terminate upon the succeeding anniversary.
4. Compensation. During the Term of Employment, the
Company shall pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in bimonthly
installments, a base salary at a rate of $105,000 per annum, as increased, on
an annual basis to reflect the increase in the United States Government cost
of living index for the Chicago, Illinois area. Notwithstanding the minimum
increase set forth above, the Board of Directors in their sole discretion, may
establish a higher compensation level.
(b) An annual bonus compensation based on Executive's performance as
determined and approved by the Board of Directors, in its sole discretion.
Such bonus will be at the full discretion of the Board of Directors, and may
not be paid at all. Executive acknowledges that no such bonuses have been
agreed upon or promised. If the Board of Directors decides to pay a bonus,
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it is to be paid within thirty days after the issuance of audited financial
statements for the Company.
(c) During the Term of Employment the Executive shall receive an
automobile allowance of $500 per month and reimbursements for automobile
insurance, maintenance, and business fuel not to exceed $6,000 per annum.
5. Reimbursement of Expenses. During the Term of Employment, the
Company shall reimburse Executive for documented travel, entertainment and
other expenses reasonably incurred by Executive in connection with the
performance of his duties hereunder and, in each case, in accordance with the
rules, customs and usages promulgated by the Company from time to time in
effect.
6. Benefits
During the Term of Employment, the Executive shall be entitled to
perquisites and benefits (including health, short and long term disability,
pension and life insurance benefits consistent with past practice, or as
increased from time to time) established from time to time, by the Board of
Directors for executives of the Company.
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided,
however, that any Confidential Information may be disclosed to officers,
representatives, employees and agents of the Company who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9). Executive shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Company, except as required
in his normal course of employment by the Company. Executive shall use his
best efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure
is required by applicable law, the Executive shall provide the Company with
prompt notice of such requirement, prior to making any
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disclosure, so that the Company may seek an appropriate protective order. At
the request of the Company, Executive agrees to deliver to the Company, at any
time during the Term of Employment, or thereafter, all Confidential
Information which he may possess or control. Executive agrees that all
Confidential Information of the Company (whether now or hereafter existing)
conceived, discovered or made by him during the Term of Employment exclusively
belongs to the Company (and not to Executive). Executive will promptly
disclose such Confidential Information to the Company and perform all actions
reasonably requested by the Company to establish and confirm such exclusive
ownership.
(b) The terms of this Section 7 shall survive the termination of this
Agreement regardless of who terminates this Agreement, or the reasons
therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the
opportunity to have special knowledge of the Company and its Confidential
Information and the capabilities of individuals employed by or affiliated with
the Company and that interference in these relationships would cause
irreparable injury to the Company. In consideration of this Agreement,
Executive covenants and agrees that:
(i) From the date hereof until the later to occur of five
years from the date hereof, or the first anniversary of expiration on
termination of the Term of Employment (the "Restricted Period"),
Executive will not, without the express written approval of the Board
of Directors of the Company, anywhere in the Market, directly or
indirectly, in one or a series of transactions, own, manage, operate,
control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder,
lender, director, officer, employee, joint venturer, investor,
lessor, supplier, agent, representative or other participant, in any
business which competes, directly or indirectly, with the Business in
the Market ("Competitive Business") without regard to (A) whether the
Competitive Business has its office, manufacturing or other business
facilities within or without the Market, (B) whether any of the
activities of the Executive referred to above occur or are performed
within or without the Market or (C) whether the Executive resides, or
reports to an office, within or without the Market; provided,
however, that (x) the Executive may, anywhere in the Market, directly
or indirectly, in one or a series of transactions, own, invest or
acquire an interest in up to five percent (5%) of the capital stock
of a corporation whose capital stock is traded
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publicly, or that (y) Executive may accept employment with a
successor company to the Company.
(ii) During the Restricted Period (which shall not include
any period of violation of this Agreement by Executive or period
which is required for litigation to enforce the rights hereunder),
Executive will not without the express prior written approval of the
Board of Directors of the Company (A) directly or indirectly, in one
or a series of transactions, recruit, solicit or otherwise induce or
influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor,
supplier, customer, agent, representative or any other person which
has a business relationship with the Company or had a business
relationship with the Company within the twenty-four (24) month
period preceding the date of the incident in question, to
discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (B) employ or seek to employ or
cause any Competitive Business to employ or seek to employ any person
or agent who is then (or was at any time within six (6) months prior
to the date the Executive or the Competitive Business employs or
seeks to employ such person) employed or retained by the Company.
Notwithstanding the foregoing, nothing herein shall prevent the
Executive from providing a letter of recommendation to an employee
with respect to a future employment opportunity.
(iii) The scope and term of this Section 8 would not
preclude him from earning a living with an entity that is not a
Competitive Business.
(b) Upon a final, non-appealable finding that the Executive has
breached his obligations in any material respect under this Section 8, the
Company, in addition to pursuing all available remedies under this Agreement,
at law or otherwise, and without limiting its right to pursue the same shall
cease all payments to the Executive under this Agreement or any other
agreement.
9. Definitions
"Burger King Regulations" is defined in Section 1.
"Business" means (a) the construction, development, operations,
ownership and promotion of Burger King restaurants or (b) any similar or
incidental business conducted, or engaged in, by the Company prior to the date
hereof or at any time during the Term of Employment.
"Cause" is defined in Section 3(d).
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"Companies" means Parent and its successors or any of its direct or
indirect subsidiaries (including the Company), now or hereafter existing.
"Company" is defined in the introduction.
"Competitive Business" is defined in Section 8(a)(i).
"Confidential Information" means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, "know-how",
trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulae, improvements or other proprietary or intellectual property of the
Company, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that
becomes generally available to the public other than as a result of a
disclosure by the Executive not permissible hereunder.
"Executive" means Scott Vasakta or his estate, if deceased.
"Market" means any county in the United States of America and each
similar jurisdiction in any other country in which the Business was conducted
by or engaged in by the Company prior to the date hereof or is conducted or
engaged in, or for which a restaurant site is in development, by the Company
at any time during the Term of Employment.
"Restricted Period" is defined in Section 8(a)(i).
"Term of Employment" is defined in Section 3(a).
10. Notice
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such
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other addressee or address as shall be set forth in a notice
given in the same manner):
If to Executive: Scott Vasatka
560 Ololu Drive
Winter Park, FL 32789
with a copy to:
Vinton, Slivka & Panasci, P.C.
1600 Stout Street
Suite 1100
Denver, Colorado 80202
Attention: Ernest J. Panasci, Esq.
If to Company: c/o Jordan Industries, Inc.
Arbor Lake Centre, Suite 300
1751 Lake Cook Road
Deerfield, IL 60015
Any such notices shall be deemed to be given on the date personally delivered
or such return receipt is issued.
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
(ii) Executive is not subject to any covenants, agreements or restrictions,
including without limitation any covenants, agreements or restrictions arising
out of Executive's prior employment or the Burger King Regulations which would
be breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of the Burger King Regulations in
any material respect or in any manner which might reasonably have a material
adverse effect in respect of the Company's ongoing business, operations,
conditions, franchises, or other business relationships or properties.
12. Other Matters
Executive agrees and acknowledges that the obligations owed to
Executive under this Agreement are solely the obligations of the Company, and
that none of the Company's stockholders, directors, officers or lenders will
have any obligations or liabilities in respect of this Agreement and the
subject matter hereof.
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13. Validity
If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions
hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any
court determines that any provision of Section 8 or any other provision hereof
is unenforceable because of the power to reduce the scope or duration of such
provision, as the case may be and, in its reduced form, such provision shall
then be enforceable.
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any other breach of such other party. Each of the parties (and third
party beneficiaries) to this Agreement will be entitled to enforce its rights
under this breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions
of Sections 7 and 8 of this Agreement and that any party (and third party
beneficiaries) may in its sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions in order to enforce or prevent any violations of the provisions of
this Agreement. In the event either party takes legal action to enforce any of
the terms or provisions of this Agreement, the nonprevailing party shall pay
the successful party's costs and expenses, including but not limited to,
attorneys' fees, incurred in such action.
16. Assignment; Third Parties
Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations
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hereunder, without the prior written consent of the other. The parties agree
and acknowledge that each of the Companies and the stockholders and investors
therein are intended to be third party beneficiaries of, and have rights and
interests in respect of, Executive's agreements set forth in Sections 7 and 8.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter of this Agreement, and supersedes and replaces all prior
Agreements, understandings and commitments with respect to such subject
matter.
18. Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE PARTIES
HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS
AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT
BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY
TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE
ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH
PARTY AGREES THAT JURISDICTION AND VENUE WILL BE PROPER IN CHICAGO, ILLINOIS
AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF
THE STATE OF ILLINOIS OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN
THIS SECTION 11(G) SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
19. Arbitration
ANY DISPUTE BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING
TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE,
SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN
RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE
SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER
STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER
INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED,
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OR FEDERAL OR STATE COMMON LAW, SHALL BE SUBMITTED TO, AND RESOLVED
EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN CHICAGO, ILLINOIS, AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF ILLINOIS. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS
OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON
THE PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9
U.S.C. SECTION 1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF
A COURT OF RECORD.
20. Further Action
Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.
21. Counterparts
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
EXECUTIVE:
---------------------------------------------
Name: Scott Vasatka
NATIONAL RESTAURANT ENTERPRISES, INC.
By
-------------------------------------------
Name:
Title:
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MBP Draft 4/24/96
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of ______, 1996 ("this
Agreement"), is by and among AmeriKing, Inc., a Delaware corporation
("AmeriKing") National Restaurant Enterprises, Inc., a Delaware Corporation
(collectively the "Company"), and _________ ("Indemnitee").
WITNESSETH
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as directors, executive officers, or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against
them arising out of their service to and activities on behalf of the
corporation; and
WHEREAS, the current difficulties or virtual impossibility of
obtaining adequate insurance and uncertainties relating to indemnification
have increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of AmeriKing has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, the shareholders of the Company have adopted the Amended and
Restated Certificate of Incorporation of the Company (the "Certificate") and
the Amended and Restated Bylaws of the Company (the "Bylaws") providing for
the indemnification of the directors, officers, agents and employees of the
Company to the full extent permitted by the General Corporation Law of the
State of Delaware (the "Act"). The Charter, the Bylaws and the Act
specifically provide that they are not exclusive, and thereby contemplate that
contracts may be entered into between the Company and the members of its Board
of Directors and its executive officers with respect to indemnification of
such directors and executive officers; and
<PAGE>
WHEREAS, this Agreement is being entered into as part of Indemnitee's
total compensation for serving as a director and/or an executive officer, as
the case may be; and
NOW THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
SECTION 1. Service by Indemnitee.
Indemnitee agrees to serve as director of the Company and/or
executive officer of the Company if so designated by the Company and appointed
by the Board of Directors, and agrees to the indemnification provisions
provided for herein. Indemnitee may at any time and for any reason resign from
such position (subject to any other contractual obligation or other obligation
imposed by operation of law), in which event the Company shall have no
obligation under this Agreement to continue Indemnitee in any such position.
SECTION 2. Indemnification.
The Company shall indemnify Indemnitee to the fullest extent
permitted by applicable law in effect on the date hereof, notwithstanding that
such indemnification is not specifically authorized by this Agreement, the
Charter, the Bylaws, the Act or otherwise. In the event of any change, after
the date of this Agreement, in any applicable law, statute or rule regarding
the right of a Delaware corporation to indemnify a member of its board of
directors or an officer, such changes, to the extent that they would expand
Indemnitee's rights hereunder, shall be within the scope of Indemnitee's
rights and the Company's obligations hereunder, and, to the extent that they
would narrow Indemnitee's rights hereunder, shall be excluded from this
Agreement; provided, however, that any change that is required by applicable
laws, statutes or rules to be applied to this Agreement shall be so applied
regardless of whether the effect of such change is to narrow Indemnitee's
rights hereunder. Without diminishing the scope of the indemnification
provided by this Section 2, the rights of indemnification of Indemnitee
provided hereunder shall include indemnification in respect of the Company's
proposed initial public offering of Common Stock pursuant to its Registration
Statement on Form S-1 (File No. 333-_____) and shall further include any other
public offerings of securities by the Company, and shall not be limited to
those rights set forth hereinafter, except to the extent expressly prohibited
by applicable law.
SECTION 3. Action or Proceeding Other Than an Action by or
in the Right of the Company.
Indemnitee shall be entitled to the indemnification rights provided
in this Section 3 if he is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative in nature, other than an
action by or in the right of the Company, by reason of the fact that he is or
was a director, officer, employee, agent or fiduciary of the Company or is or
was serving at the request of the Company as a director, officer, employee,
agent, partner, trustee or fiduciary of any other entity (a "Related
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Company") or by reason of anything done or not done by him in any such
capacity. Pursuant to this Section 3, Indemnitee shall be indemnified against
reasonable costs and expenses (including, but not limited to, counsel fees,
costs, judgments, penalties, fines, ERISA excise taxes, and amounts paid in
settlement) (collectively, "Damages") actually and reasonably incurred by him
in connection with such action, suit or proceeding (including, but not limited
to, the investigation, defense or appeal thereof), if, in the case of conduct
in his official capacity with the corporation, he acted in good faith and in
the Company's best interests, and in all other cases, he acted in good faith
and was at least not opposed to the Company's best interests, and with respect
to any criminal action or proceeding had no reasonable cause to believe his
conduct was unlawful, except that no indemnification shall be made in respect
of any claim, issue or matter as to which Indemnitee shall have been finally
adjudged to be liable for (i) negligence or misconduct in the performance of
his duty to the Company unless and only to the extent that the court in which
such action or suit was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such expenses as such court shall deem
proper or (ii) the indemnification does not relate to any liability arising
under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
of the rules or regulations promulgated thereunder. Notwithstanding the
foregoing, the Company shall be required to indemnify an officer or director
in connection with an action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by the Board or a committee
thereof. No indemnity pursuant to this Agreement shall be provided by the
Company for Damages that have been paid directly to Indemnitee by an insurance
carrier under a policy of directors' and officers' liability insurance
maintained by the Company.
SECTION 4. Actions by or in the Right of the Company.
Indemnitee shall be entitled to the indemnification rights provided
in this Section 4 if he is or was made a party or is threatened to be made a
party to any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative brought by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was a director, officer, employee, agent or fiduciary of the
Company or is or was serving at the request of the Company as a director,
officer, employee, agent, partner, trustee or fiduciary of any other entity by
reason of anything done or not done by him in any such capacity. Pursuant to
this Section 4, Indemnitee shall be indemnified against Damages (as defined in
Section 3 of Agreement) actually and reasonably incurred by him in connection
with such action or suit (including, but not limited to the investigation,
defense, settlement or appeal thereof) if, in the case of conduct in his
official capacity with the corporation, he acted in good faith and in the
Company's best interests, and in all other cases, he acted in good faith and
was at least not opposed to the Company's best interests, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudged to be liable for (i)
negligence or misconduct in the performance of his duty to the Company unless
and only to the extent that the court in which such action or suit was
brought, or any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability
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but in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such expenses as such court shall deem
proper or (ii) the indemnification does not relate to any liability arising
under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
of the rules or regulations promulgated thereunder. Notwithstanding the
foregoing, the Company shall be required to indemnify an officer or director
in connection with an action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by the Board or a committee
thereof. No indemnity pursuant to this Agreement shall be provided by the
Company for Damages that have been paid directly to Indemnitee by an insurance
carrier under a policy of directors' and officers' liability insurance
maintained by the Company.
SECTION 5. Indemnification for Costs, Charges and Expenses of
Successful Party.
Notwithstanding the other provisions of this Agreement, to the extent
that Indemnitee has served as a witness on behalf of the Company or has been
successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Section 3 and Section 4 hereof, or in defense of any
claim, issue or matter therein, shall be indemnified against all reasonable
costs, charges, and expenses (including counsel fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
SECTION 6. Partial Indemnification
If Indemnitee is only partially successful in the defense,
investigation, settlement or appeal of any action, suit, investigation or
proceeding described in Section 3 or Section 4 hereof, and as a result is not
entitled under Section 5 hereof to indemnification by the Company for the
total amount of reasonable Damages actually and reasonably incurred by him,
the Company shall nevertheless indemnify Indemnitee, as a matter of right
pursuant to Section 5 hereof, to the extent Indemnitee has been partially
successful.
SECTION 7. Determination of Entitlement to Indemnification.
Upon written request by Indemnitee for indemnification pursuant to
Section 3 or Section 4 hereof, the entitlement of Indemnitee to
indemnification pursuant to the terms of this Agreement shall be determined by
the following person or persons who shall be empowered to make such
determination: (a) the Board of Directors of the Company by a majority vote of
a quorum consisting of Disinterested Directors (as hereinafter defined); or
(b) if such a quorum is not obtainable or, even if obtainable, if the Board of
Directors by the majority vote of Disinterested Directors so directs, by
Independent Counsel (as hereinafter defined) in a written opinion to the Board
of Directors, a copy of which shall be delivered to Indemnitee; or (c) by the
stockholders, but shares owned by or voted under the control of directors,
including the Indemnitee, who are at the time parties to the proceeding may
not be voted on the determination. Such Independent Counsel shall be selected
by the Board of Directors and approved by Indemnitee. Upon failure of
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<PAGE>
the Board of Directors to so select such Independent Counsel or upon failure
of Indemnitee to so approve, such Independent Counsel shall be selected by the
Chancellor of the State of Delaware or such other person as the Chancellor
shall designate to make such selection. Such determination of entitlement to
indemnification shall be made no later than sixty (60) days after receipt by
the Company of a written request for indemnification. Such request shall
include documentation or information which is necessary for such determination
and which is reasonably available to Indemnitee. Any Damages incurred by
Indemnitee in connection with his request for indemnification hereunder shall
be borne by the Company. The Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom irrespective of the outcome of the determination
of Indemnitee's entitlement to indemnification. If the person making such
determination shall determine that Indemnitee is entitled to indemnification
as to part (but not all) of the application for indemnification, such person
shall reasonably prorate such partial indemnification among such claims,
issues or matters.
SECTION 8. Presumptions and Effect of Certain Proceedings.
The Secretary of the Company shall, promptly upon receipt of
Indemnitee's request for indemnification, advise in writing the Board of
Directors or such other person or persons empowered to make the determination
as provided in Section 7 that Indemnitee has made such request for
indemnification. Indemnitee shall be presumed to be entitled to
indemnification hereunder and the Company shall have the burden of proof in
the making of any determination contrary to such presumption. If the person or
persons so empowered to make such determination shall have failed to make the
requested indemnification within 60 days after receipt by the Company of such
request, the requisite determination of entitlement to indemnification shall
be deemed to have been made and Indemnitee shall be absolutely entitled to
such indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Section 3 or Section 4 hereof by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself (a) create a presumption that Indemnitee did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful or (b) otherwise adversely affect the rights of
Indemnitee to indemnification except as may be provided herein.
SECTION 9. Advancement of Expenses and Costs.
All reasonable expenses and costs incurred by Indemnitee who is party
to a proceeding (including counsel fees, retainers and advances of
disbursements required of Indemnitee) (collectively, the "Expense Advance")
shall be paid by the Company in advance of the final disposition of such
action, suit or proceeding at the request of Indemnitee within twenty (20)
days after the receipt by the Company of a statement or statements from
Indemnitee requesting such advance or advances from time to time. Such
statement or statements shall reasonably evidence the expenses and costs
incurred by him in connection therewith. The Company's obligation to
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<PAGE>
provide an Expense Advance is subject to the following conditions: (i) If the
proceeding arose in connection with Indemnitee's service as a director and/or
executive officer of the Company (and not in any other capacity in which
Indemnitee rendered service, including service to any related company), then
the Indemnitee or his representative shall have executed and delivered to the
Company an undertaking, which need not be secured and shall be accepted
without reference to Indemnitee's financial ability to make repayment, by or
on behalf of Indemnitee to repay all Expense Advance if and to the extent that
it shall ultimately be determined by a final, unappealable decision rendered
by a court having jurisdiction over the parties and the question that
Indemnitee is not entitled to be indemnified for such Expense Advance under
this Agreement or otherwise; (ii) Indemnitee shall give the Company such
information and cooperation as it may reasonably request and as shall be
within Indemnitee's power; and (iii) Indemnitee shall furnish, upon request by
the Company and if required under applicable law, a written affirmation of
Indemnitee's good faith belief that any applicable standards of conduct have
been met by Indemnitee. Indemnitee's entitlement to such Expense Advance shall
include those incurred in connection with any proceeding by Indemnitee seeking
an adjudication pursuant to this Agreement. In the event that a claim for an
Expense Advance is made hereunder and is not paid in full within twenty (20)
days after written notice of such claim is delivered to the Company,
Indemnitee may, but need not, at any time thereafter bring suit against the
Company to recover the unpaid amount of the claim.
SECTION 10. Remedies of Indemnitee in Cases of Determination not to
Indemnify or to Advance Expenses.
In the event that a determination is made that Indemnitee is not
entitled to indemnification hereunder or if payment has not been timely made
following a determination of entitlement to indemnification pursuant to
Section 7 and 8, or if expenses are not advanced pursuant to Section 9,
Indemnitee shall be entitled to a final adjudication in an appropriate court
of the State of Delaware or any other court of competent jurisdiction of his
entitlement to such indemnification or advance. The Company shall not oppose
Indemnitee's right to seek any such adjudication or any other claim. Such
judicial proceeding shall be made de novo and Indemnitee shall not be
prejudiced by reason of a determination (if so made) that he is not entitled
to indemnification. If a determination is made or deemed to have been made
pursuant to the terms of Section 7 or Section 8 hereof that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination
and is precluded from asserting that such determination has not been made or
that the procedure by which such determination was made is not valid, binding
and enforceable. The Company further agrees to stipulate in any such court
that the Company is bound by all the provisions of this Agreement and is
precluded from making any assertion to the contrary. If the court shall
determine that Indemnitee is entitled to any indemnification hereunder, the
Company shall pay all reasonable Damages actually incurred by Indemnitee in
connection with such adjudication (including, but not limited to, any
appellate proceedings).
SECTION 11. Other Rights to Indemnification.
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<PAGE>
The indemnification and advancement of expenses (including counsel
fees) and costs provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may now or in the future be entitled
under any provision of the By-laws, provisions of the Charter, vote of
stockholders or Disinterested Directors, provision of law or otherwise.
SECTION 12. Counsel Fees and Other Expenses to Enforce Agreement.
In the event that Indemnitee is subject to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at
issue or seeks an adjudication or award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee, if he
prevails in whole or in part in such action, shall be entitled to recover from
the Company, and shall be indemnified by the Company against, any reasonable
expenses for counsel fees and disbursements actually and reasonably incurred
by him.
SECTION 13. Duration of Agreement.
This Agreement shall continue until and terminate upon the later of
(a) 10 years after Indemnitee has ceased to occupy any of the positions or
have any of the relationships described in Section 3 or Section 4 of this
Agreement or (b) the final termination of all pending or threatened actions,
suits, proceedings or investigations with respect to Indemnitee. This
Agreement shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of Indemnitee and his spouse, assigns, heirs,
devisees, executors, administrators or other legal representatives.
SECTION 14. Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, all portions of any paragraph of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
SECTION 15. Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original, but all of which
together shall constitute one and the same Agreement. Only one such
counterpart signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.
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<PAGE>
SECTION 16. Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or to affect the construction thereof.
SECTION 17. Definitions.
For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of the Company who
is not or was not a party to the action, suit, investigation or proceeding in
respect of which indemnification is being sought by Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member of a law
firm that neither is presently nor in the past five years has been retained to
represent (i) the Company or Indemnitee in any matter material to either such
party or (ii) any other party to the action, suit, investigation or proceeding
giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee
in an action to determine Indemnitee's right to indemnification under this
Agreement.
SECTION 18. Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
SECTION 19. Mutual Acknowledgment
The Company and Indemnitee acknowledge that, in certain instances,
federal law or public policy may override applicable state law and prohibit
the Company from indemnifying Indemnitee under this Agreement or otherwise.
For example, the Company and Indemnitee acknowledge that the U.S. Securities
and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain
federal securities laws, and federal legislation prohibits indemnification for
certain ERISA violations. Furthermore, Indemnitee understands and acknowledges
that the Company has undertaken or may be required in the future to undertake
with the SEC to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy
to indemnify Indemnitee.
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<PAGE>
SECTION 20. Notice by Indemnitee.
Indemnitee agrees promptly to notify the Company in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any matter which may be subject to
indemnification covered hereunder, either civil, criminal or investigative.
SECTION 21. Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed or if (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed, to the following addresses:
(a) to Indemnitee:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
(b) to the Company:
AmeriKing, Inc.
2215 Enterprise Drive, Suite 1502
Westchester, Illinois 60154
Attention: Chief Executive Officer
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
SECTION 22. Other Agreements.
This Agreement restates and supersedes, but does not limit or negate,
any indemnification, rights or interests of Indemnitee under any prior
agreements between the Company and Indemnitee.
SECTION 23. Governing Law.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
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<PAGE>
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
AMERIKING, INC.
By:
------------------------------------
Name:
Title:
NATIONAL RESTAURANT
ENTERPRISES, INC.
By:
------------------------------------
Name:
Title:
INDEMNITEE:
------------------------------------
Name:
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<PAGE>
TENANT: NATIONAL RESTAURANT ENTERPRISES, INC,
PROPERTY:
Enterprise Office Centre
2215 Enterprise Drive
Westchester, Illinois
DATE OF LEASE: NOVEMBER 14, 1994
OFFICE LEASE
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
LANDLORD,
AND
NATIONAL RESTAURANT ENTERPRISES, INC,
TENANT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
<S> <C>
1. Base Rent 1
2. Additional Rent 1
3. Security Deposit 6
4. Use of Premises 6
5. Services 8
6. Condition and Care of Premises 9
7. Return of Premises 9
8. Holding Over 10
9. Rules and Regulations 10
10. Rights Reserved to Landlord 10
11. Alterations 12
12. Assignment and Subletting 13
13. Waiver of Certain Claims; Indemnity 15
14. Damage or Destruction by Casualty 16
15. Eminent Domain 17
16. Default: Landlord's Rights and Remedies 17
17. Subordination 19
18. Mortgagee and Ground Lessor Protection 20
19. Default Under Other Laases 20
20. Insurance 21
21. Nonwaiver 22
22. Estoppel Certificate 22
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<PAGE>
Section Page
23. Tenant-Corporation or Partnership 22
24. Real Estate Brokers 23
25. Notices 23
26. Miscellaneous 23
27. Delivery of Possession 25
28. Substitution of Premises 25
29. Signs 25
30. Landlord 25
31. Title and Covenant Against Liens 25
32. Exculpatory Provisions 26
33. Acceleration of Commencement Date 26
Exhibit A - Description of Premises
Exhibit B - Base Rent
Exhibit C - Rules and Regulations
</TABLE>
ii
<PAGE>
OFFICE LEASE
THIS OFFICE LEASE, made as of the 14th day of November, 1994, WITNESSETH:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK (herein called "Landlord"), hereby
leases to NATIONAL RESTAURANT ENTERPRISES, INC, (herein called "Tenant"), and
Tenant hereby accepts the premises as outlined on the floor plan attached
hereto as Exhibit A known as suite 1502 (herein called "Premises") in the
building located at 2215 Enterprise Drive, Westchester, Illinois (being one of
six buildings, all of which are together called the "Building"), for a term
(herein called "Term") of twenty one (21) months commencing (the "Commencement
Date") on April 1, 1996 and ending on December 31, 1997, unless sooner
terminated as provided herein, paying as rent therefor the sums hereinafter
provided, without any setoff, abatement, counterclaim or deduction whatsoever,
except as set forth below.
IN CONSIDERATION THEREOF, THE PARTIES HERETO COVENANT AND AGREE:
1. Base Rent. Tenant shall pay an annual base rent (herein called "Base
Rent") to Landlord for the Premises which Base Rent shall be payable in equal
monthly installments (herein called "Monthly Base Rent"), in advance on the
first day of each calendar month of the Term in the amounts set forth in, and
in accordance with the provisions of, EXHIBIT B, attached hereto and
incorporated herein by this reference thereto. If the Term shall begin on any
date except the first day, or shall end on any day except the last day of a
calendar month, Base Rent shall be payable at a per diem rate based on the
then current monthly payment.
Base Rent, Additional Rent (as hereinafter defined), and all other
amounts becoming due from Tenant to Landlord hereunder (herein collectively
called the "Rent") shall be paid in lawful money of the United States to
Landlord at the office of Landlord, or as otherwise designated from time to
time by written notice from Landlord to Tenant. Concurrently with the
execution hereof and at Landlord's request, Tenant shall pay Landlord Monthly
Base Rent for the first full calendar month of the Term.
Landlord may authorize Tenant to take possession of all or any part of
the Premises prior to the beginning of the Term. If Tenant does take
possession pursuant to authority so given, all of the covenants and conditions
of this lease shall apply to and shall control such pre-Term occupancy. Rent
for such pre-Term occupancy shall be paid upon occupancy and on the first day
of each calendar month thereafter at the rate set forth in Sections 1 and 2
hereof. If the Premises are occupied for a fractional month, Rent shall be
prorated on a per diem basis for such fractional month. The payment of Rent
hereunder is independent of each and every other covenant and agreement
contained in this lease.
2. Additional Rent. In addition to Base Rent, Tenant shall also pay
Additional Rent (as hereinafter defined) in accordance with the following
provisions:
(a) Definitions. As used in this lease,
(i) "Expenses" shall mean and include all expenses, costs, fees and
disbursements paid or incurred by or on behalf of the Landlord for owning,
managing, operating, maintaining and repairing the "Real Property"
(hereinafter defined) and the personal property used in conjunction therewith
(said Real Property and personalty being herein collectively called the
"Project"), including (without limitation): the cost of electricity, steam,
water, gas, fuel, heating, lighting, air conditioning; window cleaning;
insurance, including but not limited to, fire, extended coverage, liability,
workmen's compensation, elevator, or any other
<PAGE>
insurance carried by the Landlord and applicable to the Project; painting;
uniforms; management fees; supplies, sundries, sales or use taxes on supplies
or services; cost of wages and salaries of all persons engaged in the
operation, administration, maintenance and repair of the Project; and fringe
benefits, including social security taxes, unemployment insurance taxes, cost
for providing coverage for disability benefits, cost of any pensions,
hospitalization, welfare or retirement plans, or any other similar or like
expenses incurred under the provisions of any collective bargaining agreement,
or any other cost or expense which Landlord pays or incurs to provide benefits
for employees so engaged in the operation, administration, maintenance and
repair of the Project; the charges of any independent contractor who, under
contract with the Landlord or its representatives, does any of the work of
operating, maintaining or repairing of the Project; legal and accounting
expenses, including, but not to be limited to, such expenses as relate to
seeking or obtaining reductions in and refunds of real estate taxes; any costs
or expenses allocated to the Project under easement agreements, service or
operating agreements, declarations, covenants or other instruments providing
for sharing of facilities or payment for services; or any other expense or
charge, whether or not hereinbefore mentioned, which would be considered as an
expense of owning, managing, operating, maintaining or repairing the Project.
Expenses shall not include costs or other items included within the meaning of
the term "Taxes" (as hereinafter defined), costs of alterations of the
premises of tenants of the Building, costs of capital improvements to the Real
Property, depreciation charges, interest and principal payments on mortgages,
ground rental payments, and real estate brokerage and leasing commissions,
except as hereinafter otherwise provided. Notwithstanding anything contained
in this clause (i) of Section 2(a) to the contrary,
(A) The cost of any capital improvements to the Real Property made after
the date of this lease which are intended to reduce Expenses or enhance the
safety of the Real Property or which are required under any governmental laws,
regulations, or ordinances applicable to the Real Property, whether or not in
effect at the date this lease was executed, amortized over such reasonable
period as Landlord shall determine, together with interest on the unamortized
cost of any such improvement (at the prevailing loan rate available to
Landlord on the date the cost of such improvement was incurred) shall be
included in Expenses.
(B) If the Building is not at least ninety-five percent (95%) occupied
by tenants during all or a portion of any year, or if during all or a portion
of any year Landlord is not furnishing to any tenant or tenants any particular
service, the cost of which, if furnished by Landlord, would be included in
Expenses, then Landlord may elect to make an appropriate adjustment for such
year of components of Expenses and the amounts thereof which may vary
depending upon the occupancy level of the Building or with the number of
tenants using the service, such that the amount of such variable components of
Expenses which would have been incurred if the Building had been fully
occupied during the entire year or Landlord had furnished such service at
Landlord's expense to all
2
<PAGE>
existing Tenants for the entire year shall be deemed costs and expenses
paid or incurred by Landlord and included in Expenses for such year.
(ii) "Taxes" shall mean,real estate taxes, assessments (whether they be
general or special), sewer rents, rates and charges, transit taxes,
taxes based upon the receipt of rent, and any other federal, state or
local governmental charge, general, special, ordinary or extraordinary
(but not including income or franchise taxes, capital stock,
inheritance, estate, gift, or any other taxes imposed upon or measured
by the Landlord's income or profits, unless the same shall be imposed in
lieu of real estate taxes or other ad valorem taxes), which may now or
hereafter be levied, assessed or imposed against the Building or the
land on which the Building is located (the "Land"), or both. The
Building and the Land are herein collectively called the "Real
Property."
Notwithstanding anything contained in this clause (ii) of
Section 2(a) to the contrary,
(A) If at any time during the Term of this lease the method of
taxation then prevailing shall be altered so that any new tax,
assessment, levy, imposition or charge or any part thereof shall be
imposed upon Landlord in place or partly in place of any such Taxes, or
contemplated increase therein, and shall be measured by or be based in
whole or in part upon the Real Property or the rents or other income
therefrom, then all such new taxes, assessments, levies, impositions or
charges or part thereof, to the extent that they are so measured or
based, shall be included in Taxes levied, assessed or imposed against
the Real Property to the extent that such items would be payable if the
Real Property were the only property of Landlord subject thereto and the
income received by Landlord from the Real Property were the only income
of Landlord.
(B) Notwithstanding the year with respect to which any such taxes
or assessments are levied, (i) in the case of special taxes or
assessments which may be payable in installments, the amount of each
installment, plus any interest payable thereon, paid during a calendar
year shall be included in Taxes for that year and (ii) if any taxes or
assessments payable during any calendar year shall be computed with
respect to a period in excess of twelve calendar months, then taxes or
assessments applicable to the excess period shall be included in Taxes
for that year. Except as provided in the preceding sentence, all
references to Taxes "for" a particular year shall be deemed to refer to
Taxes levied, assessed or imposed for such year without regard to when
such Taxes are payable.
(C) Taxes shall also include any personal property taxes
(attributable to the calendar year in which paid) imposed upon the
furniture, fixtures, machinery, equipment, apparatus, systems and
appurtenances used in connection with the Real Property or Project or
the operation thereof.
(D) If the Building is not at least ninety-five percent (95%)
occupied by tenants during all or a portion of any year, then Landlord
may elect to make
3
<PAGE>
an appropriate adjustment for such year of components of
Taxes which may vary depending upon the occupancy level of
the Building such that the amount of such Taxes which
would have been incurred if the Building had been fully
occupied during the entire year shall also be deemed taxes
levied or assessed against the Real Property and included
in Taxes for such year.
(iii) "Rentable Area of the Building" shall be deemed to be
129,600 square feet. If, during the Term of this lease, the
actual Rentable Area of the Building is increased or decreased as
a result of adding space to the Building or removing space from
the Building, Landlord may change the Rentable Area of the
Building and Tenant's Proportionate Share by written notice to
Tenant.
(iv) "Rentable Area of the Premises" shall be deemed to
be 7,737 square feet.
(v) "Tenant's Proportionate Share" shall mean 5.97% which is the
percentage obtained by dividing the Rentable Area of the Premises
by the Rentable Area of the Building.
(vi) "Additional Rent" shall mean Tenant's Proportionate
Share of Taxes and Expenses.
(b) Computation of Additional Rent. Tenant shall pay Tenant's
Proportionate Share of Taxes and Expenses.
(c) Payments of Additional Rent, Projections. Tenant shall make
payments on account of its Additional Rent with respect to each year effective
as of the first day of each calendar year (the "Adjustment Date") with respect
to each such year as follows:
(i) Landlord may, prior to each Adjustment Date or from time to time
during the year, deliver to Tenant a written notice or notices
("Projection Notice") setting forth (A) Landlord's reasonable
estimates, forecasts or projections (collectively, the "Projections")
of Taxes and Expenses with respect to such year, and (B) Tenant's
Proportionate Share of Taxes and Expenses with respect to such year
based upon the Projections.
(ii) Until such time as Landlord furnishes a Projection Notice with
respect to any year, Tenant shall pay to Landlord a monthly
installment of Additional Rent (at the time of and together with each
payment of Monthly Base Rent) equal to the latest monthly installment
of Additional Rent. On or before the first day of the next calendar
month following Landlord's service of a Projection Notice, and on or
before the first day of each month thereafter, Tenant shall pay to
Landlord one-twelfth (1/12) of Tenant's Proportionate Share of Taxes
and Expenses shown in the Projection Notice. Within fifteen
(15) days following Landlord's Service of a Projection Notice, Tenant
shall also pay Landlord a lump sum equal to the monthly Tenant's
Proportionate Share of Taxes and Expenses shown in the Projection
Notice for January to and including the month(s) in which the
Projection Notice was sent (the "Gap Period") less the sum of any
previous payments of
4
<PAGE>
Additional Rent made during such Gap Period.
(d) Readjustments/Audit.
At any time and from time to time following the end of each year (and
after Landlord shall have determined the actual amounts of Taxes and Expenses
to be used in calculating Tenant's Proportionate Share of Taxes and Expenses
with respect to such year) if the actual Tenant's Proportionate Share of Taxes
and Expenses owed for such year exceeds the Additional Rent paid by Tenant
during such year, then Tenant shall, within thirty (30) days after the date of
Landlord's statement, pay to Landlord an amount equal to such excess
(provided, however, if such excess is equal to or greater than two (2) months
of Additional Rent, Tenant shall, within sixty (60) days after the date of
Landlord's statement as opposed to the aforesaid thirty (30) days) pay to
Landlord an amount equal to such excess. In connection therewith, Landlord
shall prepare and deliver to Tenant a detailed report (the "Report") of Taxes
and Expenses. Landlord shall use its reasonable efforts to deliver the Report
to Tenant within ninety (90) days following the end of each calendar year.
Tenant shall have ninety (90) days following its receipt of the Report to
advise Landlord of any disagreement Tenant may have with respect to the
provisions thereof. If Tenant fails to respond within said ninety (90) day
period, Tenant shall be deemed to have agreed to the determination of Landlord
and the provisions of the Report. In the event that Tenant disagrees with the
provisions of the Report and timely advises Landlord of same, Tenant shall
have the right at its sole cost and expense to audit Taxes and Expenses, and
in connection with such audit Landlord shall make available, following the
reasonable request of Tenant, such information as to Taxes and Expenses as
will allow Tenant to conclude its audit. Any disagreement of Tenant in
connection with the Report shall not relieve Tenant of its obligation to pay
contained in the first sentence of this paragraph (d) of Section 2, or
otherwise relieve Tenant of its obligation to pay Additional Rent in the
manner and at the times in this Section 2 provided. Provided, however, any
actual overpayment by Tenant shall be applied by Landlord as provided in the
sentence immediately following. If the Additional Rent paid by Tenant during
such year exceeds the actual Tenant's Proportionate Share of Taxes and
Expenses owed for such year, then Landlord shall credit such excess to Rent
payable after the date of Landlord's statement until such excess has been
exhausted. If this lease shall expire prior to full application of such
excess, Landlord shall pay to Tenant the balance thereof not theretofore
applied against Rent and not reasonably required for payment of Additional
Rent for the year in which the lease expires. No interest or penalties shall
accrue on any amounts which Landlord is obligated to credit or pay to Tenant
by reason of this Section 2(d).
(e) Proration and Survival.
With respect to any year which does not fall entirely within the Term,
Tenant shall be obligated to pay as Additional Rent for such year only a pro
rata share of Additional Rent as hereinabove determined, based upon the number
of days of the Term falling within the year. Following expiration or
termination of this lease, Tenant shall pay any Additional Rent due to the
Landlord within fifteen (15) days after the date of Landlord's statement sent
to Tenant. Without limitation on other obligations of Tenant which shall
survive the expiration or termination of this lease, the obligations of Tenant
to pay Additional Rent provided for in this Section 2 shall survive the
expiration or termination of this lease.
5
<PAGE>
(f) No Decrease In Base Rent.
In no event shall any Additional Rent result in a decrease of the Base
Rent payable hereunder as suorth in Section 1 hereof.
3. Securitv Deposit. Tenant has deposited with Landlord the sum of
$13,827.00 as security for the full and faithful performance of every
provision of this lease to be performed by Tenant. If Tenant defaults with
respect to any provision of this lease, including, but not limited to, the
provisions relating to the payment of Rent, Landlord may use, apply or retain
all or any part of this security deposit for the payment of any Rent and any
other sum in default, or for the payment of any other amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of said deposit is to be used or
applied, Tenant shall within five (5) days after written demand therefor
deposit cash with Landlord in an amount sufficient to restore the security
deposit to its original amount and Tenant's failure to do so shall be a
material breach of this lease. Tenant may not elect to apply any portion of
the security deposit toward the payment of Rent or other charges payable by
Tenant under this lease. Landlord shall not be required to keep this security
deposit separate from its general funds and Tenant shall not be entitled to
interest on such deposit. If Tenant shall fully and faithfully perform every
provision of this lease to be performed by it, the security deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option to the
last assignee of Tenant's interest hereunder) within thirty (30) days after
the expiration of the lease Term and Tenant's vacation of the Premises. Tenant
hereby agrees not to look to any mortgagee as mortgagee, mortgagee in
possession, or successor in title to the Building for accountability for any
security deposit required by the Landlord hereunder, unless said sums have
actually been received by said mortgagee or successor in title as security for
the Tenant's performance of this lease. In connection with a purchase of the
Building, the security deposit shall be deemed to have been actually received
by the purchaser to the extent same received a credit therefor on any so
called "closing" statement or the like. The Landlord may deliver the funds
deposited hereunder by Tenant to the purchaser of Landlord's interest in the
Building, in the event that such interest is sold, or credit same on any
closing statement, and thereupon Landlord shall be discharged from any further
liability with respect to such security deposit.
4. Use of Premises. Tenant shall use and occupy the Premises for general
office purposes, and for no other use or purpose. Tenant shall not use or
occupy the Premises or permit the use or occupancy of the Premises for any
purpose or in any manner which (i) is unlawful or in violation of any
applicable legal or governmental requirement, ordinance or rule; (ii) may be
dangerous to persons or property; (iii) may invalidate or increase the amount
of premiums for any policy of insurance affecting the Project, and if any
additional amounts of insurance premiums are so incurred, Tenant shall pay to
Landlord the additional amounts on demand; or (iv) may create a nuisance,
disturb any other tenant of the Building or injure the reputation of the
Building.
Tenant shall not cause or permit any Hazardous Material (as defined
below) to be brought upon, kept, or used in or about the Premises or the
Project by Tenant, its agents, employees, contractors, or invitees, without
the prior written consent of Landlord (which Landlord shall not unreasonably
withhold as long as Tenant demonstrates to Landlord's reasonable satisfaction
that such Hazardous Material is necessary or useful to Tenant's business and
will at all times be used, kept, stored and disposed of in a manner that
complies at all times with all laws regulating any such Hazardous Material so
brought upon or used or kept in or about the Premises and/or the Project and
such storage will not create an undue
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risk to other tenants of the Building, giving consideration to the nature of
the Building). If Tenant breaches the obligations stated in the preceding
sentence, or if the presence of Hazardous Material on the Premises or the
Project caused or permitted by Tenant results in contamination of the Premises
or the Project, or if contamination of the Premises or the Project, by
Hazardous Material otherwise occurs for which Tenant is legally liable to
Landlord for damage resulting therefrom, then Tenant shall indemnify, defend
and hold Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities, or losses (including, without
limitation, diminution in value of the Premises or the Project, damages for
the loss or restriction on use of rentable or usable space or of any amenity
of the Premises or the Project, damages arising from any adverse impact on
marketing of space in the Building, and sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees) which arise during or after
the term of this Lease as a result of such contamination. This indemnification
of Landlord by Tenant includes, without limitation, costs incurred in
connection with any investigation of site conditions or any cleanup, remedial,
removal or restoration work required by any federal, state, or local
governmental agency or political subdivision because of Hazardous Material
present in, on, or about the Premises or the Project or in the soil or ground
water on or under the Premises or the Project. Without limiting the foregoing,
if the presence of any Hazardous Material in, on or about the Premises or the
Project caused or permitted by Tenant results in any contamination of the
Premises or the Project, Tenant shall promptly take all actions at its sole
expense as are necessary to return the Premises or the Project to the
condition existing prior to the introduction of any such Hazardous Material
thereto; provided that Landlord's approval of such actions shall first be
obtained, which approval shall not be unreasonably withheld so long as such
actions would not potentially have any material (as determined by Landlord)
adverse long-term or short-term effect on the Premises or the Project or
exposes Landlord to any liability therefor and such actions are undertaken in
accordance with all applicable laws, rules and regulations and accepted
industry practices.
"Hazardous Material" is used in this Lease in its broadest sense and
shall mean any asbestos, petroleum based products, pesticides, paints and
solvents, polychlorinated biphenyl, lead, cyanide, DDT, acids, ammonium
compounds and other chemical products and any substance or material defined or
designated as hazardous or toxic substance, or other similar term, by any
federal, state or local environmental statute, regulation, or ordinance
affecting the Premises or the Project presently in effect or that may be
promulgated in the future, as such statutes, regulations and ordinances may be
amended from time to time, including but not limited to the statutes listed
below:
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
et seq.
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
40 U.S.C. Section 1801 et seq.
Clean Air Act, 42 U.S.C. Sections 7401-7626.
Water Pollution Control Act (Clean Water Act of 1977), 33 U.S.C. Section 1251
et seq.
Insecticide, Fungicide, and Rodenticide Act (Pesticide Act of 1987), 7 U.S.C.
Section 135 et seq.
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.
Safe Drinking Water Act, 42 U.S.C. Section 300(f) et seq.
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National Environmental Policy Act (NEPA) 42 U.S.C. Section 4321 et seq.
Refuse Act of 1899, 33 U.S.C. Section et seq.
5. Services. The Landlord shall furnish the following services, which
shall all be deemed Expenses (except to the extent to be paid entirely by
Tenant, as hereinafter provided):
(a) Heat and air conditioning. The Premises is separately thermostated,
and Tenant shall be responsible for the regulation of heating and air
conditioning in the Premises.
(b) Electricity and gas to the Premises and the building in which the
Premises is located to meters furnished by the local utility companies. Tenant
shall make all arrangements with the local utility companies to obtain service
at Tenant's sole cost and expense, and no such disconnection of gas or
electricity service shall result in any liability of Landlord to Tenant or be
deemed to be an eviction or a disturbance of Tenant's use of the Premises.
(c) Janitor service in and about that portion of the Premises to be used
for general office purposes, Saturdays, Sundays and holidays excepted, in
accordance with other buildings of the same class located in the Westchester,
Illinois area. Tenant shall not provide any other janitor services or
cleaning.
(d) Cold water for drinking, lavatory and toilet purposes and hot water
for lavatory purposes, in restrooms at locations designated by Landlord, in
common with other tenants of the Building. Tenant shall pay Landlord
Additional Rent at rates fixed by Landlord for water furnished for sinks or
restrooms within the Premises or for any other purpose. Tenant shall not waste
or permit the waste of water.
(e) Landlord shall not be obligated to furnish any services other than
those services specified or to furnish such services at times other than as
specified. If Landlord agrees to provide extra or additional services, Tenant
shall, for such extra or additional services, pay 110% of Landlord's actual
cost reasonably incurred in providing them, except that after-hours heating
and air conditioning shall be at Landlord's scheduled rate charges for such
services, such amount to be considered Additional Rent hereunder. All charges
for such extra or additional services shall be due and payable at the same
time as the installment of Base Rent with which they are billed, or if billed
separately, shall be due and payable within ten (10) days after such billing.
Any such billings for extra or additional services shall include an
itemization of the extra or additional services rendered, and the charge for
each such service.
Failure by Tenant to promptly pay Landlord's proper charges for water,
electricity or other services shall give Landlord, upon not less than thirty
(30) days' notice, the right to discontinue furnishing the services, and no
such discontinuance shall be deemed an eviction or disturbance of Tenant's use
of the Premises or render Landlord liable for damages or relieve Tenant from
performance of Tenant's obligations under this lease.
Tenant agrees that Landlord and its agents shall not be liable in
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service or failure to perform or delay in performing any other
obligation required to be performed by Landlord under this lease or by
operation of law, when such failure or delay is occasioned, in whole or in
part, by repairs, renewals or improvements, by any strike, lockout or other
labor trouble, by inability to secure electricity, gas, water, or other fuel
at the Building after reasonable effort so to do, by any accident or casualty
whatsoever, by the act
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or default of Tenant or other parties, or by any cause beyond the reasonable
control of Landlord; and such failures or delays, or the nonexistence of any
utility, whether occasioned by Landlord or some third party, shall never be
deemed to constitute an eviction or disturbance of the Tenant's use and
possession of the Premises or relieve the Tenant from paying Rent or
performing any of its obligations under this lease.
Tenant agrees to cooperate fully, at all times, with Landlord in abiding
by all reasonable regulations and requirements which Landlord may prescribe
for the proper functioning and protection of all utilities and services
reasonably necessary for the operation of the Premises and the Building.
Landlord, throughout the term of this lease, shall have free access to any and
all mechanical installations, and Tenant agrees that there shall be no
construction or partitions or other obstructions which might interfere with
the moving of the servicing equipment of Landlord to or from the enclosures
containing said installations. Tenant further agrees that neither Tenant nor
its servants, employees, agents, visitors, licensees or contractors shall at
any time tamper with, adjust or otherwise in any manner affect Landlord's
mechanical installations.
6. Condition and Care of Premises. Tenant's taking possession of the
Premises or any portion thereof shall be conclusive evidence against Tenant
that the portion of the Premises taken possession of was then in good order
and satisfactory condition. Tenant is taking possession of the Premises in its
"as is" condition. No promises of the Landlord to alter, remodel, improve,
repair, decorate or clean the Premises or any part thereof have been made, and
no representation respecting the condition of the Premises, the Building or
the Land, has been made to Tenant by or on behalf of Landlord. Tenant agrees
that blinds, shades, drapes or other forms of window coverings and treatments
shall not be placed in, on or about the outside windows in the Premises,
except to the extent that the character, shape, color, material and make
thereof is expressly approved by the Landlord. This lease does not grant any
rights to light or air over or about the property of Landlord. Except for any
damage resulting from any act of Landlord or its employees and agents, and
subject to the provisions of Section 14 hereof, Tenant shall at its own
expense keep the Premises in good repair and tenantable condition and shall
promptly and adequately repair all damage to the Premises caused by Tenant or
any of its employees, agents or invitees, including replacing or repairing all
damaged or broken glass, fixtures and appurtenances resulting from any such
damage, under the supervision and with the approval of Landlord and within any
reasonable period of time specified by Landlord. If Tenant does not do so
promptly and adequately, Landlord may, but need not, make such repairs and
replacements and Tenant shall pay Landlord the cost thereof on demand.
7. Return of Premises. At the termination of this lease by lapse of time
or otherwise or upon termination of Tenant's right of possession without
terminating this lease, Tenant shall surrender possession of the Premises to
Landlord and deliver all keys to the Premises to Landlord and make known to
the Landlord the combination of all locks of vaults then remaining in the
Premises, and shall (subject to the following paragraph) return the Premises
and all equipment and fixtures of the Landlord therein to Landlord in as good
condition as when Tenant originally took possession, ordinary wear, loss or
damage by fire or other insured casualty, damage resulting from the act of
Landlord or its employees and agents, and alterations made with Landlord's
consent excepted, failing which Landlord may restore the Premises and such
equipment and fixtures to such condition and Tenant shall pay the cost thereof
to Landlord on demand.
All installations, additions, partitions, hardware, light fixtures, non-
trade fixtures and
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improvements, temporary or permanent, except movable furniture and equipment
belonging to Tenant, in or upon the Premises, whether placed there by Tenant
or Landlord, shall be Landlord's property and shall remain upon the Premises,
all without compensation, allowance or credit to Tenant; provided, however,
that if prior to such termination or within ten (10) days thereafter Landlord
so directs by notice, Tenant, at Tenant's sole cost and expense, shall
promptly remove such of the installations, additions, partitions, hardware,
light fixtures, non-trade fixtures and improvements placed in the Premises by
Tenant as designated in such notice and repair any damage to the Premises
caused by such removal, failing which Landlord may remove the same and repair
the Premises and Tenant shall pay the cost thereof to Landlord on demand.
Tenant shall leave in place any floor covering without compensation to
Tenant. Tenant shall also remove Tenant's furniture, machinery, safes, trade
fixtures and other items of movable personal property of every kind and
description from the Premises prior to the end of the Term or ten (10) days
following termination of this lease or Tenant's right of possession, whichever
might be earlier, failing which Landlord may do so and thereupon the
provisions of Section 16(c) shall apply.
All obligations of Tenant hereunder shall survive the expiration of the
Term or sooner termination of this lease.
8. Holding Over. The Tenant shall pay Landlord for each day Tenant
retains possession of the Premises or any part thereof after termination of
this lease, by lapse of time or otherwise, an amount which is 1.75 times the
amount of Rent for a day (computed on a year of 360 days) based on the annual
rate of Base Rent and Additional Rent applicable under Sections 1 and 2 to the
period in which such possession occurs (and if such possession occurs
following the full Term of this lease, 1.75 times the annual Base Rent and
Additional Rent applicable in the last year of this lease), and Tenant shall
also pay all damages, consequential as well as direct, sustained by Landlord
by reason of such retention. Nothing in this Section contained, however, shall
be construed or operate as a waiver of Landlord's right of re-entry or any
other right of Landlord.
9. Rules and Regulations. Tenant agrees to observe the rights reserved
to Landlord contained in Section 10 hereof and agrees, for itself, its
employees, agents, clients, customers, invitees and guests, to comply with the
rules and regulations set forth in Exhibit C attached to this lease and by
this reference incorporated herein and such other rules and regulations as
shall be adopted by Landlord pursuant to Section 10(m) of this lease.
Any violation by Tenant of any of the rules and regulations contained in
EXHIBIT C attached to this lease or other Section of this lease, or as may
hereafter be adopted by Landlord pursuant to Section 10(m) of this lease, may
be restrained; but whether or not so restrained, Tenant acknowledges and
agrees that it shall be and remain liable for all damages, loss, costs and
expense resulting from any violation by the Tenant of any of said rules and
regulations. Nothing in this lease contained shall be construed to impose upon
Landlord any duty or obligation to enforce said rules and regulations, or the
terms, covenants and conditions of any other lease against any other tenant or
any other persons, and Landlord and its beneficiaries shall not be liable to
Tenant for violation of the same by any other tenant, its employees, agents,
invitees, or by any other person.
10. Rights Reserved to Landlord. Landlord reserves the following
rights, exercisable without notice and without liability to Tenant for damage or
injury to property, person or business and
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without effecting an eviction or disturbance of Tenant's use or possession or
giving rise to any claim for setoff or abatement of rent or affecting any of
Tenant's obligations under this lease:
(a) To change the name or street address of the Building.
(b) To install and maintain signs on the exterior and interior of the
Building, and to prescribe the location and style of the suite number and
identification sign or lettering for the Premises occupied by the Tenant.
(c) To designate the character, shape, color, material and make of all
window coverings and treatments on all outside windows in the Premises.
(d) To retain at all times, and to use in appropriate instances, pass keys
to the Premises.
(e) To grant to anyone the right to conduct any business or render any
service in the Building, whether or not it is the same as or similar to the
use expressly permitted to Tenant by Section 4.
(f) To exhibit the Premises at reasonable hours.
(g) To decorate, remodel, repair, alter or otherwise prepare the
Premises for reoccupancy at any time after Tenant vacates or abandons the
Premises.
(h) To have access for Landlord and other tenants or occupants of the
Building to all mail receptacles according to the rules of the United States
Postal Service.
(i) To enter the Premises at reasonable hours for reasonable purposes,
including the posting of notices of nonresponsibility, inspection and
supplying janitor service or other services to be provided to Tenant
hereunder.
(j) To require all persons entering or leaving the Building during such
hours as Landlord may from time to time reasonably determine to identify
themselves to security personnel by registration or otherwise, and to
establish their right to enter or leave. Landlord shall not be liable in
damages for any error with respect to admission to or eviction or exclusion
from the Building of any person. In case of fire, invasion, insurrection, mob,
riot, civil disorder, public excitement or other commotion, or threat thereof,
Landlord reserves the right to limit or prevent access to the Building during
the continuance of the same, shut down elevator service, activate elevator
emergency controls, or otherwise take such action or preventive measures
deemed necessary by Landlord for the safety of the tenants or other occupants
of the Building or the protection of the Building and the property in the
Building. Tenant agrees to cooperate in any reasonable safety program
developed by Landlord.
(k) To control and prevent access to common areas and other areas.
(l) Provided that reasonable access to the Premises shall be maintained
and the business of Tenant shall not be interfered with unreasonably, to
relocate, eniarge, reduce or change corridors, exits, entrances in or to the
Building and to decorate and to make repairs, alterations, additions and
improvements, structural or otherwise, in or to the Building or any part
thereof, and any adjacent building, land,
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street or alley, including for the purpose of connection with or entrance into
or use of the Building in conjunction with any adjoining or adjacent building
or buildings, now existing or hereafter constructed, and may for such purposes
erect scaffolding and other structures reasonably required by the character of
the work to be performed, and during such operations may enter upon the
Premises and take into and upon or through any part of the Building, including
the Premises, all materials that may be required to make such repairs,
alterations, improvements, or additions, and in that connection Landlord may
temporarily close public entry ways, other public spaces, stairways or
corridors and interrupt or temporarily suspend any services or facilities
agreed to be furnished by Landlord, all without the same constituting an
eviction of Tenant in whole or in part and without abatement of rent by reason
of loss or interruption of the business of Tenant or otherwise and without in
any manner rendering Landlord liable for damages or relieving Tenant from
performance of Tenant's obligation under this lease; Landlord may at its
option make any repairs, alterations, improvements and additions in and about
the Building and the Premises during ordinary business hours and, if Tenant
desires to have such work done during other than business hours, Tenant shall
pay all overtime and additional expenses resulting therefrom.
(m) From time to time to make and adopt such reasonable rules and
regulations, in addition to or other than or by way of amendment or
modification of the rules and regulations contained in Exhibit C attached to
this lease or other Sections of this lease, for the protection and welfare of
the Building and its tenants and occupants, as the Landlord may determine, and
the Tenant agrees to abide by all such rules and regulations.
11. Alterations.
(a) Without Landlord's prior written consent, Tenant shall not make or
cause to be made any decorating, exterior, structural, electrical, plumbing,
ventilation, air conditioning or other type of alterations, improvements,
additions, changes or repairs in or to the Premises or the Building. As a
condition to granting its consent, Landlord may impose reasonable requirements
in addition to any set forth in this lease, including, without limitation,
requirements as to the manner and time for the performance of any such work
and the type and amount of insurance and bonds Tenant must acquire and
maintain in connection therewith. In addition, at Landlord's option, Landlord
shall have the right: to approve the contractors or mechanics performing the
work; to approve all plans and specifications relating to the work; to review
the work of Tenant's architects, engineers, contractors or mechanics and to
control any construction or other activities being undertaken within the
Building, with Landlord to be reimbursed on demand of same for any costs
incurred in connection with such review or control; and to require correction
of the work in instances in which materials or workmanship is defective or not
in accordance with plans or specifications previously approved by Landlord.
Landlord's approval of any plans and specifications shall create no
responsibility on the part of Landlord for the completeness, design,
sufficiency or compliance with all laws, ordinances, regulations, rules and
requirements of governmental entities having jurisdiction. Tenant shall
deliver to Landlord for Landlord's files, at Tenant's sole cost and expense,
complete copies of all final working drawings and plans and specifications.
Except as expressly provided herein, all alterations, improvements, additions,
changes or repairs shall be provided by and paid for by Tenant at its sole
expense, but shall become the property of Landlord and shall be surrendered
with the Premises upon termination of this lease; provided, however, that
Landlord may, by written notice to Tenant as provided in Section 7 of this
lease, require Tenant, at Tenant's sole cost and expense, to remove any or all
improvements, alterations, additions or fixtures installed or made by Tenant
on or to the Premises and to repair any damages to the Premises caused by such
removal.
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(b) All work in connection with any alterations, improvements, changes,
additions or repairs in the Premises or the Building made by or for the
benefit of Tenant shall be performed in full compliance with all laws,
ordinances, regulations, rules and requirements of all governmental entities
having jurisdiction and in full compliance with all insurance rules, orders,
directions, regulations and requirements. If there is now or if there shall be
installed in the Building a sprinkler system, and if any fire rating bureau or
any similar body having jurisdiction or any governmental authority having
jurisdiction requires or recommends that any changes, modifications,
alterations, additional sprinkler heads or other equipment be made or supplied
by reason of Tenant's business or the improvements it has added or the
location of partitions, trade fixtures or other contents of the Premises, or
if any such changes, modifications, alterations, additions or other equipment
become necessary to prevent imposition of a penalty or charge against the full
allowance for a sprinkler system in the fire insurance rate as fixed by said
bureau or by any fire insurance company, Tenant shall, at its own cost,
promptly make and supply all such changes, modifications, alterations,
additional sprinkler heads or other equipment.
(c) Before work is commenced as provided in this Section 11, Tenant
shall give Landlord at least fifteen (15) days' written notice. Landlord shall
be entitled to enter the Premises during regular hours to post a notice of
non-responsibility. Tenant shall secure, at Tenant's own cost, payment and
performance bonds, satisfactory to Landlord, for said work, and during the
progress of the work, Tenant shall at its sole cost and expense, upon
Landlord's request, furnish Landlord with sworn contractor's statements and
lien waivers covering all work theretofore performed, together with such
endorsements to Landlord's title insurance policy as Landlord may require. Any
mechanic's liens for work claimed to have been performed for, or materials
claimed to have been furnished to, Landlord or Tenant shall be discharged by
Tenant, at Tenant's sole expense as provided in Section 31. Tenant agrees to
indemnify, hold harmless and defend Landlord from any loss, cost, damage or
expense, including attorney's fees, arising out of any such lien claim or out
of any other claim relating to work done or materials supplied to the Premises
at Tenant's request or on Tenant's behalf.
12. Assignment and Subletting.
(a) Tenant shall not (i) assign, transfer, mortgage, pledge,
hypothecate or encumber or subject to or permit to exist upon or be subjected
to any lien or charge, this lease or any interest under it, (ii) allow to
exist or occur any transfer of or lien upon this lease or the Tenant's
interest herein by operation of law, (iii) sublet the Premises or any part
thereof, or (iv) permit the use or occupancy of the Premises or any part
thereof for any purpose not provided for under Section 4 of this lease or by
anyone other than the Tenant and Tenant's employees. If consent to any of the
foregoing is requested by Tenant, Landlord has the absolute right to withhold
its consent without giving any reason whatsoever. In no event shall this lease
be assigned or assignable by voluntary or involuntary bankruptcy proceedings
or otherwise, and in no event shall this lease or any rights or privileges
hereunder be an asset of Tenant under any bankruptcy, insolvency or
reorganization proceedings.
(b) Tenant shall, by notice in writing, advise Landlord of its intention
from, on and after a stated date (which shall not be less than sixty (60) days
after the date of Tenant's notice) to assign this lease or sublet any part or
all of the Premises for the balance or any part of the Term, and, in such
event, Landlord shall have the right, to be exercised by giving written notice
to Tenant within thirty (30) days after receipt of Tenant's notice, to
recapture the space described in Tenant's notice and such recapture notice
shall, if given, terminate this lease with respect to the space therein
described as of the date stated in Tenant's notice. Tenant's notice shall
state the name and address of the proposed subtenant or assignee
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and a true and complete copy of the proposed sublease or assignment shall be
delivered to Landlord with said notice. If Tenant's notice shall cover all of
the space hereby demised, and if Landlord shall give the aforesaid recapture
notice with respect thereto, the Term of this lease shall expire and end on
the date stated in Tenant's notice as fully and completely as if that date had
been herein definitely fixed for the expiration of the Term. If, however, this
lease be terminated pursuant to the foregoing with respect to less than the
entire Premises, the Rent and the Tenant's Proportionate Share as defined
herein shall be adjusted by Landlord on the basis of the number of rentable
square feet retained by Tenant, and this lease as so amended shall continue
thereafter in full force and effect. If Landlord, upon receiving Tenant's
notice with respect to any such space, shall not exercise its right to
terminate as aforesaid, Landlord will not unreasonably withhold its consent to
Tenant's assignment or subletting the space covered by its notice; provided,
however, that in addition to other circumstances under which Landlord's
consent may be withheld (whether similar or dissimilar to the following
reasons), Tenant agrees that the withholding by Landlord of its consent to
Tenant's assignment or subletting the space covered by its notice will not be
deemed "unreasonable" if (i) the proposed assignee or subtenant is
disreputable or otherwise not in keeping with the nature or class of tenants
in the Building, (ii) the proposed assignee or subtenant is not sufficiently
financially responsible, or in Landlord's reasonable opinion will not in the
future be sufficiently financially responsible, to perform its obligations
under the lease or its sublease, (iii) the use of the Premises by the proposed
assignee or subtenant would, in Landlord's reasonable judgment, significantly
increase the pedestrian traffic in and out of the Building or would require
Landlord to perform any alterations to the Building to comply with applicable
building code requirements or other laws, (iv) there is in existence at the
time of such notice any sublease of the Premises or prior assignments of this
lease, (v) there is at the time of such notice, any uncured default by Tenant
pursuant to this Lease; or, (vi) at the time of such notice, Tenant is not in
occupancy of the Premises.
(c) Tenant agrees that all advertising by Tenant or on Tenant's behalf
with respect to the leasing of space in the Building must be approved in
writing by Landlord prior to publication.
(d) If Tenant, having first obtained Landlord's consent in accordance
with the foregoing provision of this Section, shall assign this lease or
sublet the Premises, or any part thereof, at a rental or for other monetary
consideration in excess of the Rent or pro rata portion thereof due and
payable by Tenant under this lease, then Tenant shall pay to Landlord, as
additional rent (1) on the first day of each month during the term of any
sublease, one-half (1/12) of the excess of all rent and other consideration due
from the subtenant for such month over the Rent then payable to Landlord
pursuant to the provisions of this lease for said month (or if only a portion
of the Premises is being sublet, the excess of all rent and other
consideration due from the subtenant for such month over the portion of the
Rent then payable to Landlord pursuant to the provisions of this lease for
said month which is allocable on a square footage basis to the space sublet)
and (2) immediately upon receipt thereof, one-half (1/12) of any other rent or
consideration received by Tenant from such assignment or subletting.
(e) If Tenant is a corporation, (other than a corporation whose stock is
traded through a national or regional exchange or over-the-counter), any
transaction or series of transactions (including, without limitation, any
dissolution, merger, consolidation or other reorganization of Tenant, or any
issuance, sale, gift, transfer or redemption of any capital stock of Tenant,
whether voluntary, involuntary or by operation of law, or any combination of
any of the foregoing transactions) resulting in the transfer of control of
Tenant, other than by reason of death, shall be deemed to be transfer of
Tenant's interest under this lease for the purpose of Section 12(a). If Tenant
is a partnership, any transaction or series of transactions (including,
without limitation, any withdrawal or admittance of a partner or any change in
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any partner's interest in Tenant, whether voluntary, involuntary or by
operation of law, or any combination of any of the foregoing transactions)
resulting in the transfer of control of Tenant, other than by reason of death,
shall be deemed to be a transfer of Tenant's interest under this lease for the
purposes of Section 12(a). The term "control" as used in this Section 12(e)
means the power to directly or indirectly direct or cause the direction of the
management or policies of Tenant. If Tenant is a corporation, a change or
series of changes in ownership of stock which would result in direct or
indirect change in ownership by the stockholders or an affiliated group of
stockholders of less than fifty percent (50%) of the outstanding stock as of
the date of the execution and delivery of this lease or which are effected
through a recognized stock exchange to stockholders not acting in concert to
obtain control shall not be considered a change of control.
(f) Notwithstanding the foregoing provisions of this section, Landlord
shall not withhold its consent to a sublet of the Premises (or portion
thereof) or an assignment of Tenant's interest in this lease to a "Permitted
Transferee" (hereinafter defined) provided: (A) the "use" of the Premises will
be the same as that of Tenant and in conformance with the terms and provisions
of this lease regarding the permitted use of the Premises, and in conformance
with all other terms and provisions of this lease, (B) Tenant is not in
default of any of the terms and provisions of this lease, and (C) the
assignee's or sublessee's net worth at the time of the assignment or sublet,
as applicable, is equal to or greater than the greater of: (a) the net worth
of Tenant as of the date of this lease, and (b) the net worth of Tenant as of
the date of the assignment or sublet. For purposes of this paragraph the term
Permitted Transferee shall mean: (i) a parent or wholly owned subsidiary, of
Tenant, (ii) any entity controlled by Tenant (fifty one percent (51%) of all
of the issued and outstanding voting stock of such entity shall be deemed
control for purposes of this clause (ii)), (iii) any entity resulting from a
merger or consolidation of Tenant with another corporation or other
corporations (regardless of which corporation is the surviving corporation),
and (iv) any entity to which all or substantially all of Tenant's assets or
stock are transferred. The provisions of this paragraph are further
conditioned upon at least thirty (30) days prior written notice to Landlord of
the proposed assignment of Tenant's interest in this lease or sublet of the
Premises to a Permitted Transferee. Notwithstanding the forgoing provisions to
the contrary, Landlord reserves the right, without release of Tenant, to
require any assignee of Tenant's interest in this lease and/or any sublessee
of the Premises or any portion thereof, to assume in writing delivered to
Landlord in advance of any assignment or subletting and for Landlord's
benefit, an assumption of the obligations of Tenant under this lease, or in
the case of a sublet of less than all of the Premises, such allocable portion
thereof as reasonably determined by Landlord.
(g) Any assignment, subletting, use or occupancy, or transfer shall not
operate to relieve the Tenant from any covenant or obligation hereunder,
except to the extent, if any, expressly provided for in writing by Landlord,
nor be deemed to be a consent to or relieve Tenant from obtaining Landlord's
consent to any subsequent assignment, transfer, lien, charge, subletting, use
or occupancy. Tenant shall pay all of Landlord's costs, charges and expenses,
including attorney's fees incurred in connection with any assignment or
sublease requested or made by Tenant.
13. Waiver of Certain Claims; Indemnity.
(a) To the extent not expressly prohibited by law, Landlord and Tenant
each releases and waives any and all claims for, and rights to recover,
damages against and from the other, and the other's respective agents,
partners, shareholders, officers, directors (and, in the case of claims by
Tenant, any trustee ("Trustee") holding legal title to the Real Property if
same is held in trust) and employees
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(collectively, the "Released Parties"), for loss, damage or destruction to any
of its property (including the Premises, the Building and their contents), the
elements of which are insured against or which would have been insured against
had such party suffering such loss, damage or destruction maintained the
property or physical damage insurance policies required under Section 20
hereof. In no event shall this clause be deemed, construed or asserted (i) to
affect or limit any clalms or rights against any Released Parties other than
the right to recover damages for loss, damage or destruction to property, or
(ii) to benefit any third party other than the Released Parties.
(b) To the extent not expressly prohibited by law, Tenant and Landlord
(each as to the other the "Indemnitor") agrees to hold harmless and indemnify
the other and the other's agents, partners, shareholders, officers, directors,
Trustee, and employees (collectively, the "Indemnitees") from any losses,
damages, judgments, claims, expenses, costs and liabilities imposed upon or
incurred by or asserted against the Indemnitees, including reasonable
attorney's fees and expenses, for death or injury that may arise from or be
caused directly or indirectly by any negligent act of omission or commission
of any willful misconduct of the Indemnitor or any of the Indemnitor's
respective agents, partners, or employees. Such third parties shall not be
deemed third party beneficiaries of this agreement. In case any action, suit
or proceeding is brought against any of the Indemnitees by reason of any such
act of the Indemnitor or any of the Indemnitor's respective agents, partners
or employees, then the Indemnitor will, at the Indemnitor's expense and at the
option of said Indemnitees, by counsel approved by said Indemnitees, resist
and defend such action, suit or proceeding.
14. Damage or Destruction by Casualty. If the Premises or any part of
the Building shall be damaged by fire or other casualty and if such damage
does not render all or a "substantial portion" (as determined by Landlord) of
the Premises or the Building untenantable, then Landlord shall proceed to
repair and restore the Premises with reasonable promptness, subject to
reasonable delays for insurance adjustments and delays caused by matters
beyond Landlord's control. If any such damage renders all or a substantial
portion of the Premises or the Building untenantable, Landlord shall, with
reasonable promptness after the occurrence of such damage, estimate the length
of time that will be required to substantially complete the repair and
restoration of such damage and shall by notice advise Tenant of such estimate.
If it is so estimated that the amount of time required to substantially
complete such repair and restoration will exceed one hundred eighty (180) days
from the date such damage occurred, then either Landlord or Tenant (but as to
Tenant, only if all or a substantial portion of the Premises are rendered
untenantable) shall have the right to terminate this lease as of the date of
such damage upon giving notice to the other at any time within twenty (20)
days after Landlord gives Tenant the notice containing said estimate (it being
understood that Landlord may, if it elects to do so, also give such notice of
termination together with the notice containing said estimate). Unless this
lease is terminated as provided in the preceding sentence, Landlord shall
proceed with reasonable promptness to repair and restore the Premises, subject
to reasonable delays for insurance adjustments and delays caused by matters
beyond Landlord's control, and also subject to zoning laws and building codes
then in effect. Landlord shall have no liability to Tenant, and Tenant shall
not be entitled to terminate this lease if such repairs and restoration are
not in fact completed within the time period estimated by Landlord, as
aforesaid, or within said one hundred eighty (180) days, so long as Landlord
shall proceed with reasonable diligence to complete such repairs and
restoration. Notwithstanding anything to the contrary herein set forth, (a)
Landlord shall have no duty pursuant to this Section 14 to repair or restore
any portion of the alterations, additions or improvements made by Tenant in
the Premises or to expend for any repair or restoration amounts in excess of
insurance proceeds paid to Landlord and available for repair or restoration,
and (b) Tenant shall not have the right to terminate this lease pursuant to
this Section 14 if the damage or destruction was
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caused by the act or neglect of Tenant, its agents, partners or employees.
In the event any such fire or casualty damage not caused by the act or
neglect of Tenant, its agents, partners or employees, renders the Premises
untenantable and Tenant is not occupying the Premises, and if this lease shall
not be terminated pursuant to the foregoing provisions of this Section 14 by
reason of such damage, then Rent shall abate during the period beginning with
the date of such damage and ending with the date when Landlord completes its
repair and restoration. Such abatement shall be in an amount bearing the same
ratio to the total amount of Rent for such period as the portion of the
Premises not ready for occupancy from time to time bears to the entire
Premises. In the event of termination of this lease pursuant to this Section
14, Rent shall be apportioned on a per diem basis and be paid to the date of
the fire or casualty.
15. Eminent Domain. If all or a substantial portion of the Building, or
any part thereof which includes all or a substantial portion of the Premises,
shall be taken or condemned by any competent authority for any public or
quasi-public use or purpose, the Term of this lease shall end upon and not
before the date when the possession of the part so taken shall be required for
such use or purpose, and without apportionment of the award to or for the
benefit of Tenant. If any condemnation proceeding shall be instituted in which
it is sought to take or damage any part of the Building, the taking of which
would, in Landlord's opinion, prevent the economical operation of the
Building, or if the grade of any street or alley adjacent to the Building is
changed by any competent authority, and such taking, damage or change of grade
makes it necessary or desirable to remodel the Building to conform to the
taking, damage or changed grade, Landlord shall have the right to terminate
this lease upon not less than ninety (90) days' notice prior to the date of
termination designated in the notice. In either of the events above referred
to, Rent at the then current rate shall be apportioned as of the date of the
termination. No money or other consideration shall be payable by the Landlord
to the Tenant for the right of termination, and the Tenant shall have no right
to share in the condemnation award, whether for a partial or total taking, for
loss of Tenant's leasehold or improvements, or in any judgment for damages
caused by the change of grade.
16. Default: Landlord's Rights and Remedies.
(a) If default shall be made in the payment of the Rent or any
installment thereof or any other sum required to be paid by Tenant under the
terms of any other agreement between Landlord and Tenant, or if a default
involves a hazardous condition and is not cured by Tenant immediately upon
written notice to Tenant, or if the interest of Tenant in this lease shall be
levied or under execution or other legal process, or if any voluntary petition
in bankruptcy or for corporate reorganization or any similar relief shall be
filed by Tenant, or if any involuntary petition in bankruptcy shall be filed
against Tenant under any federal or state bankruptcy or insolvency act and
shall not have been dismissed within thirty (30) days from the filing thereof,
or if a receiver shall be appointed for Tenant or any of the property of
Tenant by any court and such receiver shall not have been dismissed within
thirty (30) days from the date of his appointment, or if Tenant shall make an
assignment for the benefit of creditors, or if Tenant shall admit in writing
Tenant's inability to meet Tenant's debts as they mature, or if Tenant shall
abandon or vacate the Premises during the Term, or if default shall be made in
the observance or performance of any of the other covenants or conditions in
this lease which Tenant is required to observe and perform and such
non-monetary default shall continue for ten (10) days after written notice to
Tenant, then Landlord may treat the occurrence of any one or more of the
foregoing events as a breach of this lease, and thereupon at its option may,
with or without notice or demand of any kind to Tenant or any other person,
have any one or more of the following described remedies (any of which may be
pursued by Landlord in its own name
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or by and in the name of the beneficiaries of Landlord or the agent of such
beneficiaries) in addition to all other rights and remedies provided at law or
in equity or elsewhere herein:
(i) Landlord may terminate this lease and the Term created
hereby, in which event Landlord may forthwith repossess the Premises
and be entitled to recover forthwith as damages a sum of money equal
to the value of the Rent provided to be paid by Tenant for the balance
of the original Term, less the rental value of the Premises for said
period ("Rental Value"), and plus any other sum of money and damages
owed by Tenant to Landlord. Should the Rental Value exceed the value
of the Rent provided to be paid by Tenant for the balance of the
original Term of the Lease, Landlord shall have no obligation to pay
to Tenant the excess or any part thereof.
(ii) Landlord may terminate Tenant's right of possession and may
repossess the Premises by forcible entry and detainer suit, by taking
peaceful possession or otherwise, without terminating this lease, in
which event Landlord may, but shall be under no obligation to, relet
the same for the account of Tenant, for such rent and upon such terms
as shall be satisfactory to Landlord. For the purpose of such reletting,
Landlord is authorized to decorate or to make any repairs. If Landlord
shall fail to relet the Premises, Tenant shall pay to Landlord as
damages a sum equal to the amount of the Rent reserved in this lease for
the balance of its original Term. If the Premises are relet and a
sufficient sum shall not be realized from such reletting after paying
all of the costs and expenses of such decorations, repairs, changes,
alterations and additions and the other expenses of such reletting and
of the collection of the rent accruing therefrom to equal or exceed the
Rent provided for in this lease for the balance of its original Term,
Tenant shall satisfy and pay such deficiency upon demand therefor from
time to time. Tenant agrees that Landlord may file suit to recover any
sums falling due under the terms of this Section 16 from time to time
and that no suit or recovery of any portion due Landlord hereunder shall
be any defense to any subsequent action brought for any amount
theretofore reduced to judgment in favor of Landlord.
(b) If Landlord exercises either of the remedies provided for in
subparagraphs (i) and (ii) of the foregoing Section 16(a), Tenant shall
surrender possession and vacate the Premises immediately and deliver
possession thereof to the Landlord, and Landlord may then or at any time
thereafter re-enter and take complete and peaceful possession of the Premises,
with or without process of law, full and complete license so to do being
hereby granted to the Landlord, and Landlord may remove all occupants and
property therefrom, without being deemed in any manner guilty of trespass,
eviction or forcible entry and detainer and without relinquishing Landlord's
right to Rent or any other right given to Landlord hereunder or by operation
of law.
(c) All property removed from the Premises by Landlord pursuant to any
provisions of this lease or of law may be handled, removed or stored by the
Landlord at the cost and expense of the Tenant, and the Landlord shall in no
event be responsible for the value, preservation or safekeeping thereof.
Tenant shall pay Landlord for all expenses incurred by Landlord in such
removal and storage charges against such property so long as the same shall be
in Landlord's possession or under Landlord's control.
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All property not removed from the Premises or retaken from storage by Tenant
within thirty (30) days after the end of the Term, however terminated, shall,
at Landlord's election, be conclusively deemed to have been conveyed by Tenant
to Landlord as by bill of sale without further payment or credit by Landlord
to Tenant.
(d) Tenant shall pay all of Landlord's costs, charges and expenses,
including court costs and attorneys' fees, incurred in enforcing Tenant's
obligations under this lease or incurred by Landlord in any litigation,
negotiation or transactions in which Tenant causes the Landlord, without
Landlord's fault, to become involved or concerned.
(e) In the event that Tenant shall file for protection under any chapter
of the Bankruptcy Code now or hereafter in effect, or a trustee-in-bankruptcy
shall be appointed for Tenant, Landlord and Tenant agree, to the extent
permitted by law, to request that the debtor-in-possession or
trustee-in-bankruptcy, if one is appointed, shall assume or reject this lease
within sixty (60) days thereafter.
17. Subordination.
(a) Landlord may have heretofore or may hereafter encumber with a
mortgage or trust deed the Real Property or any interest therein, and may have
heretofore and may hereafter sell and lease back the Land, or any part of the
Real Property, and may have heretofore or may hereafter encumber the leasehold
estate under such lease with a mortgage or trust deed. (Any such mortgage or
trust deed is herein called a "Mortgage" and the holder of any such mortgage
or the beneficiary under any such trust deed is herein called a "Mortgagee".
Any such lease of the underlying land is herein called a "Ground Lease", and
the lessor under any such lease is herein called a "Ground Lessor". Any
Mortgage which is a first lien against the Building, the Land, the Real
Property, the leasehold estate under a Ground Lease or any interest therein is
herein called a "First Mortgage" and the holder or beneficiary of any First
Mortgage is herein called a "First Mortgagee".)
(b) If requested by a Mortgagee or Ground Lessor, Tenant will either (i)
subordinate its interest in this lease to said Mortgage or Ground Lease, and
to any and all advances made thereunder and to the interest thereon, and to
all renewals, replacements, supplements, amendments, modifications and
extensions thereof, or (ii) make certain of Tenant's rights and interest in
this lease superior thereto; and Tenant will promptly execute and deliver such
agreement or agreements as may be reasonably required by such Mortgagee or
Ground Lessor; provided however, Tenant covenants it will not subordinate this
lease to any Mortgage other than a First Mortgage without the prior written
consent of the First Mortgagee.
(c) It is further agreed that (i) if any Mortgage shall be foreclosed,
or if any Ground Lease be terminated, (A) the liability of the Mortgagee or
purchaser at such foreclosure sale or the liability of a subsequent owner
designated as Landlord under this lease shall exist oniy so long as such
Mortgagee, purchaser or owner is the owner of the Building, Land or Real
Property, and such liability shall not continue or survive after further
transfer of ownership; (B) the Mortgagee or Ground Lessor or their successors
or assigns that succeeds to the interest of the Landlord in the Building or
the Land, or acquires the right to possession of the Building or the Land,
shall not be (1) liable for any act or omission of the party named above (or
any successor in title thereto) as the Landlord, under this lease; (2) liable
for the performance of Landlord's covenants pursuant to the provisions of this
lease which arise and accrue prior to such entity succeeding to the interest
of Landlord (or any successor in title thereto) under this lease
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or acquiring such right to possession; (3) subject to any offsets or defenses
which Tenant may have at any time against Landlord (or any successor in title
thereto); (4) bound by any Rent which the Tenant may have paid previously for
more than one (1) month; (5) liable for the performance of any covenant of
Landlord under this lease which is capable of performance only by the original
Landlord (or any successor in title thereto); and (C) upon request of the
Mortgagee, if the Mortgage shall be foreclosed, Tenant will attorn, as Tenant
under this lease, to the purchaser at any foreclosure sale under any Mortgage
or upon request of the Ground Lessor, if any Ground Lease shall be terminated,
Tenant will attorn as Tenant under this lease to the Ground Lessor, and Tenant
will execute such instruments as may be necessary or appropriate to evidence
such attornment; and (ii) this lease may not be modified or amended so as to
reduce the Rent or shorten the Term, or so as to adversely affect in any other
respect to any material extent the rights of the Landlord, nor shall this
lease be cancelled or surrendered, without the prior written consent, in each
instance, of the First Mortgagee or any Ground Lessor.
(d) Should any prospective First Mortgagee or Ground Lessor require a
modification or modifications of this lease, which modification or
modifications will not cause an increased cost or expense to Tenant or in any
other way materially and adversely change the rights and obligations of Tenant
hereunder, in the reasonable judgment of Tenant, then and in such event,
Tenant agrees that this lease may be so modified and agrees to execute
whatever documents are required therefor and deliver the same to Landlord
within ten (10) days following the request therefor. Should any prospective
Mortgagee or Ground Lessor require execution of a short form of lease for
recording (containing, among other customary provisions, the names of the
parties, a description of the Premises and the Term of this lease), Tenant
agrees to execute such short form of lease and deliver the same to Landlord
within ten (10) days following the request therefor.
18. Mortgagee and Ground Lessor Protection. Tenant agrees to give any
First Mortgagee and any Ground Lessor, by registered or certified mail, a copy
of any notice or claim of default served upon the Landlord by Tenant, provided
that prior to such notice Tenant has been notified in writing (by way of
service on Tenant of a copy of an assignment of Landlord's interests in
leases, or otherwise) of the address of such First Mortgagee or Ground Lessor
(hereinafter the "Notified Party"). Tenant further agrees that if Landlord
shall have failed to cure such default within twenty (20) days after such
notice to Landlord (or if such default cannot be cured or corrected within
that time, then such additional time as may be necessary if Landlord has
commenced within such twenty (20) days and is diligently pursuing the remedies
or steps necessary to cure or correct such default), then the Notified Party
shall have an additional thirty (30) days within which to cure or correct such
default (or if such default cannot be cured or corrected within that time,
then such additional time as may be necessary if such Notified Party has
commenced within such thirty (30) days and is diligently pursuing the remedies
or steps necessary to cure or correct such default, including the time
necessary to obtain possession if possession is necessary to cure or correct
such default) before Tenant may exercise any right or remedy which it may have
on account of any such default of Landlord.
19. Default Under Other Leases. If the term of any lease, other than
this lease, heretofore or hereafter made by Tenant for any space in the
Building shall be terminated or terminable after the making of this lease
because of any default by Tenant under such other lease, such fact shall
empower Landlord, at Landlord's sole option, to terminate this lease by notice
to Tenant or to exercise any of the rights or remedies set forth in Section
16.
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20. Insurance.
(a) At all times during the Term of this lease, Tenant shall at its sole
cost and expense maintain in full force and effect insurance protecting Tenant
and Landlord (and Landlord's beneficiaries, if Landlord is ever a land trust),
and their respective agents, and any other parties designated by Landlord from
time to time, with terms, coverages and in companies at all times satisfactory
to Landlord as follows:
(i) Commercial General Liability Insurance against claims for
personal injury, death or property damage occurring in connection with the use
and occupancy of the Premises, including contractual liability insuring the
indemnification provisions contained in this lease, naming Landlord, and
Landlord's mortgagee, principals and principals' beneficiaries, and the
management of the Building, as additional insureds, such insurance to afford
protection to the limit of not less than Three Million Dollars ($3,000,000.00)
for each occurrence and annual aggregate.
(ii) Workers Compensation Insurance, as required to meet the
applicable laws of the state in which the Building is located, and Employers
Liability Insurance.
(iii) At all times when any work is in process in connection with
any change or alteration being made by Tenant, Tenant shall require all
contractors and subcontractors to maintain the insurance described in (i) and
(ii). Landlord and Landlord's mortgagee, principals and principals'
beneficiaries and the management of the Building will be added as additional
insureds to such policies, and evidence of same shall be delivered to
Landlord.
(iv) Property insurance on an "all risk" basis (including
sprinkler leakage, if applicable) for the full replacement cost of all
additions, improvements and alterations to the Premises and of all office
equipment, furniture, trade fixtures, merchandise and all other items of
Tenant's property on the Premises. Tenant agrees to have such insurance
policies endorsed to provide for a waiver of subrogation against Landlord by
the insurance carrier.
Tenant shall, prior to the commencement of the Term hereof and prior to
the expiration of any policy, furnish Landlord certificates evidencing that
all required insurance is in force and providing that such insurance may not
be cancelled or changed without at least thirty (30) days' prior written
notice to Landlord and Tenant (unless such cancellation is due to nonpayment
of premiums, in which event ten (10) days' prior notice shall be provided).
(b) Tenant shall comply with all applicable laws and ordinances, all
orders and decrees of court and all requirements of other governmental
authority and shall not directly or indirectly make any use of the Premises
which may thereby be prohibited or be dangerous to person or property or which
may jeopardize any insurance coverage, or may increase the cost of insurance
or require additional insurance coverage.
(c) Landlord and Tenant hereby waive all claims of recovery from the
other party for loss or damage to any of its property.
21. Nonwaiver. No waiver of any condition expressed in this lease shall
be implied by any neglect of Landlord to enforce any remedy on account of the
violation of such condition whether or not
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such violation be continued or repeated subsequently, and no express waiver
shall affect any condition other than the one specified in such waiver and
that one only for the time and in the manner specifically stated. Without
limiting the provisions of Section 8, it is agreed that no receipt of moneys
by Landlord from Tenant after the termination in any way of the Term or of
Tenant's right of possession hereunder or after the giving of any notice shall
reinstate, continue or extend the Term or affect any notice given to Tenant
prior to the receipt of such moneys. It is also agreed that after the service
of notice or the commencement of a suit or after final judgment for possession
of the Premises, Landlord may receive and collect any moneys due, and the
payment of said moneys shall not waive or affect said notice, suit or
judgment.
22. Estoppel Certificate. Tenant agrees that from time to time upon
written request by Landlord, or the holder of any Mortgage or any ground
lessor, Tenant (or any permitted assignee, subtenant or other occupant of the
Premises claiming by, through or under Tenant) will deliver to Landlord or to
the holder of any Mortgage or ground lessor or contract purchaser of an
interest in Landlord or in the Building, within ten (10) days after such
written request shall have been served upon Tenant, a statement in writing
signed by Tenant, addressed to such person or persons as Landlord shall
request, certifing (a) that this lease is unmodified and in full force and
effect (or if there have been modifications, that the lease as modified is in
full force and effect and identifying the modifications); (b)the date upon
which Tenant began paying Rent and the dates to which the Rent and other
charges have been paid, (c) the date upon which the Term shall end, (d) that
the Landlord is not in default under any provision of this lease, or, if in
default, the nature thereof in detail; (e) that the Premises have been
completed in accordance with the terms hereof and Tenant is in occupancy and
paying Rent on a current basis with no rental offsets or claims; (f) that
there has been no prepayment of Rent other than that provided for in the
lease; (g)the amount of any security deposit made by Tenant or
Tenant-successor, (h)that there are no actions, whether voluntary or
otherwise, pending against Tenant under the bankruptcy laws of the United
States or any State thereof, and (i) such other matters as may be required by
the Landlord, holder of a Mortgage, ground lessor or contract purchaser.
23. Tenant-Corporation or Partnership. In case Tenant is a corporation,
Tenant (a) represents and warrants that this lease has been duly authorized,
executed and delivered by and on behalf of the Tenant and constitutes the
valid and binding agreement of the Tenant in accordance with the terms hereof
and (b) if Landlord so requests, it shall deliver to Landlord or its agent,
concurrently with the delivery of this lease executed by Tenant, certified
resolutions of the board of directors (and shareholders, if required)
authorizing Tenant's execution and delivery of this lease and the performance
of Tenant's obligations hereunder. In case Tenant is a partnership, Tenant
represents and warrants that all of the persons who are general or managing
partners in said partnership have executed this lease on behalf of Tenant, or
that this lease has been executed and delivered pursuant to and in conformity
with a valid and effective authorization therefor by all of the general or
managing partners of such partnership, and is and constitutes the valid and
binding agreement of the partnership and each and every partner therein in
accordance with its terms. Also, it is agreed that each and every present and
future general partner in Tenant shall be and remain at all times jointly and
severally liable hereunder and that the death, resignation or withdrawal of
any partner shall not release the liability of such partner under the terms of
this lease unless and until the Landlord shall have consented in writing to
such release, Landlord being under no obligation to so consent.
24. Real Estate Brokers. Tenant represents that Tenant has directly
dealt with and only with CB Commercial Real Estate Group, Inc. (whose
commission, if any, shall be paid by Landlord pursuant
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to separate agreement) as broker in connection with this lease and agrees to
indemnify and hold Landlord harmless from all damages, liability and expense
(including reasonable attorneys' fees) arising from any claims or demands of
any other broker or brokers or finders for any commission alleged to be due
such broker or brokers or finders in connection with its participating in the
negotiation with Tenant of this lease.
25. Notices. All notices to or demands upon Landlord or Tenant desired
or required to be given under any of the provisions hereof shall be in
writing. Any notices or demands from Landlord to Tenant shall be deemed to
have been given if a copy thereof has been personally delivered to Tenant or
Tenant's agent (including without limitation delivery by messenger or courier,
with evidence of receipt) or mailed by United States registered or certified
mail, return receipt requested, addressed to Tenant at the address of the
Premises after Tenant's occupancy of the Premises. If Tenant is a corporation,
any notices or demands from Landlord to Tenant also shall be deemed to have
been given if a copy thereof is mailed by United States registered or
certified mail, return receipt requested, to Tenant's registered agent in
Illinois. Any notices or demands from Landlord to Tenant may be signed by
Landlord, its beneficiaries, the managing agent for the Building or any agent
of any of them. Any notices or demands from Tenant to Landlord shall be deemed
to have been given if a copy thereof has been personally delivered to Landlord
or the managing agent of the Building (including without limitation delivery
by messenger or courier, with evidence of receipt) or mailed by United States
registered or certified mail, return receipt requested, to Landlord in care of
ARES, Inc. Oak Brook Business Center, 2000 York Road, Suite 106 Oak Brook,
Illinois 60521, with a copy to MONY Real Estate Investment Management, 1333
Butterfield Road, Suite 400, Downers Grove, Illinois 60515. Landlord, its
beneficiaries, or the managing agent of the Building may, upon notice to
Tenant, change either the address for, or the party who shall receive, notices
or demands from Tenant to Landlord on Landlord's behalf. All notices to or
demands upon Landlord or Tenant mailed by registered or certified mail, return
receipt requested, shall be deemed served at the time the same were posted.
26. Miscellaneous.
(a) Each provision of this lease shall extend to and shall bind and
inure to the benefit not only of Landlord and Tenant, but also their
respective heirs, legal representatives, successors and assigns, but this
provision shall not operate to permit any transfer, assignment, mortgage,
encumbrance, lien, charge, or subletting contrary to the provisions of Section
12.
(b) All of the agreements of Landlord and Tenant with respect to the
Premises are contained in this lease; and no modification, waiver or amendment
of this lease or of any of its conditions or provisions shall be binding upon
Landlord unless in writing signed by Landlord.
(c) Submission of this instrument for examination shall not constitute a
reservation of or option for the Premises or in any manner bind Landlord and
no lease or obligation on Landlord shall arise until this instrument is signed
and delivered by Landlord and Tenant; provided, however, the execution and
delivery by Tenant of this lease to Landlord or the agent of Landlord's
beneficiary shall constitute an irrevocable offer by Tenant to lease the
Premises on the terms and conditions herein contained, which offer may not be
revoked for thirty (30) days after such delivery.
(d) The word "Tenant" whenever used herein shall be construed to mean
Tenants or any one or more of them in all cases where there is more than one
Tenant; and the necessary grammatical changes
23
<PAGE>
required to make the provisions hereof apply either to corporations or other
organizations, partnerships or other entities, or individuals, shall in all
cases be assumed as though in each case fully expressed. In all cases where
there is more than one Tenant, the liability of each shall be joint and
several.
(e) Clauses, plats, and riders, if any, signed by Landlord and Tenant
and endorsed on or affixed to this lease are part hereof and in the event of
variation or discrepancy the duplicate original hereof, including such
clauses, plats and riders, if any, held by Landlord shall control.
(f) The headings of Sections are for convenience only and do not limit,
expand or construe the contents of the Sections.
(g) The Landlord's title is and always shall be paramount to the title of
Tenant, and nothing in this lease contained shall empower Tenant to do any act
which can, shall or may encumber the title of Landlord.
(h) Time is of the essence of this lease and of each and all provisions
thereof.
(i) All amounts (including, without limitation, Base Rent and Additional
Rent) owed by Tenant to Landlord pursuant to any provision of this lease shall
not be deemed a loan but shall bear interest from the date due until paid at
the annual rate equal to three percentage points in excess of the rate of
interest announced from time to time by The First National Bank of Chicago at
Chicago, Illinois, or any successor thereto, as its corporate base rate,
changing as and when said corporate base rate changes, unless a lesser rate
shall then be the maximum rate permissible by law with respect thereto, in
which event said lesser rate shall be charged.
(j) The invalidity of any provision of this lease shall not impair or
affect in any manner the validity, enforceability or effect of the rest of
this lease
(k) All understandings and agreements, oral or written, heretofore made
between the parties hereto are merged in this lease, which alone fully and
completely expresses the agreement between Landlord (and its beneficiary and
their agents) and Tenant.
(l) It is acknowledged and agreed by each of the parties hereto, that
each has an obligation to the other to mitigate damages, which, it is
acknowledged by Landlord, would include Landlord's obligation to mitigate
damages in the event of a default by Tenant under the terms and provisions of
this lease.
(m) Tenant, on paying the rent and performing the covenants this lease
requires it to perform, may peaceably and quietly have, hold and enjoy the
Premises for the Term and any extension or renewal of the Term.
(n) In the event that a party hereto sues to enforce the provisions this
lease as against the other, the prevailing party in such suit shall be
entitled to an award for the costs incurred in bringing or defending same, as
applicable, including without limitation, reasonable attorney fees.
27. Delivery of Possession. If the Landlord shall be unable to give
possession of the Premises on the date of the commencement of the Term for any
reason, Landlord shall not be subject to
24
<PAGE>
any liability for failure to give possession. Under such circumstances the
Rent reserved and covenanted to be paid herein shall not commence until the
Premises are available for occupancy, and no such failure to give possession
on the date of commencement of the Term shall affect the validity of this
lease or the obligations of the Tenant hereunder, nor shall the same be
construed to extend the Term.
28. Substitution of Premises. At any time hereafter, Landlord may
substitute for the Premises other premises (herein called "The New Premises")
provided that the New Premises shall be similar to the Premises in area and
use for Tenant's purposes and shall be located in the Building. If Tenant is
already in occupancy of the Premises, then in addition, Landlord shall pay the
expense of Tenant for moving from the Premises to the New Premises and for
improving the New Premises so that they are substantially similar to the
Premises; such move shall be made during evenings, weekends, or otherwise so
as to incur the least inconvenience to Tenant; and Landlord shall first give
Tenant at least thirty (30) days notice before making such change. If Landlord
shall exercise its right hereunder, the New Premises shall thereafter be
deemed for the purposes of this lease as the Premises.
29. Signs. No signs shall be installed on the exterior of, or adjacent
to, the Premises or the Building. All signs which are erected in or on the
interior of the Premises shall be in accordance with the building standard
designated by Landlord and subject to Landlord's prior written approval. The
installation and maintenance of any and all signs by or on behalf of Tenant
shall be in full compliance with all applicable laws, ordinances, regulations,
rules and orders of any governmental authority having jurisdiction, and Tenant
shall obtain all necessary licenses and permits in connection therewith.
Tenant shall install and promptly repair, maintain and service all such signs
in accordance with proper techniques and procedures, and shall indemnify, hold
harmless and defend Landlord from all loss, cost, damage or expense, including
attorney's fees, arising out of any claim relating to the installation,
existence, operation, maintenance, repair, removal or condition of any such
sign. On or before the termination of this lease, Tenant shall, at its sole
expense, remove all such signs in a manner satisfactory to Landlord and shall
immediately repair, at Tenant's sole expense, any injury or damage caused by
removal. All costs and expenses relating to all such signs shall be borne
solely by Tenant.
30. Landlord. The term "Landlord" as used in this lease means only the
owner or owners at the time being of Landlord's interest in the Building and
the Land so that in the event of any assignment, conveyance or sale, once or
successively, of Landlord's interest in the Land and Building, or any
assignment of this lease by Landlord, said Landlord making such sale,
conveyance or assignment shall be and hereby is entirely freed and relieved of
all covenants and obligations of Landlord hereunder accruing after such
conveyance, sale or assignment, and Tenant agrees to look solely to such
purchaser, grantee or assignee with respect thereto. This lease shall not be
affected by any such conveyance, assignment or sale, and Tenant agrees to
attorn to the purchaser, grantee or assignee.
31. Title and Covenant Against Liens. The Landlord's title is and always
shall be paramount to the title of the Tenant and nothing in this lease
contained shall empower the Tenant to do any act which can, shall or may
encumber the title of the Landlord. Tenant covenants and agrees not to suffer
or permit any lien of mechanics or materialmen to be placed upon or against
the Real Property any portion thereof including the Premises or against the
Tenant's leasehold interest in the Premises and, in case of any such lien
attaching, to immediately pay and remove same. Tenant has no authority or
power to cause or permit any lien or encumbrance of any kind whatsoever,
whether created by act of Tenant, operation of law or otherwise, to attach to
or be placed upon the Real Property, Land, Building or Premises, and any and
all liens and encumbrances created by Tenant shall attach only to Tenant's
25
<PAGE>
interest in the Premises. If any such liens created, caused or permitted by
Tenant so attach and Tenant fails to pay and remove same within ten (10) days,
Landlord, at its election, may pay and satisfy the same and in such event the
sums so paid by Landlord, with interest from the date of payment at the rate
set forth in Section 26(i) hereof for amounts owed Landlord by Tenant. Such
sums shall be deemed to be additional rent due and payable by Tenant at once
without notice or demand.
32. Exculpatory Provisions. The liability of any Landlord under this
lease or any amendment to this lease, or any instrument or document executed
in connection with this lease, shall be limited to and enforceable solely
against the assets of such Landlord constituting an interest in the Land
or Building (including, where the Landlord is a trustee of a land trust, the
subject matter of the trust) and not other assets of such Landlord. Assets of
a Landlord which is a partnership do not include the assets of the partners of
such Landlord, and negative capital account of a partner in a partnership
which is a Landlord and an obligation of a partner to contribute capital to
the partnership which is Landlord shall not be deemed to be assets of the
partnership which is Landlord. No directors, officers, employees or
shareholders of any corporation which is Landlord shall have any personal
liability arising from or in connection with this lease. At any time during
which Landlord is trustee of a land trust, all of the representations,
warranties, covenants and conditions to be performed by it under this lease or
any documents or instruments executed in connection with this lease are
undertaken solely as trustee, as aforesaid, and not individually, and no
personal liability shall be asserted or be enforceable against it or any of
the beneficiaries under said trust agreement by reason of any of the
representations, warranties, covenants or conditions contained in this lease
or any documents or instruments executed in connection with this lease.
33. Acceleration of Commencement Date. It is acknowledged and agreed
that Tenant will be subleasing the Premises from Sears Mortgage Corporation
("Sears") for a term commencing on or about October 15, 1994 and continuing
through and including March 31, 1996 (the "Sublease Possession Period"). In the
event that Landlord should terminate Sears lease to the Premises or Sears
right to possession of the Premises during the Sublease Possession Period, and
should thereafter obtain lawful possession of same during the Sublease
Possession Period, Landlord shall lease the Premises to Tenant during such
remaining portion of the Sublease Possession Period pursuant to the terms and
provisions of this lease, except that Base Rent under this lease for the
remaining Sublease Possession Period shall be at the per square foot rate of
Seven and 15/100th Dollars ($7.15). In the event Landlord shall lease the
Premises to Tenant during the remaining portion of the Sublease Possession
Period in accordance with the foregoing, the parties hereto shall execute and
deliver an amendment to this lease reflecting the new Commencement Date.
***
(SIGNATURE PAGE FOLLOWS IMMEDIATELY)
***
26
<PAGE>
IN WITNESS WHEREOF, the parties have caused this lease to be executed on
the date first above written.
LANDLORD:
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
BY:
ITS:
NAME: DATED:
TENANT:
NATIONAL RESTAURANT ENTERPRISES, INC.
BY:
ITS:
NAME: DATED:
27
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
A1
<PAGE>
EXHIBIT B
BASE RENT
<TABLE>
<CAPTION>
Lease Year Square Footage Base Rent per. Annual Base Monthly Base
sq. ft. Rent/Partial Rent
Year
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
April 1, 1996- 7,737 $7.15 $55,320 $4,610
March 31, 1997
April 1, 1997- 7,737 $7.30 $56,480/$42,363 $4,707
December 31,1997
</TABLE>
B1
<PAGE>
EXHIBIT C
RULES AND REGULAONS
ATTACHED TO AND MADE A PART OF THE LEASE
The following Rules and Regulations shall be in effect at the Building.
Landlord reserves the right to adopt reasonable modifications and additions
hereto. In the case of any conflict between these regulations and the Lease,
the Lease shall be controlling.
1. Except with the prior written consent of Landlord, no tenant shall
conduct any retail sales in or from the Premises, or any business other
than that specifically provided for in the Lease.
2. Landlord reserves the right to prohibit personal goods and services
vendors from access to the Building except upon such reasonable terms and
conditions, including but not limited to a provision for insurance
coverage, as are related to the safety, care and cleanliness of the
Building, the preservation of good order thereon, and the relief of any
financial or other burden on Landlord occasioned by the presence of such
vendors or the sale by them of personal goods or services to a tenant or
its employees. If reasonably necessary for the accomplishment of these
purposes, Landlord may exclude a particular vendor entirely or limit the
number of vendors who may be present at any one time in the Building. The
term "personal goods or services vendors" means persons who periodically
enter the Building of which the Premises are a part for the purpose of
selling goods or services to a tenant, other than goods or services which
are used by a tenant only for the purpose of conducting its business on
the Premises. "Personal goods or services" include, but are not limited
to, drinking water and other beverages, food, barbering services, and
shoeshining services.
3. The sidewalks, halls, passages, elevators and stairways shall not be
obstructed by any tenant or used by it for any purpose other than for
ingress to and egress from their respective Premises. The halls, passages,
entrances, elevators, stairways, balconies, janitorial closets, and roof
are not for the use of the general public, and Landlord shall in all cases
retain the right to control and prevent access thereto of all persons
whose presence in the judgment of Landlord shall be prejudicial to the
safety, character, reputation and interests of the Building and its
tenants, provided that nothing herein contained shall be construed to
prevent such access to persons with whom Tenant normally deals only for
the purpose of conducting its business on the Premises (such as clients,
customers, office suppliers and equipment vendors, and the like) unless
such persons are engaged in illegal activities. No tenant and no employees
of any tenant shall go upon the roof of the Building without the written
consent of Landlord.
4. The sashes, sash doors, windows, glass lights, and any lights or
skylights that reflect or admit light into the halls or other places of
the Building shall not be covered or obstructed. The toilet rooms, water
and wash closets and other water apparatus shall not be used for any
purpose other than that for which they were constructed, and no foreign
substance of any kind whatsoever shall be thrown therein, and the
expense of any breakage, stoppage or damage, resulting from the
violation of this rule shall be borne by the tenant who, or whose
clerks, agents, employees, or visitors, shall have caused it.
5. No sign, advertisement or notice visible from the exterior of the
Premises or Building shall be
C1
<PAGE>
inscribed, painted or affixed by Tenant on any part of the Building or
the Premises without the prior written consent of Landlord. If Landlord
shall have given such consent at any time, whether before or after the
execution of this Lease, such consent shall in no way operate as a
waiver or release of any of the provisions hereof or of this Lease, and
shall be deemed to relate only to the particular sign, advertisement or
notice so consented to by Landlord and shall not be construed as
dispensing with the necessity of obtaining the specific written consent
of Landlord with respect to each and every such sign, advertisement or
notice other than the particular sign, advertisement or notice, as the
case may be, so consented to by Landlord.
6 In order to maintain the outward professional appearance of the Building,
all window coverings to be installed at the Premises shall be subject to
Landlord's prior reasonable approval. If Landlord, by a notice in writing
to Tenant, shall object to any curtain, blind, shade or screen attached
to, or hung in, or used in connection with, any window or door of the
Premises, such use of such curtain, blind, shade or screen shall be
forthwith discontinued by Tenant. No awnings shall be permitted on any
part of the Premises.
7. Tenant shall not do or permit anything to be done in the Premises, or
bring or keep anything therein, which shall in any way increase the rate
of fire insurance on the Building, or on the property kept therein, or
obstruct or interfere with the rights of other tenants, or in any way
injure or annoy them; or conflict with the regulations of the Fire
Department or the fire laws, or with any insurance policy upon the
Building, or any part thereof, or with any rules and ordinances
established by the Board of Health or other governmental authority.
8. No safes or other objects larger or heavier than the freight elevators of
the Building are limited to carry shall be brought into or installed in
the Premises. Landlord shall have the power to prescribe the weight,
method of installation and position of such safes or other objects. The
moving of safes shall occur only between such hours as may be designated
by, and only upon previous notice to, the manager of the Building, and the
persons employed to move safes in or out of the Building must be
acceptable to Landlord. No freight, furniture or bulky matter of any
description shall be received into the Building or carried into the
elevators except during hours and in a manner approved by Landlord.
9. Landlord shall clean the Premises as provided in the Lease, and except
with the written consent of Landlord, no person or persons other than
those approved by Landlord will be permitted to enter the Building for
such purpose, but Tenant shall not cause unnecessary labor by reason of
Tenant's carelessness and indifference in the preservation of good order
and cleanliness.
10. No tenant shall sweep or throw or permit to be swept or thrown from the
Premises any dirt or other substance into any of the corridors or halls or
elevators, or out of the doors or windows or stairways of the Building,
and Tenant shall not use, keep or permit to be used or kept any foul
or noxious gas or substance in the Premises, or permit or suffer the
Premises to be occupied or used in a manner offensive or objectionable
to Landlord or other occupants of the Building by reason of noise, odors
and/or vibrations, or interfere in any way with other tenants or those
having business therein, nor shall any animals or birds be kept in or
about the Building. Smoking or carrying lighted cigars or cigarettes in
the elevators of the Building is prohibited.
11. Except for the use of microwave ovens and coffee makers for Tenant's
personal use, no cooking
C2
<PAGE>
shall be done or permitted by Tenant on the Premises, nor shall the
Building be used for lodging.
12. Tenant shall not use or keep in the Building any kerosene, gasoline, or
inflammable fluid or any other illuminating material, or use any method
of heating other than that supplied by Landlord.
13. If Tenant desires telephone or telegraph connections, Landlord will
direct electricians as to where and how the wires are to be introduced.
No boring or cutting for wires or other otherwise shall be made without
directions from Landlord.
14. Each tenant, upon the termination of its tenancy, shall deliver to
Landlord all the keys of offices, rooms and toilet rooms, and security
access card/keys which shall have been furnished such tenant or which
such tenant shall have had made, and in the event of loss of any keys so
furnished, shall pay Landlord therefor.
15. No Tenant shall lay linoleum or other similar floor covering so that the
same shall be affixed to the floor of the Premises in any manner except by
a paste, or other material which may easily be removed with water, the use
of cement or other similar adhesive materials being expressly prohibited.
The method of affixing any such linoleum or other similar floor covering
to the floor, as well as the method of affixing carpets or rugs to the
Premises shall be subject to reasonable approval by Landlord. The expense
of repairing any damage resulting from a violation of this rule shall be
borne by Tenant by whom, or by those agents, clerks, employees or
visitors, the damage shall have been caused.
16. No furniture, packages or merchandise will be received in the Building
or carried up or down in the elevators, except between such Building
hours and in such elevators as shall be designated by Landlord.
17. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 5:00p.m. and 8:00 a.m. access to the Building or to the halls,
corridors, elevators or stairways in the Building, or to the Premises may
be refused unless the person seeking access is known to the building
watchman, if any, in charge and has a pass or is properly identified.
Landlord shall in no case be liable for damages for the admission to or
exclusion from the Building of any person whom Landlord has the right to
exclude under Rule 3 above. In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right but shall
not be obligated to prevent access to the Building during the continuance
of the same by closing the doors or otherwise, for the safety of the
tenants and protection of property in the Building.
18. Tenant shall see that the windows and doors of the Premises are closed
and securely locked before leaving the Building and Tenant shall
exercise extraordinary care and caution that all water faucets or water
apparatus are entirely shut off before Tenant or Tenant's employees
leave the Building, and that all electricity, gas or air shall likewise
be carefully shut off, so as to prevent waste or damage, and for any
default or carelessness Tenant shall make good all injuries sustained by
other tenants or occupants of the Building or Landlord.
19. Tenant shall not alter any lock or install a new or additional lock or
any bolt on any door of the Premises without prior written consent of
Landlord. If Landlord shall give its consent, Tenant shall in each case
furnish Landlord with a key for any such lock.
C3
<PAGE>
20. Tenant shall not install equipment, such as but not limited to
electronic tabulating or computer equipment, requiring electrical or air
conditioning service in excess of those to be provided by Landlord under
the Lease.
21. No bicycle, or shopping cart, or other vehicle or any animal shall be
brought into the Premises or the halls, corridors, elevators or any part
of the Building by Tenant.
22. Landlord shall have the right to prohibit the use of the name of the
Building or Project or any other publicity by Tenant which in Landlord's
opinion tends to impair the reputation of the Building or Project or
their desirability for other tenants, and upon written notice from
Landlord, Tenant will refrain from or discontinue such publicity.
23. Tenant shall not erect any aerial or antenna on the roof or exterior
walls of the Premises, Building, or Project without the prior written
consent of Landlord.
C4
<PAGE>
TENANT:
NATIONAL RESTAURANT ENTERPRISES, INC. D/B/A AMERIKING
PROPERTY:
ENTERPRISE CENTRE
2215 ENTERPRISE DRIVE, UNIT 1502
WESTCHESTER, ILLINOIS 60154
HISTORY:
ORIGINAL LEASE DATED: NOVEMBER 14, 1994
THIS FIRST AMENDMENT TO LEASE DATED: APRIL 17, 1995
PREMISES RENTABLE SQUARE FOOTAGE: 7,737
TERM OF LEASE: APRIL 1, 1996 TO MAY 31, 1998 (2 YEARS AND 2 MONTHS)
FIRST AMENDMENT TO LEASE
(PERTAINING TO EXTENSION OF TERM)
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
AND
NATIONAL RESTAURANT ENTERPRISES, INC.
(D/B/A/ AMERIKING)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1.01 Incorporation ..............
1.02 Defined Terms ..............
2.01 Amendment of Lease .........
(a) Term of Lease .........
(b) Base Rent .............
3.01 Confirmation ...............
3.02 Authorization ..............
3.03 Full Force and Effect .....
3.04 Conflict ...................
3.05 Broker/Indemnification ....
</TABLE>
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is entered into as of
April 17, 1995 THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, with a mailing
address c/o MONY Real Estate Investment Management, 1333 Butterfield Road,
Suite 400, Downers Grove, Illinois (hereinafter "Landlord"), and NATIONAL
RESTAURANT ENTERPRISES, INC. D/B/A AMERIKING, (hereinafter "Tenant")
WITNESSTH:
WHEREAS, Landlord and Tenant entered into that certain lease agreement
captioned "Office Lease" (the "Lease"), pertaining to the 7,737 rentable
square foot premises (the "Premises") therein described, being located in the
building (the "building") commonly known as 2215 Enterprise Drive,
Westchester, Illinois; and
WHEREAS, Tenant desires, among other things, to extend the term of the
lease to May 31, 1998; and
WHEREAS, Landlord is willing, subject to the terms and provisions hereof
to extend the term of the Lease.
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:
ARTICLE I
INCORPORATION/DEFINED TERMS
1.01 INCORPORATION. The preambles to this Amendment are fully incorporated
herein by this reference thereto with the same force and effect as though
restated herein.
1.02 DEFINED TERMS. To the extent not otherwise defined herein to the
contrary, all capitalized terms and capitalized phrases used in this
Amendment shall have the respective meanings ascribed to them in the Lease.
ARTICLE II
AMENDMENT TO LEASE
2.01 AMENDMENT OF LEASE. The Lease is amended and modified as set forth in
this Article II effective as of the date of this Amendment, unless
specifically set forth to the contrary herein below contained.
(A) TERM OF LEASE. The Term of the Lease is amended to extend same from
its present scheduled termination date of December 31, 1997 to May 31, 1998.
(B) BASE RENT. Base Rent under the Lease for the period commencing on
April 1, 1996 through and including May 31, 1998 shall be as set forth in the
"Base Rent Table" below, and the provisions the Lease shall be read
accordingly, including without limitation, the provisions of Section 1 "Base
Rent" and "Exhibit B" to the Lease.
REVISED BASE RENT TABLE
<TABLE>
<CAPTION>
BASE RENT PER ANNUAL BASE MONTHLY
LEASE YEAR SQUARE FOOTAGE SQ. FT. RENT BASE RENT
- ------------------------------- -------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
April 1, 1996-March 31, 1997 .. 7,737 $7.15 $55,320 $4,610.00
April 1, 1997-December 31, 1997 7,737 $7.30 $56,480 $4,706.67
January 1, 1998-May 31, 1998 .. 7,737 $9.00 $69,633 $5,802.75
</TABLE>
ARTICLE IV
MISCELLANEOUS
3.01 CONFIRMATION. The terms and provisions of the Lease as modified
hereby are hereby ratified, confirmed and adopted by the parties hereto.
<PAGE>
3.02 AUTHORIZATION. The undersigned individual(s) executing this Amendment
do hereby represent and warrant to Landlord that they are each fully
empowered and authorized to execute this amendment on behalf of Tenant.
3.03 FULL FORCE AND EFFECT. Tenant does hereby represent and warrant that
the Lease as amended hereby is in full force and effect.
3.05 CONFLICT. To the extent the terms and provisions of this amendment
conflict with the terms and provisions of the Lease and/or previous
amendments thereto, the terms and provisions of this Amendment shall control.
3.05 BROKER/INDEMNIFICATION. Tenant represents that Tenant has directly
dealt with and only with CB Commercial Real Estate Group, Inc. (whose
commission, if any shall be paid by Landlord pursuant to separate agreement)
as broker in connection with this Amendment and agrees to indemnify and hold
Landlord harmless from all damages, liability and expense (including
reasonable attorneys' fees) arising from any claims or demands of any other
broker or brokers or finder for any commission alleged to be due such broker
or brokers or finders in connection with its participating in the negotiation
with Tenant of this Amendment.
* * *
[SIGNATURE PAGE FOLLOWS]
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this amendment as of
the date first above written.
LANDLORD:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
BY: /s/ JAMES I CLARK III
---------------------------
ITS: VICE PRESIDENT
--------------------------
NAME: JAMES I CLARK III DATED: 5/30/95
------------------------- --------------
TENANT:
NATIONAL RESTAURANT ENTERPRISES, INC.,
D/B/A AMERIKING
BY: /s/ WILLIAM C. OSBORN
---------------------------
ITS: PRESIDENT
--------------------------
NAME: WILLIAM C. OSBORN DATED: 4/27/95
------------------------- --------------
TENANT: NATIONAL RESTAURANT ENTERPRISES, INC. D/B/A AMERIKING
PROPERTY:
ENTERPRISE OFFICE CENTRE
2215 ENTERPRISE DRIVE
WESTCHESTER, ILLINOIS
SUITE: 1506 SUITES 1502 & 1506
PREMISES RENTABLE SQUARE FOOTAGE: 10,001
TERM OF LEASE: APRIL 1, 1996 TO JUNE 30, 1998 (2 YEARS AND 3 MONTHS)
DATE OF LEASE: NOVEMBER 14, 1994
DATE OF FIRST AMENDMENT: APRIL 17, 1995
DATE OF THIS SECOND AMENDMENT TO THE LEASE: DECEMBER 6, 1995
SECOND AMENDMENT TO LEASE
(PERTAINING TO EXPANSION AND EXTENSION OF TERM)
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
AND
NATIONAL ENTERPRISES, INC.
(D/B/A AMERKING)
TABLE OF CONTENTS
1.01 Incorporation.................................................1
1.02 Defined Terms.................................................1
2.01 Amendment of Lease............................................1
(a) Premises..................................................2
(b) Rentable Area of the Premises.............................2
(c) Tenant's Proportionate Share..............................2
(d) Expansion space Base Rent.................................2
(e) Additional Rent...........................................2
(f) Definition................................................2
(g) Extension of Term.........................................2
(h) Base Rent for Original Leased Premises....................2
3.01 Effective Date................................................3
3.02 Confirmation..................................................3
3.03 Authorization.................................................3
3.04 Limitation....................................................3
3.05 Broker........................................................3
Exhibit A - Depiction of Leased Premises (Inclusive of Original
Leased Premises and Expansion Space).
Exhibit B - Construction Work Letter.
<PAGE>
SECOND AMENDMENT TO LEASE
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
AND
NATIONAL RESTAURANT ENTERPRISES, INC.
(D/B/A AMERKING)
THIS SECOND AMENDMENT TO LEASE (this "Amendment") is entered into as of
December 6, 1995 by and between THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
(hereinafter "Landlord") and NATIONAL RESTAURANT ENTERPRISES, INC. D/B/A
AMERKING (hereinafter "Tenant)
RECITALS:
A. Landlord and Tenant entered into that certain lease agreement dated
November 14, 1994 and captioned "Office Lease" (as amended by that certain
instrument captioned First Amendment to Lease dated April 17, 1995, the "Lease")
pertaining to the premises therein described consisting of 7,737 rentable square
feet (the "Original Leased Premises").
B. Tenant wishes to: (i) expand the size of the Original Leased Premises
by an additional 2,264 rentable square feet (the "Expansion Space" which
together with the Original Leased Premises are herein after called the
"Premises), so that from and after the "Expansion Space Commencement Date"
(hereinafter defined) Tenant shall be leasing 10,001 rentable square feet of
space, and (ii) extend the term of the Lease to June 30, 1998.
C. Landlord is willing to, among other things, increase the size of the
Original Leased Premises and extend the term of the Lease, in accordance with
and subject to, the terms and provisions of this Amendment.
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:
ARTICLE I
Incorporation/Defined Terms
1.01 Incorporation. The preambles to this Amendment are fully
incorporated herein by this reference thereto with the same force and effect as
though restated herein.
1.02 Defined Terms. To the extent not otherwise defined herein to the
contrary, all capitalized terms and phrases used in this Amendment shall have
the respective meanings ascribed to them in the Lease.
ARTICLE II
Amendment of Lease
2.01 Amendment of Lease. The Lease is amended and modified as set forth
in this Article II
effective as of this Amendment, unless specifically set forth to the contrary
hereinbelow contained.
(a) Premises. From and after the "Expansion Space Commencement Date"
(hereinafter defined), the Original Leased Premises shall include the Expansion
Space, which together shall constitute the "Premises " under the Lease. From
and after the Expansion Space Commencement Date, Exhibit A to the Lease shall be
replaced with Exhibit A attached hereto which is incorporated herein by this
reference thereto.
(b) Rentable Area of the Premises. From and after the Expansion Space
Commencement Date, Section 2(a)(iv) of the Lease is amended by deleting the
reference therein contained to: "7,737 square feet", and inserting in lieu
thereof the following: "10,001 square feet".
(c) Tenant's Proportionate Share. From and after the Expansion Space
Commencement Date, Section 2(a)(v) of the Lease is amended by deleting the
reference therein contained to: "5.97%", and inserting in lieu thereof the
following: "7.72%.
(d) Expansion Space Base Rent. From and after the Expansion Space
Commencement Date, Base Rent under the Lease for the Expansion Space shall be
set forth in the following Expansion Space Base Rent Table for the periods
indicated:
EXPANSION SPACE BASE RENT TABLE
LEASE SQUARE BASE RENT PER ANNUAL MONTHLY
YEAR/PERIOD FOOTAGE SQUARE FOOT BASE RENT BASE RENT
January 1,1996 2,264 $10.50 $23,772.00 $1,981.00
to May 31, 1996
June 1, 1996 to 2,264 $10.92 $24,722.88 $2,060.24
May 31, 1997
June 1, 1997 to 2,264 $11.36 $25,719.04 $2,143.25
May 31, 1998
June 1, 1998 to 2,264 $11.36 $25,719.04 $2,143.25
June 30, 1998
(e) Additional Rent. Tenant shall continue to pay Additional Rent as
provided under the Lease as amended hereby.
(f) Definition. For purposes hereof, the Expansion Space Commencement
Date shall be January 1, 1996.
(g) Extension of Term. The term of the Lease is extended to June 30,
1998, and the Lease shall be read accordingly.
(h) Base Rent for Original Leased Premises. Base Rent under the Lease
for the Original Leased
2
Premises for that portion of the term of the Lease consisting of the one (1)
month extension of the Term to June 30, 1998 shall be as set forth in the
following Original Leased Premises Base Rent Table:
ORIGINAL LEASED PREMISES BASE RENT TABLE:
LEASE ORIGINAL LEASED BASE RENT PER ANNUALIZED MONTHLY
PERIOD PREMISES SQUARE FOOT BASE RENT BASE RENT
June 1, 1998 to 7,737 $9.00 $69,633.00 $5,802.75
June 30, 1998
ARTICLE III
Miscellaneous
3.01 Effective Date. Except as to those provisions herein specifically
stated to the contrary, if any, the terms and provisions of this Amendment are
effective as of the date of this Amendment.
3.02 Confirmation. The terms and provisions of the Lease as modified
hereby are hereby, adopted, ratified, and confirmed by the parties hereto.
3.03 Authorization. The undersigned individual executing the Amendment
does hereby represent and warrant to Landlord that he is fully empowered and
authorized to execute this Amendment on behalf of Tenant.
3.04 Limitation. The liability of Landlord under this Amendment, the
Lease or any amendment to this Lease, or any instrument or document executed in
connection with this Lease, shall be limited to and enforceable solely against
the assets of such Landlord constituting an interest in the Building (including,
where the Landlord is a trustee of a land trust, the subject matter of the
trust) and not other assets of such Landlord. Assets of a Landlord which is a
partnership do not include the assets of the partners of such Landlord, and
negative capital account of a partner in a partnership which is a Landlord and
an obligation of a partner to contribute capital to the partnership which is
Landlord shall not be deemed to be assets of the partnership which is Landlord.
No directors, officers, employees or shareholders of any corporation which is
Landlord shall have any personal liability arising from or in connection with
this Lease. At any time during which Landlord is trustee of a land trust, all
of the representations, warranties, covenants and conditions to be performed by
it under this Lease or any documents or instruments executed in connection with
this Lease are undertaken solely as trustee, as aforesaid, and not individually,
and no personal liability shall be asserted or be enforceable against it or any
of the beneficiaries under said trust agreement by reason of any of the
representations, warranties, covenants or conditions contained in this Lease or
any documents or instruments executed in connection with this Lease.
3.05 Broker. Tenant represents that Tenant has directly dealt with and
only with Advantage Real Estate Services, Inc. and CB Commercial Real Estate
Group, Inc. (whose commission, if any, shall be paid by Landlord pursuant to
separate agreement) as broker in connection with this lease and agrees to
indemnify and hold Landlord harmless from all damages, liability and expense
(including reasonable
3
attorneys' fees) arising from any claims or demands of any other broker or
brokers or finders for any commission alleged to be due such broker or brokers
or finders in connection with its participating in the negotiation with Tenant
of this lease.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
LANDLORD:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
BY:__________________________________________
ITS:_________________________________________
NAME:________________________________________ DATED: 12/18/95
TENANT:
NATIONAL RESTAURANT ENTERPRISES, INC.
D/B/A AMERIKING
BY:__________________________________________
ITS:_________________________________________
NAME:________________________________________ DATED: 12/18/95
4
[CHART]
EXHIBIT A
DEPICTION OF PREMISES
ORIGINAL LEASED PREMISES
[CHART]
EXHIBIT A
DEPICTION OF PREMISES
EXPANSION SPACE
EXHIBIT B
Construction Work Letter
1.a. Space Plans. Tenant shall cause to be prepared space plans for the
Expansion Space.
b. Working Drawings. Tenant shall cause to be prepared "Working
Drawings" based upon the approved space plans. The Working Drawings shall
include architectural, mechanical and electrical drawings.
c. Costs. Tenant shall solicit specific trade costs and provide to
Tenant an estimate of cost to complete the "Improvements" ("Cost(s)"). This
Cost shall include all items necessary to be expended to perform the
Improvements. This Cost may include (however is not limited to) general
contractor hard and soft cost, overhead and profit, general conditions, sales
tax, permit fees, electrical engineering, mechanical engineering, space
planning, architecture and construction management fees.
d. Tenant's Contractor. Tenant shall use the WELbilt Company in
connection with the construction of the improvements.
2. Allowance. Landlord shall be responsible for no more than Twenty Four
Thousand Three Hundred Thirty Eight and No/100th Dollars ($24,338.00) of the
Cost for the Expansion Space (the "Allowance"). Tenant shall be solely
responsible for all costs for the Improvements which exceed the Allowance. In
the event that the Cost are less that the Allowance, any excess of the Allowance
over the Costs shall accrue to and for the benefit of Landlord and Tenant shall
have no claim to same. Construction management fees shall not be applied
against the Allowance.
3. Representatives. Both Landlord and Tenant shall each identify to the
other in writing two individuals who have the responsibility to make changes or
decisions as it relates to all items contained in the Work Schedule including
without limitation any changes which may cause an increase in Cost of the
Improvements or a delay in occupancy.
4. Supervisory Fee. Landlord shall receive a free equal to five percent
(5%) of the Cost to compensate Landlord for its time, cost and expenses to be
incurred in inspecting the Tenant Improvement work. The aforesaid fee shall not
be payable from the Allowance, nor shall Tenant be responsible for payment of
same.
5. Procedures.
(a) Deliveries. Prior to commencing any work to the Premises for
construction of the Improvements, Tenant shall deliver or cause to be delivered
to Landlord for its review the following:
(i) copies of all contract with contractors, suppliers,
engineers or consultants for the design and/or construction of the Improvement
and the materials to be utilized in connection therewith; and
(ii) a statement certified by Tenant disclosing the various
contracts entered into, with respect to the Improvement and setting forth the
names of contractors, their address, work and material to be furnished, amount
of the contracts, amounts paid to date, amounts of current payments, balances
due and reconciliation of the cost of the various contracts entered into by
B-1
<PAGE>
the Tenant with the Improvement budget, and
(iii) a statement certified by the Tenant's general contractor
disclosing the various contracts entered into, and/or to be entered into, with
respect to the Improvements and setting forth the names of contractors, their
addresses, work and materials to be furnished, amount of the contracts, amount
paid to date, amount of current payments, balance due and reconciliation of the
cost of the various contracts entered into by the general contractor with the
Improvement budget.
(b) Disbursement Procedures. Subject to the provision hereof, Allowance
monies shall be disbursed to Tenant within fifteen (15) business days of
completion the Improvements and delivery to Landlord of final lien waivers and
paid receipts for all work performed and material installed at the Premises.
Disbursement of Allowance monies shall be subject to Landlord receiving and
approving the following: (i) copies of all licenses and permits necessary for
the lawful occupancy of the Premises as improved with the Improvements; (ii)
certification from each of the Tenant, and Tenant's architect that the
improvements have been substantially completed in accordance with the Working
Drawings; (iii) a certification from Landlord's architect, if one is retained by
Landlord, that the Improvements have been completed in accordance with the
Working Drawings, and (iv) final lien wavers. If Landlord's architect's
certification is required by Landlord, Landlord shall cause its architect to
inspect the improvements within five (5) days of notice by Tenant to Landlord of
the Improvements being substantially completed.
(c) Punchlist Procedure. At the time that Tenant seeks disbursement of
the Allowance monies, Tenant shall schedule with Landlord, Landlord's architect
if required by Landlord, and the general contractor, a walk through of the
Premises for the purpose of determining unperformed Improvements work and
improperly performed Improvement work (the "Punchlist Items"). The Tenant and
Landlord shall jointly determine and set forth in writing signed by both Tenant
and Landlord the Punchlist Items and the cost and expense of completing same.
(d) Lien Free Completion. in connection with the Improvements, Tenant
shall keep the Premises and the Building free of mechanics liens and the like.
If any such liens are created, caused or permitted by Tenant to attach and
Tenant fails to pay and remove same within ten (10) days of attachment of same,
Landlord, at its election, may pay and satisfy same and in such event the sums
so paid by Landlord, with interest from the date of payment at the rate set
forth in the Lease for amounts owed Landlord by Tenant, shall be additional rent
due and payable by Tenant at once without notice or demand. In the event that
any such liens are created, caused or permitted by Tenant to attach, Landlord
may, regardless of whether Tenant is or is not default under the Lease, withhold
from any disbursed portion of the Allowance an amount equal to on hundred
percent 150% of the amount of such lien of liens and all penalties and interest
on such lien that may accrue or be payable, or alternatively, Landlord may pay
and satisfy same out of any disbursed Allowance monies. Notwithstanding the
foregoing provision to the contrary, Tenant shall have the right to contest in
good faith and such liens with respect to which it is obligated to remove as
above set forth, provided that Tenant: (i) advise Landlord of its intent to
contest same, (ii) deposits with Landlord within the ten (10) day period
described above, monies, or money equivalents acceptable to Landlord, equal to
one hundred percent (150%) of the amount of the lien and all penalties and
interest on such lien that may accrue or be payable, and (iii) diligently and in
good faith proceeds with the prosecution of same.
B-2
<PAGE>
TENANT: NATIONAL RESTAURANT ENTERPRISES, INC. D/B/A AMERIKING
PROPERTY:
ENTERPRISE OFFICE CENTRE
SUITE: 1503
2215 ENTERPRISE DRIVE
WESTCHESTER, ILLINOIS
DATE OF LEASE: APRIL 17, 1995
TERM OF LEASE: JUNE 1, 1995 - MAY 31, 1998
RENTABLE SQUARE FOOTAGE: 4,614
OFFICE LEASE
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
AND
NATIONAL RESTAURANT ENTERPRISES, INC.
(D/B/A AMERIKING)
TENANT
<PAGE>
TABLE OF CONTENTS
Section Page
1. Base Rent 1
2. Additional Rent 1
3. Security Deposit 6
4. Use of Premises 6
5. Services 8
6. Condition and Care of Premises 9
7. Return of Premises 9
8. Holding Over 10
9. Rules and Regulations 10
10. Rights Reserved to Landlord 10
11. Alterations 12
12. Assignment and Subletting 13
13. Waiver of Certain Claims; Indemnity 15
14. Damage or Destruction by Casualty 16
15. Eminent Domain 17
16. Default: Landlord's Rights and Remedies 17
17. Subordination 19
18. Mortgagee and Ground Lessor Protection 20
19. Default Under Other Leases 20
20. Insurance 21
21. Nonwaiver 21
22. Estoppel Certificate 22
i
<PAGE>
Section page
23. Tenant-Corporation or Partnership 22
24. Real Estate Brokers 22
25. Notices 23
26. Miscellaneous 23
27. Delivery of Possession 24
28. Substitution of Premises 25
29. Signs 25
30. Landlord 25
31. Title and Covenant Against Liens 25
32. Exculpatory Provisions 26
Exhibit A Description of Premises
Exhibit B - Base Rent
Exhibit C - Rules and Regulations
Exhibit D - Construction Work Letter
ii
<PAGE>
OFFICE LEASE
THIS OFFICE LEASE, made as of April 17, 1993, WITNESSETH: -THE MUTUAL
LIFE INSURANCE COMPANY OF NEW YORK (herein called "Landlord"), hereby leases
to NATIONAL RESTAURANT ENTERPRISES, INC. d/b/a Ameriking (herein called
"Tenant"), and Tenant hereby accepts the premises as outlined on the floor
plan attached hereto as Exhibit A known as suite 1503 (herein called
"Premises") in the building located at 2213 Enterprise Drive, Westchester,
Illinois (being one of six buildings, all of which are together called the
"Building"), for a term (herein called "Term") of three (3) years commencing
(the "Commencement Date") on June 1, 1995 and ending on May 31, 1998, unless
sooner terminated as provided herein, paying as rent therefore the sums
hereinafter provided, without any setoff, abatement, counterclaim or deduction
whatsoever, except as set forth below.
IN CONSIDERATION THEREOF, THE PARTIES HERETO COVENANT AND AGREE:
1. Base Rent. Tenant shall pay an annual base rent (herein called "Base
Rent") to Landlord for the Premises which Base Rent shall be payable in equal
monthly installments (herein called "Monthly Base Rent"), in advance on the
first day of each calendar month of the Term in the amounts set forth in, and
in accordance with the provisions of, EXHIBIT B, attached hereto and
incorporated herein by this reference thereto. If the Term shall begin on any
date except the first day, or shall end on any day except the last day of a
calendar month, Base Rent shall be payable at a per diem rate based on the
then current monthly payment.
Base Rent, Additional Rent (as hereinafter defined), and all other
amounts becoming due from Tenant to Landlord hereunder (herein collectively
called the "Rent") shall be paid in lawful money of the United States to
Landlord at the office of Landlord, or as otherwise designated from time to
time by written notice from Landlord to Tenant. Concurrently with the
execution hereof and at Landlord's request, Tenant shall pay Landlord Monthly
Base Rent for the first full calendar month of the Term.
Landlord may authorize Tenant to take possession of all or any part of
the Premises prior to the beginning of the Term. If Tenant does take
possession pursuant to authority so given, all of the covenants and conditions
of this lease shall apply to and shall control such pre-Term occupancy. Rent
for such pre-Term occupancy shall be paid upon occupancy and on the first day
of each calendar month thereafter at the rate set forth in Sections 1 and 2
hereof. If the Premises are occupied for a fractional month, Rent shall be
prorated on a per diem basis for such fractional month. The payment of Rent
hereunder is independent of each and every other covenant and agreement
contained in this lease.
2. Additional Rent. In addition to Base Rent, Tenant shall also pay
Additional Rent (as hereinafter defined) in accordance with the following
provisions:
(a) Definitions. As used in this lease,
(i) "Expenses" shall mean and include all expenses, costs, fees
and disbursements paid or incurred by or on behalf of the
Landlord for owning, managing, operating, maintaining and
repairing the "Real Property" (hereinafter defined) and the
personal property used in conjunction therewith (said Real
Property and personalty being herein collectively called the
"Project"), including (without limitation): the cost of
electricity, steam, water, gas, fuel, heating, lighting, air
conditioning; window cleaning; insurance, including but
not limited to, fire, extended coverage, liability,
workmen's compensation, elevator, or any other
<PAGE>
insurance carried by the Landlord and applicable to the
Project; painting; uniforms; management fees; supplies,
sundries, sales or use taxes on supplies or services; cost
of wages and salaries of all persons engaged in the
operation, administration, maintenance and repair of the
Project; and fringe benefits, including social security
taxes, unemployment insurance taxes, cost for providing
coverage for disability benefits, cost of any pensions,
hospitalization, welfare or retirement plans, or any other
similar or like expenses incurred under the provisions of
any collective bargaining agreement, or any other cost or
expense which Landlord pays or incurs to provide benefits
for employees so engaged in the operation, administration,
maintenance and repair of the Project; the charges of any
independent contractor who, under contract with the Landlord
or its representatives, does any of the work of operating,
maintaining or repairing of the Project; legal and
accounting expenses, including, but not to be limited to,
such expenses as relate to seeking or obtaining reductions
in and refunds of real estate taxes; any costs or expenses
allocated to the Project under easement agreements, service
or operating agreements, declarations, covenants or other
instruments providing for sharing of facilities or payment
for services; or any other expense or charge, whether or not
herein before mentioned, which would be considered as an
expense of owning, managing, operating, maintaining or
repairing the Project. Expenses shall not include costs or
other items included within the meaning of the term "Taxes"
(as hereinafter defined), costs of alterations of the
premises of tenants of the Building, costs of capital
improvements to the Real Property, depreciation charges,
interest and principal payments on mortgages, ground rental
payments, and real estate brokerage and leasing commissions,
except as hereinafter otherwise provided. Notwithstanding
anything contained in this clause (i) of Section 2(a) to the
contrary,
(A) The cost of any capital improvements to the Real
Property made after the date of this lease which are
intended to reduce Expenses or enhance the safety of the
Real Property or which are required under any governmental
laws, regulations, or ordinances applicable to the Real
Property, whether or not in effect at the date this lease
was executed, amortized over such reasonable period as
Landlord shall determine, together with interest on the
unamortized cost of any such improvement (at the prevailing
loan rate available to Landlord on the date the cost of such
improvement was incurred) shall be included in Expenses.
(B) If the Building is not at least ninety-five percent
(95%) occupied by tenants during all or a portion of any
year, or if during all or a portion of any year Landlord is
not furnishing to any tenant or tenants any particular
service, the cost of which, if furnished by Landlord, would
be included in Expenses, then Landlord may elect to make an
appropriate adjustment for such year of components of
Expenses and the amounts thereof which may vary depending
upon the occupancy level of the Building or with the number
of tenants using the service, such that the amount of such
variable components of Expenses which would have been
incurred if the Building had been fully occupied during the
entire year or Landlord had furnished such service at
Landlord's expense to all
2
<PAGE>
existing Tenants for the entire year shall be deemed costs
and expenses paid or incurred by Landlord and included in
Expenses for such year.
(ii) "Taxes" shall mean real estate taxes, assessments (whether they be
general or special), sewer rents, rates and charges, transit
taxes, taxes based upon the receipt of rent, and any other
federal, state or local governmental charge, general, special,
ordinary or extraordinary (but not including income or franchise
taxes, capital stock, inheritance, estate, gift, or any other
taxes imposed upon or measured by the Landlord's income or
profits, unless the same shall be imposed in lieu of real estate
taxes or other ad valorem taxes), which may now or hereafter be
levied, assessed or imposed against the Building or the land on
which the Building is located (the "Land"), or both. The Building
and the Land are herein collectively called the "Real Property."
Notwithstanding anything contained in this clause (ii) of Section
2(a) to the contrary,
(A) If at any time during the Term of this lease the method
of taxation then prevailing shall be altered so that any new tax,
assessment, levy, imposition or charge or any part thereof shall
be imposed upon Landlord in place or partly in place of any such
Taxes, or contemplated increase therein, and shall be measured by
or be based in whole or in part upon the Real Property or the
rents or other income therefrom, then all such new taxes,
assessments, levies, impositions or charges or part thereof, to
the extent that they are so measured or based, shall be included
in Taxes levied, assessed or imposed against the Real Property to
the extent that such items would be payable if the Real Property
were the only property of Landlord subject thereto and the income
received by Landlord from the Real Property were the only income
of Landlord.
(B) Notwithstanding the year with respect to which any such
taxes or assessments are levied, (i) in the case of special taxes
or assessments which may be payable in installments, the amount of
each installment, plus any interest payable thereon, paid during a
calendar year shall be included in Taxes for that year and (ii) if
any taxes or assessments payable during any calendar year shall be
computed with respect to a period in excess of twelve calendar
months, then taxes or assessments applicable to the excess period
shall be included in Taxes for that year. Except as provided in
the preceding sentence, all references to Taxes "for" a particular
year shall be deemed to refer to Taxes levied, assessed or imposed
for such year without regard to when such Taxes are payable.
(C) Taxes shall also include any personal property taxes
(attributable to the calendar year in which paid) imposed upon the
furniture, fixtures, machinery, equipment, apparatus, systems and
appurtenances used in connection with the Real Property or Project
or the operation thereof.
(D) If the Building is not at least ninety-five percent
(95%) occupied by tenants during all or a portion of any year,
then Landlord may elect to make
3
<PAGE>
an appropriate adjustment for such year of components of Taxes
which may vary depending upon the occupancy level of the Building
such that the amount of such Taxes which would have been incurred
if the Building had been fully occupied during the entire year
shall also be deemed taxes levied or assessed against the Real
Property and included in Taxes for such year.
(iii) "Rentable Area of the Building" shall be deemed to be 129,600
square feet. If, during the Term of this lease, the actual
Rentable Area of the Building is increased or decreased as a
result of adding space to the Building or removing space from the
Building, Landlord may change the Rentable Area of the Building
and Tenant's Proportionate Share by written notice to Tenant.
(iv) "Rentable Area of the Premises" shall be deemed to be 4,614
square feet.
(v) "Tenant's Proportionate Share" shall mean 3.56% which is the
percentage obtained by dividing the Rentable Area of the Premises
by the Rentable Area of the Building.
(vi) "Additional Rent" shall mean Tenant's Proportionate Share of
Taxes and Expenses.
(b) Computation of Additional Rent. Tenant shall pay Tenant's
Proportionate Share of Taxes and Expenses.
(c) Payments of Additional Rent; Projections. Tenant shall make payments
on account of its Additional Rent with respect to each year effective as of
the first day of each calendar year (the "Adjustment Date") with respect to
each such year as follows:
(i) Landlord may, prior to each Adjustment Date or from time to
time during the year, deliver to Tenant a written notice or
notices ("Projection Notice") setting forth (A) Landlord's
reasonable estimates, forecasts or projections
(collectively, the "Projections") of Taxes and Expenses with
respect to such year, and (B) Tenant's Proportionate Share
of Taxes and Expenses with respect to such year based upon
the Projections.
(ii) Until such time as Landlord furnishes a Projection Notice
with respect to any year, Tenant shall pay to Landlord a
monthly installment of Additional Rent (at the time of and
together with each payment of Monthly Base Rent) equal to
the latest monthly installment of Additional Rent. On or
before the first day of the next calendar month following
Landlord's service of a Projection Notice, and on or before
the first day of each month thereafter, Tenant shall pay to
Landlord one-twelfth (1/12) of Tenant's Proportionate Share
of Taxes and Expenses shown in the Projection Notice. Within
fifteen (15) days following Landlord's Service of a
Projection Notice, Tenant shall also pay Landlord a lump sum
equal to the monthly Tenant's Proportionate Share of Taxes
and Expenses shown in the Projection Notice for January to
and including the month(s) in which the Projection Notice
was sent (the "Gap Period") less the sum of any previous
payments of
4
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Additional Rent made during such Gap Period.
(d) Readjustments/Audit.
At any time and from time to time following the end of each year (and
after Landlord shall have determined the actual amounts of Taxes and Expenses
to be used in calculating Tenant's Proportionate Share of Taxes and Expenses
with respect to such year) if the actual Tenant's Proportionate Share of Taxes
and Expenses owed for such year exceeds the Additional Rent paid by Tenant
during such year, then Tenant shall, within thirty (30) days after the date of
Landlord's statement, pay to Landlord an amount equal to such excess
(provided, however, if such excess is equal to or greater than two (2) months
of Additional Rent, Tenant shall, within sixty (60) days after the date of
Landlord's statement as opposed to the aforesaid thirty (30) days) pay to
Landlord an amount equal to such excess. In connection therewith, Landlord
shall prepare and deliver to Tenant a detailed report (the "Report") of Taxes
and Expenses. Landlord shall use its reasonable efforts to deliver the Report
to Tenant within ninety (90) days following the end of each calendar year.
Tenant shall have ninety (90) days following its receipt of the Report to
advise Landlord of any disagreement Tenant may have with respect to the
provisions thereof. If Tenant fails to respond within said ninety (90) day
period, Tenant shall be deemed to have agreed to the determination of Landlord
and the provisions of the Report. In the event that Tenant disagrees with the
provisions of the Report and timely advises Landlord of same, Tenant shall
have the right at its sole cost and expense to audit Taxes and Expenses, and
in connection with such audit Landlord shall make available, following the
reasonable request of Tenant, such information as to Taxes and Expenses as
will allow Tenant to conclude its audit. Any disagreement of Tenant in
connection with the Report shall not relieve Tenant of its obligation to pay
contained in the first sentence of this paragraph (d) of Section 2, or
otherwise relieve Tenant of its obligation to pay Additional Rent in the
manner and at the times in this Section 2 provided. Provided, however, any
actual overpayment by Tenant shall be applied by Landlord as provided in the
sentence immediately following. If the Additional Rent paid by Tenant during
such year exceeds the actual Tenant's Proportionate Share of Taxes and
Expenses owed for such year, then Landlord shall credit such excess to Rent
payable after the date of Landlord's statement until such excess has been
exhausted. If this lease shall expire prior to full application of such
excess, Landlord shall pay to Tenant the balance thereof not theretofore
applied against Rent and not reasonably required for payment of Additional
Rent for the year in which the lease expires. No interest or penalties shall
accrue on any amounts which Landlord is obligated to credit or pay to Tenant
by reason of this Section 2(d).
(e) Proration and Survival.
With respect to any year which does not fall entirely within the Term,
Tenant shall be obligated to pay as Additional Rent for such year only a pro
rata share of Additional Rent as hereinabove determined, based upon the number
of days of the Term falling within the year. Following expiration or
termination of this lease, Tenant shall pay any Additional Rent due to the
Landlord within fifteen (15) days after the date of Landlord's statement sent
to Tenant. Without limitation on other obligations of Tenant which shall
survive the expiration or termination of this lease, the obligations of Tenant
to pay Additional Rent provided for in this Section 2 shall survive the
expiration or termination of this lease.
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(f) No Decrease In Base Rent.
In no event shall any Additional Rent result in a decrease of the Base
Rent payable hereunder as set forth in Section 1 hereof.
3. Security Deposit. Tenant has deposited with Landlord the sum of
$12,111.75 as security for the full and faithful performance of every provision
of this lease to be performed by Tenant. If Tenant defaults with respect to
any provision of this lease, including, but not limited to, the provisions
relating to the payment of Rent, Landlord may use, apply or retain all or any
part of this security deposit for the payment of any Rent and any other sum in
default, or for the payment of any other amount which Landlord may spend or
become obligated to spend by reason of Tenant's default or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default. If any portion of said deposit is to be used or applied,
Tenant shall within five (5) days after written demand therefor deposit cash
with Landlord in an amount sufficient to restore the security deposit to its
original amount and Tenant's failure to do so shall be a material breach of
this lease. Tenant may not elect to apply any portion of the security deposit
toward the payment of Rent or other charges payable by Tenant under this
lease. Landlord shall not be required to keep this security deposit separate
from its general funds and Tenant shall not be entitled to interest on such
deposit. If Tenant shall fully and faithfully perform every provision of this
lease to be performed by it, the security deposit or any balance thereof shall
be returned to Tenant (or at Landlord's option to the last assignee of
Tenant's interest hereunder) within thirty (30) days after the expiration of
the lease Term and Tenant's vacation of the Premises. Tenant hereby agrees not
to look to any mortgagee as mortgagee, mortgage in possession, or successor
in title to the Building for accountability for any security deposit required
by the Landlord hereunder, unless said sums have actually been received by
said mortgagee or successor in title as security for the Tenant's performance
of this lease. In connection with a purchase of the Building, the security
deposit shall be deemed to have been actually received by the purchaser to the
extent same received a credit therefor on any so called "closing" statement or
the like. The Landlord may deliver the funds deposited hereunder by Tenant to
the purchaser of Landlord's interest in the Building, in the event that such
interest is sold, or credit same on any closing statement, and thereupon
Landlord shall be discharged from any further liability with respect to such
security deposit.
4. Use of Premises. Tenant shall use and occupy the Premises for general
office purposes, and for no other use or purpose. Tenant shall not use or
occupy the Premises or permit the use or occupancy of the Premises for any
purpose or in any manner which (i) is unlawful or in violation of any
applicable legal or governmental requirement, ordinance or rule; (ii) may be
dangerous to persons or property; (iii) may invalidate or increase the amount
of premiums for any policy of insurance affecting the Project, and if any
additional amounts of insurance premiums are so incurred, Tenant shall pay to
Landlord the additional amounts on demand; or (iv) may create a nuisance,
disturb any other tenant of the Building or injure the reputation of the
Building.
Tenant shall not cause or permit any Hazardous Material (as defined
below) to be brought upon, kept, or used in or about the Premises or the
Project by Tenant, its agents, employees, contractors, or invitees, without
the prior written consent of Landlord (which Landlord shall not unreasonably
withhold as long as Tenant demonstrates to Landlord's reasonable satisfaction
that such Hazardous Material is necessary or useful to Tenant's business and
will at all times be used, kept, stored and disposed of in a manner that
complies at all times with all laws regulating any such Hazardous Material so
brought upon or used or kept in or about the Premises and/or the Project and
such storage will not create an undue
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risk to other tenants of the Building, giving consideration to the nature of
the Building). If Tenant breaches the obligations stated in the preceding
sentence, or if the presence of Hazardous Material on the Premises or the
Project caused or permitted by Tenant results in contamination of the
Premises or the Project, or if contamination of the Premises or the Project,
by Hazardous Material otherwise occurs for which Tenant is legally liable to
Landlord for damage resulting therefrom, then Tenant shall indemnify, defend
and hold Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities, or losses (including, without
limitation, diminution in value of the Premises or the Project, damages for
the loss or restriction on use of rentable or usable space or of any amenity
of the Premises or the Project, damages arising from any adverse impact on
marketing of space in the Building, and sums paid in settlement of claims,
attorneys fees, consultant fees and expert fees) which arise during or after
the term of this Lease as a result of such contamination. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
cleanup, remedial, removal or restoration work required by any federal,
state, or local governmental agency or political subdivision because of
Hazardous Material present in, on, or about the Premises or the Project or
in the soil or ground water on or under the Premises or the Project. Without
limiting the foregoing, if the presence of any Hazardous Material in, on or
about the Premises or the Project caused or permitted by Tenant results in
any contamination of the Premises or the Project, Tenant shall promptly take
all actions at its sole expense as are necessary to return the Premises or
the Project to the condition existing prior to the introduction of any such
Hazardous Material thereto; provided that Landlord's approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material (as
determined by Landlord) adverse long-term or short-term effect on the
Premises or the Project or exposes Landlord to any liability therefor and
such actions are undertaken in accordance with all applicable laws, rules
and regulations and accepted industry practices.
"Hazardous Material" is used in this Lease in its broadest sense and
shall mean any asbestos, petroleum based products, pesticides, paints and
solvents, polychlorinated biphenyl, lead, cyanide, DDT, acids, ammonium
compounds and other chemical products and any substance or material defined
or designated as hazardous or toxic substance, or other similar term, by any
federal, state or local environmental statute, regulation, or ordinance
affecting the Premises or the Project presently in effect or that may be
promulgated in the future, as such statutes, regulations and ordinances may
be amended from time to time, including but not limited to the statutes
listed below:
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
et seq.
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, 40 U.S.C. Section 1801 et seq.
Clean Air Act, 42 U.S.C. Sections 7401-7626.
Water Pollution Control Act (Clean Water Act of 1977), 33 U.S.C.
Section 1251 et seq.
Insecticide, Fungicide, and Rodenticide Act (Pesticide Act of 1987),
7 U.S.C. Section 135 et seq.
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.
Safe Drinking Water Act, 42 U.S.C. Section 300(f) et seq.
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National Environmental Policy Act (NEPA) 42 U.S.C. Section 4321 et seq.
Refuse Act of 1899, 33 U.S.C. Section 407 et seq.
5. Services. The Landlord shall furnish the following services, which
shall all be deemed Expenses (except to the extent to be paid entirely by
Tenant, as hereinafter provided):
(a) Heat and air conditioning. The Premises is separately thermostated,
and Tenant shall be responsible for the regulation of heating and air
conditioning in the Premises.
(b) Electricity and gas to the Premises and the building in which the
Premises is located to meters furnished by the local utility companies. Tenant
shall make all arrangements with the local utility companies to obtain service
at Tenant's sole cost and expense, and no such disconnection of gas or
electricity service shall result in any liability of Landlord to Tenant or be
deemed to be an eviction or a disturbance of Tenant's use of the Premises.
(c) Janitor service in and about that portion of the Premises to be used
for general office purposes, Saturdays, Sundays and holidays excepted, in
accordance with other buildings of the same class located in the Westchester,
Illinois area. Tenant shall not provide any other janitor services or
cleaning.
(d) Cold water for drinking, lavatory and toilet purposes and hot water
for lavatory purposes, in restrooms at locations designated by Landlord, in
common with other tenants of the Building. Tenant shall pay Landlord
Additional Rent at rates fixed by Landlord for water furnished for sinks or
restrooms with in the Premises or for any other purpose. Tenant shall not
waste or permit the waste of water.
(e) Landlord shall not be obligated to furnish any services other than
those services specified or to furnish such services at times other than as
specified. If Landlord agrees to provide extra or additional services, Tenant
shall, for such extra or additional services, pay 110% of Landlord's actual
cost reasonably incurred in providing them, except that after-hours heating
and air conditioning shall be at Landlord's scheduled rate charges for such
services, such amount to be considered Additional Rent hereunder. All charges
for such extra or additional services shall be due and payable at the same
time as the installment of Base Rent with which they are billed, or if billed
separately, shall be due and payable within ten (10) days after such billing.
Any such billings for extra or additional services shall include an
itemization of the extra or additional services rendered, and the charge for
each such service.
Failure by Tenant to promptly pay Landlord's proper charges for water,
electricity or other services shall give Landlord, upon not less than thirty
(30) days' notice, the right to discontinue furnishing the services, and no
such discontinuance shall be deemed an eviction or disturbance of Tenant's use
of the Premises or render Landlord liable for damages or relieve Tenant from
performance of Tenant's obligations under this lease.
Tenant agrees that Landlord and its agents shall not be liable in
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service or failure to perform or delay in performing any other
obligation required to be performed by Landlord under this lease or by
operation of law, when such failure or delay is occasioned, in whole or in
part, by repairs, renewals or improvements, by any strike, lockout or other
labor trouble, by inability to secure electricity, gas, water, or other fuel
at the Building after reasonable effort so to do, by any accident or casualty
whatsoever, by the act
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or default of Tenant or other parties, or by any cause beyond the reasonable
control of Landlord; and such failures or delays, or the nonexistence of any
utility, whether occasioned by Landlord or some third party, shall never be
deemed to constitute an eviction or disturbance of the Tenant's use and
possession of the Premises or relieve the Tenant from paying Rent or
performing any of its obligations under this lease.
Tenant agrees to cooperate fully, at all times, with Landlord in abiding
by all reasonable regulations and requirements which Landlord may prescribe
for the proper functioning and protection of all utilities and services
reasonably necessary for the operation of the Premises and the Building.
Landlord, throughout the term of this lease, shall have free access to any and
all mechanical installations, and Tenant agrees that there shall be no
construction or partitions or other obstructions which might interfere with
the moving of the servicing equipment of Landlord to or from the enclosures
containing said installations. Tenant further agrees that neither Tenant nor
its servants, employees, agents, visitors, licensees or contractors shall at
any time tamper with, adjust or otherwise in any manner affect Landlord's
mechanical installations.
6. Condition and Care of Premises. Tenant's taking possession of the
Premises or any portion thereof shall be conclusive evidence against Tenant
that the portion of the Premises taken possession of was then in good order
and satisfactory condition. Tenant is taking possession of the Premises in its
"as is" condition. No promises of the Landlord to alter, remodel, improve,
repair, decorate or clean the Premises or any part thereof have been made, and
no representation respecting the condition of the Premises, the Building or
the Land, has been made to Tenant by or on behalf of Landlord. Tenant agrees
that blinds, shades, drapes or other forms of window coverings and treatments
shall not be placed in, on or about the outside windows in the Premises,
except to the extent that the character, shape, color, material and make
thereof is expressly approved by the Landlord. This lease does not grant any
rights to light or air over or about the property of Landlord. Except for any
damage resulting from any act of Landlord or its employees and agents, and
subject to the provisions of Section 14 hereof, Tenant shall at its own
expense keep the Premises in good repair and tenantable condition and shall
promptly and adequately repair all damage to the Premises caused by Tenant or
any of its employees, agents or invitees, including replacing or repairing all
damaged or broken glass, fixtures and appurtenances resulting from any such
damage, under the supervision and with the approval of Landlord and within any
reasonable period of time specified by Landlord. If Tenant does not do so
promptly and adequately, Landlord may, but need not, make such repairs and
replacements and Tenant shall pay Landlord the cost thereof on demand.
7. Return of Premises. At the termination of this lease by lapse of time
or otherwise or upon termination of Tenant's right of possession without
terminating this lease, Tenant shall surrender possession of the Premises to
Landlord and deliver all keys to the Premises to Landlord and make known to
the Landlord the combination of all locks of vaults then remaining in the
Premises, and shall (subject to the following paragraph) return the Premises
and all equipment and fixtures of the Landlord therein to Landlord in as good
condition as when Tenant originally took possession, ordinary wear, loss or
damage by fire or other insured casualty, damage resulting from the act of
Landlord or its employees and agents, and alterations made with Landlord's
consent excepted, failing which Landlord may restore the Premises and such
equipment and fixtures to such condition and Tenant shall pay the cost thereof
to Landlord on demand.
All installations, additions, partitions, hardware, light fixtures,
non-trade fixtures and
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improvements, temporary or permanent, except movable furniture and equipment
belonging to Tenant, in or upon the Premises, whether placed there by Tenant
or Landlord, shall be Landlord's property and shall remain upon the Premises,
all without compensation, allowance or credit to Tenant; provided, however,
that if prior to such termination or within ten (10) days thereafter Landlord
so directs by notice, Tenant, at Tenant's sole cost and expense, shall
promptly remove such of the installations, additions, partitions, hardware,
light fixtures, non-trade fixtures and improvements placed in the Premises by
Tenant as designated in such notice and repair any damage to the Premises
caused by such removal, failing which Landlord may remove the same and repair
the Premises and Tenant shall pay the cost thereof to Landlord on demand.
Tenant shall leave in place any floor covering without compensation to
Tenant. Tenant shall also remove Tenant's furniture, machinery, safes, trade
fixtures and other items of movable personal property of every kind and
description from the Premises prior to the end of the Term or ten (10) days
following termination of this lease or Tenant's right of possession, whichever
might be earlier, failing which Landlord may do so and thereupon the
provisions of Section 16(c) shall apply.
All obligations of Tenant hereunder shall survive the expiration of the
Term or sooner termination of this lease.
8. Holding Over. The Tenant shall pay Landlord for each day Tenant
retains possession of the Premises or any part thereof after termination of
this lease, by lapse of time or otherwise, an amount which is 1.75 times the
amount of Rent for a day (computed on a year of 360 days) based on the annual
rate of Base Rent and Additional Rent applicable under Sections 1 and 2 to the
period in which such possession occurs (and if such possession occurs
following the full Term of this lease, 1.75 times the annual Base Rent and
Additional Rent applicable in the last year of this lease), and Tenant shall
also pay all damages, consequential as well as direct, sustained by Landlord
by reason of such retention. Nothing in this Section contained, however, shall
be construed or operate as a waiver of Landlord's right of re-entry or any
other right of Landlord.
9. Rules and Regulations. Tenant agrees to observe the rights reserved
to Landlord contained in Section 10 hereof and agrees, for itself, its
employees, agents, clients, customers, invitees and guests, to comply with the
rules and regulations set forth in Exhibit C attached to this lease and by
this reference incorporated herein and such other rules and regulations as
shall be adopted by Landlord pursuant to Section 10(m) of this lease.
Any violation by Tenant of any of the rules and regulations contained in
EXHIBIT C attached to this lease or other Section of this lease, or as may
hereafter be adopted by Landlord pursuant to Section 10(m) of this lease, may
be restrained; but whether or not so restrained, Tenant acknowledges and
agrees that it shall be and remain liable for all damages, loss, costs and
expense resulting from any violation by the Tenant of any of said rules and
regulations. Nothing in this lease contained shall be construed to impose upon
Landlord any duty or obligation to enforce said rules and regulations, or the
terms, covenants and conditions of any other lease against any other tenant or
any other persons, and Landlord and its beneficiaries shall not be liable to
Tenant for violation of the same by any other tenant, its employees, agents,
invitees, or by any other person.
10. Rights Reserved to Landlord. Landlord reserves the following rights,
exercisable without notice and without liability to Tenant for damage or
injury to property, person or business and
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without effecting an eviction or disturbance of Tenant's use or possession or
giving rise to any claim for setoff or abatement of rent or affecting any of
Tenant's obligations under this lease:
(a) To change the name or street address of the Building.
(b) To install and maintain signs on the exterior and interior of the
Building, and to prescribe the location and style of the suite number and
identification sign or lettering for the Premises occupied by the Tenant.
(c) To designate the character, shape, color, material and make of all
window coverings and treatments on all outside windows in the Premises.
(d) To retain at all times, and to use in appropriate instances, pass
keys to the Premises.
(e) To grant to anyone the right to conduct any business or render any
service in the Building, whether or not it is the same as or similar to the
use expressly permitted to Tenant by Section 4.
(f) To exhibit the Premises at reasonable hours.
(g) To decorate, remodel, repair, alter or otherwise prepare the
Premises for reoccupancy at any time after Tenant vacates or abandons the
Premises.
(h) To have access for Landlord and other tenants or occupants of the
Building to all mail receptacles according to the rules of the United States
Postal Service.
(i) To enter the Premises at reasonable hours for reasonable purposes,
including the posting of notices of nonresponsibility, inspection and
supplying janitor service or other services to be provided to Tenant
hereunder.
(j) To require all persons entering or leaving the Building during such
hours as Landlord may from time to time reasonably determine to identify
themselves to security personnel by registration or otherwise, and to
establish their right to enter or leave. Landlord shall not be liable in
damages for any error with respect to admission to or eviction or exclusion
from the Building of any person. In case of fire, invasion, insurrection, mob,
riot, civil disorder, public excitement or other commotion, or threat thereof,
Landlord reserves the right to limit or prevent access to the Building during
the continuance of the same, shut down elevator service, activate elevator
emergency controls, or otherwise take such action or preventive measures
deemed necessary by Landlord for the safety of the tenants or other occupants
of the Building or the protection of the Building and the property in the
Building. Tenant agrees to cooperate in any reasonable safety program
developed by Landlord.
(k) To control and prevent access to common areas and other areas.
(l) Provided that reasonable access to the Premises shall be maintained
and the business of Tenant shall not be interfered with unreasonably, to
relocate, enlarge, reduce or change corridors, exits, entrances in or to the
Building and to decorate and to make repairs, alterations, additions and
improvements, structural or otherwise, in or to the Building or any part
thereof, and any adjacent building, land,
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street or alley, including for the purpose of connection with or entrance into
or use of the Building in conjunction with any adjoining or adjacent building
or buildings, now existing or hereafter constructed, and may for such purposes
erect scaffolding and other structures reasonably required by the character of
the work to be performed, and during such operations may enter upon the
Premises and take into and upon or through any part of the Building, including
the Premises, all materials that may be required to make such repairs,
alterations, improvements, or additions, and in that connection Landlord may
temporarily close public entry ways, other public spaces, stairways or
corridors and interrupt or temporarily suspend any services or facilities
agreed to be furnished by Landlord, all without the same constituting an
eviction of Tenant in whole or in part and without abatement of rent by reason
of loss or interruption of the business of Tenant or otherwise and without in
any manner rendering Landlord liable for damages or relieving Tenant from
performance of Tenant's obligation under this lease; Landlord may at its
option make any repairs, alterations, improvements and additions in and about
the Building and the Premises during ordinary business hours and, if Tenant
desires to have such work done during other than business hours, Tenant shall
pay all overtime and additional expenses resulting therefrom.
(m) From time to time to make and adopt such reasonable rules and
regulations, in addition to or other than or by way of amendment or
modification of the rules and regulations contained in Exhibit C attached to
this lease or other Sections of this lease, for the protection and welfare of
the Building and its tenants and occupants, as the Landlord may determine, and
the Tenant agrees to abide by all such rules and regulations.
11. Alterations:
(a) Without Landlord's prior written consent, Tenant shall not make or
cause to be made any decorating, exterior, structural, electrical, plumbing,
ventilation, air conditioning or other type of alterations, improvements,
additions, changes or repairs in or to the Premises or the Building. As a
condition to granting its consent, Landlord may impose reasonable requirements
in addition to any set forth in this lease, including, without limitation,
requirements as to the manner and time for the performance of any such work
and the type and amount of insurance and bonds Tenant must acquire and
maintain in connection therewith. In addition, at Landlord's option, Landlord
shall have the right: to approve the contractors or mechanics performing the
work; to approve all plans and specifications relating to the work; to review
the work of Tenant's architects, engineers, contractors or mechanics and to
control any construction or other activities being undertaken within the
Building, with Landlord to be reimbursed on demand of same for any costs
incurred in connection with such review or control; and to require correction
of the work in instances in which materials or workmanship is defective or not
in accordance with plans or specifications previously approved by Landlord.
Landlord's approval of any plans and specifications shall create no
responsibility on the part of Landlord for the completeness, design,
sufficiency or compliance with all laws, ordinances, regulations, rules and
requirements of governmental entities having jurisdiction. Tenant shall
deliver to Landlord for Landlord's files, at Tenant's sole cost and expense,
complete copies of all final working drawings and plans and specifications.
Except as expressly provided herein, all alterations, improvements, additions,
changes or repairs shall be provided by and paid for by Tenant at its sole
expense, but shall become the property of Landlord and shall be surrendered
with the Premises upon termination of this lease; provided, however, that
Landlord may, by written notice to Tenant as provided in Section 7 of this
lease, require Tenant, at Tenant's sole cost and expense, to remove any or all
improvements, alterations, additions or fixtures installed or made by Tenant
on or to the Premises and to repair any damages to the Premises caused by such
removal.
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(b) All work in connection with any alterations, improvements, changes,
additions or repairs in the Premises or the Building made by or for the
benefit of Tenant shall be performed in full compliance with all laws,
ordinances, regulations, rules and requirements of all governmental entities
having jurisdiction and in full compliance with all insurance rules, orders,
directions, regulations and requirements. If there is now or if there shall be
installed in the Building a sprinkler system, and if any fire rating bureau or
any similar body having jurisdiction or any governmental authority having
jurisdiction requires or recommends that any changes, modifications,
alterations, additional sprinkler heads or other equipment be made or supplied
by reason of Tenant's business or the improvements it has added or the
location of partitions, trade fixtures or other contents of the Premises, or
if any such changes, modifications, alterations, additions or other equipment
become necessary to prevent imposition of a penalty or charge against the full
allowance for a sprinkler system in the fire insurance rate as fixed by said
bureau or by any fire insurance company, Tenant shall, at its own cost,
promptly make and supply all such changes, modifications, alterations,
additional sprinkler heads or other equipment.
(c) Before work is commenced as provided in this Section 11, Tenant
shall give Landlord at least fifteen (15) days' written notice. Landlord shall
be entitled to enter the Premises during regular hours to post a notice of
non-responsibility. Tenant shall secure, at Tenant's own cost, payment and
performance bonds, satisfactory to Landlord, for said work, and during the
progress of the work, Tenant shall at its sole cost and expense, upon
Landlord's request, furnish Landlord with sworn contractor's statements and
lien waivers covering all work theretofore performed, together with such
endorsements to Landlord's title insurance policy as Landlord may require. Any
mechanic's liens for work claimed to have been performed for, or materials
claimed to have been furnished to, Landlord or Tenant shall be discharged by
Tenant, at Tenant's sole expense as provided in Section 31. Tenant agrees to
indemnify, hold harmless and defend Landlord from any loss, cost, damage or
expense, including attorney's fees, arising out of any such lien claim or out
of any other claim relating to work done or materials supplied to the Premises
at Tenant's request or on Tenant's behalf.
12. Assignment and Subletting.
(a) Tenant shall not (i) assign, transfer, mortgage, pledge, hypothecate
or encumber or subject to or permit to exist upon or be subjected to any lien
or charge, this lease or any interest under it, (ii) allow to exist or occur
any transfer of or lien upon this lease or the Tenant's interest herein by
operation of law, (iii) sublet the Premises or any part thereof, or (iv)
permit the use or occupancy of the Premises or any part thereof for any
purpose not provided for under Section 4 of this lease or by anyone other than
the Tenant and Tenant's employees. If consent to any of the foregoing is
requested by Tenant, Landlord has the absolute right to withhold its consent
without giving any reason whatsoever. In no event shall this lease be assigned
or assignable by voluntary or involuntary bankruptcy proceedings or otherwise,
and in no event shall this lease or any rights or privileges hereunder be an
asset of Tenant under any bankruptcy, insolvency or reorganization proceedings.
(b) Tenant shall, by notice in writing, advise Landlord of its intention
from, on and after a stated date (which shall not be less than sixty (60) days
after the date of Tenant's notice) to assign this lease or sublet any part or
all of the Premises for the balance or any part of the Term, and, in such
event, Landlord shall have the right, to be exercised by giving written notice
to Tenant within thirty (30) days after receipt of Tenant's notice, to
recapture the space described in Tenant's notice and such recapture notice
shall, if given, terminate this lease with respect to the space therein
described as of the date stated in Tenant's notice. Tenant's notice shall
state the name and address of the proposed subtenant or assignee
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and a true and complete copy of the proposed sublease or assignment shall be
delivered to Landlord with said notice. If Tenant's notice shall cover all of
the space hereby demised, and if Landlord shall give the aforesaid recapture
notice with respect thereto, the Term of this lease shall expire and end on
the date stated in Tenant's notice as fully and completely as if that date had
been herein definitely fixed for the expiration of the Term. If, however, this
lease be terminated pursuant to the foregoing with respect to less than the
entire Premises, the Rent and the Tenant's Proportionate Share as defined
herein shall be adjusted by Landlord on the basis of the number of rentable
square feet retained by Tenant, and this lease as so amended shall continue
thereafter in full force and effect. If Landlord, upon receiving Tenant's
notice with respect to any such space, shall not exercise its right to
terminate as aforesaid, Landlord will not unreasonably withhold its consent to
Tenant's assignment or subletting the space covered by its notice; provided,
however, that in addition to other circumstances under which Landlord's
consent may be withheld (whether similar or dissimilar to the following
reasons), Tenant agrees that the withholding by Landlord of its consent to
Tenant's assignment or subletting the space covered by its notice will not be
deemed "unreasonable" if (i) the proposed assignee or subtenant is
disreputable or otherwise not in keeping with the nature or class of tenants
in the Building, (ii) the proposed assignee or subtenant is not sufficiently
financially responsible, or in Landlord's reasonable opinion will not in the
future be sufficiently financially responsible, to perform its obligations
under the lease or its sublease, (iii) the use of the Premises by the proposed
assignee or subtenant would, in Landlord's reasonable judgment, significantly
increase the pedestrian traffic in and out of the Building or would require
Landlord to perform any alterations to the Building to comply with applicable
building code requirements or other laws, (iv) there is in existence at the
time of such notice any sublease of the Premises or prior assignments of this
lease, (v) there is at the time of such notice, any uncured default by Tenant
pursuant to this Lease; or, (vi) at the time of such notice, Tenant is not in
occupancy of the Premises.
(c) Tenant agrees that all advertising by Tenant or on Tenant's behalf
with respect to the leasing of space in the Building must be approved in
writing by Landlord prior to publication.
(d) If Tenant, having first obtained Landlord's consent in accordance
with the foregoing provision of this Section, shall assign this lease or
sublet the Premises, or any part thereof, at a rental or for other monetary
consideration in excess of the Rent or pro rata portion thereof due and
payable by Tenant under this lease, then Tenant shall pay to Landlord, as
additional rent (1) on the first day of each month during the term of any
sublease, one-half (1/2) of the excess of all rent and other consideration due
from the subtenant for such month over the Rent then payable to Landlord
pursuant to the provisions of this lease for said month (or if only a portion
of the Premises is being sublet, the excess of all rent and other
consideration due from the subtenant for such month over the portion of the
Rent then payable to Landlord pursuant to the provisions of this lease for
said month which is allocable on a square footage basis to the space sublet)
and (2) immediately upon receipt thereof, one-half (1/2) of any other rent or
consideration received by Tenant from such assignment or subletting.
(e) If Tenant is a corporation, (other than a corporation whose stock is
traded through a national or regional exchange or over-the-counter), any
transaction or series of transactions (including, without limitation, any
dissolution, merger, consolidation or other reorganization of Tenant, or any
issuance, sale, gift, transfer or redemption of any capital stock of Tenant,
whether voluntary, involuntary or by operation of law, or any combination of
any of the foregoing transactions) resulting in the transfer of control of
Tenant, other than by reason of death, shall be deemed to be transfer of
Tenant's interest under this lease for the purpose of Section 12(a). If Tenant
is a partnership, any transaction or series of transactions (including,
without limitation, any withdrawal or admittance of a partner or any change in
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any partner's interest in Tenant, whether voluntary, involuntary or by
operation of law, or any combination of any of the foregoing transactions)
resulting in the transfer of control of Tenant, other than by reason of death,
shall be deemed to be a transfer of Tenant's interest under this lease for the
purposes of Section 12(a). The term "control" as used in this Section 12(e)
means the power to directly or indirectly direct or cause the direction of the
management or policies of Tenant. If Tenant is a corporation, a change or
series of changes in ownership of stock which would result in direct or
indirect change in ownership by the stockholders or an affiliated group of
stockholders of less than fifty percent (50%) of the outstanding stock as of
the date of the execution and delivery of this lease or which are effected
through a recognized stock exchange to stockholders not acting in concert to
obtain control shall not be considered a change of control.
(f) Notwithstanding the foregoing provisions of this section, Landlord
shall not withhold its consent to a sublet of the Premises (or portion
thereof) or an assignment of Tenant's interest in this lease to a "Permitted
Transferee" (hereinafter defined) provided: (A) the "use" of the Premises will
be the same as that of Tenant and in conformance with the terms and provisions
of this lease regarding the permitted use of the Premises, and in conformance
with all other terms and provisions of this lease, (B) Tenant is not in
default of any of the terms and provisions of this lease, and (C) the
assignee's or sublessee's net worth at the time of the assignment or sublet,
as applicable, is equal to or greater than the greater of: (a) the net worth
of Tenant as of the date of this lease, and (b) the net worth of Tenant as of
the date of the assignment or sublet. For purposes of this paragraph the term
Permitted Transferee shall mean: (i) a parent or wholly owned subsidiary, of
Tenant, (ii) any entity controlled by Tenant (fifty one percent (51%) of all
of the issued and outstanding voting stock of such entity shall be deemed
control for purposes of this clause (ii)), (iii) any entity resulting from a
merger or consolidation of Tenant with another corporation or other
corporations (regardless of which corporation is the surviving corporation),
and (iv) any entity to which all or substantially all of Tenant's assets or
stock are transferred. The provisions of this paragraph are further
conditioned upon at least thirty (30) days prior written notice to Landlord of
the proposed assignment of Tenant's interest in this lease or sublet of the
Premises to a Permitted Transferee. Notwithstanding the forgoing provisions to
the contrary, Landlord reserves the right, without release of Tenant, to
require any assignee of Tenant's interest in this lease and/or any sublessee
of the Premises or any portion thereof, to assume in writing delivered to
Landlord in advance of any assignment or subletting and for Landlord's
benefit, an assumption of the obligations of Tenant under this lease, or in
the case of a sublet of less than all of the Premises, such allocable portion
thereof as reasonably determined by Landlord.
(g) Any assignment, subletting, use or occupancy, or transfer shall not
operate to relieve the Tenant from any covenant or obligation hereunder,
except to the extent, if any, expressly provided for in writing by Landlord,
nor be deemed to be a consent to or relieve Tenant from obtaining Landlord's
consent to any subsequent assignment, transfer, lien, charge, subletting, use
or occupancy. Tenant shall pay all of Landlord's costs, charges and expenses,
including attorney's fees incurred in connection with any assignment or
sublease requested or made by Tenant.
13. Waiver of Certain Claims; Indemnity.
(a) To the extent not expressly prohibited by law, Landlord and Tenant
each releases and waives any and all claims for, and rights to recover,
damages against and from the other, and the other's respective agents,
partners, shareholders, officers, directors (and, in the case of claims by
Tenant, any trustee ("Trustee") holding legal title to the Real Property if
same is held in trust) and employees
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(collectively, the "Released Parties"), for loss, damage or destruction to any
of its property (including the Premises, the Building and their contents), the
elements of which are insured against or which would have been insured against
had such party suffering such loss, damage or destruction maintained the
property or physical damage insurance policies required under Section 20
hereof. In no event shall this clause be deemed, construed or asserted (i) to
affect or limit any claims or rights against any Released Parties other than
the right to recover damages for loss, damage or destruction to property, or
(ii) to benefit any third party other than the Released Parties.
(b) To the extent not expressly prohibited by law, Tenant and Landlord
(each as to the other the "Indemnitor") agrees to hold harmless and indemnify
the other and the other's agents, partners, shareholders, officers, directors,
Trustee, and employees (collectively, the "Indemnitees") from any losses,
damages, judgments, claims, expenses, costs and liabilities imposed upon or
incurred by or asserted against the Indemnitees, including reasonable
attorney's fees and expenses, for death or injury that may arise from or be
caused directly or indirectly by any negligent act of omission or commission
of any willful misconduct of the Indemnitor or any of the Indemnitor's
respective agents, partners, or employees. Such third parties shall not be
deemed third party beneficiaries of this agreement. In case any action, suit
or proceeding is brought against any of the Indemnitees by reason of any such
act of the Indemnitor or any of the Indemnitor's respective agents, partners
or employees, then the Indemnitor will, at the Indemnitor's expense and at the
option of said Indemnitees, by counsel approved by said Indemnitees, resist
and defend such action, suit or proceeding.
14. Damage or Destruction by Casualty. If the Premises or any part of
the Building shall be damaged by fire or other casualty and if such damage
does not render all or a "substantial portion" (as determined by Landlord) of
the Premises or the Building untenantable, then Landlord shall proceed to
repair and restore the Premises with reasonable promptness, subject to
reasonable delays for insurance adjustments and delays caused by matters
beyond Landlord's control. If any such damage renders all or a substantial
portion of the Premises or the Building untenantable, Landlord shall, with
reasonable promptness after the occurrence of such damage, estimate the length
of time that will be required to substantially complete the repair and
restoration of such damage and shall by notice advise Tenant of such estimate.
If it is so estimated that the amount of time required to substantially
complete such repair and restoration will exceed one hundred eighty (180) days
from the date such damage occurred, then either Landlord or Tenant (but as to
Tenant, only if all or a substantial portion of the Premises are rendered
untenantable) shall have the right to terminate this lease as of the date of
such damage upon giving notice to the other at any time within twenty (20)
days after Landlord gives Tenant the notice containing said estimate (it being
understood that Landlord may, if it elects to do so, also give such notice of
termination together with the notice containing said estimate). Unless this
lease is terminated as provided in the preceding sentence, Landlord shall
proceed with reasonable promptness to repair and restore the Premises, subject
to reasonable delays for insurance adjustments and delays caused by matters
beyond Landlord's control, and also subject to zoning laws and building codes
then in effect. Landlord shall have no liability to Tenant, and Tenant shall
not be entitled to terminate this lease if such repairs and restoration are
not in fact completed within the time period estimated by Landlord, as
aforesaid, or within said one hundred eighty (180) days, so long as Landlord
shall proceed with reasonable diligence to complete such repairs and
restoration. Notwithstanding anything to the contrary herein set forth, (a)
Landlord shall have no duty pursuant to this Section 14 to repair or restore
any portion of the alterations, additions or improvements made by Tenant in
the Premises or to expend for any repair or restoration amounts in excess of
insurance proceeds paid to Landlord and available for repair or restoration,
and (b) Tenant shall not have the right to terminate this lease pursuant to
this Section 14 if the damage or destruction was
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caused by the act or neglect of Tenant, its agents, partners or employees.
In the event any such fire or casualty damage not caused by the act or
neglect of Tenant, its agents, partners or employees, renders the Premises
untenantable and Tenant is not occupying the Premises, and if this lease shall
not be terminated pursuant to the foregoing provisions of this Section 14 by
reason of such damage, then Rent shall abate during the period beginning with
the date of such damage and ending with the date when Landlord completes its
repair and restoration. Such abatement shall be in an amount bearing the same
ratio to the total amount of Rent for such period as the portion of the
Premises not ready for occupancy from time to time bears to the entire
Premises. In the event of termination of this lease pursuant to this Section
14, Rent shall be apportioned on a per diem basis and be paid to the date of
the fire or casualty.
15. Eminent Domain. If all or a substantial portion of the Building, or
any part thereof which includes all or a substantial portion of the Premises,
shall be taken or condemned by any competent authority for any public or
quasi-public use or purpose, the Term of this lease shall end upon and not
before the date when the possession of the part so taken shall be required for
such use or purpose, and without apportionment of the award to or for the
benefit of Tenant. If any condemnation proceeding shall be instituted in which
it is sought to take or damage any part of the Building, the taking of which
would, in Landlord's opinion, prevent the economical operation of the
Building, or if the grade of any street or alley adjacent to the Building is
changed by any competent authority, and such taking, damage or change of grade
makes it necessary or desirable to remodel the Building to conform to the
taking, damage or changed grade, Landlord shall have the right to terminate
this lease upon not less than ninety (90) days' notice prior to the date of
termination designated in the notice. In either of the events above referred
to, Rent at the then current rate shall be apportioned as of the date of the
termination. No money or other consideration shall be payable by the Landlord
to the Tenant for the right of termination, and the Tenant shall have no right
to share in the condemnation award, whether for a partial or total taking, for
loss of Tenant's leasehold or improvements, or in any judgment for damages
caused by the change of grade.
16. Default: Landlord's Rights and Remedies.
(a) If default shall be made in the payment of the Rent or any
installment thereof or any other sum required to be paid by Tenant under the
terms of any other agreement between Landlord and Tenant, or if a default
involves a hazardous condition and is not cured by Tenant immediately upon
written notice to Tenant, or if the interest of Tenant in this lease shall be
levied or under execution or other legal process, or if any voluntary petition
in bankruptcy or for corporate reorganization or any similar relief shall be
filed by Tenant, or if any involuntary petition in bankruptcy shall be filed
against Tenant under any federal or state bankruptcy or insolvency act and
shall not have been dismissed within thirty (30) days from the filing thereof,
or if a receiver shall be appointed for Tenant or any of the property of
Tenant by any court and such receiver shall not have been dismissed within
thirty (30) days from the date of his appointment, or if Tenant shall make an
assignment for the benefit of creditors, or if Tenant shall admit in writing
Tenant's inability to meet Tenant's debts as they mature, or if Tenant shall
abandon or vacate the Premises during the Term, or if default shall be made in
the observance or performance of any of the other covenants or conditions in
this lease which Tenant is required to observe and perform and such
non-monetary default shall continue for ten (10) days after written notice to
Tenant, then Landlord may treat the occurrence of any one or more of the
foregoing events as a breach of this lease, and thereupon at its option may,
with or without notice or demand of any kind to Tenant or any other person,
have any one or more of the following described remedies (any of which may be
pursued by Landlord in its own name
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or by and in the name of the beneficiaries of Landlord or the agent of such
beneficiaries) in addition to all other rights and remedies provided at law or
in equity or elsewhere herein:
(i) Landlord may terminate this lease and the Term created
hereby, in which event Landlord may forthwith repossess the
Premises and be entitled to recover forthwith as damages a
sum of money equal to the value of the Rent provided to be
paid by Tenant for the balance of the original Term, less
the rental value of the Premises for said period ("Rental
Value"), and plus any other sum of money and damages owed by
Tenant to Landlord. Should the Rental Value exceed the value
of the Rent provided to be paid by Tenant for the balance of
the original Term of the Lease, Landlord shall have no
obligation to pay to Tenant the excess or any part thereof.
(ii) Landlord may terminate Tenant's right of possession and may
repossess the Premises by forcible entry and detainer suit,
by taking peaceful possession or otherwise, without
terminating this lease, in which event Landlord may, but
shall be under no obligation to, relet the same for the
account of Tenant, for such rent and upon such terms as
shall be satisfactory to Landlord. For the purpose of such
reletting, Landlord is authorized to decorate or to make any
repairs. If Landlord shall fail to relet the Premises,
Tenant shall pay to Landlord as damages a sum equal to the
amount of the Rent reserved in this lease for the balance
of its original Term. If the Premises are relet and a
sufficient sum shall not be realized from such reletting
after paying all of the costs and expenses of such
decorations, repairs, changes, alterations and additions and
the other expenses of such reletting and of the collection
of the rent accruing therefrom to equal or exceed the Rent
provided for in this lease for the balance of its original
Term, Tenant shall satisfy and pay such deficiency upon
demand therefor from time to time. Tenant agrees that
Landlord may file suit to recover any sums falling due under
the terms of this Section 16 from time to time and that no
suit or recovery of any portion due Landlord hereunder shall
be any defense to any subsequent action brought for any
amount theretofore reduced to judgment in favor of Landlord.
(b) If Landlord exercises either of the remedies provided for in
subparagraphs (i) and (ii) of the foregoing Section 16(a), Tenant shall
surrender possession and vacate the Premises immediately and deliver
possession thereof to the Landlord, and Landlord may then or at any time
thereafter re-enter and take complete and peaceful possession of the Premises,
with or without process of law, full and complete license so to do being
hereby granted to the Landlord, and Landlord may remove all occupants and
property therefrom, without being deemed in any manner guilty of trespass,
eviction or forcible entry and detainer and without relinquishing Landlord's
right to Rent or any other right given to Landlord hereunder or by operation
of law.
(c) All property removed from the Premises by Landlord pursuant to any
provisions of this lease or of law may be handled, removed or stored by the
Landlord at the cost and expense of the Tenant, and the Landlord shall in no
event be responsible for the value, preservation or safekeeping thereof.
Tenant shall pay Landlord for all expenses incurred by Landlord in such
removal and storage charges against such property so long as the same shall be
in Landlord's possession or under Landlord's control.
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All property not removed from the Premises or retaken from storage by Tenant
within thirty (30) days after the end of the Term, however terminated,
shall, at Landlord's election, be conclusively deemed to have been conveyed
by Tenant to Landlord as by bill of sale without further payment or credit
by Landlord to Tenant.
(d) Tenant shall pay all of Landlord's costs, charges and expenses,
including court costs and attorneys' fees, incurred in enforcing Tenant's
obligations under this lease or incurred by Landlord in any litigation,
negotiation or transactions in which Tenant causes the Landlord, without
Landlord's fault, to become involved or concerned.
(e) In the event that Tenant shall file for protection under any
chapter of the Bankruptcy Code now or hereafter in effect, or a
trustee-in-bankruptcy shall be appointed for Tenant, Landlord and Tenant
agree, to the extent permitted by law, to request that the
debtor-in-possession or trustee-in-bankruptcy, if one is appointed, shall
assume or reject this lease within sixty (60) days thereafter.
17. Subordination.
(a) Landlord may have heretofore or may hereafter encumber with a
mortgage or trust deed the Real Property or any interest therein, and may
have heretofore and may hereafter sell and lease back the Land, or any part
of the Real Property, and may have heretofore or may hereafter encumber the
leasehold estate under such lease with a mortgage or trust deed. (Any such
mortgage or trust deed is herein called a "Mortgage" and the holder of any
such mortgage or the beneficiary under any such trust deed is herein called
a "Mortgagee". Any such lease of the underlying land is herein called a
"Ground Lease", and the lessor under any such lease is herein called a
"Ground Lessor". Any Mortgage which is a first lien against the Building,
the Land, the Real Property, the leasehold estate under a Ground Lease or
any interest therein is herein called a "First Mortgage" and the holder or
beneficiary of any First Mortgage is herein called a "First Mortgagee".)
(b) If requested by a Mortgagee or Ground Lessor, Tenant will either
(i) subordinate its interest in this lease to said Mortgage or Ground Lease,
and to any and all advances made thereunder and to the interest thereon, and
to all renewals, replacements, supplements, amendments, modifications and
extensions thereof, or (ii) make certain of Tenant's rights and interest in
this lease superior thereto; and Tenant will promptly execute and deliver
such agreement or agreements as may be reasonably required by such Mortgagee
or Ground Lessor; provided however, Tenant covenants it will not subordinate
this lease to any Mortgage other than a First Mortgage without the prior
written consent of the First Mortgagee.
(c) It is further agreed that (i) if any Mortgage shall be foreclosed,
or if any Ground Lease be terminated, (A) the liability of the Mortgagee or
purchaser at such foreclosure sale or the liability of a subsequent owner
designated as Landlord under this lease shall exist only so long as such
Mortgagee, purchaser or owner is the owner of the Building, Land or Real
Property, and such liability shall not continue or survive after further
transfer of ownership; (B) the Mortgagee or Ground Lessor or their
successors or assigns that succeeds to the interest of the Landlord in the
Building or the Land, or acquires the right to possession of the Building or
the Land, shall not be (1) liable for any act or omission of the party named
above (or any successor in title thereto) as the Landlord, under this lease;
(2) liable for the performance of Landlord's covenants pursuant to the
provisions of this lease which arise and accrue prior to such entity
succeeding to the interest of Landlord (or any successor in title thereto)
under this lease
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or acquiring such right to possession; (3) subject to any offsets or defenses
which Tenant may have at any time against Landlord (or any successor in title
thereto); (4) bound by any Rent which the Tenant may have paid previously for
more than one (1) month; (5) liable for the performance of any covenant of
Landlord under this lease which is capable of performance only by the original
Landlord (or any successor in title thereto); and (C) upon request of the
Mortgagee, if the Mortgage shall be foreclosed, Tenant will attorn, as Tenant
under this lease, to the purchaser at any foreclosure sale under any Mortgage
or upon request of the Ground Lessor, if any Ground Lease shall be terminated,
Tenant will attorn as Tenant under this lease to the Ground Lessor, and Tenant
will execute such instruments as may be necessary or appropriate to evidence
such attornment; and (ii) this lease may not be modified or amended so as to
reduce the Rent or shorten the Term, or so as to adversely affect in any other
respect to any material extent the rights of the Landlord, nor shall this
lease be cancelled or surrendered, without the prior written consent, in each
instance, of the First Mortgagee or any Ground Lessor.
(d) Should any prospective First Mortgagee or Ground Lessor require a
modification or modifications of this lease, which modification or
modifications will not cause an increased cost or expense to Tenant or in any
other way materially and adversely change the rights and obligations of Tenant
hereunder, in the reasonable judgment of Tenant, then and in such event,
Tenant agrees that this lease may be so modified and agrees to execute
whatever documents are required therefor and deliver the same to Landlord
within ten (10) days following the request therefor. Should any prospective
Mortgagee or Ground Lessor require execution of a short form of lease for
recording (containing, among other customary provisions, the names of the
parties, a description of the Premises and the Term of this lease), Tenant
agrees to execute such short form of lease and deliver the same to Landlord
within ten (10) days following the request therefor.
18. Mortgagee and Ground Lessor Protection. Tenant agrees to give any
First Mortgagee and any Ground Lessor, by registered or certified mail, a copy
of any notice or claim of default served upon the Landlord by Tenant, provided
that prior to such notice Tenant has been notified in writing (by way of
service on Tenant of a copy of an assignment of Landlord's interests in
leases, or otherwise) of the address of such First Mortgagee or Ground Lessor
(hereinafter the "Notified Party"). Tenant further agrees that if Landlord
shall have failed to cure such default within twenty (20) days after such
notice to Landlord (or if such default cannot be cured or corrected within
that time, then such additional time as may be necessary if Landlord has
commenced within such twenty (20) days and is diligently pursuing the remedies
or steps necessary to cure or correct such default), then the Notified Party
shall have an additional thirty (30) days within which to cure or correct such
default (or if such default cannot be cured or corrected within that time,
then such additional time as may be necessary if such Notified Party has
commenced within such thirty (30) days and is diligently pursuing the remedies
or steps necessary to cure or correct such default, including the time
necessary to obtain possession if possession is necessary to cure or correct
such default) before Tenant may exercise any right or remedy which it may have
on account of any such default of Landlord.
19. Default Under Other leases. If the term of any lease, other than
this lease, heretofore or hereafter made by Tenant for any space in the
Building shall be terminated or terminable after the making of this lease
because of any default by Tenant under such other lease, such fact shall
empower Landlord, at Landlord's sole option, to terminate this lease by notice
to Tenant or to exercise any of the rights or remedies set forth in Section
16.
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20. Insurance.
(a) At all times during the Term of this lease, Tenant shall at its sole
cost and expense maintain in full force and effect insurance protecting Tenant
and Landlord (and Landlord's beneficiaries, if Landlord is ever a land trust),
and their respective agents, and any other parties designated by Landlord from
time to time, with terms, coverages and in companies at all times satisfactory
to Landlord as follows:
(i) Commercial General Liability Insurance against claims for
personal injury, death or property damage occurring in connection with the use
and occupancy of the Premises, including contractual liability insuring the
indemnification provisions contained in this lease, naming Landlord, and
Landlord's mortgagee, principals and principals' beneficiaries, and the
management of the Building, as additional insureds, such insurance to afford
protection to the limit of not less than Three Million Dollars ($3,000,000.00)
for each occurrence and annual aggregate.
(ii) Workers Compensation Insurance, as required to meet the
applicable laws of the state in which the Building is located, and Employers
Liability Insurance.
(iii) At all times when any work is in process in connection with
any change or alteration being made by Tenant, Tenant shall require all
contractors and subcontractors to maintain the insurance described in (i) and
(ii). Landlord and Landlord's mortgagee, principals and principals'
beneficiaries and the management of the Building will be added as additional
insureds to such policies, and evidence of same shall be delivered to
Landlord.
(iv) Property insurance on an "all risk" basis (including
sprinkler leakage, if applicable) for the full replacement cost of all
additions, improvements and alterations to the Premises and of all office
equipment, furniture, trade fixtures, merchandise and all other items of
Tenant's property on the Premises. Tenant agrees to have such insurance
policies endorsed to provide for a waiver of subrogation against Landlord by
the insurance carrier.
Tenant shall, prior to the commencement of the Term hereof and prior to
the expiration of any policy, furnish Landlord certificates evidencing that
all required insurance is in force and providing that such insurance may not
be cancelled or changed without at least thirty (30) days' prior written
notice to Landlord and Tenant (unless such cancellation is due to nonpayment
of premiums, in which event ten (10) days' prior notice shall be provided).
(b) Tenant shall comply with all applicable laws and ordinances, all
orders and decrees of court and all requirements of other governmental
authority and shall not directly or indirectly make any use of the Premises
which may thereby be prohibited or be dangerous to person or property or which
may jeopardize any insurance coverage, or may increase the cost of insurance
or require additional insurance coverage.
(c) Landlord and Tenant hereby waive all claims of recovery from the
other party for loss or damage to any of its property.
21. Nonwaiver. No waiver of any condition expressed in this lease shall
be implied by any neglect of Landlord to enforce any remedy on account of the
violation of such condition whether or not
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such violation be continued or repeated subsequently, and no express waiver
shall affect any condition other than the one specified in such waiver and
that one only for the time and in the manner specifically stated. Without
limiting the provisions of Section 8, it is agreed that no receipt of moneys
by Landlord from Tenant after the termination in any way of the Term or of
Tenant's right of possession hereunder or after the giving of any notice shall
reinstate, continue or extend the Term or affect any notice given to Tenant
prior to the receipt of such moneys. It is also agreed that after the service
of notice or the commencement of a suit or after final judgment for possession
of the Premises, Landlord may receive and collect any moneys due, and the
payment of said moneys shall not waive or affect said notice, suit or
judgment.
22. Estoppel Certificate. Tenant agrees that from time to time upon
written request by Landlord, or the holder of any Mortgage or any ground
lessor, Tenant (or any permitted assignee, subtenant or other occupant of the
Premises claiming by, through or under Tenant) will deliver to Landlord or to
the holder of any Mortgage or ground lessor or contract purchaser of an
interest in Landlord or in the Building, within ten (10) days after such
written request shall have been served upon Tenant, a statement in writing
signed by Tenant, addressed to such person or persons as Landlord shall
request, certifying (a) that this lease is unmodified and in full force and
effect (or if there have been modifications, that the lease as modified is in
full force and effect and identifying the modifications); (b)the date upon
which Tenant began paying Rent and the dates to which the Rent and other
charges have been paid, (c) the date upon which the Term shall end, (d) that
the Landlord is not in default under any provision of this lease, or, if in
default, the nature thereof in detail; (e) that the Premises have been
completed in accordance with the terms hereof and Tenant is in occupancy and
paying Rent on a current basis with no rental offsets or claims; (f) that
there has been no prepayment of Rent other than that provided for in the
lease; (g) the amount of any security deposit made by Tenant or
Tenant-successor, (h) that there are no actions, whether voluntary or
otherwise, pending against Tenant under the bankruptcy laws of the United
States or any State thereof, and (i) such other matters as may be required by
the Landlord, holder of a Mortgage, ground lessor or contract purchaser.
23. Tenant-Corporation or Partnership. In case Tenant is a corporation,
Tenant (a) represents and warrants that this lease has been duly authorized,
executed and delivered by and on behalf of the Tenant and constitutes the
valid and binding agreement of the Tenant in accordance with the terms hereof
and (b) if Landlord so requests, it shall deliver to Landlord or its agent,
concurrently with the delivery of this lease executed by Tenant, certified
resolutions of the board of directors (and shareholders, if required)
authorizing Tenant's execution and delivery of this lease and the performance
of Tenant's obligations hereunder. In case Tenant is a partnership, Tenant
represents and warrants that all of the persons who are general or managing
partners in said partnership have executed this lease on behalf of Tenant, or
that this lease has been executed and delivered pursuant to and in conformity
with a valid and effective authorization therefor by all of the general or
managing partners of such partnership, and is and constitutes the valid and
binding agreement of the partnership and each and every partner therein in
accordance with its terms. Also, it is agreed that each and every present and
future general partner in Tenant shall be and remain at all times jointly and
severally liable hereunder and that the death, resignation or withdrawal of
any partner shall not release the liability of such partner under the terms of
this lease unless and until the Landlord shall have consented in writing to
such release, Landlord being under no obligation to so consent.
24. Real Estate Brokers. Tenant represents that Tenant has directly
dealt with and only with CB Commercial Real Estate Group, Inc. (whose
commission, if any, shall be paid by Landlord pursuant
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to separate agreement) as broker in connection with this lease and agrees to
indemnify and hold Landlord harmless from all damages, liability and expense
(including reasonable attorneys' fees) arising from any claims or demands of
any other broker or brokers or finders for any commission alleged to be due
such broker or brokers or finders in connection with its participating in the
negotiation with Tenant of this lease.
25. Notices. All notices to or demands upon Landlord or Tenant desired
or required to be given under any of the provisions hereof shall be in
writing. Any notices or demands from Landlord to Tenant shall be deemed to
have been given if a copy thereof has been personally delivered to Tenant or
Tenant's agent (including without limitation delivery by messenger or courier,
with evidence of receipt) or mailed by United States registered or certified
mail, return receipt requested, addressed to Tenant at the address of the
Premises after Tenant's occupancy of the Premises. If Tenant is a corporation,
any notices or demands from Landlord to Tenant also shall be deemed to have
been given if a copy thereof is mailed by United States registered or
certified mail, return receipt requested, to Tenant's registered agent in
Illinois. Any notices or demands from Landlord to Tenant may be signed by
Landlord, its beneficiaries, the managing agent for the Building or any agent
of any of them. Any notices or demands from Tenant to Landlord shall be deemed
to have been given if a copy thereof has been personally delivered to Landlord
or the managing agent of the Building (including without limitation delivery
by messenger or courier, with evidence of receipt) or mailed by United States
registered or certified mail, return receipt requested, to Landlord in care of
ARES, Inc. Oak Brook Business Center, 2000 York Road, Suite 106 Oak Brook,
Illinois 60521, with a copy to MONY Real Estate Investment Management, 1333
Butterfield Road, Suite 400, Downers Grove, Illinois 60515. Landlord, its
beneficiaries, or the managing agent of the Building may, upon notice to
Tenant, change either the address for, or the party who shall receive, notices
or demands from Tenant to Landlord on Landlord's behalf. All notices to or
demands upon Landlord or Tenant mailed by registered or certified mail, return
receipt requested, shall be deemed served at the time the same were posted.
26. Miscellaneous.
(a) Each provision of this lease shall extend to and shall bind and
inure to the benefit not only of Landlord and Tenant, but also their
respective heirs, legal representatives, successors and assigns, but this
provision shall not operate to permit any transfer, assignment, mortgage,
encumbrance, lien, charge, or subletting contrary to the provisions of Section
12.
(b) All of the agreements of Landlord and Tenant with respect to the
Premises are contained in this lease; and no modification, waiver or amendment
of this lease or of any of its conditions or provisions shall be binding upon
Landlord unless in writing signed by Landlord.
(c) Submission of this instrument for examination shall not constitute a
reservation of or option for the Premises or in any manner bind Landlord and
no lease or obligation on Landlord shall arise until this instrument is signed
and delivered by Landlord and Tenant; provided, however, the execution and
delivery by Tenant of this lease to Landlord or the agent of Landlord's
beneficiary shall constitute an irrevocable offer by Tenant to lease the
Premises on the terms and conditions herein contained, which offer may not be
revoked for thirty (30) days after such delivery.
(d) The word "Tenant" whenever used herein shall be construed to mean
Tenants or any one or more of them in all cases where there is more than one
Tenant; and the necessary grammatical changes
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required to make the provisions hereof apply either to corporations or other
organizations, partnerships or other entities, or individuals, shall in all
cases be assumed as though in each case fully expressed. In all cases where
there is more than one Tenant, the liability of each shall be joint and
several.
(e) Clauses, plats, and riders, if any, signed by Landlord and Tenant
and endorsed on or affixed to this lease are part hereof and in the event of
variation or discrepancy the duplicate original hereof, including such
clauses, plats and riders, if any, held by Landlord shall control.
(f) The headings of Sections are for convenience only and do not limit,
expand or construe the contents of the Sections.
(g) The Landlord's title is and always shall be paramount to the title
of Tenant, and nothing in this lease contained shall empower Tenant to do any
act which can, shall or may encumber the title of Landlord.
(h) Time is of the essence of this lease and of each and all
provisions thereof.
(i) All amounts (including, without limitation, Base Rent and Additional
Rent) owed by Tenant to Landlord pursuant to any provision of this lease shall
not be deemed a loan but shall bear interest from the date due until paid at
the annual rate equal to three percentage points in excess of the rate of
interest announced from time to time by The First National Bank of Chicago at
Chicago, Illinois, or any successor thereto, as its corporate base rate,
changing as and when said corporate base rate changes, unless a lesser rate
shall then be the maximum rate permissible by law with respect thereto, in
which event said lesser rate shall be charged.
(j) The invalidity of any provision of this lease shall not impair or
affect in any manner the validity, enforceability or effect of the rest of
this lease
(k) All understandings and agreements, oral or written, heretofore made
between the parties hereto are merged in this lease, which alone fully and
completely expresses the agreement between Landlord (and its beneficiary and
their agents) and Tenant.
(l) It is acknowledged and agreed by each of the parties hereto, that
each has an obligation to the other to mitigate damages, which, it is
acknowledged by Landlord, would include Landlord's obligation to mitigate
damages in the event of a default by Tenant under the terms and provisions of
this lease.
(m) Tenant, on paying the rent and performing the covenants this lease
requires it to perform, may peaceably and quietly have, hold and enjoy the
Premises for the Term and any extension or renewal of the Term.
(n) In the event that a party hereto sues to enforce the provisions this
lease as against the other, the prevailing party in such suit shall be
entitled to an award for the costs incurred in bringing or defending same, as
applicable, including without limitation, reasonable attorney fees.
27. Delivery of Possession. If the Landlord shall be unable to give
possession of the Premises on the date of the commencement of the Term for any
reason, Landlord shall not be subject to
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any liability for failure to give possession. Under such circumstances the
Rent reserved and covenanted to be paid herein shall not commence until the
Premises are available for occupancy, and no such failure to give possession
on the date of commencement of the Term shall affect the validity of this
lease or the obligations of the Tenant hereunder, nor shall the same be
construed to extend the Term.
28. Substitution of Premises. At any time hereafter, Landlord may
substitute for the Premises other premises (herein called "The New Premises")
provided that the New Premises shall be similar to the Premises in area and
use for Tenant's purposes and shall be located in the Building. If Tenant is
already in occupancy of the Premises, then in addition, Landlord shall pay the
expense of Tenant for moving from the Premises to the New Premises and for
improving the New Premises so that they are substantially similar to the
Premises; such move shall be made during evenings, weekends, or otherwise so
as to incur the least inconvenience to Tenant; and Landlord shall first give
Tenant at least thirty (30) days notice before making such change. If Landlord
shall exercise its right hereunder, the New Premises shall thereafter be
deemed for the purposes of this lease as the Premises.
29. Signs. No signs shall be installed on the exterior of, or adjacent
to, the Premises or the Building. All signs which are erected in or on the
interior of the Premises shall be in accordance with the building standard
designated by Landlord and subject to Landlord's prior written approval. The
installation and maintenance of any and all signs by or on behalf of Tenant
shall be in full compliance with all applicable laws, ordinances, regulations,
rules and orders of any governmental authority having jurisdiction, and Tenant
shall obtain all necessary licenses and permits in connection therewith.
Tenant shall install and promptly repair, maintain and service all such signs
in accordance with proper techniques and procedures, and shall indemnify, hold
harmless and defend Landlord from all loss, cost, damage or expense, including
attorney's fees, arising out of any claim relating to the installation,
existence, operation, maintenance, repair, removal or condition of any such
sign. On or before the termination of this lease, Tenant shall, at its sole
expense, remove all such signs in a manner satisfactory to Landlord and shall
immediately repair, at Tenant's sole expense, any injury or damage caused by
removal. All costs and expenses relating to all such signs shall be borne
solely by Tenant.
30. Landlord. The term "Landlord" as used in this lease means only the
owner or owners at the time being of Landlord's interest in the Building and
the Land so that in the event of any assignment, conveyance or sale, once or
successively, of Landlord's interest in the Land and Building, or any
assignment of this lease by Landlord, said Landlord making such sale,
conveyance or assignment shall be and hereby is entirely freed and relieved of
all covenants and obligations of Landlord hereunder accruing after such
conveyance, sale or assignment, and Tenant agrees to look solely to such
purchaser, grantee or assignee with respect thereto. This lease shall not be
affected by any such conveyance, assignment or sale, and Tenant agrees to
attorn to the purchaser, grantee or assignee.
31. Title and Covenant Against Liens. The Landlord's title is and always
shall be paramount to the title of the Tenant and nothing in this lease
contained shall empower the Tenant to do any act which can, shall or may
encumber the title of the Landlord. Tenant covenants and agrees not to suffer
or permit any lien of mechanics or materialmen to be placed upon or against
the Real Property any portion thereof including the Premises or against the
Tenant's leasehold interest in the Premises and, in case of any such lien
attaching, to immediately pay and remove same. Tenant has no authority or
power to cause or permit any lien or encumbrance of any kind whatsoever,
whether created by act of Tenant, operation of law or otherwise, to attach to
or be placed upon the Real Property, Land, Building or Premises, and any and
all liens and encumbrances created by Tenant shall attach only to Tenant's
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interest in the Premises. If any such liens created, caused or permitted by
Tenant so attach and Tenant fails to pay and remove same within ten (10) days,
Landlord, at its election, may pay and satisfy the same and in such event the
sums so paid by Landlord, with interest from the date of payment at the rate
set forth in Section 26(i) hereof for amounts owed Landlord by Tenant. Such
sums shall be deemed to be additional rent due and payable by Tenant at once
without notice or demand.
32. Exculpatory Provisions. The liability of any Landlord under this
lease or any amendment to this lease, or any instrument or document executed
in connection with this lease, shall be limited to and enforceable solely
against the assets of such Landlord constituting an interest in the Land or
Building (including, where the Landlord is a trustee of a land trust, the
subject matter of the trust) and not other assets of such Landlord. Assets of
a Landlord which is a partnership do not include the assets of the partners of
such Landlord, and negative capital account of a partner in a partnership
which is a Landlord and an obligation of a partner to contribute capital to
the partnership which is Landlord shall not be deemed to be assets of the
partnership which is Landlord. No directors, officers, employees or
shareholders of any corporation which is Landlord shall have any personal
liability arising from or in connection with this lease. At any time during
which Landlord is trustee of a land trust, all of the representations,
warranties, covenants and conditions to be performed by it under this lease or
any documents or instruments executed in connection with this lease are
undertaken solely as trustee, as aforesaid, and not individually, and no
personal liability shall be assetted or be enforceable against it or any of
the beneficiaries under said trust agreement by reason of any of the
representations, warranties, covenants or conditions contained in this lease
or any documents or instruments executed in connection with this lease.
IN WITNESS WHEREOF, the parties have caused this lease to be executed on
the date first above written.
LANDLORD:
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
BY:
ITS: VICE PRESIDENT
NAME:
TENANT:
NATIONAL RESTAURANT ENTERPRISES, INC.
d/b/a Ameriking
BY:
ITS:
NAME:
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EXHIBIT A
DESCRIPTION OF PREMISES
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[DESCRIPTION OF GRAPHIC]
Floor Plan of Enterprise Centre,
2215 Enterprise Drive, Westchester, Illinois.
As Built-Suite 1503-04
Rentable sq. ft: 4,614 Scale: N.T.S.
(Compass showing North for site bearing)
<PAGE>
EXHIBIT B
BASE RENT
Lease Year Square Footage Base Rent per. Annual Base Monthly Base
sq. ft. Rent Rent
- ---------- -------------- -------------- ----------- ------------------
June 1, 1995 - 4,614 $10.50 $48,447.00 $4,037.25
May 31, 1996
June 1, 1996 - 4,614 $10.92 $50,384.88 $4,198.74
May 31, 1997
June 1, 1997 - 4,614 $11.36 $52,415.04 $4,367.92
May 31, 1998
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EXHIBIT C
RULES AND REGULATIONS
ATTACHED TO AND MADE A PART OF THE LEASE
The following Rules and Regulations shall be in effect at the Building.
Landlord reserves the right to adopt reasonable modifications and additions
hereto. In the case of any conflict between these regulations and the Lease,
the Lease shall be controlling.
1. Except with the prior written consent of Landlord, no tenant shall
conduct any retail sales in or from the Premises, or any business other
than that specifically provided for in the Lease.
2. Landlord reserves the right to prohibit personal goods and services
vendors from access to the Building except upon such reasonable terms
and conditions, including but not limited to a provision for insurance
coverage, as are related to the safety, care and cleanliness of the
Building, the preservation of good order thereon, and the relief of any
financial or other burden on Landlord occasioned by the presence of such
vendors or the sale by them of personal goods or services to a tenant or
its employees. If reasonably necessary for the accomplishment of these
purposes, Landlord may exclude a particular vendor entirely or limit the
number of vendors who may be present at any one time in the Building.
The term "personal goods or services vendors" means persons who
periodically enter the Building of which the Premises are a part for the
purpose of selling goods or services to a tenant, other than goods or
services which are used by a tenant only for the purpose of conducting
its business on the Premises. "Personal goods or services" include, but
are not limited to, drinking water and other beverages, food, barbering
services, and shoeshining services.
3. The sidewalks, halls, passages, elevators and stairways shall not be
obstructed by any tenant or used by it for any purpose other than for
ingress to and egress from their respective Premises. The halls,
passages, entrances, elevators, stairways, balconies, janitorial
closets, and roof are not for the use of the general public, and
Landlord shall in all cases retain the right to control and prevent
access thereto of all persons whose presence in the judgment of Landlord
shall be prejudicial to the safety, character, reputation and interests
of the Building and its tenants, provided that nothing herein contained
shall be construed to prevent such access to persons with whom Tenant
normally deals only for the purpose of conducting its business on the
Premises (such as clients, customers, office suppliers and equipment
vendors, and the like) unless such persons are engaged in illegal
activities. No tenant and no employees of any tenant shall go upon the
roof of the Building without the written consent of Landlord.
4. The sashes, sash doors, windows, glass lights, and any lights or
skylights that reflect or admit light into the halls or other places of
the Building shall not be covered or obstructed. The toilet rooms, water
and wash closets and other water apparatus shall not be used for any
purpose other than that for which they were constructed, and no foreign
substance of any kind whatsoever shall be thrown therein, and the
expense of any breakage, stoppage or damage, resulting from the
violation of this rule shall be borne by the tenant who, or whose
clerks, agents, employees, or visitors, shall have caused it.
5. No sign, advertisement or notice visible from the exterior of the
Premises or Building shall be
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inscribed, painted or affixed by Tenant on any part of the Building or
the Premises without the prior written consent of Landlord. If Landlord
shall have given such consent at any time, whether before or after the
execution of this Lease, such consent shall in no way operate as a
waiver or release of any of the provisions hereof or of this Lease, and
shall be deemed to relate only to the particular sign, advertisement or
notice so consented to by Landlord and shall not be construed as
dispensing with the necessity of obtaining the specific written consent
of Landlord with respect to each and every such sign, advertisement or
notice other than the particular sign, advertisement or notice, as the
case may be, so consented to by Landlord.
6. In order to maintain the outward professional appearance of the
Building, all window coverings to be installed at the Premises shall be
subject to Landlord's prior reasonable approval. If Landlord, by a
notice in writing to Tenant, shall object to any curtain, blind, shade
or screen attached to, or hung in, or used in connection with, any
window or door of the Premises, such use of such curtain, blind, shade
or screen shall be forthwith discontinued by Tenant. No awnings shall be
permitted on any part of the Premises.
7. Tenant shall not do or permit anything to be done in the Premises, or
bring or keep anything therein, which shall in any way increase the rate
of fire insurance on the Building, or on the property kept therein, or
obstruct or interfere with the rights of other tenants, or in any way
injure or annoy them; or conflict with the regulations of the Fire
Department or the fire laws, or with any insurance policy upon the
Building, or any part thereof, or with any rules and ordinances
established by the Board of Health or other governmental authority.
8. No safes or other objects larger or heavier than the freight elevators of
the Building are limited to carry shall be brought into or installed in
the Premises. Landlord shall have the power to prescribe the weight,
method of installation and position of such safes or other objects. The
moving of safes shall occur only between such hours as may be designated
by, and only upon previous notice to, the manager of the Building, and
the persons employed to move safes in or out of the Building must be
acceptable to Landlord. No freight, furniture or bulky matter of any
description shall be received into the Building or carried into the
elevators except during hours and in a manner approved by Landlord.
9. Landlord shall clean the Premises as provided in the Lease, and except
with the written consent of Landlord, no person or persons other than
those approved by Landlord will be permitted to enter the Building for
such purpose, but Tenant shall not cause unnecessary labor by reason of
Tenant's carelessness and indifference in the preservation of good order
and cleanliness.
10. No tenant shall sweep or throw or permit to be swept or thrown from the
Premises any dirt or other substance into any of the corridors or halls
or elevators, or out of the doors or windows or stairways of the
Building, and Tenant shall not use, keep or permit to be used or kept
any foul or noxious gas or substance in the Premises, or permit or
suffer the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by reason
of noise, odors and/or vibrations, or interfere in any way with other
tenants or those having business therein, nor shall any animals or birds
be kept in or about the Building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the Building is prohibited.
11. Except for the use of microwave ovens and coffee makers for Tenant's
personal use, no cooking
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shall be done or permitted by Tenant on the Premises, nor shall the
Building be used for lodging.
12. Tenant shall not use or keep in the Building any kerosene, gasoline, or
inflammable fluid or any other illuminating material, or use any method
of heating other than that supplied by Landlord.
13. If Tenant desires telephone or telegraph connections, Landlord will
direct electricians as to where and how the wires are to be introduced.
No boring or cutting for wires or other otherwise shall be made without
directions from Landlord.
14. Each tenant, upon the termination of its tenancy, shall deliver to
Landlord all the keys of offices, rooms and toilet rooms, and security
access card/keys which shall have been furnished such tenant or which
such tenant shall have had made, and in the event of loss of any keys so
furnished, shall pay Landlord therefor.
15. No Tenant shall lay linoleum or other similar floor covering so that the
same shall be affixed to the floor of the Premises in any manner except
by a paste, or other material which may easily be removed with water,
the use of cement or other similar adhesive materials being expressly
prohibited. The method of affixing any such linoleum or other similar
floor covering to the floor, as well as the method of affixing carpets
or rugs to the Premises shall be subject to reasonable approval by
Landlord. The expense of repairing any damage resulting from a violation
of this rule shall be borne by Tenant by whom, or by those agents,
clerks, employees or visitors, the damage shall have been caused.
16. No furniture, packages or merchandise will be received in the Building
or carried up or down in the elevators, except between such Building
hours and in such elevators as shall be designated by Landlord.
17. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 5:00 p.m. and 8:00 a.m. access to the Building or to the halls,
corridors, elevators or stairways in the Building, or to the Premises
may be refused unless the person seeking access is known to the building
watchman, if any, in charge and has a pass or is properly identified.
Landlord shall in no case be liable for damages for the admission to or
exclusion from the Building of any person whom Landlord has the right to
exclude under Rule 3 above. In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right but shall
not be obligated to prevent access to the Building during the
continuance of the same by closing the doors or otherwise, for the
safety of the tenants and protection of property in the Building.
18. Tenant shall see that the windows and doors of the Premises are closed
and securely locked before leaving the Building and Tenant shall
exercise extraordinary care and caution that all water faucets or water
apparatus are entirely shut off before Tenant or Tenant's employees
leave the Building, and that all electricity, gas or air shall likewise
be carefully shut off, so as to prevent waste or damage, and for any
default or carelessness Tenant shall make good all injuries sustained by
other tenants or occupants of the Building or Landlord.
19. Tenant shall not alter any lock or install a new or additional lock or
any bolt on any door of the Premises without prior written consent of
Landlord. If Landlord shall give its consent, Tenant shall in each case
furnish Landlord with a key for any such lock.
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20. Tenant shall not install equipment, such as but not limited to
electronic tabulating or computer equipment, requiring electrical or air
conditioning service in excess of those to be provided by Landlord under
the Lease.
21. No bicycle, or shopping cart, or other vehicle or any animal shall be
brought into the Premises or the halls, corridors, elevators or any part
of the Building by Tenant.
22. Landlord shall have the right to prohibit the use of the name of the
Building or Project or any other publicity by Tenant which in Landlord's
opinion tends to impair the reputation of the Building or Project or
their desirability for other tenants, and upon written notice from
Landlord, Tenant will refrain from or discontinue such publicity.
23. Tenant shall not erect any aerial or antenna on the roof or exterior
walls of the Premises, Building, or Project without the prior written
consent of Landlord.
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EXHIBIT D
CONSTRUCTION WORK LETTER
This Construction Work Letter is attached to and made a part of that
certain lease captioned "Office Lease" dated April 17, 1993
1.a. Space Plans. Tenant has hereby approved those space plans dated
March 29, 1995 prepared by Herreras Design Associates ("Architect").
b. Working Drawings. Tenant shall cause to be prepared "Working Drawings"
based upon the approved space plans. The Working Drawings shall include
architectural, mechanical and electrical drawings.
c. Costs. Tenant has solicited specific trade costs and shall provide to
Landlord an estimate of the cost to complete the "Tenant Improvements"
("Cost(s)"). This Cost shall include all items necessary to be expended to
perform the Tenant Improvements. This Cost may include (however is not limited
to) general contractor hard and soft costs, overhead and profit, general
conditions, sales tax, permit fees, electrical engineering, mechanical
engineering, supervisory fees and space planning fees. Tenant in its own name
and not on behalf of Landlord, shall contract directly for the Tenant
Improvements to be performed.
2. Landlord's Allowance. Landlord shall be responsible for no more than
$69,210.00 of the Costs for the Tenant Improvements (calculated at the rate of
$15.00 per square foot of the Premises, the "Allowance"). Except as
hereinafter provided, Tenant shall be solely responsible for all costs for the
Tenant Improvements which exceed the Allowance. In the event that the Costs
are less than the Allowance, any excess of the Allowance over the Costs shall
accrue to and for the benefit of Landlord and Tenant shall have no claim to
same. In addition to the Allowance, Landlord will pay up to $1,500.00 for
architectural fees incurred by Landlord. Any architectural fees incurred by
Landlord in excess of $1,500.00 shall be charged against the Allowance.
3. Representatives. Both Landlord and Tenant shall each identify to the
other in writing two individuals who have the responsibility to make changes
or decisions as it relates to all items contained in the Work Schedule
including without limitation any changes which may cause an increase in Cost
of Tenant Improvements or a delay in occupancy.
4. Supervisory Fee. Landlord shall receive a fee equal to five percent
(5%) of the Costs to compensate Landlord for its time, costs and expenses to
be incurred in supervising the Tenant Improvement work. The aforesaid fee
shall not be payable from the Allowance, nor shall Tenant be responsible for
payment of same.
5. Disbursement Procedure.
a. Initial Deliveries. Except as otherwise hereinafter required by
Landlord, and except as otherwise provided in this lease all requests for
disbursement of Allowance monies to pay for the Tenant Improvements shall be
made by Tenant. At least ten (10) business days in advance of the first
request of the Tenant to Landlord for disbursement of Allowance monies towards
payment of the Tenant Improvements, Tenant shall deliver or cause to be
delivered to Landlord for its review the following:
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(i) copies of all contracts with contractors, suppliers, engineers
or consultants for the design and/or construction of the Tenant Improvements
and the materials to be utilized in connection therewith;
(ii) a statement certified by Tenant disclosing the various
contracts entered into, and/or to be entered into, with respect to the Tenant
Improvements and setting forth the names of contractors, their addresses, work
and materials to be furnished, amounts of the contracts, amounts paid to
date, amounts of current payments, balances due and reconciliation of the cost
of the various contracts entered into by the Tenant with the Improvement
budget (the "Tenant's Sworn Statement"); and
(ii) a statement certified by the Tenant's general contractor
disclosing the various contracts entered into, and/or to be entered into, with
respect to the Tenant Improvements and setting forth the names of contractors,
their addresses, work and materials to be furnished, amounts of the
contracts, amounts paid to date, amounts of current payments, balances due and
reconciliation of the cost of the various contracts entered into by the
general contractor with the Improvement budget (the "General Contractor's
Sworn Statement").
b. Draw Request Documents. At least ten (10) business days prior
to the date of each requested disbursement of Allowance monies for payment for
the Tenant Improvements, Tenant shall deliver the following documents with
respect to such request ("Disbursement Request Documents") to Landlord:
(i) a written certification from Tenant requesting the amount of the
disbursement and requesting landlord to disburse such amount;
(ii) a disbursement request summary form completed and certified
by Tenant showing items, on a line item by line item basis, of the various
cost components comprising the Tenant Improvements, with amounts previously
paid, amounts presently requested for disbursement, and remaining amounts to
be disbursed;
(iii) a current (i.e. as of the date of the disbursement request)
Tenant's Sworn Statement and General Contractors Sworn Statement;
(iv) a certification from the Tenant, the general contractor, the
Tenant's architect, and the landlord's architect if required by Landlord,
that the work and materials for which payment is requested have been performed,
installed or delivered;
(v) partial, or if payment in full is made final, lien waivers or
releases of lien for all lienable work done (i.e. performed to date and for
which payment has been previously made); and,
(vi) such other documentation and/or undertaking, as reasonably
required by Landlord.
c. Monthly. Landlord shall make disbursements of Allowance monies
for payment of the Tenant Improvements either directly to the contractors and
materialmen or to Tenant for payment to the contractors and materialmen.
Disbursements shall be made not more frequently than once a month,
provided: (i) no default
D2
<PAGE>
exists hereunder; (ii) Landlord has approved the Disbursement Request
Documents in writing; and (iii) if required by Landlord, Landlord has received
Tenant's written certification addressed to Landlord that no additional
contracts have been let since the submission of Tenant's Sworn Statement.
In addition to the aforesaid provisions, disbursements for the final
costs of the Tenant Improvements shall be subject to Landlord receiving and
approving the following: (i) copies of all licenses and permits necessary for
the lawful occupancy of the Tenant Improvements; (ii) certification from each
of the Tenant, Tenant's architect and the general contractor that the Tenant
Improvements have been substantially completed in accordance with the
Working Drawings; and (iii) a certification from Landlord's architect that
the Tenant Improvements have been completed in accordance with the Working
Drawings.
d. Amount of Disbursements. Subject to "Retainage" (hereinafter
defined), Landlord shall disburse the Allowance monies pro rata in accordance
with the quotient obtained (to be converted to a percentage, hereinafter
"Landlord's Disbursement Percentage" which percentage shall never exceed 100%)
by dividing the Allowance monies by the total Cost of the Tenant Improvements.
Subject to the provisions hereof, upon each request by Tenant for disbursement
of Allowance monies, Landlord shall disburse, to the extent of available
Allowance monies, an amount equal to the product of the Landlord's
Disbursement Percentage times the costs of the Tenant Improvements the subject
of the then current disbursement request.
e. Retainage. Each disbursement of Allowance monies shall be
subject to a holdback by Landlord, and such percentage shall be separately
accounted for by Landlord, of ten percent (10%) of the Costs (the "Retainage")
as set forth on the General Contractor's Sworn Statement. Retainage shall be
disbursed upon substantial completion of the work (subject, however, to a
further holdback for "Punchlist Items" (hereinafter defined)) in the amount of
one hundred fifty percent (150%) of the cost to complete such items as
determined in the manner hereinafter provided).
f. Punchlist Procedure. At the time that Tenant seeks
disbursement of the final Allowance monies and release of Retainage, Tenant
shall schedule with Landlord, Landlord's architect if required by Landlord,
and the general contractor, a walk through of the Premises for the purpose of
determining unperformed Improvement work and improperly performed Improvement
work (the "Punchlist Items"). The Tenant and Landlord shall jointly determine
and set forth in writing signed by both Tenant and Landlord the Punchlist
Items and the cost and expense of completing same.
g. Lien Free Completion. Tenant covenants and agrees to complete
the Tenant Improvements in a good and workmanlike manner. Upon completion of
the Tenant Improvements, Tenant shall provide Landlord with a copy of the
certificate of occupancy for the Premises as improved by the Tenant
Improvements together with final lien waivers for same. In connection with the
Tenant Improvements, Tenant shall keep the Premises and the Project free of
mechanics liens and the like. If any such liens are created, caused or
permitted by Tenant to attach and Tenant falls to pay and remove same within
ten (10) days of attachment of same, Landlord, at its election, may pay and
satisfy same and in such event the sums so paid by Landlord, with interest
from the date of payment at the rate set forth in this Lease for amounts owed
Landlord by Tenant, shall be additional rent due and payable by Tenant at once
without notice or demand. In the event that any such liens are created, caused
or permitted by Tenant to attach, Landlord may, regardless of whether Tenant
is or is not in default under this Lease, withhold from any undisbursed portion
of the Allowance an amount equal to 150% of the amount of such
D3
<PAGE>
lien or liens, or alternatively, landlord may pay and satisfy same out of any
undisbursed Allowance monies. Notwithstanding the foregoing provision to the
contrary, Tenant shall have the right to contest in good faith any such liens
with respect to which it is obligated to remove as above set forth, provided
that Tenant: (i) advises Landlord of its intent to contest same, (ii) deposits
with Landlord within the ten (10) day period described above, monies, or money
equivalents acceptable to Landlord, equal to one hundred and fifty percent
(150%) of the amount of the lien and all penalties and interest on such lien
that may accrue or be payable, and (iii) diligently and in good faith proceeds
with the prosecution of same.
h. Definition of Substantial Completion. For purpose of this
Lease, the term "substantial completion" shall mean the earlier to occur of: (i)
that date on which the certificate of occupancy is issued for the Premises,
and (ii) that date on which Tenant's architect, and if required by Landlord,
Landlord's architect, certifies to Landlord that the Tenant Improvements have
been sufficiently complete, in accordance with the Working Drawings, so that
Tenant can lawfully occupy the Premises for the use for which it is
intended.
D4
<PAGE>
TENANT: NATIONAL RESTAURANT ENTERPRISES, INC. D/B/A AMERIKING
PROPERTY:
ENTERPRISE OFFICE CENTRE
2215 ENTERPRISE DRIVE
WESTCHESTER, ILLINOIS
SUITE: 1503
PREMISES RENTABLE SQUARE FOOTAGE: 4,614
TERM OF LEASE: JUNE 1, 1995 TO JUNE 30, 1998 (THREE YEARS AND ONE MONTH)
DATE OF LEASE: APRIL 17, 1995
DATE OF THE FIRST AMENDMENT TO LEASE: DECEMBER 6, 1995
FIRST AMENDMENT TO LEASE
(PERTAINING TO EXTENSION OF TERM)
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
AND
NATIONAL RESTAURANT ENTERPRISES, INC.
(D/B/A AMERIKING)
TABLE OF CONTENTS
1.01 Incorporation.......................................................1
1.02 Defined Terms.......................................................1
2.01 Amendment of Lease..................................................1
(a) Extension of Term..............................................1
(b) Base Rent for Premises.........................................1
3.01 Effective Date......................................................2
3.02 Confirmation........................................................2
3.03 Authorization.......................................................2
3.04 Limitation..........................................................2
3.05 Broker..............................................................2
FIRST AMENDMENT TO LEASE
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
AND
NATIONAL RESTAURANT ENTERPRISES, INC.
(D/B/A AMERIKING)
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is entered into as of
December 6, 1995 by and between THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
(hereinafter "Landlord") and NATIONAL RESTAURANT ENTERPRISES, INC. D/B/A
AMERIKING (hereinafter "Tenant").
RECITALS:
A. Landlord and Tenant entered into that certain lease agreement dated
April 17, 1995 and captioned "Office Lease" (the "Lease") pertaining to the
premises therein described consisting of 4,614 rentable square feet (the
"Premises").
B. Tenant wishes to extend the term of the Lease to June 30, 1998.
C. Landlord is willing to extend the terms of the Lease, in accordance
with and subject to, the terms and provisions of this Amendment.
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledge, Landlord and Tenant agree as
follows:
ARTICLE I
Incorporated/Defined Terms
1.01 Incorporation. The preambles to this Amendment are fully
incorporated herein by this reference thereto with the same force and effect as
though restated herein.
1.02 Defined Terms. To the extent not otherwise defined herein to the
contrary, all capitalized terms and phrases used in this Amendment shall have
the respective meanings ascribed to them in the Lease.
ARTICLE II
Amendment of Lease
2.01 Amendment of Lease. The Lease is amended and modified as set forth
in this Article II effective as of the date of this Amendment, unless
specifically set forth to the contrary hereinbelow contained.
(a) Extension of Term. The term of the Lease is extended to June 30,
1998, and the Lease shall be read accordingly.
(b) Base Rent for Premises. Base Rent under the Lease for the Premises
for that portion of the term of the Lease consisting of the one (1) month
extension of the term to June 30, 1998 shall be as set forth in the following
Premises Base Rent Table:
PREMISES BASE RENT TABLE:
Lease period Premises Base Rent Per Annualized Base Monthly Base
Square Foot Rent Rent
June 1, 1998 to 4,614 $11.36 $52,415,04 $4,367.92
June 30, 1998
ARTICLE III
Miscellaneous
3.01 Effective Date. Except as to those provisions herein specifically
stated to the contrary, if any, the terms and provisions of this Amendment are
effective as of the date of this Amendment.
3.02 Confirmation. The terms and provisions of the Lease as modified
hereby are hereby, adopted, ratified, and confirmed by the parties hereto.
3.03 Authorization. The undersigned individual executing this Amendment
does hereby represent and warrant to Landlord that he is fully empowered and
authorized to execute this Amendment on hebalf of Tenant.
3.04 Limitation. The liability of Landlord under this Amendment, the
Lease or any amendment to this Lease, or any instrument or document executed in
connection with this Lease, shall be limited to and enforceable solely against
the assets of such Landlord constituting an interest in the Building (including,
where the Landlord is a trustee of a land trust, the subject matter of the
trust) and not other assets of such Landlord. Assets of a Landlord which is a
partnership do not include the assets of the partners of such Landlord, and
negative capital account of a partner in a partnership which is Landlord shall
not be deemed to be assets of the partnership which is Landlord. No directors,
officers, employees or shareholders of any corporation which is Landlord shall
have any personal liability arising from or in connection with this Lease. At
any time during which Landlord is trustee of a land trust, all of the
representations, warranties, covenants and conditions to be performed by it
under this Lease or any documents or instruments executed in connection with
this Lease are undertaken solely as trustee, as aforesaid, and not individually,
and no personal liability shall be asserted or be enforceable against it or any
of the beneficiaries under said trust agreement by reason of any of the
representations, warranties, covenants or conditions contained in this Lease or
any documents of instruments executed in connection with this Lease.
3.05 Broker. Tenant represents that Tenant has directly dealt with and
only with Advantage Real Estate Services, Inc. and CB Commercial Real Estate
Group, Inc. (whose commission, if any, shall be paid by Landlord pursuant to
separate agreement) as broker in connection with this lease and agrees to
indemnify and hold Landlord harmless from all damages, liability and expense
(including reasonable attorneys' fees) arising from any claims or demands of any
other broker or brokers or finders for any commission alleged to be due such
broker or brokers or finders in connection with its participating in the
negotiation with Tenant of this lease.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first
above written.
LANDLORD:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
BY:_________________________
ITS_________________________
NAME________________________ DATE:___________
TENANT:
NATIONAL RESTAURANT ENTERPRISES, INC.
D/B/A AMERIKING
BY:__________________________
ITS:_________________________
NAME:________________________ DATE:___________
AMERIKING, INC.
LIST OF SUBSIDIARIES
National Restaurant Enterprises, Inc.
AmeriKing Illinois Corporation I
AmeriKing Colorado Corporation I
AmeriKing Tennessee Corporation I
AmeriKing Virginia Corporation I
AmeriKing Cincinnati Corporation I
AmeriKing Michigan Corporation I
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary
finacial information extracted
from the 1995 consolidated
financial statements of
AmeriKing, Inc. (formerly NRE
Holdings, Inc.) and is
qualified in its entirety by
reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JAN-01-1996
<CASH> 1,887
<SECURITIES> 0
<RECEIVABLES> 1,118 <F1>
<ALLOWANCES> 0
<INVENTORY> 1,009
<CURRENT-ASSETS> 5,232 <F2>
<PP&E> 32,303
<DEPRECIATION> 3,846
<TOTAL-ASSETS> 107,236 <F3>
<CURRENT-LIABILITIES> 18,434 <F4>
<BONDS> 79,270 <F5>
0
0 <F6>
<COMMON> 0 <F7>
<OTHER-SE> 8,743 <F8>
<TOTAL-LIABILITY-AND-EQUITY> 107,236
<SALES> 139,572
<TOTAL-REVENUES> 139,572 <F9>
<CGS> 44,798
<TOTAL-COSTS> 123,181 <F10>
<OTHER-EXPENSES> 728 <F11>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,834 <F12>
<INCOME-PRETAX> 1,727
<INCOME-TAX> 825
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 902
<EPS-PRIMARY> 902 <F13>
<EPS-DILUTED> 803 <F14>
<FN>
<F1> Figure for receivables is net of allowances for doubtful accounts.
<F2> Includes prepaid expenses of $1,218.
<F3> Includes goodwill of $66,847 (net of amortization) and deferred financing
costs of $3,096, deferred organization costs of $220 and franchise agreement
expenses of $3,384 (each net of amortization) resulting from prior
acquisitions by AmeriKing, Inc. See the "Prospectus Summary" and
"Business-Business Strategy" sections of the AmeriKing Registration Statement
for a discussion of AmeriKing's acquisitions.
<F4> Includes current portion of long-term debt of $10,741 as of January 1,
1996. Management expects to refinance on a long-term basis all but $121 of the
current portion of long-term debt.
<F5> Includes long-term debt of $79,094 (net of the current portion of long-term
debt) and capitalized leases of $176 (net of the current portion of
capitalized leases). As of January 1, 1996, outstanding long-term debt of
AmeriKing on a consolidated basis consisted of (i) senior secured indebtedness
comprised of two term loans of $41,750 (net of current portion) and $19,600
(net of current portion), (ii) a promissory note of $1,744 (net of current
portion), (iii) senior subordinated notes in the aggregate principal
amount of $11,000, (iv) seller notes in the aggregate principal amount of
$4,400 and (v) a junior subordinated note in the principal amount of $600. For
a description of the terms of AmeriKing's long-term debt, see
"Description of Certain Indebtedness" in the AmeriKing Registration Statement
and Footnote 5 to AmeriKing's fiscal 1995 consolidated financial statements.
<F6> As of January 1, 1996, AmeriKing had 7,501 shares of preferred stock, $.01
par value per share, outstanding. For a description of AmeriKing's preferred
stock as of January 1, 1996, see AmeriKing's fiscal 1995 Consolidated
Statement of Stockholders' Equity and Footnote 7 to AmeriKing's fiscal 1995
Notes to Consolidated Financial Statements.
<F7> As of January 1, 1996, AmeriKing had 1,000 shares of common stock, $.01 par
value per share, outstanding. For a description of AmeriKing's common stock as
of January 1, 1996, see AmeriKing's fiscal 1995 Consolidated Statement of
Stockholders' Equity and Footnote 7 of AmeriKing's fiscal 1995 Consolidated
Financial Statements.
<F8> Consists of $7,600 of additional paid in capital and $1,143 of retained
earnings.
<F9> In fiscal 1995, AmeriKing's revenues were derived exclusively from sales
generated by its Burger King restaurants.
<F10> In fiscal 1995, AmeriKing's total costs consisted of (i) cost of sales
of $44,798, (ii) restaurant labor and related costs of $34,526, (iii)
occupancy expenses of $15,454, (iv) depreciation and amortization expenses of
$4,927, (v) advertising costs of $6,330, (vi) royalties of $4,788 and (vii)
other operating expenses of $12,358. For a description of AmeriKing's
operating costs, see AmeriKing's fiscal 1995 Consolidated Statement of
Operations.
<F11> Includes depreciation expense of $199 for AmeriKing's office and
management and directors' fees of $529.
<F12> Consists of $8,323 of interest expense and $511 of amortization of
deferred costs during fiscal 1995.
<F13> Earnings per share (before recapitalization) for fiscal 1995 were $902.
For information on AmeriKing's earnings per share for fiscal 1995, see
AmeriKing's 1995 consolidated financial statements. For a description of
AmeriKing's recapitalization, see AmeriKing's Registration Statement,
"Description of Capital Stock-The Recapitalization".
<F14> Earnings per share on a fully diluted basis (before recapitalization) were
$803. Assumes the exchange of all outstanding warrants as of January 1, 1996
into 112.36 shares of AmeriKing common stock, and the conversion of all
outstanding options as of January 1, 1996 into 11.24 shares of AmeriKing
common stock. For a description of AmeriKing's outstanding warrants and
options, see AmeriKing's Registration Statement "Principal and Selling
Stockholders". For a description of AmeriKing's recapitalization, see
AmeriKing's Registration Statement "Description of Capital Stock-The
Recapitalization".
</FN>
</TABLE>
Execution Copy
AMENDMENT NO. 1
TO
PURCHASE AND SALE AGREEMENT
THIS AMENDMENT NO. 1 TO PURCHASE AND SALE AGREEMENT (This
"Amendment No. 1"), dated as of February 7, 1996, is made by and
among AmeriKing Virginia Corporation, a Delaware corporation
("AVCI") and C&N Dining, Inc. a Virginia corporation, and its
affiliates as set forth in the Purchase and Sale Agreement
(collectively, the "Sellers").
W I T N E S S E T H:
WHEREAS, AVCI and Sellers are parties to a Purchase and Sale
Agreement, dated November 30, 1995 (the "Purchase and Sale Agreement"); and
WHEREAS, the parties to the Purchase and Sale Agreement desire to
consent to make certain amendments to the Purchase and Sale Agreement, as set
forth below.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
that, from and after the date hereof, the Purchase and Sale Agreement be, and
hereby is, amended as follows:
A G R E E M E N T:
I. DEFINED TERMS. Except as otherwise expressly provided
herein, capitalized terms used herein which are defined in the
Purchase and Sale Agreement, as amended hereby, shall have the
same meaning as specified in the Purchase and Sale Agreement, as
so amended.
II. AMENDMENTS: the Purchase and Sale Agreement is hereby
amended as set forth below.
(A) SECTION 1.3. Real Properties; Assignments of Leases;
Easements and Parking Agreements. Effective as of the date
hereof, the first paragraph of Section 1.3 of the Purchase
and Sale Agreement shall be deleted and replaced in its
entirety with the following:
36164048.3 95220174
<PAGE>
"Subject to the terms, provisions and conditions contained
in this Agreement and on the basis of representations and
warranties hereinafter set forth, at the Closing, each
Seller shall assign to Purchaser all of its leasehold
interest in the Leased Real Properties and shall assign or
otherwise transfer to the Purchaser or its designee all of
its right, title and interest in and to the Real Properties
and all parking and other access agreements and arrangements
relating to the Real Properties, as Follows:"
(B) SECTION 2.17. Tax Returns. Effective as of the date
hereof, Section 2.17 of the Purchase and Sale Agreement
shall be amended as follows:
At the end of Section 2.17, the following sentence shall be
added:
"Sellers shall be liable for any and all costs and Taxes
that are incurred by Sellers, their Affiliates or Sellers'
non-affiliated qualified intermediary in connection with
Sellers' arrangement of a like-kind exchange of property
between Purchaser and Sellers' qualified intermediary
pursuant to Section 1031 of the Code, and shall hold
Purchaser harmless for all costs, expenses and other
liabilities attributable to structuring such transactions as
a like-kind exchange, and Sellers acknowledge that
Purchaser, which agrees to acquire part of Sellers' Assets
from its "qualified intermediary" rather than from Sellers
solely for the benefit of Sellers, bears no responsibility
or liability with respect to the qualification of such
exchange under Section 1031 of the Code."
(C) SECTION 5.3(c). Instruments of Transfer. Effective as
of the date hereof, the first paragraph of Section 5.3(c) of the
Purchase and Sale Agreement shall be deleted and replaced in its
entirety with the following:
"Each Seller shall have delivered to Purchaser or
Purchaser's designee a bill of sale and assignment ("Bill of
Sale") substantially in the form annexed as Exhibit E
hereto, a Lease Assignment (if applicable) and any other
documents of transfer which Purchaser shall reasonably
request in order to evidence and effectuate the sale and
assignment to Purchaser or Purchaser's designee of the
Assets, the Real Property, the Real Property Leases, the
Assumed Contracts, and the consummation of all other
transactions contemplated by this Agreement and the other
Transaction Documents."
-2-
36164048.3 95220174
<PAGE>
(D) SECTION 5.3(o). Board Approval. Effective as of the
date hereof, Section 5.3(o) of the Purchase and Sale Agreement
shall be amended as follows:
The words "December 22, 1995" shall be deleted and replaced
by "the Closing Date".
(E) SECTION 7.2(b). Agreement to Indemnify. Between the words, "(ii)
any indebtedness, obligations or liabilities of any Seller including,
but not limited to, any liability or obligation set forth in Section
1.4(a) and the Tax liabilities set forth in Section 2.17" and "other
than those expressly assumed by Purchaser thereunder, add the
following:
", including any Tax liabilities incurred by any Seller or
Sellers in connection with its arrangement of a like-kind
exchange of property between Purchaser and a qualified
intermediary of Sellers"
(F) SECTION 9.6(ii). AmeriKing Realty Liability Company.
Effective as of the date hereof, the definition of AmeriKing
Realty Liability Company set forth in Section 9.6(ii) of the
Purchase and Sale Agreement shall be deleted in its entirety.
(G) SECTION 9.13. Purchaser's Designee/Seller's Qualified
Intermediary. Effective as of the date hereof, the first
paragraph of Section 1.3 of the Purchase and Sale Agreement shall
be deleted and replaced in its entirety with the following:
"Purchaser may designate a third party or one of its
subsidiaries or Affiliates as its designee to carry out all
or any part of the transactions contemplated hereby to be
carried out by Purchaser, which designation shall not
relieve Purchaser of its obligations hereunder.
Notwithstanding any other provision to the contrary,
Purchaser and C&N Dining, L.L.C. acknowledge that C&N
Dining, L.L.C. may desire to exchange all or part of its
Real Properties for other property of like kind within the
meaning of Section 1031 of the Code. Purchaser does not have
other property of like kind acceptable to C&N Dining, L.L.C.
but Purchaser agrees to cooperate with C&N Dining, L.L.C. in
consummating a like kind exchange through the use of a
"qualified intermediary" within the meaning of Treasure
Regulation Section 1.1031(k)-1(g)(4). In connection with
such an exchange, Purchaser agrees that C&N Dining, L.L.C.'s
rights under the Purchase and Sale Agreement and this
Amendment No.1 to the Purchase and Sale Agreement shall be
assignable to a "qualified intermediary" in
-3-
36164048.3 95220174
<PAGE>
accordance with Section 1031 of the Code and treasury
regulations thereunder."
III. EFFECT OF AMENDMENT NO. 1. Except as expressly amended
and modified herein, all other terms of the Purchase and Sale
Agreement shall remain in full force and effect as originally
made and entered into by the parties thereto.
IV. GOVERNING LAW. This Amendment No. 1 shall be governed
by and construed in accordance with the laws of the State of New
York (excluding provisions relating to choice of law). [Except
for issues related to title to real property, which shall be
governed by the laws of the Commonwealth of Virginia]
V. NECESSARY DOCUMENTS. The parties hereto agree to
execute or cause to be executed at any time, any and all other
documents or instruments necessary to carry out the terms of this
Agreement.
VI. COUNTERPARTS. This Amendment No. 1 may be executed in
any number of counterparts, each of which shall be deemed to be
an original and all of which together shall be deemed to be one
and the same instrument, and all signatures need not appear on
any one counterpart.
-4-
36164048.3 95220174
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first written above.
AMERIKING VIRGINIA CORPORATION I
By:______________________________
Name:
Title:
JOSEPH J. NAPARLO*
By:______________________________
* In his capacity as Sellers' Agent, pursuant to Section 1.8 of the
Purchase and Sale Agreement, for each of C&N Dining, Inc., N&C Dining, Inc.,
CNR, Inc., N&C Dining II, Inc., CCJ, Inc., NAPCHI, Inc., C&N Dining L.L.C.,
CCJ Realty, L.C., Joseph J. Naparlo, and The CCJ Irrevocable Trust.
-5-
36164048.3 95220174
NO. W-1
NRE HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT
RIGHT TO PURCHASE 31.2801 SHARES OF THE CLASS B
COMMON STOCK OF NRE HOLDINGS, INC.
----------------------------
Bingham, Dana & Gould
Boston, Massachusetts 02110
-----------------------------
42067496.1 052296 1348C 94138013
<PAGE>
RIGHT TO PURCHASE 31.2081 SHARES OF THE CLASS B
COMMON STOCK OF NRE HOLDINGS, INC.
This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as amended,
and may not be sold or transferred in the absence of such registration or an
exemption therefrom under such Act or any applicable state securities laws.
Furthermore, this Warrant may be sold or otherwise transferred only in
compliance with the conditions specified in Articles IV and V of the
Stockholders Agreement dated as of September 1, 1994 among NRE Holdings, Inc.,
National Restaurant Enterprises, Inc., The First National Bank of Boston and
the Stockholders (as defined therein) (the "Agreement"), a complete and
correct copy of which is available for inspection at the principal office of
NRE Holdings, Inc. and will be furnished without charge to the holder of this
Warrant upon written request.
NO. W-1
NRE HOLDINGS, INC.
COMMON STOCK PURCHASE WARRANT
NRE Holdings, Inc. a Delaware corporation (together with any
corporation which shall succeed or to assume the obligations of NRE Holdings,
Inc. hereunder, (the "Company"), hereby certifies that, for value received,
The First National Bank of Boston ("FNBB") or its assigns, is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time after the date hereof, subject to the provisions of
Section 2.4 hereof, 31.2081 shares equal to 3%, on a fully diluted basis, of
the outstanding fully paid and non-assessable shares of its Class B Common
Stock, .01 par value per share (the "Class B Common Stock"), when exercised
pursuant to Section 2.1 hereof, at an initial purchase price per share of $.01
(such price per share as adjusted from time to time as provided herein is
referred to herein as the "Exercise Price"). The number and character of such
shares of Class B Common Stock and the Exercise Price are subject to
adjustment as provided herein.
This Warrant is issued (a) in connection with a Revolving
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Credit and Term Loan Agreement (the "Credit Agreement") dated as of September
1, 1994 among the Company, National Restaurant Enterprises, Inc. ("NRE"),
FNBB, the other banks which are or may become parties thereto (collectively,
the "Banks"), and The First National Bank of Boston, as Agent, (b) in
connection with a Warrant Agreement dated as of August 31, 1994 between the
Company and FNBB (the "Warrant Agreement"), and (c) pursuant to the Agreement.
The holder of this Warrant shall be entitled to all of the benefits and shall
be subject to all of the obligations of the Agreement as provided therein.
1. DEFINITIONS. Terms defined in the Agreement and not
otherwise defined herein are used herein with the meanings so
defined. Certain terms are used in this Warrant as
specifically defined in Section 12 hereof.
2. EXERCISE OF WARRANT.
2.1. EXERCISE. This Warrant may be exercised, subject to the
provisions of Section 2.4 hereof, in full or in part, at any time and from
time to time by the holder hereof. In any case, exercise of this Warrant shall
be by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, by certified or official bank check payable to the
order of the Company or by wire transfer to its account, in an amount equal to
the product of the number of shares of Class B Common Stock for which this
Warrant is then being exercised times the Exercise Price then in effect. In
the event of any partial exercise of this Warrant, the Company, at its
expense, will forthwith upon each such partial exercise, issue and deliver to
or upon the order of the holder hereof a new Warrant or Warrants of like
tenor, in the name of the holder hereof or as such holder (upon payment by
such holder of any applicable transfer taxes) may request, calling in the
aggregate on the face or faces thereof for the number of shares of Class B
Common Stock equal (without giving effect to any adjustment therein) to the
number of such shares called for on the face of this Warrant minus the number
of such shares (without giving effect to any adjustment therein) for which
this Warrant shall have been exercised. Upon any exercise of this Warrant, in
whole or in part, the holder hereof may pay the aggregate Exercise Price with
respect to the shares of Class B Common Stock for which this Warrant is then
being exercised (collectively, the "Exercise Shares") by surrendering its
rights to a number of Exercise Shares having a fair market value equal to or
greater than the required Exercise Price, in which case the holder hereof
would receive the number of Exercise Shares to which it would otherwise be
entitled upon such exercise, less the
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surrendered shares.
2.2. CONFLICT WITH OTHER LAWS. Any other provisions of this
Warrant to the contrary notwithstanding, neither FNBB nor any of its
affiliates shall be entitled to exercise the rights under this Warrant to
purchase securities of the Company if, as a result of such purchase, FNBB and
all affiliates of FNBB, taken together would own, control or have power to
vote securities of the Company in violation or contravention of any law or
regulation or any judgment, decree or order of any governmental authority then
applicable to FNBB and its affiliates. For the purposes of this paragraph, a
written statement of FNBB or of any of its affiliates exercising this Warrant,
delivered to the Company upon surrender of this Warrant, to the effect that
FNBB or its affiliate, as the case may be, is legally entitled to exercise its
rights under this Warrant to purchase securities of the Company and that such
purchase will not violate or contravene any law or regulation or any judgment,
decree or order of any governmental authority then applicable to FNBB and its
affiliates, shall be conclusive and binding upon the Company and shall
absolutely obligate and bind the Company to deliver, in accordance with the
other terms and provisions hereof, certificates or other appropriate
instruments representing the securities so purchased.
2.3. WARRANT AGENT. In the event that a bank or trust company
shall have been appointed as trustee for the holder of the Warrant pursuant to
Section 6.2 hereof, such bank or trust company shall have all the powers and
duties of a warrant agent appointed pursuant to Section 13 hereof and shall
accept, in its own name for the account of the Company or such successor
entity as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of this Warrant
pursuant to this Section 2.
2.4. TERMINATION. This Warrant shall terminate upon the
earlier to occur of (a) exercise in full or (b) August 31,
2002.
3. REGISTRATION RIGHTS. The holder of this Warrant has the right
to cause the Company to register shares of Warrant Stock, and any shares
issued upon exercise hereof, under the Securities Act and any blue sky or
securities laws of any jurisdictions within the United States at the time and
in the manner specified in Section ___ of the Agreement.
4. FINANCIAL INFORMATION. The Company shall deliver to the holder of this
Warrant all financial information that the Company and NRE are required to
deliver to the
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Banks pursuant to ss.9.4 of the Credit Agreement, in the time and manner
provided therein, and, for the purposes of this Section 4, the provisions of
ss.9.4 of the Credit Agreement shall survive the termination of the Credit
Agreement.
5. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
5.1 DELIVERY OF CERTIFICATES. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within ten (10)
days thereafter, the Company, at its expense (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates
for the number of fully paid and non-assessable shares of Class B Common Stock
(or Other Securities) to which such holder shall be entitled on such exercise,
together with any other stock or Other Securities and property (including
cash, where applicable) to which such holder is entitled upon such exercise.
5.2. FRACTIONAL SHARES. In the event that the exercise of this
Warrant, in full or in part, results in the issuance of any fractional share
of Class B Common Stock, then in such event the holder of this Warrant shall
be entitled to cash equal to the fair market value of such fractional share on
the date of exercise, as determined in good faith by the Company's Board of
Directors.
6. ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS AND
RECLASSIFICATIONS. In case at any time or from time to time, the holders of
Common Stock shall have received, or (on or after the record date fixed for
the determination of shareholders eligible to receive) shall have become
entitled to receive, without payment therefor:
(a) other or additional stock or Other Securities or property (other than
cash) by way of dividend; or
(b) other or additional stock or Other Securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate restructuring;
other than additional shares of Common Stock issued as a stock dividend or in
a stock-split (adjustments in respect of which are provided for in Section 8
hereof), then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 2 hereof, shall be entitled to receive
the amount of stock and Other Securities and property (including cash in the
case referred to in subsection (b) of this Section 6) which such holder would
have received prior to or would have held on the date of such exercise if on
the date hereof he had been the holder of record of the number of shares of
Class B Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date
of such exercise, retained such shares and all such other or additional stock
and Other Securities and property (including cash in the case referred to in
subsection (b) of this Section 6) receivable by such holder as aforesaid
during such period, giving effect to all further
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adjustments called for during such period by Sections 7 and 8 hereof.
7. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION,
MERGER, ETC.
7.1. CERTAIN ADJUSTMENTS. In case at any time or from time to
time, the Company shall (a) effect a capital reorganization, reclassification
or recapitalization, (b) consolidate with or merge into any other person, or
(c) transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 2 hereof at any time after the consummation of
such reorganization, recapitalization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Class B Common Stock (or Other Securities) issuable on such exercise
prior to such consummation or effective date, the stock and Other Securities
and property (including cash) to which such holder would have been entitled
upon such consummation or in connection with such dissolution, as the case may
be, if such holder had so exercised this Warrant immediately prior thereto,
all subject to further adjustment thereafter as provided in Sections 6 and 8
hereof.
7.2. APPOINTMENT OF TRUSTEE FOR WARRANT HOLDERS UPON
DISSOLUTION. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company,
prior to such dissolution, shall, at its expense, deliver or cause to be
delivered the stock and Other Securities and property (including cash, where
applicable) receivable by the holders of the Warrant after the effective date
of such dissolution pursuant to this Section 7 to a bank or trust company
having its principal office in Boston, Massachusetts, as trustee for the
holder or holders of the Warrant.
7.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 7, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and
Other Securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or Other Securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 9 hereof.
8. ADJUSTMENTS FOR ISSUANCE OF COMMON STOCK AND AMOUNT
OF OUTSTANDING COMMON STOCK.
8.1. GENERAL. If at any time there shall occur any stock split,
stock dividend, reverse stock split or other subdivision or combination of the
Company' Common Stock ("Stock Event"), then the number of shares of Class B
Common Stock to be received by the holder of this Warrant shall be
appropriately adjusted such that the proportion of the number of shares
issuable hereunder to the total number of shares of the Company (on a fully
diluted basis) prior to such Stock Event is equal to the proportion of the
number of shares issuable hereunder after
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such Stock Event to the total number of shares of the Company (on a fully
diluted basis) after such Stock Event. No adjustment to the Exercise Price
shall be made in connection with any adjustment of the number of shares of
Class B Common Stock receivable upon exercise of this Warrant, except that the
Exercise Price shall be proportionately decreased upon the occurrence of any
stock split or other subdivision of the Common Stock.
8.2. OTHER ISSUANCES OF COMMON STOCK. Unless the holder of this
Warrant shall otherwise agree, if at any time there shall be any increase in
the number of shares of Common Stock outstanding or which the Company is
obligated to issue, or covered by any option, warrant or convertible security
which is outstanding or which the Company is obligated to issue, then the
number of shares of Class B Common Stock to be received by the holder of this
Warrant shall be adjusted to that number determined by multiplying the number
of shares of Class B Common Stock purchasable hereunder prior thereto by a
fraction (a) the numerator of which shall be the number of shares of Common
Stock outstanding or which the Company is obligated to issue, or covered by
options, warrants or convertible securities which are outstanding or which the
Company is obligated to issue, immediately after such increase, and (b) the
denominator of which shall be the number of shares of Common Stock outstanding
or which the Company is obligated to issue, or covered by options, warrants or
convertible securities which are outstanding or which the Company is obligated
to issue, immediately prior to such increase. Thereupon, the Exercise Price
shall be correspondingly reduced so that the aggregate Exercise Price for all
shares of Class B Common Stock covered hereby shall remain unchanged. The
provisions of this Section 8.2 shall not apply to any issuance of additional
Common Stock for which an adjustment is provided under Section 8.1 hereof.
8.3. OTHER SECURITIES. In case any Other Securities shall have
been issued, or shall then be subject to issue upon the conversion or exchange
of any stock (or Other Securities) of the Company (or any other issuer of
Other Securities or any other entity referred to in Section 6 hereof) or to
subscription, purchase or other acquisition pursuant to any rights or options
granted by the Company (or such other issuer or entity), the holder hereof
shall be entitled to receive upon exercise hereof such amount of Other
Securities (in lieu of or in addition to Common Stock) as is determined in
accordance with the terms hereof, treating all references to Common Stock
herein as references to Other Securities to the extent applicable, and the
computations, adjustments and readjustments provided for in this Section 8
with respect to the number of shares of Class B Common Stock issuable upon
exercise of this Warrant shall be made as nearly as possible in the manner so
provided and applied to determine the amount of Other Securities from time to
time receivable on the exercise of the Warrant, so as to provide the holder of
the Warrant with the benefits intended by this Section 8 and the other
provisions of this Warrant.
9. NO DILUTION. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger or dissolution, avoid or seek to avoid the
observance or performance of any of the terms of the Warrant. Without limiting
the generality of the foregoing, the Company (a) will not increase the par
value of any shares of stock receivable on the exercise of the Warrant above
the amount payable therefor on such exercise, (b) will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-
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assessable shares of stock on the exercise of the Warrant from time to time
outstanding, (c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary
or involuntary dissolution, liquidation or winding up, unless the rights of
the holders thereof shall be limited to a fixed sum or percentage of par value
in respect of participation in dividends and in any such distribution of
assets, (d) will comply in all respects with the provisions of Section VIII of
the Agreement except to the extent such compliance may be waived by Section
VIII of the Agreement, and (e) will not transfer all or substantially all of
its properties and assets to any other entity (corporate or otherwise), or
consolidate with or merge into any other entity or permit any such entity to
consolidate with or merge into the Company (if the Company is not the
surviving entity), unless such other entity shall expressly assume in writing
and will be bound by all the terms of this Warrant and the Agreement.
10. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In the case of
each event that may require any adjustment or readjustment in the shares of
Class B Common Stock issuable on the exercise of this Warrant, the Company at
its expense will promptly prepare a certificate setting forth such adjustment
or readjustment, or stating the reasons why no adjustment or readjustment is
being made, and showing, in detail, the facts upon which any such adjustment
or readjustment is based, including a statement of (a) the number of shares of
the Company Common Stock then outstanding on a fully diluted basis, and (b)
the number of shares of Class B Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such adjustment or readjustment
and as adjusted and readjusted (if required by Section 8) on account thereof.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the
calculations used to determine such adjustment or readjustment. At its option,
the holder of a Warrant may confirm the adjustment noted on the certificate by
causing such adjustment to be computed by an independent certified public
accountant at the expense of the Company.
11. NOTICES OF RECORD DATE. In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any Other
Securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of a11 or
substantially all the assets of the Company to or any consolidation or merger
of the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company; or
(d) any proposed issue or grant by the Company of any shares of stock of
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any class or any Other Securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of
any class or any Other Securities (other than the issue of Class B
Common Stock on the exercise of this Warrant),
then, and in each such event, the Company will mail or cause to be mailed to
the holder of this Warrant a notice specifying (a) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right,
(b) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is anticipated to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or Other Securities) shall
be entitled to exchange their shares of Common Stock (or Other Securities) for
securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up and (c) the amount and character of any
stock or Other Securities, or rights or options with respect thereto, proposed
to be issued or granted, the date of such proposed issue or grant and the
persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least thirty (30) days prior
to the date specified in such notice on which any such action is to be taken.
12. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. Sufficient
shares of authorized but unissued Class B Common Stock of the Company have
been reserved by appropriate corporate action in connection with the
prospective exercise of the Warrant, and the conversion of shares of Class B
Common Stock into shares of the Class A Common Stock as provided in the
Certificate of Incorporation of the Company. Neither the issuance of the
Warrant or the shares of Warrant Stock or conversion of shares of Common Stock
of one class into shares of the other class will require any further corporate
action by the stockholders or directors of the Company, will be subject to
pre-emptive rights in any present or future stockholders of the Company or
will conflict with any provision of any agreement to which the Company is a
party or by which it is bound, and such Common Stock, when issued upon
exercise of the Warrant in accordance with their terms or upon such
conversion, will be duly authorized, fully paid and non-assessable.
13. DEFINITIONS. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
The term Common Stock includes (a) the Company's Class A
Common Stock, $.01 par value per share (the "Class A Common Stock"),
(b) the Class B Common Stock, (c) the Class C Common Stock, $.01 par
value per share (the "Class C Common Stock"), (d) the Class D Common
Stock, $.01 par value per share (the "Class D Common Stock"), (e) any
other capital stock of any class or classes (however designated) of
the Company, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance
of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and
(f) any Other Securities into which or for which any of the
securities described in clauses (a), (b), (c), (d) or (e) above have
been converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
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The term the Company shall include NRE Holdings, Inc. and
any corporation which shall succeed to or assume the obligations of
the Company hereunder.
The term Other Securities refers to any stock (other than
Common Stock) and Other Securities of the Company or any other entity
(corporate or otherwise) which (a) the holder of this Warrant at any
time shall be entitled to receive, or shall have received, on the
exercise of this Warrant, in lieu of or in addition to Common Stock,
or (b) at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities,
in each case pursuant to Section 6 or 7 hereof.
14. WARRANT AGENT. The Company may, by written notice to the holder
of this Warrant, appoint an agent having an office in Boston, Massachusetts
for the purpose of issuing Class B Common Stock on the exercise of this
Warrant pursuant to Section 2 hereof, and exchanging or replacing this Warrant
pursuant to the Agreement, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
15. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
16. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, or sent by overnight courier at such address
as may have been furnished to the Company in writing by such holder or, until
any such holder furnishes to the Company an address, then to, and at the
address of, the last holder of this Warrant who has so furnished an address to
the Company.
17. MISCELLANEOUS. In case any provision of this Warrant shall be
invalid, illegal or unenforceable, or partially invalid, illegal or
unenforceable, the provision shall be enforced to the extent, if any, that it
may legally be enforced and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by and construed in accordance with the domestic
substantive laws (and not the conflict of law rules) of the Commonwealth of
Massachusetts. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. This
Warrant shall take effect as an instrument under seal.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officer and its corporate seal to be impressed
hereon and attested by its Secretary.
Dated as of September 1, 1994
NRE HOLDINGS, INC.
(Corporate Seal) By:___________________________
Title:
Attest:
- ---------------------------
Secretary
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FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: NRE HOLDINGS, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder shares of
Class B Common Stock of NRE HOLDINGS, INC. and herewith makes payment of $
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to , whose address is .
Dated:
__________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant)
------------------------------------------
(Address)
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INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of AmeriKing, Inc. on
Form S-1 of our reports dated March 12, 1996, October 10, 1995, and May 18,
1996, appearing in the Prospectus, which is part of this Registration Statement
and to the reference to us under the headings "Selected Consolidated Financial
Information" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
May 21, 1996
Chicago, Illinois
