SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported):
AUGUST 20, 1997
CARROLS CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
<TABLE>
<CAPTION>
1-6553 16-0958146
<S> <C> <C>
(Commission File No.) (IRS Employer
Identification No.)
</TABLE>
968 James Street, Syracuse, New York 13203
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(315) 424-0513
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On August 20, 1997, the Company acquired 63 Burger King restaurants for an
aggregate purchase price of approximately $52 million in cash, pursuant to
a Purchase Agreement, dated as of July 7, 1997, among the Company and
Richard D. Fors, Jr., Charles J. Mund, Charles J. Mund, Jr., Eric W. Mund,
William J. O'Donnell, John T. Sweeney, William J. Reznicek and certain
other individuals and entities signatory thereto. A copy of the agreement
is filed as an Exhibit hereto and is hereby incorporated by reference
herein. The Company funded the purchase price of such purchase by using
funds borrowed from Texas Commerce Bank National Association and other
lenders pursuant to a loan agreement entered into on March 27, 1997. The
purchase price for this transaction was determined through negotiations
among the parties.
2
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ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The 63 Burger King restaurants acquired by the Company were affiliated
with Resser Management Corporation, Pennyline Group, Incorporated and
Derby Management Corporation. Combined Financial Statements for the
years ended December 31, 1996, 1995 and 1994 for these entities and
the independent auditors report thereon, together with the notes
thereto, are located at pages 5 through 23 of this report
This report does not include the unaudited Interim Financial
Statements of the Burger King Franchisees required by Item 7 (a) to
Form 8K. Pursuant to Item 7 (a) (4) to Form 8K, such interim
financial information will be filed by an amendment to this report no
later than 60 days from the date hereof.
(B) PRO FORMA FINANCIAL INFORMATION
This report does not include the pro forma financial information
required by Item 7 (b) to Form 8K. Pursuant to Item 7 (b) (2) to Form
8K, such pro forma financial information will be filed by an amendment
to this report no later than 60 days from the date hereof.
(C) EXHIBITS
10.41 Purchase Agreement dated as of July 7, 1997 among Carrols
Corporation, as Purchaser, and the individuals and trusts listed on
Exhibit A attached thereto, as Sellers, the individuals and entities
listed on Exhibit B attached thereto, as Affiliated Real Property
Owners, and Richard D. Fors, Jr. and Charles J. Mund, as the Seller's
representatives.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 4, 1997
CARROLS CORPORATION
By: ______________________________
Paul R. Flanders
Vice President - Finance
4
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<PAGE>
Burger King Franchises affiliated with
Resser Management Corp.,
Pennyline Group, Inc. and
Derby Management Corp.
COMBINED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
5
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<PAGE>
BURGER KING FRANCHISES AFFILIATED WITH RESSER MANAGEMENT CORP.,
PENNYLINE GROUP, INC. AND DERBY MANAGEMENT CORP.
DECEMBER 31, 1996, 1995 AND 1994
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 1
Combined Financial Statements:
Balance Sheets 2
Statements of Income 3
Statements of Equity 4
Statements of Cash Flows 5 - 6
Notes to Combined Financial Statements 7 - 17
6
6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Boards of Directors and Stockholders of
Resser Management Corp., Pennyline Group, Inc. and Derby Management Corp.
We have audited the accompanying combined balance sheets of the Burger King
franchises affiliated with Resser Management Corp., Pennyline Group, Inc. and
Derby Management Corp. ("the combined BKs") as of December 31, 1996, 1995 and
1994 and the related statements of income, equity, and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
combined 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 audits 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 our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the combined BKs as of
December 31, 1996, 1995 and 1994 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
BECK, VILLATA & CO., P.C.
Montvale, NJ
July 21, 1997
7
7
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
COMBINED BALANCE SHEETS
As of December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C> <C>
1996 1995 1994
CURRENT ASSETS
Cash $ 557,095 $ 676,279 $ 440,013
Inventories 398,664 369,631 393,663
Note receivable - related party landlord 35,910 - -
Notes receivable-management companies 15,590,266 12,906,568 11,648,675
Prepaid expenses and other current assets 350,505 297,806 412,378
TOTAL CURRENT ASSETS 16,932,440 14,250,284 12,894,729
PROPERTY AND EQUIPMENT
Building 352,907 352,907 350,160
Restaurant equipment 15,328,566 14,281,103 13,532,249
Leasehold improvements 6,551,857 5,879,337 4,962,772
Total property and equipment, at cost 22,233,330 20,513,347 18,845,181
Less: accumulated depreciation 16,967,207 15,920,433 14,864,393
NET PROPERTY AND EQUIPMENT 5,266,123 4,592,914 3,980,788
OTHER ASSETS
Deferred charges - net 1,358,042 1,331,149 1,360,252
Note receivable - related party landlord, net of current 386,181 - -
portion
Long-term notes receivable - management companies 5,200,000 5,200,000 5,200,000
Security deposits 20,950 17,850 15,850
TOTAL OTHER ASSETS 6,965,173 6,548,999 6,576,102
$ 29,163,736 $ 25,392,197 $ 23,451,619
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Notes payable to-
Banks $ 494,162 $ 467,031 $ 377,272
Supplier 33,793 31,338 15,182
Stockholders 1,286,953 224,818 259,465
Affiliates - - 286,696
Accounts payable 1,180,258 1,288,575 2,118,233
Taxes withheld and payable 572,424 532,182 446,770
Accrued expenses and other current liabilities 716,251 656,696 675,399
TOTAL CURRENT LIABILITIES 4,283,841 3,200,640 4,179,017
Notes payable, net of current portion -
Banks 2,184,318 1,515,594 1,450,989
Supplier 171,199 204,997 120,506
Stockholders 99,138 1,625,875 1,455,442
Cash dividends payable - - 983,370
Due to unrelated landlord 11,000 - -
TOTAL LIABILITIES 6,749,496 6,547,106 8,189,324
EQUITY
Common stock, no par value, 70,500 shares authorized,
4,170.6 shares issued and outstanding in 1996, 69,500
shares authorized, 4,070.6 shares issued and outstanding
in 1995; 68,500 shares authorized, 3,870.6 shares issued 489,704 488,704 483,704
and outstanding in 1994
Subscriptions receivable ( 5,000) ( 5,000) ( 6,000)
Additional paid-in capital 5,901,554 5,901,554 5,901,554
Retained earnings 15,939,480 12,480,146 8,883,037
Members' capital 88,502 ( 20,313) -
TOTAL EQUITY 22,414,240 18,845,091 15,262,295
COMMITMENTS AND CONTINGENT LIABILITIES
- -
$ 29,163,736 $ 25,392,197 $ 23,451,619
</TABLE>
The accompanying notes are an integral part of this financial statement.
8
8
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
COMBINED STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
SALES
$ 62,443,804 $ 57,043,828 $ 53,446,908
COST OF GOODS SOLD
Food 15,172,054 14,559,944 13,701,265
Paper 1,812,198 1,638,513 1,466,814
TOTAL COST OF GOODS SOLD 16,984,252 16,198,457 15,168,079
GROSS PROFIT
45,459,552 40,845,371 38,278,829
OPERATING AND ADMINISTRATIVE EXPENSES
Salaries and wages 10,289,673 9,372,202 8,793,369
Payroll taxes and other employee benefits 1,531,890 1,410,272 1,328,884
Accounting 555,444 531,410 506,991
Advertising 3,063,187 2,721,272 2,527,253
Amortization of deferred charges 135,962 125,404 127,732
Depreciation 1,049,735 1,056,042 983,988
Electric and gas 2,279,344 2,158,954 2,089,600
Hauling of waste 228,127 253,489 247,709
Insurance 206,319 223,850 237,608
Interest 286,113 258,245 238,385
Kitchen and dining room supplies 448,645 457,755 417,138
Promotion 1,615,066 1,086,073 769,537
Rent 5,289,603 4,734,334 4,701,231
Repairs and maintenance 1,485,780 1,359,809 1,311,484
Royalties 2,185,862 1,996,919 1,870,852
Taxes and licenses 948,453 899,792 889,210
Other operating expenses 680,872 593,469 568,877
Fees to affiliated companies-
Management 2,977,536 2,682,805 2,562,574
Administrative 4,424,789 4,017,546 3,912,503
Consulting 1,042,324 991,051 890,745
TOTAL OPERATING AND ADMINISTRATIVE EXPENSES 40,724,724 36,930,693 34,975,670
INCOME FROM OPERATIONS
4,734,828 3,914,678 3,303,159
OTHER INCOME (EXPENSE)
Interest income - affiliated companies 1,313,539 1,174,520 1,003,813
Interest expense - stockholders ( 72,218) ( ( 52,371)
92,264)
Use tax assessment - 73,317 -
Miscellaneous - 1,740 -
NET OTHER INCOME 1,241,321 1,157,313 951,442
NET INCOME
$ 5,976,149 $ 5,071,991 $ 4,254,601
</TABLE>
The accompanying notes are an integral part of this financial statement.
9
9
<PAGE>
Burger King Franchises Affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
COMBINED STATEMENTS OF EQUITY
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Stock Additional
Common Subscriptions Paid-in Retained Members'
Stock Receivable Capital Earnings Capital Total
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994
$ 481,704 ($ 5,000) $ 5,901,554 $ 5,310,814 $ -
$11,689,072
Issuance of 200 shares common stock ( 1,000)
2,000 1,000
Net income, year ended December 31, 1994
4,254,601 4,254,601
Cash dividends declared ( 682,378) ( 682,378)
Balance, December 31, 1994 ( 6,000) -
483,704 5,901,554 8,883,037 15,262,295
Issuance of 400 shares common stock
( 3,000)
5,000 2,000
Collection of subscriptions receivable
4,000 4,000
Dividends declared in prior years returned to
equity 983,370 983,370
Net income, year ended December 31, 1995 ( 20,313)
5,092,304 5,071,991
Cash dividends declared ( 2,478,565) ( 2,478,565)
Balance, December 31, 1995 ( 5,000) ( 20,313)
488,704 5,901,554 12,480,146 18,845,091
Issuance of 100 shares common stock
( 1,000)
1,000 -
Collection of subscriptions receivable
1,000 1,000
Net income, year ended December 31, 1996
5,867,334 5,976,149
Cash dividends declared ( 2,408,000)
(2,408,000) 108,815
Balance, December 31, 1996 $ 489,704 ($ 5,000) $ $
5,901,554 15,939,480 88,502 $22,414,240
</TABLE>
The accompanying notes are an integral part of this financial statement.
10
10
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,976,149 $ 5,071,991 $ 4,254,601
Adjustments to reconcile net income to net cash flow from
operating activities:
Depreciation and amortization 1,185,697 1,181,446 1,111,720
Non-cash supplier rebates ( 31,343) ( 25,263) ( 432)
Effect of changes in operating assets and liabilities:
Inventories ( 29,036) 24,032 ( 73,971)
Prepaid expenses and other current assets ( 53,700) 114,572 100,984
Accounts payable ( 108,317) ( 877,383) 24,944
Taxes withheld and payable 40,242 85,462 116,187
Accrued expenses and other current liabilities 120,775 55,416 ( 19,485)
NET CASH PROVIDED BY OPERATING ACTIVITIES
7,100,467 5,630,273 5,514,548
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ( 776,911) (562,682) ( 576,188)
Net increase in notes receivable - management companies ( 2,848,664) ( 1,634,203) ( 3,278,031)
Collection of note receivable - related party 15,739 - -
New franchise fees ( 95,000) ( 70,000) ( 75,000)
Deferred costs ( 37,995) ( 6,301) ( 3,396)
Increase in deposits ( 3,100) ( 2,000) -
NET CASH USED IN INVESTING ACTIVITIES
( 3,745,931) ( 2,275,186) ( 3,932,615)
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction of long-term debt ( 530,898) (421,176) ( 456,932)
Reduction of term notes payable - stockholders ( 114,816) (125,384) ( 57,188)
Reduction of term notes payable - affiliates - ( 286,696) ( 469,080)
Reduction of demand notes payable-stockholders ( 532,806) - -
Dividends paid to stockholders ( 2,408,000) (2,478,565) ( 682,378)
Loans made by stockholders 110,800 187,000 218,892
Stockholder capital contributions 2,000 6,000 1,000
NET CASH USED IN FINANCING ACTIVITIES
( 3,473,720) ( 3,118,821) ( 1,445,686)
Net increase (decrease) in cash
( 119,184) 236,266 136,247
Cash, beginning of year
676,279 440,013 303,766
Cash, end of year
$ 557,095 $ 676,279 $ 440,013
</TABLE>
The accompanying notes are an integral part of this financial statement.
11
11
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
COMBINED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
INTEREST PAID
$ 286,612 $ 276,340 $ 252,907
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital Expenditures:
Purchase of property and equipment $ 1,719,983 $ 1,668,168 $ 1,701,025
Financed through
Notes payable - banks ( 752,753) ( 442,839) ( 482,387)
Notes payable - supplier - ( 125,910) ( 136,120)
Management company bank loan ( 190,319) ( 249,012) ( 138,980)
Stockholders' bank loan - ( 240,000) ( 350,000)
Accounts payable - ( 47,725) ( 17,350)
Net cash paid
$ 776,911 $ 562,682 $ 576,188
Other:
Additional accounts borrowed under notes payable - banks loaned
to affiliate for building costs $ - $ 132,702 $ 90,527
Supplier notes payable reduced by rebate income
$ 31,343 $ 25,263 $ 432
Franchise fees paid by affiliate in prior year
$ 5,000 $ 10,000 $ 5,000
Deferred costs paid by affiliate in prior year
$ - $ 10,000 $ -
Amount payable to landlord for deferred costs related to Food
Court $ 22,000 $ - $ -
Long-term borrowing
$ 474,000 $ - $ -
Loaned to related party for purchase of property ( 437,830) - -
Loaned to management company for Thruway Food Corp. lease ( 30,353) - -
termination
Deferred loan costs ( 5,817) - -
Net cash
$ - $ - $ -
</TABLE>
The accompanying notes are an integral part of this financial statement.
12
12
<PAGE>
Burger King Franchises Affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1: NATURE OF BUSINESS AND ORGANIZATION:
The companies included in these combined financial statements each operate a
franchised restaurant of Burger King Corporation. As of December 31, 1996,
forty-one of the restaurants operate in western New York state ("Resser
stores"), eleven of the restaurants serve the southern tier portion of New York
state ("Pennyline stores"), and nine of the restaurants operate in the Indiana
and Kentucky region ("Derby stores"). A franchise royalty of three and one-
half percent (3.5%) of sales is paid to Burger King Corporation. In addition,
four percent (4%) of sales is paid to Burger King Corporation for advertising,
promotion and public relations. Additional amounts are contributed voluntarily
to the national advertising fund periodically. The majority stockholders of
the Companies personally guarantee the agreements with Burger King Corporation.
All of the companies are under common control. As of December 31, 1996, three
of the affiliates are limited liability companies, while the other fifty-eight
companies are corporate entities. Resser Management Corp., Pennyline Group,
Inc. and Derby Management Corp. ("the Management companies"), all of which are
under the same common control, employ the management personnel for their
respective groups of stores, as well as incur various common general and
administrative expenses of the stores. The Management companies also disburse
all cash on behalf of the stores.
There are generally no intercompany transactions between the affiliated
restaurant companies included in these combined financial statements and,
accordingly, no eliminations were necessary in combination.
Three of the restaurants included in these combined financial statements,
Outlet Restaurant LLC, Parkside Restaurant Corp., and Blankenbaker Restaurant
LLC, opened in 1996. Two restaurants, LaGrange Restaurant LLC and Chamberlain
Food Corp., opened in 1995. Two other companies, Falconer Restaurant Corp.,
and Outerloop Food Corp., commenced operations in 1994.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) 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 reported period.
B) Revenue and Cost Recognition
The Companies' revenue is collected at the point of sale and no trade
accounts receivable are carried. Expenditures are recorded on the
accrual basis whereby expenses are recorded when incurred, rather than
when paid. Refunds and rebates on food, soda, paper products and other
miscellaneous items are received by the Management companies and have
been recorded in the accompanying combined financial statements as a
reduction of cost of goods sold in the period received.
C) Inventory
Inventories consist of food, paper, condiments and miscellaneous
promotional items, and are stated at the lower of cost (first-in,
first-out method) or market.
D) Depreciation
Depreciation is provided by use of the straight-line and accelerated
methods over the estimated useful lives of the related assets,
generally 5 years for restaurant equipment and 15 years for leasehold
improvements. The building (owned by one of the Derby stores) is being
depreciated over a period of 32 years.
E) Repairs and Maintenance
Expenditures for repairs and maintenance are charged directly to
expense as incurred. Expenditures for additions and betterments are
capitalized.
13
13
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
F) Advertising Costs
The Companies contribute to a national advertising fund and participate
in various advertising and marketing programs with Burger King
Corporation, as described in Note 1. All costs related to marketing
and advertising the Companies' products are expensed in the period
incurred.
G) Deferred Charges
Deferred charges, including the initial cost of the various franchises,
are being amortized over the initial life of the franchise (generally
20 years) or the estimated useful life of the asset. Costs incurred to
extend the term of the franchise agreements are deferred until the
initial period is expired.
H) Impairment of Long-Lived Assets
In the event that facts and circumstances indicate that the cost of
franchise assets or other assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset
would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow value is required.
I) Store Development Costs
Costs incurred in developing new restaurant locations are deferred by
the respective Management company until the store opens for business.
The costs are then included in the capitalized cost of the new
facility. Development costs for unopened stores as of December 31,1996
reflected by the Management companies were approximately $147,000 as of
December 31, 1996, $125,000 as of December 31, 1995, and $88,000 as of
December 31, 1994.
J) Cash and Cash Equivalents
The companies would consider any highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents. As discussed in Note 1, the Management companies make all
cash disbursements on behalf of the stores. Consequently, only
depository accounts and petty cash funds are maintained by the
restaurant entities.
K) Income Taxes
All of the corporate affiliates have elected under the Internal Revenue
Service and the applicable state tax laws to be taxed as "S"
corporations. Thus, no provision for income taxes is required since
any income of the affiliates is taxable directly to the individuals and
not to the corporate entity. Minimal income taxes are incurred by
several of the New York "S" corporations whose taxable income exceeds
certain levels. The limited liability companies are treated as
partnerships for income tax purposes. Consequently, income taxes are
not payable, or provided for, by these entities.
NOTE 3: FAIR VALUES OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK:
The Companies have a number of financial instruments, none of which is held for
trading purposes. The Companies estimate that the fair value of all financial
instruments at December 31, 1996, does not differ materially from the aggregate
carrying value of the financial instruments recorded in the accompanying
combined balance sheet. Considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value and,
accordingly, the estimates are not necessarily indicative of the amounts that
the Companies could realize in a current market exchange. The Companies'
related party notes receivable represent a significant concentration of credit
risk as of December 31,1996. Exposure to losses on receivables is principally
dependent on the financial condition of various related parties, including the
individual stockholders.
NOTE 4: RELATED PARTY TRANSACTIONS:
The three Management companies provide bookkeeping and supervisory services to
their respective restaurant affiliates under management agreements. For the
Resser and Pennyline stores, the fee for these services is 4.5% of sales. For
the Derby stores, the fees range from 3% to 6.5% of restaurant sales.
14
14
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 4: RELATED PARTY TRANSACTIONS (CONTINUED):
The three Management companies also provide the management personnel for the
restaurants in accordance with administrative agreements. For the Pennyline
stores, the fee is based on 7% of restaurant sales. For the Derby stores, the
fee is equal to 10% of restaurant sales. For the Resser stores, the fee is
based on actual salaries paid to the restaurant managers in 1996 and 1995, and
on 7% of restaurant sales in 1994.
The Resser stores each have an agreement with Consolidated Data Management
Corp. ("CDM"), which is owned by the majority stockholders, to provide
technical consulting services to the stores. The fee for the stores is 2.5% of
sales. CDM is also the lessee under lease agreements with a financial
institution, of cash register equipment utilized by the restaurants. The
equipment is accounted for by CDM as equipment under capital leases. The
original cost of the equipment as reflected by CDM is $1,341,792. Depreciation
and interest expense incurred by CDM for the year ended December 31, 1996 was
$213,997 and $115,653, respectively. Depreciation and interest expense
incurred by CDM for the year ended December 31, 1995 was $289,625 and $123,588,
respectively, Depreciation and interest expense incurred by CDM for the year
ended December 31, 1994 was $298,882 and $92,282, respectively.
All of the affiliates incur accounting fees to Accounting Dynamics Corp.
("ADC"), which is owned by a major stockholder of the affiliates. Fees to ADC
for the years ended December 31, 1996, 1995 and 1994 were $445,473, $428,340
and $395,473, respectively.
The Resser and Pennyline stores incurred repairs and maintenance expenses to
Resser Management Corp. in the amount of $17,532 for the year ended December
31, 1996, $138,789 for the year ended December 31, 1995, and $94,319 for the
year ended December 31, 1994.
NOTE 5: NOTE RECEIVABLE - RELATED PARTY LANDLORD:
In connection with a 1996 loan and security agreement with a
financial institution, one of the affiliates, Main Street Food
Corp., loaned funds to Parkside Land Corp., a commonly
controlled company. The note is receivable in equal monthly
installments of $5,520, which include interest at a rate of 8.9%
per annum. The note is scheduled to mature March 25, 2006.
$
422,091
Less: Current Portion
35,910
$ 386,181
Scheduled maturities of the receivable as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1997 $ 35,910
1998 33,208
1999 36,287
2000 39,652
2001 43,328
Thereafter 233,706
$ 422,091
</TABLE>
NOTE 6: NOTES RECEIVABLE - MANAGEMENTCOMPANIES:
Each of the affiliated restaurant companies has a note receivable (or payable)
with its respective Management company represented by promissory notes which
are generally due on demand. Interest has been calculated monthly at a rate of
7% per annum. A portion of the amount is reflected as long-term notes in
accordance with the specific terms of those notes. In these combined financial
statements, the demand notes receivable are reflected net of notes payable of
$670,000 in 1996, $372,000 in 1995, and $415,000 in 1994. Management has
determined that no allowance for the receivables is necessary.
15
15
<PAGE>
Burger King Franchises Affiliated with Resser Management Corp.,
Pennyline Group. Inc. and Derby Management Corp.
Notes to Combined Financial Statements (Continued)
December 31, 1996, 1995 and 1994
NOTE 7: TERM NOTES PAYABLE - AFFILIATES:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Note Payable - Affiliate was payable by four (4) of the
restaurants to Hamalo Foods, a partnership in which the
majority stockholders were partners. Interest was
payable monthly at the rate of one-half percent (.5%)
over the prime rate plus an additional surcharge of 18%
of total interest was charged. The note was secured by
the property and equipment of the borrowers.
$ - $ - $ 153,092
Note payable to Resser Management Corp. was due from one
of the restaurants December 1, 1997, but was satisfied
in 1995. Monthly payments were $2,267 plus interest at
a rate of prime plus 1%.
- - 79,342
Note payable to Resser Management Corp. was due from
two of the restaurants June 1, 1995. Monthly payments
were $3,794 plus interest at a rate of prime plus 3/4%.
- - 37,875
Notes payable to Consolidated Data Management Corp. were
due from various restaurant affiliates January 1, 1995.
Interest was at a rate of prime plus 3/4%.
- - 16,387
$ - $ - $ 286,696
</TABLE>
NOTE 8: NOTES PAYABLE - BANKS:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Note payable to a financial institution is due from one
of the affiliates, Scottsburg Food Corp. Monthly
installments of $1,948 include interest at the rate of
9.25% per annum. The note is due January 1, 2002. The
note is secured by the equipment purchased with the
proceeds. The note is guaranteed by a corporate
affiliate and personally guaranteed by the stockholders
of the Company and another individual.
$ 93,264 $ 135,327 $ 173,148
Note Payable - Bank is due March 31, 1999 from one of
the affiliates, New Albany Food Corp. Monthly
installments of $917 include interest at 1% above the
bank's prime rate. The note is secured by property and
equipment of the Company.
24,739 35,743 46,747
Note payable to a financial institution is due from
Chamberlain Food Corp. May 1, 2000, and is payable in
equal monthly installments of $6,338. Payments include
interest at the rate of 9.75% per annum. The note is
secured by all of the personal property of the Company
and leasehold improvements to the premises. The note is
guaranteed by a corporate affiliate and personally
guaranteed by the stockholders of the Company.
194,103 248,311 -
</TABLE>
16
16
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
Notes to Combined Financial Statements (Continued)
December 31, 1996, 1995 and 1994
NOTE 8: NOTES PAYABLE - BANKS (CONTINUED):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Note payable is due March 1, 2005, from one of the
affiliates, Clarksville Food Corp. Monthly installments
of $3,969 include interest at the rate of prime plus 2%.
The note is secured by the real property purchased with
the proceeds. The note is personally guaranteed by the
stockholders of the Company.
$ 187,435 214,337 237,321
Note payable to a financial institution is due from one
of the affiliates, Outerloop Food Corp. Monthly
installments of $4,548 through August 9, 2001 include
interest at the rate of 10.5% per annum. The note is
secured by all of the equipment of the Company and
leasehold improvements to the premises. The note is
guaranteed by a corporate affiliate and personally
guaranteed by the stockholders of the Company.
200,994 235,125 263,377
Note payable to a financial institution is due from one
of the affiliates, Sellersburg Food Corp. Monthly
installments are currently $3,959 including interest at
the rate of 1.5% above the prime rate. At September 1,
1997, all remaining principal and interest will be due.
The note is secured by the property and equipment of the
borrower. The note is guaranteed by a corporate
affiliate and personally guaranteed by the stockholders
of the Company. 105,717 143,530 176,385
Note payable to a financial institution is due from
LaGrange Restaurant LLC December 1, 2000, and is payable
in equal monthly installments of $6,412. Payments
include interest at the rate of 1.5% per annum over the
prime rate. The interest rate to be charged has a floor
of 7% and a ceiling of 10.5%. The note is secured by
all of personal property of the Company and leasehold
improvements to the premises. The note is guaranteed by
a corporate affiliate and personally guaranteed by the
members of the Company.
239,582 288,962 -
Note payable is due from one of the affiliates, Holiday
Food Corp. The note is due December 30, 2000 to a
financial institution. Monthly payments are $3,031
including interest at the rate of prime plus 1/2%. The
note is secured by restaurant equipment and the real
estate of an affiliate corporation. The note is
guaranteed by a corporate affiliate and by the
stockholders of the Company. 122,382 155,524 184,732
Note Payable - Bank is due March 1, 1997 from one of the
affiliates, Commons Food Corp. Principal payments of
$4,167 plus interest at prime plus (1%) are payable
monthly. The note is secured by the property and
equipment of the borrower. The note is guaranteed by
the stockholders of the borrower.
12,560 62,564 116,735
</TABLE>
17
17
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 8: NOTES PAYABLE - BANKS (CONTINUED):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Note Payable is due August 31, 1998 from one of the
affiliates, Silver Creek Food Corp. The monthly
payments are $3,921 including interest at the rate of
10.30%. The note is secured by the restaurant equipment
of the borrower and is guaranteed by two corporate
affiliates and by the stockholders of the borrower.
$ 71,780 $ 109,314 $ 143,189
Note Payable to a financial institution is due October
25, 2000, from Grant Food Corp. The monthly payments
are $2,809, including interest at the rate of 10.5%.
The note is secured by the restaurant equipment of the
borrower. The note is also guaranteed by two of the
stockholders of the borrower.
106,007 127,353 146,582
Note payable to a financial institution is due January
1, 2001 from one of the affiliates, Falconer Restaurant
Corp. The note is payable in monthly installments of
$3,890, including interest at the bank's base rate plus
.75%. The note is secured by the restaurant equipment
of the borrower.
151,306 182,557 210,038
Note payable from one of the affiliates, Main Street
Food Corp., is with respect to a loan and security
agreement together with Parkside Land Corp.
("Parkside"), a related party, in connection the
purchase of the Main Street Food Corp. real property by
Parkside. The aggregate amount of the loans was
$1,100,000, of which $474,000 was to Main Street Food
Corp. in the form of a promissory note. The note is
due March 25, 2006, payable in equal monthly
installments of $5,979 which include interest at a rate
of 8.9% per annum. The obligation is secured by
substantially all of the assets of the Company, as well
as the real property owned by Parkside. 451,181 - -
Note payable to a financial institution is from
Blankenbaker Restaurant LLC and is due June 1, 2003.
The note is payable in equal monthly installments of
$4,793 including interest at the rate of 8.78% per
annum. The note is secured by all of the personal
property of the restaurant. 277,785 - -
Note payable to a financial institution is from Outlet
Restaurant LLC and is due April, 2001. The note is
payable in equal monthly installments of $3,213
including interest at the rate of 8.85% per annum. The
note is secured by substantially all of the property and
equipment of the restaurant.
135,905 - -
</TABLE>
18
18
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 8: NOTES PAYABLE - BANKS (CONTINUED):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
One of the affiliates, Parkside Restaurant Corp.,
obtained a loan to finance equipment purchases and the
cost of leasehold improvements. The total credit
available under the agreement is $335,000. As of the
balance sheet date, $303,740 has been advanced. Upon
being fully funded or April 30, 1997, whichever comes
first, the outstanding balance will be converted to a 10
year term loan, with interest at the base rate of a
financial institution plus three-quarters percent
(3/4%). The scheduled maturities assume conversion of
the note. The loan is secured by the equipment and
leaseholds acquired and personally guaranteed by the
stockholders. $ 303,740 $ - $ -
Note payable was due March 1, 1997, from one of the
affiliates, Clarksville Food Corp. Monthly installments
of $4,437 include interest at the rate of prim plus 2%.
The note was secured by all the equipment, furniture and
fixtures of the borrower. The note was personally
guaranteed by the stockholders of the Company. The note
was paid in full in 1996.
- 29,549 76,798
Note payable was due July 12,1996 from one of the
affiliates, Gowanda Food Corp. Monthly payments of
$2,330 included interest at the bank's base rate plus
3/4%. The rate of interest had a ceiling of 11 % and a
floor of 6.75%. The note was secured by all the
personal property of the Company and personally
guaranteed by the majority stockholders of the borrower.
- 14,429 -
Note payable was due January 1, 1996 from one of the
affiliates, Gowanda Food Corp. Payments of interest at
the rate of prime plus 1% were due monthly. The rate of
interest had a ceiling of 14% and a floor of 9.5%. On
February 1, 1992, monthly payments of $4,015, including
interest, commenced. The note was secured by all the
personal property of the Company and personally
guaranteed by the majority stockholders of the borrower.
- - 39,645
Note payable was due May 1, 1995 from one of the
affiliates, Wellsville Food Corp. The monthly payments
of $3,368 included interest at the prime rate plus 3/4%.
The rate of interest had a ceiling of 13 1/4 % and a
floor of 8 1/2 %. The note was secured by restaurant
equipment and guaranteed by a corporate affiliate and
the majority stockholders of the borrower.
- - 13,564
2,678,480 1,982,625 1,828,261
Less: Current portion 494,162 467,031 377,272
$ $ $ 1,450,989
2,184,318 1,515,594
</TABLE>
19
19
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 8: NOTES PAYABLE - BANKS (CONTINUED):
Estimated maturities of Notes Payable - Bank during the next five years and in
the aggregate are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C> <C>
1997 $ 494,162
1998 521,800
1999 494,500
2000 415,900
2001 235,600
Thereafter 516,518
$ 2,678,480
</TABLE>
NOTE 9: NOTES PAYABLE - SUPPLIER:
Notes payable to a supplier of the Burger King restaurants are payable by the
various affiliates in eighty-four equal monthly installments. Interest is
calculated at a rate of 3.25% over the rate of 30 day commercial paper. The
notes mature at various dates through the year 2002. The notes are secured by
the restaurant equipment acquired from the supplier. Estimated maturities as
of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C> <C>
1997 $ 33,793
1998 36,465
1999 39,379
2000 42,555
2001 46,411
2002 6,389
$ 204,992
</TABLE>
NOTE 10: NOTES PAYABLE - STOCKHOLDERS:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Note Payable - Stockholders is payable to a joint
venture of the stockholders of the Company by Evans Food
Corp. The note is due December 1, 1997. The monthly
payments are $3,803 plus interest at the rate of 11.8%
per annum. The note is secured by the equipment of one
of the companies in this combination. $ 39,604 $ 78,578 $ 131,955
Note Payable - Stockholders is payable to the two
majority stock holders by Union Road Food Corp. The
note represents proceeds from a loan obtained by the
individuals which is due June 1, 1999, and is payable in
equal monthly principal installments of $5,834 plus
interest at a rate of 1% over prime. The note is
secured by property and equipment of Union Road Food
Corp. 169,146 244,988 314,996
Notes Payable to stockholders consists of advances made
by the stockholders to eighteen of the affiliates.
Interest is calculated monthly at a rate of 7% per annum
on the total unpaid balance. There are no specified
terms for repayment.
1,177,339 1,527,127 1,267,957
1,386,089 1,850,693 1,714,908
Less: Current portion 1,286,951 224,818 259,465
$ 99,138 $ $ 1,455,443
1,625,875
</TABLE>
20
20
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 11: RETIREMENT PLAN:
Effective April 11, 1995, the affiliates elected to participate in a 401(k)
Plan and Trust which covers substantially all full-time employees. Employees
may elect to contribute a maximum of 15% of eligible wages. The Management
companies match 25% of each employee's contribution up to a maximum of 1.5% of
eligible wages. The matching contributions are fully vested to the employee
after five years of service. The matching contributions made by the Management
companies for 1996 and 1995 totaled $44,222 and $3,630, respectively. Such
expense is not reflected in these combined financial statements.
NOTE 12: RENTAL COMMITMENTS:
As of December 31, 1996, twelve of the restaurant affiliates lease their
facilities from unrelated parties under operating lease agreements expiring at
various dates through the year 2008. Additionally, one of the affiliates,
which owns its building, leases its land from an unrelated party. The
remaining companies included in these combined financial statements lease their
facilities from various related parties. The related party lease agreements,
as well as some of the unrelated lease agreements, provide for contingent rents
based on percentages of restaurant sales. All operating expenses of the leased
properties are paid by the restaurant affiliates.
The following is a summary of rent expense for the year ended December 31,
1996:
<TABLE>
<CAPTION>
Total Related Unrelated
<S> <C> <C> <C>
Minimum $ 3,883,249 $ 3,368,393 $ 514,856
Contingent 1,406,354 1,236,748 169,606
$ 5,289,603 $ 4,605,141 $ 684,462
</TABLE>
The following is a summary of rent expense for the year ended December 31,
1995:
<TABLE>
<CAPTION>
Total Related Unrelated
<S> <C> <C> <C>
Minimum $ 3,673,544 $ 3,161,515 $ 512,029
Contingent 1,060,790 879,834 180,956
$ 4,734,334 $ 4,041,349 $ 692,985
</TABLE>
The following is a summary of rent expense for the year ended December 31,
1994:
<TABLE>
<CAPTION>
Total Related Unrelated
<S> <C> <C> <C>
Minimum $ 3,022,691 $ 2,489,082 $ 533,609
Contingent 1,678,540 1,528,603 149,937
$ 4,701,231 $ 4,017,685 $ 683,546
</TABLE>
The following is a summary of minimum future rental payments under the
operating lease agreements as of December 31, 1996:
<TABLE>
<CAPTION>
Total Related Unrelated
<S> <C> <C> <C>
1997 $ 4,073,544 $ 3,473,818 $ 599,726
1998 3,933,078 3,342,024 591,054
1999 3,383,647 2,833,748 549,899
2000 3,253,848 2,719,098 534,750
2001 3,171,301 2,641,798 529,503
Thereafter 14,799,813 10,860,121 3,939,692
$ 32,615,231 $ 25,870,607 $ 6,744,624
</TABLE>
Various lease agreements provide for additional options to extend the terms of
the leases.
21
21
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 13: CONTINGENCIES:
Eleven of the affiliates are guarantors of a mortgage loan of a major
stockholder. Each of the eleven restaurant guarantors is limited to the
principal amount of $250,000, plus any accrued and unpaid interest. The note
is secured by eleven parcels of real estate owned by the individual. The
original amount of the loan was $5,000,000. Equal monthly installments of
principal commenced November 1, 1994, and are due through September 1, 2004,
plus interest at a rate of one percent (1 %) over the prime rate. The note
matures October 1, 2004, at which time a balloon payment of $1,697,750 is due.
As of December 31, 1996, the total outstanding balance of the mortgage loan is
$4,250,750. The loan agreement requires the maintenance of a debt service
coverage ratio with respect to the borrower, the restaurant guarantors, and a
combined group of related entities.
Five of the affiliates are guarantors of a mortgage loan of CJM Properties,
L.P., a limited partnership whose general partner is the spouse of a major
stockholder. Each of the guarantees of the five restaurant guarantors is
limited to the principal amount of $250,000, plus any accrued and unpaid
interest. The note is secured by five parcels of real estate owned by the
partnership, and is also personally guaranteed by the aforementioned
stockholder. The original amount of the loan was $2,100,000. Equal monthly
installments of principal commenced November 1, 1994, and are due through
September 1, 2004, plus interest at a rate of one percent (1 %) over the prime
rate. The note matures October 1, 2004, at which time a balloon payment of
$711,270 is due. As of December 31, 1996, the total outstanding balance of the
mortgage loan is $1,787,910. The loan agreement requires the maintenance of a
debt service coverage ratio with respect to the borrower, the restaurant
guarantors, and a combined group of related entities.
Four of the affiliates are guarantors of a mortgage loan of EWM Properties,
L.P., a limited partnership whose general partner is the spouse of a major
stockholder. Each of the guarantees of the four restaurant guarantors is
limited to the principal amount of $250,000, plus any accrued and unpaid
interest. The note is secured by four parcels of real estate owned by the
partnership, and is also personally guaranteed by the aforementioned
stockholder. The original amount of the loan was $1,900,000. Equal monthly
installments of principal commenced November 1, 1994, and are due through
September 1, 2004, plus interest at a rate of one percent (1%) over the prime
rate. The note matures October 1, 2004 at which time a balloon payment of
$639,790 is due. As of December 31, 1996, the total outstanding balance of the
mortgage loan is $1,614,070. The loan agreement requires the maintenance of a
debt service coverage ratio with respect to the borrower, the restaurant
guarantors, and a combined group of related entities.
One of the affiliates has guaranteed a note payable by an affiliated
partnership which is due September 15, 2002. The note is also personally
guaranteed by the stockholders. The note is payable in monthly installments of
$8,807 including interest at the prime rate plus 1.5% per annum. The rate of
interest will not be less than 7% or greater than 10.75% per annum. The note
is secured by certain real property of the borrower and equipment of the
corporate guarantor. The loan is also secured by the lease between the
borrower and the Company. As of the balance sheet date, the outstanding
balance of the note is $806,175.
One of the affiliates has guaranteed a note payable by one of the stockholders
which is due September 15,2002. The note is also personally guaranteed by
another stockholder. The note is payable in monthly installments of principal
plus interest at the prime rate plus 1.5% per annum. The rate of interest will
not be less than 7% or greater than 10.75% per annum. The note is secured by
certain real property of the borrower and equipment of the corporate guarantor.
The loan is also secured by the lease between the borrower and the Company. As
of the balance sheet date, the outstanding balance of the note is $551,597.
One of the affiliates has guaranteed a note payable by a joint venture of the
Company's stockholders due in December 2000. The note is secured by the real
property of the borrower and all the furniture, fixtures, equipment and
leasehold improvements of the Company. The note is payable in monthly
installments of principal and interest with the balance due at maturity.
Interest is at the rate of 11.18%. As of the balance sheet date, the balance
of the note is $468,363.
One of the affiliates has guaranteed a note payable by the stockholders of the
Company due in December, 1997. The note is secured by all the equipment of the
Company. The note is payable in monthly installments of principal and
interest. Interest is at the rate of 11.08%. As of the balance sheet date,
the balance is $39,604. The proceeds from the loan were advanced to the
Company under the same terms (see Note 10).
22
22
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 13: CONTINGENCIES (CONTINUED):
One of the affiliates has guaranteed a note payable by one of the stockholders
which is due September 15, 2002. The note is also personally guaranteed by
another stockholder of the Company. The note is payable in monthly
installments of $6,489 including interest at the prime rate plus 1.5% per
annum. The rate of interest will not be less than 7% or greater than 10.75%
per annum. The note is secured by certain real property of the borrower and
equipment of the corporate guarantor. The loan is also secured by the lease
between the borrower and the Company. As of the balance sheet date, the
outstanding balance of the note is $553,673.
One of the affiliates has guaranteed a note payable of its majority
stockholders, who in turn advanced the proceeds to the Company (see Note 10.).
The note matures June 1, 1999 and is payable in equal monthly principal
installments of $5,834, plus interest at a rate of 1% over prime. As of the
balance sheet date, the balance of the note is $169,146. The note is secured
by property and equipment of the Company.
Three affiliates are guarantors of a mortgage loan of the majority
stockholders. The note is secured by the real property of the borrower. The
note bears interest at prime plus .75% and is due April 1, 2001. Amortization
of principal is based on a 15 year schedule. As of the balance sheet date, the
balance of the mortgage is $115,556.
One of the affiliates is a guarantor of a note obtained by a major shareholder.
The note was related to the purchase of the parcel of real estate upon which
the Grant Food Corp. restaurant facility was built. The note is secured by
the real estate and by all the personal property of the Company. The original
amount of the loan was $850,000. As at December 31, 1996, the balance of the
note was $754,171. Monthly payments of principal and interest are required.
Interest is calculated at a floating rate, which currently equates to 10.32%
per annum. The maturity date is October 28, 2008.
One of the affiliates has guaranteed a note payable of an affiliated company
due February 1, 2005. The note is also guaranteed by the majority shareholders
of the affiliate. The note is secured by all the assets of the borrower. The
note is payable in monthly installments of principal and interest. Interest is
at the rate of prime plus 1%. The rate of interest has a ceiling of 14% and a
floor of 9.5%. As of the balance sheet date, the balance outstanding is
$262,733.
One of the affiliates has guaranteed a note payable of an affiliated company
due in July, 2005. The note is secured by the real property of the borrower.
The stockholders of the borrower have each personally guaranteed the note. The
note is payable in monthly installments of $4,978, which includes interest at
the rate of prime plus 1%. The interest rate has a floor of 7% a ceiling of
11.25%. As of the balance sheet date, the balance of the note is $367,460.
One of the affiliates has guaranteed a note payable of an affiliated company
due April 1, 2004. The note is secured by real property of the borrower. The
majority shareholders of the affiliate have each personally guaranteed the
note. The note is payable in monthly installments of principal and interest.
Interest is at the rate of prime plus 3/4%. The interest rate has a ceiling of
14% and a floor of 9 1/4%. As of the balance sheet date, the balance
outstanding is $240,632.
One of the affiliates has guaranteed a note payable by an affiliated
partnership which is due September 15, 2002. The note is also personally
guaranteed by the stockholders of the affiliate. The note is payable in
monthly installments of $6,489 including interest at the prime rate plus 1.5%
per annum. The rate of interest will not be less than 7%, or greater than
10.75% per annum. The note is secured by certain real property of the borrower
and equipment of the corporate grantor. The loan is also secured by the lease
between the borrower and the Company. As of the balance sheet date, the
outstanding balance of the note is $594,030.
One of the affiliates and the three majority stockholders of the affiliate are
guarantors of a bank loan of an affiliated company. The loan is secured by the
real property of the affiliate and the equipment, furniture and fixtures of the
Company. As of the balance sheet date, the balance outstanding is $105,417.
The loan is due April 28, 1998 and bears interest at the rate of prime plus 1%.
The principal is fully amortized by monthly payments over the term of the loan.
Three of the affiliates have guaranteed a note payable of an affiliated company
which is due May 1, 2000. The note is also personally guaranteed by the
stockholders. The note is payable in monthly installments of $5,240 including
interest at the prime rate plus .75% per annum. The rate of interest will not
be less than 8.25%, or greater than 12%. The note is secured by certain
personal property purchased with the proceeds. As of the balance sheet date,
the outstanding balance of the note is $171,914.
23
23
<PAGE>
Burger King Franchises affiliated with Resser Management Corp.,
Pennyline Group, Inc. and Derby Management Corp.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996, 1995 and 1994
NOTE 14: SUBSEQUENT EVENT:
On July 7, 1997, the stockholders of the affiliated restaurant entities signed
a Purchase Agreement to sell substantially all of their interests, or in
specified cases, the operating assets of the restaurant affiliates. The
approximate purchase price is $50,900,000, which includes all of the restaurant
entities included in these combined financial statements plus an additional
restaurant opened in January, 1997, and is subject to various closing and post-
closing adjustments. Two additional restaurant entities which commenced
operations in 1997 are included in the Purchase Agreement and will be sold at
cost to open the restaurants.
24
24
Exhibit 10.41
PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July 7, 1997,
among CARROLS CORPORATION, a Delaware corporation (the "PURCHASER"), the
individuals and trusts listed on Exhibit A hereto (collectively, the
"SELLERS"), the individuals who control such trusts (together with the
individuals who are Sellers, the "RESPONSIBLE INDIVIDUALS"), the
individuals and entities listed on Exhibit B hereto (collectively, the
"AFFILIATED REAL PROPERTY OWNERS") and Richard D. Fors, Jr. and Charles J.
Mund, as the representatives of the Sellers (the "SELLERS'
REPRESENTATIVES"):
W I T N E S S E T H:
WHEREAS, each Seller is the beneficial and record owner of the
number of issued and outstanding shares of capital stock and the membership
interests (such shares and membership interests being collectively referred
to herein as the "INTERESTS") of the corporations and limited liability
companies (collectively, the "RESTAURANT ENTITIES") set forth opposite each
Seller's name on Exhibit A hereto;
WHEREAS, all of the Sellers collectively own all of the
outstanding Interests of the Restaurant Entities;
WHEREAS, each Restaurant Entity owns and operates the Burger King
restaurant identified by address and Burger King Franchise number opposite
such Restaurant Entity's name on Exhibit C hereto (collectively, the
"RESTAURANTS");
WHEREAS, the Sellers propose to sell, and Purchaser proposes to
purchase, the Interests or, in specified cases, the Listed Assets of the
Restaurant Entities and, in such cases, to assume the Listed Liabilities of
the Restaurant Entities;
WHEREAS, each Restaurant Entity owns or leases the personal
property used or held for use in or in connection with the conduct of
business at its Restaurant;
WHEREAS, at the Closing, each Restaurant Entity is required to
have transferred to a Management Company or another entity unrelated to the
Restaurant Entities other than by common ownership by one or more of the
Sellers all of the Assets of each Restaurant Entity that are not Listed
Assets and a Management Company or such other entity shall have assumed all
of the Liabilities of each Restaurant Entity that are not Listed
Liabilities;
WHEREAS, each Restaurant Entity is the lessee or owner of the
building, other real property and, if applicable, land upon and in which
its Restaurant is located (collectively, the "REAL PROPERTIES");
WHEREAS, each of the entities set forth on Exhibit D hereto (the
"UNAFFILIATED REAL PROPERTY OWNERS", and together with the Affiliated Real
Property Owners, the "REAL PROPERTY OWNERS") owns the Real Property (the
"LEASED REAL PROPERTY") on which the Restaurant, identified by Burger King
Franchise number opposite its name on Exhibit D, is located;
WHEREAS, each of the Affiliated Real Property Owners owns or
leases either the Restaurant, identified by Burger King Franchise number
opposite its name on Exhibit B, or the Real Property on which such
Restaurant is located (but not including the Excluded Portions) (the "OWNED
REAL PROPERTIES");
WHEREAS, each of the Restaurant Entities set forth on Exhibit E
hereto leases Real Property pursuant to a lease (a "THIRD PARTY LEASE")
from an Unaffiliated Real Property Owner and, to the extent necessary to
give effect to the sale of such Restaurant Entity (or the sale of Listed
Assets and assumption of Listed Liabilities of a Restaurant Entity, as
applicable) hereunder, without affecting such leases, will attempt to
obtain the consent of such unaffiliated landlord to such sale and the
assignment of any such Third Party Lease.
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
DEFINITIONS
Section 1.01 DEFINITIONS.
(a) As used in this Agreement, capitalized terms have the
meanings, or are cross-referenced to the Section in this Agreement where
their definitions are located, as set forth in Exhibit F hereto.
Section 1.02 GAAP. Unless otherwise set forth, all accounting
terms used in this Agreement shall be interpreted on a basis consistent
with GAAP and consistent with the relevant Restaurant Entity's or
Management Company's past practice. To the extent of any inconsistency
between a GAAP interpretation and a Restaurant Entity's or Management
Company's past practice, the GAAP interpretation shall be applied.
Section 1.03 SINGULAR AND PLURAL TERMS. All capitalized terms
that are defined in the singular or plural shall have the equivalent
meanings when used in the plural or singular, respectively.
ARTICLE II
SALE AND PURCHASE OF INTERESTS
Section 2.01 SALE OF INTERESTS. At the closing provided for in
Section 3.01 hereof (the "CLOSING"): (i) except as set forth in
Sections 10.07(b) and 10.07(c) hereto, each Seller shall sell, transfer,
assign and convey all of such Seller's Interests to the Purchaser, and
shall deliver to the Purchaser (x) a stock certificate or certificates or
other evidences of title representing all of any applicable Seller's
Interests in the Restaurant Entities which are corporations, and in the
case of stock certificates, duly endorsed in blank or with duly executed
stock powers attached, in proper form for transfer, and with appropriate
transfer stamps, if any, affixed, free and clear of any Lien with respect
thereto, other than Liens (A) created by the Purchaser or (B) arising under
applicable securities laws as they relate to the transferability of
"restricted securities" as defined in Rule 144 under the Securities Act,
and (y) a membership certificate or certificates or other evidences of
title, if any, representing all of any applicable Seller's Interest in the
Restaurant Entities which are limited liability companies; and (ii) except
as set forth in Sections 10.07(b) and 10.07(c) hereto, the Purchaser shall
purchase, acquire and accept all of the Sellers' Interests for the Purchase
Price.
Section 2.02 PURCHASE PRICE AND PAYMENT.
(a) PURCHASE PRICE. The aggregate purchase price to be
paid by the Purchaser hereunder (the "PURCHASE PRICE") shall be an amount
equal to the lesser of (i) the sum of (x) five times Combined Net Cash Flow
as set forth on Schedule 2.02(a) hereto and (y) $900,000, or
(ii) $50,900,000, in each case plus or minus the net amount of any
adjustments pursuant to Sections 3.09, 6.19 and 7.01 below.
(b) PAYMENT OF PURCHASE PRICE. The Purchase Price shall be
paid by the Purchaser at the Closing as follows:
(i) the Purchaser shall pay to the Sellers'
Representatives the Purchase Price, less the amount of the Escrow Fund, in
cash, to be allocated by the Sellers' Representatives as set forth on
Exhibit A hereto; PROVIDED, HOWEVER, that the Purchaser shall bear no
responsibility or liability for such allocation; and
(ii) the Purchaser shall pay to the Escrow Agent,
pursuant to the terms of an Escrow Agreement substantially in the form of
Exhibit G hereto, $3,500,000 in cash (the "ESCROW FUND"), which amount
shall be deemed allocated among the Sellers as set forth in Exhibit A, held
and dealt with as provided in the Escrow Agreement.
(c) Any such payment shall be made in United States dollars
by certified or bank cashier's check drawn on a Federal Reserve Bank and
payable in immediately available funds or by wire transfer of immediately
available funds, in the case of payments to the Sellers or their assignees,
to such account[s] as the Sellers' Representatives shall designate in a
written notice delivered to the Purchaser not less than two Business Days
prior to the Closing Date.
Section 2.03 TRANSFER TAXES. Except for (a) sales or use taxes
relating to Listed Assets owned by a Restaurant Entity purchased pursuant
to Section 10.07(b) and the assets of the Additional Restaurants purchased
pursuant to Section 10.07(c), respectively, which shall be paid by the
Purchaser, and (b) real estate transfer taxes relating to the Real Property
of such Additional Restaurants, which shall be paid one-half by the
Purchaser and one-half by the Sellers, the Sellers shall pay all stock
transfer Taxes, recording fees and other sales, transfer, use, purchase or
similar Taxes resulting from the transactions contemplated hereby.
ARTICLE III
CLOSING; REPRESENTATIVES; RESPONSIBLE PARTY;
ASSIGNMENTS; ADJUSTMENTS
Section 3.01 CLOSING. The Closing of the sale and purchase of
the Interests shall take place at the offices of Schulte Roth & Zabel LLP,
900 Third Avenue, New York, New York 10022 at 10:00 a.m. New York City
time, on August 1, 1997, or at such other time and place as the Purchaser
and the Sellers' Representatives mutually agree upon in writing.
Section 3.02 REPRESENTATIVES; RESPONSIBLE PARTY. Each Seller
hereby irrevocably appoints the Sellers' Representatives as such Seller's
representative and attorney, with full power of substitution and re-
substitution, to do any and all things and to execute any and all Documents
or Other Papers, in such Seller's name, place and stead, in any way which
such Seller could do if personally present, in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, to accept on such Seller's behalf any amount payable to such
Seller under this Agreement, and the Purchaser shall be entitled to rely,
as being binding upon such Seller, upon any Document or Other Paper
believed by it to be genuine and correct and to have been signed or sent by
the Sellers' Representatives, and the Purchaser shall not be liable to any
Seller for any action taken or omitted to be taken by it in such reliance.
THIS POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Sellers hereby revoke all other powers of attorney with respect to the
Interests which they may have heretofore appointed or granted, and no
subsequent power of attorney shall be given (and if given, shall not be
effective) by the Sellers with respect to the Interests, this Agreement and
the transactions contemplated hereby. All authority herein conferred or
agreed to be conferred shall, to the maximum extent permitted by applicable
laws, survive the death or incapacity of any Seller and any obligation of
any Seller under this Agreement shall be binding upon the heirs, personal
representatives and successors of such Seller.
Section 3.03 REAL PROPERTIES: LEASES AND ASSIGNMENTS OF LEASES.
(a) LEASES OF OWNED REAL PROPERTY. (i) Subject to sub-
Section (ii) below, at Closing, the Purchaser and each Affiliated Real
Property Owner shall have executed, acknowledged, and delivered a lease
agreement (individually, a "LEASE"), in the form attached as Exhibit H
hereto with respect to the Restaurant located on the Real Property owned or
controlled by such Affiliated Real Property Owner.
(ii) Purchaser shall have the right, (A) at any time
after the four year and six month anniversary date of the Closing Date,
upon at least ninety days' prior written notice (which may be given prior
to such anniversary date), to cancel the Lease relating to Burger King
Franchise number 591; and (B) at any time up to 120 days after the end of
any fiscal year of the Purchaser (including the fiscal year in which the
Closing occurs), upon at least ninety days' prior written notice given
during such 120 day period, to cancel the Lease relating to Burger King
Franchise number 956, if such Restaurant's operations were Cash Flow
Negative for such fiscal year. Such notice shall be accompanied by a
certificate from the Purchaser's Chief Financial Officer certifying that
such Restaurant's operations were Cash Flow Negative and providing a
reasonably detailed schedule showing the calculation thereof on a basis
consistent with the calculation set forth in Schedule F-I hereto.
(iii) At the Closing, each Affiliated Real Property
Owner, as lessor under each applicable Lease, shall execute, acknowledge
and deliver a Memorandum of Lease (each, a "MEMORANDUM OF LEASE") for each
Lease, in the form attached as Exhibit I hereto, each of which shall set
forth such material terms of such Lease as shall be required to permit the
recording thereof and which Memorandum of Lease may be recorded by the
Purchaser at the Purchaser's expense with the local recorder of deeds of
the respective counties where the Owned Real Properties are located.
(b) ASSIGNMENT OF THIRD PARTY LEASES.
(i) Except as provided in clause (ii) below, at the
Closing, each Leasing Entity shall deliver to the Purchaser (A) a consent
to assignment, in a form reasonably acceptable to the Purchaser (the
"CONSENT TO LEASE ASSIGNMENT AND TRANSACTION"), and an assignment of lease,
in a form reasonably acceptable to the Purchaser (the "LEASE ASSIGNMENT"),
of the Third Party Leases to the extent that such lease would otherwise be
terminated or affected by or be deemed to have been improperly transferred
or otherwise improperly assigned as a consequence of the transactions
contemplated by this Agreement, and (B) an Estoppel Certificate
substantially in the form attached as Exhibit J hereto (the "TENANT
ESTOPPEL CERTIFICATE") and shall use commercially reasonable efforts to
cause the Unaffiliated Real Property Owners to execute and deliver an
Estoppel Certificate substantially in the form attached as Exhibit K hereto
(or in such other form as each Unaffiliated Real Property Owner may be
obligated or willing to execute; the "LANDLORD ESTOPPEL AND AGREEMENT"),
with respect to each of the Third Party Leases, if and to the extent such
Unaffiliated Real Property Owner is obligated under such Third Party Lease
to deliver an estoppel certificate, each of which shall have been duly
executed by the applicable tenant or landlord under the Third Party Lease.
(ii) At the Closing, Purchaser and the following
Affiliated Real Property Owners shall have executed, acknowledged and
delivered a Lease in the form attached as Exhibit H hereto with respect to
the Restaurants located on the real property controlled by such Affiliated
Real Property Owners as follows:
(A) In connection with its purchase of the Interests
of the Sellers in Clarksville Restaurant Corp., Purchaser will be assigned
the ground lease held by Clarksville Food Corp. simultaneously with (1) the
conveyance of the building by Clarksville Food Corp. to Derby Management
Corp. and (2) the leasing of the building pursuant to the terms and
conditions of the Lease by Derby Management Corp. to Purchaser. In
accordance with the Lease, Purchaser shall be entitled to credit the amount
of ground rent paid by the Purchaser against payments of Rent under the
Lease.
(B) In connection with its purchase of 790 Union Road
Food Corp., Purchaser will not acquire the existing sublease. Instead, the
existing sublease will be terminated and Union Road Land Corp. will
sublease Restaurant #790 to Purchaser pursuant to the terms and conditions
of the Lease.
(C) In connection with its purchase of Urban Boulevard
Food Corp., Purchaser will not acquire the existing sublease. Instead, the
existing sublease will be terminated and Fennec Restaurant Corp. will
sublease Restaurant #3277 to Purchaser pursuant to the terms and conditions
of the Lease.
(iii) All "minimum" or "fixed rentals" and any other
monetary obligations accruing under the Third Party Leases and included on
the Closing Schedules shall be adjusted, as set forth in Section 3.09(e),
for the month in which the Closing occurs by multiplying such obligations
by a fraction the numerator of which is the number of days in such month
prior to the Closing Date and the denominator of which is the number of
days in the month in which the Closing occurs.
Section 3.04 ASSIGNMENT OF FRANCHISE AGREEMENTS. At the Closing,
there shall have been delivered to the Purchaser such documentation in form
and substance reasonably satisfactory to the Purchaser and its counsel
which effectively assigns or transfers to the Purchaser all necessary
rights under the Burger King Franchise Agreements and the Purchaser shall
assume all of the Sellers' or the Restaurant Entities' obligations
thereunder arising during and relating to periods on or after the Closing
Date. The Sellers shall be responsible for and shall have paid, on or
prior to the Closing Date, all franchise assignment fees owed to Burger
King in connection with the assignment of the Burger King Franchise
Agreements to Purchaser.
Section 3.05 TRAS.
(a) To the extent not otherwise reimbursed by Burger King to the
Sellers, the Purchaser shall pay to the relevant Sellers an aggregate of
$5,000 for each TRA promptly upon the Purchaser's receipt of documentation,
in form and substance reasonably satisfactory to the Purchaser and its
counsel, which either effectively assigns or transfers to the Purchaser the
Seller's rights under the TRAs set forth on Schedule 4.35(b) or otherwise
effectively permits the Purchaser to succeed to all of the rights of the
Sellers therein.
(b) Any reimbursement or credit received by the Purchaser after
the Closing Date in respect of such TRA shall be paid to the Sellers'
Representatives, except that if the Purchaser has made payment for such
TRA hereunder such amount shall be paid to and/or retained by the
Purchaser.
Section 3.06 ASSIGNMENT OF DEVELOPMENT RIGHTS. If any Seller,
Restaurant Entity or any of their respective Affiliates possess territorial
development rights which it may have from Burger King regarding the
exclusive right to develop any Burger King restaurant within the Restricted
Area (the "DEVELOPMENT RIGHTS"), then, at the Closing, each such Seller
and/ or Restaurant Entity shall deliver to the Purchaser and its counsel a
Development Rights Assignment in form and substance reasonably acceptable
to the Purchaser, which effectively assigns or transfers to the Purchaser
such Development Rights and the Purchaser shall assume all of such Seller's
or Restaurant Entity's obligations thereunder arising during and relating
to periods on or after the Closing Date.
Section 3.07 ASSIGNMENT OF ASSETS AND LIABILITIES. At the
Closing, each Restaurant Entity shall, pursuant to the Excess Assignment
and Assumption Agreement in the form of Exhibit L, (x) assign, transfer,
convey and deliver to the Management Companies (or another entity unrelated
to the Restaurant Entities other than by common ownership by one or more of
the Sellers), and the Management Companies (or such other entities) shall
accept the assignment, transfer, conveyance and delivery of, such
Restaurant Entity's Assets (other than Listed Assets) and (y) assign to the
Management Companies (or such other entities), and the Management Companies
(or such other entities) shall accept such assignment of and shall assume,
effective at the time of Closing, the Liabilities (other than Listed
Liabilities) of each of the Restaurant Entities (the "EXCESS LIABILITIES").
The Sellers' Representatives jointly and severally guarantee the payment or
satisfaction of the Excess Liabilities.
Section 3.08 LISTED ASSETS AND LISTED LIABILITIES SCHEDULE.
Five days prior to the Closing, the Sellers' Representatives
shall complete and deliver to the Purchaser a schedule, which may be
updated up to the Closing (the "SCHEDULE OF LISTED ASSETS AND LISTED
LIABILITIES") setting forth by Restaurant Entity and on a combined basis
for all of the Restaurant Entities a reasonable description of the Listed
Assets and the Listed Liabilities of each Restaurant Entity as of the close
of business on the last day of the month preceding such determination.
Section 3.09 Purchase Price Adjustments.
(a) CLOSING SCHEDULES
(i) Five days prior to the Closing, the Sellers'
Representatives shall complete and deliver to the Purchaser a schedule (the
"PRELIMINARY CLOSING SCHEDULE") setting forth by Restaurant Entity the
Listed Assets (other than Operating Assets and Franchises) and Listed
Liabilities of the Restaurant Entities (on an individual and on a combined
basis), as reasonably estimated by Sellers (based upon book value) to
reflect such items as of the Closing Date. The Preliminary Closing
Schedule shall be determined in accordance with GAAP and the terms of this
Agreement, and shall be subject to the reasonable approval of the
Purchaser.
(ii) In the event that the aggregate Listed Assets
reflected in the Preliminary Closing Schedule exceed the aggregate Listed
Liabilities reflected therein, the Purchase Price shall be increased by the
amount of such excess. In the event that the aggregate Listed Liabilities
reflected therein exceed the aggregate Listed Assets reflected therein, the
Purchase Price shall be decreased by the amount of such excess. Any
adjustment made pursuant to this Section 3.09(a)(ii) is hereinafter
referred to as the "PRELIMINARY ADJUSTMENT".
(iii) No later than thirty days after the Closing, the
Sellers' Representatives shall complete and deliver to the Purchaser a
final schedule (the "FINAL CLOSING SCHEDULE", and together with the
Preliminary Closing Schedule, the "CLOSING SCHEDULES") setting forth by
Restaurant Entity and on a combined basis for all of the Restaurant
Entities as of the close of business on the Closing Date the book value of
the Listed Assets (other than Operating Assets and Franchises) and the
Listed Liabilities of each Restaurant Entity. The Final Closing Schedule
shall be determined in accordance with GAAP, in accordance with the terms
of this Agreement, and shall be certified by the Sellers' Auditor. The
expenses of preparing and auditing the Final Closing Schedule shall be
borne by the Sellers.
(iv) For purposes of valuing the Inventory for the
Closing Schedules, Inventory shall be equal to the lower of cost or market
value (net of any reserves established therefor and appearing thereon) of
such Inventory as charged to each Restaurant Entity by a non-Affiliate
supplier or vendor utilizing the first-in first-out accounting method.
Such Inventory value for each Restaurant Entity shall be determined for
purposes of the Final Closing Schedule by physical inventories to be taken
in each Restaurant at the close of business on the day immediately
preceding the Closing Date by the manager thereof, who shall certify the
results thereof, to his or her Knowledge, to the Purchaser and the Sellers'
Representatives. The Purchaser shall have the right to have at least one
of its representatives present at the taking of such inventories. The
inventories shall then be priced by the Sellers' Representatives by
multiplying the physical items by their cost, determined as aforesaid.
(v) After receipt of the Final Closing Schedule, the
Purchaser shall have fifteen Business Days (the "FINAL CLOSING SCHEDULE
REVIEW PERIOD") in which to review the Final Closing Schedule. The
Purchaser shall have full access to the financial records and other
information used in the preparation of the Final Closing Schedule,
including access to the pertinent draft and final working papers of the
Sellers' Representatives and the Sellers' Auditor. If the Purchaser has
any objection to the Final Closing Schedule within such Final Closing
Schedule Review Period, it shall deliver written notice thereof to the
Sellers' Representatives and to the Sellers' Auditor setting forth, with
reasonable specificity, the nature of the objection, the amount thereof and
the basis therefor. If the Purchaser fails to deliver such written notice
to the Sellers' Representatives prior to the end of the Final Closing
Schedule Review Period, the Final Closing Schedule shall be final and
binding on all of the parties hereto. In the event that the Purchaser and
the Sellers' Representatives cannot reconcile their differences concerning
the Final Closing Schedule within five Business Days after delivery of such
notice, the Purchaser and the Sellers' Representatives shall mutually
engage a "Big Six" national public accounting firm other than the
Purchaser's accountants (the "THIRD ACCOUNTING FIRM") to review the Final
Closing Schedule and, within 20 Business Days of such engagement, make a
final determination as to the matters in dispute between the parties. Any
such final determination by the Third Accounting Firm shall be final and
binding upon the parties hereto absent manifest error. The costs of the
Third Accounting Firm shall be borne one-half by the Purchaser and one-half
by the Sellers.
(vi) In the event that the aggregate Listed Assets
reflected in the Final Closing Schedule exceed the aggregate Listed
Liabilities reflected therein (the "FINAL EXCESS"), then the Purchaser
shall promptly pay to the Sellers an amount equal to either (A) the Final
Excess minus the Preliminary Adjustment, if the Preliminary Adjustment
resulted in an adjustment in favor of the Sellers at Closing, or (B) the
Final Excess plus the Preliminary Adjustment, if the Preliminary Adjustment
resulted in an adjustment in favor of the Purchaser at Closing. In the
event that the aggregate Listed Liabilities reflected in the Final Closing
Schedule exceed the aggregate Listed Assets reflected therein (the "FINAL
DEFICIT"), then the Escrow Agent shall promptly pay to the Purchaser from
the Escrow Fund an amount equal to either (C) the Final Deficit plus the
Preliminary Adjustment, if the Preliminary Adjustment resulted in an
adjustment in favor of the Sellers at Closing, or (D) the Final Deficit
minus the Preliminary Adjustment, if the Preliminary Adjustment resulted in
an adjustment in favor of to the Purchaser at Closing.
(b) ADDITIONAL RESTAURANTS ADJUSTMENT. (i) At the Closing
the Purchase Price shall be increased by the aggregate out of pocket third-
party non-Affiliate purchase price, costs and expenses incurred to acquire
and/or construct, open and equip the Additional Restaurants set forth on
Schedule 3.09(b) (collectively, "Opening Expenses") and, to the extent the
Sellers incur additional Opening Expenses after the date hereof that are
not set forth on Schedule 3.09(b) then the Sellers shall provide the
Purchaser with appropriate documentation evidencing the payment and amount
of such costs promptly after their receipt thereof. The Purchase Price
shall be further increased by the amount set forth in such documentation
and for any franchise fees and TRA expenses incurred in connection
therewith, except to the extent the Purchaser shall be required to pay
Burger King for such franchise fees and TRA expenses; PROVIDED, that in no
event shall the Purchase Price be increased for the amount of any financing
costs of any kind, including, without limitation, the cost of obtaining
such financing; loan or commitment fees; the costs of any appraisals in
connection therewith and the payment of principal and interest on any loans
obtained through any financing.
(ii) In the event that any Seller or any Affiliate of
any Seller intends to acquire any interest or right to any interest in any
Burger King restaurant business or operation within the Restricted Area
prior to the Closing, other than those set forth on Exhibit C hereto, then
such Seller or Affiliate of such Seller shall first request the approval of
the Purchaser to acquire such interest or right to such interest. If the
Purchaser approves such acquisition, then such acquisition may be
consummated and the acquired restaurant shall be deemed to be an Additional
Restaurant and shall be governed by the terms of Section 3.09(b)(i) hereof.
(c) ENVIRONMENTALLY DAMAGED RESTAURANT AND DAMAGED
RESTAURANT ADJUSTMENT. The Purchase Price shall be adjusted, if necessary,
pursuant to the provisions of Sections 6.19 (Environmentally Damaged
Restaurant) and 7.01 (Damaged Restaurant) hereto.
(d) ALLOCATION OF ADJUSTMENT. Anything contained in this
Section 3.09 to the contrary notwithstanding, any Purchase Price adjustment
that results from this Section 3.09 shall be allocated among the Sellers by
the Sellers' Representatives. The Purchaser shall bear no responsibility
for, and shall not be liable to, any Seller for any such allocation.
(e) ADJUSTMENT FOR RENT OBLIGATIONS. Except with respect
to the Additional Restaurants, the Purchase Price shall be increased by the
portion of any rent allocated pursuant to Section 3.03(b)(iii) from and
after the Closing Date but paid by the Sellers or the Restaurant Entities
as of the Closing Date and shall be decreased by the portion of any rent
allocated pursuant to Section 3.03(b)(iii) prior to the Closing Date but
not paid by the Sellers or the Restaurant Entities as of the Closing Date.
Section 3.10 POST-CLOSING ALLOCATIONS.
(a) All obligations of the Restaurant Entities including
utilities, electricity, water and gas shall be prorated as between the
Sellers and the Purchaser for the month in which the Closing occurs by
allocating to the Sellers the amount of such obligation for such month
multiplied by a fraction the numerator of which is the number of days in
such month prior to the Closing Date, and the denominator of which is the
number of days in the month in which the Closing occurs, and by allocating
the balance to the Purchaser. The Sellers and the Purchaser shall settle
such allocations by making the appropriate payments to each other (after
taking into account all such allocations) within 90 days after the Closing
Date.
(b) To the extent any additional rent is due, or any refund
or reduction is owing to any Restaurant Entity or the Purchaser with
respect to the current lease year pursuant to any Third Party Lease being
transferred or assigned to the Purchaser in connection with the
transactions set forth in this Agreement, the Sellers and the Purchaser
shall allocate such additional rents, refunds and reductions between them
for such year by allocating to the Sellers based upon the relative number
of days during such lease year prior to the Closing Date over the number of
days in such lease year and by allocating the balance to the Purchaser.
The Sellers and the Purchaser shall settle such allocations by making
appropriate payments to each other (after taking into account all
allocations) within 180 days after the last such lease year.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
(a) Richard D. Fors, Jr. (in his individual capacity, "Fors")
and Charles J. Mund (in his individual capacity, "Mund") jointly and
severally represent and warrant to the Purchaser with respect to themselves
and on behalf of their respective Sellers and each of the Restaurant
Entities owned (directly or indirectly) by either of them, and (b) each of
the other Sellers individually represents and warrants, on their own behalf
as Sellers and only as to each Restaurant Entity owned by such Seller, as
follows:
Section 4.01 ORGANIZATION AND QUALIFICATION. Each Restaurant
Entity is either a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, having the
requisite corporate power and lawful authority to own, lease and operate
its assets, properties and business and to carry on its business as it is
now being conducted, or is a limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation, having the requisite power and lawful authority to own, lease
and operate its assets, properties and business and to carry on its
business as it is now being conducted. Each Restaurant Entity is duly
qualified either as a foreign corporation or as a foreign limited liability
company to transact business, and is in good standing, in each of the
jurisdictions set forth opposite such Restaurant Entity's name on
Schedule 4.01 hereto. The jurisdictions set forth on Schedule 4.01 hereto
are the only jurisdictions where the character of each Restaurant Entity's
properties, owned or leased, or the nature of each Restaurant Entity's
activities makes such qualification necessary, except where the failure to
be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect on any such Restaurant Entity. Each Restaurant
Entity does not own or lease property in any jurisdiction other than its
jurisdiction of incorporation or formation and the jurisdictions set forth
on Schedule 4.01 hereto, and is not required for any reason to be qualified
or otherwise authorized to do business in any other jurisdiction.
Section 4.02 SUBSIDIARIES; INVESTMENTS. Each Restaurant Entity
does not, directly or indirectly, own or Control or have any capital or
other equity interest or participation, or any interest convertible,
exchangeable or exercisable for, any capital or other equity interest or
participation in, nor is such Restaurant Entity, directly or indirectly,
subject to any obligation or requirement to loan funds to or invest in, any
Person.
Section 4.03 AUTHORIZATION. Each of the Restaurant Entities, the
Sellers and the Responsible Individuals has the requisite power and
authority to enter into this Agreement, the Escrow Agreement and the other
agreements, instruments, documents and certificates to be executed and
delivered by such party pursuant hereto (collectively, the "RELATED
DOCUMENTS"), and to consummate the transactions contemplated hereby and
thereby. All acts and other proceedings required to be taken by any
Restaurant Entity and/or any of the Sellers or Responsible Individuals to
authorize the execution, delivery and performance of this Agreement, the
Escrow Agreement and the Related Documents to which they are a party, and
the consummation of the transactions contemplated hereby and thereby, have
been duly and properly taken.
Section 4.04 VALID AND BINDING AGREEMENT. This Agreement, the
Escrow Agreement and the Related Documents, to the extent that any
Restaurant Entity or any Seller or Responsible Individual is a party
thereto, constitute such Person's valid and binding obligations,
enforceable against such Person in accordance with their terms, except as
limited by: (i) applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally from time to time in effect; and (ii) the availability of
equitable remedies (regardless of whether enforceability is considered in a
proceeding at law or in equity).
Section 4.05 TITLE TO INTERESTS. Each Seller is, directly or
indirectly, the record and beneficial owner of the Interests set forth
opposite such Seller's name on Exhibit A hereto, free and clear of any Lien
(other than Liens (i) which will be discharged prior to or at Closing or
(ii) arising under applicable securities laws), and has, or as of the
Closing will have, full power and authority to convey such Interests free
and clear of any Lien (other than Liens arising under applicable securities
laws), and, upon delivery of and payment for such Interests as herein
provided, the Purchaser will acquire good and valid title thereto, free and
clear of any Lien (other than Liens (i) created by the Purchaser, or
(ii) arising under applicable securities laws).
Section 4.06 CAPITALIZATION. The authorized capitalization of
each Restaurant Entity is set forth on Schedule 4.06 hereto, along with the
number of outstanding Interests of such Restaurant Entity. All such
outstanding Interests representing shares of capital stock are validly
issued and outstanding, fully paid and nonassessable. All such outstanding
Interests representing member interests in a limited liability company were
validly created. Except as set forth on such Schedule 4.06, there are no
other Interests of any Restaurant Entity outstanding, and no other
outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including any preemptive rights), stock appreciation
rights, calls or commitments of any character whatsoever to which any
Restaurant Entity is a party or may be bound requiring the issuance or sale
of Interests of any Restaurant Entity, and, except as set forth on Schedule
4.06 there are no Contracts or Other Agreements by which any Restaurant
Entity is or may become bound to issue additional Interests, or any
options, warrants, convertible or exchangeable securities, subscriptions,
rights (including any preemptive rights), stock appreciation rights, calls
or commitments of any character whatsoever relating to such Interests.
Section 4.07 GOVERNING INSTRUMENTS; MINUTE BOOKS. Copies of the
Governing Instruments of each Restaurant Entity, and all amendments to
each, have heretofore been delivered to the Purchaser and such copies, as
so amended, are true, complete and accurate. The minute books of each
Restaurant Entity contain true, complete and accurate records of all
meetings and consents in lieu of meetings of their respective Boards of
Directors, stockholders and members and any committees thereof (or persons
performing similar functions) since the time of their respective
organizations. The stock books or capitalization records of each
Restaurant Entity are true, complete and accurate.
Section 4.08 ABSENCE OF CONFLICTS. The execution and delivery of
this Agreement, the Escrow Agreement and the Related Documents, the
consummation of the transactions contemplated hereby and thereby, and
compliance with the provisions hereof and thereof have not and will not
(subject to obtaining any required consents, approvals, authorizations,
exemptions or waivers identified in Section 4.10 hereof): (i) violate,
conflict with or result in a breach of any provision of or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate
the performance required by, or result in a creation of any Lien upon any
of the assets, properties or business of each Restaurant Entity under, any
of the terms, conditions or provisions of (x) the Governing Instruments of
each Restaurant Entity or (y) any Contract or Other Agreement to which each
Restaurant Entity or any of their respective assets, properties or business
may be subject; or (ii) subject to compliance with the statutes, laws,
rules and regulations referred to in Section 4.09 hereof, violate any
judgment, ruling, order, writ, injunction, award, decree, statute, law,
ordinance, code, rule or regulation of any court or foreign, federal,
state, county or local government or any other governmental, regulatory or
administrative agency or authority which is applicable to each Restaurant
Entity or any of their respective assets, properties or businesses.
Section 4.09 GOVERNMENTAL APPROVALS. Other than (i) in
connection, or in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR ACT"), and (ii) as may be
required under applicable securities laws, no notice to, filing or
registration with, or permit, license, variance, waiver, exemption,
franchise, order, consent, authorization or approval of, any foreign,
federal, state, county or local government or any other governmental,
regulatory or administrative agency or authority (collectively, "PERMITS")
is necessary for the consummation by the parties hereto (other than the
Purchaser) of the transactions contemplated by this Agreement, the Escrow
Agreement and the Related Documents.
Section 4.10 CONSENTS. Schedule 4.10 hereto sets forth a list of
all consents, approvals, exemptions, waivers or other authorizations which
each Seller, each Restaurant Entity and any Affiliated Real Property Owner
is required to obtain from, and any filing which such Seller, Restaurant
Entity or Affiliated Real Property Owner is required to make with, any
Person including, but not limited to, consents required from Burger King
(the "BURGER KING CONSENTS") or any lender to any Real Property Owner in
connection with the execution, delivery and consummation of this Agreement,
the Escrow Agreement and the other Related Documents and the consummation
of the transactions contemplated hereby or thereby (collectively, the
"REQUIRED CONSENTS").
Section 4.11 FINANCIAL STATEMENTS. The combined balance sheet
for all of the Restaurant Entities at December 31, 1994, December 31, 1995
and December 31, 1996, and the related combined statements of income,
retained earnings and cash flow for the years then ended, including the
notes thereto (the "FINANCIALS"), to be delivered to the Purchaser as
provided below will be prepared in a form meeting the requirements of the
Securities Act and the Exchange Act, will be certified by the Sellers'
Auditor, and will fairly present the combined financial position of the
Restaurant Entities as at such dates and the results of operations and the
changes in retained earnings and cash flow thereof for the years then ended
in accordance with GAAP. The Sellers' Representatives shall cause the
Financials to be delivered to the Purchaser as soon as possible, but in no
event later than five days prior to the Closing Date.
Section 4.12 TAX MATTERS.
(a) Each Restaurant Entity which is a corporation elected to be
an "S Corporation" under Section 1362(a) of the Code (and the comparable
provision of all relevant state and local taxing jurisdictions) during the
period indicated on Schedule 4.12 opposite such Restaurant Entity's name,
and such election was effective at all times during such period. Except as
provided on Schedule 4.12, no action has been taken by any of the
Restaurant Entities which are corporations or any of the Sellers which has
resulted or would result in the termination of the status of any of such
Restaurant Entities as an S Corporation.
(b) Each Restaurant Entity which is a limited liability company
is treated as a partnership for Tax purposes and such treatment has been
effective during the period indicated on Schedule 4.12 opposite such
Restaurant Entity's name. No action has been taken by any Restaurant
Entity which is a limited liability company or any of the Sellers which has
resulted or would result in the termination of the status of any limited
liability company as a partnership for Tax purposes.
(c) Each Restaurant Entity has filed all Tax Returns which such
Restaurant Entity is required to file, all such Tax Returns are true and
correct in all material respects and each Restaurant Entity has paid or
provided for all Taxes due, whether or not shown on such Tax Returns, and
for all deficiencies or other assessments of Tax owed by it.
(d) No penalties or other charges are, or will become, due with
respect to the late filing of any such Tax Return.
(e) No Tax Liens have been filed with respect to any Restaurant
Entity (other than for Taxes not yet due and payable).
(f) No federal income Tax Returns of any Restaurant Entity have
been audited after the fiscal year ended December 31, 1993; no such audits
are pending, or to the Knowledge of the Sellers threatened with respect to
any federal income tax return filed for any fiscal year and all
deficiencies and assessments of Tax made in connection therewith have been
paid. Each of the federal income Tax Returns heretofore filed by each
Restaurant Entity in respect of the fiscal year ended December 31, 1994 and
later years correctly and accurately reflects the amount of its Tax
liability thereunder.
(g) Schedule 4.12 hereto sets forth the latest years for which
state Tax Returns of each Restaurant Entity have been audited.
(h) No Tax deficiency is currently proposed, asserted or
assessed and no basis exists for any such Tax deficiency or assessment.
(i) No audit of any Tax Return of any Restaurant Entity is in
progress. No extensions of time with respect to any date on which any Tax
Return was or is to be filed by any Restaurant Entity is in force, and no
waiver or agreement by any Restaurant Entity is in force for the extension
of time for the assessment or payment of any Tax. No Restaurant Entity is
a party to any agreement providing for the allocation or sharing of Taxes.
(j) The Restaurant Entities have complied in all respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes from the wages or salaries of employees and
independent contractors and have paid over to the proper governmental
authorities all amounts required to be so withheld and are not liable for
any Taxes for failure to comply with such laws, rules and regulations.
(k) The Sellers and the Restaurant Entities are not "foreign
persons" within the meaning of Treasury Regulations Section 1.1445-2(b)(2),
and they will deliver to the Purchaser, on or before the Closing Date,
"FIRPTA" certificates and affidavits of non-foreign status which meet the
requirements of Section 1.1445-2(b)(2) of the Treasury Regulations in the
forms attached hereto as Exhibits M or N, as applicable.
(l) Except as provided on Schedule 4.12, as of December 31,
1995, there were no assets of the Restaurant Entities for which the tax
basis and book basis differed materially.
(m) No Restaurant Entity has at any time consented under
Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2)
of the Code apply to any sale of its stock. No Restaurant Entity is a
party to any agreement that provides for the payment of any amount that
would be nondeductible (in whole or in part) pursuant to Section 280G of
the Code.
(n) Since January 1, 1994, no Restaurant Entity has filed with
respect to any item a disclosure statement pursuant to Section 6662 of the
Code or any comparable disclosure with respect to foreign, state or local
tax statutes.
Section 4.13 COMPLIANCE WITH LAW. Each Restaurant Entity is not
in violation of and since January 1, 1996 has not failed to comply in any
respect with, any judgment, ruling, order, writ, injunction, award, decree,
statute, law, ordinance, code, rule or regulation, of any court or foreign,
federal, state, county or local government or any other governmental,
regulatory or administrative agency or authority applicable to it or to
their respective assets, properties, businesses or operations. The conduct
of each Restaurant Entity's respective businesses is in conformity with all
customary Burger King operating standards and with applicable foreign,
federal, state, county and local energy, public utility and health
requirements and all other foreign, federal, state, county and local
governmental, regulatory and administrative requirements. Each Restaurant
Entity has all Permits set forth on Schedule 4.13 hereto and all of such
Permits are in full force and effect and no other Permits are necessary or
required for the conduct of the business of each Restaurant Entity. Since
January 1, 1994, there have been no violations recorded in respect of any
Permit other than those which, individually or in the aggregate, would not
have a Material Adverse Effect and no proceeding is pending, or, to the
Knowledge of the Restaurant Entities or any of the Sellers, threatened, to
revoke or limit any Permit. This representation and warranty shall be
deemed not to cover the matters expressly covered in Sections 4.16(b)(vi),
4.16(d), 4.20, 4.24, 4.25, 4.26 and 4.28.
Section 4.14 LITIGATION. Except as set forth on Schedule 4.14
hereto, there are no outstanding judgments, rulings, orders, writs,
injunctions, awards or decrees of any court or any foreign, federal, state,
county or local government or any other governmental, regulatory or
administrative agency or authority or arbitral tribunal against or
involving any Restaurant Entity, any Seller (relevant to the Restaurant
Entities) or otherwise relating to the business of any Restaurant Entity.
No Restaurant Entity or Seller is a party to, or to the Knowledge of any
Restaurant Entity or any of the Sellers threatened with, any litigation or
judicial, governmental, regulatory, administrative or arbitration
proceeding relevant to the Restaurant Entities or otherwise relating to the
business of any Restaurant Entity other than as set forth on Schedule 4.14
hereto and none of the matters set forth on Schedule 4.14 hereto, if
decided adversely, would have a Material Adverse Effect on the relevant
Restaurant Entity.
Section 4.15 AGREEMENTS. Schedule 4.15 hereto sets forth and
the Sellers have made available to the Purchaser (to the extent in written
form) or have informed the Purchaser as to (to the extent not in written
form) all of the following Contracts and Other Agreements to which any
Restaurant Entity, Responsible Individual or Seller is a party or by or to
which their respective assets, properties or businesses are bound or
subject: (i) Contracts and Other Agreements with any current or former
officer, director, employee, consultant, agent or shareholder of any
Restaurant Entity; (ii) Contracts and Other Agreements with any labor union
or association representing any employee of any Restaurant Entity;
(iii) Contracts and Other Agreements with respect to any Restaurant Entity
involving annual payments under any such Contract or Other Agreement or
under any related series of Contracts or Other Agreements of at least
$10,000 for the sale of materials, supplies, equipment, merchandise or
services; (iv) Contracts and Other Agreements with respect to any
Restaurant Entity involving annual payments under any such Contract or
Other Agreement or under any related series of Contracts or Other
Agreements of at least $10,000 for the purchase or acquisition of
materials, supplies, equipment, merchandise or services; (v) patent,
trademark, service mark, trade name, and copyright and franchise licenses,
royalty agreements or similar Contracts and Other Agreements relating to
the business of any Restaurant Entity; (vi) distributorship,
representative, management, marketing, sales, agency, printing or
advertising Contracts and Other Agreements relating to the business of any
Restaurant Entity (other than in the ordinary course of business);
(vii) Contracts and Other Agreements for the grant to any Person (other
than customers) of any preferential rights to purchase any assets,
properties or businesses of any Restaurant Entity; (viii) joint venture
Contracts and Other Agreements relating to the business of any Restaurant
Entity; (ix) Contracts and Other Agreements under which any Restaurant
Entity has guaranteed the obligations of any Person; (x) Contracts and
Other Agreements (other than the constituent documents of any Restaurant
Entity) under which any Restaurant Entity agrees to indemnify any Person or
to share Tax Liability with any Person; (xi) Contracts and Other Agreements
limiting the freedom of any Restaurant Entity to engage in any line of
business in any geographic area; (xii) Employee Benefit Plans (as such term
is defined in Section 4.25 hereof); (xiii) Contracts and Other Agreements
relating to the acquisition by any Restaurant Entity after January 1, 1994
of any operating business or the capital stock of any Person;
(xiv) Contracts and Other Agreements for the payment by any Restaurant
Entity of fees or other consideration (other than payments and
distributions of accumulated Subchapter S income which by their terms would
not survive the Closing or require any payment or satisfaction of any
obligation thereafter) to any Seller, any officer or director of any Seller
or any Restaurant Entity or any other Restaurant Entity in which any of the
foregoing has an interest; (xv) leases of real or personal property by each
Restaurant Entity; and (xvi) any other material contract or other agreement
Material to the Business, whether or not made in the ordinary course of
business. Subject to the assumption and limitations included in
Section 4.16(b)(iii), all of the Contracts and Other Agreements set forth
on Schedule 4.15 hereto and all licenses for commercially available
software are in full force and effect and each Restaurant Entity or each
Seller, as the case may be, has paid in full or accrued all amounts due
thereunder and has satisfied in full or provided for all of its Liabilities
thereunder to the extent required by GAAP. Except as separately identified
on Schedule 4.15 hereto, no notice to, filing or registration with, or
permit, license, variance, waiver, exemption, franchise, order, consent,
authorization or approval of, any Person is needed in order that the
Contracts and Other Agreements constituting either Listed Assets or Listed
Liabilities continue in full force and effect (without breach by any
Restaurant Entity or any Seller of, or giving any contractual party a right
to terminate or modify, such Contract or Other Agreement) following the
consummation of the transactions contemplated hereby. Except as separately
identified on Schedule 4.15 hereto, all of the Contracts and Other
Agreements set forth on Schedule 4.15 hereto may be terminated by the
Restaurant Entity which is a party thereto on not more than 90 days' notice
without the payment of any penalty or charge.
Section 4.16 PROPERTIES. (a) Each Restaurant Entity will have
good and marketable title to (or valid leasehold interest in) all Listed
Assets (whether personal, tangible or intangible) to be reflected on the
Schedule of Listed Assets and Listed Liabilities as of the Closing Date.
(b) (i) Except as set forth on Schedule 4.16(b)(i), each
Affiliated Real Property Owner has good title to its respective Owned Real
Properties (including without limitation the real property and the building
thereon) with all necessary power and authority to enter into the Leases,
and in the case of Leased Real Property, each Leasing Entity has valid
leasehold interests in its respective Leased Real Property.
(ii) Such Owned Real Property and Leased Real Property
(together with any related Easements) includes all Real Property as is used
or held for use or to be used or held for use primarily in connection with
the conduct of the business and operations of the Restaurant Entities as
heretofore conducted. The Real Properties and all improvements thereon
represent all of the locations at which the respective Restaurant Entities
and any of their respective Affiliates conduct business relating to the
Restaurants (other than administrative offices) and are now, and at Closing
will be, the only locations where any of the Listed Assets of the
Restaurant Entities or the Restaurants are located. No other Real Property
other than the Owned Real Properties and Leased Real Properties is owned,
used or leased by any of the Restaurant Entities except for Real Property
used by any of the Restaurant Entities as its administrative offices.
(iii) Assuming the enforceability thereof against the
other parties thereto, all such leases of Leased Real Property are, and
upon the Closing all the Leases will be, valid, binding and enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles, and there does not exist under any such existing lease
of Leased Real Property any default (or any event which, with notice or
lapse of time or both, would constitute a default).
(iv) The plants, buildings, structures and equipment
located in and comprising the Restaurants and that are used in connection
with the operation of the business of the Restaurant Entities are in good
operating condition and repair and have been maintained on a basis
consistent with standards established by Burger King (giving due account to
the age and length of use of same, ordinary wear and tear excepted), are
suitable for their present uses and, in the case of plants, buildings and
other structures (including without limitation, the roofs thereof), are
structurally sound.
(v) The plants, buildings, structures and equipment
located in and comprising the Restaurants and that are used in connection
with the operation of the business of the Restaurant Entities conform in
all respects to the standards of Burger King under the terms and conditions
set forth in the applicable Burger King Franchise Agreement.
(vi) The plants, buildings and structures located in
and comprising the Restaurants and that are used in connection with the
operation of the business of the Restaurant Entities (a) comply with the
minimum standards regarding barrier removal set forth in Title III of the
Americans with Disabilities Act, 28 CFR 36.101 ET. SEQ. (the "ADA"), and
(b) with respect to any Restaurants which have been remodeled or otherwise
altered in a way which affects usability (as described in the ADA) after
January 26, 1992, comply in all respects with the provisions of the ADA
applicable thereto. The Restaurants listed on Schedule 4.16(b)(vi) are all
of the Restaurants which have been so remodeled or otherwise so altered
after January 26, 1992.
(vii) Schedule 4.16(b)(vii) hereto sets forth with
respect to each Seller and/or Restaurant Entity all written or oral parking
leases, easements, agreements, grants, licenses, options and any other
agreement (collectively referred to herein as "Easements") pursuant to
which such Seller or Restaurant Entity 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, other than over public
roads, in and to the applicable Real Property.
(viii) Each Restaurant Entity currently has, and the
Purchaser immediately after the Closing will have, access to public roads
or valid Easements over private streets or private property for such
ingress to and egress from all such Real Properties as is necessary for the
conduct of the business of each Restaurant Entity as presently conducted.
(ix) None of the structures on such Real Properties
encroaches upon real property of another Person, and, to the Knowledge of
the Sellers no structure of any other Person encroaches upon any of such
Real Properties.
(x) The expiration dates, monetary terms and renewal
terms for each of the Third Party Leases are as set forth on
Schedule 4.16(b)(x) hereof. Except as set forth on Schedule 4.16(b)(x)
hereof, no lease of Leased Real Property provides for additional or
accelerated payments or other consideration to be made on account of the
transactions contemplated hereby, including due to a change in control of
the Restaurant Entity which is a party to such lease.
(c) None of the properties or assets (whether real,
personal, tangible or intangible) constituting Listed Assets is subject to
any Liens, except:
(i) As disclosed in the Financials or on Schedule
4.16(c) or immaterial Liens arising after December 31, 1996 in the ordinary
course of business;
(ii) Liens for Taxes, assessments, governmental,
regulatory or administrative charges or levies, or the claims of
materialmen, carriers, landlords, and like persons, which are not yet due
or being contested in good faith (and for which adequate reserves are
established as shown on the Financials or which have been established after
the date thereof); or
(iii) Liens which do not materially detract from the
value of such property or assets as now used, or interfere in any material
respect with any present use of such property or assets.
(d) No violation of any statute, law, ordinance, code, rule
or regulation (including, without limitation, statutes, laws, ordinances,
codes, rules or regulations relating to zoning, city planning or similar
matters, but excluding the matters covered in Section 4.13, 4.16(b)(vi),
4.20, 4.24, 4.25, 4.26 and 4.28), relating to any of the properties or
assets of any Restaurant Entity, whether owned or leased, presently exists
or has existed at any time since January 1, 1996 other than for violations
which have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on such
Restaurant Entity. Except as set forth on Schedule 4.16(d), there are no
developments affecting any of such properties or assets pending or, to the
Knowledge of any of the Sellers, threatened (other than (A) general
economic conditions, (B) conditions affecting the fast food industry
generally, (C) actions by competitors that have been widely publicized, and
(D) actions by competitors other than Wendy's International Inc.
("WENDY'S") or McDonald's Corporation ("MCDONALD'S")) which could
reasonably be expected to materially detract from the value of such
property or assets, interfere in any material respect with any present use
of such property or assets or materially and adversely affect the
marketability of such properties or assets. To Seller's Knowledge, neither
Wendy's nor McDonald's is developing or planning any store or has opened
any store since January 1, 1997 within the Restricted Area other than as
described in Schedule 4.16(d).
(e) On the Closing Date, each Restaurant other than the
Additional Restaurants, together with its related assets and property, will
constitute a fully operable "turn-key" Burger King restaurant, in full
compliance with the Burger King standards currently applicable thereto,
sufficient to permit the Purchaser to obtain the consent of Burger King to
the transfer of the Burger King Franchise Agreement relating to each
Restaurant and to permit the Purchaser to immediately operate the business
at such Restaurant as presently conducted thereon; provided, however, that
no representation or warranty is made regarding any conditions that Burger
King may attach to such approval.
(f) Set forth on Schedule 4.16(f) hereto is a true and
complete list of each certificate of occupancy for each Restaurant located
on the Real Properties, copies of such 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. 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. All notes or notices of violation of
any laws against or affecting any such Real Properties have been or are
being complied with. There are no outstanding 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.
(g) 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 any Seller, threatened against
the Real Properties, except as set forth on Schedule 4.16(g).
(h) 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, are connected pursuant to valid permits, are fully operable and
are adequate in all material respects to service the Real Properties and
the Restaurants located thereon as presently operated and to permit
compliance with all laws and normal utilization of the Real Properties and
the Restaurants located thereon as presently operated and no Seller has any
Knowledge of any actions (other than routine immaterial maintenance) that
are required after the Closing to keep such utilities operable and valid.
(i) All licenses, permits, certificates, including, without
limitation, proof of dedication, required from all governmental agencies
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 as currently being operated and to ensure adequate
vehicular and pedestrian ingress to and egress from the Real Properties as
currently being operated and the Restaurants located thereon are set forth
on Schedule 4.16(i) hereto and have been obtained. To the knowledge of
Sellers, the Easements are valid and binding, in full force and effect and
enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
Section 4.17 FRANCHISE AGREEMENTS. The Sellers have delivered to
Purchaser true, complete and correct copies of the Burger King Franchise
Agreements, including any and all amendments thereto and including any
Development Rights agreements whether exclusive or otherwise. Each
Restaurant Entity (or Seller in the case of Restaurant Entities which are
limited liability companies) owns its respective right, title and interest
in its Burger King Franchise Agreement, free and clear of all Liens (other
than Liens created (i) by the Burger King Franchise Agreements, and
(ii) hereby). Subject to the written consent of Burger King, each
Restaurant Entity (or Seller in the case of Restaurant Entities which are
limited liability companies) has the requisite power and authority to sell,
assign, transfer and convey its Burger King Franchise Agreement. No
Restaurant Entity nor any Seller has received any notice of violation with
respect to the Burger King Franchise Agreements which has not been cured in
all material respects, and no Seller knows or has reason to know of any
event which would give rise to a violation or default under any of the
Burger King Franchise Agreements. Pursuant to the terms of each of the
Burger King Franchise Agreements, the Sellers may be required to pay a fee
to Burger King in connection with the transfer or assignment of each of the
Restaurant Entities. Other than for such fees, no Burger King Franchise
Agreement provides for additional or accelerated payments or other
consideration to be made on account of the transactions contemplated
hereby, including due to a change in control of the Restaurant Entity which
is a party to such Burger King Franchise Agreement. Exhibit A to
Schedule 4.15 sets forth the expiration date of each Burger King Franchise
Agreement.
Section 4.18 INVENTORY. As of the Closing, the Inventory of each
Restaurant Entity will be in usable or salable condition in the ordinary
course of business at the amounts to be carried on the Final Closing
Schedule representing the lower of cost or market value (determined on a
first-in-first-out basis) (net of any reserves established therefor and
appearing thereon). The materials, supplies, and additions thereto,
included in such Inventory will be of at least the standard quality for
such items in accordance with Burger King standards. The amounts of the
Inventories reflected on the Final Closing Schedule will be, and the
amounts of Inventories reflected on the books and records of each
Restaurant Entity have been, determined in accordance with GAAP (except as
otherwise expressly provided herein). The quality and quantities of all
such Inventory of each Restaurant Entity 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.
Section 4.19 ASSETS. Exhibit O hereto sets forth all Operating
Assets owned or claimed by each Restaurant Entity having an initial
acquisition cost of $10,000 or more. All Contracts and Other Agreements
pursuant to which any Restaurant Entity may hold or use any interest owned
or claimed by any Restaurant Entity (including, without limitation,
options) in or to the Operating Assets are in full force and effect and,
with respect to the performance of any Restaurant Entity, there is no
default or event of default (or event which, with notice or lapse of time
or both, would constitute a default) under any such Contract or Other
Agreement which would have a Material Adverse Effect on the applicable
Restaurant Entity. The Operating Assets of each Restaurant Entity are
functioning properly and are in reasonably satisfactory working condition,
consistent with the current specifications of Burger King. During the past
three years there has not been any material interruption of the operations
of any Restaurant Entity due to inadequate maintenance of the Operating
Assets. The Operating Assets required to operate a Burger King restaurant
are owned, or at the Closing will be owned, by each respective Restaurant
Entity in possession of any such Operating Assets.
Section 4.20 INTANGIBLE PROPERTY. Set forth on Exhibit A to
Schedule 4.15 are all of the franchise agreements, as amended or modified,
between any Seller or Restaurant Entity and Burger King regarding the
Restaurants (the "BURGER KING FRANCHISE AGREEMENTS"). Other than the
Burger King Franchise Agreements, there are no patents, trademarks, service
marks, trade names, copyrights, franchises, applications for any of the
foregoing, or Permits, grants and licenses or other rights running to or
from each Restaurant Entity relating to any of the foregoing (other than
licenses relating to commercially available software) which are used in the
business of the Restaurant Entities. Each Restaurant Entity has no notice
of any adversely held franchise of any other Person or notice of any claim
of any other Person relating to any of the Burger King Franchise Agreements
and licenses relating to commercially available software or any process or
confidential information of any Restaurant Entity, and neither any
Restaurant Entity nor any of the Sellers has any Knowledge of any basis for
any such charge or claim.
Section 4.21 LIABILITIES. (a) As at December 31, 1996 and the
Closing Date, no Restaurant Entity had or will have any direct or indirect
Indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, subordinated or unsubordinated, matured
or unmatured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of Taxes, other governmental,
regulatory or administrative charges or lawsuits brought, required by GAAP
to be set forth on a financial statement, that has not been listed on the
Financials or the Final Closing Schedule and has not and will not be paid
in full or fully and adequately reflected or reserved against on the
Financials or the Final Closing Schedule. Except as listed on the
Financials no Restaurant Entity has any Liabilities individually in an
amount that could reasonably be expected to exceed $10,000 other than those
incurred since January 1, 1997 in the ordinary course of business. Neither
any Restaurant Entity nor any of the Sellers or Responsible Individuals has
any Knowledge of any possible or potential liabilities which are likely to
give rise to any Liabilities of any Restaurant Entity except in the
ordinary course of business.
(b) The "Listed Liabilities", as reflected on the Final
Closing Schedule (by description and amount) and the Schedule of Listed
Assets and Listed Liabilities, will include only unpaid Liabilities, if
any, arising from trade payables and accrued operating expenses due and
payable within thirty days after Closing, AND WILL NOT INCLUDE (except as
otherwise provided herein) (i) any Taxes of the Sellers or the Responsible
Individuals, including without limitation employer payroll and related
taxes relating to periods prior the Closing, and (ii) obligations related
to insurance policies, BUT WILL INCLUDE the amount (in cost terms) of any
accrued vacation pay (and all employer payroll and related taxes),
calculated in accordance with the provisions of Schedule 4.21(b) hereto.
Section 4.22 SUPPLIERS. The relationships of each Restaurant
Entity with their respective suppliers are not based on terms and
conditions less favorable to such Restaurant Entity than the Restaurant
Entity would receive in an arms-length transaction with an unaffiliated
third party. No supplier of any Restaurant Entity has canceled or
otherwise terminated, or threatened in writing to cancel or otherwise
terminate, its relationship with any Restaurant Entity during the twelve
months immediately preceding the date hereof or has during the last twelve
months materially decreased, or threatened to materially decrease or
materially limit its services, supplies or materials to any Restaurant
Entity. Neither any Restaurant Entity nor any of the Sellers has received
any notice during the twelve months immediately preceding the date hereof
that any such supplier intends to cancel or otherwise materially modify its
relationship with any Restaurant Entity or to materially decrease or
materially limit its services, supplies or materials to any Restaurant
Entity.
Section 4.23 EMPLOYMENT AND LABOR AGREEMENTS. (a) The
management and consulting agreements listed on Exhibit B to Schedule 4.15
hereto constitute all employment and consulting contracts and other
agreements between each Restaurant Entity and any of such Restaurant
Entity's employees, consultants and agents, including the Management
Companies. None of the Contracts or Other Agreements listed thereon
provides for additional or accelerated payments or other consideration to
be made on account of the transactions contemplated hereby. True, complete
and accurate copies of the Documents and Other Papers setting forth the
terms of each Contract and Other Agreement described on Exhibit B to
Schedule 4.15 hereto have heretofore been delivered to the Purchaser.
There are no oral modifications to any of such Contracts or Other
Agreements. The Liabilities related to the Contracts and Other Agreements
set forth on Exhibit B to Schedule 4.15 hereto have been truly and
accurately provided for on the books of account of each Restaurant Entity.
(b) (i) No Restaurant Entity has entered into any
collective bargaining agreements with respect to its Employees, (ii) there
are no written personnel policies to the Restaurant Entities' employees
generally, other than employee manuals, true and complete copies of which
have previously been provided to the Purchaser, (iii) there is no labor
strike, dispute, slowdown or work stoppage or lockout pending or, to each
Responsible Individual's or Seller's Knowledge, threatened against or
affecting each such Restaurant Entity and during the past three years there
has been no such action, (iv) to each Responsible Individual's or Seller's
Knowledge, no union organization campaign is in progress with respect to
any of the employees of any Restaurant Entity and no question concerning
representation exists respecting such employees, (v) there is no unfair
labor practice, charge or complaint pending or, to each Responsible
Individual's or Seller's Knowledge, threatened against each such Restaurant
Entity, and (vi) no Restaurant Entity has entered into any agreement,
arrangement or understanding restricting its ability to terminate the
employment of any or all of its employees at any time, for any lawful or no
reason, without penalty or liability.
Section 4.24 DISCRIMINATION AND OCCUPATIONAL SAFETY. No Person
(including, but not limited to, any foreign, federal, state, county or
local government or other governmental, regulatory or administrative agency
or authority) has asserted since January 1, 1994 any claim, suit, action,
proceeding or investigation against any Restaurant Entity arising out of
any statute, law, ordinance, code, rule or regulation relating to
discrimination in employment or employment practices or occupational safety
and health standards (including, without limitation, The Fair Labor
Standards Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. <section> 1981, the Rehabilitation Act of 1973, as
amended, the Age Discrimination in Employment Act of 1967, as amended, or
the Worker Adjustment and Retraining Notification Act, as amended) which,
if upheld, would have a Material Adverse Effect on the relevant Restaurant
Entity.
Section 4.25 EMPLOYEE BENEFIT PLANS. (a) Schedule 4.25 hereto
lists all employee benefit plans of each Restaurant Entity which any
Restaurant Entity maintains or to which any Restaurant Entity is obligated
to contribute, including, without limitation, each single employer,
multiemployer and multiple employer pension, profit-sharing, stock bonus,
money purchase, retirement, welfare benefit, savings, insurance, vacation
pay, severance pay, stock purchase, stock option, incentive or deferred
compensation and bonus plan or arrangement, and any other employee benefit
plan covering each Restaurant Entity's employees, consultants, agents and
ex-employees, and their dependents and beneficiaries (collectively, the
"EMPLOYEE BENEFIT PLANS"). None of the Employee Benefit Plans which are
not qualified plans exempt from income Taxation, provides or promises
benefits to ex-employees (including retirees) of any Restaurant Entity and
their dependents and beneficiaries, except as specifically required under
the Code with respect to continuation of coverage. All of such Employee
Benefit Plans have been operated in accordance with their terms, and all of
such Employee Benefit Plans that are nonmultiemployer plans, and that are
subject to the terms of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the Code, or other statutes, laws, ordinances,
codes, rules and regulations comply in all material respects with ERISA,
the Code, and such other statutes, laws, ordinances, codes, rules and
regulations, as applicable, and, in the case of each such Employee Benefit
Plan which is a qualified plan exempt from income Tax, a determination has
been received from the appropriate District Director of Internal Revenue
that such plan is qualified under Section 401(a) of the Code and the trust
created thereunder, if any, is exempt from federal Tax under Section 501(a)
of the Code and nothing has occurred since such determination that would
adversely affect the qualification of such plan or the tax-exempt status of
such related trust. There has been no transaction involving any Employee
Benefit Plan maintained by any Restaurant Entity which is a "prohibited
transaction" under ERISA or the Code in connection with which such
Restaurant Entity would be subject to Liability under ERISA or any Tax
Liability imposed by the Code, or which would subject any such Employee
Benefit Plan or such Restaurant Entity to a penalty under ERISA, the Code
or any other statute, law, ordinance, code, rule or regulation.
(b) Other than accrued vacation pay, none of the Employee
Benefit Plans listed on Schedule 4.25 hereto provides for additional or
accelerated payments or other consideration to be made on account of the
transactions contemplated hereby. No suit, action, claim, proceeding,
investigation or arbitration has been made or instituted or, to the
Knowledge of the Restaurant Entity or any of the Sellers, threatened, with
respect to any of such Employee Benefit Plan or any assets thereof.
(c) All contributions or payments required to be made to
such Employee Benefit Plans by their terms or by law and any relevant
collective bargaining agreement(s), before or after the Closing Date, with
respect to all periods or events occurring prior to the Closing Date
(including all insurance premiums) have been properly paid or accrued on
the books of account of each Restaurant Entity prior to the Closing Date
(including, without limitation, a PRO RATA share with respect to any period
including the Closing Date based on the ratio of the number of days in such
period to the total number of days in the plan year). Required annual
reports (Form 5500 series), if any, with respect to each Employee Benefit
Plan have been properly filed including the payment in full of any late
fees, interest and penalties if and to the extent applicable.
(d) No Restaurant Entity nor any trade or business treated
as a single employer under common control with any Restaurant Entity within
the meaning of Section 414 of the Code (an "ERISA AFFILIATE") maintains or
has an obligation to contribute to any Employee Benefit Plan subject to
Title IV of ERISA. No Restaurant Entity nor any ERISA Affiliate is subject
to any asserted or unasserted withdrawal or other liability under Title IV
of ERISA or is potentially secondarily liable for any withdrawal or other
liability under Title IV of ERISA.
(e) True, complete and accurate copies of the documents
setting forth the terms of each Employee Benefit Plan listed on
Schedule 4.25 hereto, including, without limitation, plans, agreements,
amendments, trusts and all related Contracts and Other Agreements and,
where applicable, copies of the plans': (i) most recent summary plan
descriptions and modifications thereto; (ii) notices distributed to
employees, consultants, agents, dependents and other beneficiaries with
regard to any continuation of coverage required under law; (iii) most
recent favorable Internal Revenue Service determination letters; (iv) three
most recent annual reports (Forms 5500), including, without limitation,
audited financial statements and all schedules thereto; and (v) three most
recent actuarial reports have heretofore been delivered to the Purchaser.
There are no oral modifications to any of such Employee Benefit Plans. The
Liabilities for all benefits provided pursuant to the Employee Benefit
Plans set forth on Schedule 4.25 hereto have been truly and accurately
provided for on the books of account of each Restaurant Entity or
Management Company in accordance with GAAP.
Section 4.26 TERMINATED PLANS. There have not been any Employee
Benefit Plans in effect at any time during the three years preceding the
Closing Date with respect to which any Restaurant Entity or any ERISA
Affiliate has taken action during such period which has or will result in
termination of such Employee Benefit Plans. No Restaurant Entity or ERISA
Affiliate has any Liability to any Person, including, without limitation,
the Pension Benefit Guaranty Corporation (the "PBGC"), any other
governmental, regulatory or administrative agency or authority or any
participant in or beneficiary of any such Employee Benefit Plan, nor is any
Restaurant Entity or ERISA Affiliate liable or potentially liable for any
excise, income or other Tax or penalty, as a result of any Employee Benefit
Plan termination. All terminations have been made in accordance with the
Code and ERISA, all required filings and participant communications have
been made and, where appropriate, each Restaurant Entity has obtained a
favorable determination letter from the Internal Revenue Service with
respect to the termination of each Employee Benefit Plan which is a
qualified retirement plan and has not received a notice of noncompliance
from the PBGC with respect to any Employee Benefit Plan. The notices to
the PBGC, participants and beneficiaries were made, and favorable
determination letters were received, based on full and accurate disclosure
of all relevant facts. All steps with regard to the termination of each
terminated Employee Benefit Plan shall have been completed on or prior to
the Closing Date, including, without limitation, the distribution of
accrued benefits to participants and the purchase and distribution of
annuity contracts to participants, and the making of all required post-
termination filings.
Section 4.27 EMPLOYEES. Schedule 4.27 hereto sets forth all of
the multi-unit supervisory personnel relating to the Restaurants. Except
as set forth on Schedule 4.27, none of such employees and none of the other
key employees of any Restaurant has, to the Knowledge of any of the
Sellers, given notice to any Restaurant Entity that he or she intends to
resign or retire as a result of the transactions contemplated hereby or
otherwise.
Section 4.28 ENVIRONMENTAL MATTERS. (i) There has been no
Release at any of the assets, properties or businesses of any Restaurant
Entity, or any of their respective predecessors in interest (which are or
had been Affiliates of any Seller or Restaurant Entity), during any period
where the Restaurant Entity owned, leased or operated the assets,
properties or businesses that is reasonably likely to give rise to an
Environmental Liability; (ii) no Hazardous Materials are used, stored,
disposed or generated on any assets, properties or businesses of any
Restaurant Entity or any of their respective predecessors in interest
(which are or had been Affiliates of any Seller or Restaurant Entity) or
any facility leased or operated by any Restaurant Entity, or any of their
respective predecessors in interest (which are or had been Affiliates of
any Seller or Restaurant Entity), except in compliance with Environmental
Laws; (iii) the operations of the Restaurant Entities are in compliance
with Environmental Laws; (iv) to the Sellers' Knowledge there has not been
any Release or threatened Release of Hazardous Materials at a facility
which received Hazardous Materials generated by any of the Restaurant
Entities or their respective predecessors in interest (which are or had
been Affiliates of any Seller or Restaurant Entity); (v) there is no
Environmental Claim pending, nor, to the Knowledge of any Restaurant Entity
or any of the Sellers, threatened, against any Restaurant Entity or any of
their respective predecessors in interest (which are or had been Affiliates
of any Seller or Restaurant Entity) that are reasonably likely to result in
Environmental Liability; (vi) to the Knowledge of any Restaurant Entity or
any of the Sellers, no Environmental Claims have been asserted or
threatened to be asserted against any of the facilities which received
Hazardous Materials generated by any Restaurant Entity or any of their
respective predecessors in interest (which are or had been Affiliates of
any Seller or Restaurant Entity); and (vii) no Liens have been filed or are
pending against any Property of the Sellers or any of their respective
predecessors in interest (which are or had been Affiliates of any
Restaurant Entity or Seller) applicable to it or their respective assets,
properties, or businesses with respect to any Environmental Liabilities.
Since January 1, 1994, each Restaurant Entity has maintained true and
complete records relating to their respective waste generation, treatment,
storage and disposal activities in connection with their respective
businesses and to materials handling within their respective facilities and
by outside processors in connection with their respective businesses.
Section 4.29 INSURANCE. Schedule 4.29 hereto sets forth all
currently effective policies or binders of fire, liability, workers
compensation, vehicular or other insurance held by or on behalf of each
Restaurant Entity (specifying the insurer, the policy number or covering
note number with respect to binders, and describing each pending claim
thereunder for more than $10,000 per claim setting forth the aggregate
amounts paid out under each such policy through the date hereof and the
aggregate limit of any of the insurer's liability thereunder). All such
policies and binders are in full force and effect. No Restaurant Entity is
in default with respect to any provision contained in any current policy or
binder or has failed to give any notice or present any claim for more than
$10,000 under any of the policies or binders in due and timely fashion.
There are no outstanding unpaid claims in an estimated or actual amount in
excess of $10,000 under any of the policies or binders other than those set
forth on Schedule 4.29 hereto or arising after the date hereof in the
ordinary course of business. None of the Sellers nor any Restaurant Entity
has received a notice of cancellation or nonrenewal of any current policy
or binder. None of the Sellers nor any Restaurant Entity has any Knowledge
of any inaccuracy in any application for any of the policies or binders,
any failure to pay premiums when due or any similar state of facts which
might form the basis for termination of any current insurance. No
Restaurant Entity has been refused any insurance with respect to their
respective assets, properties or businesses, nor has any coverage been
materially limited by any insurance carrier to which any Restaurant Entity
has applied for any such insurance or with which any Restaurant Entity has
carried insurance during the last three years.
Section 4.30 OPERATIONS OF THE RESTAURANT ENTITIES. Except as
set forth on Schedule 4.30 or the other Schedules hereto, from December 31,
1996 through the date hereof, the business of each Restaurant Entity has
been conducted in the ordinary course on a basis consistent with past
practice and no Restaurant Entity has:
(i) been subject to any event, occurrence, development
or state of circumstances or facts which has had or could reasonably be
expected to have a Material Adverse Effect on the relevant Restaurant
Entity (other than (A) general economic conditions, (B) conditions
affecting the fast food industry generally, (C) actions by competitors
which have been widely publicized, (D) actions by competitors other than
Wendy's or McDonald's and (E) as set forth on Schedule 4.16(d));
(ii) amended its Governing Instruments from those
provided to the Purchaser or merged with or into or consolidated with any
other Person, subdivided or in any way reclassified any shares of its
capital stock or membership interests, as applicable, or changed or agreed
to change in any manner the rights of its outstanding capital stock or
membership interests, as applicable, or the character of its business;
(iii) issued, sold, purchased or redeemed, or entered
into any Contracts or Other Agreements to issue, sell, purchase or redeem,
any shares of its capital stock or membership interests, as applicable, or
any options, warrants, convertible or exchangeable securities,
subscriptions, rights, (including preemptive rights), stock appreciation
rights, calls or commitments of any character whatsoever relating to its
capital stock, or membership interests, as applicable, except in connection
with its initial organization;
(iv) entered into or amended any employment, deferred
compensation, severance, retirement or other similar agreement; entered
into any Contract or Other Agreement with any labor union or association
representing any employee; or adopted, entered into or amended any Employee
Benefit Plan or made any change in the actuarial methods or assumptions
used in funding any defined benefit pension plan, or made any change in the
assumptions or factors used in determining benefit equivalencies thereunder
except as required by law;
(v) adopted a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or other
reorganization of such Restaurant Entity except as contemplated by
Sections 10.07(b) and 10.07(c);
(vi) waived any right of value Material to the
Business;
(vii) made any change in its accounting methods,
principles or practices or made any change in depreciation or amortization
policies or rates adopted by it or elected the early adoption of any change
in financial accounting standards promulgated by the Financial Accounting
Standards Board;
(viii) materially changed any of its business policies;
(ix) incurred any damage, destruction or other casualty
loss (whether or not covered by insurance) affecting the business or assets
of such Restaurant Entity which, individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse Effect on such
Restaurant Entity;
(x) made any wage or salary increase or bonus, or
increase in any other direct or indirect compensation, for or to any of its
officers, directors, employees, consultants or agents or any accrual for or
Contract or Other Agreement to make or pay the same except in the ordinary
course of business consistent with past practice;
(xi) other than accrued vacation pay, made any payment
or commitment to pay severance or termination pay to any of its officers,
directors, employees, consultants, agents or other representatives;
(xii) except in the ordinary course of business and
except as provided in Section 10.07, entered into any lease (as lessor or
lessee); sold, abandoned or made any other disposition of any of its
assets, properties or businesses other than sales of Inventory in the
ordinary course of business; granted or suffered any Lien on any of its
assets, properties or businesses not reflected in the Financials; entered
into, amended or terminated any Third Party Lease or any Contract or Other
Agreement of the type required to be disclosed pursuant to Section 4.15
hereof to which it is a party or by or to which it or its assets,
properties or businesses are bound or subject or pursuant to which it
agrees to indemnify any Person or to refrain from competing with any
Person;
(xiii) made any capital expenditures in excess of
$25,000 in any one case or $100,000 in the aggregate other than in
connection with the opening of any Additional Restaurant;
(xiv) incurred or assumed any debt, obligation or
liability for borrowed money, or issued any debt securities, or assumed,
guaranteed, endorsed or otherwise as an accommodation became responsible
for, liabilities of any other Person or made any loans or advances;
(xv) except for Operating Assets and Inventory, made
any acquisition of all or any part of the assets, properties, capital stock
or business of any other Person;
(xvi) taken any action outside of the ordinary course
of its business which could reasonably be expected to have a material
adverse effect on sales or on any Restaurant Entity;
(xvii) amended, terminated or entered into any other
material transaction; or
(xviii) agreed to do any of the foregoing.
Section 4.31 POTENTIAL CONFLICTS OF INTEREST. (a) Schedule 4.31
lists the services performed by any Management Company on behalf of any
Restaurant Entity or Restaurant. Except as set forth on Schedule 4.31
hereto, no Seller, Responsible Individual nor any officer or director of
any Restaurant Entity or any Restaurant Entity controlled by any of the
foregoing or any member of the immediate family of any of the foregoing:
(i) owns, directly or indirectly, any interest in
(excepting not more than 5% stock holdings held solely for investment
purposes in securities of any Person which are listed on any national
securities exchange or regularly traded in the over-the-counter market) or
is an owner, sole proprietor, shareholder, member, partner, director,
officer, employee, consultant or agent of, any Person which is a competitor
(other than another Restaurant Entity and related Real Property Owners),
lessor, lessee, or supplier of any Restaurant Entity within the Restricted
Area;
(ii) owns, directly or indirectly, in whole or in part,
any Operating Assets, patent, trademark, service mark, trade name,
copyright, franchise, invention, permit, license or secret or confidential
information which any Restaurant Entity is using or the use of which is
necessary for or used in the business of the Restaurant Entity; or
(iii) has any cause of action or other suit, action or
claim whatsoever against, or owes any amount to, any Restaurant Entity,
except for claims in the ordinary course of business, such as for accrued
vacation pay, accrued benefits under Employee Benefit Plans and similar
matters and except for rights to indemnification and advancement of
expenses under the constituent documents of any Restaurant Entity;
PROVIDED, HOWEVER, the Sellers know of no basis for any claim thereunder.
(b) Except as set forth in Schedule 4.31 or in the
Financials, during the three years prior to the date hereof, no Seller or
Responsible Individual nor any officer or director of any Restaurant Entity
or any Restaurant Entity controlled by any of the foregoing or any member
of the immediate family of any of the foregoing has engaged in any
transaction with or on behalf of any Restaurant Entity other than the
receipt of compensation by any officer or director from any such Restaurant
Entity in the ordinary course of business or the receipt of dividends or
distributions to a shareholder in a Sub S corporation as properly declared
by the board of directors of any such Restaurant Entity or the payment of
rent to an Affiliated Real Property Owner.
Section 4.32 BANKS, BROKERS AND PROXIES. Schedule 4.32 hereto
sets forth: (i) the name of each bank, trust company and securities or
other broker which holds assets of any Restaurant Entity or which has a
lending relationship with any Restaurant Entity; (ii) the name of each
Person authorized by any Restaurant Entity to effect transactions therewith
or to have access to any safe deposit box or vault; and (iii) all proxies,
powers of attorney or other like instruments to act on behalf of any
Restaurant Entity in matters concerning its business or affairs.
Section 4.33 NO BROKER. No broker, finder, agent or similar
intermediary has acted for or on behalf of any Restaurant Entity or any of
the Sellers in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary
is entitled to any broker's, finder's or similar fee or other commission in
connection herewith based on any Contract or Other Agreement with any
Restaurant Entity or any of the Sellers or any action taken by any
Restaurant Entity or any of the Sellers.
Section 4.34 INTERCOMPANY DEBTS. Except as set forth on
Schedule 4.34 hereto, no Seller owes any amount to any Restaurant Entity.
All amounts set forth on Schedule 4.34 hereto shall be paid by the
applicable Seller to such Restaurant Entity at or prior to the Closing.
Section 4.35 BURGER KING RIGHTS. (a) Except as set forth on
Schedule 4.35(a), none of the Sellers nor any Affiliates of any Seller has
any interest or right to any interest in any Burger King Restaurant in the
Restricted Area, other than Existing Restaurants, New Restaurants and
Additional Restaurants.
(b) Schedule 4.35(b) hereto sets forth with respect to each
Seller and/or Restaurant Entity all rights such Seller or Restaurant Entity
may have to TRAs with Burger King within the Restricted Area. Except as
set forth on Schedule 4.35(b) hereto, no Seller, Responsible Individual or
Restaurant Entity nor any Affiliate of any Seller or Restaurant Entity
possesses any rights to any TRA with Burger King with respect to the
Restricted Area.
(c) Except as set forth on Schedule 4.35(c), no Seller,
Responsible Individual or Restaurant Entity or their respective Affiliates
has any territorial or Development Rights from Burger King regarding the
exclusive right to develop any Burger King restaurant within the Restricted
Area.
Section 4.36 NET CASH FLOW. The Sellers' Representatives have
delivered to the Purchaser the Schedule of Combined Net Cash Flows,
certified by the Sellers' Auditor. The expenses of preparing, including
the fees and expenses of the Sellers' Auditor, have been and shall be borne
by the Sellers. The Net Cash Flow reflected on the Schedule of Combined
Net Cash Flows for each of the Restaurant Entities, attached hereto as
Schedule 2.02(a), includes all of the operating costs and expenses incurred
or paid that are attributable to operating such Restaurant Entity's
respective Restaurant as a stand-alone Burger King Restaurant, regardless
of whether or not such operating expenses were incurred or paid by or on
behalf of any of the Restaurant Entities.
Section 4.37 LOAN FACILITIES. Schedule 4.37 hereto sets forth
all loan agreements that any of the Restaurant Entities are a party to and
any related UCC filings made in connection with any such loans. Other than
as set forth on Schedule 4.37, there are no loan agreements or facilities
in connection with any of the Restaurant Entities. All such loan
facilities will be paid off at or prior to Closing.
Section 4.38 ADDITIONAL RESTAURANTS. (a) Schedule 3.09(b)
hereto includes only bona fide out of pocket third-party non-Affiliate
purchase price, costs and expenses incurred or paid to acquire, open and/or
construct and equip the Additional Restaurants including, without
limitation, franchise fees and TRA expenses to the extent the Purchaser is
not required to pay Burger King therefor, costs relating to the real
property, buildings, fixtures, equipment and other personal property
comprising each Additional Restaurant sold to the Purchaser but not
including any financing costs of any kind, including, without limitation,
the cost of obtaining such financing, the costs of any appraisals in
connection therewith and the payment of principal and interest on any loans
obtained through any financing.
(b) Schedule 3.09(b) may be updated up to 90 days after the
Closing Date to reflect new information pertaining to the Additional
Restaurants in accordance with the provisions of Section 4.38(a) hereof.
Any such update shall be deemed to be a new representation by the Sellers
as to the matters set forth in Section 4.38(a).
Section 4.39 FULL DISCLOSURE. All Documents and Other Papers
delivered by or on behalf of the Sellers, the Responsible Individuals or
any Restaurant Entity in connection with this Agreement and the
transactions contemplated hereby are true, complete, accurate and
authentic. The representations and warranties contained in this ARTICLE IV
do not contain any untrue statement of a material fact and do not omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were
made, not false or misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
Section 5.01 ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and has the requisite corporate power and lawful
authority to own, lease and operate its assets, properties and business and
to carry on its business as it is now being conducted.
Section 5.02 AUTHORITY RELATIVE TO THIS AGREEMENT. The Purchaser
has the requisite corporate power and authority to enter into, execute and
deliver this Agreement, the Escrow Agreement and the Related Documents and
to perform fully its obligations hereunder and thereunder. The execution
and delivery of this Agreement, the Escrow Agreement and the Related
Documents and the consummation by the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of the Purchaser and no other corporate proceedings on the part
of the Purchaser are necessary to authorize the execution, delivery and
performance of this Agreement, the Escrow Agreement and the Related
Documents and the transactions contemplated hereby and thereby. This
Agreement has been, and the Escrow Agreement and the Related Documents will
be, duly executed and delivered by the Purchaser and this Agreement
constitutes, and the Escrow Agreement and the Related Documents will
constitute, the valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, except as
limited by: (i) applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting the enforcement of creditor's
rights generally from time to time in effect; and (ii) the availability of
equitable remedies (regardless of whether enforceability is considered in a
proceeding at law or in equity).
Section 5.03 ABSENCE OF CONFLICTS. The execution and delivery of
this Agreement, the Escrow Agreement and the Related Documents, the
consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof, will not: (i) violate,
conflict with or result in a breach of any provision of or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate
the performance required by, or result in a creation of any Lien upon any
of the assets, properties or businesses of the Purchaser under, any of the
terms, conditions or provisions of (x) the charter documents or by-laws of
the Purchaser or (y) any Contract or Other Agreement to which the Purchaser
or any of its assets, properties or businesses may be subject; or
(ii) subject to compliance with the statutes, laws, rules and regulations
referred to in Section 4.09 hereof, violate any judgment, ruling, order,
writ, injunction, award, decree, statute, law, ordinance, code, rule or
regulation of any court or any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency
or authority which is applicable to the Purchaser or any of its assets,
properties or businesses.
Section 5.04 NO BROKER. No broker, finder, agent or similar
intermediary has acted for or on behalf of the Purchaser in connection with
this Agreement or the transactions contemplated hereby, and no broker,
finder, agent or similar intermediary is entitled to any broker's,
finder's, or similar fee or other commission in connection therewith based
on any Contract or Other Agreement with the Purchaser or any action taken
by the Purchaser.
Section 5.05 CONSENTS. Except for the Burger King Consents, the
consent of the Purchaser's senior secured lender, any filings required
pursuant to the HSR Act and any filings that Purchaser may be required to
make with the Securities and Exchange Commission, the Purchaser is not
required to obtain any consents, approvals or other authorizations or to
make any filing with any governmental authority or agency or any other
Person in connection with the execution, delivery and consummation of this
Agreement, the Escrow Agreement and the Related Documents and the
consummation of the transactions contemplated hereby and thereby.
Section 5.06 FINANCIAL RESOURCES. The Purchaser has cash or
credit facilities presently available to meet all of its payment
obligations set forth herein.
Section 5.07 FULL DISCLOSURE. All Documents and Other Papers
delivered by or on behalf of the Purchaser in connection with this
Agreement and the transactions contemplated hereby are true, complete,
accurate and authentic. The representations and warranties contained in
this ARTICLE V do not contain any untrue statement of a material fact and
do not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not false or misleading.
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.01 CONDUCT OF BUSINESS. From the date hereof through
the Closing Date, the Sellers and the Responsible Individuals shall use
their respective commercially reasonable efforts to cause each Restaurant
Entity to conduct its respective businesses in the ordinary course in a
manner consistent with past practice and, without the prior written consent
of the Purchaser, shall not undertake any of the actions specified in
Section 4.30 hereof.
Section 6.02 INSURANCE. From the date hereof through the Closing
Date, the Sellers shall use their respective commercially reasonable
efforts to cause each Restaurant Entity to maintain in force (including
necessary renewals thereof) the insurance policies listed on Schedule 4.29
hereto, except to the extent that they may be replaced with equivalent
policies appropriate to insure the assets, properties and businesses of
each Restaurant Entity to substantially the same extent as currently
insured.
Section 6.03 LITIGATION. The Sellers shall promptly notify the
Purchaser of any suits, actions, claims, proceedings or investigations
which are threatened in writing or commenced against any Seller or any
Restaurant Entity or against any officer, director, employee, consultant,
agent or shareholder with respect to the affairs of any Restaurant Entity
including with respect to this Agreement and the transactions contemplated
hereby.
Section 6.04 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND
WARRANTIES; SATISFACTION OF CONDITIONS. The Sellers and the Responsible
Individuals shall use their respective commercially reasonable efforts to
cause their respective Restaurant Entities to preserve their respective
business organizations intact; keep available the services of their
respective present officers, employees, consultants and agents subject to
customary staffing changes with respect to non-management level employees
made in the ordinary course of business; maintain their respective present
suppliers, licensors, licensees, contractors and others with which they
have advantageous business relationships and preserve their respective
goodwill; and conduct their respective businesses in such a manner so that
the representations and warranties contained in ARTICLE IV hereof shall
continue to be true, complete and accurate in all material respects on and
as of the Closing Date with the same force and effect as if made on and as
of the Closing Date. The Purchaser shall use its commercially reasonable
efforts to cause the representations and warranties contained in ARTICLE V
hereof to continue to be true, complete and accurate in all material
respects on and as of the Closing Date with the same force and effect as if
made on and as of the Closing Date.
Section 6.05 ADVICE OF CHANGES. (a) The Sellers'
Representatives shall give prompt written notice to the Purchaser of:
(i) the occurrence, or failure to occur, of any event which occurrence or
failure could reasonably be expected to cause any representation or
warranty contained in ARTICLE IV of this Agreement, if made on or as of the
date of such event or as of the Closing Date, to be untrue or inaccurate in
any material respect; (ii) any failure of any Seller, Responsible
Individual or any Restaurant Entity or of any officer, director, employee,
consultant or agent of any Restaurant Entity, to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied
with or satisfied by it or them under this Agreement; (iii) any event of
which it has Knowledge which could reasonably be expected to result in the
failure of the parties hereto (other than Purchaser) to satisfy the
conditions specified in ARTICLE VIII or IX hereof; (iv) any notice of, or
other communication relating to, a material default (or event which, with
notice or lapse of time or both, would constitute a material default),
received by any Restaurant Entity, Responsible Individual or any Seller
subsequent to the date hereof and prior to the Closing Date, under any
Contract or Other Agreement Material to the Business of any Restaurant
Entity; (v) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated hereby; (vi) any notice or other communication
from any foreign, federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority in
connection with the transactions contemplated hereby; (vii) subject to the
exceptions set forth in Section 4.30(i), any adverse change Material to the
Business of any Restaurant Entity, or the occurrence of any event which
could reasonably be expected to result in a Material Adverse Effect on such
Restaurant Entity; or (viii) any matter hereafter arising which, if
existing, occurring or known at the date hereof, would have been required
to be disclosed to the Purchaser pursuant to ARTICLE IV hereof; PROVIDED,
HOWEVER, that no such notification shall affect the representations or
warranties or the covenants of the Sellers and Responsible Individuals
hereunder.
(b) The Purchaser shall give prompt written notice to the
Seller's Representatives of: (i) the occurrence, or failure to occur, of
any event which occurrence or failure could reasonably be expected to cause
any representation or warranty contained in ARTICLE V of this Agreement, if
made on or as of the date of such event or as of the Closing Date, to be
untrue or inaccurate; (ii) any failure of the Purchaser or of any officer,
director, employee, consultant or agent of the Purchaser, to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; (iii) any event of which it has
Knowledge which could reasonably be expected to result in the failure of
the Purchaser to satisfy the conditions specified in ARTICLE IX hereof;
(iv) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated hereby; (v) any notice or other communication
from any foreign, federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority in
connection with the transactions contemplated hereby; (vi) any adverse
change Material to the Business of the Purchaser, or the occurrence of any
event which could reasonably be expected to result in a Material Adverse
Effect on the Purchaser; or (vii) any matter hereafter arising which, if
existing, occurring or known at the date hereof, would have been required
to be disclosed to the Sellers; PROVIDED, HOWEVER, that no such
notification shall affect the representations or warranties of the
Purchaser or the conditions to the obligations of the Purchaser hereunder.
Section 6.06 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to
the Closing Date, the Sellers shall cause each Restaurant Entity, and each
Restaurant Entity's respective officers, directors, employees, consultants
and agents to afford the Purchaser and its officers, employees,
consultants, agents, counsel, accountants and other representatives
reasonable access during normal business hours to all of the properties,
books, records, contracts, other agreements, Documents and Other Papers of
each Restaurant Entity and to furnish to the Purchaser all such Contracts
and Other Agreements and Documents and Other Papers, and copies, extracts
and summaries thereof (certified, if reasonably requested), and information
with respect to the affairs of each Restaurant Entity as the Purchaser may
from to time reasonably request, and will cause the officers, employees,
agents and consultants of each Restaurant Entity to keep the officers of
the Purchaser informed as to the affairs of each Restaurant Entity and to
arrange for meetings with management of each Restaurant Entity from time to
time during normal business hours upon the Purchaser's reasonable request.
No investigation pursuant to this Section 6.06 shall affect any
representations, warranties or covenants of the Sellers and Responsible
Individuals hereunder. All of such information shall be subject to the
terms of the Confidentiality Letter, dated September 27, 1996, between the
Purchaser and Richard D. Fors, Jr. on behalf of the Sellers.
Section 6.07 PAYMENT OF INTERCOMPANY DEBTS. Prior to or at the
Closing, each Seller and Management Company shall pay and shall use its
best efforts to cause each of such Seller and the Management Companies to
pay to any Restaurant Entity any amounts owed as of the Closing Date by
such Person to such Restaurant Entity.
Section 6.08 SUPPLEMENTS TO DISCLOSURES. Prior to the Closing
Date, each 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 materially inaccurate
thereby.
Section 6.09 REGULATORY FILINGS AND CONSENTS. (a) From the date
hereof, 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.
(b) Each Seller shall use such person's commercially
reasonable efforts to obtain all Required Consents, including (both before
and after the Closing) the Burger King Consents, from third parties
necessary to consummate the transactions contemplated by this Agreement and
the Related Documents.
(c) The Purchaser shall use its commercially reasonable
efforts to obtain the consents required under Section 8.16, including
without limitation, the Burger King Consents.
(d) The Sellers' Representatives shall furnish to the
Purchaser copies of all correspondence, filings or communications (or, in
the absence of written communications, memoranda setting forth the
substance thereof) between the Sellers, the Responsible Individuals, the
Restaurant Entities, the Management Companies or any of their respective
officers, directors, employees, consultants and agents, on the one hand,
and any government agency or authority or third party, including Burger
King, or members of the staff of such agency or authority or third party,
on the other hand, with respect to this Agreement, the Escrow Agreement and
the Related Documents and the transactions contemplated hereby and thereby.
(e) The Purchaser shall have the right to review and
reasonably approve all such correspondence, filings and communications and
shall have the right to participate, where feasible, in any discussions or
negotiations with any such government agency or authority or third party,
including Burger King, or members of the staff of such agency or authority
or third party.
(f) Notwithstanding the foregoing, none of the parties to
this Agreement shall be required to allow the other party hereto to
participate in discussions or negotiations or to furnish any materials to
any other party to the extent prohibited by statute, rule or regulation
from being so furnished or to the extent counsel to the party asserting a
privilege advises is subject to a legally recognized privilege.
Section 6.10 ACCESS TO RESTAURANTS PRIOR TO CLOSING. Within at
least ten Business Days of the Closing Date, the Sellers shall give the
Purchaser and its agents reasonable access to the Restaurants for the
purpose of facilitating the Purchaser's integration of the cash register
systems. Such access by the Purchaser shall be upon reasonable prior
notice and the Purchaser shall use its commercially reasonable efforts to
conduct such activities in a manner so as not to unreasonably interfere
with the business of the Restaurants. To the extent there is storage space
available at the Restaurants which shall not unreasonably interfere with
the operation of the relevant Restaurant Entity, the Purchaser may also, at
its sole risk, store its equipment at the Restaurants. To further
facilitate the Purchaser's integration of the Restaurant's systems, the
Sellers hereby covenant and agree to close the Restaurants to business at
8:00 p.m. on the day immediately preceding the Closing Date. In connection
with any termination of this Agreement, the Purchaser shall, at its sole
expense, promptly remove such equipment from the relevant Restaurant
Entities.
Section 6.11 SUBSEQUENT FINANCIAL STATEMENTS AND REPORTS. From
the date hereof to and including the Closing Date, the Sellers shall cause
each Restaurant Entity to (a) provide to the Purchaser no later than three
days after the end of each week the weekly operating and sales analysis for
such week as used by such Restaurant Entity; PROVIDED, that if any
Restaurant Entity has not historically prepared such weekly operating and
sales analysis then it shall provide to Purchaser a weekly report providing
similar information to the extent feasible, (b) provide to the Purchaser no
later than 10 days after the end of each month a monthly management report
in scope and detail reasonably describing such month's activities, and
(c) timely prepare, and promptly deliver to the Purchaser, monthly
financial statements to include, without limitation, a reasonably detailed
cost breakout of each Restaurant Entity's performance by location and
otherwise to be in scope and detail reasonably satisfactory to the
Purchaser. Each such report or statement shall present fairly the
information set forth therein in accordance with accounting policies and
procedures consistent with those historically used by each Restaurant
Entity in the preparation of the Financials. Upon the Purchaser's
reasonable request, each Restaurant Entity shall provide additional
financial information regarding each Restaurant Entity in a form reasonably
satisfactory to the Purchaser to the extent such information is readily
available or may be obtained without unreasonable effort or expense.
Section 6.12 NO SOLICITATION. During the term of this Agreement,
except with respect to Restaurant Entities or Restaurants that the
Purchaser does not purchase pursuant to this Agreement, the Sellers, the
Responsible Individuals and each Restaurant Entity shall not (i) solicit,
initiate or encourage any inquiries, proposals or offers from any Person
for, or enter into any discussions or agreements with any Person with
respect to, the acquisition of any equity interest in the business of any
Restaurant Entity, or all, or substantially all, of the assets of any
Restaurant Entity (an "ACQUISITION TRANSACTION"), (ii) furnish or cause to
be furnished any non-public information concerning the business and
operations of any Restaurant Entity to any Person (other than any of the
parties hereto and their officers, directors, employees, consultants and
agents) or (iii) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any
Person to do or seek any of the foregoing. The Sellers and the Responsible
Individuals shall promptly notify the Purchaser of any inquiry or proposal
received by any of them or their Affiliates with respect to any such
Acquisition Transaction. The Sellers, the Responsible Individuals and any
Restaurant Entity shall not sell, grant, transfer or otherwise dispose of
any option or proxy to any Person with respect to, create any Lien upon, or
transfer any interest in, any shares of the capital stock or membership
interests of any Restaurant Entity or enter into any agreement to do so,
except in each case with respect to Restaurant Entities or Restaurants that
the Purchaser does not purchase pursuant to this Agreement.
Section 6.13 CONVEYANCE TAXES. The parties hereto shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real
property transfer or gains, sales, use, transfer, value added, stock
transfer and stamp taxes, any transfer, recording, registration and other
fees, and any similar taxes which become payable as a result of the
transactions contemplated hereby. Such Taxes and fees shall be paid by the
Sellers, other than (a) sales and use taxes relating to Listed Assets owned
by a Restaurant Entity purchased pursuant to Section 10.07(b) and the
assets of the Additional Restaurants purchased pursuant to Section
10.07(c), which shall be paid by the Purchaser, and (b) real estate
transfer taxes relating to the Real Property of such Additional
Restaurants, which shall be paid one-half by the Purchaser and one-half by
the Sellers.
Section 6.14 REAL PROPERTY TAX. (a) The Sellers and the
Responsible Individuals shall timely pay any New York State Real Estate
Transfer Tax imposed by Article 31 of the New York State Tax Law and any
other real property transfer taxes imposed by any jurisdiction where any of
the Real Property and Leases is situated in connection with the
consummation of the transactions contemplated hereby, except that the
Purchaser and the Sellers each shall pay one-half of any such real estate
transfer taxes relating to the Real Property of the Additional Restaurants
purchased pursuant to Section 10.07(c). The fair market value of the Real
Property and Leases subject to such real property transfer tax will be
conclusively determined by an appraiser selected by the Sellers and the
Responsible Individuals.
(b) Pursuant to Section 4.12, on or prior to the Closing
Date the Sellers' Representatives shall execute and deliver to the
Purchaser certifications pursuant to the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA CERTIFICATES") in the form of Exhibits M
or N hereto, as applicable. Purchaser acknowledges and agrees that upon
such delivery of such affidavits, Purchaser shall not withhold any portion
of the Purchase Price pursuant to Section 1445 of the Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder.
Section 6.15 HSR ACT FILING. (a) The Sellers' Representatives
shall timely and promptly make, on behalf of the Sellers, the Responsible
Individuals and the Restaurant Entities, all filings which are required
under the HSR Act. Except as set forth in Section 6.09(f), the Sellers'
Representatives shall supply the Purchaser with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between the Sellers' Representatives or any of the
Restaurant Entities or their counsel, on the one hand, and (other than the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice (the "ANTITRUST DIVISION")) any other
foreign, federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority or members
of their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby. Except as set forth in
Section 6.09(f) the Purchaser shall have the right to review and comment on
all such correspondence, filings and communications and shall have the
right to participate, where feasible, in any discussions or negotiations
with the FTC, the Antitrust Division and any other governmental, regulatory
or administrative agency or authority or members of their respective
staffs.
(b) The Purchaser will cause its "ultimate parent" (as such
term is defined in the HSR Act) to timely and promptly make all filings
which are required under the HSR Act. Except as set forth in
Section 6.09(f), the Purchaser will supply the Sellers' Representatives
with copies of all correspondence, filings or communications (or memoranda
setting forth the substance thereof) between the Purchaser or its "ultimate
parent" or their respective counsel, on the one hand, and (other than the
FTC and the Antitrust Division) any other foreign, federal, state, county
or local government or any other governmental, regulatory or administrative
agency or authority or members of their respective staffs, on the other
hand, with respect to this Agreement and the transactions contemplated
hereby.
Section 6.16 HUMAN RESOURCE MATERIALS.
(a) The Sellers and Responsible Individuals hereby covenant
and agree that immediately prior to the Closing they will cause the
Management Companies to transfer to the Purchaser, or to provide to the
Purchaser copies of, all employee related documents and information as of
the Closing Date as the Purchaser may reasonably request and to provide to
the Purchaser such other assistance, at the Sellers' sole cost, as the
Purchaser may reasonably request to transfer the Management Companies'
human resource functions on behalf of the Restaurant Entities to the
Purchaser, including, but not limited to, payroll and related data, medical
plans and 401(k) plans.
(b) The Sellers shall provide within five Business Days
preceding the Closing an updated schedule of vacation days accrued by all
employees of each Restaurant Entity, and the value of such accrued vacation
days for each such employee, as of the Closing Date.
Section 6.17 FINANCIALS. The Sellers hereby covenant and agree
to prepare and deliver the combined balance sheet for all of the Restaurant
Entities as at December 31, 1994, December 31, 1995 and December 31, 1996
and the related statements of income, retained earnings and cash flow for
the years then ended, including the notes thereto, which will be prepared
in a form meeting the requirements of the Securities Act and the Exchange
Act, will be certified by the Sellers' Auditor, and will fairly present the
combined financial position of the Restaurant Entities as at such dates and
the results of operations and the changes in retained earnings and cash
flow thereof for the years then ended in accordance with GAAP. The
December 31, 1994, December 31, 1995 and December 31, 1996 financial
statements shall be delivered to the Purchaser as soon as such financial
statements are available but in no event later than five days prior to
Closing. One-half of the expenses of certifying the foregoing financial
statements for the year ended December 31, 1994 shall be borne by the
Purchaser, up to an aggregate of $10,000. The Sellers shall bear the other
expenses associated with preparing and certifying such financial
statements.
Section 6.18 FURTHER ASSURANCES. In addition to the actions,
contracts, other agreements, Documents and Other Papers specifically
required to be taken or delivered pursuant to this Agreement, the Escrow
Agreement and the Related Documents, each of the parties hereto shall
execute such contracts, other agreements, Documents and Other Papers and
take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby.
Section 6.19 ENVIRONMENTAL MATTERS. (a) Promptly after the date
hereof, the Sellers shall, at their sole cost and expense, cause to be
performed "Phase I" environmental site assessments consistent with ASTM E
1527 (hereinafter "PHASE I ESAS") for each of the Real Properties, other
than those on which the Additional Restaurants are located, which shall be
conducted by a reputable, licensed environmental services company selected
by the Sellers and reasonably satisfactory to the Purchaser (the
"ENVIRONMENTAL CONSULTANT"). The Phase I ESAs may be relied upon by both
the Sellers and the Purchaser. The Purchaser shall approve the scope of
work for the Phase I ESAs prior to the implementation of such work, which
approval shall not be unreasonably withheld or delayed. The Sellers and
the Purchaser shall have equal rights to jointly consult (together with the
Sellers' Representatives) with the Environmental Consultant concerning the
results of the Phase I ESAs as they are being performed.
(b) In the event that any of the Phase I ESAs shall
recommend that a "Phase II" environmental site assessment (a "PHASE II
ESA") be performed or shall disclose any environmental conditions resulting
from current or prior operations or Hazardous Materials migrating onto the
Real Properties from adjacent properties which are unacceptable to the
Purchaser in the good faith exercise of its business judgment ("AREAS OF
ENVIRONMENTAL CONCERN"), then the Sellers shall have the option, to be
exercised within ten Business Days after receipt of any recommendation that
a Phase II ESA be performed to (i) at their sole cost and expense, cause
Phase II ESAs to be performed for each Real Property to further investigate
the Areas of Environmental Concern or (ii) give the Purchaser the option
not to purchase the Restaurant Entity with respect to which there is an
Area of Environmental Concern. The Purchaser shall have ten Business Days
from the receipt of a notice of such option to determine whether to acquire
such Restaurant Entity. If the Purchaser does not notify the Sellers of
its determination not to purchase such Restaurant Entity within such ten-
Business Day period, its right to reject such Restaurant Entity with
respect to such Option shall terminate. If the Purchaser decides to
acquire such Restaurant Entity it shall be obligated to acquire such
Restaurant Entity (subject to the other terms and conditions hereof), and
no Phase II shall be performed or commenced prior to Closing. If the
Purchaser decides not to acquire any such Restaurant Entity the Purchase
Price shall be reduced by five times the Net Cash Flow of such Restaurant
Entity as set forth in the Schedule of Combined Net Cash Flows. If the
Purchaser determines not to acquire more than five Restaurant Entities
under this Section 6.19(b), the Purchaser shall have the option to
terminate this Agreement within ten Business Days thereafter upon written
notice to the Sellers' Representatives.
(c) The Purchaser shall approve the scope of work for the
Phase II ESAs prior to the implementation of such work, which approval
shall not be unreasonably withheld or delayed, and shall also have the
right to consult (together with the Sellers' Representatives) with the
Environmental Consultant provided a Sellers' Representative is present
during all such consultations concerning the results of the Phase II ESAs
as they are being performed.
(d) In the event that a Phase II ESA shall identify Areas
of Environmental Concern which contain Hazardous Materials that exceed an
applicable Cleanup Standard (an "ENVIRONMENTALLY DAMAGED RESTAURANT"), then
the Environmental Consultant shall estimate the cost of (x) the Remedial
Action which is necessary to bring the contamination levels down to the
Cleanup Standard established by the appropriate governmental agency and
(y) any restoration or reconstruction that is necessary to restore the
Environmentally Damaged Restaurant to its previous condition in terms of
utility and appearance existing prior to the implementation of the Phase II
ESA ((x) and (y) are collectively referred to hereinafter as the "ESTIMATED
REMEDIATION COST"). If the Estimated Remediation Cost does not exceed
$200,000, then the Purchase Price shall be reduced by the Estimated
Remediation Cost and any Remedial Action at the Environmentally Damaged
Restaurant shall be conducted by and shall be the responsibility of the
Purchaser; PROVIDED, that the Sellers' Representatives shall provide
information and, at the Purchaser's expense with respect to out-of-pocket
expenses, assistance as is reasonably requested by the Purchaser. If the
Estimated Remediation Cost exceeds $200,000, then the Purchaser shall have
the option, to be exercised within thirty days after receipt of such Phase
II ESA, to (i) purchase the Restaurant Entity associated with such
Environmentally Damaged Restaurant, have the Purchase Price reduced by
$200,000 and conduct the Remedial Action at such Environmentally Damaged
Restaurant or (ii) not purchase the Restaurant Entity associated with such
Environmentally Damaged Restaurant under this Agreement and reduce the
Purchase Price by five times the Net Cash Flow of such Restaurant Entity.
(e) In performing any Phase II ESAs, the Sellers and the
Environmental Consultant shall be responsible for restoring, at the expense
of the Sellers, the properties to their previous condition in terms of
utility and appearance including, but not limited to, patching, repaving
and/or regarding the parking areas existing prior to the implementation of
the Phase II ESA.
(f) In the event that the Phase II ESAs shall identify ten
or more Real Properties with Areas of Environmental Concern with an
aggregate Estimated Remediation Cost for all such Real Properties in excess
of $1,200,000, then the Purchaser shall have the option to terminate this
Agreement, which option shall be exercisable within 10 Business Days from
the date Purchaser shall have received the Phase II ESAs disclosing such
conditions.
Section 6.20 LEASED PROPERTY. Prior to the Closing Date the
Sellers and the Responsible Individuals shall cause the Restaurant Entities
to (a) purchase for cash all of the equipment included on the Schedule of
Listed Assets and Listed Liabilities or comprising the Additional
Restaurants that would otherwise not be owned by the Restaurant Entities at
the Closing, such that valid title to such equipment is owned by the
appropriate Restaurant Entity free and clear of any Lien as of the Closing
Date and (b) pay all amounts due and owing under any Third Party Lease or
equipment lease as of or after the period prior to the Closing Date.
Section 6.21 BURGER KING FRANCHISE AGREEMENTS. The Purchaser
agrees to furnish to Burger King all documents reasonably necessary to
exhibit the financial and operational capabilities of the Purchaser.
Section 6.22 REBATES AND DISCOUNTS. All rebates and discounts
which the Restaurant Entities receive on account of periods or events prior
to the Closing Date shall be paid to the Sellers' Representative within 10
days of receipt thereof to the extent that such rebates and discounts are
not reflected as an asset in the Schedule of Combined Net Cash Flows or in
the Final Closing Schedule.
Section 6.23 EASEMENTS. Each of the Sellers, Responsible
Individuals and Restaurant Entities hereby assigns and transfers as of the
Closing such Seller's, Responsible Individual's or Restaurant Entity's
rights under both recorded and unrecorded Easements to the Purchaser
(excluding any such rights any of such Persons may have as the owner of a
fee interest in the Real Property related thereto) by inclusion in the
related Lease or by assignment to Purchaser, as the case may be, and shall
execute and deliver any documents of transfer reasonably requested by the
Purchaser in connection with such rights, and shall not take any act which
in anyway infringes on the Purchaser's ability to use such Easements.
Section 6.24 SELLERS' AND RESPONSIBLE INDIVIDUALS' COVENANTS.
The covenants of the Sellers and the Responsible Individuals contained in
this Agreement shall be deemed to bind such Persons only with respect to
those Restaurant Entities and Management Companies in which they have any
equity interest, except that Fors and Mund shall have joint and several
liability with respect thereto.
ARTICLE VII
DAMAGE OR DESTRUCTION
Section 7.01 DAMAGE TO OR DESTRUCTION OF RESTAURANTS. If any of
the Restaurants (a "DAMAGED RESTAURANT") is substantially damaged or is
destroyed by fire or other casualty (whether or not such damage or
destruction is covered by insurance), and such Damaged Restaurant is not
repaired, rebuilt and/or replaced prior to the Closing Date by the
applicable Restaurant Entity, then (i) the Purchaser shall acquire such
Restaurant pursuant to the other provisions of this Agreement, (ii) all
insurance proceeds payable in connection with such damage or destruction
and any right to make a claim therefor (to the extent not expended prior to
the Closing to rebuild or replace the Damaged Restaurant), whether payable
to a Seller, any Management Company or any of their respective Affiliates,
shall be assigned to the Purchaser or the appropriate Restaurant Entity as
determined by the Purchaser and shall be used to rebuild or repair the
Damaged Restaurant to its condition prior to such casualty with such
changes as may be required by law, and (iii) a portion of the Purchase
Price equal to (X) in the case of any Damaged Restaurant which is not an
Additional Restaurant, five times the Net Cash Flow of such Restaurant
Entity and (Y) in the case of any Additional Restaurant, the aggregate
Opening Expenses otherwise payable by the Purchaser pursuant to Section
3.09(b) with respect to such Additional Restaurant shall be withheld (the
"WITHHELD AMOUNT") and applied as set forth herein. The Purchaser shall
first apply the proceeds described under clause (ii) to such repair,
rebuilding or replacement and shall effect such repair, rebuilding or
replacement as quickly as is commercially reasonable. The Withheld Amount
shall be paid to the Sellers' Representatives to the extent not used in the
repair, rebuilding and/ or replacement of such Damaged Restaurant at the
earlier of (x) the time that the Purchaser has repaired, rebuilt and/ or
replaced such Damaged Restaurant or (y) 150 days after Closing; PROVIDED,
HOWEVER, that such 150 day period shall be extended by the number of days
that the Purchaser is delayed in the repairing, rebuilding or replacing of
such Damaged Restaurant by force majeure. The provisions of this
Section 7.01 shall apply to each Restaurant so affected.
Section 7.02 NOTIFICATION OF DAMAGE OR DESTRUCTION. Sellers'
Representatives shall immediately notify the Purchaser of any destruction
or material damage to any of the Restaurants of which they become aware.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PURCHASER'S
OBLIGATION TO CLOSE
The obligation of the Purchaser to enter into and complete the
Closing is subject, at its option, to the fulfillment on or prior to the
Closing Date of the following conditions, any one or more of which may be
waived by the Purchaser in its sole discretion:
Section 8.01 REPRESENTATIONS AND COVENANTS. The representations
and warranties of the Sellers and Responsible Individuals contained in this
Agreement shall be true, complete and accurate in all material respects as
to the Restaurant Entities taken as a whole on and as of the Closing Date
with the same force and effect as though made on and as of the Closing
Date. The Sellers and Responsible Individuals shall have performed and
complied in all material respects as to the Restaurant Entities taken as a
whole with all covenants and agreements required by this Agreement to be
performed or complied with by the Sellers on or prior to the Closing Date.
The Sellers' Representatives shall have delivered to the Purchaser one or
more certificates, dated the Closing Date and signed by the Sellers, to the
foregoing effect and stating that all conditions to the Purchaser's
obligations hereunder have been satisfied in all material respects as to
the Restaurant Entities taken as a whole.
Section 8.02 GOOD STANDING CERTIFICATES. The Sellers'
Representatives shall have delivered to the Purchaser: (i) copies of the
respective Governing Instruments, including all amendments thereto, of each
Restaurant Entity, certified, as applicable, by the Secretary of State or
other appropriate official of the applicable jurisdiction of incorporation
or formation; (ii) certificates from the Secretary of State or other
appropriate official of the respective jurisdictions of incorporation or
formation of each Restaurant Entity to the effect that each Restaurant
Entity is in good standing and subsisting in such jurisdiction and listing
all charter documents of each Restaurant Entity on file in such state;
(iii) a certificate from the Secretary of State or other appropriate
official in each foreign jurisdiction in which each Restaurant Entity is
qualified to do business to the effect that each Restaurant Entity is
qualified or authorized to do business in such State; and (iv) to the
extent obtainable a certificate as to the Tax status of each Restaurant
Entity from the appropriate official in its respective jurisdiction of
incorporation or formation and each State in which each Restaurant Entity
is qualified to do business, in each case, dated a date reasonably
proximate to the Closing Date.
Section 8.03 GOVERNMENTAL PERMITS AND APPROVALS. Any and all
Permits necessary for the consummation of the transactions contemplated
hereby or required in order for any Restaurant Entity to carry on its
respective businesses as currently conducted, or to maintain in effect any
Permits pursuant to which any Restaurant Entity carries on its respective
businesses as currently conducted shall have been obtained, and the
continued conduct by any Restaurant Entity of its respective businesses in
substantially the same manner as currently conducted and, except as
disclosed pursuant to ARTICLE IV, the consummation of the transactions
contemplated hereby shall not materially violate or conflict with any
judgment, code, ruling, order, writ, injunction, decree, award, statute,
law, ordinance, rule or regulation or other restriction binding upon or
applicable to any Restaurant Entity. None of the Permits shall contain any
terms, limitations or conditions which the Purchaser determines in the good
faith exercise of its reasonable business judgment to be materially
burdensome to the Purchaser, or which materially restricts the Purchaser's
rights as the sole shareholder or a member of any Restaurant Entity
(including, without limitation, its right to participate actively in the
management of any Restaurant Entity) or which would prevent the Purchaser
or any Restaurant Entity from conducting their respective businesses in
substantially the same manner as conducted on the date hereof.
Section 8.04 HART-SCOTT-RODINO. The waiting period specified in
the HSR Act, including any extensions thereof, shall have expired or
otherwise terminated, and neither the Purchaser nor the Sellers shall be
subject to any injunction or temporary restraining order against
consummation of the transactions contemplated hereby.
Section 8.05 LEGAL PROCEEDINGS. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened by or
before any court or any foreign, federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority
seeking to restrain, prohibit or invalidate the sale of any of the
Interests to the Purchaser hereunder or the consummation of the
transactions contemplated hereby or seeking damages relating to the
transactions contemplated hereby in excess of $1,000,000 in the aggregate.
Section 8.06 THIRD PARTY CONSENTS.
(a) All consents, waivers, licenses, variances, exemptions,
franchises, permits, approvals and authorizations from parties to any
Contracts and Other Agreements (including any amendments and modifications
thereto) with any Restaurant Entity which may be required in connection
with the performance by the Sellers of their obligations under this
Agreement or to assure such Contracts and Other Agreements are not
materially and adversely affected by the consummation of the transactions
contemplated hereby (absent any breach by any Restaurant Entity but without
giving any contracting party the right to terminate or modify any such
Contract or Other Agreement for any reason, including due to a change in
Control of any Restaurant Entity) shall have been obtained, including,
without limitation, the Required Consents, Tenant Estoppel Certificate and
the Burger King Consents (the Landlord Estoppel and Agreement from an
Unaffiliated Real Property Owner is not a condition precedent to
Purchaser's obligation to close the purchase of that Restaurant Entity);
PROVIDED, that any consents that are subject to conditions which the
Purchaser reasonably deems materially burdensome will be deemed not to have
been received; and PROVIDED FURTHER, that to the extent that any such
Consents, Certificates or Agreements have not been obtained or refused at
the Closing Date for up to 10 Restaurant Entities, such Restaurant Entities
shall not be purchased at the Closing and, instead, the Purchaser shall
deposit into an escrow fund for a maximum term of 90 days from the Closing
Date a portion of the Purchase Price equal to the product of five
multiplied by the Net Cash Flow for each of the relevant Restaurant
Entities and any risk of loss associated with such Restaurant Entities
shall be borne by the Sellers until such Consents, Certificates and
Agreements are received, except that in the case of any Additional
Restaurant, the amount deposited into the escrow fund shall equal the
aggregate Opening Expenses otherwise payable by the Purchaser pursuant to
Section 3.09(b) with respect to such Additional Restaurant. The Purchaser
and the Sellers shall enter into mutually acceptable arrangements which
shall provide for the sale of such Restaurant Entities to the Purchaser and
for the payment to the Sellers of the relevant portion of such escrow if
the relevant Consents and Certificates are received within such 90 day
period.
(b) Notwithstanding the foregoing, in the event that the Burger
King Consents require as a condition thereof, or Burger King notifies the
Sellers or the Sellers' Representatives in writing that as a condition to
their giving such consents (the "BURGER KING REMODELING NOTICE"), that any
Restaurant (or any appurtenance thereto) be renovated, remodeled or
repaired, then the Sellers' Representatives shall have the option to either
(i) cause any such required renovations, remodelings or repairs to be made
at the Sellers' sole cost and expense prior to Closing, or to obtain Burger
King's consent, and provide the Purchaser with adequate assurance
reasonably acceptable to the Purchaser that any such renovations,
remodelings or repairs will be made by the Sellers promptly following the
Closing, or (ii) notify the Purchaser in writing within ten Business Days
after the receipt by the Sellers Representatives of the Burger King
Consents or the Burger King Remodeling Notice that the Sellers elect not to
make such required renovations, remodelings or repairs (a "NO-REPAIR
NOTICE"). Unless the Sellers' Representatives provide a timely No-Repair
Notice as aforesaid, the Sellers shall be deemed to have irrevocably
agreed, at their sole cost and expense, to make or cause to be made such
renovations, remodelings or repairs (subject to the satisfaction of the
other conditions of this Agreement) either prior to Closing or, with Burger
King's consent and adequate assurance reasonably acceptable to the
Purchaser, promptly after the Closing. If the Sellers' Representatives
provide the Purchaser with a timely No-Repair Notice, then the Purchaser
shall have ten Business Days from the receipt thereof to either
(x) terminate this Agreement or (y) notify the Sellers' Representatives and
Burger King in writing that the Purchaser will, at its sole cost and
expense, make or cause to be made any such renovations, remodelings or
repairs either prior to Closing or, with Burger King's consent, promptly
after the Closing. Unless the Purchaser provides timely notice of the
termination of this Agreement as aforesaid, the Purchaser shall be deemed
to have irrevocably agreed, at its sole cost and expense, to make or cause
to be made such renovations, remodelings or repairs (subject to the
satisfaction of the other conditions of this Agreement) either prior to
Closing or, with Burger King's consent, promptly after the Closing. Any
costs and expenses incurred to make such renovations, remodelings or
repairs shall be referred to as "Remodeling Expenses".
Section 8.07 CERTIFICATES. Subject to the provisions of
Sections 10.07(b) and 10.07(c), the applicable Sellers shall have tendered
to the Purchaser the stock certificate or certificates or other evidences
of title, if any, representing all of the Interests of such Sellers in the
Restaurant Entities in accordance with Section 2.01 hereof, and, in the
case of stock certificates duly endorsed in blank or with duly executed
stock powers attached, in proper form for transfer and with appropriate
transfer stamps, if any, affixed.
Section 8.08 OPINIONS OF COUNSEL TO THE SELLERS, THE RESTAURANT
ENTITIES, THE AFFILIATED REAL PROPERTY OWNERS AND THE SELLERS'
REPRESENTATIVES. The Purchaser shall have received the favorable opinions,
dated the Closing Date and addressed to the Purchaser, of (i) Lowenstein,
Sandler, Kohl, Fisher & Boylan, P.A. and Saperston & Day, P.C., special New
York counsel, in the form of Exhibit P hereto; (ii) Mayer, Vogt, Smith &
Palmquist, special Indiana and Kentucky counsel, in form and substance
reasonably satisfactory to the Purchaser; and (iii) Fessenden, Laumer &
DeAngelo, special Pennsylvania counsel, in form and substance reasonably
satisfactory to the Purchaser.
Section 8.09 RESIGNATION OF DIRECTORS AND OFFICERS. Subject to
the provisions of Sections 10.07(b) and 10.07(c), the Purchaser shall have
received the resignation, effective upon the Closing, of all officers and
members of the Board of Directors of each Restaurant Entity.
Section 8.10 PAYMENT OF INTERCOMPANY DEBT. Each Seller,
Management Company and their respective Affiliates shall have paid to any
Restaurant Entity any amounts owed by such Person to any Restaurant Entity
and all amounts due any of the foregoing by any such Restaurant Entity
shall have been forgiven or paid.
Section 8.11 INSTRUMENTS OF TRANSFER. With respect to any
transaction referred to in Sections 10.07(b) and 10.07(c), each Seller
shall have delivered to Purchaser a bill of sale and assignment,
substantially in the form of Exhibit Q hereto (a "GENERAL ASSIGNMENT, BILL
OF SALE AND ASSUMPTION"), and any other documents of transfer which
Purchaser reasonably shall request in order to evidence and effectuate the
sale and assignment to Purchaser of any assets and the Third Party Leases,
and the consummation of all other transactions contemplated by this
Agreement and the Related Documents.
Section 8.12 NO MATERIAL ADVERSE CHANGE; CERTIFICATES. There
shall have been no material adverse change, nor any events which could
reasonably be expected to have a material adverse change, in the business,
operations or financial or other condition of the Restaurant Entities taken
as a whole from the date hereof to the Closing Date (the "INTERIM PERIOD")
nor shall have there been, for all Existing Restaurant Entities 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 the cost of food and other goods
sold determined on a basis consistent with the financial statements
referred to in Section 4.11 hereof. At Closing, Purchaser shall have
received a certificate dated the Closing Date in form satisfactory to
Purchaser from the Sellers' Representatives to the foregoing effect.
Section 8.13 OTHER DOCUMENTS. The Purchaser shall have received
the following as set forth in this Agreement:
(i) a fully executed original counterpart of the Lease
and the Memoranda of Lease from each of the applicable Affiliated Real
Property Owners;
(ii) with respect to each of the Sellers' Third Party
Leases, a Consent to Lease Assignment and Transaction or a Consent to
Sublease, as applicable (to the extent required under Section 3.03(b)(i)
hereof), a Lease Assignment (to the extent the lease is actually being
assigned), a Tenant Estoppel and, subject to Sections 3.03(b)(i) and 8.06
hereof, a Landlord Estoppel and Agreement;
(iii) FIRPTA Certificates;
(iv) a fully executed original counterpart of the
Escrow Agreement; and
(v) Subject to the provisions of Sections 10.07(b) and
10.07(c), all the books and records of the Restaurant Entities, including,
but not limited to, general ledgers, Tax Returns, invoices, canceled checks
for the period such records are required by law to be kept, originals or
certified copies of all Governing Instruments, minute books and originals
of all contracts included in the Listed Assets and any plans and
specifications relating to the Real Properties.
Section 8.14 PAYOFF OF LOANS. Subject to the provisions of
Sections 10.07(b) and 10.07(c), all of the loans to or owed by each
Restaurant Entity whether set forth on Schedule 4.37 hereto or otherwise
shall have been paid off in full at or prior to Closing and appropriate
evidence thereof shall have been delivered to the Purchaser.
Section 8.15 TERMINATION OF AGREEMENTS. Subject to the provisions
of Sections 10.07(b) and 10.07(c), all Contracts and Other Agreements
between any Restaurant Entity and any Management Company or any of their
respective Affiliates shall have been terminated at or prior to the Closing
and the Purchaser shall have received a certificate signed by the Sellers'
Representatives to such effect.
Section 8.16 SENIOR LENDER'S Consent. The Purchaser shall have
received, if necessary, the written consent of its senior secured lender to
the transactions contemplated hereby.
Section 8.17 SELLERS' AUDITOR'S Consent. The Purchaser shall
have received the agreement of the Sellers' Auditor, in form and substance
reasonably satisfactory to the Purchaser and its counsel and to the
Sellers' Auditor and its counsel, to provide a consent to the use of any
financial statements delivered by the Sellers' Auditor in any filing by the
Purchaser pursuant to the Securities Act or the Exchange Act upon
completion of standard procedures (which the Sellers' Auditor shall agree
to do expeditiously). The Purchaser agrees to pay the Sellers' Auditor a
reasonable fee.
Section 8.18 TOTAL RESTAURANT ENTITIES. There shall be
transferred not fewer than 52 Restaurant Entities directly or pursuant to
Section 10.07(b).
ARTICLE IX
CONDITIONS PRECEDENT TO THE SELLERS'
OBLIGATION TO CLOSE
The obligation of the Sellers to enter into and complete the
Closing is subject, at the option of the Sellers, to the fulfillment on or
prior to the Closing Date of the following conditions, any one or more of
which may be waived by the Sellers in their sole discretion:
Section 9.01 REPRESENTATIONS AND COVENANTS. The representations
and warranties of the Purchaser contained in this Agreement shall be true,
complete and accurate in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date. The Purchaser shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date. The
Purchaser shall have delivered to the Sellers' Representatives a
certificate, dated the Closing Date and signed by an officer of the
Purchaser, to the foregoing effect and stating that all conditions to the
Sellers' obligations hereunder have been satisfied.
Section 9.02 PURCHASE PRICE. The Purchaser shall have tendered
payment for the Interests in the amount and in the manner specified in
Section 2.02 hereof.
Section 9.03 HART-SCOTT-RODINO. The waiting period specified in
the HSR Act, including any extensions thereof, shall have expired or
otherwise terminated, and neither the Purchaser nor the Sellers shall be
subject to any injunction or temporary restraining order against
consummation of the transactions contemplated hereby.
Section 9.04 LEGAL PROCEEDINGS. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened by or
before any court or any foreign, federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority
seeking to restrain, prohibit or invalidate the sale of any of the
Interests to the Purchaser hereunder or the consummation of the
transactions contemplated hereby or seeking damages relating to the
transactions contemplated hereby in excess of $1,000,000.
Section 9.05 CERTIFICATES. At Closing, the Sellers'
Representatives shall have received a certificate dated the Closing Date in
form satisfactory to Sellers' Representative and signed by the Purchasers
pursuant to Section 9.01 hereof.
Section 9.06 OTHER DOCUMENTS. The Sellers' Representatives shall
have received the following as set forth in this Agreement:
(i) a Consent to Lease Assignment and Transaction with
respect to its Third Party Lease and the Lease Assignment;
(ii) a fully executed original counterpart of each
Lease and the Escrow Agreement;
(iii) a fully executed original counterpart of any
General Assignment, Bill of Sale and Assumption required to be delivered
with respect to any transaction referred to in Sections 10.07(b) or
10.07(c); and
(iv) all other documents, instruments and agreements
required to be delivered by the Purchaser to the Sellers Representative
pursuant to this Agreement and the Related Documents.
Section 9.07 OPINION OF COUNSEL TO THE PURCHASER. The Sellers
shall have received the favorable opinion of Schulte Roth & Zabel LLP,
counsel to the Purchaser, dated the Closing Date, addressed to the Sellers,
in the form of Exhibit R hereto.
Section 9.08 TOTAL RESTAURANT Entities. There shall be
transferred not fewer than 52 Restaurant Entities directly or pursuant to
Section 10.07(b) whether due to Burger King's exercise of its right of
first refusal or otherwise.
Section 9.09 BURGER KING CONSENTS. Subject to the provisions of
Section 8.06, the Burger King consents shall have been obtained and shall
not have imposed any materially burdensome obligation on the Sellers.
ARTICLE X
PROVISIONS AS TO TAX MATTERS
Section 10.01 LIABILITY FOR TAXES. Except as otherwise provided
in this ARTICLE X, the Sellers shall have no liability for any Taxes,
whether disputed or not, attributable to any Restaurant Entity.
Section 10.02 INDEMNIFICATION. The Sellers and the Responsible
Individuals shall indemnify, defend and hold harmless the Purchaser, the
Restaurant Entities and their respective assigns from and against any and
all Losses suffered, sustained, incurred or required to be paid by the
Purchaser, the Restaurant Entities or any of their respective assigns based
upon, arising out of or otherwise with respect to Taxes attributable to
(i) all taxable periods of any Restaurant Entity ending on or prior to the
Closing Date to the extent not reflected on the Schedule of Listed Assets
and Listed Liabilities, (ii) all Taxes allocated to the Sellers pursuant to
Section 10.03, (iii) all Taxes arising as a result of a breach or
inaccuracy of any representation or warranty, or any failure to perform or
comply with any covenant or agreement, with respect to Taxes and (iv) any
liability or obligation relating to the withholding of Taxes from the wages
and salaries of employees and independent contractors for periods prior to
the Closing. The indemnification obligations set forth herein shall
survive the Closing.
Section 10.03 ALLOCATION OF TAXES. If, for any federal, state,
local or foreign Tax purposes, the taxable period of any Restaurant Entity
does not terminate on the Closing Date, Taxes, if any, attributable to the
taxable period of any Restaurant Entity that includes the Closing Date
shall be allocated to (i) the Sellers, for the period up to and including
the Closing Date to the extent not reflected on the Schedule of Listed
Assets and Listed Liabilities and (ii) the Purchaser, for all other
periods. For purposes of the preceding sentence, Taxes for the period up
to and including the Closing Date shall be determined on the basis of an
interim closing of the books as of the close of business on the Closing
Date. Exemptions, allowances or deductions that are calculated on an
annual basis, such as a deduction for depreciation, shall be apportioned on
a daily basis. The Sellers and the Purchaser shall cooperate in preparing
any such Tax filings, and each party shall provide all information
reasonably requested by the other party (at such requesting party's sole
expense) in order to complete such filing(s).
Section 10.04 RIGHT TO REFUND. Purchaser agrees to assign and
promptly remit (and to cause each Restaurant Entity to assign and promptly
remit) to the Sellers all refunds (including interest thereon) received by
the Purchaser or any Restaurant Entity of any Taxes for which the Sellers
have indemnified the Purchaser or paid on behalf of the Purchaser or any
Restaurant Entity hereunder. The Purchaser agrees that, upon the request
of the Sellers' Representatives, the Purchaser shall file, or cause each
Restaurant Entity to file (at the Sellers' sole expense), a claim for
refund of any Tax for which the Sellers have indemnified the Purchaser or
paid on behalf of the Purchaser or any Restaurant Entity hereunder.
Section 10.05 CALCULATION OF INDEMNITY. The Purchaser, the
Restaurant Entities and each of their respective assigns, as the case may
be, shall include in its notice of any claim for indemnification pursuant
to this ARTICLE X a calculation of the amount of the requested indemnity
payment, which calculation shall be reviewed in advance by the independent
certified public accountants for the Purchaser, the Restaurant Entities, or
such assigns, as the case may be. For purposes of this ARTICLE X and the
calculation of any indemnity: interest or penalties accruing after the
Closing Date with respect to a liability for (i) Taxes attributable to a
taxable period ending on or prior to the Closing Date or (ii) Taxes
allocated to the Sellers pursuant to Section 10.03, shall be deemed to be
attributable to (x) a taxable period ending on or prior to the Closing Date
or (y) Taxes allocated to the Sellers pursuant to Section 10.03,
respectively.
Section 10.06 NOTIFICATION; CONTESTS.
(a) Each party hereto shall promptly notify the other
parties in writing upon receipt of notice of any pending or threatened Tax
audits, examinations, proceedings or assessments of any Restaurant Entity.
Notwithstanding the foregoing, the failure to give notice under the
preceding sentence shall not relieve the Sellers or Responsible Individuals
of any obligations hereunder except to the extent that the Sellers shall
have been materially prejudiced in their ability to conduct such audit,
examination, proceeding or assessment. The Sellers' Representatives shall
be entitled to control and conduct any audit, examination, proceeding or
assessment (a "CONTEST") related to the liability for, or a claim for
refund of, any Taxes for which the Sellers would be required to indemnify
the Purchaser or the Restaurant Entities or any of their respective
assigns, or to which refund the Sellers or Responsible Individuals would be
entitled, pursuant to this ARTICLE X.
(b) The Sellers' or Responsible Individuals' right to
control and conduct a Contest shall be limited to amounts in dispute which
would be paid or received by the Sellers or Responsible Individuals for
which the Sellers or Responsible Individuals would be liable or to which
refund the Sellers would be entitled pursuant to this ARTICLE X. With
respect to a Contest, the Sellers or Responsible Individuals shall have the
right to determine, in their sole discretion, such issues as: (i) the
forum, administrative or judicial, in which to contest any proposed
adjustment; (ii) the attorney and accountants to represent any Restaurant
Entity in the Contest; (iii) whether or not to appeal any decision of any
administrative or judicial body; and (iv) whether to settle any such
Contest and the Sellers or Responsible Individuals shall have the right to
determine, with the consent of the Purchaser, which consent shall not be
unreasonably withheld or delayed, whether any prior tax return will be
amended; PROVIDED, HOWEVER, the Sellers or Responsible Individuals shall
not consent (without the prior written consent of the Purchaser) to any
settlement that may reasonably be expected to have an adverse effect on the
Taxes of any Restaurant Entity with respect to the period after the Closing
Date for which it may not seek indemnity from the Sellers or Responsible
Individuals hereunder; PROVIDED FURTHER that the Sellers or Responsible
Individuals shall keep the Purchaser informed of the status of any such
Contest. The Purchaser and the Restaurant Entities shall deliver to the
Sellers' Representatives any power of attorney required to allow the
Sellers' Representatives and its counsel and accountants to represent any
Restaurant Entity in connection with the Contest.
(c) The Sellers' Representatives shall have access to all
relevant books and records of each Restaurant Entity, and each Restaurant
Entity shall furnish to the Sellers' Representatives any information or
copies, summaries or extracts of any documents which may be relevant in
connection with the Contest and shall provide such other assistance in this
connection as the Sellers' Representatives may reasonably request. The
Purchaser agrees that it will cooperate, and cause each Restaurant Entity
to cooperate, fully with the Sellers' Representatives and its attorneys and
accountants in the defense against or compromise of any claim in any
Contest. Indemnification payments (if any) required to be made as a result
of any Contests shall be made no later than five days after the claims
asserted are finally determined.
Section 10.07 SECTION 338(H)(10) ELECTION AND ASSET SALE. (a) At
the request of the Purchaser, the Sellers and Responsible Individuals agree
to make along with the Purchaser a joint election under Section 338(h)(10)
of the Code, to treat the purchase and sale of the shares of stock of the
Restaurant Entities set forth on Schedule 10.07(a) as a sale of all of the
assets of those Restaurant Entities and to make any applicable comparable
election under the relevant provisions of state, local and foreign Tax
laws. The parties agree that $26,380,511 of the Purchase Price shall be
allocated to the assets of Restaurant Entities set forth on
Schedule 10.07(a) in accordance with Schedule 10.07(a) hereto. Each party
covenants to report gain or loss or cost basis in a manner consistent with
Schedule 10.07(a) hereto for Tax purposes. The parties shall exchange
mutually acceptable Internal Revenue Service Forms 8594 reflecting such
allocations which shall be filed with the Internal Revenue Service and any
applicable state, local or foreign Tax authorities. The Sellers shall pay
all Taxes incurred in connection with the foregoing Code Section 338(h)(10)
election (and each election under the comparable provisions of state, local
and foreign Tax laws) described in this Section except for sales or use tax
payable on Listed Assets sales made pursuant to the terms hereof, which
shall be paid by the Purchaser. No more than $125,000 shall be allocated to
Section 1245 property owned by each Restaurant Entity with respect to which
such election is made.
(b) No more than five days prior to the Closing Date,
Purchaser may elect, in lieu of purchasing the membership interests of the
limited liability companies listed on Schedule 10.07(b), to purchase
directly or through a wholly-owned subsidiary of the Purchaser, the assets
of such companies and assume the liabilities of such companies, PROVIDED,
that the Purchaser shall remain primarily liable for the performance of its
obligations hereunder. The parties agree that up to $2,860,561 of the
Purchase Price shall be allocated to the assets of the limited liability
companies in accordance with Schedule 10.07(b) hereto. Each party
covenants to report gain or loss or cost basis in a manner consistent with
Schedule 10.07(b) hereto for Tax purposes. The parties shall exchange
mutually acceptable Internal Revenue Service Forms 8594 reflecting such
allocations which shall be filed with the Internal Revenue Service and any
applicable state, local or foreign Tax authorities. Except for sales or
use taxes payable on Listed Assets sold pursuant to the terms hereof which
shall be paid by the Purchaser, the Sellers or Responsible Individuals
shall pay all Taxes incurred in connection with the asset sale described in
this Section. No more than $125,000 shall be allocated to Section 1245
property owned by each Restaurant Entity with respect to which such asset
sale is effected.
(c) With respect to Additional Restaurants purchased
pursuant to the terms of this Agreement, the Purchaser shall purchase the
Real Property (including the building thereon and fixtures appurtenant
thereto) and the Listed Assets of such Additional Restaurant and assume
such Restaurant's Listed Liabilities. The parties agree that an amount
equal to the aggregate Opening Expenses shall be allocated to the assets of
the Additional Restaurants (excluding inventory) in accordance with Section
3.09(b) hereto. Each party covenants to report gain or loss or cost basis
in a manner consistent with Schedule 3.09(b) hereto for Tax purposes. The
parties shall exchange mutually acceptable Internal Revenue Service Forms
8594 reflecting such allocations which shall be filed with the Internal
Revenue Service and any applicable state, local or foreign Tax authorities.
Except for (a) sales or use taxes payable on the assets of the Additional
Restaurants purchased pursuant to this Section 10.07(c), which shall be
paid by the Purchaser, and (b) real estate transfer taxes relating to the
Real Property of such Additional Restaurants, which shall be paid one-half
by the Purchaser and one-half by the Sellers, the Sellers or Responsible
Individuals shall pay all Taxes incurred in connection with the asset sale
described in this Section.
Section 10.08 TAX RETURNS. The Sellers shall cause to be
prepared and filed all Tax Returns that include the Restaurant Entities for
all taxable periods of the Restaurant Entities that end on or before the
Closing Date. The Purchaser shall cause to be prepared and filed all Tax
Returns for taxable periods ending after the Closing Date. In accordance
with Section 10.03, the Sellers shall pay on a timely basis all Taxes for
the period up to and including the Closing Date and the Purchaser shall pay
on a timely basis all Taxes for the period subsequent to the Closing Date.
Section 10.09 COOPERATION. The Sellers and the Purchaser agree,
and the Purchaser agrees to cause the Restaurant Entities after the Closing
to agree, to provide, or cause to be provided, at the cost of the
requesting party any assistance that the other may reasonably request with
respect to all matters relating to the income or other Tax Liabilities of
the Restaurant Entities, the Responsible Individuals or the Sellers for any
taxable year or period prior to or including the Closing Date. The
requested party shall bear the cost of: (i) providing forms, information,
schedules and other assistance which would customarily be prepared or
provided in connection with the preparation of the requested party's income
Tax Returns, consistent with past practices; and (ii) providing information
and data which would customarily be provided in connection with the audit
of the requested party's income Tax Returns. Assistance will include, but
not be limited to, the following:
(a) submission of data in the form reasonably required
by the Sellers' Representatives in order to prepare estimates and complete,
within its normal time requirements, the Restaurant Entities' or the
Sellers' or Responsible Individuals' income Tax Returns for 1996 and 1997,
including all schedules thereto. This also may include data permitting a
determination of earnings and profits needed in computations to fulfill Tax
reporting requirements;
(b) execution of tax elections relating to the income
of the Restaurant Entities and the Sellers, for a period ending on or prior
to the Closing Date deemed necessary or advisable by the Sellers, so long
as such action does not adversely affect any Tax Liability of any
Restaurant Entity for future years;
(c) within ten days of a request therefore, providing
access to the books and records of the Restaurant Entities or otherwise
providing all information reasonably required to be able to respond to
Internal Revenue Service inquiries in the format reasonably specified by
the Sellers' Representatives.
(d) providing within sixty days copies of and access
to files containing all Tax Returns, working papers, internal memoranda and
opinions of counsel or advisors relevant to Tax Returns for each Restaurant
Entity or which have included or may be required to include any Restaurant
Entity; and
(e) retention of records required under Section 6001
of the Code and any agreements between the Internal Revenue Service and any
Restaurant Entity.
Each party will reimburse the other party hereto for all
reasonable out of pocket costs incurred by such party in connection with
providing assistance pursuant to this Section 10.09.
Section 10.10 ALLOCATION OF RESPONSIBILITY. Each Seller shall
have responsibility under this ARTICLE X only with respect to the
Restaurant Entity or Management Company in which it had an interest except
that Fors and Mund shall have joint and several responsibility with respect
thereto.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE SELLING
SHAREHOLDERS
Section 11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE
SELLERS. (a) Notwithstanding any right of the Purchaser to fully
investigate the affairs of the Restaurant Entities and the Sellers, the
Purchaser has the right to rely fully upon the representations, warranties,
covenants and agreements of the Sellers contained in this Agreement.
(b) All such representations, warranties, covenants and
agreements of the Sellers shall survive the execution and delivery hereof
and the Closing hereunder as follows: (i) all representations and
warranties contained in the first sentence of Section 4.01 and
Sections 4.03, 4.04, 4.05, 4.06, 4.12, 4.25, 4.26 and 4.28 and 4.38 (only
to the extent such Section 4.38 relates to any of the foregoing)
(collectively, the "LONG TERM PROVISIONS") shall survive for the applicable
statute of limitations period and any extensions thereof (other than
extensions of time resulting from acts of the Purchaser not consented to by
the Sellers' Representatives) and (ii) all representations and warranties
contained in this Agreement other than those listed in Section 11.01(b)(i)
shall survive through April 30, 1998 or, if sooner, the thirtieth day
following the completion of an audit of the consolidated financial
statements of the Purchaser for the year ended December 31, 1997; PROVIDED,
HOWEVER, that any claim hereunder in respect of any representation or
warranty herein brought prior to the expiration of the applicable survival
period may be pursued thereafter.
ARTICLE XII
INDEMNIFICATION
Section 12.01 OBLIGATION OF THE SELLERS TO INDEMNIFY.
(a) Subject to the limitations set forth in ARTICLE XII, (i) Fors and Mund
and the Sellers controlled by them shall jointly and severally, and
(ii) each of the other Responsible Individuals and Sellers shall severally
and not jointly (with respect to the Restaurant Entity or Restaurant
Entities owned directly or indirectly by such Seller), indemnify, defend
and hold harmless from the date hereof and after the Closing the Purchaser
and its assigns and, after the Closing, the Restaurant Entities and their
assigns, from and against, any Losses suffered, sustained, incurred or
required to be paid by the Purchaser or any Restaurant Entity or their
respective assigns, as the case may be, based upon, arising out of or
otherwise with respect to:
(i) a breach or inaccuracy of any representation or
warranty, or any failure to perform or comply with any covenant or
agreement, of the Sellers or Responsible Individuals contained herein or in
any Document or Other Paper delivered pursuant hereto;
(ii) the matters set forth on Schedule 4.14
(litigation);
(iii) any activities, responsibilities or obligations
performed or undertaken by any Management Company on behalf of any of the
Restaurant Entities, including, but not limited to, Losses in connection
with any Employee Benefit Plan maintained by any Management Company; and
(iv) the actions or the operations of any Restaurant
Entity on or prior to the Closing Date (other than those arising from
Listed Liabilities that are reflected on the Final Closing Schedule) or for
Listed Liabilities arising from acts or omissions occurring prior to the
Closing in amounts that are in excess of the amounts set forth on the Final
Closing Schedule; PROVIDED, HOWEVER, that the Purchaser, its successors and
assigns, the Restaurant Entities and their successors and assigns shall not
be entitled to indemnification for Losses arising out of (i) Remedial
Actions assumed or undertaken by the Purchaser pursuant to Section 6.19(d),
(ii) the repair, rebuilding or replacement of any Damaged Restaurant
pursuant to Section 7.01 in excess of the Withheld Amount, or (iii)
Remodeling Expenses assumed or undertaken by the Purchaser pursuant to
Section 8.06, in each case regardless of whether such Losses result from a
breach of any representation or warranty made by Fors, Mund, the other
Sellers or any Responsible Individual.
(b) None of the Sellers' or Responsible Individuals'
representations or warranties in this Agreement shall be deemed to have
been breached for purposes of Section 12.01(a)(i) and, therefore, none of
such Persons shall have any liability under Section 12.01(a)(i), except to
the extent that (x) any individual breach or series of related breaches of
any representation or warranty has resulted in Losses exceeding $10,000 (a
"QUALIFYING BREACH") and (y) the total amount of Losses that resulted from
all Qualifying Breaches would exceed $400,000 in the aggregate; PROVIDED,
that no such representation or warranty shall be deemed to have been
breached and no such Person shall have any liability for such purposes due
to the Sellers' failure to fully equip or construct any Additional
Restaurant if the Purchase Price was not increased to reflect the
incremental costs which are the basis for such breach. In the event the
total amount of such Losses exceeds $400,000 in the aggregate, (A) the
Sellers and the Responsible Individuals shall be responsible for one-half
of such Losses up to $400,000, and (B) the Sellers and the Responsible
Individuals shall be responsible for all of such Losses in excess of
$400,000.
(c) (i) In no event shall any Responsible Individual or
Seller (other than Fors and Mund and their related Sellers) have any
liability under this ARTICLE XII in excess of the portion of the Purchase
Price received by such Responsible Individual and related Seller and,
subject to the provisions of clause (ii) below, Fors and Mund and their
related Sellers shall not be liable under this ARTICLE XII in excess of the
aggregate Purchase Price received by them.
(ii) The aggregate Losses that may be recovered for
breaches of representations or warranties that are not Long Term Provisions
shall be limited to $10,000,000.
(d) With respect to any Additional Restaurant, neither
Fors, Mund, the other Sellers nor any Responsible Individuals shall have
any liability under this ARTICLE XII with respect to any breach of the
representations and warranties contained in Sections 4.16(b)(iv) and (v),
4.16(e) or the third sentence of Section 4.19 (the "Asset Quality
Representations") unless any claim thereunder is brought within 90 days of
the Closing. Prior to pursuing any claim made for indemnification under
the Asset Quality Representations with respect to any Additional
Restaurant, the Purchaser shall first use commercially reasonable efforts
to recover under any remedy it may have under any manufacturer's or other
third party warranty and the amount of any indemnifiable Losses shall be
reduced by any amounts recovered by the Purchaser pursuant thereto.
(e) The provisions of ARTICLE X and XII shall constitute
the sole and exclusive remedy of any indemnified party after the Closing
with respect to the breach of any representation or warranty of the
Responsible Individuals or Sellers contained in this Agreement, the Related
Documents and any certificate delivered pursuant hereto or thereto. To the
extent of any covenant or restriction which is required to be performed or
observed on or after the Closing Date, none of the limitations set forth in
this ARTICLE XII shall apply. Any other rights to indemnification or
Losses to which the Purchaser or any other indemnified party might
otherwise be entitled after the Closing, whether now existing or hereafter
arising, with respect to such a breach, are hereby waived to the maximum
extent permitted by applicable law. Notwithstanding the provisions of this
Section 12.01, except for Section 12.01(b) and 12.01(c)(i) which shall
supersede any provisions in this Agreement to the contrary, the
indemnification provided for hereby shall not apply to any Losses related
to Taxes, and indemnification in respect of such Losses shall be governed
by the provisions of ARTICLE X hereof.
(f) The representation set forth in Section 4.36 shall not
be breached and the Purchaser shall have no claim for Losses pursuant to
this ARTICLE XII with respect to a breach of Section 4.36 unless the
Combined Net Cash Flow, as finally determined for purposes of calculating
the Purchase Price hereunder, is less than $10,000,000.
Section 12.02 OBLIGATION OF THE PURCHASER TO INDEMNIFY.
(a) The Purchaser shall indemnify, defend and hold harmless
the Sellers and their respective assigns from and against any Losses
suffered, sustained, incurred or required to be paid by any of the Sellers
based upon, arising out of or otherwise with respect to: (i) a breach or
inaccuracy of any representation or warranty, or any failure to perform or
comply with any covenant or agreement, of the Purchaser contained herein or
in any Document or Other Paper delivered pursuant hereto, (ii) the
performance or satisfaction of all Listed Liabilities (including
liabilities arising out of the Listed Assets) and (iii) any potential
Losses of any kind or nature arising out of the actions or the operations
of any Restaurant Entity after the Closing Date.
(b) The Purchaser shall indemnify the Sellers and the
Responsible Individuals for any Losses suffered by any of them with respect
to a claim by Burger King pursuant to the Burger King Franchise Agreements
regarding any event arising after the Closing Date with respect to any
Restaurant Entity acquired by the Purchaser hereunder that is not related
to any breach of any representation, warranty or covenant of any Seller or
Responsible Individual.
(c) Notwithstanding the provisions of this Section 12.02,
the indemnification provided for hereby shall not apply to any Losses
related to Taxes, and indemnification in respect of such Losses shall be
governed by the provisions of ARTICLE X hereof.
Section 12.03 NOTICE AND OPPORTUNITY TO DEFEND. (a) If any
Person entitled to indemnification pursuant to this ARTICLE XII (an
"INDEMNIFIED PERSON") receives notice of any claim or the commencement of
any suit, action, proceeding or investigation with respect to which the
Indemnified Person intends to seek indemnification pursuant to this ARTICLE
XII from any other Person (or Persons) (an "INDEMNIFYING PERSON"), the
Indemnified Person shall promptly give the Indemnifying Person (which in
the case of the Sellers shall be satisfied by delivery to the Sellers'
Representatives) notice thereof (an "INDEMNIFICATION NOTICE"), but the
failure to give an Indemnification Notice to the Indemnifying Person shall
not relieve the Indemnifying Person of any liability that it may have to an
Indemnified Person except to the extent that the Indemnifying Person shall
have been materially prejudiced in its ability to defend the suit, action,
claim, proceeding or investigation for which such indemnification is sought
by reason of such failure.
(b) Upon receipt of an Indemnification Notice, the
Indemnifying Person shall be entitled at its option and at its cost and
expense to assume the defense of such suit, action, claim, proceeding or
investigation with respect to which it is called upon to indemnify an
Indemnified Person pursuant to this ARTICLE XII; PROVIDED that notice of
the Indemnifying Person's intention to assume such defense shall be
delivered by the Indemnifying Person to the Indemnified Person within a
reasonable time in light of the circumstances then and there existing. In
the event that the Indemnifying Person elects to assume the defense of such
suit, action, claim, proceeding or investigation, as the case may be, the
Indemnifying Person shall promptly retain counsel reasonably satisfactory
to the Indemnified Person (which may be counsel to the Indemnifying Person
so long as the Indemnifying Person can reasonably show that such counsel
would not be subject to a conflict of interest with respect thereto). The
Indemnified Person shall have the right to employ its own counsel in any
such suit, action, claim, proceeding or investigation, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Person
unless: (i) the employment of such counsel shall have been authorized by
the Indemnifying Person; (ii) the Indemnifying Person failed promptly to
retain counsel reasonably satisfactory to the Indemnified Person to take
charge of the defense of such suit, action, claim, proceeding or
investigation and to notify the Indemnified Party of such retainer, or
(iii) the Indemnified Person shall have reasonably concluded that there may
be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Person (other than a
defense arising by virtue of this ARTICLE XII), in which event, such fees
and expenses (including, without limitation, reasonable fees paid to
witnesses) shall be borne by the Indemnifying Person (but in no event shall
the Indemnifying Person be required to pay the fees and expenses of more
than one counsel retained by all Indemnified Persons with respect to any
one suit, action, claim, proceeding or investigation). In the event of
(i), (ii) or (iii) above, the Indemnifying Person shall not have the right
to direct the defense of any suit, action, claim, proceeding or
investigation on behalf of the Indemnified Person.
(c) If an Indemnifying Person elects to assume the defense
of any suit, action, claim, proceeding or investigation for which it is
called upon to indemnify an Indemnified Person pursuant to this ARTICLE
XII: (i) no compromise or settlement thereof may be effected by the
Indemnifying Person without the Indemnified Person's written consent (which
shall not be unreasonably withheld or unreasonably delayed) unless:
(x) there is no finding or admission of any violation of any judgment,
ruling, order, writ, award, decree, statute, law, ordinance, code, rule or
regulation of any court or foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency
or authority or any violation of the rights of any Person by the
Indemnified Person and no effect on any other suit, action, claim,
proceeding or investigation that may be made against the Indemnified
Person; and (y) the sole relief provided is monetary damages that are paid
in full by the Indemnifying Person; and (ii) the Indemnifying Person shall
have no liability with respect to any compromise or settlement thereof
effected without its consent (which shall not be unreasonably withheld or
unreasonably delayed).
(d) At any time after the assumption of the defense of any
suit, action, claim, proceeding or investigation by an Indemnifying Person
in accordance with this Section 12.03, the Indemnifying Person may request
the Indemnified Person to agree in writing to the abandonment of such suit,
action, claim, proceeding or investigation or to the payment or compromise
by the Indemnifying Person thereof, whereupon such abandonment, payment or
compromise, as the case may be, shall be effected unless the Indemnified
Person determines that such suit, action, claim, proceeding or
investigation should be continued, and so notifies the Indemnifying Person
in writing within 15 days of such request from the Indemnifying Person. In
the event that the Indemnified Person determines that such suit, action,
claim, proceeding or investigation should be continued, the Indemnifying
Person shall be liable hereunder only to the extent of the lesser of:
(i) the amount which the other party to the contested suit, action, claim,
proceeding or investigation had agreed to accept in payment or compromise
as of the time the Indemnifying Person made its request therefor to the
Indemnified Person; or (ii) such amount for which the Indemnifying Person
may be liable with respect to such suit, action, claim, proceeding or
investigation by reason of the provisions of this ARTICLE XII.
(e) If the Indemnifying Person fails to notify the
Indemnified Person of its election to assume the defense of any suit,
action, claim, proceeding or investigation for which it is called upon to
indemnify an Indemnified Person pursuant to this ARTICLE XII within thirty
days after the Indemnified Person gives the Indemnification Notice to the
Indemnifying Person, the Indemnifying Person shall be bound by any
determination made in such suit, action, claim, proceeding or investigation
or compromise or settlement thereof effected by the Indemnified Person.
(f) Notwithstanding the provisions of this Section 12.03,
the indemnification mechanism provided for hereby shall not apply to any
Losses related to Taxes, and the mechanism for indemnification in respect
of such Losses shall be governed by the provisions of ARTICLE X hereof.
Section 12.04 DISPUTES WITH BURGER King. Anything in
Section 12.03 hereto to the contrary notwithstanding, in the case of any
suit, action, claim, proceeding or investigation by Burger King or any of
its Subsidiaries with respect to matters relating to any Burger King
Franchise Agreement, the Indemnified Person shall be entitled to approve
the counsel selected by the Indemnifying Person, which approval shall not
be unreasonably withheld.
Section 12.05 COOPERATION. If requested by the Indemnifying
Person, the Indemnified Person shall cooperate to the extent reasonably
requested in the defense or prosecution of any suit, action, claim,
proceeding or investigation for which such Indemnifying Person is being
called upon to indemnify the Indemnified Person pursuant to this ARTICLE
XII, and the Indemnified Person shall furnish such records, information and
testimony (subject to appropriate non-disclosure agreements to the extent
necessary to protect privileged information) and attend all such
conferences, discovery proceedings, hearing, trials and appeals as may be
reasonably requested in connection therewith and, if appropriate, the
Indemnified Person shall make any counterclaim against the party asserting
such suit, action, claim, proceeding or investigation or any cross-
complaint against any Person in connection therewith and the Indemnified
Person further agrees to take such other actions as reasonably may be
requested by an Indemnifying Person to reduce or eliminate any Loss for
which the Indemnifying Person would have responsibility, but the
Indemnifying Person will reimburse the Indemnified Person for any fees or
expenses incurred by it in so cooperating or acting at the request of the
Indemnifying Person.
Section 12.06 RECOVERIES. The amount of any Losses suffered,
sustained, incurred or required to be paid by any Indemnified Person shall
be reduced by the amount of any insurance proceeds and other amounts paid
to the Indemnified Person by, or offset against any amount owed by the
Indemnified Person to, any Person not a party to this Agreement.
Section 12.07 PAYMENT OF LOSSES. The Indemnifying Person shall
pay to the Indemnified Person in cash the amount of any Loss to which the
Indemnified Person may become entitled by reason of the provisions of this
ARTICLE XII, such payment to be made within five days after such Losses are
finally determined either by mutual agreement of the parties hereto or
pursuant to the final nonappealable judgment of a court of competent
jurisdiction.
Section 12.08 ESCROW FUND. The obligation of the Sellers under
Section 12.01 and under ARTICLE X hereof shall be satisfied first from the
Escrow Fund pursuant to the procedures set forth therein and, if the Escrow
Fund is inadequate to provide indemnification to the Purchaser or its
assigns as provided in the Escrow Agreement, then from the Sellers as
provided in Section 12.01 and in ARTICLE X hereof.
Section 12.09 AUTHORITY OF THE SELLERS' REPRESENTATIVES. The
Sellers' Representatives shall be authorized to take any action relating to
ARTICLE X or ARTICLE XII hereof on behalf of any or all Sellers (without
prior notice or consent) and such action shall be binding on all Sellers.
ARTICLE XIII
COVENANT NOT TO COMPETE
Section 13.01 COVENANT NOT TO COMPETE. Each Seller agrees and,
to the extent it Controls any Affiliates of such Seller, agrees to cause
such Affiliate and the Sellers' Representatives hereby jointly and
severally covenant and agree that, for a period of three years following
the Closing Date it, he or she and his or her Affiliates will not, directly
or indirectly, for its, his or her own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor, consultant or
otherwise (except as permitted in the applicable Lease):
(i) own, operate, manage, develop, finance, or
otherwise engage in any type of fast food or quick service restaurant
business within the Restricted Area except for any Restaurant Entity or
Restaurant not acquired by the Purchaser pursuant to the terms hereof;
(ii) within the Restricted Area, except for any
Restaurant Entity or Restaurant not acquired by the Purchaser pursuant to
the terms hereof; sell, develop, lease for occupancy or otherwise use or
permit to be used any property presently owned or leased or hereafter
acquired or leased by it, him or her for use as any type of fast food or
quick service restaurant business, except for any transactions with the
Purchaser or any of its Affiliates and except with respect to any real
property on which any Restaurant located on the Closing Date but which
related lease has been terminated by its terms; or
(iii) employ or solicit the employment of any executive
or management level employees of the Restaurant Entities or Restaurants
that are acquired by the Purchaser pursuant to this Agreement who are
employed by or in any of such Restaurant Entities or Restaurants on the
date hereof or at any time from the date hereof through the Closing Date so
long as they are employees of the Purchaser or any subsidiary of the
Purchaser and for six months after any termination of such employment;
PROVIDED, that the Sellers shall be entitled to engage in general
solicitations through mass media advertising.
Notwithstanding the foregoing, the Sellers (other than Fors or
Mund) shall have the right to become employees of Burger King even if their
job responsibilities involve Burger King restaurants or other fast food or
quick service restaurants affiliated with Burger King.
Section 13.02 GEOGRAPHIC AREA REASONABLE; REDUCTION OF
GEOGRAPHICAL AREA AND TIME RESTRICTION. The Sellers and the Sellers'
Representatives acknowledge that the restricted period of time and
geographical area specified in Section 13.01 hereof are reasonable.
Notwithstanding anything herein to the contrary, if the period of time or
the geographical area specified under Section 13.01 hereof should be
determined to be unreasonable in any judicial proceeding, then the period
of time and territory of the restriction shall be reduced so that this
Agreement may be enforced in such area and during such period of time as
shall be determined to be reasonable.
Section 13.03 EFFECT OF BREACH. The parties acknowledge that any
breach of this ARTICLE XIII will cause the Purchaser irreparable harm for
which there is no adequate remedy at law, and as a result, the Purchaser
shall be entitled to apply for the issuance by a court of competent
jurisdiction of an injunction, restraining order or other equitable relief
in favor of itself restraining any Seller or the Sellers' Representatives,
as the case may be, from committing or continuing any such violation. Any
right to obtain an injunction, restraining order or other equitable relief
hereunder shall not be deemed a waiver of any right to assert any other
remedy that the Purchaser may have at law or in equity.
Section 13.04 ALLOCATION OF PURCHASE PRICE. The parties agree
that $1 of the Purchase Price shall be allocated to the Covenant Not to
Compete described in this ARTICLE XIII for Tax purposes including, without
limitation, the completing of Tax Returns, and shall not be used for any
other purposes including, without limitation, the defense of any claim
involving the Covenant Not to Compete described in this Article XIII.
ARTICLE XIV
TERMINATION OF AGREEMENT
Section 14.01 TERMINATION OF AGREEMENT. This Agreement may be
terminated prior to the Closing as follows:
(i) at the election of the Sellers' Representatives or
the Purchaser, if the Closing shall not have occurred on or prior to
September 30, 1997; PROVIDED, HOWEVER, that no party shall be entitled to
terminate this Agreement pursuant to this clause if the failure of such
party to fulfill any of its obligations under this Agreement (other than as
a result of actions or omissions of the Opposing Party) shall have been the
reason that the Closing shall not have occurred on or before said date;
(ii) at the election of the Sellers' Representatives,
if the Purchaser has, in any material respect, breached or failed to
perform or comply with any representation, warranty, covenant or agreement
contained in this Agreement; PROVIDED, HOWEVER, that if such breach or
failure is curable, notice of such breach or failure shall have been given
to the Purchaser and the Purchaser shall not have cured such failure within
ten days;
(iii) at the election of the Purchaser, if any of the
Sellers has, in any material respect with respect to the Restaurant
Entities taken as a whole, breached or failed to perform or comply with any
representation, warranty, covenant or agreement contained in this
Agreement; PROVIDED, HOWEVER, that if such breach or failure is curable,
notice of such breach or failure shall have been given to the Sellers'
Representatives and the Sellers shall not have cured such failure within
ten days;
(iv) at the election of the Purchaser pursuant to
Section 6.19; or
(v) at any time on or prior to the Closing Date, by
mutual written consent of the Sellers' Representatives and the Purchaser.
Section 14.02 EFFECT OF TERMINATION. In the event that this
Agreement is terminated pursuant to Section 14.01 hereof, it shall become
null and void and have no further force or effect, except as otherwise
specifically provided in Section 15.01 hereof; PROVIDED, HOWEVER, that if
this Agreement is so terminated by either the Sellers' Representatives or
the Purchaser because one or more of the conditions to the terminating
party's obligations hereunder is not satisfied as a result of an Opposing
Party's failure to comply in any material respect with its obligations
under, or its material breach of any other provision of, this Agreement
(other than as a result of actions or omissions of such terminating party),
it is expressly agreed and understood that the terminating party's right to
pursue all legal remedies for breach of contract and damages shall also
survive such termination unimpaired.
ARTICLE XV
NON-TRANSFERRED ENTITIES
Section 15.01 APPLICATION OF ARTICLES. The parties hereto hereby
acknowledge that there is a possibility that fewer than 64, but in no event
less than 52, Restaurant Entities will be directly transferred to the
Purchaser pursuant to this Agreement. To the extent that certain
Restaurant Entities are not transferred to the Purchaser on the Closing
Date (the "Non-Transferred Entities"), Articles II, III, IV (other than
Section 4.11), VI (other than Sections 6.17 and 6.19), VIII (other than
Section 8.18), IX (other than Section 9.08) and X hereof and any related
Schedules, Exhibits and definitions shall be deemed to be amended and
modified solely to the extent necessary to reflect the transfer of the
other Restaurant Entities until such time, if any, as the Non-Transferred
Entities are transferred to the Purchaser in accordance with the terms of
this Agreement.
Section 15.02 EXTENSION OF TIME PERIODS. Any obligation of the
Sellers or Sellers' Representatives to deliver to the Purchaser any
documents, instruments and certificates relating to the Non-Transferred
Entities shall not become effective unless and until the Non-Transferred
Entities are duly transferred to the Purchaser; PROVIDED, that the Sellers
shall deliver the Financials with respect to only the Restaurant Entities
actually transferred as promptly as practicable after all Restaurant
Entities to be transferred pursuant hereto have been identified.
Section 15.03 ADJUSTMENTS. The amounts set forth in Section 10.07
shall be adjusted accordingly to reflect the Non-Transferred Entities.
ARTICLE XVI
MISCELLANEOUS
Section 16.01 FEES AND EXPENSES. Each of the parties hereto
shall pay its own fees and expenses incident to the negotiation,
preparation and execution of this Agreement, including attorneys',
accountants' and other advisors fees, except for HSR Act filing fees, which
shall be paid (a) by the Purchaser if the Notification and Report Form is
filed by the Sellers' Representatives, on behalf of the Sellers, the
Responsible Individuals and the Restaurant Entities, as required, with the
FTC within ten days of the date this Agreement is executed by all of the
parties hereto or (b) by the Sellers if the Notification and Report Form is
not so filed by such parties (other than as a result of the Purchaser's
actions). Except for (a) sales or use taxes relating to Listed Assets
owned by a Restaurant Entity purchased pursuant to Section 10.07(b) and the
assets of the Additional Restaurants purchased pursuant to Section
10.07(c), which shall be paid by the Purchaser, and (b) real estate
transfer taxes relating to the Real Property of such Additional
Restaurants, which shall be paid one-half by the Purchaser and one-half by
the Sellers, the Sellers shall pay all stock transfer Taxes, recording fees
and other sales, transfer, use, purchase or similar Taxes resulting from
the transactions contemplated hereby.
Section 16.02 PUBLICITY. No publicity release or announcement
concerning this Agreement or the transactions contemplated hereby shall be
issued without advance approval of the form and substance thereof by the
Sellers' Representatives and the Purchaser.
Section 16.03 NOTICES. Any notice or other communication
required or which may be given hereunder shall be in writing and shall be
delivered personally, telecopied, telegraphed or telexed, or sent by
certified, registered, or express mail, postage prepaid, to the parties at
the following addresses or at such other addresses as shall be specified by
the parties by like notice, and shall be deemed given when so delivered
personally, telecopied, telegraphed or telexed, or if mailed, two days
after the date of mailing, as follows:
(a) if to the Purchaser, to:
Carrols Corporation
968 James Street
Syracuse, New York 13203-6969
Telecopier Number: (315) 475-9616
Attention: Daniel T. Accordino, President
and
Joseph A. Zirkman, Esq.
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Telecopier Number: (212) 593-5955
Attention: Andr<e'> Weiss, Esq.
(b) if to any Seller, to the Sellers' Representatives or to
any Management Company, to :
Resser Management Corp.
5820 Main Street
Williamsville, New York 13221
Telecopier Number: (315) 475-9616
Attention: Richard D. Fors, Jr.
and
Charles J. Mund
with a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068
Telecopier Number: (201) 992-5820
Attention: R. Barry Stiger, Esq.
(b) if to the Sellers' Auditor, to:
Beck Villata and Co., P.C.
1390 Northeast 162nd Street
North Miami Beach, Florida 33162
Telecopier Number: (305) 944-6100
Attention: Frank Beck
Section 16.04 ENTIRE AGREEMENT. This Agreement, the Escrow
Agreement and the Related Documents (including the Exhibits and Schedules
hereto) contains the entire agreement among the parties with respect to the
purchase of the Interests and related transactions and supersedes all prior
Contracts and Other Agreements, written or oral, with respect thereto.
Section 16.05 WAIVERS AND AMENDMENTS. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms
and conditions hereof may be waived, only by a written instrument signed by
the Purchaser and the Sellers' Representatives or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any
right, power or privilege hereunder, preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at
law or in equity. The rights and remedies of any party arising out of or
otherwise in respect of any inaccuracy in or breach of any representation
or warranty, or any failure to perform or comply with any covenant or
agreement, contained in this Agreement shall in no way be limited by the
fact that the act, omission, occurrence or other state of facts upon which
any claim of any such inaccuracy, breach or failure is based may also be
the subject matter of any other representation, warranty, covenant or
agreement contained in this Agreement (or in any other agreement between
the parties) as to which there is no inaccuracy, breach or failure.
Section 16.06 GOVERNING LAW. This Agreement shall be governed
by, and construed and enforced in accordance with and subject to, the laws
of the State of New York applicable to agreements made and to be performed
entirely within such State.
Section 16.07 BINDING EFFECT; BENEFIT. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto
and any Indemnified Person or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
Section 16.08 NO ASSIGNMENT. This Agreement is not assignable
except by operation of law; except that the Purchaser may assign its rights
to a wholly-owned Subsidiary or to any corporation that owns all of the
outstanding common stock of the Purchaser, provided, that the Purchaser
shall remain liable for the performance of its obligations hereunder and
under each Lease; and except that the obligations of the Management
Companies set forth in Sections 3.07 and 6.07 hereto may be assigned to an
entity or entities other than the Management Companies so long as such
other entity or entities are directly wholly-owned by Fors and/or Mund.
Section 16.09 VARIATIONS IN PRONOUNS. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the identity of the Person or Persons may require.
Section 16.10 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 16.11 EXHIBITS AND SCHEDULES. The Exhibits and Schedules
to this Agreement are a part of this Agreement as if set forth in full
herein.
Section 16.12 HEADINGS. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 16.13 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency
or authority to be invalid, void, unenforceable or against public policy
for any reason, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
Section 16.14 ACCESS. From and after the Closing for a period of
seven years, each of the Purchaser and the Sellers' Representatives shall
provide reasonable access to each other and to each other's respective
representatives with respect to the books and records of the Restaurant
Entities and Restaurants acquired directly or under Section 10.07(b) and
the Management Companies, as the case may be, to the extent that such
access is reasonably necessary in furtherance of a legitimate business
purpose, including tax, franchise, financial and indemnification matters.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CARROLS CORPORATION
By: /S/ DANIEL T. ACCORDINO
Name: Daniel T. Accordino
Title: President
This is the first of ten signature pages
<PAGE>
THE SELLERS AND THE RESPONSIBLE INDIVIDUALS:
(Each Seller and Responsible Individual should sign exactly as such
Seller's or Responsible Individual's name appears on such Sellers' or
Responsible Individual's stock certificate(s) for the Existing Restaurant
Entities or as reflected on the records of the New Restaurant Entities. If
a certificate is registered in the name of more than one shareholder, each
registered holder must sign.)
/S/ RICHARD D. FORS, JR. /S/ WILLIAM J. O'DONNELL
Name: Richard D. Fors, Jr. Name: William J. O'Donnell
/S/ CHARLES J. MUND /S/ JOHN T. SWEENEY
Name: Charles J. Mund Name: John T. Sweeney
CHARLES J. MUND, JR. /S/ WILLIAM J. REZNICEK
Name: Charles J. Mund, Jr. Name: William J. Reznicek
/S/ ERIC W. MUND
Name: Eric W. Mund
MUND TRUST OF 5/27/88
By: /S/ CHARLES J. MUND
Charles J. Mund, Trustee
By: /S/ CAROL C. MUND
Carol C. Mund, Trustee
This is the second of ten signature pages
<PAGE>
THE CHARLES J. MUND CHARITABLE
REMAINDER UNITRUST
By:/S/ CHARLES J. MUND
Charles J. Mund, Trustee
By:/S/ CAROL C. MUND
Carol C. Mund, Trustee
THE RICHARD D. FORS, JR. CHARITABLE
REMAINDER UNITRUST
By:/S/ RICHARD D. FORS, III
Richard D. Fors, III, Trustee
By:/S/ CHRISTOPHER FORS
Christopher Fors, Trustee
By:/S/ ANDREW L. FORS
Andrew L. Fors, Trustee
THE PATRICIA P. FORS CHARITABLE
REMAINDER UNITRUST
By:/S/ RICHARD D. FORS, III
Richard D. Fors, III, Trustee
By:/S/ CHRISTOPHER FORS
Christopher Fors, Trustee
By:/S/ ANDREW L. FORS
Andrew L. Fors, Trustee
This is the third of ten signature pages
<PAGE>
THE REAL PROPERTY OWNERS
EWM PROPERTIES, L.P.
By:/S/ CAROL C. MUND
Carol C. Mund
General Partner
CJM PROPERTIES, L.P.
By:/S/ CAROL C. MUND
Carol C. Mund
General Partner
UNION ROAD LAND CORP.
By:/S/ CHARLES J. MUND
Name: Charles J. Mund
Title: Vice President
PARKSIDE LAND CORP.
By:/S/ CHARLES J. MUND
Name: Charles J. Munc
Title: President
This is the fourth of ten signature pages
FENNEC RESTAURANT CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: President
ELLICOTT LAND CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
FREDONIA FOOD CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
WELLSVILLE REALTY CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
This is the fifth of ten signature pages
<PAGE>
GOWANDA LAND CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
SILVER CREEK LAND CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
HOLIDAY LAND CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
MAINWORK LAND CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
This is the sixth of ten signature pages
<PAGE>
MT. TABOR LIMITED PARTNERSHIP
By: MT. TABOR REALTY CORP.
General Partner
By:/S/ WILLIAM J. REZNICK
William J. Reznicek
President
WESTPORT REALTY CORP.
By:/S/ WILLIAM J. REZNICEK
Name: William J. Reznicek
Title: President
ALLEAN LAND CORP.
By:/S/ WILLIAM J. REZNICEK
Name: William J. Reznicek
Title: Vice President
FORS FAMILY LIMITED PARTNERSHIP
By:
Name:
General Counsel
This is the seventh of ten signature pages
<PAGE>
SELLERS' REPRESENTATIVES:
By:/S/ RICHARD D. FORS, JR.
Richard D. Fors, Jr.
Sellers' Representative
By:/S/ CHARLES J. MUND
Charles J. Mund
Sellers' Representative
This is the eighth of ten signature pages
<PAGE>
RESTAURANT ENTITIES WHOSE ASSETS ARE BEING
SOLD
OUTLET RESTAURANT, LLC
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: President
BLANKENBAKER RESTAURANT, LLC
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
LAGRANGE RESTAURANT, LLC
By: /S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
ALLEAN FOOD CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
BROOKS ROAD FOOD CORP.
By: /S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
This is the ninth of ten signature pages
<PAGE>
The Management Companies hereby agree to be bound by the provisions of
Sections 3.07 and 6.07 hereto and to be jointly and severally liable with
the Sellers and with the Sellers' Representatives in respect of the
Sellers' indemnification obligations under Section 12.01(a)(iii) and
(a)(iv).
RESSER MANAGEMENT CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: President
DERBY MANAGEMENT CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
PENNYLINE GROUP, INC.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: Vice President
CONSOLIDATED DATA MANAGEMENT CORP.
By:/S/ RICHARD D. FORS, JR.
Name: Richard D. Fors, Jr.
Title: President
This is the tenth of ten signature pages
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CONFORMED COPY
<PAGE>
-ii-
PURCHASE AGREEMENT
Among
CARROLS CORPORATION
(as Purchaser)
And
THE INDIVIDUALS AND TRUSTS LISTED ON EXHIBIT A
ATTACHED HERETO
(as Sellers)
THE INDIVIDUALS AND ENTITIES LISTED ON EXHIBIT B
ATTACHED HERETO
(as Affiliated Real Property Owners)
And
RICHARD D. FORS, JR.
And
CHARLES J. MUND
(as the Sellers' Representatives)
Dated as of July 7, 1997
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<PAGE>
TABLE OF CONTENTS
PAGE
Section 1.01 Definitions
Section 1.02 GAAP
Section 1.03 Singular and Plural Terms
ARTICLE II SALE AND PURCHASE OF INTERESTS
Section 2.01 Sale of Interests
Section 2.02 Purchase Price and Payment
Section 2.03 Transfer Taxes
ARTICLE III CLOSING; REPRESENTATIVES; RESPONSIBLE PARTY;
ASSIGNMENTS; ADJUSTMENTS
Section 3.01 Closing
Section 3.02 Representatives; Responsible Party
Section 3.03 Real Properties: Leases and Assignments of
Leases
Section 3.04 Assignment of Franchise Agreements
Section 3.05 TRAs
Section 3.06 Assignment of Development Rights
Section 3.07 Assignment of Assets and Liabilities
Section 3.08 Listed Assets and Listed Liabilities Schedule
Section 3.09 Purchase Price Adjustments
Section 3.10 Post-Closing Allocations
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 4.01 Organization and Qualification
Section 4.02 Subsidiaries; Investments
Section 4.03 Authorization
Section 4.04 Valid and Binding Agreement
Section 4.05 Title to Interests
Section 4.06 Capitalization
Section 4.07 Governing Instruments; Minute Books
Section 4.08 Absence of Conflicts
Section 4.09 Governmental Approvals
Section 4.10 Consents
Section 4.11 Financial Statements
Section 4.12 Tax Matters
Section 4.13 Compliance with Law
Section 4.14 Litigation
Section 4.15 Agreements
Section 4.16 Properties
Section 4.17 Franchise Agreements
Section 4.18 Inventory
Section 4.19 Assets
Section 4.20 Intangible Property
Section 4.21 Liabilities
Section 4.22 Suppliers
Section 4.23 Employment and Labor Agreements
Section 4.24 Discrimination and Occupational Safety
Section 4.25 Employee Benefit Plans
Section 4.26 Terminated Plans
Section 4.27 Employees
Section 4.28 Environmental Matters
Section 4.29 Insurance
Section 4.30 Operations of the Restaurant Entities
Section 4.31 Potential Conflicts of Interest
Section 4.32 Banks, Brokers and Proxies
Section 4.33 No Broker
Section 4.34 Intercompany Debts
Section 4.35 Burger King Rights
Section 4.36 Net Cash Flow
Section 4.37 Loan Facilities
Section 4.38 Additional Restaurants
Section 4.39 Full Disclosure
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 5.01 Organization
Section 5.02 Authority Relative to this Agreement
Section 5.03 Absence of Conflicts
Section 5.04 No Broker
Section 5.05 Consents
Section 5.06 Financial Resources
Section 5.07 Full Disclosure
ARTICLE VI COVENANTS AND AGREEMENTS
Section 6.01 Conduct of Business
Section 6.02 Insurance
Section 6.03 Litigation
Section 6.04 Continued Effectiveness of Representations
and Warranties; Satisfaction of Conditions
Section 6.05 Advice of Changes
Section 6.06 Corporate Examinations and Investigations
Section 6.07 Payment of Intercompany Debts
Section 6.08 Supplements to Disclosures
Section 6.09 Regulatory Filings and Consents
Section 6.10 Access to Restaurants Prior to Closing
Section 6.11 Subsequent Financial Statements and Reports
Section 6.12 No Solicitation
Section 6.13 Conveyance Taxes
Section 6.14 Real Property Tax
Section 6.15 HSR Act Filing
Section 6.16 Human Resource Materials
Section 6.17 Financials
Section 6.18 Further Assurances
Section 6.19 Environmental Matters
Section 6.20 Leased Property
Section 6.21 Burger King Franchise Agreements
Section 6.22 Rebates and Discounts
Section 6.23 Easements
Section 6.24 Sellers' and Responsible Individuals'
Covenants
ARTICLE VII DAMAGE OR DESTRUCTION
Section 7.01 Damage to or Destruction of Restaurants
Section 7.02 Notification of Damage or Destruction
ARTICLE VIII CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION
TO CLOSE
Section 8.01 Representations and Covenants
Section 8.02 Good Standing Certificates
Section 8.03 Governmental Permits and Approvals
Section 8.04 Hart-Scott-Rodino
Section 8.05 Legal Proceedings
Section 8.06 Third Party Consents
Section 8.07 Certificates
Section 8.08 Opinions of Counsel to the Sellers, the
Restaurant Entities, the Affiliated Real
Property Owners and the Sellers'
Representatives
Section 8.09 Resignation of Directors and Officers
Section 8.10 Payment of Intercompany Debt
Section 8.11 Instruments of Transfer
Section 8.12 No Material Adverse Change; Certificates
Section 8.13 Other Documents
Section 8.14 Payoff of Loans
Section 8.15 Termination of Agreements
Section 8.16 Senior Lender's
Section 8.17 Sellers' Auditor's
Section 8.18 Total Restaurant Entities
ARTICLE IX CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION TO
CLOSE
Section 9.01 Representations and Covenants
Section 9.02 Purchase Price
Section 9.03 Hart-Scott-Rodino
Section 9.04 Legal Proceedings
Section 9.05 Certificates
Section 9.06 Other Documents
Section 9.07 Opinion of Counsel to the Purchaser
Section 9.08 Total Restaurant
Section 9.09 Burger King Consents
ARTICLE X PROVISIONS AS TO TAX MATTERS
Section 10.01 Liability for Taxes
Section 10.02 Indemnification
Section 10.03 Allocation of Taxes
Section 10.04 Right to Refund
Section 10.05 Calculation of Indemnity
Section 10.06 Notification; Contests
Section 10.07 Section 338(h)(10) Election and Asset Sale
Section 10.08 Tax Returns
Section 10.09 Cooperation
Section 10.10 Allocation of Responsibility
ARTICLE XI SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE
SELLING SHAREHOLDERS
Section 11.01 Survival of Representations and Warranties
of the Sellers
ARTICLE XII INDEMNIFICATION
Section 12.01 Obligation of the Sellers to Indemnify
Section 12.02 Obligation of the Purchaser to Indemnify
Section 12.03 Notice and Opportunity to Defend
Section 12.04 Disputes with Burger
Section 12.05 Cooperation
Section 12.06 Recoveries
Section 12.07 Payment of Losses
Section 12.08 Escrow Fund
Section 12.09 Authority of the Sellers' Representatives
ARTICLE XIII COVENANT NOT TO COMPETE
Section 13.01 Covenant Not to Compete
Section 13.02 Geographic Area Reasonable; Reduction of
Geographical Area and Time Restriction
Section 13.03 Effect of Breach
Section 13.04 Allocation of Purchase Price
ARTICLE XIV TERMINATION OF AGREEMENT
Section 14.01 Termination of Agreement
Section 14.02 Effect of Termination
ARTICLE XV NON-TRANSFERRED ENTITIES
Section 15.01 Application of Articles
Section 15.02 Extension of Time Periods
Section 15.03 Adjustments
ARTICLE XVI MISCELLANEOUS
Section 16.01 Fees and Expenses
Section 16.02 Publicity
Section 16.03 Notices
Section 16.04 Entire Agreement
Section 16.05 Waivers and Amendments
Section 16.06 Governing Law
Section 16.07 Binding Effect; Benefit
Section 16.08 No Assignment
Section 16.09 Variations in Pronouns
Section 16.10 Counterparts
Section 16.11 Exhibits and Schedules
Section 16.12 Headings
Section 16.13 Severability
Section 16.14 Access
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TABLE OF EXHIBITS
Exhibit A List of Sellers, Responsible Individuals, Trust Classification,
Interests Held and Share of Purchase Price
Exhibit B Affiliated Real Property Owners
Exhibit C Restaurant Entities and Restaurants
Exhibit D Unaffiliated Real Property Owners
Exhibit E Leasing Entities
Exhibit F Definitions
Exhibit G Form of Escrow Agreement
Exhibit H Form of Lease
Exhibit I Form of Memorandum of Lease
Exhibit J Form of Tenant Estoppel Certificate
Exhibit K Form of Landlord Estoppel and Agreement
Exhibit L Form of Excess Assignment, Bill of Sale and Assumption
Exhibit M Certification of Non-Foreign Status
Exhibit N Affidavit that Transferor is not a Foreign Person
Exhibit O Operating Assets
Exhibit P Form of Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
and Saperston & Day, P.C., counsel to the Restaurant Entities, the
Sellers and the Responsible Individuals
Exhibit Q Form of General Assignment, Bill of Sale and Assumption
Exhibit R Form of Opinion of Schulte Roth & Zabel LLP, counsel to the
Purchaser
Exhibit S Existing Restaurant Entities
Exhibit T New Restaurant Entities
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<PAGE>
-5-
TABLE OF SCHEDULES
2.02(a) Combined Net Cash Flow
3.08 Schedule of Listed Assets and Listed Liabilities
3.09 Preliminary and Final Closing Schedules
3.09(b) Costs to Construct and Equip Additional Restaurants
4.01 Jurisdictions of Qualification To Do Business for Each Restaurant Entity
4.06 Authorized Capitalization of Each Restaurant Entity
4.10 Required Consents
4.12 Audited Tax Returns
4.13 Permits
4.14 Litigation
4.15 Contracts and Contracts Consents
4.16(b)(i) Affiliated Real Property Owner Titles
4.16(b)(vi) Remodeled or Altered Restaurants
4.16(b)(vii) Easements
4.16(b)(x) Real Property Lease Expiration Dates, Monetary Terms and Renewal
Terms, Accelerated Lease Payments
4.16(c) Liens on Properties
4.16(d) Developments
4.16(f) Certificates of Occupancy
4.16(g) Condemnation and Eminent Domain Proceedings
4.16(i) Real Property Licenses, Permits and Certificates
4.21(b) Calculation of Accrued Vacation Pay
4.25 Employee Benefit Plans
4.27 Multi-Unit Supervisory Personnel
4.29 Insurance
4.30 Operations of the Restaurant Entities
4.31 Potential Conflicts of Interest
4.32 Banks, Brokers and Proxies
4.34 Intercompany Debts
4.35(a) Other Burger King Interests
4.35(b) TRAs
4.35(c) Development Rights
4.37 Loan Facilities Agreements
10.07(a) Identification of Restaurant Entities making Section 338(h)(10)
election; Allocation of Purchase Price Among Assets
10.07(b) Identification of Restaurant Entities to be sold in asset sales;
Allocation of Purchase Price Among Assets
F-I Calculation of Cash Flow Negative
F-II Calculation of Prompt Payment Discounts
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<PAGE>
-6-
EXHIBIT F
"ACCOUNTING CHARGES" means the amount, if any, charged to any
Restaurant Entity by any Person for accounting or auditing services for
the twelve months ended December 31, 1996, excluding Administrative Cost
Charges, Consulting Fees and Management Fees.
"ADDITIONAL RESTAURANT" means each Burger King restaurant
business within the Restricted Area (as set forth on Schedule 3.09(b))
that is not an Existing Restaurant Entity or a New Restaurant Entity in
which any Seller or any Affiliate of any Seller has any interest or right
to any interest.
"ADMINISTRATIVE COST CHARGE" means the amount, if any, charged
to any Restaurant Entity by any Management Company for administrative
costs for the twelve months ended December 31, 1996, excluding Accounting
Charges, Consulting Fees and Management Fees.
"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.
"ASSETS" means all assets held by any Restaurant Entity as of
the Closing Date, before giving effect to the assignment provisions of
Section 3.07 hereof.
"BURGER KING" means Burger King Corporation, a Florida
corporation.
BUSINESS DAY" means any day other than Saturday, Sunday or a
day in which banking institutions in New York City are authorized or
required by law or executive order to close.
"CASH FLOW NEGATIVE" means, for the designated Restaurant, a
loss reported by that Restaurant on its internal profit and loss
statement as determined on a basis consistent with Purchaser's historical
practice as reflected on Schedule F-I hereto without deduction for
amortization, depreciation and general and administrative expenses
associated with multi-unit supervision, but with deductions for allocated
direct costs including but not limited to worker's compensation and
general liability claims.
"CLEANUP STANDARD" means the standard established or applied
for non-industrial properties by the governmental authority having
jurisdiction over the property to which such standard is to be applied or
used to determine the adequacy or completeness of a Remedial Action,
unless otherwise approved by the governmental authority having
jurisdiction over the Remedial Action.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED NET CASH FLOW" means the aggregate of the Net Cash
Flows for all of the Restaurant Entities, as set forth on the Schedule of
Combined Net Cash Flows attached to the Agreement as Schedule 2.02(a).
"CONSULTING FEES" means the amount, if any, charged to any
Restaurant Entity by any Affiliate of such Restaurant Entity for
consulting services for the twelve months ended December 31, 1996,
excluding Accounting Charges, Administrative Cost Charges and Management
Fees.
"CONTRACTS AND/OR OTHER AGREEMENTS" means and includes all
contracts, agreements, purchase orders, sales orders, guaranties,
options, promissory notes, assignments, instruments, indentures, notes,
bonds, leases, mortgages, deeds of trust, franchises, licenses, permits,
commitments or binding arrangements or understandings, express or
implied, written or oral.
"CONTROL" means, with respect to any Person, the power to
direct the management and policies of such Person, directly or
indirectly, by or through ownership of at least 10% of the outstanding
stock of such Person, agency or otherwise, or pursuant to or in
connection with a contract with one or more other Persons by or through
ownership of a majority of the outstanding stock of such Person, agency
or otherwise; and the terms "CONTROLLING" and "CONTROLLED" shall have
meanings correlative to the foregoing.
"DOCUMENTS AND/OR OTHER PAPERS" means and includes any
document, instrument, Contract or Other Agreement, certificate, notice,
consent, affidavit, however evidenced, including, without limitation,
letter, telegram, telex, telecopy, e-mail, computer disk, statement,
schedule (including any Schedule to this Agreement), exhibit (including
any Exhibit to this Agreement) or any other paper or non-oral means
whatsoever.
"ENVIRONMENTAL CLAIMS" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other written
communication from any governmental agency, department, bureau, office or
other authority, or any third party involving violations of Environmental
Laws or Releases of Hazardous Materials (i) from any assets, properties
or businesses of any Restaurant Entity or any of their respective
predecessors in interest which are or had been Affiliates of any Seller
or Restaurant Entity or, in the event such predecessor in interest was
not an Affiliate of any of them, if a Restaurant Entity, Seller or
Affiliate of any of them had Knowledge of receipt by such predecessor of
any of the foregoing; (ii) from adjoining properties or businesses; or
(iii) from or onto any facilities which received Hazardous Materials
generated by any Restaurant Entity or any of their respective
predecessors in interest which are or had been Affiliates of any Seller
or Restaurant Entity.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et
seq., as amended; the Solid Waste Disposal Act, including the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq., as
amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as amended;
the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as amended; and any
other federal, state, local or municipal laws, statutes, regulations,
rules or ordinances imposing liability or establishing standards of
conduct for protection of the environment.
"ENVIRONMENTAL LIABILITIES" means any monetary obligations,
losses, liabilities (including strict liability), damages, punitive
damages, consequential damages, treble damages, costs and expenses
(including all reasonable out-of-pocket fees, disbursements and expenses
of counsel, out-of-pocket expert and consulting fees and out-of-pocket
costs for environmental site assessments, remedial investigation and
feasibility studies), fines, penalties, sanctions, restrictions and
interest incurred as a result of any Environmental Claim filed by any
governmental agency, department, bureau, office or other authority, or
any third party which relate to any violations of Environmental Laws,
Remedial Actions, Releases or threatened Releases of Hazardous Materials
from or onto (i) any property presently or formerly owned by any of the
Restaurant Entities or any of their respective predecessors in interest,
or (ii) any facility which received Hazardous Materials generated by any
Restaurant Entity or any of their respective predecessors in interest.
"ESCROW AGENT" means State Street Bank and Trust Company.
"ESCROW AGREEMENT" means the escrow agreement, to be entered
into on or prior to the Closing Date by and among the Escrow Agent, the
Purchaser, the Sellers and the Sellers' Representatives.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCLUDED PORTIONS" means the portions of the Real Properties
on which the Restaurants associated with Burger King Franchise numbers
562, 7104 and 8505 are located which are not covered by the Leases for
the respective Real Properties and which are described on Exhibit B as
not being covered by such Leases.
"EXISTING RESTAURANT ENTITY" means any of the Restaurant
Entities listed on Exhibit S to the Agreement that were in operation for
at least twelve months at December 31, 1996.
"FRANCHISES" means the aggregate rights of each Restaurant
Entity to own and operate its respective Restaurant pursuant to the terms
of each Restaurant Entity's Burger King Franchise Agreement.
"GAAP" means United States generally accepted accounting
principles applied on a consistent basis, as in effect from time to time.
"GOVERNING INSTRUMENTS" shall mean, with respect to any Person,
the certificate of incorporation or formation, articles of incorporation,
bylaws, code of regulations, operating agreement, partnership agreement
or other organizational or governing documents however denominated of
such Person.
"GROSS SALES" means Gross Sales as defined in the applicable
Restaurant Entity's Burger King Franchise Agreement.
"HAZARDOUS MATERIALS" means (a) any element, compound, or
chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance,
extremely hazardous substance or chemical, hazardous waste, medical
waste, biohazardous or infectious waste, special waste, or solid waste
under Environmental Laws; (b) petroleum, petroleum-based or petroleum-
derived products; (c) polychlorinated biphenyls; (d) any radioactive or
explosive materials; and (e) any asbestos-containing materials.
"IMMEDIATE FAMILY" means such person's spouse, parents,
children, siblings, mothers and fathers-in-law, sons and daughters-in-
law, and brothers and sisters-in-law.
"INDEBTEDNESS" means all items which, in accordance with GAAP,
should be included in determining total liabilities as shown on the
liability side of a balance sheet as of the date Indebtedness is to be
determined.
"INTEREST EXPENSE" means the amount, if any, reflected on the
Financials as being accrued by any Restaurant Entity as interest on any
Indebtedness for money borrowed by such Restaurant Entity for the twelve
months ended December 31, 1996.
"INTEREST INCOME" means the amount, if any, reflected on the
Financials as being accrued by any Restaurant Entity as interest on any
cash or cash equivalents of such Restaurant Entity for the twelve months
ended December 31, 1996.
"INVENTORY" means all of the food, related paper products and
current promotional items owned by the Restaurant Entities or otherwise
used or held for use in, or in connection with, the businesses being
conducted at the Restaurants.
"KNOWLEDGE" means, with respect to any Restaurant Entity or the
Purchaser, the actual knowledge of any of its officers, directors,
shareholders or members, with respect to the manager of any Restaurant,
the actual Knowledge of such manager and, with respect to the Sellers the
actual knowledge of any of the Sellers, in each case after reasonable
inquiry.
"LIABILITIES" means liabilities and obligations of any
Restaurant Entity relating to events which arise prior to the Closing.
"LIEN" means and includes any lien, security interest, pledge,
charge, option, right of first refusal, claim, mortgage, lease, easement
or any other encumbrance whatsoever.
"LISTED ASSETS" means Operating Assets, Franchises, Inventory
and petty cash funds, all of which are to be set forth (in descriptive
form and number of items) on the Schedule of Listed Assets and Listed
Liabilities. Prepaid insurance premiums (or any insurance dividends) are
not Listed Assets.
"LOSSES" means collectively any and all liabilities, losses,
claims, damages, obligations, deficiencies, judgments, amounts paid in
settlement of any suits, actions, claims, proceedings or investigations,
reasonable out-of-pocket costs and expenses, including, but not limited
to, interest, penalties, costs of investigation and reasonable attorney's
and accountant's fees and disbursements.
"MANAGEMENT COMPANY" means any of Resser Management Corp.,
Derby Management Corporation, Pennyline Group Inc. and Consolidated Data
Management Corp.
"MANAGEMENT FEES" means the amount, if any, charged to any
Restaurant Entity by any Management Company in connection with the
management of the Restaurant owned by any such Restaurant Entity for the
twelve months ended at December 31, 1996, excluding Accounting Charges,
Administrative Cost Charges and Consulting Fees.
"MATERIAL ADVERSE EFFECT" means an adverse effect material to
the business, assets, properties, operations, results of operations,
condition (financial or otherwise) or prospects of the applicable Person.
"MATERIAL TO THE BUSINESS" means material to the business,
assets, properties, operations, results of operations, condition
(financial or otherwise) or prospects of the applicable Person.
"NET CASH FLOW" means the Net Earnings for each Restaurant
Entity before federal income taxes, depreciation and amortization, PLUS
the sum (without duplication) of (i) the Rental Excess, (ii) Special
Charges, (iii) Interest Expense and (iv) Volume Purchase Rebates; LESS
the sum (without duplication) of (w) Interest Income, (x) Prompt Payment
Discounts, (y) any other expenses that would be incurred by such
Restaurant Entity during the twelve-month period ended at December 31,
1996 in operating any Restaurant as a stand-alone Burger King Restaurant
(E.G., costs of insurance (including costs relating to claims), salary
and benefits of Restaurant managers, incentive compensation for
Restaurant managers and costs relating to recruiting and training
Restaurant employees) but instead were incurred by any Management Company
or any other third party, which expenses shall be allocated PRO RATA
among the Restaurant Entities based on their relative cash flows prior to
such allocation; and (z) the annual amount of any increase in rent or
other expense relating to any change of control or comparable provisions
as may be triggered by the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that with respect to each of the New Restaurant
Entities (a) open less than 12 full months as of May 31, 1997, Net Cash
Flow shall be calculated based upon the average of the Net Cash Flows per
Existing Restaurant Entity for all of the Existing Restaurant Entities in
such New Restaurant Entity's Geographic Sector as shown on Exhibit C
hereto, and (b) open at least 12 full months as of May 31, 1997, Net Cash
Flow shall be determined with respect to such New Restaurant Entity's
first 12 consecutive full months of operations, as reflected in the 1996
audited and 1997 unaudited internal financial statements (where such 1997
operations would be treated as 1996 operations for purposes of this
definition) of such Entity; and PROVIDED, FURTHER, that no amount shall
be included in Net Cash Flow on account of or that relates to any
Additional Restaurant.
"NET EARNINGS" means for each Existing Restaurant Entity, the
net earnings of such Existing Restaurant Entity for the twelve months
ended December 31, 1996, as set forth for such Existing Restaurant Entity
on the Schedule of Combined Net Cash Flows.
"NEW RESTAURANT ENTITY" means each Restaurant Entity listed on
Exhibit T to the Agreement that at December 31, 1996 had less than twelve
complete months of operation and any Restaurant Entity opened after
December 31, 1996.
"OPERATING ASSETS" means (i) all of the machinery, equipment,
fixtures, furnishings, supplies (other than Inventory), uniforms, spare
equipment parts and all other personal property owned by the Restaurant
Entities 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 on Exhibit O hereto, (ii) all leasehold improvements owned by
the Restaurant Entities, (iii) all licensed software and (iv) all of the
right, title and interest of the Restaurant Entities in any other asset
or property owned, leased, subleased, used or held for use in, or in
connection with, the businesses being conducted at the Restaurants
including, but not limited to, contract rights and other general
intangibles.
"OPPOSING PARTY" means, with respect to the Purchaser, any of
the Sellers and the Sellers' Representatives and, with respect to the
Sellers and the Sellers' Representatives, the Purchaser.
"PERSON" means an individual, partnership, corporation, limited
liability company, firm, joint venture, association, enterprise, joint
stock company, trust, unincorporated organization, cooperative, or other
Restaurant Entity.
"PROPERTY" means real, personal or mixed property.
"PROMPT PAYMENT DISCOUNTS" means the amount calculated in
accordance with the formula of Schedule F-II hereto, which amount is
denominated on such Schedule as "Z."
"RELEASE" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, dumping,
or disposing of Hazardous Materials including the abandonment or
discarding of barrels, containers or other closed receptacles containing
Hazardous Materials into the environment other than pursuant to the terms
of any permit, consent, authorization or license.
"REMEDIAL ACTION" means all actions taken to (i) clean up,
remove, respond to, remediate, contain, treat, monitor, assess, evaluate
or in any other way address Hazardous Materials in the indoor or outdoor
environment; (ii) prevent or minimize a Release or threatened Release of
Hazardous Materials so that they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor
environment; (iii) perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities; or (iv) any other
actions required by CERCLA.
"RENTAL CHARGES" means the amount charged as fixed monthly and
percentage rent under the applicable lease with respect to the Owned Real
Properties.
"RENTAL EXCESS" means the amount, if any, payable by any
Restaurant Entity for Rental Charges in excess of 8 1/2 % of Gross Sales
by that Restaurant Entity for the twelve months ended December 31, 1996
as reflected in the net income set forth in the Financials.
"RESTRICTED AREA" means, with respect to any Responsible
Individual, the county or counties in which any Restaurants, owned
directly or indirectly by such Responsible Individual (or related Seller)
are located.
"SCHEDULE OF COMBINED NET CASH FLOWS" means a schedule prepared
on behalf of the Sellers setting forth on a combined basis for all of the
Restaurant Entities, the Net Cash Flows, certified by the Sellers'
Auditor to be in accordance with the terms of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLERS' AUDITOR" means Beck Villata and Co., P.C., the
independent certified public accountant for the Sellers.
"SPECIAL CHARGES" means Accounting Charges, Administrative Cost
Charges, Consulting Fees and Management Fees.
"SUBSIDIARY" means each Restaurant Entity the majority of the
voting equity securities or equity interest of which is owned, directly
or indirectly, by any Person other than an individual.
"TAX" or "TAXES" means all foreign, federal, state, county or
local net income, gross income, gross receipts, sales, use, AD VALOREM,
employment, payroll, social security, unemployment, disability, unitary,
intangible, franchise, license, excise, severance, occupation, premium,
windfall profits, real and personal property, capital, recording,
transfer, customs or other taxes, fees, stamp taxes and duties,
assessment or charges of any kind whatsoever (whether payable directly or
by withholding), together with any interest and any penalties, fines,
additions to tax or additional amounts imposed with respect thereto.
"TAX RETURN" means all income tax, excise tax, sales tax, use
tax, gross receipts tax, franchise tax, employment and payroll related
tax, property tax and all other tax returns, reports and forms (including
exhibits and schedules) required to be filed with respect to any Taxes.
"TRA" means any Target Reservation Agreement between Burger
King and any Seller, Responsible Individual or any Affiliate of any
Seller, Responsible Individual or any Restaurant Entity relating to the
Restricted Area.
"VOLUME PURCHASE REBATES" means the aggregate of the amounts,
if any, of any purchase rebates received in connection with the operation
of any Restaurant on account of the volume of purchases, as recorded on
the books and records of the applicable Management Company and as
properly recorded on the books and records of each Restaurant Entity for
the twelve months ended December 31, 1996.
(b) The terms defined in Exhibit A or cross-referenced to the
definitions in this Agreement include the plural and the singular.
<TABLE>
<CAPTION>
DEFINED TERM SECTION NO.
<S> <C>
Acceptance Notice 13.02
Acquisition Notice 13.02
Acquisition Transaction 6.12
ADA 4.16(b)(vi)
Affiliated Real Property Owners Preamble
Agreement Preamble
Antitrust Division 6.15
Areas of Environmental Concern 6.19(b)
Asset Quality Representations 12.01(d)
Burger King Consents 4.10
Burger King Franchise Agreements 4.20
Burger King Remodeling Notice 8.06(b)
Canadian Acquisition 13.02
CRT 4.12
Closing 2.01
Closing Schedules 3.09(a)(iii)
Closing Schedule Review Period 3.08(a)(v)
Consent of Lease Assignment and Transaction 3.03(b)(i)
Contests 10.06
Damaged Restaurant 7.01
Development Rights 3.06
Development Acquisition 13.02
Easements 4.16(b)(vii)
Employee Benefit Plans 4.25(a)
Environmental Consultant 6.19(a)
Environmentally Damaged Restaurant 6.19(d)
Restaurant Entity Preamble
ERISA 4.25(a)
ERISA Affiliate 4.25(d)
Escrow Fund 2.02(b)(ii)
Estimated Remediation Cost 6.19(d)
Excess Liabilities 3.07
Excess Assignment, Bill of Sale and Assumption 3.07
Financials 4.11
Final Closing Schedule 3.09(a)(iii)
Final Deficit 3.09(a)(vi)
Final Excess 3.09(a)(vi)
FIRPTA Certificates 6.14(b)
Fixed Rentals 3.03(b)(ii)
Fors ARTICLE IV
FTC 6.15
GRIT 10.02
Gross Profit 8.12
HSR Act 4.09
Indemnification Notice 12.03(a)
Indemnified Person 12.03(a)
Indemnifying Person 12.03(a)
Interests Preamble
Interim Period 8.12
Lease Assignment 3.03(b)(i)
Lease 3.03(a)(i)
Leasing Entities Preamble
Listed Liabilities 4.21(b)
Long Term Provisions 11.01(b)
McDonald's 4.16(d)
Memorandum of Lease 3.03(a)(iii)
Minimum 3.03(b)(ii)
Mund ARTICLE IV
No-Repair Notice 8.06
Non-Transferred Entities 15.01
One Year Provisions 11.01(b)
Opening Expenses 3.09(b)
Owned Real Properties Preamble
PBGC 4.26
Permits 4.09
Phase I ESAs 6.19(a)
Phase II ESAs 6.19(b)
Post Closing Adjustment Amount 3.09(a)(vi)
Preliminary Adjustment 3.09(a)(ii)
Preliminary Closing Schedule 3.09(a)(i)
Purchase Price 2.02(a)
Purchaser Preamble
Qualifying Breach 12.01(b)
Real Properties Preamble
Real Property Owners Preamble
Related Documents 4.03
Remodeling Expenses 8.07
Required Consents 4.10
Restaurant Entity Preamble
Restaurants Preamble
Schedule of Listed Assets and Listed Liabilities 3.08
Responsible Individuals Preamble
Sellers Preamble
Sellers' Representatives Preamble
Third Accounting Firm 3.09(a)(v)
Third Party Leases Preamble
Unaffiliated Real Property Owners Preamble
Wendy's 4.16(d)
Withheld Amount 7.01
</TABLE>
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-7-
Exhibit A
List of Selling Persons, Responsible Individuals, Trust Classifications,
Interests Held and
Share of Purchase Price
See attached.
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-8-
List of Selling Persons, Selling Individuals and Related Information
STOCKHOLDERS
(%)
<TABLE>
<CAPTION>
R.D. RDF, Patricia Charles CJM, Mund Charles Eric W. William John T. William
BK# Name Fors, Jr. Fors CRT J. Sr. Trust* J. Mund J. Sweeney J.
Jr. CRT Mund, CRT Mund, O'Donnell Reznicek
Sr. Jr.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Western NY
State
364 364 Tonawanda 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
507 507 Payne 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
528 528 Niagara 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
562 Williamsville 50.00% 2.00% 48.00%
Restaurant
Corp.
591 591 West 50.00% 2.00% 46.00% 1.00% 1.00%
Seneca Food
Corp.
750 750 50.00% 2.00% 46.00% 1.00% 1.00%
Cheektowaga
Food Corp.
766 766 Depew 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
790 790 Union 50.00% 48.00% 1.00% 1.00%
Road Food
Corp.
792 Sheridan Food 50.00% 2.00% 48.00%
Corp.
839 Transit Rd. 50.00% 2.00% 48.00%
Restaurant
Corp.
855 855 Orchard 50.00% 2.00% 46.00% 1.00% 1.00%
Park Food
Corp.
874 Getzville 25.00% 25.00% 50.00%
Restaurant
Corp.
883 883 South 25.00% 25.00% 48.00% 1.00% 1.00%
Park Food
Corp.
885 885 Hamburg 25.00% 25.00% 48.00% 1.00% 1.00%
Food Corp.
945 945 Hertel 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
953 953 Delmore 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
956 956 Mainalo 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
959 959 Pine 50.00% 2.00% 46.00% 1.00% 1.00%
Ridge Food
Corp.
970 970 Mainherst 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
973 973 Lockport 25.00% 25.00% 48.00% 1.00% 1.00%
Food Corp.
2485 2485 Bailey 50.00% 2.00% 46.00% 1.00% 1.00%
Avenue Food
Corp.
2548 2548 Main 50.00% 48.00% 1.00% 1.00%
Street Food
Corp.
2763 2763 Military 50.00% 2.00% 46.00% 1.00% 1.00%
Road Food
Corp.
3277 Urban 50.00% 2.00% 46.00% 1.00% 1.00%
Boulevard
Food Corp.
3334 Peace Bridge 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
3478 East Aurora 50.00% 2.00% 46.00% 1.00% 1.00%
Restaurant
Corp.
4046 Seneca 50.00% 2.00% 46.00% 1.00% 1.00%
Restaurant
Corp.
4585 Blasdell 50.00% 2.00% 46.00% 1.00% 1.00%
Restaurant
Corp.
4560 French Rd. 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
4731 McKinely Pkwy 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
5041 Young Street 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
5672 Eastern Hills 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
5865 Grand Island 50.00% 2.00% 46.00% 1.00% 1.00%
Food Corp.
6172 Covention 50.00% 48.00% 1.00% 1.00%
Restaurant
Corp.
6247 Springville 25.00% 25.00% 48.00% 1.00% 1.00%
Food Corp.
6403 Elmwood 50.00% 48.00% 1.00% 1.00%
Avenue Food
Corp.
6538 Riverside 25.00% 25.00% 48.00% 1.00% 1.00%
Food Corp.
6958 Evans Food 25.00% 25.00% 2.00% 24.00% 24.00%
Corp.
7228 Commons food 50.00% 2.00% 24.00% 24.00%
Corp.
7972 Grant Food 25.00% 25.00% 2.00% 24.00% 24.00%
Corp.
9696 Outlet 25.00% 25.00% 2.00% 24.00% 24.00%
Restaurant
LLC
Southern Tier
802 Jamestown 42.50% 40.80% 0.85% 0.85% 15.00%
Food Corp.
1463 Olean Food 21.25% 21.25% 40.80% 0.85% 0.85% 15.00%
Corp.
1805 Penn Avenue 42.50% 40.80% 0.85% 0.85% 15.00%
Food Corp.
6012 Ellicott Food 21.25% 21.25% 40.50% 1.00% 1.00% 15.00%
Corp.
2242 Pomfret 42.50% 40.80% 0.85% 0.85% 15.00%
Restaurant
Corp.
6443 Wellsville 21.25% 21.25% 40.50% 1.00% 1.00% 15.00%
Food Corp.
6571 Gowanda Food 42.50% 40.50% 1.00% 1.00% 15.00%
Corp.
7104 Silver Creek 21.25% 21.25% 2.50% 20.00% 20.00% 15.00%
Food Corp.
7549 Holiday Food 21.25% 21.25% 40.50% 1.00% 1.00% 15.00%
Corp.
8194 Falconer 21.25% 21.25% 2.50% 20.00% 20.00% 15.00%
Restaurant
Corp.
10243 Parkside 18.75% 18.75% 1.50% 18.00% 18.00% 25.00%
Restuarant
Corp.
10517 Allean Food 37.50% 1.50% 18.00% 18.00% 25.00%
Corp.
Indiana
6103 New Albany 18.75% 18.75% 37.50% 25.00%
Food Corp.
6293 Corydon Food 18.75% 18.75% 37.50% 25.00%
Corp.
6612 Clarksville 18.75% 18.75% 37.50% 25.00%
Food Corp.
7172 Scottsburg 18.75% 18.75% 37.50% 25.00%
Food Corp.
7357 Sellersburg 18.75% 18.75% 37.50% 25.00%
Food Corp.
8505 Outer Loop 15.00% 15.00% 30.00% 15.00% 25.00%
Food Corp.
8853 Chambertain 15.00% 15.00% 30.00% 15.00% 25.00%
Food Corp.
9307 Lagrange 15.00% 15.00% 30.00% 15.00% 25.00%
Restaurant
LLC
9709 Blankenbaker 15.00% 15.00% 30.00% 15.00% 25.00%
Restaurant
LLC
10309 New Cut Food 18.75% 18.75% 37.50% 25.00%
Corp.
10541 Brooks Road 37.50% 37.50% 25.00%
Food Corp.
</TABLE>
*GRIT for which Chuck and Carol Mund act as trustees for the benefit of
their sons.
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