AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 ("Amendment") to Agreement and Plan of Merger
dated as of October 4, 2000, is made as of November 20, 2000, by and among Ruby
Tuesday, Inc., a Georgia corporation (the "Parent"), Tia's, LLC, a Delaware
limited liability company (the "Target") and Specialty Restaurant Group, LLC, a
Delaware limited liability company (the "Acquiror").
WHEREAS, Parent, Target and Acquiror entered into that certain
Agreement and Plan of Merger dated as of October 4, 2000 (the "Agreement'); and
WHEREAS, the parties wish to amend the Agreement as hereinafter set
forth; and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings attributed to such terms in the Agreement.
NOW, THEREFORE, for and in consideration of the covenants, terms and
conditions contained herein, the parties agree as follows:
1. Pursuant to Section 2(b)(ii) of the Agreement, at the Closing,
Surviving Company shall deliver to Parent (a) the Pledge Agreement in the form
attached hereto as Exhibit O, executed by all of the members of Surviving
Company, and (b) such executed UCC-1 financing statements and/or similar
instruments described therein. The parties acknowledge that no second lien on
assets of Surviving Company is permitted by the Third-Party Lender.
2. The parties agree that adjustments described in Section 2(c) of the
Agreement shall include (i) Surviving Company's purchase of the promissory note
of Scott Blevins (an employee of Surviving Company after the Closing), dated
October 16, 2000, in the original principal amount of $12,500.00 in favor of
Parent, and (ii) the credit given to Target or Parent by Tennessee liquor and
wine wholesalers in connection with the "delivery" of liquor and wine inventory
at Restaurants located in the State of Tennessee.
3. Parent and Acquiror acknowledge that the approximate cost to develop
the Development Restaurants is $4,253,428.00. The Development Restaurants are
open and in operation. Parent and Acquiror agree that the original principal
amount of the Note, as contemplated in Section 2(b)(ii) of the Agreement, is
$28,753,428.00. The form of Note attached to the Agreement as Exhibit B is
replaced and superseded by the form of Note attached to this Amendment as
Exhibit B. Upon final determination of such costs, any underpayment or
overpayment of actual costs from such estimate shall be promptly paid by the
appropriate party to the other.
4. The form of Surviving Company Operating Agreement attached to the
Agreement as Exhibit F is replaced and superseded by the form of Surviving
Company Operating Agreement attached to this Amendment as Exhibit F.
5. The form of Executive Employment Agreement attached to the Agreement
as Exhibit N is replaced and superseded by the form of Executive Employment
Agreement attached to this Amendment as Exhibit N.
6. In addition to the documents and instruments to be delivered at the
Closing pursuant to Section 4(b) of the Agreement, Surviving Company and Parent
shall enter into (a) an amendment to sublease with respect to the Tia's
Restaurant located in Huntsville, Alabama, in the form attached hereto as
Exhibit P, and (b) a comprehensive amendment to subleases in the form attached
hereto as Exhibit P-1.
7. At the Closing, Parent and Surviving Company shall enter into a
Defense and Indemnity Agreement, as contemplated by Section 4(b)(xii) of the
Agreement, in the form attached hereto as Exhibit Q.
8. In all other respects, the Agreement is ratified and reaffirmed.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Amendment as of the date first above written.
PARENT:
RUBY TUESDAY, INC.
By: /s/J. Russell Mothershed
Name: J. Russell Mothershed
Title: Senior Vice President
TARGET:
TIA'S, LLC
By: /s/ Daniel T. Cronk
Name: Daniel T. Cronk
Title: Vice President
PARENT:
SPECIALTY RESTAURANT GROUP, LLC
By: /s/ James H. CarMichael
Name: James H. CarMichael
Title: President
<PAGE>
Loan Nos. 001-6687-001,
001-6687-002 and 001-6687-003
MASTER AGREEMENT AND INDEMNITY
REGARDING LEASES AND SUBLEASES
THIS MASTER AGREEMENT AND INDEMNITY REGARDING LEASES AND SUBLEASES (the
"Agreement") dated November 20, 2000, is made and executed by RUBY TUESDAY,
INC., a Georgia corporation, whose address is 150 West Church Avenue, Maryville,
Tennessee 37801 ("RTI"), and GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING
CORPORATION and GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION OF
ARKANSAS, each a Delaware corporation, whose address is 10900 N.E. 4th Street,
Suite 500, Bellevue, Washington 98004 (collectively, "GE CAPITAL").
Recitals
A. Concurrently herewith, RTI is selling and transferring its rights
and interests in and to various restaurants operated by RTI to Specialty
Restaurant Group, LLC, a Delaware limited liability company ("SRG").
B. The restaurants which are described on Exhibit "A" attached hereto
are leased by RTI from third party landlords. Each restaurant described on
Exhibit "A" attached hereto is individually called a "Leased Site", and all of
such restaurants are collectively called the "Leased Sites". The leases pursuant
to which RTI leases the Leased Sites from third parties are individually called
a "Lease" and are collectively called the "Leases".
C. In connection with the sale and transfer of the restaurants to SRG,
RTI is subleasing certain of the Leased Sites to SRG pursuant to certain
subleases (individually a "Sublease"; and collectively, the "Subleases") between
RTI and SRG.
D. GE CAPITAL has agreed to provide a portion of the financing required
for the acquisition by SRG of the restaurants from RTI. The loans by GE CAPITAL
to SRG are collectively called the "Loans". The Loans are evidenced by a certain
Loan Agreement (herein so called) dated of even date herewith between GE CAPITAL
and SRG. The Loans are to be secured by, among other things, (i) deeds of trust,
deeds to secure debts and/or mortgages (collectively, the "Mortgages") covering
the interests of SRG in and to each of the Leased Sites, and (ii) security
agreements covering the personal property of SRG to be located at each of the
Leased Sites (the "Personal Property").
E. RTI has agreed to execute and deliver this Agreement as an
inducement to GE CAPITAL to extend the Loans to SRG.
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, RTI hereby agrees for the benefit of GE CAPITAL
as follows:
1. Agreement to Perform Obligations.
--------------------------------
(a) Subject to Section 1(b) below, RTI agrees to pay each and
every monetary obligation of the tenant under each of the Leases as and when
such obligations become due (such obligations being collectively called
"Monetary Obligations"). In addition, subject to Section 1(b) below, RTI agrees
to perform each and every nonmonetary obligation of the tenant under each of the
Leases as and when such obligations become due (such obligations being called
"Nonmonetary Obligations").
(b) Notwithstanding Section 1(a) above, with respect to any
Monetary Obligations which SRG is obligated to pay pursuant to a Sublease, but
which SRG fails to pay in accordance with the applicable Sublease, RTI's
obligation to pay such Monetary Obligations shall terminate ninety (90) days
after RTI delivers the written notice described in Section 6 below to GE
CAPITAL. In addition, RTI shall not be obligated to perform Nonmonetary
Obligations which SRG is obligated to perform pursuant to a Sublease, but which
SRG fails to perform in accordance with the applicable Sublease.
(c) In the event RTI fails to pay or perform any of its
Monetary Obligations or Nonmonetary Obligations under the Leases, RTI
acknowledges and agrees that GE CAPITAL shall have the right to pay and/or
perform such obligations on behalf of RTI. To the extent RTI is obligated
pursuant to this Section 1 to pay or perform any of its Monetary or Nonmonetary
Obligations, RTI shall reimburse GE CAPITAL, within ten (10) days after RTI's
receipt of a written demand from GE CAPITAL, for all Monetary Obligations paid
by GE CAPITAL to the applicable lessor and for all costs and expenses paid or
incurred by GE CAPITAL on behalf of RTI in connection with GE CAPITAL's payment
of such Monetary Obligations or performance of such Nonmonetary Obligations.
2. Delivery of Notices. Within two (2) business days after its receipt
of any default notice given by RTI's lessor under any Lease, and within ten (10)
business days after its receipt of any other notice pertaining to any Lease, RTI
shall deliver a copy of such notice to GE CAPITAL.
3. Representations by RTI. RTI represents and warrants to GE
CAPITAL as follows with respect to the Leases:
(a) Each of the Leases are in full force and effect;
(b) RTI has delivered true, correct and complete copies
of each of the Leases to GE CAPITAL;
(c) RTI has all necessary power and authority to execute
and deliver the Subleases, and
each of the Subleases is binding upon and enforceable against RTI; and
(d) Except as listed on Exhibit "B" attached hereto, RTI
is not in default of any of its obligations under any of the Leases.
4. No Amendments or Terminations. Without the prior written consent of
GE CAPITAL, RTI agrees that it shall not amend or terminate any of the Leases
where such amendment would decrease the term of the applicable Lease, increase
the rent or other Monetary Obligations thereunder or otherwise adversely affect
the rights of SRG under the related Sublease.
5. No Assignment. RTI agrees that it shall not assign any of its rights
or interests under any of the Leases (a) except to SRG or an affiliate or
subsidiary thereof or to an affiliate or subsidiary of RTI, or (b) except to a
purchaser of all, or substantially all, of the assets of RTI provided that such
purchaser expressly assumes all of the obligations of RTI under this Agreement.
Any other assignment by RTI of its rights or interests under the Leases shall
require the prior written consent of GE CAPITAL. No such assignment by RTI shall
operate to release RTI from liability under the terms of this Agreement.
6. Default by SRG. RTI hereby agrees to deliver written notice to GE
CAPITAL of any default by SRG under any Sublease, which written notice shall
describe each alleged default of SRG which RTI intends to enforce against SRG.
Notwithstanding any such default by SRG, RTI shall not terminate the applicable
Sublease if GE CAPITAL, within ninety (90) days after its receipt of written
notice of such default, either (a) cures or causes such default to be cured or
(b) delivers written notice to RTI of GE CAPITAL's intention to acquire the
interest of SRG under such Sublease by Foreclosure (as defined in Section 7
below). If GE CAPITAL delivers the written notice described in subpart (b) of
the immediately preceding sentence with respect to any Sublease, GE CAPITAL
shall pay all Monetary Obligations of SRG under such Sublease which first arise
or accrue ninety (90) days after the date GE CAPITAL receives the notice of
default from RTI which is applicable to such Sublease.
7. Acquisition of Property by GE CAPITAL. If GE CAPITAL forecloses upon
any of the Mortgages, or if any Sublease shall be assigned in lieu of
foreclosure (such foreclosure or assignment in lieu thereof being collectively
called a "Foreclosure"), then the Sublease shall, at the option of GE CAPITAL or
the third party who acquires the Leased Site at a Foreclosure (GE CAPITAL and
any such third party being collectively called the "Successor Owner"), continue
as a direct sublease between RTI and the Successor Owner. RTI hereby consents to
the assignment by SRG of its rights under the Subleases to GE CAPITAL, any
designee of GE CAPITAL and any Successor Owner.
8. No Liability. In the event the Successor Owner acquires
the interest of SRG under any Sublease, the Successor Owner shall not be:
(a) liable or responsible for any act or omission of SRG;
(b) subject to any claims or defenses which RTI might
have against SRG;
(c) liable or responsible for any default by SRG under the
Lease or obligated to cure any prior default by SRG under the Sublease
(including, without limitation, any failure by SRG to pay rent or other
amounts which have become due under such Sublease with respect to the
ninety (90) day period after GE CAPITAL receives the written notice of
default described in Section 6 above);
(d) liable or responsible for any agreement of SRG to
indemnify or defend RTI, or to reimburse RTI for any sums expended by
RTI; or
(e) bound by any amendment to the Sublease not approved
by GE CAPITAL in writing.
9. New Lease. In the event of the termination of any Sublease
(including, without limitation, any termination pursuant to the Federal
Bankruptcy Code), (i) GE CAPITAL shall have the right, subject to any consent of
RTI's landlord under the related Lease and if such Lease is still in effect, to
request that RTI enter into a new sublease agreement with GE CAPITAL or its
designee within forty-five (45) days after the date on which GE CAPITAL receives
written notice of the termination of such Sublease, and (ii) RTI and GE CAPITAL
(or its designee) shall enter into such new sublease agreement on the same terms
and conditions as the Sublease, as modified by this Agreement, within thirty
(30) days after RTI receives GE CAPITAL's request. GE CAPITAL shall be
responsible, at its cost and expense, to secure any necessary consent of RTI's
landlord under the related Lease.
10. Waiver of Liens.
---------------
(a) RTI hereby waives and relinquishes in favor of GE CAPITAL,
its successors and assigns, for the term of the Loans or until the Loans are
otherwise satisfied (as evidenced by a written acknowledgment delivered by GE
CAPITAL to RTI, which acknowledgment shall not be unreasonably withheld), all
rights and demands of every kind against the Personal Property including, but
not limited to, the right of foreclosure, levy, execution, sale and distraint
for rent and all other rights arising under real property law or by contract
which RTI now has or may hereafter acquire with respect to the Personal
Property.
(b) RTI hereby agrees that the Personal Property shall not
constitute fixtures and may be removed by GE CAPITAL from the Leased Sites at
any time, subject to the terms and conditions of the applicable Lease. Without
limitation of the foregoing, in the event of any termination of any Sublease, GE
CAPITAL shall have the right, subject to the terms and conditions of the
applicable Lease, to remove the Personal Property from the applicable Leased
Site for a period of sixty (60) days after GE CAPITAL receives written notice of
such termination.
11. Liquidated Damages.
------------------
(a) Notwithstanding anything contained herein to the contrary,
in the event any of the Leases or Subleases is terminated as a result of any RTI
Event (as such term is hereinafter defined), then RTI shall pay to GE CAPITAL,
within ten (10) days after the date on which the Lease or Sublease is
terminated, as liquidated damages and not as a penalty, the Lease Termination
Payment (as hereinafter defined). The "Lease Termination Payment" for any Leased
Site shall be determined by dividing the Cash Flow of SRG from the applicable
Leased Site for the twelve (12) month period immediately preceding the date of
termination of the Lease or Sublease by the total, consolidated Cash Flow of SRG
for the same period, and multiplying the result by the then-current unpaid
principal balance of the Loans. "Cash Flow" of SRG shall be determined as
provided in the Loan Agreement. Notwithstanding the foregoing, the Lease
Termination Payment shall not be payable as the result of the termination of any
Lease or Sublease if, after deducting the Cash Flow of SRG from the applicable
Leased Site for the twelve (12) month period immediately preceding the date of
the termination, SRG is not in violation of either Section 2(a)(ii) or Section
2(b)(ii) of the Loan Agreement. RTI and GE CAPITAL acknowledge and agree that
the Lease Termination Payment is a fair and reasonable estimate of the amount of
damages to be incurred by GE CAPITAL in the event any of the Leases or Subleases
are terminated.
(b) For the purpose of Section 11(a), an "RTI Event"
shall mean any of the following:
(i) The failure of RTI to pay any of the
Monetary Obligations or to perform any of the Nonmonetary Obligations, subject
to Section 1(b) above;
(ii) Any breach by RTI of any of its covenants or
obligations under this Agreement;
(iii) Any misrepresentation or breach of warranty
by RTI under this Agreement; or
(iv) The failure by RTI to obtain the consent of
any landlord to a Sublease.
(c) Any Lease Termination Payment paid by RTI pursuant to this
Section 11 shall be applied by GE CAPITAL, without payment of any prepayment
premium, to reduce the unpaid principal balance of the Loans.
(d) In the event RTI is obligated to pay a Lease Termination
Payment pursuant to this Section 11 and RTI is simultaneously obligated to pay
an amount to GE CAPITAL with respect to the same Leased Site pursuant to that
certain Agreement Regarding Collateral (herein so called) dated of even date
herewith between RTI and GE CAPITAL, RTI shall only be obligated to pay the
greater of the two (2) amounts. In addition, any payment by RTI of the entire
amount of its obligations with respect to a Leased Site pursuant to the
Agreement Regarding Collateral shall release RTI from further liability with
respect to such Leased Site under this Agreement, but not from liability with
respect to the remainder of the Leased Sites.
12. Notices. All notices be given under this Agreement shall be in
writing and shall be deemed given and received (a) upon receipt if given by hand
delivery, (b) two (2) business days after deposit in the U.S. Mail with first
class postage prepaid and certified with return receipt requested, or (c) one
(1) business day after delivery to a recognized overnight courier for next day,
priority overnight delivery. The respective addresses for RTI and Lender are as
follows:
RTI: Ruby Tuesday, Inc.
150 West Church Avenue
Maryville, Tennessee 37801
Attn: Chief Financial Officer
Lender: General Electric Capital Business Asset
Funding Corporation
10900 N.E. 4th, Suite 500
Bellevue, Washington 98004
Attn: Franchise Finance Department
The address to which any notice or other writing must be sent to either
party hereto may be changed upon written notice given by such party as provided
in this Section 12.
13. Conflict. In the event of any conflict between the terms
of this Agreement and any of the terms of the Lease, the terms of this Agreement
shall govern and control.
14. Illegal or Invalid Provisions. If any term or provision of this
Agreement is held to be illegal, invalid or unenforceable, the legality,
validity and enforceability of the remaining terms and provisions of this
Agreement shall not be affected thereby, and in lieu of such illegal, invalid or
unenforceable term or provision there shall be added automatically to this
Agreement a legal, valid and enforceable term or provision as similar as
possible to the term or provision declared illegal, invalid, and unenforceable.
15. Governing Law. This Agreement and all of the transactions
contemplated herein shall be governed by and construed in accordance with the
laws of the State of Washington.
16. Successors and Assigns. This Agreement shall be binding upon
RTI and each of its respective successors and assigns and shall inure to the
benefit of GE CAPITAL and each of its successors, assigns and transferees.
17. Consideration. RTI acknowledges that the Loans by GE CAPITAL
to SRG will benefit RTI and therefore, that RTI has received good and
valuable consideration for the execution and delivery of this Agreement.
RTI:
RUBY TUESDAY, INC.,
a Georgia corporation
By: /s/ J. Russell Mothershed
Print: J. Russell Mothershed
Its: Senior Vice President
GE CAPITAL:
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION,
a Delaware corporation
By: /s/ Dawn Peretti
Print: Dawn Peretti
Its: Vice President
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION OF ARKANSAS,
a Delaware corporation
By: /s/ Dawn Peretti
Print: Dawn Peretti
Its: Vice President
<PAGE>
AGREEMENT REGARDING COLLATERAL
THIS AGREEMENT REGARDING COLLATERAL (this "Agreement") dated as of
November 20, 2000, is made and executed by and between GENERAL ELECTRIC CAPITAL
BUSINESS ASSET FUNDING CORPORATION and GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION OF ARKANSAS, each a Delaware corporation (collectively, "GE
CAPITAL"), and RUBY TUESDAY, INC., a Georgia corporation ("RTI") and SPECIALTY
RESTAURANT GROUP, LLC, a Delaware limited liability company ("SRG").
R E C I T A L S:
A. Concurrently herewith, GE CAPITAL is extending three (3) loans (the
"Loans") to SRG in order to facilitate the acquisition by SRG of sixty-nine (69)
restaurant properties from RTI (individually, a "Property" and collectively, the
"Properties"). The Loans are to be secured by, among other things, first lien
deeds of trust and mortgages covering all fee simple and ground leased real
property interests to be acquired by SRG from RTI and first and prior perfected
security interests covering all personal property to be acquired by SRG from RTI
(such real and personal property is collectively called the "Collateral").
B. SRG has failed to satisfy all of the conditions precedent
of GE CAPITAL to the funding of the Loans.
C. In order to induce GE CAPITAL to extend the Loans to SRG
notwithstanding the failure of SRG to satisfy all of GE CAPITAL's conditions
with respect to the Collateral, SRG and RTI have agreed to execute and deliver
this Agreement.
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, GE CAPITAL, SRG and RTI hereby agree as
follows:
1. Collateral Deficiencies. GE CAPITAL and RTI each hereby acknowledge
and agree that the list attached hereto as Exhibit "A" and made a part hereof
for all purposes (the "Collateral Deficiency List") describes each of the items
required by GE CAPITAL which SRG has failed to deliver (or has not delivered in
a condition reasonably satisfactory to GE CAPITAL) as the date of this
Agreement. RTI agrees to diligently attempt to satisfy and deliver all of the
items set forth on the Collateral Deficiency List until and including February
28, 2001 (such date being called the "Deficiency Determination Date"). GE
CAPITAL shall not unreasonably withhold or delay its approval of any item
described on the Collateral Deficiency List which is delivered by RTI to GE
CAPITAL after the date hereof.
2. Failure to Satisfy Collateral Deficiencies.
------------------------------------------
(a) In the event that on the Deficiency Determination Date,
RTI has not delivered or satisfied all of the items on the Collateral Deficiency
List to the reasonable satisfaction of GE CAPITAL, then within ten (10) days
after GE CAPITAL delivers written notice to RTI and SRG of the occurrence of an
"Acceleration Event", RTI shall pay to GE CAPITAL, for each of the Properties
which have one (1) or more items on the Collateral Deficiency List on the
Deficiency Determination Date (such Properties being called the "Deficiency
Properties"), the amount for each of the Deficiency Properties which is
described on Exhibit "B" attached hereto (each such amount being called a
"Deficiency Payment"). For the purpose of this Agreement, an "Acceleration
Event" shall mean and refer to the acceleration by GE CAPITAL of the maturity of
one (1) or more of the Loans as a result of a default by SRG. No Deficiency
Payment shall be due with respect to any Deficiency Property which is not shown
on Exhibit "B" attached hereto.
(b) Notwithstanding Section 2(a) above, for any of the
Deficiency Properties which are designated as "No Mortgage" on Exhibit "A", if
GE CAPITAL does not receive a valid, first lien deed of trust, mortgage or
similar instrument covering each of such Deficiency Properties along with
mortgagee policies of title insurance in form acceptable to GE CAPITAL prior to
the date GE CAPITAL delivers written notice of the occurrence of an Acceleration
Event to RTI and SRG, then the Deficiency Payment for each such Deficiency
Property shall be increased by multiplying the amount set forth on Exhibit "B"
by 1.25.
(c) Notwithstanding Section 2(a) above, with respect to the
Deficiency Properties which are designated as Store Nos. 3406, 3979, 3477, and
4171, if on the date GE CAPITAL delivers written notice of the occurrence of an
Acceleration Event to RTI and SRG, the sole remaining item on the Collateral
Deficiency List for any of such Deficiency Properties is "need to amend use
restriction", then the Deficiency Payment for such Deficiency Property shall be
reduced by multiplying the amount set forth on Exhibit "B" by .50.
3. Conveyance of Properties. Upon receipt by GE CAPITAL of a Deficiency
Payment with respect to any of the Deficiency Properties, GE CAPITAL shall
assign all of its right, title and interest in and to such Deficiency Property
to RTI or RTI's designee. GE CAPITAL further agrees that upon GE CAPITAL's
acquisition of SRG's interest in the trade and service marks described on
Exhibit "C" attached hereto (collectively, the "Trade Marks"), GE CAPITAL shall
grant to RTI a paid up, royalty-free license to use the Trade Marks which are
necessary for RTI to operate a restaurant at each of the Deficiency Properties.
SRG agrees that on demand by RTI after the payment by RTI of a Deficiency
Payment, SRG shall assign to RTI all of its right, title and interest in and to
the Deficiency Property with respect to which such Deficiency Payment was paid
to GE CAPITAL and in the event SRG is the owner of any of the Trade Marks, SRG
shall grant to RTI a paid up, royalty-free license to use the Trade Marks for
the operation of a restaurant at each such Deficiency Property.
4. Limitation. In the event RTI is obligated to pay any Deficiency
Payment and RTI is simultaneously obligated to pay an amount to GE CAPITAL with
respect to the same Property pursuant to that certain Master Agreement and
Indemnity Regarding Leases and Subleases dated of even date herewith, executed
by RTI in favor of GE CAPITAL (the "Master Agreement"), RTI shall only be
obligated to pay the greater of the two (2) amounts. In addition, if RTI pays
any amount with respect to a Deficiency Property pursuant to the terms of the
Master Agreement prior to the date a Deficiency Payment becomes due with respect
to such Deficiency Property, RTI shall not thereafter be obligated to pay a
Deficiency Payment with respect to such Deficiency Property pursuant to the
terms of this Agreement.
5. Reimbursement by GE CAPITAL. In the event GE CAPITAL at any time has
received, as a result of the exercise of its rights and remedies against the
Collateral and the payment by RTI of the RTI Payments (as hereinafter defined),
an amount in excess of the entire principal balance of the Loans, all accrued
interest thereon, all prepayment premiums (if any) and all costs, fees and
expenses paid or incurred by GE CAPITAL and secured by the Loan Documents or
which are to be reimbursed to GE CAPITAL pursuant to the terms of the Loan
Documents (including, without limitation, attorneys' fees and court costs), then
GE CAPITAL shall pay to RTI the amount of such excess up to (but not exceeding)
the amount of the RTI Payments. The term "RTI Payments" shall mean any
Deficiency Payments and any amounts paid by RTI to GE CAPITAL pursuant to the
Master Agreement.
6. Approvals After Deficiency Determination Date. Notwithstanding
anything contained in Sections 1 or 2 above, in the event RTI satisfies or
delivers all of the items set forth on the Collateral Deficiency List with
respect to a Deficiency Property and in accordance with Section 1 above after
the Deficiency Determination Date, but prior to the occurrence of an
Acceleration Event, GE CAPITAL agrees that such Property shall not thereafter be
a Deficiency Property for the purpose of this Agreement and that no Deficiency
Payment shall be payable with respect to such Property.
7. Notices. All notices be given under this Agreement shall be in
writing and shall be deemed given and received (a) upon receipt if given by hand
delivery, (b) two (2) business days after deposit in the U.S. Mail with first
class postage prepaid and certified with return receipt requested, or (c) one
(1) business day after delivery to a recognized overnight courier for next day,
priority overnight delivery. The respective addresses for RTI and GE CAPITAL are
as follows:
RTI: Ruby Tuesday, Inc.
150 West Church Avenue
Maryville, Tennessee 37801
Attn: Chief Financial Officer
GE CAPITAL: General Electric Capital Business Asset
Funding Corporation
10900 N.E. 4th, Suite 500
Bellevue, Washington 98004
Attn: Franchise Finance Department
The address to which any notice or other writing must be sent to either
party hereto may be changed upon written notice given by such party as provided
in this Section 7.
8. Illegal or Invalid Provisions. If any term or provision of this
Agreement is held to be illegal, invalid or unenforceable, the legality,
validity and enforceability of the remaining terms and provisions of this
Agreement shall not be affected thereby, and in lieu of such illegal, invalid or
unenforceable term or provision there shall be added automatically to this
Agreement a legal, valid and enforceable term or provision as similar as
possible to the term or provision declared illegal, invalid, and unenforceable.
9. Governing Law. This Agreement and all of the transactions
--------------
contemplated herein shall begoverned by and construed in accordance with the
laws of the State of Washington.
10. Successors and Assigns. This Agreement shall be binding
----------------------
upon and shall inure to the benefit of the parties hereto and each of their
respective successors and assigns.
11. Consideration. RTI acknowledges that the Loans by GE CAPITAL
-------------
to SRG will benefit RTI and therefore, that RTI has received good and valuable
consideration for the execution and delivery of this Agreement.
12. Attorneys' Fees. SRG agrees to reimburse GE CAPITAL for all
reasonable attorneys' fees and expenses incurred by GE CAPITAL in connection
with this Agreement after the date hereof. SRG further acknowledges and agrees
that such attorneys' fees and expenses can be paid from the deposit which SRG
has previously delivered to GE CAPITAL in connection with the Loans and that
fifty percent (50%) of such deposit shall not be refunded to SRG until after the
Deficiency Determination Date.
RTI:
RUBY TUESDAY, INC.,
a Georgia corporation
By: /s/ J. Russell Mothershed
Print: J. Russell Mothershed
Its: Senior Vice President
GE CAPITAL:
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION,
a Delaware corporation
By: /s/ Dawn Peretti
Print: Dawn Peretti
Its: Vice President
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION OF ARKANSAS,
a Delaware corporation
By: /s/ Dawn Peretti
Print: Dawn Peretti
Its: Vice President
SRG:
SPECIALTY RESTAURANT GROUP, LLC,
a Delaware limited liability company
By: /s/ James H. CarMichael
James H. CarMichael
President and Chief Executive Officer
<PAGE>
Loan Nos. 001-00066876-001,
00066876-002 and 001-00066876-003
DEBT SUBORDINATION AGREEMENT
THIS DEBT SUBORDINATION AGREEMENT (this "Agreement") dated as of
November 20, 2000 is made by RUBY TUESDAY, INC., a Georgia corporation
("Creditor"), SPECIALTY RESTAURANT GROUP, LLC, a Delaware limited liability
company ("Borrower"), and GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING
CORPORATION and GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION OF
ARKANSAS, each a Delaware corporation (collectively, "GE CAPITAL").
R E C I T A L S:
A. GE CAPITAL has agreed to extend three (3) loans (collectively, the
"Loans") to Borrower in the aggregate principal amount of $30,000,000.00 in
connection with Borrower's acquisition of certain restaurants from Creditor
pursuant to that certain Agreement and Plan of Merger dated as of October 4,
2000, as amended (the "Merger Agreement"), to be evidenced and secured by
various documents and instruments executed by Borrower in favor of GE CAPITAL
(collectively called the "Loan Documents"). The Loan Documents include, without
limitation, a certain Loan Agreement (herein so called) dated of even date
herewith between Borrower and GE CAPITAL.
B. In connection with the Merger Agreement, Creditor is currently owed
certain indebtedness for borrowed money by Borrower (the "Current Debt"). The
Current Debt is evidenced by a certain promissory note dated of even date
herewith (the "Subordinate Note") executed by Borrower in favor of Creditor. The
Current Debt is secured solely by the Pledge Agreement (the "Pledge Agreement")
dated of even date herewith, executed by each of the members of Borrower in
favor of Creditor.
C. In addition to the Current Debt, Creditor may from time to time
hereafter be owed certain additional indebtedness by Borrower (the "Future
Debt") (the Current Debt and the Future Debt are sometimes collectively called
the "Debt").
D. As a material inducement to GE CAPITAL to extend the Loans to
Borrower, Creditor has agreed to execute and deliver this Agreement to GE
CAPITAL.
NOW THEREFORE, in consideration of the premises and in order to induce
GE CAPITAL to extend the Loans to Borrower, the parties hereto do hereby agree
as follows:
1. Agreement to Subordinate. Creditor and Borrower each agree that the
Debt is, and shall continue to be, subordinate in right of payment to the prior
payment in full of all indebtedness and obligations (whether direct or
contingent) of Borrower to GE CAPITAL under or with respect to the Loans, and
whether such indebtedness or obligations consist of principal, interest, fees,
or expenses (all indebtedness and obligations of Borrower to GE CAPITAL under or
with respect to the Loans are collectively called the "Obligations"). However,
until (a) either (i) a Default (as such term is hereinafter defined) occurs or
(ii) GE CAPITAL declares the entire unpaid balance of one (1) or both of the
Loans immediately due and payable (the events described in (a)(i) and (a)(ii)
being called "Subordination Events"), and (b) GE CAPITAL has delivered written
notice to Creditor as provided in Section 2 below, Creditor shall be entitled to
receive payments on the Debt in the normal course of Borrower's business and
after all payments which are due on the Obligations at the time of such payments
are paid by Borrower to GE CAPITAL. For the purpose of this Agreement, a Default
shall mean (x) the occurrence of a default by Borrower in any of its monetary
obligations under the Loan Documents (including, without limitation, any failure
by Borrower to pay installments of principal and interest to GE CAPITAL in
accordance with the terms of the Loan Documents, any failure by Borrower to pay
any insurance premiums required by the Loan Documents to be paid by Borrower and
any failure of Borrower to pay any taxes required by the Loan Documents to be
paid by Borrower), or (y) the occurrence of any default under Section 2 of the
Loan Agreement.
2. No Payment on the Subordinated Debt. Subject to the rights of
Creditor set forth in Section 3(c) below, Creditor agrees, following Creditor's
receipt of written notice of the occurrence of a Subordination Event, not to
ask, demand, sue for, take, or receive from Borrower, directly or indirectly, in
cash or other property, by set-off or in any other manner, payment of all, or
any part of, the Debt unless and until either (a) the Obligations shall have
been paid in full, or (b) GE CAPITAL delivers written notice to Creditor stating
that such Subordination Event has been cured to the satisfaction of GE CAPITAL.
Any written notice of a Subordination Event delivered by GE CAPITAL to Creditor
shall include a copy of any notice of default delivered by GE CAPITAL to
Borrower in connection with such Subordination Event.
3. In Furtherance of Subordination. Creditor further agrees as
follows:
-------------------------------
(a) Upon any distribution of all, or any part of, the assets
of Borrower to creditors of Borrower upon the dissolution, winding up,
liquidation, arrangement, reorganization, adjustment, protection,
relief, or composition of Borrower or its debts, whether in any
bankruptcy, insolvency, arrangement, reorganization, receivership,
relief, or similar proceedings or upon an assignment for the benefit of
creditors or any other marshaling of the assets and liabilities of
Borrower or otherwise, any payments or distributions of any kind
(whether in cash, property, or securities), which otherwise would be
payable or deliverable upon or with respect to the Debt shall be paid
or delivered directly to GE CAPITAL for application to, or as
collateral (in the case of noncash property or securities) for, the
payment of the Obligations until the Obligations shall have been paid
in full.
(b) All payments or distributions upon, or with respect to,
the Debt which are received by Creditor after GE CAPITAL delivers
written notice to Creditor of the occurrence of a Subordination Event,
but prior to the payment in full of all of the Obligations or other
satisfaction of the Obligations in the manner described in Section 13
below, shall be received in trust for the benefit of GE CAPITAL, and
shall be forthwith paid over to GE CAPITAL in the same form as so
received (with any necessary indorsement) to be applied (in the case of
cash) to, or held as collateral (in the case of noncash property or
securities) for, the payment of the Obligations.
(c) Creditor shall be entitled to enforce payment of the Debt
against Borrower as long as no such action by Creditor causes a Default
to occur. In addition, Creditor shall be entitled to exercise its
rights under the Pledge Agreement to acquire the membership interests
in Borrower without the prior written consent of GE CAPITAL.
(d) Creditor shall deliver to GE CAPITAL copies of all notices
given by Creditor under the Pledge Agreement concurrently with the
delivery of such notices to the pledgors thereunder.
(e) From time to time upon each request by GE CAPITAL (made no
more frequently than two (2) times each calendar year unless a
Subordination Event has occurred and is continuing), Creditor shall
deliver to GE CAPITAL written notice of the then-current amount of the
Debt and evidence acceptable to GE CAPITAL of Creditor's compliance
with this Agreement. Nothing in this Section 3(e) shall limit the
obligations of Borrower pursuant to Section 4 of the Loan Agreement.
(f) Without the prior written consent of GE CAPITAL, Creditor
shall not ask for, demand or accept any collateral or security for the
Current Debt other than the pledge of the member interests in Borrower
by all members of Borrower pursuant to the Pledge Agreement.
4. Rights of Subrogation. Creditor agrees that no payment or
distribution to GE CAPITAL pursuant to the provisions of this Agreement shall
entitle Creditor to exercise any rights of subrogation in respect thereof until
the Obligations shall have been paid in full or otherwise satisfied (in the
manner provided in Section 13 below), whereupon Creditor shall be subrogated to
the rights of GE CAPITAL to the fullest extent provided by law or in equity.
5. No Change in or Disposition of Debt. Creditor will not sell,
-------------------------------------
assign, pledge, encumber, or otherwise dispose of any of the Debt unless such
sale, assignment, pledge, encumbrance, or disposition is made expressly subject
to this Agreement.
6. Agreement by Borrower. Borrower agrees that it will not make
-----------------------
any payment of any of the Debt, or take any other action, in contravention of
the provisions of this Agreement.
7. Obligations Hereunder Not Affected.
----------------------------------
(a) All rights and interests of GE CAPITAL hereunder, and all
agreements and obligations of Creditor and Borrower under this
Agreement, shall remain in full force and effect irrespective of:
(1) any lack of validity or enforceability of
the Loan Documents, or any other agreement or instrument
relating thereto;
(2) any change in the time, manner, or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to departure from the Loan Documents;
(3) any exchange, release, or nonperfection of
any collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, of or for all or any
of the Obligations;
(4) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Borrower
or Creditor;
(5) any assignment, endorsement, or transfer,
in whole or in part, of the Obligations, although made without
notice to, or the consent of, Creditor or Borrower, or any
other party;
(6) any extension of the time for payment or
performance of all or any portion of the Obligations; or
(7) the operation of law or any other cause, whether
similar or dissimilar to the foregoing, or any adjustment,
indulgence, forbearance or compromise that may be granted or
given by GE CAPITAL to any party, or the failure by GE CAPITAL
to file or enforce a claim against Borrower, or any
impairment, modification, change, release, or limitation of
liability of, or stay of action or lien enforcement proceeding
against, Borrower or its properties, or its estate in
bankruptcy resulting from the operation of any present or
future provision of the Federal Bankruptcy Code or any other
similar federal or state statute;
it being the intention of the parties hereto that this Agreement shall
remain in full force and effect notwithstanding any act, omission, or
thing which might, but for the provisions hereof, otherwise operate as
a legal or equitable discharge of Creditor or Borrower from the
provisions hereof.
(b) This Agreement shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment of any of
the Obligations is rescinded or must otherwise be returned by GE
CAPITAL upon the insolvency, bankruptcy, or reorganization of Borrower
or otherwise, as though such payment had not been made.
8. Waiver.
------
(a) Creditor and Borrower each hereby waive: (1) promptness,
diligence, notice of acceptance, and any other notice with respect to
any of the Obligations and this Agreement (except for notices expressly
provided for either in the Loan Documents or in this Agreement); (2)
any requirement that GE CAPITAL protect, secure, perfect, or insure any
security interest or lien or any property subject to the Loan Documents
or exhaust any right or take any action against Borrower, or any other
person or entity or any collateral; and (3) any right of Creditor to
require GE CAPITAL to marshal the assets of Borrower.
(b) To the fullest extent permitted by law, Creditor and
Borrower hereby irrevocably and unconditionally waive and release for
the benefit of GE CAPITAL: (1) all benefits that might accrue to any of
them by virtue of any present or future law exempting the properties of
Borrower from attachment, levy, or sale and execution by GE CAPITAL or
providing for any appraisement, valuation, stay of execution, exemption
from civil process, redemption or extension of time for payment in any
enforcement action by GE CAPITAL; (2) all notices of any event of
default under the Loan Documents or of GE CAPITAL's election to
exercise or its actual exercise of any right, remedy or recourse
available to it with respect to the Obligations (except for notices
expressly provided for herein); and (3) any right to a sale in inverse
order of alienation.
9. Representations of Creditor. Creditor represents and warrants to GE
CAPITAL that (a) the original principal balance of the Current Debt is
$28,753,428.00, (b) the Current Debt is evidenced solely by the Subordinate
Note, (c) the Current Debt is secured solely by a pledge of the membership
interests of Borrower pursuant to the Pledge Agreement, and (d) true, correct
and complete copies of the Subordinate Note and the Pledge Agreement are
attached hereto as Exhibit "A".
10. Amendments, Etc. No amendment or waiver of any provision of this
Agreement nor consent to any departure by Creditor or Borrower therefrom shall
in any event be effective unless the same shall be in writing and signed by
Creditor, Borrower and GE CAPITAL, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. Borrower and GE CAPITAL each agree that they shall not amend Section 2 of
the Loan Agreement in a manner which increases Borrower's obligations thereunder
without the prior written consent of Creditor.
11. Addresses for Notices. All notices, requests and other
communications to either party hereunder shall be in writing and shall be given
to such party at its address set forth below or at such other address as such
party may hereafter specify for the purpose of notice to Creditor, Borrower, or
GE CAPITAL. Each such notice, request or other communication shall be effective
(a) if given by mail, five (5) business days after such notice is deposited in
the United States Mail (or when actually received by the addressee, if earlier)
with first class postage prepaid, addressed as aforesaid, provided that such
mailing is by registered or certified mail, return receipt requested, (b) if
given by overnight delivery, one (1) business day after it is deposited with a
nationally recognized overnight delivery service such as Federal Express or
Airborne with next day delivery charges prepaid, addressed as provided below, or
(c) if given by any other means, when delivered at the address specified in this
Section 11.
If to Creditor: Ruby Tuesday, Inc.
Attn: Chief Financial Officer
150 West Church Avenue
Maryville, Tennessee 37801
If to Borrower: Specialty Restaurant Group, LLC
150 West Church Avenue
Maryville, Tennessee 37801
Attn: President
If to GE CAPITAL: General Electric Capital Business Asset
Funding Corporation
10900 NE 4th, Suite 500
Bellevue, Washington 98004
Attn: Franchise Finance Department
12. No Waiver; Remedies. No failure on the part of GE CAPITAL or
Creditor to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
13. Continuing and Binding Agreement. This Agreement is a continuing
agreement and shall: (a) remain in full force and effect until the Obligations
shall have been paid in full or until GE CAPITAL acknowledges in a written
notice delivered to Creditor that the Obligations have been otherwise satisfied
(which acknowledgment shall not be unreasonably withheld or delayed); (b) be
binding upon GE CAPITAL, Creditor, Borrower and their respective heirs,
successors and assigns; and (c) inure to the benefit of and be enforceable by GE
CAPITAL, Creditor and Borrower and their respective heirs, successors,
transferees, and assigns.
14. Limitation on Future Debt.
-------------------------
(a) Notwithstanding anything contained herein to the contrary,
the Future Debt shall not include payments by, or obligations of, Borrower to
Creditor which are not in the nature of the repayment of a loan or advance made
subsequent to the date hereof by Creditor to Borrower including, without
limitation, payments or obligations of Borrower to Creditor (i) under any lease
or sublease agreement pursuant to which Creditor leases or subleases real or
personal property to Borrower, (ii) under the Support Services Agreement, Option
Agreement, Nonsolicitation Agreement, Intellectual Property Agreement, or the
Defense and Indemnity Agreement, each between Borrower and Creditor and each
dated of even date herewith, (iii) under the Participation and Operating
Agreement of Borrower should Creditor acquire member interests of Borrower
pursuant to such Option Agreement, or (iv) pursuant to the Merger Agreement
(except the Subordinated Note and the Pledge Agreement).
(b) In the event any Future Debt is secured by real or
personal property of Borrower, other than real or personal property which
secures the payment of the Loans (such real or personal property being called
the "Collateral"), Creditor shall have the right to enforce its rights and
remedies against the Collateral without the prior written consent of GE CAPITAL.
In the event any deficiency obligation remains owing to Creditor after the
enforcement of its rights and remedies against the Collateral, such deficiency
obligation shall be considered part of the Debt for the purposes of this
Agreement. If any excess proceeds are available after the exercise of Creditor's
rights and remedies against the Collateral, and if Creditor has received written
notice of the occurrence of a Subordination Event, such excess proceeds shall be
paid to GE CAPITAL.
15. Payments by Borrower. In the event Creditor is obligated to make
any payment to Borrower at any time after Creditor has received written notice
of the occurrence of a Subordination Event, Creditor agrees that such payment,
and all future payments due from Creditor to Borrower, shall be paid to GE
CAPITAL until either (a) the Obligations are paid in full or otherwise satisfied
in the manner described in Section 13 hereof or (b) GE CAPITAL delivers written
notice to Creditor stating that such Subordination Event has been cured to the
satisfaction of GE CAPITAL. Creditor shall not be liable to Borrower for any
payments actually paid by Creditor to GE CAPITAL pursuant to this Section 15.
16. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Washington.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto each have caused this Agreement
to be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
CREDITOR:
RUBY TUESDAY, INC.,
a Georgia corporation
By: /s/ J. Russell Mothershed
Print: J. Russell Mothershed
Its: Senior Vice President
BORROWER:
SPECIALTY RESTAURANT GROUP, LLC,
a Delaware limited liability company
By: /s/ James H. CarMichael
James H. CarMichael,
President and Chief Executive Officer
GE CAPITAL:
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION,
a Delaware corporation
By: /s/Dawn Peretti
Print: Dawn Peretti
Its: Vice President
GENERAL ELECTRIC CAPITAL BUSINESS ASSET
FUNDING CORPORATION OF ARKANSAS,
a Delaware corporation
By: /s/Dawn Peretti
Print: Dawn Peretti
Its: Vice President
<PAGE>
AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of November 20, 2000, is
made by and between RUBY TUESDAY, INC., a Georgia corporation ("RTI") and JAMES
CARMICHAEL, an individual residing in the State of Tennessee ("CarMichael").
RECITALS:
A. RTI, Specialty Restaurant Group, LLC, a Delaware limited liability company
("Borrower") and Tia's, LLC, a Delaware limited liability company ("Tia's") and
wholly-owned subsidiary of RTI, entered into that certain Agreement and Plan of
Merger dated as of October 4, 2000, as amended, (the "Merger Agreement"),
pursuant to which Tia's is to be merged with and into Borrower, effective as of
the date hereof.
B. Pursuant to the Merger Agreement, RTI agreed to provide seller financing in
the amount of $28,753,428, in exchange for Borrower's secured promissory note
and certain other promises and covenants of Borrower.
C. GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION, a Delaware
corporation, and GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION OF
ARKANSAS, each a Delaware corporation (collectively "GE Capital") has agreed to
extend three (3) loans (the "Loans") to Borrower in the aggregate principal
amount of $30,000,000 in connection with Borrower's merger with Tia's pursuant
to the Merger Agreement, to be evidenced and secured by various documents and
instruments executed by Borrower in favor of GE Capital (such documents
collectively being referred to as the "Loan Documents").
D. As a condition to the consummation of the transactions contemplated by the
Merger Agreement, RTI and Borrower have required that CarMichael enter into the
Employment Agreement (as defined in the Merger Agreement).
E. As a condition to the extension of the Loans, GE Capital has required that
CarMichael guarantee indebtedness evidenced by the Loan Documents pursuant to
one (1) or more documents acceptable to GE Capital (collectively the
"Guaranty").
F. In order to induce CarMichael to enter into the transactions described above,
RTI and CarMichael wish to enter into the covenants and agreements set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
CarMichael to enter into the Guaranty and the Employment Agreement as part of
the transactions contemplated by the Merger Agreement, the parties hereto hereby
agree as follows:
1. Foreclosure under Guaranty. If GE Capital commences or
completes any foreclosure action in accordance with the terms of the Guaranty,
whether judicially or by exercise of a power of sale or by deed in lieu of
foreclosure, and if CarMichael's employment pursuant to the Employment Agreement
has not (i) been voluntarily terminated by CarMichael or (ii) been terminated by
SRG for Cause (as defined in the Employment Agreement), CarMichael will deliver
written notice of such foreclosure (the "Foreclosure Notice") to RTI. Said
Foreclosure Notice will trigger RTI's responsibilities hereunder. Within thirty
(30) days after receipt of a Foreclosure Notice, RTI shall take the action
described in Paragraph 2 hereof. Notwithstanding the foregoing, if the
Employment Agreement has been terminated by CarMichael voluntarily or if the
Employment Agreement has been terminated for Cause, this Agreement shall
terminate immediately upon the occurrence of either such event and shall have no
further force and effect.
2. Payment to GE Capital. Within thirty (30) days after receipt of a
Foreclosure Notice, and if the Employment Agreement has not been terminated by
CarMichael voluntarily and the Employment Agreement has not been terminated by
RTI for Cause, RTI shall pay to GE Capital the sum of Three Hundred Thousand
Dollars ($300,000.00)(the "RTI Payment").
3. Employment/Consulting. A. Upon RTI making the RTI Payment,
CarMichael agrees that, if requested by RTI within ninety (90) days following
the making of the RTI Payment (the "Request"), CarMichael shall enter into a two
(2) year employment, consulting or similar relationship with RTI pursuant to
which CarMichael shall become a full time employee or consultant (or similar
arrangement) of RTI in connection with the management and operation of the Tia's
Tex-Mex and/or American Cafe restaurants, or such other restaurants as RTI may
from time to time designate, at an annual gross salary of $250,000.00. Such
employment, consulting or similar arrangement shall contain, without limitation,
typical provisions for the reimbursement of ordinary and reasonable business
expenses, typical benefits (if an employee), the maintenance of RTI's
confidential information and trade secrets, the non-solicitation of RTI
employees (during the term of such agreement, employment or other relationship
and two (2) years thereafter) and termination for cause.
B. In the event CarMichael and RTI enter into such employment,
consulting or similar relationship and same is not terminated by RTI within such
two (2) year period for cause or CarMichael does not resign within such two (2)
year period, or if RTI does not make the Request that CarMichael enter into such
employment, consulting or similar relationship, RTI's rights to collect the RTI
Payment from CarMichael (see paragraph C below) shall be deemed waived and, in
addition, RTI shall pay (directly or pursuant to a trust or other mechanism
established by RTI) the ordinary and reasonable undergraduate college education
expenses (tuition, room, board, fees, books, supplies, and other typical
expenses) for each of CarMichael's two (2) minor children with respect to a
four-year undergraduate college education, with a maximum RTI liability of
$25,000.00 (pre-tax, if any), per year per child and $200,000.00 (pre-tax, if
any), in the aggregate (the "College Fund"). Such undergraduate education must
be completed by each child by age 25.
C. Should CarMichael, if requested by RTI, enter into the employment,
consulting or similar relationship described above and same is terminated by RTI
for cause within such two (2) year period or if CarMichael resigns within such
two (2) year period, or if CarMichael refuses to enter into such relationship
with RTI following the Request, then CarMichael agrees that RTI shall have no
obligation with respect to the College Fund and CarMichael further agrees to
repay to RTI, within thirty (30) days following notice by RTI that CarMichael
should do so, the amount of the RTI Payment ($300,000.00). In that regard,
CarMichael acknowledges and agrees that RTI shall have all rights and remedies,
at law or in equity, with respect to the collection of the RTI Payment from
CarMichael; provided, that the amount of CarMichael's liability shall be limited
to the amount of the RTI Payment ($300,000.00). CarMichael acknowledges and
agrees that "cause" shall exist if CarMichael fails to exhibit his best efforts
and overall work performance as CarMichael has exhibited while CarMichael was
the President/Partner of the American Cafe concept and an employee of RTI, as
typically determined by RTI.
4. Entire Agreement. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement among the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral, including, without
limitation that certain letter dated as of October 4, 2000, between RTI and
CarMichael.
5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by CarMichael (whether by
operation of law or otherwise) without the prior written consent of RTI. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by and upon the parties and their respective
successors and permitted assigns. This Agreement, including all of the rights,
interests or obligations of RTI hereunder may be assigned by RTI. RTI shall
promptly give notice of any such assignment to CarMichael and the other party.
6. Notices. All notices or other communications that are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
RTI: Ruby Tuesday, Inc.
Attention: Legal Department
150 West Church Avenue
Maryville, Tennessee 37801
Facsimile No.: (865) 379-6817
CarMichael: Mr. James H. CarMichael
3634 Morning Dew Lane
Friendsville, TN 37737
Facsimile No.: (865) 995-9998
with a copy to: H. Leo Beale II
Kizer and Black, Attorneys
329 Cates Street
Maryville, TN 37801
Facsimile No.: (865) 982-5776
7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws
--------------
of the State of Tennessee without regard to conflict of laws principles.
8. No Third-Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of the parties hereto and their
respective successors or permitted assigns. It is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other person or entity other than a party to
this Agreement.
9. Expenses. In the event of any legal proceeding in
--------
which enforcement of this Agreement
is sought by either party, the losing party agrees to pay to the successful
party any reasonable sums, costs and expenses which the successful party may pay
or incur with respect to such legal proceeding or any claim, counterclaim or
defense made or asserted thereunder, including, but not limited to, court costs,
collection charges, reasonable travel expenses, and reasonable attorneys' fees
actually incurred.
10. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, and all of which, when taken
together, constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto each have caused this Agreement
to be duly executed and delivered by its officers thereunto duly authorized as
of the date first above written.
RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed____________
Print: J. Russell Mothershed
Its: Senior Vice President
/s/ James H. CarMichael--------------------
JAMES CARMICHAEL
<PAGE>
PROMISSORY NOTE
$28,753,428.00 November 20, 2000
FOR VALUE RECEIVED, the undersigned, SPECIALTY RESTAURANT GROUP, LLC, a
Delaware limited liability company (the "Borrower"), promises to pay to the
order of RUBY TUESDAY, INC., a Georgia corporation (herein the "Lender" and,
along with each subsequent holder of this Note, referred to as the "Holder"),
the principal sum of TWENTY EIGHT MILLION SEVEN HUNDRED FIFTY THREE THOUSAND
FOUR HUNDRED TWENTY EIGHT DOLLARS ($28,753,428.00), plus the amount accrued and
unpaid thereon pursuant to Paragraphs (i) and (ii) below, with interest on the
outstanding principal balance of this Note from the date hereof until fully paid
at a simple interest rate of TEN PERCENT (10%) per annum as hereinafter
provided.
This Note shall be payable as follows:
(i) From the date hereof, and continuing on the 20th day of
each successive month, until the date that occurs three (3) years after the date
hereof, Borrower shall make payments of thirty-six (36) consecutive monthly
installments of interest accrued and outstanding on the principal amount hereof
in the amounts shown on Schedule I hereto and incorporated by reference herein;
(ii) Beginning on the date that occurs three (3) years and one
(1) month after the date hereof, and continuing on the 20th day of each
successive month, Borrower shall make payments of eighty-four (84) consecutive
monthly installments of principal and interest accrued and unpaid thereon in the
amounts shown on Schedule II hereto and incorporated by reference herein,
including a final payment of all unpaid principal hereof and accrued and unpaid
interest hereon being due and payable on November 20, 2010 in the amount shown
on such Schedule II;
PROVIDED, HOWEVER, that should all or any part of any payment of principal,
interest or other amounts owing and payable hereunder be limited pursuant to
that certain Debt Subordination Agreement of even date herewith among Borrower,
Lender and GE (hereinafter defined)(the "Debt Subordination Agreement") then the
amount of such principal, interest or other amount which is not paid shall be
added to, and become a part of, the unpaid principal hereof and shall be paid by
Borrower to the Holder when the next monthly payment of interest, or principal
and interest, is due hereunder, with priority over the monthly payments
described above, to the extent the payment of the total or a portion of such
amount (deferred amount plus monthly payment) is permitted pursuant to the Debt
Subordination Agreement.
Interest shall be calculated on the basis of three hundred and sixty
(360) days per year for the actual number of days elapsed.
This Note is made and delivered by Borrower in favor of and to Lender
in connection with the consummation of the transactions contemplated pursuant to
that certain Agreement and Plan of Merger among Lender, Borrower and Tia's, LLC
dated October 4, 2000, as amended, (the "Merger Agreement") and is a portion of
the Merger Consideration as defined therein.
Upon the occurrence of (a) a failure to pay principal or accrued
interest hereunder following five (5) days written notice thereof given by
Holder to Borrower or a breach or default by Borrower of any other term or
condition hereof; (b) a default or breach by Borrower under, pursuant to, or in
connection with, (1) those certain three (3) promissory notes in favor of
General Electric Capital Business Asset Funding Corporation or General Electric
Capital Business Asset Funding Corporation of Arkansas (collectively "GE") in
the aggregate original principal amount of $30,000,000.00 dated of even date
herewith (collectively the "Third Party Note"), or any agreement or instrument
securing or relating to the performance and payment thereof, including, without
limitation, that certain Security Agreement dated of even date herewith executed
by Borrower in favor of GE, or other related documents or instruments; (2) any
other indebtedness for borrowed money currently owing, or subsequently incurred
by Borrower, or any affiliate or subsidiary thereof (the "Other Indebtedness")
or any agreement or instrument securing or relating to the performance and
payment thereof, or other related documents or instruments (the Third Party
Note, the Other Indebtedness and such documents as secure the performance and
payment thereof being incorporated herein by this reference); (c) a default or
breach by Borrower under any agreement, instrument, document, indenture or
collateral instrument between Borrower and Lender, or given by Borrower in favor
of Lender, including, without limitation the Merger Agreement and the documents
and/or agreements executed and delivered in connection therewith; (d) a default
or breach by either party under or pursuant to that certain Employment Agreement
between Borrower and James H. CarMichael dated as of the date hereof as in
effect on the date hereof, or the termination of such agreement by the
"Executive" (as defined in such agreement) or such Executive's resignation of
employment with Borrower or the termination or resignation of employment by any
successor "Executive" of Borrower; (e) Borrower's or the managers or Borrower
failing, refusing or omitting to operate the business and affairs of Borrower in
compliance with, or as provided for in, that certain First Amended and Restated
Participation and Operating Agreement of Borrower dated as of the date hereof as
in effect on the date hereof including, without limitation, Borrower's failure
to enforce reasonably and in good faith the terms and conditions of such
Employment Agreement; or (f) an event of default occurs under sections 4(c),
7(a)(1), 7(h) or 7(i) of the Pledge Agreement (hereinafter defined), or an event
of default occurs by fifty percent (50%) or more of the Pledgors (as defined in
the Pledge Agreement) under sections 7(a)(2) and 7(c) through 7(g), inclusive,
of the Pledge Agreement, each as described in such Pledge Agreement; subject in
each case only to any cure period provided in such promissory note(s) or other
documents, instruments, agreements, indentures or collateral instrument, without
extension or modification, the Holder shall have the right to declare the unpaid
principal of and accrued and unpaid interest on this Note to be forthwith due
and payable. If any principal or interest is not paid when due, the Borrower
agrees to pay a late charge of five cents ($0.05) for each dollar of each and
every monthly installment which is not paid when due, to help defray the added
expense incurred by the Holder in handling said delinquent payment, provided
that in no event shall such late charge be construed as interest or cause
interest to be due or payable hereunder in excess of the maximum interest
permitted by applicable law.
The principal hereof and interest hereon shall be payable in lawful
money of the United States of America, at the Lender's principal office at 150
West Church Street, Maryville, Tennessee 37801, or at such other place as the
Holder hereof may designate in writing to the Borrower. The Borrower may prepay
this Note in full or in part at any time without notice, penalty, prepayment
fee, or payment of unearned interest; provided, however, any partial prepayment
shall be made in increments of at least $10,000. All payments hereunder received
from the Borrower by the Holder shall be applied first to interest to the extent
then accrued and then to principal, in inverse order of maturity.
This Note is secured only by a collateral pledge of the Member
Interests (by the members of Borrower) in favor of Lender pursuant to that
certain Pledge Agreement of even date herewith granting to the Lender a lien in
such Member Interests to which reference is hereby made. Nothing in the Debt
Subordination Agreement, including any required deferral of any payments under
this Note pursuant to the terms and conditions of the Debt Subordination
Agreement, shall impair Lender's ability to exercise the rights and remedies
provided to Lender under or pursuant to the Pledge Agreement.
All parties liable for the payment of this Note agree to pay the Holder
hereof reasonable attorneys' fees, not to exceed ten (10) percent of the
principal sum named and, to the extent permitted by law, defined in this Note,
for the services of counsel employed to collect this Note, whether or not suit
be brought, and whether incurred in connection with collection, trial, appeal,
or otherwise, and to indemnify and hold the Holder harmless against liability
for the payment of state intangible, documentary and recording taxes, and other
taxes (including interest and penalties, if any) which may be determined to be
payable with respect to this transaction.
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and in the event
any such payment is inadvertently paid by the Borrower or inadvertently received
by the Holder, then such excess sum shall be credited as a payment of principal,
unless the Borrower shall notify the Holder, in writing, that the Borrower
elects to have such excess sum returned to it forthwith. It is the express
intent hereof that the Borrower not pay and the Holder not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Borrower under applicable law.
The remedies of the Holder as provided herein and in any other
documents governing or securing repayment hereof shall be cumulative and
concurrent and may be pursued singly, successively, or together, at the sole
discretion of the Holder, and may be exercised as often as occasion therefor
shall arise.
No act of omission or commission of the Holder, including specifically
any failure to exercise any right, remedy, or recourse, shall be effective
unless set forth in a written document executed by the Holder, and then only to
the extent specifically recited therein. A waiver or release with reference to
one event shall not be construed as continuing, as a bar to, or as a waiver or
release of any subsequent right, remedy, or recourse as to any subsequent event.
The Borrower and all sureties, endorsers, and guarantors of this Note
hereby (a) waive demand, presentment of payment, notice of nonpayment, protest,
notice of protest and all other notice, filing of suit, and diligence in
collecting this Note, or in enforcing any of its rights under any guaranties
securing the repayment hereof; (b) agree to any substitution, addition, or
release of any collateral or any party or person primarily or secondarily liable
hereon; (c) agree that the Holder shall not be required first to institute any
suit, or to exhaust his/her, their, or its remedies against the Borrower or any
other person or party to become liable hereunder, or against any collateral in
order to enforce payment of this Note; (d) consent to any extension,
rearrangement, renewal, or postponement of time of payment of this Note and to
any other indulgence with respect hereto without notice, consent, or
consideration to any of them; and (e) agree that, notwithstanding the occurrence
of any of the foregoing (except with the express written release by the Holder
or any such person), they shall be and remain jointly and severally, directly
and primarily, liable for all sums due under this Note.
Whenever used in this Note, the words "Borrower" and "Holder" shall be
deemed to include the Borrower and the Holder named in the opening paragraph of
this Note, and their respective heirs, executors, administrators, legal
representatives, successors, and assigns. It is expressly understood and agreed
that the Holder shall never be construed for any purpose as a partner, joint
venturer, co-principal, or associate of the Borrower, or of any person or party
claiming by, through, or under the Borrower in the conduct of their respective
businesses.
Time is of the essence to Borrower's performance of this Note.
Borrower shall have no right of, and shall not, offset against
Borrower's obligations under this Note with respect to the amount of any claim
against Lender or any Holder, or any obligation of Lender or any Holder, or any
affiliate thereof, to Borrower.
This Note shall be construed and enforced in accordance with the laws
of the State of Tennessee.
The pronouns used herein shall include, when appropriate, either gender
and both singular and plural, and the grammatical construction of sentences
shall conform thereto.
All references herein to any document, instrument, or agreement shall
be deemed to refer to such document, instrument, or agreement as the same may be
amended, modified, restated, supplemented, or replaced from time to time.
IN WITNESS WHEREOF, the undersigned Borrower has executed this
instrument under seal as of the day and year first above written.
SPECIALTY RESTAURANT GROUP, LLC
By: /s/James H. CarMichael
Name: James H. CarMichael
Title: President
<PAGE>
MEMBER PLEDGE AGREEMENT
THIS MEMBER PLEDGE AGREEMENT, (the "Pledge Agreement") dated November
20, 2000, made by and among each of the individuals listed on Schedule I hereto
(each a "Pledgor"; collectively the "Pledgor's"), Specialty Restaurant Group,
LLC, a Delaware limited liability company, having its principal place of
business at 150 West Church Avenue, Maryville, Tennessee 37801 (the "Borrower"),
and Ruby Tuesday, Inc., a Georgia corporation having its principal place of
business at 150 West Church Avenue, Maryville, Tennessee 37801 (together with
its successors and assigns, the "Lender").
W I T N E S S E T H
A. WHEREAS, each Pledgor is currently the holder of the percentage
of the membership interests of the Borrower reflected on Schedule I hereto;
----------
B. WHEREAS, the Borrower, the Lender and Tia's, LLC, a Delaware limited
liability company and wholly-owned subsidiary of Lender, entered into that
certain Agreement and Plan of Merger, dated October 4, 2000, as amended (the
"Merger Agreement"), pursuant to which Tia's is, as of the date of this Pledge
Agreement, being merged with and into the Borrower;
C. WHEREAS, pursuant to the Merger Agreement, Lender has made a loan
(the "Loan") to the Borrower, evidenced by a Promissory Note in the original
principal amount of TWENTY EIGHT MILLION SEVEN HUNDRED FIFTY THREE THOUSAND FOUR
HUNDRED TWENTY EIGHT DOLLARS ($28,753,428.00) dated as of the date hereof (the
"Note");
D. WHEREAS, as a condition to the Lender extending the Loan to the
Borrower, the Lender requires that the Pledgors execute and deliver this Pledge
Agreement in order to pledge and grant a perfected security interest in the
membership interests in the Borrower owned by each Pledgor to the Lender as
security for the performance of the obligations of the Borrower under the Note;
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, each
of the Pledgors hereby agree with the Lender as follows:
1. Definitions. Unless otherwise defined herein, all capitalized
terms used in this Pledge Agreement shall have the meanings ascribed to such
terms in the Note.
2. Pledge. As collateral security for the prompt and complete payment,
performance and observance by the Borrower of all obligations under the Note
(whether accruing prior or subsequent to the commencement of a bankruptcy or
similar proceeding involving the Pledgor or the Borrower) and all present and
future obligations of the Pledgors under this Pledge Agreement whether at stated
maturity, by acceleration or otherwise (all of the foregoing being herein
referred to as the "Commitments"), each Pledgor hereby (a) pledges to the
Lender, and grants to the Lender a first priority security interest in, and
hypothecates to the Lender, the collateral described with respect to such
Pledgor in paragraph 3 below (collectively, the "Pledged Collateral"), and (b)
assigns and transfers (to the extent assignable) to the Lender, subject to the
provisions of paragraph 8 of this Pledge Agreement, all of such Pledgor's rights
and interests under the Certificate of Formation of the Borrower and the Amended
and Restated Participation and Operating Agreement of the Borrower, dated as of
the date hereof, as amended from time to time (the "LLC Agreement") or arising
at law in his or her capacity as a member. Notwithstanding the foregoing or any
other term, provision or condition contained in this Agreement, the Commitments
shall not include and no Pledgor shall incur or be liable for any of the
obligations of Borrower under or pursuant to the Note.
3. Description of Pledged Collateral. The Pledged Collateral is
described with respect to each Pledgor as follows and on any of the separate
schedules at any time furnished by such Pledgor or the Borrower to the Lender
(which schedules are hereby deemed part of this Pledge Agreement):
(a) Such Pledgor's existing membership interest and all right,
title and interest of such Pledgor as a member and its entire economic interest,
now existing or hereafter acquired, in (i) the Borrower, and (ii) all
certificates, instruments, securities or other documents evidencing or
representing the same (all of the foregoing being hereinafter collectively
referred to as the "Pledged Equity Interests");
(b) All right, title and interest of such Pledgor in and to
all present and future payments, proceeds, distributions, instruments,
compensations, properties, assets, interests and rights in connection with or
relating to the Pledged Equity Interests, and all monies due or to become due
and payable to the Pledgor in connection with or relating to the Pledged Equity
Interests or otherwise paid, issued or distributed from time to time in respect
thereof or in exchange therefor, all general intangibles, investment property,
securities, instruments (as such terms are defined in the Uniform Commercial
Code of the relevant jurisdiction (the "UCC")) constituting or relating to the
Pledged Equity Interests, and any certificate, instrument or other document
evidencing or representing the same (including, without limitation, all proceeds
of dissolution or liquidation); and
(c) All proceeds of every kind and nature, including proceeds
of proceeds, of any and all of the Pledged Equity Interests (including, without
limitation, proceeds which constitute property of the type described above) and,
to the extent not otherwise included, all money and cash proceeds.
4. Delivery of Certificates, Instruments, Etc.
------------------------------------------
(a) Simultaneously with the execution of this Agreement with
respect to the initial Pledged Collateral, or within two (2) business days
following acquisition of any certificate or instrument evidencing or
representing any Pledged Collateral and issued after the date of this Agreement,
each Pledgor shall deliver to the General Counsel of the Lender, or such other
executive officer of Lender as Lender may from time to time designate, any
original certificates or instruments evidencing or representing the initial
Pledged Collateral or hereafter issued with respect to the Pledged Collateral,
together with an assignment of investment security separate from certificate
duly executed in blank for each such certificate or instrument.
(b) Each Pledgor shall:
(i) concurrently with the execution and delivery
hereof and within two (2) business days following the acquisition
thereof with respect to any Pledged Equity Interest which is acquired
by such Pledgor after such execution and delivery, instruct the
Borrower and the Borrower hereby agrees to register the pledge created
hereunder of such equity interests as contemplated by Section 8-108 of
the UCC, to the extent determined to be applicable to such Pledgor, in
such form as shall be acceptable to the Lender;
(ii) within two (2) business days following the
registration of any pledge contemplated by clause (i) of this paragraph
4(b), instruct the Borrower (and the Borrower hereby agrees) to issue
to the Lender and such Pledgor an "initial transaction statement" (as
defined in Section 8-408 of the UCC) with respect to such pledge in
such form as shall be acceptable to Lender; and
(iii) otherwise instruct the Borrower and the
Borrower hereby agrees to fulfill its obligations under the UCC
regarding the pledge created hereunder and the registration thereof
(including, without limitation, under Section 8-408(7) of the UCC), to
the extent determined to be applicable to such Pledgor.
(c) Each Pledgor shall and hereby agrees to, concurrently with
the execution and delivery hereof and within two (2) business days following
acquisition thereof with respect to any Pledged Equity Interest which is
acquired by such Pledgor after such execution and delivery, and if instructed to
do so by the Lender, execute and deliver to Lender UCC financing statements, in
form and substance satisfactory to and prepared by the Lender, which Lender may
file at Lender's expense in the jurisdictions that Lender deems appropriate.
5. Each Pledgor Remains Liable. Anything herein to the contrary
notwithstanding, (a) each Pledgor shall remain liable under the LLC Agreement to
perform all of his/her/its duties and obligations thereunder to the same extent
as if this Pledge Agreement had not been executed, (b) the exercise by the
Lender of any of the rights hereunder shall not release any Pledgor from any of
its duties or obligations under the LLC Agreement, and (c) the Lender shall not
have any obligation or liability under the LLC Agreement by reason of this
Pledge Agreement, nor shall the Lender be obligated to perform any of the
obligations or duties of any Pledgor thereunder or to take any action to collect
or enforce any claim for any payment assigned hereunder.
6. Recourse to Pledgor. The liability of each Pledgor for the
Commitments shall be a full recourse and several liability with respect to the
Commitments of such Pledgor hereunder, and each Pledgor shall be responsible for
satisfaction of such Pledgor's Commitments in full and all deficiencies as
provided herein.
7. Representations, Warranties and Covenants of the Pledgor. The
Pledgors and the Borrower, jointly and severally, hereby represent, warrant and
covenant as provided in Sections 7(a)(1), 7(b)(2), 7(h) and 7(i); each Pledgor
hereby represents, warrants and covenants with respect to himself/herself/itself
only as provided in Sections 7(a)(2), 7(b)(1), 7(b)(3), 7(b)(4), and 7(c)
through 7(g) inclusive; and Borrower hereby represents, warrants, and covenants
as provided in Sections 7(a)(2), and 7(b) through 7(g) inclusive, as follows:
(a) (1) Set forth on Schedule I hereto is a complete and
accurate list and description of the membership interests of the Members of the
Borrower at the date hereof. (2) Such Pledgor is the sole holder of record and
the sole beneficial owner of his/her/its Pledged Equity Interests reflected on
Schedule I beside such Pledgor's name, free and clear of any security interest,
lien, claim, charge or other encumbrance ("Lien") thereon or affecting the title
thereto except for the lien created by this Pledge Agreement and the
restrictions on transfer set forth in the LLC Agreement.
(b) (1) Such Pledgor's ownership of the Pledged Equity
Interests is evidenced by a certificate or instrument., which certificate or
instrument has been delivered by such Pledgor to Lender, together with an
assignment of investment security separate from certificate duly executed in
blank, simultaneously with such Pledgor's execution hereof. (2) The address of
the Borrower's principal place of business and the location of its books and
records relating to the Pledged Collateral is at the address first above
written. (3) The address of the principal residence of such Pledgor is set forth
on Schedule I. (4) The Borrower, with respect to Borrower's principal place of
business and the location of its books and records relating to the Pledged
Collateral and each Pledgor, with respect to such Pledgor's principal residence,
will not change said address, location or name without thirty (30) days' prior
written notice to Lender.
(c) Except as otherwise specifically permitted hereunder,
without the consent of the Lender (which shall not be unreasonably withheld or
delayed), such Pledgor will not, and the Borrower will not permit any Pledgor
to, assign (by operation of law or otherwise), sell, lease, transfer, pledge,
hypothecate or grant a Lien in or otherwise dispose of or abandon (collectively
"Transfer"), nor will such Pledgor suffer or permit any of the same to occur
with respect to, any of his/her/its Pledged Collateral. Notwithstanding the
foregoing sentence, Transfers which are permitted pursuant to Section 17 of the
LLC Agreement (as in effect as of the date hereof) may be completed by any
Pledgor with respect to the Pledged Collateral of such Pledgor for so long as
(A) no default or breach has occurred and is continuing, and no event or
condition has occurred which with the giving of notice or lapse of time, or
both, would constitute a default or breach under or with respect to (i) the Note
(without regard to the required deferral of any payments under the Note pursuant
to the terms and conditions of that certain Debt Subordination Agreement of even
date herewith among Borrower, Lender, General Electric Capital Business Asset
Funding Corporation, and General Electric Capital Business Asset Funding
Corporation of Arkansas (collectively "GE Capital")), or (ii) either of GE
Capital's three (3) loans to Borrower made in connection with the closing of the
Merger Agreement in the aggregate original principal amount of $30,000,000, or
(B) with respect to each Pledgor individually, no Event of Default (hereinafter
defined) has occurred and is continuing, and no event or condition has occurred
which with the giving of notice or lapse of time, or both, would constitute an
Event of Default by such Pledgor. The Transferring Pledgor shall provide not
less than ten (10) business days prior notice of any Transfer to Lender and no
Transfer shall be permitted unless and until the transferee expressly and
affirmatively adopts and affirms that the terms and conditions of this Agreement
(including all representations, warranties and covenants of a Pledgor) apply to
the Transferred Pledged Collateral pursuant to such documents as Lender
reasonably requires.
(d) Except for such consents as may be required by the LLC
Agreement, all of which have been duly obtained and are in full force and
effect, and except for any consents as may be required to be obtained by such
Pledgor in connection with any disposition of any portion of his/her/its Pledged
Equity Interests by laws affecting the offering and sale of securities
generally, no consent of any Person is required to be obtained by such Pledgor
and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with any governmental or other
regulatory authority is required to be obtained by such Pledgor in connection
with (i) the execution, delivery, performance, validity or enforceability of
this Pledge Agreement, (ii) the perfection or maintenance of the security
interest in favor of the Lender created hereby (including the first priority
nature of such security interest), other than as contemplated in paragraph 4, or
(iii) the exercise by the Lender of the rights and remedies provided for in this
Pledge Agreement.
(e) The pledge of the Pledged Collateral by such Pledgor
pursuant to this Pledge Agreement upon the taking of the steps described in
paragraph 4, as applicable, and the completion of any other filings or actions
required pursuant to the UCC, creates a valid and perfected first priority
security interest in his/her/its Pledged Collateral in favor of the Lender,
securing the prompt and complete performance and observance of the Commitments.
(f) Such Pledgor will, at the cost and expense of Lender,
perform all acts and execute all documents reasonably requested by the Lender
from time to time to evidence, perfect, maintain or enforce the Lender's first
priority security interest granted herein or otherwise in furtherance of the
provisions of this Pledge Agreement, and such Pledgor will defend title to
his/her/its Pledged Collateral and the Liens of the Lender thereon against any
claim of any Person and will maintain and preserve such Liens until the
termination of this Pledge Agreement in accordance with paragraph 22 hereof.
(g) Such Pledgor has the right, power, legal capacity, and
requisite authority to pledge, assign, transfer, deliver, deposit and set over
his/her/its Pledged Collateral pledged by such Pledgor to the Lender as provided
herein, and this Pledge Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid and binding obligation
of such Pledgor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, or other similar laws
affecting the rights of creditors generally or by the application of general
equity principles.
(h) The Pledged Equity Interests are duly issued, fully paid
and non-assessable.
(i) The Pledgors shall not hereafter, and the Borrower shall
not hereafter permit the Pledgors to, amend or modify the LLC Agreement in any
way that could adversely affect the rights of Lender under this Pledge Agreement
or with respect to the Pledged Collateral without the prior written consent of
the Lender.
8. Assigned Rights and Certain Payments Prior to Default. So long as
---------------------------------------------------------
no Event of Default (as defined in paragraph 10hereof) shall have occurred and
be continuing, the Pledgors shall be entitled:
(a) To exercise, as the Pledgors may determine, but not in a
manner inconsistent with the terms hereof or contrary to the provisions of the
Note (without regard to the required deferral of any payments under the Note
pursuant to the terms and conditions of that certain Debt Subordination
Agreement of even date herewith among Borrower, Lender, and GE Capital), all of
the Pledgors' rights under the LLC Agreement; and
(b) Except as otherwise provided in paragraphs 9 and 10
hereof, to receive and retain for the Pledgors' own accounts any and all
distributions or payments with respect to the Pledged Collateral.
9. Payments and Distributions.
--------------------------
(a) If any of the obligations of the Borrower under or
pursuant to the Note are outstanding, upon the dissolution or liquidation (in
whole or in part) of the Borrower, and if any sum shall be paid or payable as a
liquidating distribution or otherwise upon or with respect to any of the Pledged
Equity Interests, such sum shall be paid to the Lender promptly, and in any
event within two (2) business days after receipt thereof, to be held by the
Lender as additional collateral hereunder and to be applied by the Lender in
satisfaction of such obligations.
(b) If any of the obligations of the Borrower under or
pursuant to the Note are outstanding and any distribution payable in additional
Pledged Equity Interests shall be declared with respect to any of the Pledged
Equity Interests, or any fractions thereof shall be issued pursuant to any
transaction, or any distribution of capital shall be made on any of the Pledged
Equity Interests, or any of the Borrower's interests, obligations, or other
properties shall be distributed upon or with respect to the Pledged Equity
Interests, in each case pursuant to a recapitalization or reclassification of
the capital of the Borrower, or pursuant to the dissolution, liquidation (in
whole or in part), bankruptcy or reorganization of the Borrower, or to the
merger or consolidation of the Borrower with or into another entity, the
interests, obligations or other properties so distributed shall promptly be
delivered to the Lender or registered in the Lender's name as applicable, and,
if received by any Pledgor, in any event within two (2) business days after
receipt thereof, to be held by the Lender as additional collateral hereunder
subject to the terms of this Pledge Agreement, and all of the same shall
constitute Pledged Collateral for all purposes hereof.
(c) Borrower may make, and each Pledgor may receive, Cash
Distributions (as defined in the LLC Agreement) if and to the extent provided
for in the LLC Agreement (as in effect as of the date hereof) for so long as (A)
no default or breach has occurred and is continuing, and no event or condition
has occurred which with the giving of notice or lapse of time, or both, would
constitute a default or breach under or with respect to (i) the Note (without
regard to the terms and conditions of that certain Debt Subordination Agreement
of even date herewith among Borrower, Lender and General Electric Capital
Business Asset Funding Corporation ("GE Capital"), or (ii) any of GE Capital's
three (3) loans to Borrower made in connection with the closing of the Merger
Agreement in the aggregate original principal amount of $30,000,000, or (B) with
respect to each Pledgor individually, no Event of Default (hereinafter defined)
has occurred and is continuing, and no event or condition has occurred which
with the giving of notice or lapse of time, or both, would constitute an Event
of Default by such Pledgor.
10. Events of Default; Assigned Rights and Certain Payments After an
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Event of Default; Application of Cash Collateral.
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(a) The following shall be "Events of Default" under this
Pledge Agreement; provided that an Event of Default by an individual Pledgor
shall not constitute an Event of Default by the other Pledgors and Lender may
enforce its rights and remedies only against the defaulting Pledgor:
(i) should any amounts due under this Pledge
Agreement or the Note not be paid when due (without regard to the
required deferral of any payments under the Note pursuant to the terms
and conditions of that certain Debt Subordination Agreement of even
date herewith among Borrower, Lender, and GE Capital);
(ii) should any representation or warranty contained
in this Pledge Agreement be false, misleading or
erroneous in any material respect;
(iii) should any covenant, agreement or conditions
set forth in this Pledge Agreement or in the Note not be fully and
timely performed, observed or kept (without regard to the required
deferral of any payments under the Note pursuant to the terms and
conditions of that certain Debt Subordination Agreement of even date
herewith among Borrower, Lender, and GE Capital);
(iv) should the Borrower or such Pledgor make an
assignment for the benefit of creditors, file a petition in bankruptcy,
petition or apply to any tribunal for an appointment of a custodian,
receiver or any trustee for it or a substantial part of their assets,
or commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction whether now or hereafter in effect, or
there is filed any such petition or application, or such proceeding is
commenced against such Pledgor or the Borrower, in which an order for
relief is entered or which remains undismissed for a period of thirty
(30) days or more, or such Pledgor or the Borrower by any act or
omission indicates its consent to, approval of or acquiesce in any
petition, application or proceeding or order of relief for the
appointment of a custodian, receiver or any trustee for it, for any
substantial part of their properties, or suffers any such
custodianship, receivership, or trusteeship to continue undischarged
for a period of thirty (30) days or more; or
(v) Such Pledgor or the Borrower conceals, removes or
permits to be concealed or removed any part of such Pledgor's property,
within intent to hinder, delay or defraud their creditors or any of
them, or makes or suffers a transfer of any of their property which may
be fraudulent under any bankruptcy, fraudulent conveyance or similar
law, or has made any transfer of their property to or for the benefit
of a creditor at a time when other creditors similarly situated have
not been paid, or suffers or permits, while insolvent, any creditor to
obtain a lien upon any of their property through legal proceedings or
distraint which is not vacated within thirty (30) days from the date
thereof.
(b) Upon the occurrence of any Event of Default and during the
continuance thereof, all rights of such Pledgor to exercise or refrain from
exercising their respective rights under the LLC Agreement which any such
Pledgor would otherwise be entitled to exercise pursuant to paragraph 8(a)
hereof and to receive any payments or distributions from the Borrower shall
cease, and thereupon the Lender shall be entitled to exercise all of such rights
with respect to the Pledged Equity Interest of such Pledgor, to receive and
retain, as additional collateral hereunder, any and all payments, distributions,
proceeds, monies, compensation, properties, assets, instruments or rights at any
time declared or paid upon monies, compensation, properties, assets, instruments
or rights at any time declared or paid upon any of such Pledgor's Pledged Equity
Interests during the continuance of such Event of Default and to otherwise act
with respect to such Pledgor's Pledged Equity Interests as outright owner
thereof; provided, however, that the Lender shall not have any duty to exercise
such rights or to preserve the same and shall not be liable for any failure to
do so or any delay in doing so.
(c) All payments or distributions from the Borrower which are
received by any Pledgor contrary to the provisions of subparagraph (a) above
shall be received and held in trust for the benefit of the Lender and shall be
forthwith paid over to the Lender as Pledged Collateral in the same form as so
received (with any necessary endorsement).
(d) Any cash, properties, assets, instruments or rights
received and retained by the Lender as additional collateral hereunder pursuant
to the foregoing provisions shall be applied by the Lender to the payment of the
obligations of the Borrower under or pursuant to the Note pursuant to paragraph
12(e) hereof.
11. Expenses. In the event of any legal proceeding to which any Pledgor
is a party in which enforcement of this Pledge Agreement or the security
interest granted herein is sought by the Lender and opposed by such Pledgor, and
if Lender is successful therein, such Pledgor hereby agrees to pay to the
Lender, and the Lender shall be entitled to receive from such Pledgor, any
reasonable sums, costs and expenses which the Lender may pay or incur with
respect to such legal proceeding or any claim, counterclaim or defense made or
asserted thereunder, including, but not limited to, court costs, collection
charges, reasonable travel expenses, and reasonable attorneys' fees actually
incurred.
12. Remedies.
--------
(a) Upon the occurrence and during the continuation of any
Event of Default and after expiration of any applicable cure period provided in
paragraph 12(b) hereof, the Lender may exercise in respect of the Pledged
Collateral of the defaulting Pledgor, in addition to other rights and remedies
provided for herein or otherwise available to the Lender under the Note or at
law or in equity, all the rights and remedies of a secured party under the UCC
at that time and may also, without obligation or resort to other security, at
any time and from time to time sell, resell, assign and deliver, in its sole
discretion, all or any of such Pledged Collateral, in one or more lots at the
same or different times, and all right, title and interest, claim and demand
therein and right of redemption thereof, on any securities exchange on which
such Pledged Equity Interests or any of them may be listed, or at public or
private sale, for cash, upon credit or for future delivery, and in connection
therewith the Lender may grant options, such Pledgor hereby waiving and
releasing any right of redemption to the extent permitted by applicable law.
(b) Notwithstanding anything to the contrary in this Pledge
Agreement, the Note or the other Loan Documents, the Lender agrees that it will
not exercise any of its other rights and remedies hereunder until the Lender has
first sent written notice of an Event of Default to the defaulting Pledgor.
Lender agrees that it will act in a commercially reasonable manner. For purposes
hereof, ten (10) days' written notice of an Event of Default to such Pledgor, at
the address set forth in this Pledge Agreement, is deemed to be commercially
reasonable. Lender agrees that any assignment of investment security separate
from certificate that is delivered by a Pledgor to Lender pursuant to this
Agreement will only be used in a manner that is in accordance with this
Agreement.
(c) If any of the Pledged Collateral is sold by the Lender
upon credit or for future delivery, the Lender shall not be liable for the
failure of the purchaser to purchase or pay for the same and, in the event of
any such failure, the Lender may resell such Pledged Collateral. In no event
shall any Pledgor be credited with any part of the proceeds of sale of any
Pledged Collateral until cash payment thereof has been received by the Lender.
(d) The Lender may purchase any Pledged Collateral at any
public sale and, if any Pledged Collateral is of a type customarily sold in a
recognized market or is of the type which is the subject of widely distributed
standard price quotations, the Lender may purchase such Pledged Collateral at
private sale for the then applicable standard price, free from any right of
redemption, which is hereby waived and released to the extent permitted by
applicable law, and in each case may make payment therefor by any means,
including, without limitation, by release or discharge of Commitments in lieu of
cash payment.
(e) The Lender shall apply and account for the cash proceeds
actually received from any sale or other disposition of the Pledged Collateral
to the payment of the Commitments in the following order of priority:
First, to any outstanding fees and expenses that may be due
to the Lender (and its agents or counsel) and which are incurred in
connection with the Note or this Pledge Agreement;
Second, to the payment of the costs and expenses of such
sale or other disposition, including, without limitation, expenses of
the Lender or its agents and counsel, and all expenses, liabilities and
advances made or incurred by the Lender in connection therewith;
Third, to the Lender for payment of all costs and expenses
of collection and the unpaid principal and accrued and unpaid interest
payable under or pursuant to the Note;
Fourth, to the Lender for the payment of the Commitments;and
Finally, after payment in full of the Note and all the
Commitments, to the Pledgor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
(f) Each Pledgor recognizes that the Lender may not be able to
effect a public sale of any or all of the Pledged Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, or in applicable Blue Sky or other state securities laws, as now or
hereafter in effect, but may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. Any such Pledged Collateral
sold at any such private sale may be sold at a price and upon other terms less
favorable to the seller than if sold at public sale. The Lender shall have no
obligation to delay sale of any such securities for the period of time necessary
to permit the issuer of such securities, even if such issuer would agree, to
register such securities for public sale under the Securities Act of 1933. The
Lender shall have the right (but shall be under no obligation) to seek and rely
upon the advice of any national brokerage or investment firm as to the best
manner to expose the Pledged Collateral for sale and as to the best price
reasonable obtainable at private sale. The Pledgor will not assert that it is
commercially unreasonable for the Lender to effect any private sale made under
the foregoing circumstances and such reliance upon the advice of such
professionals shall be conclusive evidence that Lender has conducted the
disposition of the Pledged Collateral in a commercially reasonable manner.
(g) No demand, advertisement or notice, all of which are
hereby expressly waived, shall be required in connection with any sale or other
disposition of any part of the Pledged Collateral which threatens to decline
speedily in value or which is of a type customarily sold on a recognized market;
otherwise the Lender shall give the Pledgor at least ten (10) days' prior notice
of the time and place of any public sale and of the time after which any private
sale or other disposition is to be made, which notice the Pledgor agrees is
reasonable, all other demands, advertisements and notices of any sale or other
disposition of Pledged Collateral being hereby waived to the fullest extent
permitted by law.
(h) The Lender shall not be obligated to make any sale of
Pledged Collateral if it shall determine not to do so, regardless of the fact
that notice of sale may have been given. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned.
(i) The remedies provided herein in favor of the Lender shall
not be deemed exclusive, but shall be cumulative, and shall be in addition to
all other remedies in favor of the Lender existing at law or in equity. This
Agreement shall constitute a security agreement under the UCC, and the Lender
shall have all rights and remedies afforded to a secured party thereunder.
13. Lender Appointed Attorney-in-Fact.
---------------------------------
(a) To effectuate the terms and provisions hereof, each
Pledgor hereby appoints Daniel T. Cronk, General Counsel of the Lender as each
Pledgor's attorney-in-fact for the purpose (with full power of such attorney or
of Lender to substitute any other executive officer of Lender), following five
(5) days' written notice to the defaulting Pledgor from and after the occurrence
and during the continuance of an Event of Default of such Pledgor, of carrying
out the provisions of this Pledge Agreement and taking any action and executing
any instrument which the Lender may deem necessary or advisable to accomplish
the purposes of this Pledge Agreement in accordance with its terms with respect
to such defaulting Pledgor. Without limiting the generality of the foregoing,
the Lender shall, from and after the occurrence and during the continuance of an
Event of Default, have the right and power to:
(i) receive, endorse without recourse and collect all
checks and other orders for the payment of money made payable to such
Pledgor representing any interest or distribution or other amount
payable in respect to his/her/its Pledged Collateral or any part
thereof and to give full discharge for the same;
(ii) execute endorsements, assignments or other
instruments of conveyance or transfer with respect to
all or any of such Pledged Collateral all without recourse;
(iii) exercise all rights of such Pledgor under the
LLC Agreement, including, without limitation, the right to sign any and
all amendments, instruments, certificates, proxies, and other writings
necessary or advisable to exercise all rights and privileges of (or on
behalf of) the owner of the Pledged Collateral, including, without
limitation, all voting rights with respect to the Pledged Equity
Interests; and
(iv) to execute and file UCC financing statements
or continuation statements on behalf of such Pledgor.
(b) All acts done under the foregoing authorization are hereby
ratified and approved and neither the Lender nor any of its designees or agents
shall be liable for any acts of commission or omission, for any error of
judgment or for any mistake of fact or law except for acts of bad faith, gross
negligence and willful misconduct.
(c) This power of attorney, being coupled with an interest,
is irrevocable for so long as any Commitments remain unpaid.
(d) Notwithstanding the foregoing, in no event shall the
Lender incur, create or assume or be deemed to have incurred, created or assumed
any new obligations or liabilities of any Pledgor to the Lender or to third
parties by virtue of the exercise by the Lender of the power of attorney
described in this paragraph.
14. Lender's Duties; Reasonable Care.
--------------------------------
(a) The Lender shall have the duty to exercise reasonable care
in the custody and preservation of any Pledged Collateral in its possession,
which duty shall be fully satisfied if the Lender maintains safe custody of such
Pledged Collateral in the manner generally utilized for similar property of its
own.
(b) The Lender shall have no obligation to ascertain the
occurrence of, or to notify any Pledgor with respect to, any calls, conversions,
exchanges, redemptions, offers, tenders or similar matters (collectively,
"events") and shall not be deemed to assume any such further obligation as a
result of the establishment by the Lender of any internal procedures with
respect to any securities in its possession, nor shall the Lender be deemed to
assume any other responsibility for, or obligation or duty with respect to, any
Pledged Collateral, or its use, of any nature or kind, or any matter or
proceedings arising out of or relating thereto, including, without limitation,
any obligation or duty to take any action to collect, preserve or protect the
Pledgor's rights in the Pledged Collateral or against any prior parties thereto,
but the same shall be at each Pledgor's sole risk and responsibility at all
times.
15. Rights and Remedies Not Waived. The Lender's prior recourse to any
Pledged Collateral shall not constitute a condition of any demand, suit or other
proceeding for payment or collection of the Commitments. Time is of the essence
of this Agreement. No act, omission or delay by the Lender shall constitute a
waiver of its rights and remedies hereunder or otherwise. No single or partial
waiver by the Lender of any default hereunder or right or remedy which it may
have shall operate as a waiver of any other default, right or remedy or of the
same default, right or remedy on a future occasion.
16. Lender May Perform. If any Pledgor fails to perform any agreement
contained herein, the Lender, after five (5) business days written notice to
such Pledgor, may itself perform, or cause performance of, such agreement, and
the reasonable expenses of the Lender incurred in connection therewith shall be
payable by such Pledgor upon demand and shall constitute Commitments.
17. Setoff; Consent to Jurisdiction, Etc.
------------------------------------
(a) In any litigation in any court with respect to, in
connection with, or arising out of, this Pledge Agreement, the Pledged
Collateral, or any instrument or document delivered pursuant to this Pledge
Agreement, or the validity, protection, interpretation, collection or
enforcement thereof, or any other claim or dispute howsoever arising, between
any Pledgor and the Lender, such Pledgor, to the fullest extent it may
effectively do so, waives the right to interpose any setoff, recoupment,
counterclaim or cross-claim in connection with any such litigation, irrespective
of the nature of such setoff, recoupment, counterclaim or cross-claim, unless
such setoff, recoupment, counterclaim or cross-claim could not, by reason of any
applicable Federal or State procedural laws, be interposed, pleaded or alleged
in any other action. EACH PLEDGOR AGREES THAT THIS PARAGRAPH 17 IS A SPECIFIC
AND MATERIAL ASPECT OF THIS PLEDGE AGREEMENT AND ACKNOWLEDGES THAT THE LENDER
WOULD NOT EXTEND TO THE BORROWER ANY LOANS OR FINANCIAL ACCOMMODATIONS UNDER THE
NOTE IF THIS PARAGRAPH 17 WERE NOT PART OF THIS PLEDGE AGREEMENT.
(b) Each Pledgor and, by acceptance hereof, the Lender hereby
irrevocably consents to the jurisdiction of the courts of the State of Tennessee
and of any Federal Court located in the Eastern District of Tennessee in
connection with any action or other proceeding arising out of or relating to
this Pledge Agreement, the Pledged Collateral, or the Note or any document or
instrument delivered pursuant to this Pledge Agreement or thereunder. In any
such or other proceeding, each Pledgor and the Lender waives, to the fullest
extent it may effectively do so, trial by jury, personal service of any summons,
complaint or other process and agrees that the service thereof may be made by
certified or registered mail directed to any Pledgor and the Lender at the
address and to the person set forth below for notices. Each Pledgor and the
Lender hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.
18. Admissibility of Pledge Agreement. Each Pledgor agrees that any
copy of this Pledge Agreement signed by the Pledgors and transmitted by
telecopier or any other means for delivery to the Lender shall be admissible in
evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence.
19. Notices. All notices and other communications to each Pledgor or
the Lender hereunder shall be in writing and shall be personally delivered or
sent by certified mail, postage prepaid, return receipt requested, or by a
reputable courier delivery service or by telecopy and shall be given with
respect to the Pledgors to the address as set forth on Schedule I, and with
respect to the Lender to the address first set forth above Attention: Legal
Department or to such other address as such party may hereafter specify by
notice to the other party.
20. Terms. All terms defined in the UCC and used herein shall have
-----
the respective meanings as defined in the UCC, unless otherwise expressly
defined herein or unless the context otherwise requires.
21. Amendments and Modification. No provision hereof shall be
---------------------------
modified, altered, waived or limited except by written instrument expressly
referring to this Pledge Agreement and to such provision, and executed by the
party to be charged.
22. Continuing Pledge Agreement; Assignments under the Note;
Termination. This Pledge Agreement shall create a continuing, perfected security
interest in the Pledged Collateral and shall (i) remain in full force and effect
until indefeasible payment in full of the Commitments, (ii) be binding upon each
Pledgor and its successors and assigns, and (iii) inure to the benefit of, and
be enforceable by, the Lender and its successors, transferees and assigns. Upon
the indefeasible payment in full of the Note and the Commitments, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to each Pledgor. Upon such termination, the Lender will, without
representation or warranty of any nature whatsoever and wholly without recourse,
(A) return to each Pledgor such of the Pledged Collateral (and all certificates,
if any, evidencing Pledged Collateral) as shall not have been sold or otherwise
applied pursuant to the terms hereof, and (B) execute and deliver to each
Pledgor such documents as such Pledgor shall reasonably request to evidence such
termination.
23. Interest. All amounts payable from time to time by any Pledgor
--------
hereunder shall bear interest and be payable at thedefault rate as specified in
the Note and shall constitute Commitments hereunder.
24. Security Interest Absolute.
--------------------------
(a) All rights of the Lender and security interests hereunder,
and all of the obligations of any Pledgor hereunder, shall be absolute and
unconditional, irrespective of, as the same may relate to any Pledgor or any
other Borrower notwithstanding:
(i) any change in the time, manner or place of
payment of, or in any other term of, the Note or any of the
Commitments, or any other amendment or waiver of or any consent to any
departure from the Note;
(ii) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent
to departure from any guaranty, for the Note or any of the Commitments;
or
(iii) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, any Pledgor.
(b) Each Pledgor hereby consents and agrees that, without the
necessity of any reservation of rights against such Pledgor, and without notice
to or further assent by such Pledgor, (i) any demand for payment of the Note or
any of the Commitments may be rescinded, in whole or in part, and the Note or
any of the Commitments may be continued, and the Note or any of the Commitments
or any collateral security or guaranty therefor, or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, waived, surrendered, or released and (ii)
the Note may be amended, modified, supplemented or terminated, in whole or in
part, and any collateral at any time held by the Lender may be sold, exchanged,
waived, surrendered or released (and any security interest in the collateral may
be unperfected), in each case all without notice to or further assent by any
Pledgor, which will remain bound under this Pledge Agreement, and all without
impairing, abridging, releasing or affecting the pledge provided for herein,
notwithstanding any such renewal, extension, modification, acceleration,
compromise, waiver, surrender, release, amendment, modification, supplement,
termination, sale, exchange, waiver, surrender or release (or lack of
perfection). Each Pledgor waives any and all notice of creation, modification,
renewal extension or accrual of any of the Commitments and notice of or proof of
reliance by any holder or owner of the Commitments upon this Pledge Agreement,
and the Commitments shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Pledge Agreement.
25. Counterparts. This Pledge Agreement may be executed in any number
------------
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be deemed an original and all
of which shall together constitute one and the same agreement.
26. Governing Law. THIS PLEDGE AGREEMENT AND THE COMMITMENTS
-------------
THEREUNDER SHALL BE GOVERNED IN ALL RESPECTS BY THE INTERNAL LAWS OF THE STATE
OF TENNESSEE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE.
27. Captions; Severability.
----------------------
(a) The captions of the paragraphs and subparagraphs of this
Pledge Agreement have been inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this Pledge
Agreement.
(b) If any term of this Pledge Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby.
28. Acknowledgement of Receipt. Each Pledgor acknowledges receipt of
--------------------------
a copy of this Pledge Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Pledge Agreement as of the date first above set forth.
PLEDGOR:
/s/ James H. CarMichael
Name of Pledgor: James H. CarMichael
/s/ Martin Linwood Armbrester
Name of Pledgor: Martin Linwood Armbrester
/s/ Jill C. Foye
Name of Pledgor: Jill C. Foye
/s/ George Nicholas Evans
Name of Pledgor: George Nicholas Evans
/s/ James E. James Sr.
Name of Pledgor: James E. James, Sr.
/s/ Michael S. Jones
Name of Pledgor: Michael S. Jones
/s/ James Mallon
Name of Pledgor: James Mallon
/s/ Tom Mazza
Name of Pledgor: Tom Mazza
/s/ William McCauley
Name of Pledgor: William McCauley
/s/ Heather McCormick
Name of Pledgor: Heather McCormick
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
/s/ Julia Reid
Name of Pledgor: Julia Reid
/s/ Nicholas Galanos
Name of Pledgor: Nicholas Galanos
ACCEPTED, ACKNOWLEDGED AND AGREED this ______ day of November, 2000:
RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed
Name: J. Russell Mothershed
Title: Senior Vice President
SPECIALTY RESTAURANT GROUP, LLC
By: /s/ James H. CarMichael
Name: James H. CarMichael
Title: President
<PAGE>
SPECIALTY RESTAURANT GROUP, LLC
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is made as of November 20, 2000
(the "Grant Date"), by and between SPECIALTY RESTAURANT GROUP, LLC, a Delaware
limited liability company (the "Company"), and RUBY TUESDAY, INC., a Georgia
corporation (the "Optionee"). Capitalized terms used but not defined in this
Agreement shall have the same meaning as in that certain First Amended and
Restated Participation and Operating Agreement of the Company, dated the date
hereof (the "Operating Agreement").
WITNESSETH:
WHEREAS, the Company desires to grant to the Optionee an option to
purchase thirty-three percent (33%) of the Membership Interests of the Company
under the terms and conditions set forth herein; and
WHEREAS, the Company and the Optionee wish to confirm the terms and
conditions of such option;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, it is hereby agreed between the parties hereto as follows:
SECTION 1
GRANT OF OPTION
1.1. Grant of Option. Subject to the terms, restrictions, limitations
and conditions stated herein, the Company hereby grants to the Optionee an
option (the "Option"), exercisable at any time prior to the fifth (5th)
anniversary of the date of this Agreement (the "Option Period"), to purchase
from the Company an additional Membership Interest so that, after such purchase,
Optionee's Percentage Interest shall be thirty-three percent (33%), subject to
the terms and conditions set forth in this Agreement. If Optionee desires to
exercise the Option, it shall deliver to the Company a notice (the "Option
Notice") of such intention at any time during the Option Period. If the Option
Notice is given, then the Optionee shall be obligated to purchase, and the
Company shall be obligated to sell, free and clear of all Liens, such additional
Membership Interest at a closing (the "Option Closing") held on that date
specified by Optionee which is not more than 120 days after the date of the
Option Notice, or such later date as shall be mutually agreed upon (the "Option
Closing Date"). The Option may be exercised for an exercise price determined in
accordance with the following chart:
Date of Exercise of Option Exercise Price
-------------------------- --------------
November 20, 2000 - November 19, 2001 $600,000
November 20, 2001 - November 19, 2002 $700,000
November 20, 2002 - November 19, 2003 $770,000
November 20, 2003 - November 19, 2004 $847,000
November 20, 2004 - November 20, 2005 $932,000
1.2 Transferees; Payment; Deliveries at Closing. The Optionee may
designate, at least 15 days prior to the Option Closing, one or more Persons to
be the ultimate transferees of the Membership Interest to be purchased under the
Option (such ultimate transferees being referred to individually and
collectively as the "Transferee"); provided, however, such Transferee must, at
the time of designation by the Optionee, be an Affiliate (as defined in this
Section 1.2), director or successor in interest (by merger, sale of
substantially all assets of the Company, or sale of a controlling interest of
the stock of the Company) to Optionee or one of its Affiliates (as defined in
this Section 1.2). No designation of a third-party Transferee shall relieve the
Optionee of its obligations to purchase the additional Membership Interest. At
the Option Closing, the Company shall execute and deliver an Issuance of
Membership Interest, in the form of Schedule I attached hereto. At the Option
Closing, the Transferee shall pay the purchase price for the Membership
Interest, determined in accordance with Section 1.1, by wire transfer in
immediately available federal funds to such account as shall be designated by
the Company. (As used in this Section 1.2, "Affiliate" means any Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the Optionee.)
1.3 Covenants of the Company. The Company covenants and agrees that,
during the Option Period, (i) the Operating Agreement shall not be amended or
changed without Optionee's written consent, except that non-material amendments
or changes may be made if they do not, in Optionee's judgment, affect Optionee's
rights hereunder (or under the Operating Agreement should the Option be
exercised by Optionee) and provided that the Company provides Optionee with full
and complete copies of any such amendments or changes within ten (10) days
thereafter, (ii) the Company and its Managers and Members shall comply with all
terms of the Operating Agreement, (iii) the Company shall enforce the terms and
provisions of, and require performance by the Executive of, the Executive
Employment Agreement, (iv) the Company shall advise Optionee in writing of any
changes in membership ownership, (v) the Company shall provide Optionee with a
copy of its annual Business Plan, and (vi) the Company shall provide the
following financial statements to Optionee: (A) quarterly unaudited profit and
loss statements, (B) annual unaudited balance sheet, plus such updating
unaudited balance sheets as may be reasonably requested by Optionee, and (C)
upon request by Optionee, a balance sheet and profit and loss statement for the
fiscal year most recently ended, audited in accordance with generally accepted
accounting principles by an independent public accountant or other party
reasonably acceptable to Optionee.
1.4 Term and Termination of Option. The term of the Option (the "Option
Period") shall commence on the Grant Date and end on the earlier of (i) the
exercise of the Option, or (ii) the fifth (5th) anniversary of the Grant Date.
Upon the expiration of the Option Period, the Option and all unexercised rights
granted to Optionee hereunder shall terminate, and thereafter be null and void.
SECTION 2
INVESTMENT REPRESENTATIONS
2.1. Investment Representations. With respect to the Option and,
---------------------------
upon exercise of the Option, the Membership Interest represented thereby (for
purposes of this Section 2, each a "Security" and collectively, the
"Securities"),Optionee hereby represents and warrants to the Company as follows:
(a) The Security is being purchased for the Optionee's own
account without the participation of any other Person, with
the intent of holding the Security for investment and without
the intent of participating, directly or indirectly, in a
distribution of the Securities and not with a view to, or for
resale in connection with, any distribution of the Securities
or any portion thereof, nor is the Optionee aware of the
existence of any distribution of the Company's securities;
(b) Optionee is not acquiring the Security based upon any
representation, oral or written, by any person with respect to
the future value of, or income from, the Security but rather
upon an independent examination and judgment as to the
prospects of the Company; and
(c) The Security was not offered to Optionee by means of
publicly-disseminated advertisements or sales literature, nor
is the Optionee aware of any offers made to other persons by
such means.
2.2. Representations Regarding Registration. The Optionee acknowledges
that the Optionee must continue to bear the economic risk of the investment in
the Security for an indefinite period and recognizes that the Security has not
been registered under any United States federal or state law relating to the
registration of securities for sale and have been issued in reliance upon
exemption from registration under United States federal and applicable state
securities laws. The undersigned agrees as follows:
(a) The Security will not be offered for sale, sold or
transferred other than pursuant to an effective registration
or exemption from United States federal and applicable state
securities laws, with evidence of compliance therewith
satisfactory to the Company. The Company shall be entitled to
rely upon an opinion of counsel satisfactory to it with
respect to compliance with the above laws.
(b) The Company will be under no obligation to register the
Security or to comply with any exemption available for sale of
the Security without registration, and the information or
conditions necessary to permit routine sales of securities of
the Company under Rule 144 of the Securities Act of 1933 (the
"1933 Act") are not now available and no assurance has been
given that they will become available. The Company is under no
obligation to act in any manner so as to make Rule 144
available with respect to the Security.
(c) The Company may, if it so desires, refuse to permit the
transfer of the Security unless the request for transfer is
accompanied by an opinion of counsel acceptable to the Company
to the effect that neither the sale nor the proposed transfer
will result in any violation of the 1933 Act or the securities
laws of any other jurisdiction.
(d) If any certificate is issued to evidence the Security, a
legend indicating that the Security has not been registered
under such laws and referring to the restrictions on
transferability and sale of the Security may be placed on such
certificate delivered to Optionee or any substitute therefor,
and any transfer agent of the Company may be instructed to
require compliance therewith.
SECTION 3
GENERAL PROVISIONS
3.1. Governing Laws. This Agreement shall be construed, administered
and enforced according to the laws of the State of Delaware. All actions arising
out of this Agreement shall be brought in the state court or federal district
courts located in the state, county or judicial district of Knox or Blount
Counties, Tennessee, and each party hereby consents to the jurisdiction thereof.
3.2. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of the successors and permitted assigns of the Optionee and the
Company.
3.3. Notice. Except as otherwise specified herein, all notices and
other communications under this Agreement shall be in writing and shall be
deemed to have been given if personally delivered or if sent by registered or
certified United States mail, return receipt requested, postage prepaid,
addressed to the proposed recipient at the last known address of the recipient.
Any party may designate any other address to which notices shall be sent by
giving notice of the address to the other parties in the same manner as provided
herein.
3.4. Severability. In the event that any one or more of the provisions
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
3.5. Entire Agreement. This Agreement expresses the entire
----------------
understanding of the parties with respect to the Option.
3.6. Headings and Capitalized Terms. Section headings used herein
-------------------------------
are for convenience of reference only and shall not be considered in construing
this.
3.7. Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
IN WITNESS WHEREOF, the Company and the Optionee have executed and
delivered this Agreement as of November 20, 2000.
COMPANY:
SPECIALTY RESTAURANT GROUP, LLC
By: /s/ James H. CarMichael
Name/Title: James H. CarMichael, President
OPTIONEE:
RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed
Name/Title: J. Russell Mothershed
Senior Vice President
<PAGE>
NONSOLICITATION AGREEMENT
THIS NONSOLICITATION AGREEMENT (the "Agreement") is made as of the 20th
day of November 20, 2000 ("Effective Date"), between SPECIALTY RESTAURANT GROUP,
LLC, a Delaware limited liability company ("Acquiror"), and RUBY TUESDAY, INC.,
a Georgia corporation ("Parent"). Capitalized terms used but not defined herein
shall have the meanings ascribed to them in that certain Agreement and Plan of
Merger among Parent, Acquiror and Tia's LLC, a Delaware limited liability
company ("Target') and wholly-owned subsidiary of Parent, dated as of October 4,
2000, as amended (the "Merger Agreement").
W I T N E S S E T H:
WHEREAS, Parent is engaged in the business of owning, operating and
franchising casual dining restaurants that offer, as a primary menu item or mix
of menu items, soups, sandwiches, chicken, ethnic cuisine, health or
fitness-oriented dishes and a full bar (the "Business of Parent"); and
WHEREAS, Parent owns, directly or indirectly, all of the Restaurants
being acquired by Acquiror upon the consummation of the merger of Target with
and into Acquiror, with Acquiror being the Surviving Company (the "Merger"); and
WHEREAS, pursuant to the Merger Agreement, Parent has agreed to accept,
as partial Merger Consideration, the Surviving Company's promissory note in the
original principal amount of $28,753,428.00 (the "Note"); and
WHEREAS, the executive employees of Acquiror are existing or former
executives of Parent or its Affiliates, and as such developed relationships with
and obtained confidential information regarding Parent's, its Affiliates' and
its franchisees' key employees; and
WHEREAS, Parent would suffer irreparable harm if the Surviving Company
were to, directly or indirectly, solicit for hire or hire these key employees of
Parent, its Affiliates or its franchisees while the Note is being repaid and for
a period of two (2) years thereafter; and
WHEREAS, the execution and delivery of this Agreement by Acquiror and
the agreement by Acquiror to be bound by its terms are necessary for the
effective preservation of the goodwill and business of Parent; and
WHEREAS, pursuant to the Merger Agreement and as a condition to the
Merger, Acquiror has agreed to enter into an agreement not to solicit these key
employees;
WHEREAS, the Parent is not willing to consummate the Merger without the
execution of this Agreement;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and agreements hereinafter set forth and those contained in the Merger
Agreement, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions. Whenever used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "Affiliate" or "Affiliated", used to indicate a
relationship to a specified person, firm, corporation, partnership, association
or entity, means any person, firm, corporation, partnership, association or
entity that, directly or indirectly or through one or more intermediaries,
controls, is controlled by or is under common control with such person, firm,
corporation, partnership, association or entity.
(b) "Agreement" means this Agreement, together with any
exhibits, schedules, addenda or amendments hereto.
(c) "Applicable Period" begins on the Effective Date and ends
on the two-year anniversary of the date the Note is paid in full or the
Promissory Note is terminated, whichever is earlier.
2. Termination. This Agreement shall remain in force and effect for the
Applicable Period unless terminated earlier by mutual agreement of Acquiror and
Parent. No termination or expiration of this Agreement shall affect or impair
any obligations, duties, indemnities, or liabilities of either party that by
their nature continue beyond termination.
3. Agreement Not to Solicit Employees. Acquiror covenants and agrees
that, without the prior written approval of Parent, for the Applicable Period,
it will not, either directly or indirectly, on Acquiror's own behalf or in the
service or on behalf of others, solicit, divert or hire, or attempt to solicit,
divert or hire, any employee having a job title set forth on Exhibit A attached
hereto or the functional equivalent thereof ("Key Employees") that is employed
by Parent or any Affiliate or franchisee of Parent, for employment by Acquiror,
an Affiliate of Acquiror or any third party engaged in a business that is the
same as or similar to the Business of Parent, whether or not such employee is a
full-time or temporary employee and whether or not such employment is pursuant
to a written agreement and whether or not such employment is for a determined
period or is at will.
4. Irreparable Harm. Acquiror agrees that the covenant contained in
Section 3 of this Agreement is the essence of this Agreement and that such
covenant is reasonable and necessary to protect and preserve the legitimate
business interests and properties of Parent and the Business of Parent. Acquiror
also agrees that Parent may, in addition to the other remedies that may be
available to it hereunder or at law, commence proceedings in equity for an
injunction temporarily or permanently enjoining Acquiror from violating such
provisions; and for purposes of any such proceeding in equity, it will be
presumed, and it is hereby agreed by the parties hereto that, the remedies at
law available to Parent would be inadequate and that Parent would suffer
immediate and irreparable harm as a result of the violation of any provision
hereof by Acquiror.
5. Notices. All notices, requests, demands and other communications
required hereunder shall be in writing and shall be deemed to have been duly
given if delivered, if sent by facsimile or if mailed, by United States
certified or registered mail, postage prepaid, to the party to which the same is
directed at the following addresses (or at such addresses as shall be given in
writing by the parties to one another):
If to Parent: Ruby Tuesday, Inc.
150 West Church Avenue
Maryville, Tennessee 37801
Attention: Legal Department
Facsimile: 865-379-6816
If to Acquiror: Specialty Restaurant Group, LLC
150 West Church Avenue
Maryville, Tennessee 37801
Attention: President
Facsimile: 865-379-6830
With a copy to: J. Christopher Kirk, Esq.
McCampbell & Young, P.C.
2021 First Tennessee Plaza
P. O. Box 550
Knoxville, Tennessee 37901-0550
Facsimile: 865-546-9808
Notices delivered in person or by facsimile shall be effective on the date of
delivery. Notices delivered by mail as aforesaid shall be effective upon the
third calendar day subsequent to the postmark date hereof.
6. Modification of Restrictive Covenants by Court. In the event a Court
of competent jurisdiction finds that the restrictions contained in this
Agreement regarding Acquiror's activities (including but not limited to the
restrictions relating to time and scope) are too broad and/or restrictive to be
enforceable, the parties hereby agree that the Court shall have the power and
authority to reduce such restrictions to a level that, in the discretion of the
Court, are enforceable and to enforce said restrictions within that parameter;
and the parties hereby grant to the Court all authority and authorization needed
to accomplish the above.
7. Attorneys' Fees. In the event of any controversy, claim, dispute, or
litigation between the parties hereto to enforce or interpret any of the
provisions of this Agreement, or any right of either party hereto, the
non-prevailing party to such controversy, claim, dispute, or litigation shall
pay the prevailing party all costs and expenses, including reasonable attorneys'
fees incurred by the prevailing party, including, without limitation, fees
incurred during the trial of any action or any fees incurred as a result of an
appeal from such judgment entered in connection with such litigation.
8. Liquidated Damages. The parties acknowledge and agree that it would
be difficult or impossible to ascertain the damages arising out of Acquiror's
breach of the covenant contained in Section 3. Therefore, in the event of such
breach, the parties hereby agree that, as liquidated damages and not as a
penalty, for each violation of Section 3, Acquiror will pay to Parent One
Hundred Percent (100%) of the Key Employee's then-current annual salary. Both
parties acknowledge and agree that this formula is a reasonable pre-estimate of
the losses that will be incurred by Parent in the event of any such breach by
Acquiror.
9. Miscellaneous.
-------------
(a) Assignment. This Agreement may be assigned by Parent in
connection with any merger or consolidation to which Parent is a party, or in
connection with any transfer of all or substantially all of Parent's assets. It
is hereby agreed between the parties that the rights and obligations accruing to
Parent under this Agreement may be assigned, in whole or in part, by Parent
without the consent of Acquiror. This Agreement shall inure to the benefit of
and shall be binding upon the successors and permitted assigns of Parent and
Acquiror. Neither this Agreement nor any right of Acquiror hereunder may be
assigned by Acquiror without Parent's written consent, nor may Acquiror in any
way delegate the performance of Acquiror's covenants and obligations hereunder.
(b) Waiver. The waiver by Parent of any breach of this
Agreement by Acquiror shall not be effective unless in writing, and no such
waiver shall constitute the waiver of the same or another breach on a subsequent
occasion.
(c) Governing Law. This Agreement shall be governed by
--------------
and construed in accordance with the laws of the State of Tennessee without
reference to its conflicts of law rules.
(d) Entire Agreement. This Agreement embodies the entire
----------------
agreement and understanding of the parties hereto,and supersedes all prior
agreements and understandings related to the subject matter hereof, except as
expressly referenced herein.
(e) Amendment. This Agreement may not be modified,
---------
amended, supplemented or terminated except by a writteninstrument executed by
the parties hereto.
(f) Severability. Each of the covenants and agreements
hereinabove contained shall be deemed separate, severable and independent
covenants, and in the event that any covenant shall be declared invalid by any
court of competent jurisdiction, such invalidity shall not in any manner affect
or impair the validity or enforceability of any other part or provision of such
covenant or of any other covenant contained herein.
(g) Captions and Section Headings. Except as set forth
-----------------------------
in Section 1 hereof, captions and section headings usedherein are for
convenience only and are not a part of this Agreement and shall not be used in
construing it.
(h) Independent of Other Agreements. The covenants and
agreements of Acquiror hereunder are independent of the covenants,
representations, warranties and agreements of the parties to the Merger
Agreement, and no default, breach or failure to perform by any party to the
Merger Agreement will constitute an excuse or other justification for Acquiror
to fail to observe fully its covenants and agreements hereunder.
IN WITNESS WHEREOF, Parent and Acquiror have each executed and
delivered this Agreement as of the date first shown above.
Acquiror:
--------
SPECIALTY RESTAURANT GROUP, LLC
By: /s/ James H. CarMichael__________________________
Name: James H. CarMichael
Title: President
Parent:
------
RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed_______________________
Name: J. Russell Mothershed
Title: Senior Vice President
<PAGE>
<PAGE>
SUPPORT SERVICES AGREEMENT
This Support Services Agreement (the "Agreement") is made and entered
into this 20th day of November, 2000, between Ruby Tuesday, Inc., a Georgia
corporation ("RTI"), and Specialty Restaurant Group, LLC, a Delaware limited
liability company ("SRG").
RECITALS
WHEREAS, RTI, SRG and Tia's, LLC, a Delaware limited liability company
are parties to that certain Agreement and Plan of Merger dated October 4, 2000,
as amended (the "Merger Agreement"); and
Whereas, in connection with the closing of the Merger Agreement RTI has
agreed to provide to SRG, and SRG wishes to receive and has agreed to pay for,
certain support services as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
1. Support Services. RTI shall provide the following services to
----------------
SRG during the term hereof, subject to the terms and conditions contained
herein:
A. Accounting. Accounting support as reasonably necessary to meet
----------
the needs of SRG's restaurant business, from time totime, including accounts
payable processing, fixed assets accounting, general ledger bookkeeping,
financial statement preparation, and cash management.
B. Payroll. Hourly and management payroll processing services as
reasonably necessary to meet the needs of SRG's restaurant business from time to
time, including tracking of hours, preparation/delivery to units of checks,
withholding of payroll related tax and filing of payroll-related tax forms,
including Federal forms 940 and 941, and similar state, county and city forms,
as appropriate; remittance of appropriate payroll taxes; issuance of Forms W-2;
preparation of Form 8027 (tip allocation reporting); storage of payroll records
as required by law; and providing assistance as RTI deems necessary with
employment verifications. Coordinate the processing of unemployment claims
through third party service providers on SRG's behalf, at a reasonable cost to
SRG.
C. Taxes. Such information as reasonably available from the
-----
operating results of the Restaurants for use by SRG in the preparation of SRG's
tax returns. RTI shall also prepare and file on behalf of SRG tax schedules
required for compliance with regulations for state, local, sales/use, property,
payroll and special taxes owed by SRG, exclusive of income tax returns.
D. Technology and POS. Hardware and software for the point-of-sale
systems and information technology systems to be used in the management and
operation of SRG's restaurants, including store systems, store systems back of
house, POS services, POS maintenance access to and typical use of RTI's
"network", and basic support (updates and the like) for SRG's "americancafe.com"
and tiastexmex.com" web sites, and to the extent new technology and systems
appropriate to Restaurants are developed by, or on behalf of RTI, upgrades and
updates in such hardware and software. Such hardware and software will be made
available to SRG at a reasonable cost. To the extent necessary for RTI to
provide the services, the parties shall endeavor in good faith to secure such
licenses from third parties for the benefit of RTI and/or SRG. If such licenses
cannot be reasonably obtained, the parties shall in good faith determine if or
how any affected services might be supplied to SRG hereunder. Licenses for any
similar RTI proprietary software shall be supplied to SRG during the term of
this Agreement without additional charge.
E. Liquor License. From time to time, as reasonably requested by SRG,
consulting and clerical services to assist SRG in (i) SRG's obtaining liquor
licenses required for new restaurants and (ii) SRG's renewing liquor licenses in
accordance with the provisions of state and local law. SRG acknowledges that,
notwithstanding services provided under this sub-section E, SRG is solely
responsible for the liquor licenses, the applications and qualification
therefor, all fees and costs associated therewith including out-of-pocket
expenses incurred by RTI, all filing fees, local counsel fees and similar
expenses, and the operation of its restaurants in accordance with the
requirements of such licenses and applicable law. SRG understands and expressly
agrees that RTI shall not be liable under any circumstances for any direct or
indirect, consequential or other damages incurred or alleged by SRG, any
affiliate of or person or entity holding a member interest in SRG, or any other
party resulting from the failure to obtain or renew any liquor license for a
restaurant on a timely basis or as required by law. RTI is not obligated to
provide SRG any assistance whatsoever in connection with the resolution of any
violations or alleged violations of federal, state or local liquor laws or in
connection with any claims, demands or liability with respect to the sale or
service of beer, wine and/or distilled spirits to customers at any restaurant.
SRG shall promptly notify RTI of any violations or alleged violations of
federal, state or local liquor laws of which it becomes aware.
F. Purchasing/Supply Systems. Subject
---------------------------
to vendors consent and the terms hereof, RTI shall support SRG's
participation in and under RTI's purchasing contracts and
supply/distribution systems as same exists from time to time, including volume
pricing. SRG acknowledges that, to the extent it chooses to so participate, it
must fully participate and be subject to, and comply with all the terms and
conditions of, any relevant or applicable RTI contracts. SRG shall not be
eligible to participate in such program with any vendor to the extent such
vendor does not agree that RTI shall not be liable for SRG's obligations in
connection with such participation including, without limitation, SRG's
obligation to pay for product or services, or SRG's failure to perform under
such contract or agreement. SRG shall receive the appropriate rebates/allowances
paid by such vendors with respect to SRG's purchases, to the extent same are
received by RTI.
G. Financial Analyst. During the initial eighteen (18) months of the
term of this Agreement, RTI shall provide to SRG one (1) financial analyst,
designated by RTI, who shall devote substantially all of his/her time to SRG's
requirements for financial analysis matters. The initial financial analyst shall
be Kimberly Mitchell. Should the designated employee leave RTI's employment, be
promoted by RTI, or advise RTI that he/she no longer desires to serve in such
role, RTI shall promptly designate a replacement analyst.
H. Other Services. From time to time, as reasonably requested by SRG (1) access
to: RTI's management and team member training materials (RTI makes no warranties
or representations concerning same, including the appropriateness or
effectiveness thereof), RTI's test kitchen (on a reasonable basis and with
sufficient advance scheduling with RTI; SRG shall indemnify and hold RTI
harmless from any claims, demands, damages, losses, costs or expenses incurred
by RTI in connection therewith including damage to equipment or losses caused by
fire, heat or cold), and the "ASAP" warehouse, and (2) the following services:
"WOW" reports (as prepared by RTI for its restaurants) for SRG's restaurants,
human resource tracking ("3 star, 4 star, developing managers program and
modules), human resources coordinator and mail services (SRG pays all postage or
similar costs). In addition, from time to time, as reasonably requested by SRG,
RTI shall provide the following services: shopper's report grading, "WOW-U"
meetings (200/300/500); RTI makes no warranties or representations concerning
same, including the appropriateness or effectiveness thereof), product
specification and menu research (collectively the "Extra Services").
I. Level of Services. The amount or level of services to be provided by RTI
pursuant to this Agreement for each of the described services shall be
substantially the same as the amount or level or such service as provided as of
the date hereof by RTI's support departments/functions to RTI's company operated
restaurants. RTI shall be under no obligation to provide an amount or level of
any service to SRG hereunder which exceeds such amount absent additional
compensation from SRG in an amount then agreed by the parties
.
2. Fees and Payment Terms.
----------------------
A. Support Services Fee. Subject to RTI's right to increase as
--------------------
described in Section 2.C. below, during the term of this Agreement, SRG shall
pay to RTI a
continuing fee of one percent (1%) from the date hereof until the first
anniversary of such date and one and one-half (1 1/2%) percent thereafter, of
the Gross Sales (as defined below) from the operation of SRG's restaurants in
consideration of the services described in Sections 1.A. through 1.E. and 1.H.
(except the Extra Services) above. Such fee, and any fees described in Sections
2.C., 2.D., or 2.E. below, shall be due and payable for each restaurant operated
by SRG on the tenth (10th) day of each month based on the Gross Sales for the
preceding month (the first such month beginning on the date that such Restaurant
commences operations and ending on the last day of such month). Such payment
shall be delivered by SRG to RTI by electronic funds transfer to an account
designated by RTI, in writing, so that it is received by RTI on the tenth (10th)
day of the month, provided that such day is a business day. If the date on which
such payment would otherwise be due is not a business day, then payment shall be
due on the next business day.
B. Gross Sales. For the purposes hereof, "Gross Sales" shall mean the
total selling price of all services and products and all income of every other
kind and nature related to SRG's restaurants (including, without limitation,
income related to catering, delivery, and any other sales of food products or
food preparation services provided from or related to SRG's restaurants),
whether for cash or credit and regardless of collection in the case of credit.
If a cash shortage occurs, the amount of Gross Sales shall be determined based
on the records of the electronic cash register system or point-of-sale system
and any cash shortage shall not be considered in the determination of Gross
Sales.
(1) Gross Sales shall, however, expressly exclude the
following:
(a) receipts from the operation of any public
telephone installed in any restaurant, sales from vending or gaming machines
located at any restaurant, except for any amount representing SRG's share of
such revenues;
(b) sums representing sales taxes collected
directly from customers, based upon present or future
laws of federal, state or local governments, collected by SRG in the operation
of any restaurant, and any other tax, excise or duty charged to customers which
is levied or assessed against SRG by any federal, state, municipal or local
authority, based on sales of specific merchandise sold at or from any
restaurant, provided that such taxes are actually transmitted to the appropriate
taxing authority;
(c) tips or gratuities paid directly by
restaurant customers to employees of SRG or paid to SRG and
then turned over to such employees by SRG in lieu of direct tips or gratuities;
(d) the exchange of merchandise among SRG's
restaurants where such exchanges are made solely for the
convenient operation of SRG's business and not for the purpose of depriving RTI
of the benefits of any sales which would otherwise be made at, in or from SRG's
restaurants;
(e) returns to shippers or manufacturers; and
(f) proceeds from isolated sales of trade
fixtures not constituting any part of SRG's products and
services offered for resale at any restaurant nor having any material effect
upon the ongoing operation of such restaurant.
(2) The following are included in Gross Sales except to
the extent limited herein:
(a) the full value of any meals furnished to
SRG's employees as an incident to their employment shall
be included in Gross Sales, and SRG may credit the full value of discounts
provided for such meals against monthly Gross Sales during the month in which
the meals were furnished for the purpose of determining the amount of Gross
Sales upon which the fee is due;
(b) the full value of all coupons, gift
certificates, or vouchers which are issued by a third party
and accepted by SRG shall be included in Gross Sales when redeemed during the
month in which such coupon, gift certificate or voucher is redeemed. If SRG
issues any coupons, gift certificates, or vouchers, the full value of all
proceeds from the sale of those coupons, gift certificates or vouchers shall be
included in Gross Sales during the month in which such coupon, gift certificate
or voucher was sold, and SRG shall receive a credit for the value of that
coupon, gift certificate, or voucher in the month in which such is redeemed for
the purpose of determining the amount of Gross Sales upon which the fee is due;
and
(c) the full value of any complimentary and
promotional food dispensed from any restaurant shall not
be included in Gross Sales except to the extent same exceed one and eighty-five
one hundredths percent (1.85%) of the sales at such restaurant during the month
in which the complimentary or promotional food is dispensed.
C. Increase in Support Services Fee. RTI may at its option elect to increase the
amount payable under Section 2.A of this Agreement to such amount as it may
reasonably determine, or to impose a separate fee in such amount as RTI may
reasonably determine, from time to time (referred to herein as a "Fee Increase")
to compensate RTI for the services provided pursuant to Section 1.E. In the
event that RTI elects to impose a Fee Increase pursuant to the terms hereof, SRG
shall have a period of 30 days from the receipt of notice of the proposed Fee
Increase to elect whether to pay such increase. If SRG elects not to pay the
proposed Fee Increase, it shall notify RTI of that within the 30-day period, and
RTI's obligation to provide the services described in Section 1.E. shall
automatically terminate 60 days following the date upon which SRG received
notice of the proposed Fee Increase. During such 60 day period, the Fee Increase
shall not be imposed.
D. Other Fees. (1) With respect to the services described in Section
1.F., SRG shall pay to RTI a fee calculated on each anniversary hereof by
dividing the number of SRG's restaurants by the total number of RTI and SRG
restaurants on the same date, and multiplying that percentage by RTI's overhead
expense budget for the RTI (or subsidiaries or affiliates) departments providing
such services for the then current RTI fiscal year. Such fee shall be paid by
SRG in twelve (12) equal monthly installments on or before the tenth (10th) day
of each month.
(2) With respect to the services described in Section 1.G., SRG shall reimburse
to RTI RTI's costs and expenses incurred in connection with such employee,
including wages, bonus, benefits, and out-of-pocket expenses incurred in
providing such services to SRG. Such amounts shall be paid by SRG to RTI monthly
on or before the tenth (10th) day of each month.
(3) With respect to the Extra Services, SRG shall pay to RTI a
reasonable fee as agreed between SRG and RTI from time to time for each such
service, plus any reasonable out-of-pocket expenses (e.g., travel expenses)
incurred by RTI or RTI's employee's in rendering such services. The basis for
each such fee may be (a) the amount charged by RTI to its franchise partners or
company operated restaurants for such service, (b) a pro-rata or proportional
amount of RTI's (or subsidiaries or affiliates) overhead expense budget for the
departments which provide such service, or ( c ) such other basis as agreed by
SRG and RTI.
E. Fees on Renewal. Upon any renewal of this Agreement by SRG, the fees
payable by SRG to RTI for each service hereunder shall be (1) the amount then
charged by RTI to its franchise partners for the same or substantially similar
service, or (2) if such service is not then provided to such franchise partners,
a fee calculated by dividing the number of SRG's restaurants by the total number
of RTI and SRG restaurants on the anniversary of this Agreement, and multiplying
that percentage by RTI's overhead expense budget for the RTI (or subsidiaries or
affiliates) departments providing such services for the then current RTI fiscal
year.
F. No Right of Offset. SRG shall have no right of, and shall
------------------
not, offset against SRG's obligations under this Agreement with respect to the
amount of any claim against RTI, or any obligation of RTI, or any affiliate
thereof, to Borrower.
3. Term and Termination. The term of this Agreement shall commence on the date
hereof and shall continue for a period of three (3) years, unless sooner
terminated as provided herein. This Agreement may be extended by SRG for two (2)
consecutive one (1) year terms upon notice given by SRG not less than six (6)
months prior to the end of the initial three (3) year term or the first renewal
term. RTI may terminate this Agreement upon the failure by SRG to comply with
any of the terms and conditions herein, by giving SRG written notice of default
and, following a period of ten (10) days (with respect to monetary defaults) or
thirty (30) days (with respect to other defaults) in which SRG my cure such
default, this Agreement shall automatically terminate. SRG may terminate this
Agreement for any breach hereunder by RTI by providing RTI notice of termination
stating the nature of the breach at least thirty (30) days prior to the
effective date of termination, provided that RTI may avoid termination by
initiating a remedy to cure such default within such thirty (30) day period and
thereafter promptly completing such cure. If any such default is not so cured by
RTI, this Agreement shall terminate without further notice to RTI.
4. Office Space. During the term of this Agreement, SRG shall be
allowed to occupy two (2) offices and six (6) office cubicles (2 large and 4
small) within RTI's offices located at 150 West Church Avenue, Maryville,
Tennessee, or [INSERT ADDRESS OF ALCOA BUILDING], as determined by RTI. There
shall be no rent or similar charges payable by SRG in connection with such
occupancy; provided, however, that any damage to the office space occupied by
SRG beyond ordinary wear and tear shall be repaired by SRG at its sole expense.
The precise locations of such offices shall be determined by RTI from time to
time. RTI's office equipment (telephone, desk top computer) located in any such
offices may be utilized by employees of SRG in the normal performance of their
duties. Additional or new equipment desired by SRG may be acquired by SRG at its
sole expense. Repairs to any such equipment shall be the sole responsibility of
SRG. SRG may also reasonably utilize RTI office equipment (copiers and the like)
located near such offices. SRG shall be responsible for its own office supplies
at its sole cost and expense. SRG may continue to utilize RTI's e-mail system
for its office and restaurant employees; provided, however, that same shall not
disrupt efficient communication within RTI's system, that the parties shall take
reasonable safeguards to assure that neither has access to the confidential
information or trade secrets of the other, and that SRG employees shall comply
with all RTI policies and all laws applicable to the use of such systems. From
time to time SRG and RTI shall agree upon a reasonable amount payable to RTI by
SRG in connection with SRG's use of telephone lines (local and long distance
charges), telecommunication systems (connection and/or useage fees), and similar
costs incurred by or assessed against RTI, or in the alternative SRG shall
arrange for such items to be directly and separately billed to SRG. SRG shall
indemnify, defend and hold harmless RTI and its affiliates, subsidiaries,
employees, officers and directors from any and all claims, demands, actions,
causes of action, liability, damages, costs, and expense which arise, are
related to, or are asserted by any party, including SRG's invitees, licensees
and the employees of SRG, in connection with SRG's occupancy or use of the
office space described above. SRG shall have no right to assign, sublet or
license its right to occupy such space to any third party and any attempt to do
so shall be null and void and constitute a material breach of this Agreement by
SRG.
5. Miscellaneous.
-------------
A. Any failure by RTI or SRG to object to or take action with respect
to any breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of or consent to that breach or any
subsequent breach by such other party.
B. RTI AND SRG AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR DISPUTE
ARISING OUT OF OR RELATING TO THIS AGREEMENT (AND ATTACHMENTS) OR THE
RELATIONSHIP CREATED BY THIS AGREEMENT TO NON-BINDING MEDIATION PRIOR TO
BRINGING SUCH CLAIM, CONTROVERSY OR DISPUTE IN A COURT OR BEFORE ANY OTHER
TRIBUNAL. THE MEDIATION SHALL BE CONDUCTED THROUGH EITHER AN INDIVIDUAL MEDIATOR
OR A MEDIATOR APPOINTED BY A MEDIATION SERVICES ORGANIZATION OR BODY AGREED UPON
BY THE PARTIES AND, FAILING SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME
AFTER EITHER PARTY HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK MEDIATION OF ANY
CLAIM, CONTROVERSY OR DISPUTE (NOT TO EXCEED FIFTEEN (15) DAYS), BY THE AMERICAN
ARBITRATION ASSOCIATION (OR ANY SUCCESSOR ORGANIZATION) IN ACCORDANCE WITH ITS
RULES GOVERNING MEDIATION, AT RTI'S PRINCIPAL PLACE OF BUSINESS. THE COSTS AND
EXPENSES OF MEDIATION, INCLUDING COMPENSATION AND EXPENSES OF THE MEDIATOR
(EXCEPT FOR THE ATTORNEYS' FEES INCURRED BY EITHER PARTY), SHALL BE BORNE BY THE
PARTIES EQUALLY. IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR
DISPUTE WITHIN NINETY (90) DAYS AFTER THE MEDIATOR HAS BEEN CHOSEN, THEN THE
DISPUTE SHALL AUTOMATICALLY BE REFERRED TO ARBITRATION UNDER SECTION 5.C. BELOW
TO RESOLVE SUCH CLAIM, CONTROVERSY OR DISPUTE, UNLESS SUCH TIME PERIOD IS
EXTENDED BY WRITTEN AGREEMENT OF THE PARTIES. NOTWITHSTANDING THE FOREGOING, RTI
MAY BRING AN ACTION: (1) FOR MONIES OWED, OR (2) FOR INJUNCTIVE OR OTHER
EXTRAORDINARY RELIEF, IN A COURT HAVING JURISDICTION AND IN ACCORDANCE WITH
SECTION 5.D. BELOW, WITHOUT FIRST SUBMITTING SUCH ACTION TO MEDIATION.
C. (1) EXCEPT AS PROVIDED IN THIS AGREEMENT, RTI AND SRG AGREE THAT ANY
CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THE LICENSE, SRG'S
OPERATION OF THE RESTAURANT UNDER THIS AGREEMENT (AND ANY AMENDMENTS THERETO)
INCLUDING, BUT NOT LIMITED TO, ANY CLAIM BY SRG OR PERSONS CLAIMING ON BEHALF OF
SRG CONCERNING THE ENTRY INTO, THE PERFORMANCE UNDER OR THE TERMINATION OF THE
AGREEMENT, OR ANY OTHER AGREEMENT BETWEEN RTI, OR ITS AFFILIATES, AND SRG, ANY
CLAIM AGAINST A PAST OR PRESENT OFFICER, DIRECTOR, EMPLOYEE OR AGENT OF RTI,
INCLUDING THOSE OCCURRING SUBSEQUENT TO THE TERMINATION OF THIS AGREEMENT, THAT
CANNOT BE AMICABLY SETTLED AMONG THE PARTIES OR THROUGH MEDIATION SHALL, EXCEPT
AS SPECIFICALLY SET FORTH HEREIN AND IN SECTION 5.D., BE REFERRED TO
ARBITRATION. THE ARBITRATION SHALL BE CONDUCTED THROUGH AN ORGANIZATION OR BODY
AGREED UPON BY THE PARTIES, AND FAILING SUCH AGREEMENT WITHIN A REASONABLE TIME
AFTER THE DISPUTE HAS BEEN REFERRED FOR ARBITRATION (NOT TO EXCEED FIFTEEN (15)
DAYS). ARBITRATION SHALL BE CONDUCTED BY THE AMERICAN ARBITRATION ASSOCIATION IN
ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AS AMENDED,
EXCEPT THAT THE ARBITRATOR SHALL APPLY THE FEDERAL RULES OF EVIDENCE IN
CONDUCTING THE HEARING SESSIONS. IF SUCH RULES ARE IN ANY WAY CONTRARY TO OR IN
CONFLICT WITH THIS AGREEMENT, THE TERMS OF THE AGREEMENT SHALL CONTROL.
(2) RTI AND SRG SHALL EACH SELECT ONE ARBITRATOR. IF THE PARTY
UPON WHOM THE DEMAND FOR ARBITRATION IS SERVED FAILS TO SELECT AN ARBITRATOR
WITHIN FIFTEEN (15) DAYS AFTER THE RECEIPT OF THE DEMAND FOR ARBITRATION, THEN
THE ARBITRATOR SO DESIGNATED BY THE PARTY REQUESTING ARBITRATION SHALL ACT AS
THE SOLE ARBITRATOR TO RESOLVE THE CONTROVERSY AT HAND. THE TWO ARBITRATORS
DESIGNATED BY THE PARTIES SHALL SELECT A THIRD ARBITRATOR. IF THE TWO
ARBITRATORS DESIGNATED BY THE PARTIES FAIL TO SELECT A THIRD ARBITRATOR WITHIN
FIFTEEN (15) DAYS, THE THIRD ARBITRATOR SHALL BE SELECTED BY THE ORGANIZATION
AGREED UPON OR, IF THE PARTIES CANNOT AGREE, BY THE AMERICAN ARBITRATION
ASSOCIATION, OR ANY SUCCESSOR THERETO, UPON APPLICATION BY EITHER PARTY. ALL OF
THE ARBITRATORS SHALL BE EXPERIENCED IN THE ARBITRATION OF COMMERCIAL DISPUTES.
THE ARBITRATION SHALL TAKE PLACE AT RTI'S CORPORATE OFFICES. THE AWARD OF THE
ARBITRATORS SHALL BE FINAL AND JUDGMENT UPON THE AWARD RENDERED IN ARBITRATION
MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. THE COSTS AND EXPENSES
OF ARBITRATION MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. THE
ARBITRATORS SHALL BE REQUIRED TO SUBMIT WRITTEN FINDINGS OF FACT AND CONCLUSIONS
OF LAW WITHIN THIRTY (30) BUSINESS DAYS FOLLOWING THE FINAL HEARING SESSION OF
THE ARBITRATION. THE COSTS AND EXPENSES OF ARBITRATION, INCLUDING COMPENSATION
AND EXPENSES OF THE ARBITRATORS, SHALL BE BORNE EQUALLY BY THE PARTIES. EACH
PARTY FURTHER AGREES THAT, UNLESS SUCH LIMITATION IS PROHIBITED BY APPLICABLE
LAW, THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ANY DAMAGES WAIVED BY
SECTION G.
(3) IN PROCEEDING WITH ARBITRATION AND IN MAKING
DETERMINATIONS HEREUNDER, THE ARBITRATORS SHALL NOT EXTEND, MODIFY OR SUSPEND
ANY TERMS OF THIS AGREEMENT OR THE REASONABLE STANDARDS OF BUSINESS PERFORMANCE
AND OPERATION ESTABLISHED BY RTI IN GOOD FAITH. NOTICE OF OR REQUEST TO OR
DEMAND FOR ARBITRATION SHALL NOT STAY, POSTPONE OR RESCIND THE EFFECTIVENESS OF
ANY TERMINATION OF THIS AGREEMENT.
D. WITH RESPECT TO ANY CLAIMS, CONTROVERSIES OR DISPUTES WHICH ARE NOT
FINALLY RESOLVED THROUGH MEDIATION OR ARBITRATION AS OTHERWISE PROVIDED ABOVE,
SRG HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE AND THE FEDERAL
DISTRICT COURTS LOCATED IN THE STATE, COUNTY OR JUDICIAL DISTRICT IN WHICH RTI'S
PRINCIPAL PLACE OF BUSINESS IS LOCATED. SRG HEREBY WAIVES ALL QUESTIONS OF
PERSONAL JURISDICTION FOR THE PURPOSE OF CARRYING OUT THIS PROVISION. SRG HEREBY
AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON SRG IN ANY PROCEEDING RELATING
TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP CREATED BY THIS
AGREEMENT BY ANY MEANS ALLOWED BY FEDERAL LAW OR THE LAW OF THE STATE IN WHICH
RTI MAINTAINS ITS PRINCIPAL PLACE OF BUSINESS. SRG FURTHER AGREES THAT VENUE FOR
ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE THE COUNTY
(OR AN ADJACENT COUNTY) OR JUDICIAL DISTRICT (OR JUDICIAL DISTRICT IN SUCH
ADJACENT COUNTY) IN WHICH THE RTI'S PRINCIPAL PLACE OF BUSINESS IS LOCATED;
PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION (1) FOR MONIES OWED, OR (2) FOR
INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF, RTI MAY BRING SUCH ACTION IN ANY STATE
OR FEDERAL DISTRICT COURT WHICH HAS JURISDICTION. WITH RESPECT TO ALL CLAIMS,
CONTROVERSIES, DISPUTES OR ACTIONS, THIS AGREEMENT SHALL BE GOVERNED AND
ENFORCED UNDER THE LAWS OF THE STATE OF TENNESSEE (WITHOUT REGARD TO CHOICE OF
LAW ).
E. SRG AND RTI ACKNOWLEDGE THAT EACH PARTY'S AGREEMENT REGARDING
APPLICABLE STATE LAW AND FORUM SET FORTH IN SECTION 5.D. ABOVE PROVIDE EACH OF
THE PARTIES WITH THE MUTUAL BENEFIT OF UNIFORM INTERPRETATION OF THIS AGREEMENT
AND ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR THE PARTIES' RELATIONSHIP
CREATED BY THIS AGREEMENT. SRG AND RTI FURTHER ACKNOWLEDGE THE RECEIPT AND
SUFFICIENCY OF MUTUAL CONSIDERATION FOR SUCH BENEFIT.
F. SRG AND RTI ACKNOWLEDGE THAT THE EXECUTION OF THIS AGREEMENT AND
ACCEPTANCE OF THE TERMS BY THE PARTIES OCCURRED AT RTI'S PRINCIPAL PLACE OF
BUSINESS, AND FURTHER ACKNOWLEDGE THAT THE PERFORMANCE OF CERTAIN OBLIGATIONS OF
SRG ARISING UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, THE PAYMENT OF
MONIES DUE HEREUNDER AND THE SATISFACTION OF CERTAIN REQUIREMENTS OF RTI, SHALL
OCCUR WHERE RTI'S PRINCIPAL PLACE OF BUSINESS IS LOCATED AT THE TIME SUCH
OBLIGATION IS DUE.
G. SRG HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT
TO OR CLAIM OF ANY PUNITIVE, EXEMPLARY, INCIDENTAL, INDIRECT, SPECIAL,
CONSEQUENTIAL OR OTHER DAMAGES (INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS)
AGAINST RTI, ITS AFFILIATES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
SHAREHOLDERS, PARTNERS, AGENTS, REPRESENTATIVES, INDEPENDENT CONTRACTORS,
SERVANTS AND EMPLOYEES, IN THEIR CORPORATE AND INDIVIDUAL CAPACITIES, ARISING
OUT OF ANY CAUSE WHATSOEVER (WHETHER SUCH CAUSE BE BASED IN CONTRACT,
NEGLIGENCE, STRICT LIABILITY, OTHER TORT OR OTHERWISE) AND AGREE THAT IN THE
EVENT OF A DISPUTE, SRG SHALL BE LIMITED TO THE RECOVERY OF ANY ACTUAL DAMAGES
SUSTAINED BY IT. IF ANY OTHER TERM OF THIS AGREEMENT IS FOUND OR DETERMINED TO
BE UNCONSCIONABLE OR UNENFORCEABLE FOR ANY REASON, THE FOREGOING PROVISIONS OF
WAIVER BY AGREEMENT OF PUNITIVE, EXEMPLARY, INCIDENTAL, INDIRECT, SPECIAL,
CONSEQUENTIAL OR OTHER DAMAGES (INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS)
SHALL CONTINUE IN FULL FORCE AND EFFECT.
H. This Agreement contains the entire agreement of the parties
regarding the subject matter hereof. This Agreement may
be modified only by a duly authorized writing executed by all parties.
I. The parties acknowledge and agree that this Agreement does not
create a fiduciary relationship between them, and that nothing in this Agreement
is intended to constitute either party an agent, legal representative,
subsidiary, joint venturer, partner, employee or servant of the other for any
purpose. Further, RTI shall not be deemed to have a fiduciary duty with respect
to any of the obligations or duties undertaken under this Agreement.
J. The parties agree that this Agreement and all information disclosed
to or received by either hereunder shall be maintained as confidential, except
to the extent available to the general public or as required by law.
K. All notices and demands required to be given hereunder shall be in
writing and shall be sent by personal delivery, expedited delivery service,
certified or registered mail, return receipt requested, first class postage
prepaid, facsimile, telegram or telex (provided that the sender confirms the
facsimile, telegram or telex by sending an original confirmation copy by
certified or registered mail or expedited delivery service within three (3)
business days after transmission), to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other parties:
If directed to RTI, the notice shall be
addressed to:
Ruby Tuesday, Inc.
150 West Church Avenue
Maryville, TN 37801
Attention: Chief Executive Officer
Facsimile: (865) 379-6816
If directed to SRG, the notice shall be addressed to:
Specialty Restaurant Group, LLC
150 West Church Avenue
Maryville, TN 37801
Attention: James H.CarMichael
Facsimile: (865) 379-6830
with copy to:
J. Christopher Kirk, Esq
McCampbell & Young, P.C.
2021 First Tennessee Plaza
P.O. Box 550
Knoxville, Tennessee 37901-0550
Facsimile: 865-346-9808
Any notices sent by personal delivery shall be deemed given upon
receipt. Any notices given by telex or facsimile shall be deemed given upon
transmission, provided confirmation is made as provided above. Any notice sent
by expedited delivery service or registered or certified mail shall be deemed
given three (3) business days after the time of mailing. Any change in the
foregoing addresses shall be effected by giving fifteen (15) days written notice
of such change to the other parties. Business days for the purpose of this
Agreement exclude Saturday, Sunday and the following national holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Memorial Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving and Christmas. Any failure or delay in
providing a copy of any notice to J. Christopher Kirk/McCampbell & Young, P.C.
shall not affect or impair the effectiveness or sufficiency of such notice given
by RTI to SRG.
L. The rights and remedies of RTI under this Agreement are fully
assignable and transferable to any subsidiary or affiliate of RTI, any successor
by merger or any person or entity which acquires substantially all of the assets
of RTI, and shall inure to the benefit of such affiliates, successors and
assigns. Neither this Agreement nor any of the rights or obligations of SRG
hereunder may be assigned or transferred by SRG without the prior written
consent of RTI, which consent shall not be unreasonably withheld or delayed, it
being understood that RTI may withhold such consent if the assignee is the owner
or operator of restaurants, or provider of restaurant services, similar to
those, or competitive with those, provided by RTI. SRG may assign and transfer
its rights, but not its obligations, under this Agreement to any wholly owned
subsidiary of SRG.
M. RTI acknowledges and agrees that all of the data and information
provided by SRG to RTI pursuant to this agreement ("Data") shall be and shall
remain the property of SRG, and RTI further agrees that it shall have no
ownership interest in such Data. RTI agrees to provide to SRG hard copies and/or
electronic copies of any or all such Data as requested by SRG or its agents,
such copies to be provided to SRG at RTI's cost of preparing such copies or a
reasonable estimate of such cost made by RTI. RTI further agrees to allow SRG,
its employees, agents, accountants, and attorneys to have access to any and all
Data during RTI's normal business hours upon prior written request for such
access from SRG.
N. RTI agrees not to disclose, disseminate, or use for its own benefit
or for the benefit of others any such Data during the term of this Agreement or
for a period of two (2) years after the termination of this Agreement; provided,
however, RTI is not obligated to maintain the confidentiality of, or refrain
from using, any Data that (i) is already known to RTI at the time of disclosure
to RTI; (ii) is a matter of public knowledge on the date that it is furnished to
RTI; (iii) subsequently becomes available to RTI on a non-confidential basis
from a source other than SRG or its agents if to RTI's knowledge such source
owes no duty or obligation of confidentiality to SRG; (iv) has been approved for
release and released to the general public pursuant to the authorization of SRG;
(v) has been disclosed pursuant to a requirement of a court, governmental agency
or of law without similar restrictions or other protections against public
disclosure, or has been required to be disclosed by operation of law; (vi) is
independently developed by RTI without use, directly or indirectly, of the Data;
(vii) is furnished to a non-Affiliated third party by SRG without restrictions
on the third party's right to disclose the information; or (viii) is reasonably
required to be disclosed, disseminated or used in connection with RTI's
provision of the services as described herein. In exercising its duty of
confidentiality hereunder, RTI agrees to use the same standards of care that RTI
applies to its own confidential information, and SRG agrees that application of
such standards of care satisfy RTI's duty of confidentiality hereunder. RTI
further agrees that, upon the termination of this Agreement, RTI shall deliver
to SRG all copies of any and all Data then in the possession of RTI at RTI's
cost of preparing such copies or a reasonable estimate of such cost made by RTI.
O. This Agreement may be executed in counterparts, and each
copy so executed shall be deemed to be an original and all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
witnessed by their signatures below.
RTI:
RUBY TUESDAY, INC.,
a Georgia corporation
ATTEST:
By: /s/ J. Russell Mothershed________________
Name: J. Russell Mothershed
/s/ Daniel T. Cronk---------------
Title: Senior Vice President
SRG:
SPECIALTY RESTAURANT GROUP, LLC
By: /s/ James H. CarMichael_________________
Name: James H. CarMichael
/s/ Mary Jane Trainor-------------
Witness Title: President
<PAGE>
INTELLECTUAL PROPERTY AGREEMENT
THIS INTELLECTUAL PROPERTY AGREEMENT (this "Agreement") is made this
day 20th of November, 2000 ("Effective Date"), by and between RUBY TUESDAY,
INC., a Georgia corporation ("Parent"), RUBY TUESDAY BUSINESS DEVELOPMENT, INC.,
a Delaware corporation ("RTBDI") and wholly owned subsidiary of Parent, and
SPECIALTY RESTAURANT GROUP, LLC, a Delaware limited liability company
("Acquiror").
WHEREAS, Parent is in the business of owning, operating and franchising
certain casual dining restaurant chains, inter alia, under the trademarks and
service marks Tia's(R) Tex-Mex, American Cafe(R) and L&N Seafood(R) ("Parent's
Business");
WHEREAS, Parent owns all of the issued and outstanding membership
interests of Tia's, LLC, a Delaware limited liability company ("Target"), which
owns and operates the Tia's chain of restaurants (the "Tia's Restaurants") and
owns certain United States trademark and service mark registrations regarding
the Tia's Marks (as defined below) and other intellectual property rights
associated with the Tia's Restaurants;
WHEREAS, certain executives and employees of Parent and Target have
formed Acquiror in order to acquire from Parent and Target certain existing
Tia's, American Cafe and L&N Seafood restaurants and certain intellectual
property rights in those restaurants for use in the Fifty United States (as
defined below);
WHEREAS, RTBDI owns the United States trademark and service mark
registrations listed in Exhibit A attached hereto;
WHEREAS, Parent, Target and Acquiror have entered into that certain
Agreement and Plan of Merger (the "Merger Agreement"), dated October 4, 2000, as
amended pursuant to which Target is to be merged with and into Acquiror (the
"Merger");
WHEREAS, upon the consummation of the Merger, Acquiror will own the
Tia's Restaurants and hold certain intellectual property rights of Target,
including, without limitation certain United States trademark and service mark
registrations regarding the Tia's Marks (as defined below); and
WHEREAS, as a condition to the Merger, Parent has agreed that,
contemporaneously with the consummation of the Merger, Parent will assign
certain tangible restaurant property assets of its American Cafe and L&N Seafood
Restaurants to Acquiror and will assign or will cause RTBDI to assign certain
intellectual property rights related to such assets and owned by Parent or RTBDI
to Acquiror for use by Acquiror in the Fifty United States (as defined below).
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual promises and undertakings below, the consideration in the Merger
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereby agree as follows:
1. Definitions.
The following terms have the meanings given in this Section 1:
"Affiliate" means any entity that, directly or indirectly, through one
or more intermediaries, controls or is under common control with a
person or entity. When used to describe Parent's affiliates, the term
"Affiliate" includes, without limitation, RTBDI but does not include
Target.
"Fifty United States" means the fifty United States of America and the
District of Columbia.
"Franchisee" means any franchisee of Parent or of any Affiliate.
"Marks" means the Tia's Marks and the RTBDI Marks.
"Note" has the meaning given that term in the Merger Agreement.
"Other Intellectual Property Rights" means all copyrights, trade
secrets, trade dress and other statutory and common law intellectual
property rights other than trademark rights.
"RTBDI Marks" means those marks and names listed as RTBDI Marks on
Exhibit A, together with any associated U.S. trademark registrations
and any other trademark and service mark registrations obtained and
trademark and service mark applications filed in the U.S. Patent and
Trademark Office and any other jurisdiction within the Fifty United
States with respect to such marks and names.
"Tia's Marks" means those marks and names listed as Tia's Marks on
Exhibit A, together with any associated U.S. trademark registrations
and any other trademark and service mark registrations obtained and
trademark and service mark applications filed in the U.S. Patent and
Trademark Office and any other jurisdiction within the Fifty United
States with respect to such marks and names.
"United States Territories" means the territories, protectorates,
possessions and commonwealths of the United States other than the Fifty
United States.
2. Assignments and Licenses of Rights.
(a) Assignment of Rights in RTBDI Marks in the Fifty United
States. Contemporaneously with the execution of this
Agreement, Parent, RTBDI and Acquiror have dated, executed,
duly notarized and delivered the Trademark Assignment
Agreement in the form of Exhibit B attached hereto, pursuant
to which Parent and RTBDI have assigned to Acquiror whatever
rights Parent and RTBDI have in the RTBDI Marks in the Fifty
United States and in all the goodwill appurtenant thereto.
(b) Exclusive License of Certain Other Intellectual Property Rights by
Parent and RTBDI. As of the date hereof, each of Parent
and RTBDI hereby grants to Acquiror and Acquiror hereby
accepts an exclusive, royalty-free, paid-up, territorial,
perpetual and non-transferable license under Parent's and
RTBDI's Other Intellectual Property Rights in the
distinctive exterior and interior designs, decors, color
schemes and furnishings, special recipes and menu items,
and advertising and promotional programs in or used by
Parent's or its Affiliates' American Cafe and L&N Seafood
restaurants, as well as under any such Other Intellectual
Property Rights with respect to the Tia's restaurants
owned by Parent, if any, for use by Acquiror, and under
sublicense by its Affiliates, solely in the Fifty United
States and solely in the manner in which such rights are
exercised by Parent and its Affiliates as of the date
hereof; provided, however, that Acquiror may create derivative
works of any or all of the materials and information
embodying these Other Intellectual Property Rights for use in
the Fifty United States in the same or similar manner
that such materials and information are used as of the date
hereof. This license shall be exclusive within the
Fifty United States, and shall operate to preclude RTBDI,
Parent, its Affiliates, the Franchisees, and any third
parties claiming a license from Parent or RTBDI, from using
such materials and information embodying these Other
Intellectual Property Rights in the Fifty United States.
This license includes the right for Acquiror to (i) bring suit
in its own name or, if required by law, jointly with Parent
and/or RTBDI, as applicable, at its own expense and on its own
behalf, for any infringement or unfair use of the Other
Intellectual Property Rights by third parties in the Fifty
United States; (ii) in any such suit, to enjoin infringement
and collect for its use, damages, profits and awards of
whatever nature recoverable for such infringement or use; and
(iii) to settle any claim or suit for infringement or unfair
use of any Other Intellectual Property Rights by granting the
infringing party a sublicense hereunder consistent with the
terms of this Agreement upon Parent's or RTBDI's prior written
consent, as applicable.
If requested by Acquiror pursuant to Acquiror's reasonable
interpretation of pertinent law, Parent and/or RTBDI, as
applicable, will join as a party plaintiff in any such suit
for enforcement of any Other Intellectual Property Right
against an infringement or unfair use in the Fifty United
States, subject to Acquiror's reimbursement of the reasonable
costs of such participation. In any event, amounts recovered
in any such suit, or by way of settlement thereof, shall be
for Acquiror's sole use and benefit.
Acquiror shall protect the confidential information and trade
secrets of Parent and RTBDI licensed hereunder in the same
manner and to the same extent as it protects similar
information of its own (but must in any event use reasonable
care for the protection of such information), and it must not
use, reproduce, distribute or disclose any such information to
anyone other than its employees, agents or independent
contractors who have a specific need to know such information
and have been informed of, and obligated in writing to,
observe the confidentiality obligations imposed by this
Agreement. These confidentiality obligations will survive the
termination of this Agreement for three (3) years and, with
respect to trade secret information, will continue to survive
thereafter for so long as such information remains entitled to
trade secret protection under applicable law.
(c) Assignment Back of Rights Outside the Fifty United States in
Target's Other Intellectual Property Rights. Effective
immediately after the Merger, Acquiror hereby assigns to
RTBDI all right, title and interest in the Other
Intellectual Property Rights owned by Target as of the date
hereof in the United States Territories and in every
other country or jurisdiction in the world. During the term
of this Agreement, Acquiror further agrees to assign,
and hereby does so assign to RTBDI, all right, title and
interest, in the United States Territories and in every
other country or jurisdiction in the world, under any Other
Intellectual Property Rights in materials or information
developed or otherwise owned by Acquiror or its Affiliates
after the date hereof and used in or in connection with
the Tia's restaurants. Upon written request, Acquiror will
periodically provide a written description of such
materials and information to Parent and RTBDI.
(d) Interim License to Sell Off Existing Inventory.
Notwithstanding any terms in this Agreement to the contrary,
Acquiror hereby grants to Parent, its Affiliates and the
Franchisees, and Parent, its Affiliates and the Franchisees
hereby accept, a non-exclusive, royalty-free, paid-up,
non-transferable license to sell items bearing the Marks in
the Fifty United States that are in inventory owned by Parent,
its Affiliates or the Franchisees or on order as of
the date hereof, including, without limitation, paper/note
pads, business cards, paper cups, stationery and
clothing, until such inventories of such items of Parent, its
Affiliates and the Franchisees are exhausted. Without
limiting the generality of the foregoing, Parent, its
Affiliates and the Franchisees shall have the right to sell
caps and other clothing containing any Mark out of their
existing inventory.
Notwithstanding any terms in this Agreement to the contrary,
Parent and RTBDI hereby grant to Acquiror and its Affiliates,
and Acquiror and its Affiliates hereby accept, a
non-exclusive, royalty-free, paid-up, non-transferable license
to use in the Fifty United States certain Ruby Tuesday(R)
marks on office-type paper products in inventory that is in
the possession of Acquiror or its members as of the date
hereof, including without limitation paper, note pads,
business cards, and stationery, until such inventory is
exhausted.
3. Concurrent Use Registrations for the RTBDI Marks and Tia's Marks by
RTBDI.
(a) Concurrent Use Registrations for the RTBDI Marks and Tia's
Marks. In the Trademark Assignment Agreement, RTBDI is
surrendering to Acquiror only those rights and goodwill it
has in the RTBDI Marks in the Fifty United States as of
the date hereof. The parties agree that immediately after
the date hereof or at any later time, RTBDI may file
concurrent use applications in the U.S. Patent and Trademark
Office for concurrent registration of the Tia's Marks
and RTBDI Marks, for use on goods and services provided
solely in the United States Territories, that are the same
as or of the same class as the goods and services in
connection with which such marks are used as of the date
hereof. Acquiror hereby expressly consents to the filing of
such concurrent use applications in the U.S. Patent and
Trademark Office, the institution of concurrent use
proceedings with respect thereto, the issuance of concurrent
use registrations for the United States Territories thereon
by such office, and the modification of the registrations
for the RTBDI Marks and the Tia's Marks to reflect the limits
on those registrations to the Fifty United States.
(b) Concurrent Registrations for Subsequent Marks. In further
consideration of the Merger, the assignments and licenses
granted hereunder, and the services to be provided to Acquiror
under the Support Services Agreement, Acquiror hereby
agrees to limit its registrations of any and all future
stylized versions and other variations of the Marks and any
substitute and successor marks thereto (collectively the
"Subsequent Marks") to use solely in the Fifty United
States. Acquiror hereby expressly consents to the filing of
concurrent use applications in the U.S. Patent and
Trademark Office, the institution of concurrent use
proceedings with respect thereto, the issuance of concurrent
use registrations for the United States Territories thereon by
such office and the modification of the registrations for
the RTBDI Marks and the Tia's Marks to reflect the limits on
such registrations to the Fifty United States.
4. Prohibitions on the Parties' Respective Use and Assertion of the Marks
and Subsequent Marks.
(a) Beginning on the date hereof and continuing for so long as any
of Parent, its Affiliates or the Franchisees remains
in the casual dining restaurant business, neither Acquiror
nor its Affiliates: (i) shall use the Marks or the
Subsequent Marks, or license such marks for use, outside
the Fifty United States; (ii) shall file any further
federal or state trademark or service mark applications
covering the United States Territories for or with respect
to the Marks or the Subsequent Marks; (iii) shall file any
trade name, trademark or service mark applications for or
with respect to the Marks or the Subsequent Marks in any
country or jurisdiction outside the United States; (iv)
shall assert any trademark or service mark right or other
similar intellectual property right against Parent, its
Affiliates or the Franchisees for or with respect to the
Marks or the Subsequent Marks in the United States
Territories or in any other country or jurisdiction in the
world; or (v) shall oppose, object to or otherwise
interfere with any applications for registration of the Marks
or the Subsequent Marks by Parent, any Affiliate or
any Franchisee in the United States Territories or in any
other country or jurisdiction of the world.
(b) Beginning on the date hereof and continuing for so long as
Acquiror remains in the casual dining restaurant
business, neither Parent, RTBDI, the Affiliates nor the
Franchisees: (i) shall use the Marks or the Subsequent Marks
or license such marks for use in the Fifty United States; (ii)
shall file any federal or state trademark or service
mark applications covering the Fifty United States for or
with respect to the Marks or the Subsequent Marks; (iii)
shall assert any trademark or service mark right or other
similar intellectual property right against Acquiror for
or with respect to the Marks or the Subsequent Marks in the
Fifty United States; or (iv) shall oppose, object to or
otherwise interfere with any state registration of the Marks
or the Subsequent Marks by Acquiror in the Fifty United
States.
5. Acknowledgement of Rights. RTBDI, Parent and its Affiliates acknowledge and
agree that, after the date hereof, Acquiror will own all right, title and
interest, as between the parties hereto, in and to the Marks, the Subsequent
Marks and Target's Other Intellectual Property Rights in the Fifty United
States. Acquiror and its Affiliates acknowledge and agree that, after the date
hereof, Parent and/or RTBDI will own all right, title and interest in and to the
Marks, the Subsequent Marks and Target's Other Intellectual Property Rights, as
between the parties hereto, in the United States Territories and in all other
countries and jurisdictions of the world.
6. Warranties/Disclaimers. Acquiror represents and warrants that, as of the date
hereof, it has not used any Mark or Subsequent Mark outside the Fifty United
States nor filed an application for registration of or otherwise obtained any
trademark or service mark registration covering any Mark or Subsequent Mark.
The assignments and licenses made by the parties herein are made "AS IS" without
any representation or warranty of any kind, including without limitation any
implied warranties of merchantability, fitness for a particular purpose, or
noninfringement.
7. Training of Certain Employees. Acquiror agrees to permit employees of Parent,
its Affiliates and the Franchisees to train in restaurants owned and/or operated
by Acquiror and its Affiliates and to otherwise participate in and cooperate
with such training; and hereby grants to Parent, its Affiliates and the
Franchisees a non-exclusive, fully-paid, royalty-free, worldwide license to use,
reproduce and distribute Acquiror's training manuals for purposes of training
employees of Parent, its Affiliates, the Franchisees and potential new
franchisees. In connection with such training, Parent agrees to pay Acquiror a
training fee of $100 per employee per week, which also includes one meal per
shift for each such employee. Acquiror further agrees to permit and cooperate
with tours of Acquiror's and its Affiliates' restaurants by employees of Parent,
RTBDI, its Affiliates and the Franchisees for potential new franchisees of
Parent and Affiliates. Notwithstanding any terms to the contrary in this
Agreement, Parent, its Affiliates and the Franchisees may use the Marks, the
Subsequent Marks and materials and information embodying Other Intellectual
Property Rights owned by Acquiror in the Fifty United States for the sole
purpose of training their employees and franchisees.
8. Gift Certificates and Coupons. Parent, its Affiliates and its Franchisees
agree that they will not issue, print or distribute any coupon or gift
certificates after the date hereof that are redeemable on their face at
Acquiror's or its Affiliates' restaurants; and Acquiror and its Affiliates agree
that they will not issue, print or distribute any coupon or gift certificates
after the date hereof that are redeemable on their face at Parent's, its
Affiliates' or its Franchisees' restaurants. Parent and Acquiror agree, for
customer relations purposes and upon written request, to promptly reimburse each
other for any coupons or gift certificates issued or distributed by the one
party that are honored by the other party.
9. Domain Names. With respect to the use of the Marks as domain names, Parent
and its Affiliates shall have the exclusive right as between the parties hereto
to apply for and use on the World Wide Web and any other portion of the Internet
and any successor or related networks thereto any domain names other than the
domain names described in the following sentence. Acquiror shall have the
exclusive right as between the parties hereto to apply for and use on the World
Wide Web and any other portion of the Internet and any successor or related
networks thereto the following domain names: tiastexmex.com, americancafe.com,
lnseafood.com, mozzarellas.com and specialtyrestaurantgroup.com. Each party
hereby agrees that the other party's use of any Subsequent Mark as a Universal
Resource Locator or domain name on the World Wide Web and any other portion of
the Internet and any successor or related networks thereto will not constitute
trademark infringement, unfair competition or any other similar business tort or
infringement against such party.
10. Restrictions on Sale of Certain Food Items. Parent agrees that, for a period
of five (5) years from the Effective Date hereof, neither Parent nor any
Affiliates will offer for sale in any restaurant located in the Fifty United
States any food item substantially similar to the following food items currently
sold at American Cafe restaurants: peanut butter pie, smoked chicken pasta or
the pasta pies. The restrictions in this Section 10 do not apply to any food
item currently offered for sale by any restaurant of Parent or its Affiliates or
franchisees.
11. Further Assurances. The parties shall execute any further documents
reasonably required by the other party to effect, record and perfect their
respective rights hereunder and shall otherwise reasonably cooperate with the
other party to facilitate the transfer and recognition of rights and goodwill
contemplated hereby. Acquiror hereby agrees to fully cooperate with Parent's and
RTBDI's efforts in applying for and obtaining concurrent use registrations on
the Marks and the Subsequent Marks for use solely in the United States
Territories, including without limitation by participating and cooperating in
any concurrent use proceedings before the Trademark Trial and Appeal Board, by
executing any forms, consents or other documentation requested by RTBDI or
Parent or required by the U.S. Patent and Trademark Office or the Commissioner
thereof in order for RTBDI or Parent to obtain the concurrent registrations and
by amending the existing registrations on the Marks and by limiting the
registrations of the Subsequent Marks to limit their applicable territorial
scope to the Fifty United States.
12. Termination.
(a) This Agreement may be terminated upon the mutual written
agreement of the parties and by Parent upon the default of
Acquiror under the Note. This Agreement may not otherwise be
terminated. If a party should breach or threaten to breach
this Agreement, the non-breaching party, in addition to any
other remedies it may have at law or in equity, will be
entitled to an injunction or other similar remedy in order to
specifically enforce this Agreement without having to post a
bond.
(b) Except as otherwise agreed between the parties in writing,
termination of this Agreement for any reason shall not
affect any assignments made hereunder. All rights and
obligations hereunder that by their nature are continuing
will survive the execution and delivery of this Agreement.
Subject to rights of General Electric Capital Business
Asset Funding Corporation or of General Electric Capital
Business Asset Funding Corporation of Arkansas under Loan
Agreements in the aggregate amount of $30,000,000 between
Acquiror and such entities of even date herewith, if any,
if the Note is accelerated or terminated by Parent based
upon Acquiror's default, Acquiror shall immediately
thereafter assign to RTBDI or its successor or assign all
right, title and interest in the Marks and Subsequent
Marks and all goodwill associated therewith and any Other
Intellectual Property Rights owned by Acquiror as a result
of the Merger or this Agreement and any applications filed and
registrations issued thereon so that RTBDI will own
the Marks, Subsequent Marks and such Other Intellectual
Property Rights to the same extent as RTBDI and Parent owned
the Marks and Other Intellectual Property Rights on the day
prior to the date hereof. Acquiror agrees to execute
and file any documentation required to perfect or record such
assignments.
13. Quality Standards. During the term hereof, each party agrees that, with
respect to the goods and services in connection with which it uses the Marks and
Subsequent Marks, it will maintain and adhere to commercially prudent standards
of quality that are not materially lower than the standards practiced in the
respective restaurants today.
14. Independent Parties. Each party to this Agreement is an independent
contractor and not an agent of the other party. Nothing in this Agreement shall
be construed as creating a joint venture or agency relationship between the
parties. Each party will be solely responsible for the costs and expenses it
incurs as a result of its performance of obligations or exercise of its rights
under this Agreement.
15. Notices. All notices, reports and communications required or permitted
pursuant to this Agreement shall be in writing and shall be mailed, telecopied,
or delivered to the other party at the address shown in the Merger Agreement (or
at such other address as may be specified by a notice given to the other party
in accordance with the Merger Agreement) and shall be effective when actually
delivered to such address.
16. Exclusive Forum. In regard to any action to enforce or interpret this
Agreement, or otherwise arising out of or relating to this Agreement, each party
(i) consents and submits to personal jurisdiction and venue in the state and
federal courts of Knox or Blount County, State of Tennessee (referred to as the
"Court"); (ii) waives any and all objections to jurisdiction and venue in the
Court; and (iii) waives any objection that the Court is an inconvenient forum.
Each party further agrees that jurisdiction and venue concerning any legal or
equitable action to enforce or interpret this Agreement, or otherwise arising
out of this Agreement, shall rest exclusively in the state and federal courts of
Knox or Blount County, State of Tennessee, so that any such action shall be
brought and defended in the Court.
17. General. This Agreement, together with the Merger Agreement, all documents
and agreements referenced therein and the Trademark Assignment Agreement, is the
final and complete agreement between the parties regarding the subject matter
hereof, and any and all other discussions, writings and negotiations are merged
herein. This Agreement is governed by the laws of the State of Delaware without
reference to its conflicts of law rules. Neither party may assign its rights or
benefits hereunder without the prior written consent of the other party, except
that (i) either party may assign this Agreement in connection with a merger or
the sale of all or substantially all of the assets to which the Marks relate,
provided, however, that while the Note is outstanding, Acquiror may not assign
this Agreement without Parent's prior written consent, (ii) Parent may assign
its rights and benefits hereunder to any Affiliate and may sublicense its rights
and benefits with respect to the Marks and Subsequent Marks hereunder, directly
or indirectly, to any Franchisee, and (iii) RTBDI may assign its rights and
benefits hereunder to Parent or any Affiliate and may sublicense its rights and
benefits hereunder, directly or indirectly to any Franchisee. This Agreement may
only be amended by the written agreement of all parties hereto, and shall inure
to the benefit of the parties and their successors, affiliates and permitted
assigns. If any one or more of the provisions in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect by a court
of competent jurisdiction, the same shall not invalidate or otherwise affect any
other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
Nothing in this Agreement will be construed or interpreted as transferring,
limiting or otherwise interfering with any intellectual property rights owned by
Parent, RTBDI, any Affiliate or any Franchisee as of the date hereof that are
not expressly assigned to Acquiror in this Agreement or obtained by Acquiror by
virtue of the Merger and all such rights are expressly reserved. This Agreement
may be executed in any number of counterparts, each of which, when executed and
delivered, shall be deemed an original, and all of which counterparts, when
taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed, sealed and
delivered this Agreement as of the date first written above.
Parent:
Ruby Tuesday, Inc.
By: /s/ J. Russell Mothershed
Name: J. Russell Mothershed
Its: Senior Vice President
RTBDI:
Ruby Tuesday Business Development, Inc.
By: /s/ Victoria L. Garrett
Name: Victoria L. Garrett
Its: Vice President
Acquiror:
Specialty Restaurant Group, LLC
By: /s/ James H. CarMichael
Name: James H. CarMichael
Its: President/CEO
<PAGE>
ASSIGNMENT AND ASSUMPTION
THIS ASSIGNMENT AND ASSUMPTION is entered into as of the 20th day of
November, 2000 by and between RUBY TUESDAY, INC., a Georgia corporation
("Assignor"), and SPECIALTY RESTAURANT GROUP, LLC, a Delaware limited liability
company ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor has entered into the Managing Partner Agreements,
District Partner Agreements and Consulting Agreement set forth in Exhibit A (the
"Agreements");
WHEREAS, pursuant to the Managing Partner Agreements each "Partner" (as
defined in the Agreements) has delivered to Assignor shares of common stock of
Assignor (the "Assignor Shares");
WHEREAS, pursuant to Section 4(c)(x) of that certain Agreement and Plan
of Merger dated October 4, 2000, as amended, by and among Assignor, Assignee and
Tia's, LLC, a Delaware limited liability company (the "Merger Agreement"),
Assignor agreed to assign the Agreements, and to deliver the Assignor Shares, to
Assignee as of the Effective Time (as defined in the Merger Agreement); and
WHEREAS, in accordance with Section 4(c)(x) of the Merger Agreement,
Assignor desires to assign and transfer to Assignee, effective as of the date
hereof, all of Assignor's right, title and interest in and to the Agreements and
the Assignor Shares, together with all of Assignor's duties, obligations and
liabilities thereunder arising out of or attributable to events or conditions
occurring on or after the date hereof; and
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the execution and delivery hereof, the parties hereto agree as
follows:
1. Assignor hereby assigns and transfers to Assignee, effective as of the date
hereof, all of Assignor's right, title and interest in and to the Agreements and
the Assignor Shares, and all of its duties, obligations and liabilities
thereunder arising out of or attributable to events or conditions occurring on
or after the date hereof.
2. Assignee hereby accepts such assignment and transfer, assumes, accepts and
agrees to be bound by all of the terms and conditions of the Agreements, and
covenants and agrees to assume, accept and perform all of the duties,
obligations and liabilities of Assignor thereunder arising out of events
occurring on or after the date hereof.
3. Assignor warrants and represents to Assignee as follows:
(a) Each of the Agreements is in full force and effect;
(b) None of the Agreements or any of the Assignor Shares has otherwise
been transferred, assigned, encumbered or conveyed by
Assignor; and
(c) Assignor has no knowledge of any material reach by Assignor of
the terms of any of the Agreements.
4. This Assignment and Assumption may be executed in multiple counterparts, each
of which will be deemed an original and all of which taken together will
constitute but a single instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption to be duly executed, effective as of date first written above.
ASSIGNOR:
RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed
Name: J. Russell Mothershed
Title: Senior Vice President
ASSIGNEE:
SPECIALTY RESTAURANT GROUP, LLC
By: /s/ James H. CarMichael
Name: James H. CarMichael
Title: President
<PAGE>
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Indemnity") is entered into as of the
20th_ day of November, 2000 by and between RUBY TUESDAY, INC., a Georgia
corporation ("RTI"), and SPECIALTY RESTAURANT GROUP, LLC, a Delaware limited
liability company ("SRG").
W I T N E S S E T H:
WHEREAS, RTI has entered into the Managing Partner Agreements and
District Partner Agreements set forth in Schedule I hereto (each an "Agreement";
collectively, the "Agreements");
WHEREAS, pursuant to the Agreements each "Partner" (as defined in the
Agreements) has delivered to RTI shares of common stock of RTI (the "RTI
Shares");
WHEREAS, pursuant to Section 4(c)(x) of that certain Agreement and Plan
of Merger dated October 4, 2000, as amended, by and among RTI, SRG and Tia's,
LLC, a Delaware limited liability company (the "Merger Agreement"), RTI agreed
to assign the certain of the Agreements set forth in Exhibit A to that certain
Assignment and Assumption, dated the date hereof (the "Assignment and
Assumption"), and to deliver the RTI Shares related to such Agreements, to SRG
as of the Effective Time (as defined in the Merger Agreement); and
WHEREAS, pursuant to the terms of the Assignment and Assumption, SRG
will assume and has assumed, effective as of the date hereof, all of RTI's
right, title and interest in and to the Agreements assigned pursuant to the
Assignment and Assumption, and the related RTI Shares, together with all of
RTI's duties, obligations and liabilities thereunder arising out of or
attributable to events or conditions occurring on or after the date hereof, and
WHEREAS, in order to induce RTI to enter into the Assignment and
Assumption, SRG has agreed to enter into this Indemnity with RTI;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the execution and delivery hereof, the parties hereto agree as
follows:
1. SRG hereby agrees to defend against and/or with respect to Claims
(hereinafter defined) asserted against, and agrees to indemnify and hold
harmless from and/or with respect to Claims incurred by, RTI and its directors,
officers, employees, affiliates, controlling persons, agents and
representatives, and each individual named as "power of attorney under each
Agreement, and their respective successors and assigns (individually, an
"Indemnitee" and, collectively, the "Indemnitees"). For purposes hereof "Claims"
shall mean, collectively, all liability, demands, claims, actions or causes of
action, assessments, losses, damages, costs and expenses (including, without
limitation, reasonable attorney's fees and expenses) asserted against or
incurred by any Indemnitee as a result of or arising out of the transactions
contemplated by the Merger Agreement and/or the Assignment and Assumption,
including, without limitation, (a) any assertion by any Partner under any
Agreement that RTI (or SRG as RTI's successor under any Agreement) breached or
caused the termination of any such Agreement by entering into, or consummating,
the transaction described in the Merger Agreement, (b) any assertion by any
Partner that such Agreement (s) is not assignable by RTI to SRG in connection
with the consummation of the transaction described in the Merger Agreement, ( c
) the delivery of the RTI Shares to SRG, (d) SRG's performance of it's duties
and obligations under such Agreement as of and after the date hereof. SRG shall
have the right to designate counsel to represent and defend the Indemnitees with
respect to any Claim, the costs and expenses of which shall be paid directly by
SRG. The Indemnitees shall have the right to demand that SRG select different
counsel and if SRG refuses such request the Indemnitees shall have the right to
designate and retain their own and separate counsel with respect to such Claims,
the costs and expenses of which shall be paid directly, or reimbursed to the
Indemnitee by, SRG.
2. Any Indemnitee who receives actual notice of any Claim shall promptly inform
SRG thereof, including providing copy of all documents or instruments in which
such Claim is asserted or described; provided, however, that the failure or
unreasonable delay of the Indemnitee to so inform SRG shall not constitute a
defense to SRG's obligations hereunder except to the extent SRG is actually and
materially prejudiced thereby.
3. Simultaneously with the execution hereof, the form of Exercise of Power of
Substitution attached hereto as Exhibit B with respect to the Agreements
assigned pursuant to the Assignment and Assumption shall be executed, delivered
and accepted.
4. This Indemnity, together with the Merger Agreement and the Assignment and
Assumption, contains the entire understanding of the parties hereto with respect
to the matters covered hereby, and this Indemnity may be amended only by an
agreement in writing executed by all the parties hereto.
5. This Indemnity shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and legal representatives. None of the
parties hereto (nor any of their affiliates) shall assign this Indemnity or
rights hereunder without the prior written consent of each party hereto.
6. This Indemnity is for the sole benefit of the Indemnitees and their
respective successors and assigns, and nothing herein expressed or implied shall
give or be construed to give any other person or entity any legal or equitable
rights hereunder.
7. This Indemnity shall be governed by and construed and enforced in accordance
with the laws of the State of Tennessee applied to agreements made and to be
performed entirely within such state, without regard to the principles of
conflicts of laws.
8. This Indemnity may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together will constitute one and
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indemnity to be
duly executed, effective as of date first written above.
RTI:
---
RUBY TUESDAY, INC.
By: /s/ J. Russell Mothershed
Name: J. Russell Mothershed
Title: Senior Vice President
SRG:
---
SPECIALTY RESTAURANT GROUP, LLC
By: /s/ James H. CarMichael
Name: James H. CarMichael
Title: President
