SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: September 28, 1994
NPC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Kansas
(State of incorporation)
0-13007 48-0817298
(Commission (IRS Employer
File Number) Identification No.)
720 W. 20th Street, Pittsburg, Kansas 66762
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (316-231-3390)
Item 2. Acquisition or Disposition of Assets.
On June 7, 1994, the registrant signed a
definitive asset exchange agreement by and among registrant,
Pizza Hut, Inc. (PHI, a Delaware Corporation) and Pizza Hut of
San Diego, Inc. (PHSD, a California Corporation). Agreement
provides for the exchange of certain assets of the registrant
for assets of PHI and/or PHSD and for the registrant to enter
into or otherwise receive new franchise agreements for the
operation of the registrants Pizza Hut restaurants and
delivery kitchens. Additionally, on July 19, 1994 and as
contemplated by the agreement above, the registrant signed a
definitive asset purchase agreement by and among registrant
and listed selling stockholders. Agreement provided for the
purchase of all assets related to 17 Pizza Hut restaurants.
Effective August 3, 1994 and August 4, 1994,
respectively, the transactions described above, meeting all
conditions precedent by registrant and PHI and PHSD or selling
stockholders, was closed. The transaction was financed in the
normal course of business through the registrant's existing
line of credit with their lead banking institution.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(a) Pro forma financial information. Attached
hereto as Exhibit 1
Exhibit Description
A Asset Purchase Agreement between
NPC International, Inc. and
Listed Sellers
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
NPC INTERNATIONAL, INC.
Date: October 3, 1994 By: James K. Schwartz
Vice President and
Chief Financial Officer
Exhibit 1
NPC International, Inc.
Pro Forma Consolidated Financial Information
(Unaudited)
On June 7, 1994, the registrant signed a
definitive asset exchange agreement by and among registrant,
Pizza Hut, Inc. (PHI, a Delaware Corporation) and Pizza Hut of
San Diego, Inc. (PHSD, a California Corporation). Agreement
provides for the exchange of certain assets of the registrant
for assets of PHI and/or PHSD and for the registrant to enter
into or otherwise receive new franchise agreements for the
operation of the registrants Pizza Hut restaurants and
delivery kitchens. Additionally, on July 19, 1994, and as
contemplated by the agreement above, the registrant signed a
definitive asset purchase agreement by and among registrant
and listed selling stockholders. Agreement provided for the
purchase of all assets related to 17 Pizza Hut restaurants.
Effective August 3, 1994 and August 4, 1994,
respectively, the transactions described above, meeting all
conditions precedent by registrant and exchanging or selling
stockholders, was closed. The transaction was financed in the
normal course of business through the registrant's existing
line of credit with their lead banking institution.
The pro forma consolidated condensed Balance Sheet
at June 28, 1994, and the consolidated statements of income
for the fiscal year ended March 29, 1994 and for the first
quarter ended June 28, 1994 and notes thereto should be read
in conjunction with NPC International, Inc.'s annual report on
Form 10-K for the fiscal year ended March 29, 1994. The
transactions described above have been accounted for under the
purchase method of accounting.
The pro forma consolidated condensed financial
information is presented for information purposes only and is
not necessarily indicative of actual results, nor do they
purport to represent results which will occur in the future.
<TABLE>
NPC International, Inc.
Pro Forma Consolidated Condensed Income Statement
(Unaudited)
<CAPTION>
Fiscal Net Assets
Year Ended Purchased or Pro Forma Pro Forma
March 29, 1994 Exchanged Adjustments Consolidated
(1)
<S> <C> <C> <C> <C>
Net sales $ 332,207,000 (11,015,000) $321,192,000
Franchise revenues 5,215,000 5,215,000
Total revenues 337,422,000 (11,015,000) 326,407,000
Cost of sales 98,693,000 (2,387,000) 96,306,000
238,729,000 (8,628,000) 230,101,000
Direct labor costs 97,102,000 (3,460,000) 93,642,000
Operating expenses 89,988,000 (1,161,000) 88,827,000
General and
administrative expenses 26,686,000 (3,458,000) (980,000)(A) 22,248,000
213,776,000 (8,079,000) (980,000) 204,717,000
24,953,000 (549,000) 980,000 25,384,000
Interest expense (6,629,000) - (427,000)(B) (7,056,000)
Other income (expense) 182,000 - - 182,000
Income before taxes 18,506,000 (549,000) 553,000 18,510,000
Provision for taxes 7,211,000 (214,000) 216,000 (C) 7,213,000
Net income $11,295,000 (335,000) 337,000 $11,297,000
Earnings per share $0.45 $ 0.45
Weighted average
shares outstanding 25,167,349 25,167,349
<FN>
See notes to pro forma consolidated condensed income statement.
</TABLE>
<TABLE>
NPC International, Inc.
Pro Forma Consolidated Condensed Income Statement
(Unaudited)
<CAPTION>
First Net Assets
Quarter Purchased or Pro Forma Pro Forma
Ended
June 28, Exchanged (1) Adjustments Consolidated
1994
<S> <C> <C> <C> <C>
Net sales $83,179,000 (2,571,000) $80,608,000
Franchise revenues 1,278,000 1,278,000
Total revenues 84,457,000 (2,571,000) 81,886,000
Cost of sale 24,367,000 (566,000) 23,801,000
60,090,000 (2,005,000) 58,085,000
Direct labor costs 24,110,000 (797,000) 23,313,000
Operating expense 22,428,000 (283,000) 22,145,000
General and
administrative
expenses 5,941,000 (771,000) (232,000)(A) 4,938,000
52,479,000 (1,851,000) (232,000) 50,396,000
7,611,000 (154,000) 232,000 7,689,000
Interest expense (1,552,000) - (107,000)(B) (1,659,000)
Other income (exp) 67,000 - - 67,000
Income before taxes 6,126,000 (154,000) 125,000 6,097,000
Provision for tax 2,371,000 (59,000) 48,000 (C) 2,360,000
Net income $3,755,000 (95,000) 77,000 $3,737,000
Earnings per share $ 0.15 $0.15
Weighted average
shares outstanding 25,028,287 25,028,287
<FN>
See notes to pro forma consolidated condensed income statement.
</TABLE>
NPC International, Inc.
Notes to Pro Forma Consolidated
Condensed Income Statements
(Unaudited)
The unaudited pro forma consolidated condensed income
statement illustrates the estimated effect of the asset
exchange between NPC International, Inc. (the Company) and
Pizza Hut, Inc. and Pizza Hut of San Diego, Inc.
(collectively, PHI) and the asset purchase between the Company
and selling stockholder's (collectively stockholder's) and the
financing as if the transaction occurred for income statement
purposes at the beginning of the periods presented.
The condensed pro forma consolidated income statements
give effect to the acquisition under the purchase method of
accounting subject to the assumptions and adjustments detailed
in these notes.
(1) Represents the cumulative affect on income and
expenses of all assets exchanged and purchased for
the period presented.
(A) As a result of the asset exchange with PHI, the
Company's operating areas were consolidated and
therefore operating efficiencies were achieved. As
such, general and administrative expenses were
reduced by the anticipated dollar savings of the
consolidation net of amortization of certain
acquisition costs ($250,000 amortized over five
years).
(B) Interest was recorded based upon the estimated
increase in debt resulting from the transactions
using the interest rate of 6.44%, the Company's
effective borrowing rate for the fiscal year ended
March 29, 1994.
(C) Income taxes were adjusted to reflect the income tax
effect of the adjustments contained in the condensed
pro forma consolidated income statements using the
Company's statutory tax rate in effect during the
periods presented.
<TABLE>
NPC International, Inc.
Pro Forma Consolidated Condensed Balance Sheet
(Unaudited)
CAPTION
June 28, PHI Asset Pro Forma
1994 (1) Transaction Purchase (3)
(2) Consolidated
<S> <C> <C> <C> <C>
ASSETS
Current assets $14,339,000 $14,339,000
Facilities and
equipment, net 138,848,000 $(3,489,000) (A) $4,081,000 (C) 139,440,000
Franchise rights 28,132,000 5,989,000 (C) 34,121,000
Goodwill, less
accumulated
amortization 33,029,000 33,029,000
Other assets 8,304,000 250,000 (B) 85,000(C,D) 8,639,000
$222,652,000 $(3,239,000) $10,155,000 $229,568,000
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current
liabilities $ 38,188,000 $250,000 (B) $35,000 (D) $38,473,000
Long-term debt
and obligations
under
capital leases 75,118,000 (3,489,000) (A) 10,120,000 (C) 81,749,000
Deferred income
taxes and other 6,652,000 6,652,000
Stockholders' equity:
Class A Common 139,000 139,000
Class B Common 137,000 137,000
Paid-in capital 22,316,000 22,316,000
Retained earnings 99,455,000 99,455,000
122,047,000 - - 122,047,000
Less treasury stk (19,353,000) (19,353,000)
Total stock-
holders' equity 102,694,000 - - 102,694,000
$222,652,000 $(3,239,000) $10,155,000 $229,568,000
<FN>
See notes to pro forma consolidated condensed balance
</TABLE>
NPC International, Inc.
Notes to Pro Forma Consolidated
Condensed Balance Sheet
(Unaudited)
The unaudited pro forma consolidated condensed balance
sheet was prepared assuming the asset exchange with PHI and
asset purchase with selling stockholders was consummated at
the end of the period for which the balance sheet is
presented.
The condensed pro forma consolidated balance sheet gives
effect to the acquisition under the purchase method of
accounting subject to the assumptions and adjustments detailed
in these notes.
(1) The Company signed a definitive asset exchange
agreement with PHI on June 7, 1994, where at that
time the first phase of the transaction was
completed. At that time, the Company exchanged 39
restaurants for one PHI restaurant, and the Company
received a new Pizza Hut franchise agreement for all
operating areas effective March 30, 1994 through
2010. As such, the June 28, 1994, balances include
the reclassification of approximately $10,000,000 in
facilities and equipment to franchise rights.
(2) Represents the balance sheet impact of the asset
exchange between PHI and the Company.
(3) Represents the balance sheet impact of the asset
purchase from selling stockholders of 17 Pizza Hut
restaurants.
(A) Represents the cash differential of the value of the
Company's real estate as compared to that of PHI's
real estate, net of purchase price adjustments. All
cash received by the Company as a result of the
exchange is assumed to reduce corporate
indebtedness.
(B) Estimated costs associated with the PHI asset
exchange were accrued.
(C) Allocation of asset purchase price of $10,120,000 as
follows:
- $4,081,000 Facilities and equipment
- $5,989,000 Acquired franchise rights
- $ 50,000 Five year non-compete agreement
(D) Estimated acquisition-related expenses and
transition costs were accrued.
EXHIBIT A
ASSET PURCHASE AGREEMENT
CONFIDENTIAL
BETWEEN
NPC INTERNATIONAL, INC.
AND
LISTED SELLERS
_________________, 1994
ASSET PURCHASE AGREEMENT
ARTICLE I .................................................1
PURCHASE AND SALES OF ASSETS
Section 1.1 Assets ...........................1
Section 1.2 Excluded Assets ..................2
ARTICLE II ................................................2
PURCHASE PRICE OF ASSETS
Section 2.1 Purchase Price ...................2
Section 2.2 Form of Payment ..................3
Section 2.3 Adjustment of Purchase Price .....3
Section 2.4 Obligations Assumed by Buyer .....3
Section 2.5 Obligations Satisfied by Sellers .3
Section 2.6 Allocation of Purchase Price .....4
Section 2.7 Inventory Purchase ...............4
ARTICLE III ...............................................4
CLOSING
Section 3.1 Date, Time and Place of Closing ..4
Section 3.2 Deliveries by Sellers at Closing .4
Section 3.3 Deliveries by Buyer at Closing ...6
Section 3.4 Transfer of Operations ...........6
ARTICLE IV ................................................6
REPRESENTATIONS AND WARRANTIES OF SELLERS
Section 4.1 Organization and Good Standing;
Execution and Delivery Permitted .6
Section 4.2 Conditions of Assets .............7
Section 4.3 Absence of Other Assets ..........8
Section 4.4 Ownership of Assets ..............8
Section 4.5 Franchises .......................9
Section 4.6 Documents Sufficient .............9
Section 4.7 Litigation or Condemnation .......9
Section 4.8 Taxes ............................10
Section 4.9 Contracts ........................10
Section 4.10 Disclosure .......................10
Section 4.11 Labor Relations ..................10
Section 4.12 Employee Benefit Plans ...........10
Section 4.13 Liabilities of Sellers ...........11
Section 4.14 Licensure ........................11
Section 4.15 Insurance Coverage ...............11
Section 4.16 Severance Pay ....................11
Section 4.17 Environmental Matters ............11
Section 4.18 Financial Statements .............13
Section 4.19 Inventory ........................13
Section 4.20 Leases ...........................13
Section 4.21 Consents .........................14
ARTICLE V .................................................14
COVENANTS OF SELLERS
Section 5.1 Transfer of Licenses and Permits .14
Section 5.2 Agreements Respecting Employees
of Sellers .......................14
Section 5.3 Conduct of Business ..............14
ARTICLE VI ................................................15
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 6.1 Corporate Existence ..............15
Section 6.2 Corporate Power and Authority ....15
Section 6.3 Execution and Delivery Permitted .15
ARTICLE VII ...............................................15
COVENANTS OF BUYER
ARTICLE VIII ..............................................16
PRORATIONS AND PURCHASE PRICE ADJUSTMENT; CONDITIONS
TO CLOSING
Section 8.1 Prorations and Purchase Price
Adjustments ......................16
Section 8.2 Conditions to Closing ............16
ARTICLE IX ................................................17
INDEMNIFICATION AGAINST LOSS
Section 9.1 Indemnification by Sellers .......17
Section 9.2 Indemnification by Buyer .........18
Section 9.3 Indemnification Procedure ........18
Section 9.4 Limitation of Indemnification ....18
ARTICLE X .................................................19
NONCOMPETITION
ARTICLE XI ................................................19
MISCELLANEOUS
Section 11.1 Notices ..........................19
Section 11.2 Applicable Law ...................19
Section 11.3 Binding on Successors ............20
Section 11.4 Payment of Costs .................20
Section 11.5 Closing Not to Prejudice Claim
for Damages ......................20
Section 11.6 Survival of Representations,
Warranties, Covenants and
Undertakings .....................21
Section 11.7 Additional Documents .............21
Section 11.8 Time is of the Essence ...........21
Section 11.9 Titles ...........................21
Section 11.10 Entire Agreement .................21
Section 11.11 Counterparts .....................21
ARTICLE XII ...............................................21
SIMULTANEOUS TRANSFER OF CERTAIN MISSOURI
AND IOWA RESTAURANT LOCATIONS
LIST OF EXHIBITS
EXHIBIT A-1 RESTAURANTS LOCATION - PURCHASE
EXHIBIT A-2 RESTAURANT LOCATION - LEASED
EXHIBIT B FRANCHISE AGREEMENTS AND LICENSES
EXHIBIT C ASSUMED CONTRACTS
EXHIBIT D EQUIPMENT SCHEDULES
EXHIBIT E EXCLUDED ASSETS
EXHIBIT F ALLOCATION OF PURCHASE PRICE
EXHIBIT G INTENTIONALLY OMITTED
EXHIBIT H FINANCIAL STATEMENTS
LIST OF SCHEDULES
SCHEDULE 4.5 FRANCHISE AGREEMENTS
SCHEDULE 4.7 PENDING CLAIMS AND LITIGATION
SCHEDULE 4.12 EMPLOYEE BENEFIT PLANS
SCHEDULE 4.15 INSURANCE COVERAGE
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this ______ day
of ____________, 1994 by and among the undersigned defined
sellers, as owners or stockholders of the Pizza Hut
operations, companies and properties which are the subject
hereof (the "Sellers"), and NPC International, Inc., a Kansas
corporation (the "Buyer").
WHEREAS, Sellers own various items of personal property
and interests in real property used in the operation of
certain Pizza Hut restaurants at the locations set forth on
Exhibits "A-1 and A-2" to this Agreement (the "Restaurant
Locations") pursuant to the Pizza Hut, Inc. Franchise
Agreements listed on Exhibit "B" to this Agreement (the
"Franchise Agreements");
WHEREAS, Sellers desire to sell such personal property,
to convey certain interests in such real property and to
assign the Franchise Agreements to Buyer;
WHEREAS, Buyer desires to purchase such personal property
and real property interests and to acquire such franchise
rights from Sellers; and
WHEREAS, Buyer and Sellers have agreed upon the terms and
conditions of such transactions and desire to reduce the same
to writing;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements, covenants, representations, warranties and
promises set forth herein, and in order to prescribe the terms
and conditions of such purchase and sale, the parties hereto
agrees as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Assets. Subject to the terms and
conditions set forth in this Agreement, Sellers hereby agree
that at the Closing (as defined in Section 3.1 below) they
shall, jointly and severally, as the respective interest of
each may appear, sell, transfer, convey, and assign to Buyer
and Buyer hereby agrees at the Closing to purchase and accept
from Sellers, free and clear of all mortgages, liens, security
interests, pledges and encumbrances, the following assets
(collectively, the "Assets"):
(a) All of each Sellers' right, title, and interest
in the Restaurant Locations set forth on Exhibit "A-1",
including all of each Sellers' interest thereunder in the
buildings, fixtures, signs, parking facilities, trash
facilities, fences, or other improvements (the "Real
Property");
(b) All of each Sellers' right, title, and interest
in and to the real property leases on Restaurant Locations as
described on Exhibit "A-2" ("Leases"), and the contracts with
a remaining term not exceeding one year which are transferable
and related to the operation of Buyer's business (and other
than any equipment lease) and licenses related to and used in
the normal and customary operations of the Restaurant
Locations, all as set forth on Exhibit "C" of this Agreement
(the "Assumed Contracts and Licenses");
(c) All of each Sellers' right, title, and interest
in and under the Franchise Agreements;
(d) All of each Sellers' right, title, and interest
in and to the equipment used in the normal and customary
operations of the Restaurant Locations, including but not
limited to the furniture, machinery, equipment, tables,
chairs, cash registers, ovens, refrigerators, display cases,
shelves, utensils, tools, pans, salad bars, sneeze guards,
lights, uniforms, curtains, signs, menus, tablecloths,
glasses, plates, dishes, silverware, pitchers, books,
cabinets, racks, towels, ornaments, bars, and bar equipment
(the "Equipment") set forth on the noncomprehensive Schedules
listed on and attached to Exhibit "D" to this Agreement;
(e) All of each Sellers' other rights and property
interests of any nature which are customarily used in the
operation of the Restaurant Locations, including, but not
limited to rights to use existing Restaurant Location
telephone numbers and rights arising under equipment
warranties; and
(f) The covenant of Sellers not to compete with
Buyer, as more fully set forth in Article X of this Agreement.
Collectively, the items set forth in (c) through (f) above are
referred to herein as the Personal Property.
Section 1.2 Excluded Assets. Excluded from sale under
this Agreement are all of each Sellers' cash, negotiable
instruments, receivables, operating books, records, files, and
the other assets listed on Exhibit "E" to this Agreement.
ARTICLE II
PURCHASE PRICE OF ASSETS
Section 2.1 Purchase Price. The purchase price paid
for the Assets (the "Purchase Price") shall be in the amounts
and payable as follows (adjusted as set forth in Section 2.3):
(a) Buyer will pay to Sellers the amount of Two
Million Seven Hundred Thousand Dollars ($2,700,000) for the
real property, such price to be subject to Buyer's reasonable
determination that each piece of the real property is suitable
to the operation of Buyer's business at that Restaurant
Location; and
(b) Buyer will pay to Sellers the amount of Seven
Million Four Hundred Twenty Thousand Dollars ($7,420,000) in
cash at Closing for the remainder of the Assets, with the
allocation of the Purchase Price to be agreed as set out on
Exhibit "F" hereto.
Section 2.2 Form of Payment. The Purchase Price as
adjusted shall be paid at the time of Closing through a wire
transfer of immediately available funds.
Section 2.3 Adjustment of Purchase Price. As promptly
as practical and prior to Closing, Sellers shall deliver to
Buyer an itemized statement of Purchase Price adjustments and
prorations as set forth in Section 8.1 of this Agreement.
Section 2.4 Obligations Assumed by Buyer. In addition
to the purchase of the Assets and the payment of the Purchase
Price, Buyer assumes and agrees to perform all of the Sellers'
obligations with respect to:
(a) The Leases, the Assumed Contracts and Licenses;
provided, however, that Buyer shall not be responsible for any
other obligation relating to Seller or to events or operations
of the Restaurant Locations occurring on or prior to the date
of Closing; and
(b) The Franchise Agreements; provided, however,
that Buyer shall not be responsible for the payment of
franchise fees, royalties, Pizza Hut Co-op, PFS and IPHFHA
assessments, or any other amounts relating to sales,
operations or events occurring on or prior to the date of
Closing and Sellers shall retain any rebates due related to
business of Sellers prior to Closing.
Section 2.5 Obligations Satisfied by Sellers. Sellers
shall pay all sales, transfer and other tax liabilities
arising out of the transactions which are the subject of this
Agreement, and all trade payables, accounts payable, utility
payments, business related taxes and other operating expenses
which are incurred on or before the date of Closing. In no
case shall Buyer be required to assume any liability or
obligation which:
(a) is prorated to Sellers under Section 2.3 or
Article VIII of this Agreement;
(b) arises from any event or any action or inaction
on the part of Sellers occurring on or prior to the date of
Closing which, with notice, the passage of time or both, would
result in an event of default occurring under any lease or
agreement to which Sellers are a party;
(c) is represented or warranted by Sellers in this
Agreement, or in the Exhibits attached hereto, not to exist;
(d) relates to any Sellers' employee, pension,
incentive or benefit plan or any employee agreement or claim,
including as to vacation (vested or accrued) or severance;
(e) relates to any lease of equipment used in the
operation of any Restaurant Location, unless it is an Assumed
Contract; or
(f) is not expressly assumed by Buyer hereunder.
Section 2.6 Allocation of Purchase Price. Buyer and
Sellers agree that the Purchase Price is allocated as set
forth upon Exhibit "F" to this Agreement. Such allocation
shall be binding on Buyer and Sellers for federal, state or
local tax purposes, and each of the parties hereto agrees that
it or they will file a statement setting forth such allocation
with its or their federal income tax or other returns, if
required, and will also file such further information or take
such further actions as may be necessary to comply with the
regulations that have been promulgated pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended.
Section 2.7 Inventory Purchase. Buyer further agrees
to purchase from Sellers, (i) at cost, all usable food, paper,
supplies and other inventory in each Restaurant Location at
the time of Buyer's taking possession as provided in Section
3.4 hereof ("Inventory") providing such items are currently
inventoried and included on Sellers' financial statements
provided to Buyer as inventory, (ii) any prepaids and deposits
usable by Buyer in the ordinary course of Buyer's business,
and (iii) all change funds in each Restaurant Location at the
close of business on the day prior to the date of Closing.
ARTICLE III
CLOSING
Section 3.1 Date, Time, and Place of Closing. Subject
to Article XII hereof, the consummation of the transactions
contemplated hereby (the "Closing") shall be held on
____________, _________________, 1994 beginning at 9:00 a.m.
local time in the offices of
___________________________________ or at such other place,
time or date as the parties hereto shall mutually agree. Time
is of the essence in the transactions contemplated hereby.
Section 3.2 Deliveries by Sellers at Closing. At the
Closing and thereafter as may be reasonably requested by
Buyer, Sellers shall convey, transfer, assign, and deliver all
of their interest in the Assets to Buyer, and shall in
particular deliver to Buyer the following:
(a) Such deeds, bills of sale, easements,
assignments, leases, surveys, deeds of buildings and other
appropriate instruments of transfer as Buyer has requested,
all in recordable form and content acceptable to Buyer and
Buyer's counsel and sufficient to vest in Buyer title to all
of the Assets and which, with regard to interests in real
property, reflect that same is subject to no exception to
title insurance coverage other than Permitted Encumbrances as
described in Section 4.2(b) hereof and which could
substantially affect the operation of the subject Restaurant
Locations as Pizza Hut restaurants and, with regard to both
real and the Personal Property, that such property is free and
clear of all mortgages, deeds of trust, liens, security
agreements, charges, or other encumbrances;
(b) Duly executed assignments of Leases for the
Restaurant Locations leased by Sellers, together with, where
required by the Lease, unconditional consents to assignment of
the Leases from landlords;
(c) The written consent of Pizza Hut, Inc. to
assignment by Sellers to Buyer of all of Sellers' rights under
the Franchise Agreements;
(d) The waiver, release, consent, estoppel
certificate or other document of any nature, of any person,
corporation, association or other entity whatsoever which is
necessary to consummate the transactions contemplated hereby
and to make the warranties and representations made in this
Agreement true and correct;
(e) Proof in the form of filed returns and copies
of paid checks that all real and personal property taxes
levied on the Assets which are due and payable have been paid;
(f) Where available, letters of good standing from
the tax commission for the States of Iowa, Kansas, and
Missouri, as appropriate, indicating that all sales,
employment, franchise, income and other tax liabilities of the
Sellers have been satisfied through the date of Closing;
(g) A commitment to issue ALTA Form policies of
title insurance, consistent with Section 4.2 hereof, regarding
the Real Property to be purchased by Buyer insuring title to
such property and containing only such exceptions and
exclusions as are acceptable to Buyer;
(h) Copies of policies of insurance for each
Restaurant Location, evidencing coverage of the premises and
contents in amounts specified by the Franchise Agreements or
Lease under which such Restaurant Location is operated and
certified by Sellers to be fully paid and in force at Closing;
(i) Documentation sufficient to ensure that all
leases of Equipment employed in operation of the Restaurant
Locations which are not Assumed Contracts have been terminated
and that all obligations of Sellers thereunder have been
satisfied, or that arrangements have been made to apply such
amount of the Purchase Price received from Buyer hereunder as
may be necessary to fully satisfy the obligations of Sellers
in connection with such Equipment;
(j) A Cross-Receipt; and
(k) Wire transfer instructions regarding delivery
of the Purchase Price.
Section 3.3 Deliveries by Buyer at Closing. Upon
receipt and review by Buyer's counsel of all of the documents
specified in Section 3.2 above, duly authorized and validly
executed, Buyer shall deliver to the Sellers' representatives
in attendance at Closing:
(a) the Purchase Price in the amounts, form and
manner specified in Section 2.1, 2.2 and 2.7 hereof;
(b) Assignments and Acceptances of Leases and
Franchise Agreements; and
(c) a Cross-Receipt.
Section 3.4 Transfer of Operations. Buyer shall be
entitled to immediate possession of, and to exercise all
rights attendant to the Assets from and after 10:00 a.m. local
time on the day of Closing, and operation of the Restaurant
Locations shall transfer at such time. Except as provided
hereby, all profits, losses, liabilities, claims or injuries
arising before such transfer shall be solely to the benefit or
the risk of Sellers. All such occurrences after such transfer
shall be solely to the benefit or the risk of Buyer. The risk
of loss or damage by fire, storm, flood, theft or other
casualty or cause shall be in all respects upon Sellers prior
to such transfer and upon the Buyer thereafter.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Buyer to enter into this Agreement
and to consummate the transactions contemplated hereby,
Sellers jointly and severally represent and warrant to Buyer
as follows:
Section 4.1 Organization and Good Standing; Execution
and Delivery Permitted. Each Seller corporation is a
corporation duly organized, validly existing and in good
standing under the laws of the state where incorporated and is
qualified to transact business and is in good standing as a
foreign corporation in the jurisdictions where it is required
to qualify in order to conduct business as presently
conducted. Seller has the corporate power and authority to
own, lease and operate all the Restaurant Locations and Assets
now owned, leased or operated by it and to carry on its
businesses as now conducted. Each Seller corporation will at
Closing deliver to Buyer complete and correct copies of its
respective Articles of Incorporation and Bylaws, as amended
and in effect on the date thereof as well as certificates of
good standing from each of its state of incorporation and
where qualified as a foreign corporation.
The execution, delivery and performance of this Agreement
will not result in a breach of or constitute a default under
any term in any agreement or other instrument to which Sellers
are a party, such default having not been previously waived by
the other party to any such agreement, or violate any law or
any order, rule or regulation applicable to Sellers, or any
court or of any regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over
Sellers or their properties; and will not result in the
creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the Assets.
Section 4.2 Condition of Assets.
(a) To the best knowledge of Sellers, all of the
Equipment is in good operating condition, no major repairs are
necessary concerning the Equipment, and the Equipment complies
with all material federal, state and local laws, rules and
regulations, including all environmental and occupational
safety and health regulations;
(b) Sellers have and will convey to Buyer good and
indefeasible title to the Real Property free and clear of any
all liens or encumbrances other than Permitted Encumbrances.
Permitted Encumbrances shall include as follows:
(1) Liens for current taxes and assessments not
yet due and payable, including but not limited to liens for
nondelinquent ad valorem taxes, such liens, minor
imperfections of title, or easements on real property as do
not in any material respect detract from the value thereof and
do not interfere with the present use of the Real Property;
(2) Standard form printed exceptions as set out
in the policies of title insurance to be provided hereunder;
(c) Seller has received no notice that the Real Property
violates any provisions of any applicable building code, fire,
health or safety regulations or any governmental ordinances,
orders or regulations. No condition exists with respect to
the Real Property which would prevent, or require repair or
modification thereof as a prerequisite to, use of the Real
Property in the conduct of Buyer's business;
(d) The zoning classification of the Real Property and
the Premises subject to the Leases is such that it may
continue to be used as currently used;
(e) There is no pending or threatened condemnation or, to
the knowledge of Sellers, any similar proceeding or assessment
effecting the Real Property, or, any part thereof, nor to the
best knowledge and belief of Sellers is any such proceeding or
assessment contemplated by any governmental body;
(f) Sellers have complied with all applicable laws,
ordinances, regulations, statutes, rules and restrictions
relating to the Real Property and the Premises subject to the
Leases, or any part thereof; and
(g) To the knowledge of Sellers, there is no pending or
threatened proceeding by any governmental body which would
impair or result in the limitation or termination of access to
any of the Real Property.
(h) Subject to appropriate consents of Landlords, no
condition exists which would adversely affect Buyer's use of
the Restaurant Locations the premises of which are subject to
the Leases as Pizza Hut restaurants.
(i) Seller will not be responsible for any expense
related to bringing the Real Property and/or the Premises
subject to the Leases into compliance with any code or
regulation which would not have been occasioned but for the
transfer of the Assets.
Section 4.3 Absence of Other Assets. Except as
specifically provided in this Agreement, there is no Asset,
property or right of any nature which has not previously or is
not now being transferred to Buyer hereunder by Sellers or
which is being retained by Sellers that has been customarily
employed, owned, held or used in connection with the operation
of any Restaurant Location. All Assets used in the operation
of any Restaurant Location are situated entirely upon the
premises of such Restaurant Locations have been or are being
conveyed to Buyer pursuant to this Agreement.
Section 4.4 Ownership of Assets. (a) Sellers have
good and marketable title to the Assets, which title after
Closing shall be free and clear of all deeds of trust,
mortgages, liens, security interests, charges, and
encumbrances of any nature whatsoever; (b) the Sellers have
the full, absolute and unrestricted right to assign, transfer
and convey or sublease to Buyer the Assumed Contracts and
Licenses, subject only to such consents as Sellers shall
deliver to Buyer at Closing; (c) no person or entity, other
than the Sellers, has any interest in the Assets; and (d) all
Equipment employed in the operation of the Restaurant
Locations which is leased under leases other than an Assumed
Contract has been acquired and the purchase price therefor
fully paid, or arrangements have been made to apply such
amount of the Purchase Price received from Buyer hereunder as
may be necessary to fully pay the purchase price therefor at
Closing.
Section 4.5 Franchises. Subject only to the required
consents of Pizza Hut, Inc. which shall be delivered to Buyer
at Closing, Sellers have the full, absolute, and unrestricted
right to sell, transfer, and convey to Buyer one hundred
percent (100%) of the franchisee's rights and interests under
the Franchise Agreements listed on Schedule 4.5. The
Franchise Agreements are in full force and effect and have not
been amended or modified in any respect. Sellers are current
in all obligations under said Franchise Agreements, there have
been no events of default thereunder, and no state of facts
exists which with notice or the passage of time or both would
constitute an event of default thereunder.
Section 4.6 Documents Sufficient. The documents
delivered by Sellers to Buyer pursuant to Section 3.2 of this
Agreement are valid, sufficient and effective to completely
transfer to Buyer full legal and equitable title to all of the
Assets.
Section 4.7 Litigation or Condemnation. Except as set
forth on Schedule 4.7 to this Agreement, there are no suits,
actions, condemnation actions, investigations, complaints or
other proceedings of any nature whatsoever in law or in
equity, which are pending or, to the best of Sellers'
knowledge, threatened against, or which affect in any manner,
Sellers or any of the Assets, by, in or before any federal,
state, municipal or other governmental court, department,
commission, board, bureau, agency or other instrumentality
(whether domestic or foreign). Sellers are not in default
with respect of any order, writ, injunction, garnishment, levy
or decree of any federal, state, municipal or other
governmental court, department, commission, board, bureau,
agency or instrumentality, and the use, occupancy, ownership
or transfer of the Assets do not constitute a default
thereunder. To the best of Sellers' knowledge, the operations
of Sellers at the Restaurant Locations and the condition of
the Assets do not violate any material federal, state or
municipal law, regulation or rule (including any applicable
zoning or similar use regulation or law). The Sellers'
operations at the Restaurant Locations have not received a
citation, warning or reprimand for, or otherwise been notified
of, any violation of any law, rule or regulation governing
alcoholic beverages or any health, environmental or similar
municipal, state or federal law or regulation which has not
been cured. To the best of Sellers' knowledge, Sellers have
served no food or foodstuff which was adulterated, spoiled or
contained any foreign substances, nor have Sellers served any
food item which has or, except as set forth on Schedule 4.7 of
this Agreement, is claimed to have, caused any illness or
injury to the consumer thereof.
Section 4.8 Taxes. All ad valorem and other property
taxes upon the Assets and Leases have been paid for 1993 and
all prior tax years. Sellers have also timely filed all
federal, state, local and other tax returns required to be
filed by Sellers which are due through the date of Closing.
Sellers have paid all taxes, interest, penalties, governmental
charges, duties, fees and fines imposed by the United States,
foreign countries, states, counties, municipalities, and
subdivisions, and by all other governmental entities or taxing
authorities, which are due and payable or for which
assessments have been received, the nonpayment of which would
result in a lien on any of Sellers' assets. There are no
suits, actions, claims, investigations, inquiries or
proceedings threatened or pending against Sellers with respect
to taxes, interest, penalties, governmental charges, duties or
fines, nor are any such matters under discussion with any
governmental authority, or have any claims for additional
taxes, interest, penalties, charges, fines, fees or duties
been received by or assessed against Sellers.
Section 4.9 Contracts. Except as set forth on Exhibit
"C" to this Agreement and other than agreements terminable on
no more than thirty (30) days notice, there are no management,
employment, service, marketing or advertising, vending, pest
control, supply, maintenance or other contracts or automobile,
soft drink dispenser, dishwasher or other leases entered into
by Sellers with respect to the Assets or the operation of the
Restaurant Locations.
Section 4.10 Disclosure. Neither any representation or
warranty by Sellers in this Agreement, nor any statement or
certificate furnished, or to be furnished, by or on behalf of
Sellers, nor any documents or certificate delivered to Buyer
pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain at
Closing any untrue statement of material fact or omits to
state any material fact necessary to make any statement
contained therein not misleading.
Section 4.11 Labor Relations. No employees of Sellers
are on strike, nor to the best knowledge of Sellers are any
such employees threatening to strike, and there is no strike
in progress. Sellers have no knowledge that any labor union
has recently attempted, or is presently attempting, to
organize any of Sellers' employees into a collective
bargaining unit, and no employees of Sellers are presently
organized into a collective bargaining unit.
Section 4.12 Employee Benefit Plans. Except as listed
on Schedule 4.12, Sellers have no deferred compensation,
pension, stock option, employee stock purchase, profit
sharing, retirement, bonus, medical, disability or other
employee benefit plan or arrangement. With the exception of
accrued and vested vacation liabilities, there are no accrued
liabilities under any such plan which are not fully funded.
In any event as to any such plan, particularly including any
plan which is subject to Title IV of ERISA, listed on Schedule
4.12, Sellers will pay or arrange to have the plan pay by
Closing, all benefits guaranteed, including any guarantees
under Title IV.
Section 4.13 Liabilities of Sellers. All liabilities
of Sellers related to the Restaurant Locations not expressly
assumed by Buyer hereunder will be promptly paid by Sellers;
and all liabilities secured by Assets to be transferred to
Buyer under this Agreement have been satisfied prior to, or
will be satisfied in conjunction with, Closing.
Section 4.14 Licensure. Sellers have all requisite and
necessary state, county and municipal licenses and permits, as
listed on Exhibit "C" hereto, necessary to operate the
Restaurant Locations as presently operated.
Section 4.15 Insurance Coverage. Schedule 4.15 to this
Agreement is a true and accurate list and brief description of
property, fire, casualty, liability, life, workers'
compensation, and other forms of insurance of any kind owned
or held by Sellers regarding the Restaurant Locations. All
such policies (a) are in full force and effect, (b) are valid
and outstanding policies, (c) insure against risks of the kind
customarily insured against and in the amounts customarily
carried by entities similarly situated, and (d) provide that
they will remain in full force and effect through the
respective dates set forth in Schedule 4.15
Section 4.16 Severance Pay. No employee of Sellers
involved in the operation of any Restaurant Location will be
entitled to severance pay by virtue of the transactions
contemplated by this Agreement.
Section 4.17 Environmental Matters. (a) For purposes
of this Agreement, the following terms shall have the
following meanings:
(i) "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings
relating to any Environmental Law or Environmental Permit
(hereinafter "Claims"), including, without limitation (a) any
and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental
Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury
to the environment.
(ii) "Environmental Laws" means any federal, state,
local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law in effect and in each case
as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order,
consent decree or judgment, relating to the environment or
Hazardous Substances including, without limitation, the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. 9601 et. seq.;
the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. 1101 et. seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 et. seq.; the Federal Water Pollution
Control Act, 33 U.S.C. 1251 et. seq.; the Clean Air Act, 42
U.S.C. 4701 et. seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. 136 et. seq.; the Safe Drinking
Water Act, 42 U.S.C. 300f et. seq.; the Toxic Substances
Control, 15 U.S.C. 2601 et. al.; the Oil Pollution Act of
1990, 33 U.S.C. 2701 et. seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. 1801 et. seq.; the
Atomic Energy Act, as amended, 42 U.S.C. 2011 et. seq.; or
the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C.
301 et. seq., and any laws regulating the use of biological
agents or substances including medical or infectious wastes
and the corresponding state laws, regulations and local
ordinances, etc. which may be applicable, as any such acts may
be amended.
(iii) "Environmental Permits" means all permits,
approvals, identification numbers, licenses and other
authorizations required under any applicable Environmental
Law.
(iv) "Hazardous Substances" means (a) any chemicals,
materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes,"
hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic
pollutants," "hazardous air pollutants," "pollutants,"
"contaminants," "toxic chemicals," "petroleum or petroleum
products," "toxics," "hazardous chemicals," "extremely
hazardous substances," "pesticides" or related materials, as
now, in the past, or hereafter defined in any applicable
Environmental Law; (b) any petroleum or petroleum products,
natural or synthetic gas, radioactive materials, asbestos-
containing materials, urea formaldehyde foam insulation, and
radon; and (c) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any
governmental authority.
(b) Except as would not, individually or in the
aggregate, have a material adverse effect on the business of
Seller or the Assets: (i) the Sellers have not violated, and
are not in violation of, any applicable Environmental Law nor
will Sellers violate any applicable Environmental Law between
now and the Closing; (ii) the Sellers have all Environmental
Permits and are in compliance with their requirements; (iii)
to the knowledge of the Sellers, none of the properties
currently leased or owned by the Sellers and which are the
subject of this Agreement are contaminated with any Hazardous
Substances; (iv) there are no past, pending or, to the
knowledge of the Sellers, threatened Environmental Claims, or
to the knowledge of the Sellers, circumstances that could
reasonably be anticipated to form the basis of an
Environmental Claim, against the Sellers; and (v) other than
with respect to the Shenandoah, Iowa, location to the
knowledge of the Sellers, there are no facts or circumstances
which indicate that underground storage tanks are or could
have been located on or under the Restaurant Locations.
Section 4.18 Financial Statements. Sellers have
previously provided to Buyer the unaudited consolidated
balance sheet of each of Seller as of December 31, 1993, and
the related unaudited statements of income, profit and loss
for the _______ month period then-ended (together with related
notes and schedules hereinafter together referred to as the
"Interim Financial Statements"), all as listed and described
on Exhibit "H".
The Interim Financial Statements, including the related
notes and schedules, have been prepared from the respective
books and records of each of Seller corporations in conformity
with generally accepted accounting principles applied on a
basis consistent with preceding years and throughout the
periods involved and present fairly the financial position of
each Seller corporation and Restaurant Location as represented
as of the dates of such statements. Each of Seller
corporation's has kept its books of account accurately in all
material respects in the ordinary course of business, the
transactions, entered into represent bonafide transactions and
the revenues, expenses, assets and liabilities of each of
Seller as represented therein have been properly recorded in
such books.
Section 4.19 Inventory. All items of inventory
reflected on the Balance Sheets of Sellers consist of, and on
the Closing date will consist of, items of good and standard
quality useable and sellable in the ordinary course of Buyer's
business. Such inventories are, and at Closing will be,
usable for the purposes for which intended and, in the case of
food items, wholesome and unadulterated, and will be
maintained in amounts reasonably sufficient for Seller's
operation until Closing.
Section 4.20 Leases. Each of the Leases is in full
force and effect and there is no proceeding or claim pending
or, to the knowledge of Sellers, threatened by any landlord,
nor is there any reasonably basis therefor, which will or
could have any material adverse effect upon the Lease or the
right of Buyer to remain in quiet possession of the premises
which are the subject of any Lease. Buyer has received no
notice from any landlord under the Leases which would have any
material adverse effect thereon. Sellers will obtain
unconditional assignments of the Leases, as currently in
effect and without amendment, for delivery to Buyer at
Closing.
Section 4.21 Consents. Sellers will obtain any
consents of governmental bodies, suppliers, vendors and other
persons required in order for Sellers to sell and transfer the
Assets hereunder, and the business related thereto, pursuant
to this Agreement.
ARTICLE V
COVENANTS OF SELLERS
Sellers jointly and severally covenant and agree as
follows:
Section 5.1 Transfer of Licenses and Permits. Sellers
shall use their best efforts and cooperate fully, at Buyer's
cost, in assisting Buyer with the assumption, transfer or
reissuance of any and all required state, county or city
licenses or permits required for the operation of the
Restaurant Locations, including any liquor licenses.
Section 5.2 Agreements Respecting Employees of
Sellers. Sellers agree to terminate the employment of all
employees involved in the operation of the Restaurant
Locations no later than the close of business on the date of
Closing. Buyer will consider such employees for rehire at the
discretion of Buyer at Buyer's then-current compensation rates
and benefit levels. Buyer agrees that any of Sellers' former
employees hired by Buyer will receive credit for years of
services with Sellers in connection with the transition to
Buyer's benefit plans for which such employees become
eligible.
Section 5.3 Conduct of Business. From the execution
of this Agreement until Closing, Sellers shall operate the
Restaurant Locations as they are currently being operated and
only in the ordinary course, using their best efforts to
preserve and maintain the services of Sellers' employees,
relationships with suppliers and customers, and to preserve
current levels of sales volume, and shall continue to insure
the Assets under existing policies of insurance at current
levels. Further, Sellers shall not with respect to the
business or Assets of any Restaurant Location:
(a) change in any manner the ownership of any of
the Assets;
(b) increase the rate of compensation to management
or other employees beyond the usual and customary annual merit
increases or bonuses under established compensation plans
without consent of Buyer;
(c) incur any capital expenditure obligations, or
acquire by purchase other than for cash, lease or otherwise,
any capital assets;
(d) incur any material obligations, expenses or
liabilities except in the usual and ordinary course of
business;
(e) mortgage, pledge or subject to lien any of the
Assets; or
(f) sell or otherwise dispose of any Asset except
in the ordinary course of business.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Sellers to enter into this Agreement
and to consummate the transactions contemplated hereby, Buyer
represents and warrants to Sellers as follows:
Section 6.1 Corporate Existence. Buyer is a
corporation validly existing and in good standing under the
laws of the State of Kansas.
Section 6.2 Corporate Power and Authority. Buyer has
all requisite corporate power and authority to own its
properties and assets, and to carry on the business in which
it is now engaged. Buyer has the corporate power and
authority to perform the covenants of Buyer set forth in this
Agreement.
Section 6.3 Execution and Delivery Permitted. The
execution, delivery and performance of this Agreement will not
violate or result in a breach of any term of Buyer's Articles
of Incorporation or of its Bylaws or, to the best of Buyer's
knowledge after reasonable inquiry, result in a breach of or
constitute a default under any term known to Buyer in any
agreement or other instrument to which Buyer is a party, such
default having not been previously waived by the other party
to such agreements, or to the best of Buyer's knowledge after
reasonable inquiry, violate any law or any order, rule or
regulation applicable to Buyer, of any court or of any
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Buyer or its
properties. Buyer's Board of Directors, or an authorized
committee thereof, has taken all action required by law,
Buyer's Articles of Incorporation, its Bylaws and otherwise to
authorize the purchase of the Assets in accordance with this
Agreement certified evidence of which shall be provided by
Buyer to Sellers.
ARTICLE VII
COVENANTS OF BUYER
Buyer hereby covenants and agrees to accept conveyance of
the Assets and assignment of the Leases and Franchise
Agreements, and to assume and perform the obligations of
Sellers under the Assumed Contracts after the date of Closing.
ARTICLE VIII
PRORATIONS AND PURCHASE PRICE ADJUSTMENT;
CONDITIONS TO CLOSING
Section 8.1 Prorations and Purchase Price Adjustments.
The following items shall be prorated between Buyer and
Sellers as of the date of Closing, shall constitute an
adjustment to the Purchase Price of the Assets, and shall be
payable as provided in Section 2.3 above:
(a) All ad valorem, real and personal property
taxes, general and special assessments, and any other property
taxes on the Assets for the current tax year and which are not
yet due and payable; provided, however, if the amount of such
tax for the current tax year is not determinable, it shall be
prorated on the basis of the tax for the immediately preceding
tax year;
(b) All prepaid insurance premiums on insurance
policies covering the Assets and regarding welfare benefit
programs, but only if Buyer elects to have said coverage
remain in effect;
(c) Any amounts paid with respect to the Assumed
Contracts for services extending beyond the date of Closing
which are assigned to Buyer at Closing; and
(d) Any prepaid expenses associated with the
operation of a Restaurant Location which were paid by Sellers
in the ordinary course of business, including Lease or other
deposits, telephone expenses, billboard or other advertising
expenses, cooperative fees, and utility charges.
Sellers shall bear the cost and expense of all prorated
items applicable to periods prior to the date of Closing, and
shall receive the benefits thereof, and Buyer shall bear the
cost and expense of payment of all prorated items applicable
to periods from and after the date of Closing, and receive the
benefits thereof.
Section 8.2 Conditions to Closing. The obligation of
Buyer to close hereunder is subject to satisfaction of each of
the following conditions, the occurrence of which may, at the
option of Buyer, be waived at or before Closing:
(a) All representations and warranties of Sellers
in this Agreement shall be true on and as of the date of
Closing, and Sellers shall have delivered to Buyer a
certificate to such effect dated as of the date of Closing;
(b) The Assets shall not have been substantially
damaged as a result of fire, explosion, earthquake, disaster,
accident, any action by the United States or any other
governmental authority, earthquake, flood, drought, embargo,
riot, civil disturbance, uprising, activity of armed forces,
act of God, or public enemies;
(c) There shall be no material adverse change in
the Assets or the operations of the Sellers at the Restaurant
Locations from the date hereof to the date of Closing;
(d) Sellers shall have performed and complied with
all of Sellers' obligations under this Agreement which are to
be performed or complied with by Sellers prior to or on the
date of Closing;
(e) Sellers shall be willing and able to deliver
all of the documents required to be delivered by them by this
Agreement including, without limitation, the written consent
of Pizza Hut, Inc. to assignment of the Operator's rights
under the Franchise Agreements;
(f) Buyer and Sellers shall have approved the form
and substance of the documents delivered by Sellers pursuant
to this Agreement, such approval to be in its sole discretion;
(g) Buyer shall have obtained an acceptable
commitment to provide title insurance on the real property
being acquired and containing only the Permitted Exceptions
and such exclusions as are not inconsistent with the terms of
this Agreement regarding the condition of title to be conveyed
by Sellers;
(h) Sellers shall have terminated the employment of
all employees involved in the operation of the Restaurant
Locations effective no later than the close of business on the
date of Closing, and made adequate provision for payment of
all accrued and vested vacation, sick pay, severance and other
benefits, if any, owed to Sellers' employees; and
(i) The Closing shall have been completed prior to
5:00 p.m., central daylight time, August 1, 1994.
ARTICLE IX
INDEMNIFICATION AGAINST LOSS
Section 9.1 Indemnification by Sellers. Sellers
jointly and severally agree to defend, indemnify and hold
harmless the Buyer against and in respect of any and all loss,
liability, lien, damage, costs and expense incurred or
resulting from:
(a) Any misrepresentation, breach of warranty or
nonfulfillment of any covenant or Agreement on the part of
Sellers under or in connection with this Agreement;
(b) The acts or omissions of Sellers alleged to be
violations of Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. 2000e et. seq.; the Fair Labor Standards
Act; the Age Discrimination in Employment Act; the Labor
Management Relations Act; state unemployment taxes, Section
4.17 hereof and any and all other applicable state or federal
statutes or regulations;
(c) Operation of the Restaurant Locations on or
prior to the date of Closing; and
(d) All liabilities of Sellers not expressly
assumed by Buyer hereunder including, but not limited to,
obligations arising with regard to Sellers' responsibilities
under the Franchise Agreements, assigned Leases, and Assumed
Contracts on or prior to the date of Closing.
Section 9.2 Indemnification by Buyer. Buyer agrees to
defend, indemnify, and hold harmless Sellers against and in
respect of any and all loss, liability, lien, damage, costs
and expense incurred or resulting from:
(a) Any misrepresentation, breach of warranty or
nonfulfillment of any covenant on the part of Buyer in
connection with this Agreement;
(b) Operation of the Restaurant Locations after the
date of Closing; and
(c) Obligations arising with regard to Buyer's
responsibilities under the Franchise Agreements, Leases, and
Assumed Contracts after the date of Closing.
Section 9.3 Indemnification Procedure. Promptly but
in any event within ten (10) days after the receipt by an
indemnified party hereunder of notice of any action or the
making of any claim indemnifiable hereunder, such indemnified
party, if a claim in respect thereof is to be made against an
indemnifying party under this Article, shall notify the
indemnifying party of the assertion of the claim or the
commencement of the action, and the indemnifying party shall
thereafter assume the costs and liability of the defense of
such claim; provided, however, that the indemnified party
shall be entitled, to the extent it wishes and at its own
expense, to participate in the defense of the action. If
requested by either party, the other party hereby shall
provide reasonable assistance to the requesting party, with
reasonable expenses of such assistance to be paid by the
requesting party. If, however, the indemnifying party, after
notice of a claim or notice of the commencement of an action,
breaches its obligation to defend the indemnified party, said
indemnified party shall be entitled to defend itself, and the
indemnifying party shall remain liable for breach of this
indemnity agreement including all costs associated therewith.
Section 9.4 Limitation on Indemnification. Each
party's responsibility to indemnify the other pursuant to
Section 9.1 or 9.2 hereof shall be limited to the extent that
claims for indemnity must total Twenty-Five Thousand Dollars
($25,000) in the aggregate before a party hereto may seek
reimbursement for such Claims from the other. Once the
$25,000 threshold is met, the Indemnified Party may seek
reimbursement for all additional indemnity Claims from the
Indemnifying Party for any dollar amount.
ARTICLE X
NONCOMPETITION
Each Seller and, each shareholder, officer and director
thereof, in consideration of the Closing of the transactions
contemplated herein ("Covenantor") does covenant and agree
that for a period of five (5) years after the date of this
Agreement such Covenantor will not in any capacity whatsoever
either directly or indirectly, individually or as a member of
any business organization, engage in the production, delivery
or sale at retail of any pizza, pasta or Italian food item
similar to any Italian food item currently approved by Pizza
Hut, Inc. for sale in its System Restaurants or have any
employment or interest in any firm engaged in the production
or sale at retail of any such products, at a location within a
radius of twenty-five (25) miles of any Restaurant Location
unless the Buyer shall have given its prior written consent
thereto. The covenants set forth in this Article shall not
prohibit investment in less than one percent (1%) of the
capital stock of any publicly-held company which is engaged in
the proscribed activities set forth in this Article.
EXHIBIT XI
MISCELLANEOUS
Section 11.1 Notices. Except as otherwise expressly
provided, all notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or if
mailed by certified mail, return receipt requested, with first
class postage prepaid, addressed as follows:
If to Sellers:
______________________________
______________________________
______________________________
______________________________
If to Buyer: Vice President, Finance
NPC International, Inc.
720 West 20th Street
Pittsburg, KS 66762
or to such other address as Buyer or Sellers shall have last
designated by notice to the other party.
Section 11.2 Applicable Law. This Agreement shall be
governed by, and construed and enforced in accordance with,
the internal laws of the State of Kansas.
Section 11.3 Binding on Successors. All of the terms,
provisions and conditions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto,
their respective successors, assigns and legal
representatives.
Section 11.4 Payment of Costs.
(a) Sellers shall pay:
(1) All of Sellers' legal expenses;
(2) All costs, search fees and expenses
associated with the title insurance coverage specified herein;
(3) All costs of any real estate title
curative work;
(4) One-half of all fees, costs and expenses
incurred in recording all real estate documents related to the
transaction contemplated hereby;
(5) All sales, transfer or other taxes arising
from the transaction contemplated hereby rising under state
law;
(6) All other costs and expenses incurred by
Sellers in negotiating this Agreement and in consummating the
transactions contemplated hereby, including any fees or
commissions payable to any party representing Buyer in
connection with arranging or negotiating this Agreement and
the transactions contemplated hereby.
(b) Buyer shall pay:
(1) All of its legal expenses;
(2) One-half of all fees, costs and expenses
incurred in recording all real estate documents related to the
transaction contemplated hereby; and
(3) All other costs and expenses incurred by
Buyer in negotiating this Agreement and in consummating the
transactions contemplated hereby, including any fees or
commissions payable to any party representing Buyer in
connection with arranging or negotiating this Agreement and
the transactions contemplated hereby.
Section 11.5 Closing Not to Prejudice Claim for
Damages. Closing of the transactions contemplated by this
Agreement shall not prejudice any claim for damages which
either party may have hereunder, in law or in equity, due to a
material default in observance in the due and timely
performance of any of the covenants and agreements herein
contained or for the breach of any warranty or representation
hereunder, unless such observance, performance, warranty or
representation is specifically waived in writing by the party
making such claim.
Section 11.6 Survival of Representations, Warranties,
Covenants and Undertakings. All of the representations,
warranties, covenants and undertakings made by the parties
hereto shall survive the execution of this Agreement and
Closing.
Section 11.7 Additional Documents. After Closing, each
party agrees to furnish such additional documents as are
necessary to complete the transactions contemplated hereby.
Section 11.8 Time is of the Essence. Time is of the
essence in the performance of the obligations of the parties
hereunder.
Section 11.9 Titles. The titles of the sections of
this Agreement are for convenience of reference only, and are
not to be considered in construing this Agreement.
Section 11.10 Entire Agreement. This Agreement and the
Exhibits and Schedules attached hereto and incorporated herein
by this reference contain the entire Agreement of the parties
hereto with respect to the transactions contemplated hereby
and supersede any and all prior agreements, arrangements and
undertakings between the parties. No inducements contrary to
the terms of this Agreement exist. No waiver of any term,
provision or conditions of this Agreement, whether by conduct
or otherwise, in any one or more instances shall be deemed to
be construed as a further or continuing waiver of any such
term, provision or condition or any other term, provision or
condition of this Agreement. This Agreement may not be
modified orally.
Section 11.11 Counterparts. This Agreement may be
executed in one or more counterparts which in the aggregate
shall comprise one Agreement.
ARTICLE XII
SIMULTANEOUS TRANSFER OF
CERTAIN MISSOURI AND IOWA RESTAURANT LOCATIONS
With respect to the Restaurant Locations listed on
Exhibits A-1 and A-2 hereto and marked with an asterisk
therein (the "Transfer Locations"), the Sellers acknowledge
that Buyer intends to sell or otherwise transfer the Assets
relating to the Transfer Locations (the "Transfer Assets") to
certain subsidiaries of Pizza Hut, Inc. ("Subsidiaries"), and
Sellers agree that upon such sale or transfer:
(a) all of the obligations of the Buyer, including
obligations under the representations and warranties of Buyer,
to Sellers with respect to the Transfer Assets which are to
survive the Closing, shall be assumed by and become the
obligations of the Subsidiaries, effective upon the sale of
the Transfer Assets to the Subsidiaries, and with respect
thereto, Sellers release Buyer from all such obligations.
Sellers also agree to look solely to the Subsidiaries with
respect to such obligations and shall not seek to enforce such
obligations against Buyer; and
(b) all of the representations and warranties,
covenants and other undertakings of Sellers in this Agreement
with respect to the Transfer Assets shall, effective upon
their sale to the Subsidiaries, be deemed to be for the
benefit of the Subsidiaries as though made directly to the
Subsidiaries in this Agreement; provided, however, that with
respect to any of the Transfer Assets being transferred to the
Subsidiaries, the representations and warranties herein shall
be limited to the period of time since any of such Transfer
Assets were acquired from Pizza Hut, Inc. or any of its
subsidiaries up to and through the Closing Date. Sellers
further agree to execute at Closing a novation agreement at
the request of Buyer in form acceptable to Buyer and Seller;
and
(c) the Buyer's and Subsidiaries rights and
obligations under Section 9.4, Limitation on Indemnification,
shall apply, pro rata, as between the parties and the
Subsidiaries in proportion to the fraction, the numerator of
which is the number of Restaurants acquired by Buyer or the
Subsidiaries, respectively, and the denominator is the total
number of Restaurants sold by Seller pursuant to this
Agreement.
Any cost or expense generated solely relating to the
transfer of the Transfer Assets to the Subsidiaries, not
otherwise provided for in this Agreement, shall be the expense
of Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day, month and year first above written.
BUYER:
NPC INTERNATIONAL, INC.
By __________________________
Name ________________________
Title _______________________
SELLERS:
The following defined
Seller acknowledges
agreement to be bound by
the terms of this Agreement
as the respective interest
of such Seller may appear,
as follows:
As to the interest of
Seller Pizza Hut of
Chanute, Kansas, Inc.
Attest:
____________________________ By___________________________
Secretary President
STOCKHOLDERS:
_______________________ 60%
James E. O'Donnell
_______________________ 40%
John Mertes
TOTAL 100%
As to the interest of
Seller Pizza Hut of Ft.
Scott, Kansas Inc.
Attest:
____________________________ By ___________________________
Secretary President
STOCKHOLDERS:
_______________________ 60%
James E. O'Donnell
_______________________ 40%
John Mertes
TOTAL 100%
As to the interest of
Seller Pizza Hut of Nevada,
Inc.
Attest:
____________________________ By ___________________________
Secretary President
STOCKHOLDERS:
_______________________ 60%
James E. O'Donnell
_______________________ 40%
John Mertes
TOTAL 100%
As to the interest of
Seller Pizza Hut of
Washington, Missouri, Inc.
Attest:
____________________________ By ___________________________
Secretary President
STOCKHOLDERS:
_______________________ 40%
James E. O'Donnell
_______________________ 40%
T.J. O'Donnell
_______________________ 10%
John Mertes
TOTAL 90%
As to the interest of
Seller Northwest Missouri
Pizza, Inc.
Attest:
____________________________ By ___________________________
Secretary President
STOCKHOLDERS:
_______________________ 80%
James E. O'Donnell
As to the interest of
Seller Pizza Hut of
Southwest Iowa, Inc.
Attest:
____________________________ By ___________________________
Secretary President
STOCKHOLDERS:
_______________________ 56.6%
James E. O'Donnell
Fran D. Jabara Living Trust
By: ___________________ 43.4%
Trustee
TOTAL 100%
As to the Real Property at the following locations:
1625 S. Santa Fe, Chanute,KS
1100 E. Austin, Nevada, MO
320 W. Lockling, Brookfield, MO
1180 S. Odell, Marshall, MO
9th & Avalon, Trenton, MO:
J&J Enterprises, Inc.
Attest:
____________________________ By ___________________________
Secretary President
STOCKHOLDERS:
_______________________ 60%
James E. O'Donnell
_______________________ 40%
John Mertes
TOTAL 100%
As to the Real Property at
1810 South Main, Ft. Scott, KS:
J&J Real Estate, a Kansas
general partnership
_______________________ 60%
James E. O'Donnell
_______________________ 40%
John Mertes
TOTAL 100%
constituting all the partners of J&J Real Estate.
As to the Real Property at
1905 E. 5th, Washington,MO:
_______________________
James E. O'Donnell
_______________________
T.J. O'Donnell
_______________________
Christine Graf
as individuals, jointly and severally.
As to the Real Property at
606 Highway 135 East,
Albany, MO and 303 S. 25th
Street, Bethany, MO:
______________________________
James E. O'Donnell
______________________________
Rose M. O'Donnell
as individuals, jointly and severally.
