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: June 9, 2000
NPC INTERNATIONAL, INC.
(Exact name of registrant is specified in its charter)
Kansas
(State of incorporation)
0-13007 48-0817298
(Commission Identification No.) (IRS Employer Identification No.)
720 West 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
Pursuant to an Asset purchase Agreement (the "Agreement"), dated
June 6, 2000, by and among NPC International, Inc. and certain of
its subsidiaries and affiliates (collectively, the "Company") and
certain subsidiaries and affiliates of Pizza Hut, Inc.
(collectively, "Pizza Hut") the Company completed the 64 unit
acquisition of Pizza Hut restaurants announced May 4, 2000. The
acquisition consisted of units in Iowa (58), Illinois (4) and
Georgia (2).
The consideration for the purchase of the 64 units was
$18,650,000. Additional consideration for inventory and cash on
hand at the time of closing will also be paid. The purchase price
was negotiated between the Company and Pizza Hut, based primarily
on the Company's internal review of the value of the cash flow
generated by operations of the restaurants and future development
opportunities perceived to be available to the Company.
The company financed the acquisition through its existing
Revolving Credit Facility.
A press release of Registrant issued on June 8, 2000, announcing
the completion of the above described acquisition, is attached as
an exhibit to this report and incorporated herein by reference.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a.) Financial statements of business acquired
Not applicable.
(b.) Pro forma financial information
Not applicable.
(c.) Exhibits
The exhibits set forth on the Index to Exhibits on page 3 are
incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
NPC INTERNATIONAL, INC.
DATED: June 9, 2000
By /s/ Troy D. Cook
Troy D. Cook
Sr. Vice President Finance
Chief Financial Officer
Principal Financial Officer
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
2-A Asset Sale Agreement
99-A Press Release of Registrant dated June 8, 2000
EXHIBIT 2-A
STANDARD FORM
ASSET SALE AGREEMENT
By and Between
NPC INTERNATIONAL, INC. AND
NPC MANAGEMENT, INC.
and
PIZZA HUT OF AMERICA, INC.,
EL KrAm, INC.,
RED RAIDER PIZZA COMPANY and
UPPER MIDWEST PIZZA HUT, INC.
and
PIZZA HUT, INC.
Dated as of June 6, 2000
ASSET SALE AGREEMENT
ASSET SALE AGREEMENT, dated as of June 6, 2000 (this
"Agreement"), is by and among PIZZA HUT OF AMERICA, INC., EL KrAm,
INC., RED RAIDER PIZZA COMPANY AND UPPER MIDWEST PIZZA HUT, INC.
(the "Sellers") and NPC INTERNATIONAL, INC. AND NPC MANAGEMENT,
INC. (the "Buyer"), and Pizza Hut, Inc. ("PHI").
W I T N E S S E T H :
WHEREAS, the Sellers operate the 64 Pizza Hut restaurants
listed on Schedule 1.1 hereto and own or lease certain real and
personal property that they use in connection with such
restaurants; and
WHEREAS, the Sellers desire (i) to sell, convey, assign,
transfer or lease (as provided below) to the Buyer the operations
of and substantially all of the real and personal property (the
"Assets") owned by the Sellers (or any of them) and used in
connection with such restaurants and (ii) to assign or sublease to
the Buyer substantially all of the real property leased from third
parties and used in connection with such restaurants, and the
Buyer desires to acquire such restaurants and property "AS IS,
WHERE IS", with all faults (collectively, the "Acquisition"), on
the terms and subject to the conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the premises and of the
mutual covenants of the parties set forth in this Agreement, the
Sellers and the Buyer hereby agree as follows:
1. Transfer of Business and Property.
1.1 Tangible Personal Property.
Subject to the terms of this Agreement, at the Closing (as
such term is defined in Section 7), each Seller shall sell,
convey, assign, transfer and deliver to the Buyer, and the
Buyer shall purchase and acquire from such Seller, all of
such Seller's right, title and interest in and to the
following types of tangible personal property
(collectively, the "Personal Property") relating to the
Pizza Hut restaurant business (the "Business") being
conducted at the restaurants listed on Schedule 1.1 hereto
(collectively, the "Restaurants") that are operated by such
Seller:
(a) all furniture, signs, fixtures and equipment located
in the Restaurants;
(b) all prepaid rents, advertising and other amounts and
all utility and miscellaneous deposits relating to the
Restaurants (subject to Sections 1.6 and 7.1);
(c) all uniforms, menus, dishes, glassware, utensils and
other small wares located in the Restaurants;
(d) all inventories of usable food ingredients, packaging
materials, supplies, paper products and other consumables
and stores in the Restaurants, as well as a change fund for
each Restaurant consisting of cash in drawers and in safes
located in such Restaurant (but excluding any deposits in
safes located in such Restaurant and any amounts in local
bank accounts) in an amount and in denominations adequate
to do business at such Restaurant on the morning after the
Closing Date (as such term is defined in Section 7)
(subject to Sections 1.6 and 7.1);
(e) copies of real property records relating solely to the
operations of the Restaurants, and copies of certain
personnel and payroll records relating solely to the Hired
Employees (as such term is defined in Section 5) who worked
in the Restaurants immediately prior to the Closing; and
(f) buildings and improvements, if any, owned by any of
the Sellers located on the Leased Real Property (as such
term is defined in Section 1.3(b)).
1.2 Excluded Property.
It is expressly understood and agreed that:
(a) Leased Equipment.
The Personal Property shall not include the equipment
listed or described on Schedule 1.2, which is leased by the
Sellers pursuant to lease agreements with third parties.
Notwithstanding the foregoing, the relevant Seller will
assign and transfer to the Buyer all of such Seller's
right, title and interest in and to, and the Buyer will
assume and will agree to faithfully perform, pay and
discharge when due all of the terms, covenants, liabilities
and obligations of such Seller under, each equipment lease
(collectively, the "Equipment Leases") with respect to
leased equipment located in the Restaurants (collectively,
the "Leased Equipment"). The Buyer will have 90 days after
the Closing Date to review any non-readily terminable
Equipment Leases which the Sellers may assign and transfer,
and the Sellers agree to assume and may terminate those
Equipment Leases rejected by the Buyer in writing within
such 90 day period. Notwithstanding the foregoing, the
Buyer agrees to perform the obligations arising under the
Equipment Leases for at least 90 days following the Closing
Date, if not terminable sooner, and for the entire term of
the Equipment Leases if such Equipment Leases are not
terminated or put back to the Sellers within the allotted
90 days.
(b) Contracts.
The relevant Seller will assign and transfer to the Buyer
all of such Seller's right, title and interest in and to,
and the Buyer will assume and will agree to faithfully
perform, pay and discharge when due all of the terms,
covenants, liabilities and obligations of such Seller
under, each contract and agreement (including, without
limitation, each service, security, maintenance, print
advertising and supply contract) used on the Closing Date
in the normal and customary operations of, and that relates
specifically to, one or more of the Restaurants
(collectively, the "Contracts"). During the first 90 days
after the Closing Date, the Buyer may reject any non-
readily terminable contracts (other than print advertising
contracts) which the Sellers have assigned and transferred
and the Sellers agree to assume and may terminate those
Contracts rejected by the Buyer in writing within such 90
day period. Notwithstanding the foregoing, the Buyer
agrees to perform the obligations arising under all of the
Contracts for at least 90 days following the Closing Date,
if not terminable sooner, and for the entire term of the
Contracts if such Contracts are not terminated or put back
to the Sellers within the allotted 90 days. Additionally,
the Buyer agrees that it will pay for or reimburse the
Sellers for any non-terminable benefits flowing from the
Contracts (including print advertising) that are received
by the Restaurants or the Business after the Closing Date
for which PHI and/or the Sellers have previously paid or
will pay, regardless of the date of assignment or
termination of such Contracts. The Contracts shall not
include, and Sellers will not assign, any contracts with
hotels or motels for in-room delivery service of Pizza Hut
products, any contracts for credit card service involving
one or more of the Restaurants, any contracts with respect
to participation in the National School Lunch Program,
automobile leases, and any other contracts (other than
print advertising contracts and computer hardware
maintenance contracts) that are covered by a master
agreement which includes any Pizza Hut restaurant other
than the Restaurants listed on Schedule 1.1. All such
contracts as related to the Restaurants will be terminated
at Closing by Sellers. Notwithstanding the foregoing, the
Buyer may seek to contract with hotels, motels and school
food service programs within the delivery areas, if any,
designated in the Franchise Agreement (as defined at
Section 4.4).
(c) Ordinary Course Dispositions.
The Personal Property relating to any individual Restaurant
shall not include any property or assets which have been
disposed of prior to the Closing in the ordinary course of
business consistent with the past operations of such
Restaurant, and subject to the provisions of Section 4.1.
(d) Intellectual Property.
The Personal Property shall not include any patents,
trademarks, copyrights, any applications or registrations
for any thereof, or any other intellectual property or
similar rights or assets.
(e) Cash, Etc.
The Personal Property shall not include any cash (other
than the change funds specifically referred to in Sections
1.1(d)), bank accounts, cash equivalents or other similar
types of investments or marketable securities.
1.3 Real Property.
(a) Owned Real Property.
The Sellers collectively own the parcels of real estate
listed or described on Schedule 1.3(a) hereto, together
with all buildings and improvements located thereon
(collectively, the "Owned Real Property"). At Closing, the
relevant Seller will lease to the Buyer, and the Buyer will
lease from such Seller, the Owned Real Property under
leases in the form attached hereto as Exhibit "H" and
Exhibit "H-1" (collectively, the "Seller Leases"). Sellers
will also sublease to Buyer any additional parking lot
leases that support the Restaurants located on Owned Real
Property.
(b) Leased Real Property.
The Sellers collectively lease from third parties the
parcels of real estate listed or described on Schedule
1.3(b) (collectively, the "Leased Real Property") pursuant
to existing real property leases (the "Real Property
Leases"). The Buyer hereby agrees to execute an Assignment
and Assumption of Lease Agreement and Blanket Guaranty,
substantially in the form attached as Exhibit "A" hereto,
with respect to each parcel of Leased Real Property,
pursuant to which the Buyer will assume all of the relevant
Seller's right, title and interest in and to, and will
agree to faithfully perform, pay and discharge when due all
of the terms, covenants, liabilities and obligations of the
relevant Seller under, the Real Property Lease related to
such parcel of the Leased Real Property. The Buyer also
agrees to name the Seller as an additional insured as its
interests may appear, with respect to its insurance
coverage required to be carried under the terms of the Real
Property Leases related to each Leased Real Property, to
indemnify the Seller from any losses resulting from any
contingent liability that Seller may have with respect to
the Leased Real Property. The relevant Seller agrees to use
reasonable, good-faith efforts to obtain:
(i) from each landlord from whom consent to an
assignment of a Real Property Lease to the Buyer is
required, a consent to such assignment; and
(ii) from each landlord, an estoppel certificate with
respect to each Real Property Lease.
The Sellers need not pay any consideration or incur any
incremental liability to obtain either a consent or an
estoppel certificate from any landlord. If any required
consent to an assignment cannot be obtained prior to
Closing, the relevant Seller may, at its option, either (i)
proceed with the assignment and agree to indemnify the
Buyer for any losses suffered by Buyer as a consequence of
the lack of consent, or (ii) sublease the affected Leased
Real Property to the Buyer, or (iii) enter into a
management agreement or other similar arrangement with the
Buyer on terms that are no less favorable to the Buyer than
those contained in the Real Property Lease covering the
affected Leased Real Property.
1.4 Licenses.
(a) The Buyer acknowledges that certain operational
licenses and permits, excluding alcoholic beverage
licenses, are required in the operation of the Restaurants
and the Business (collectively, "Licenses") and that
neither such Licenses nor any alcoholic beverage licenses
will be transferred or assigned by the Sellers as part of
the Acquisition. The Buyer recognizes that it must make
application to the appropriate regulatory agencies for all
necessary Licenses. Application for all required Licenses
shall be in accordance with Section 1.4(b). Upon the
execution of this Agreement by all parties hereto, the
Buyer agrees to promptly file all necessary applications.
The Buyer acknowledges that the Buyer is responsible for
obtaining alcoholic beverage licenses in the event Buyer
desires to sell alcoholic beverages in the Restaurants.
All costs, fees and expenses associated with the Buyer
obtaining new Licenses (including alcoholic beverage
licenses) shall be borne by the Buyer.
(b) The Buyer hereby agrees that neither it nor any of its
Affiliates (as defined in Section 8.12(e)) will take any
action, or fail to take any action, which would result in
any of the Sellers' Licenses (including alcoholic beverage
licenses) being revoked or otherwise terminated prior to
Closing. The Buyer's applications for Licenses (including
alcoholic beverage licenses) shall specify that such
Licenses are not to become effective until the day
following the Closing Date and that the approval of such
applications by the applicable agency or authority shall be
conditioned upon the event of Closing. In the event that
this Agreement is terminated or abandoned prior to the
Closing or the Closing Date is rescheduled, the Buyer
hereby agrees, at its cost, to immediately withdraw or
reschedule all pending applications with respect to all
Licenses (including alcoholic beverage licenses) and to
otherwise take all action, in cooperation with the Sellers,
as may be required to cause all rights in the applicable
Licenses (including alcoholic beverage licenses) to remain
with or return to the Sellers. This Section 1.4(b) shall
expressly and permanently survive the termination or
abandonment of this Agreement.
(c) The Buyer and each Seller acknowledge that neither
this Agreement nor the Closing will be conditioned upon or
subject to the Buyer's ability to obtain the Licenses
(including alcoholic beverage licenses). The Sellers will
remove all of the Licenses (including alcoholic beverage
licenses) from the Restaurants on the Closing Date.
(d) The Sellers agree to provide the Buyer with license
screen summaries of the Licenses (to the knowledge of
Sellers) under which the Sellers currently operate the
Restaurants, excluding any and all construction, building,
zoning and occupancy permits.
1.5 Restaurant Inventories and Change Funds.
At the close of business on the Closing Date, Sellers'
representatives (who may, at the Buyer's election, be
accompanied by the Buyer's representatives) will take
inventory, utilizing an Inventory Form in the form of
Exhibit "B", of the food ingredients, supplies, paper
products, and other consumables in each Restaurant and
count each Restaurant's change fund. The Buyer may, at its
option, send its representatives to the Restaurants to
accompany Sellers' representatives during these
inventory/cash counts, and may then verify the accuracy of
those inventory/cash counts. Unless the Buyer's
representatives accompany Sellers' representatives during
these inventory/cash counts and point out any discrepancies
during the inventory/cash counts, the inventory/cash counts
prepared by Sellers' representatives will be final. Any
differences between the actual inventories and change funds
and the estimates described in Section 1.6 will be resolved
pursuant to Section 7.1.
1.6 Purchase Price and Other Payments.
As consideration for the transfer of the Assets and the
other undertakings of the Sellers and PHI in this
Agreement, the Buyer shall pay the following amounts to the
parties and at the times noted:
(a) [INTENTIONALLY DELETED]
(b) Purchase Price Balance.
At Closing, the Buyer shall pay to the Sellers the sum of
$18,650,000, representing the balance of the Purchase
Price.
(c) Estimated Charges.
At Closing, the Buyer shall pay to the Sellers, as provided
in Section 7.8, the sum of $214,865, representing an
estimate of the net amount due to Sellers, after
prorations, for prepaid items (including rent and
advertising), inventories, utilities, change funds,
property taxes, and similar costs chargeable to Buyer under
this Agreement ("Estimated Charges"). An itemization of
the Estimated Charges is reflected in the form attached
hereto as Exhibit "J" ("Pre-Close Statement"). Any
difference between the Estimated Charges paid at Closing
and the actual costs that should have been paid by Buyer
will be resolved after the Closing pursuant to section 7.1.
(d) Other Taxes and Fees.
At Closing, or when otherwise due, as provided in Section
7.8, the Buyer shall pay to the Sellers, or to the
appropriate governmental authority, its prorata share of
any and all applicable sales, use, excise, transfer,
documentary, and recording fees and taxes, and all other
fees and taxes arising from the Acquisition (other than
Sellers' income taxes) that any party hereto may be
required to pay by any applicable law, rule or regulation.
To the extent any such fees or taxes are payable by
Sellers, they will be included in the Estimated Charges.
(e) Other Amounts.
At Closing, or when otherwise due, the Buyer shall pay to
the Sellers, or to the appropriate payee, any other amounts
due under this Agreement or any other agreement
contemplated hereby.
The Purchase Price balance and all other amounts payable by
the Buyer to Sellers at Closing shall be paid by wire
transfer of immediately available funds to an account
designated by Sellers. All such amounts must be wired to
Sellers by no later than 10:30 a.m. on the day following
the Closing Date. The Purchase Price includes the initial
franchise fees required by the Franchise Agreement (as
defined in Section 4.4), which initial fees will be
collected by Sellers and remitted to PHI. The Purchase
Price does not include any other fees due under the
Franchise Agreement.
1.7 Closing Documents.
Prior to or at the Closing of the Acquisition, the Sellers,
PHI, and the Buyer will exchange the following fully
executed documents:
(a) the Franchise Agreement in the form attached as Exhibit
"E";
(b) Assignment and Assumption Agreement for the Real
Property Leases and Blanket Guaranty in the form of
Exhibit "A" hereto, accompanied by any required
consents and estoppel certificates (or indemnities)
as contemplated by Section 1.3(b);
(c) a Bill of Sale for the Assets, in the form
attached as Exhibit "C";
(d) Assignment and Assumption Agreement for the Equipment
Leases and Contracts being assumed in the form of
Exhibit "D" hereto;
(e) The SUS/FMS License and Support Agreement;
(f) the Access and Confidentiality Agreement in the form
attached as Exhibit "F";
(g) A waiver letter from AmeriServe Food Distribution,
Inc. or the Sales and Distribution Agreement in the
form attached as Exhibit "G"; and
(h) Seller Leases of the Owned Real Propertiesin the form
of Exhibit "H" and Exhibit "H-1";
(i) the Pepsi-Cola Beverage Supply and Marketing Agreement
in the form attached as Exhibit "K"; and
(j) any other documents reasonably requested by any party.
1.8 Non-Assumption.
At the Closing, the Buyer shall assume the liabilities of
PHI and the Sellers that relate to the operation of the
Restaurants from and after the Closing Date (the "Assumed
Liabilities"). Except as specifically contemplated by this
Agreement, the Buyer will not assume any liabilities or
obligations that arise from the operations of the
Restaurants on or before the Closing Date, and the Sellers
agree to timely perform all obligations relating to the
Restaurants that arise out of operations of the Restaurants
for the period prior to the Closing Date.
1.9 Title Insurance, Surveys and Environmental Reports.
Due to the critical timeline requirements to close the
transaction, PHI may order title searches on all Owned Real
Property and Leased Real Property to be transferred to the
Buyer pursuant to this Agreement. These title searches
will be performed by either Lawyer's Title, Stewart Title
or another title company approved by PHI. PHI has
established relations with such companies and the Buyer
will be entitled to the benefit of PHI's preferred rates.
If permissible under applicable law and the terms of any
agreement with such companies, the fees paid for the
searches may be applied toward the title policy costs for
title policies desired by the Buyer based upon these title
searches. As provided for in Sections 1.6 and 7.8, the
Buyer shall reimburse the Sellers at Closing for all actual
or estimated costs incurred by Sellers on behalf of the
Buyer related to these items subject to any post-closing
adjustments pursuant to Section 7.1 of this Agreement.
1.10 POS and Computer Systems
The Restaurants will contain the software and hardware for
the proprietary SUS/FMS Systems (the "SUS/FMS Systems") of
the Sellers' parent company, PHI. At the Closing, the
Buyer will execute a separate license and support agreement
with PHI (in form and substance satisfactory in all
respects to PHI) (a "SUS/FMS License and Support
Agreement"), which will require the Buyer to pay the
standard software support, Help Desk and menu fees then
being charged by PHI with respect to the SUS/FMS Systems
for each such Restaurant. Buyer will also keep in force a
hardware maintenance agreement with a vendor approved by
PHI. Neither the Sellers nor PHI will have any liability
to the Buyer for losses suffered by the Buyer as a result
of the Buyer's failure to properly install, update and use
software updates or to implement necessary hardware changes
after Closing.
2. Representations of Sellers.
Each Seller represents to the Buyer that as of the date of this
Agreement:
2.1 Corporate Power and Authority.
Such Seller is a corporation duly organized and in good
standing under the laws of the jurisdiction of its
incorporation, and has full corporate power and authority
to execute, deliver and perform its obligations under this
Agreement and each other agreement or document executed or
to be executed by such Seller in connection herewith, and
to consummate the transactions contemplated hereby and
thereby. Such Seller is authorized to do business and is
in good standing in the states in which the Restaurants
operated by such Seller are located. This Agreement has
been, and each other agreement or document to be executed
by such Seller in connection herewith will be, duly
executed and delivered by such Seller and constitutes, or
will constitute, a legal, valid and binding obligation of
such Seller, enforceable against such Seller in accordance
with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
2.2 No Conflict or Breach.
The execution, delivery and performance of this Agreement
and any other agreements or documents contemplated hereby
and the consummation by such Seller of the transactions
contemplated hereby or thereby do not and will not:
(a) conflict with or constitute a violation of the
certificate of incorporation or by-laws of such Seller;
(b) to the knowledge of such Seller, conflict with or
constitute a violation of (with or without the giving of
notice or the lapse of time or both) any provision of any
law, judgment, order, decree, rule or regulation of any
legislative body, court, governmental or regulatory
authority or arbitrator which is applicable to or relates
to such Seller; or
(c) to the knowledge of such Seller, with or without the
giving of notice or the lapse of time or both, violate or
conflict with, constitute a default under, result in a
breach, acceleration or termination of any provision of, or
require notice to or the consent of any third party under,
any contract, agreement, commitment, indenture, mortgage,
deed of trust, lease, licensing agreement, note or other
instrument or obligation to which such Seller is a party or
by which such Seller is bound, which could, individually or
in the aggregate, reasonably be expected to have a material
adverse effect upon such Seller or the ability of such
Seller to perform its obligations under this Agreement or
any other agreement or document contemplated hereby.
2.3 Consents.
To the knowledge of such Seller, except the filings with
the Federal Trade Commission (the "FTC") and the Department
of Justice (the "DOJ") referred to in Section 4.3, no
material consent, approval, or authorization of, or
designation, declaration or filing with, or notice to, any
legislative body, court, governmental or regulatory
authority or arbitrator under any provision of any law,
judgment, order, decree, rule or regulation is required on
the part of such Seller in connection with the execution,
delivery and performance of this Agreement or any other
agreement or document contemplated hereby or with the
consummation of the transactions contemplated hereby and
thereby.
2.4 Title to Owned Property.
Such Seller has good and marketable title to all of the
Personal Property and the Owned Real Property with respect
to the Restaurants operated by such Seller, free and clear
of any liens and encumbrances, except for (i) Personal
Property, with respect to any Restaurant operated by such
Seller, disposed of prior to the Closing in the ordinary
course of business of such Restaurant consistent with the
past operations of such Seller and Section 4.1, below, (ii)
certain fixtures, buildings and improvements located on the
Leased Real Property which such Seller has the right to use
pursuant to the Real Property Leases (or any of them),
(iii) easements or other encumbrances which do not
materially adversely affect the full use and enjoyment of
the Owned Real Property, or the purposes for which it is
currently used, and (iv) liens for taxes and assessments
not yet due and payable. This representation does not
constitute a representation by such Seller as to the title
of such Seller's lessors of any Leased Real Property or
Leased Equipment, nor does this representation constitute a
representation of the condition of any of the Personal
Property or the Owned Real Property or the Leased Real
Property, which is sold or leased, as applicable, "AS IS,
WHERE IS", with all faults. Additionally, the Seller shall
not be required to execute an "Owner's Affidavit" to delete
standard exceptions to an owner's or mortgagee's title
policy.
2.5 Adequacy of Personal Property.
The Personal Property and the Leased Equipment with respect
to the Restaurants operated by such Seller constitute all
of the items of tangible personal property required to
operate such Restaurants as Pizza Hut restaurants. This
representation does not constitute a representation of the
condition of the Personal Property or Leased Equipment,
each of which are sold or assigned, as applicable, "AS IS,
WHERE IS", with all faults. Schedule 2.5 lists the items
of Personal Property and Leased Equipment (other than
computer hardware and software) required to operate the
respective type of Restaurant listed thereon.
2.6 Leases.
Each of the material Equipment Leases and Real Property
Leases with respect to the Restaurants operated by such
Seller is in full force and effect, and to the knowledge of
such Seller, such Seller has not received notice of a
material default under any of them. Subject to obtaining
any necessary consents and approvals, such Seller has the
right to assign each such material Equipment Lease and Real
Property Lease to the Buyer, providing the Buyer with the
right to use such Leased Equipment or to occupy such Leased
Real Property, as the case may be, on terms and conditions
that are materially the same as such Seller had prior to
any such assignment. This representation does not
constitute a representation as to the adequacy of any
lessor's title to any of the Leased Equipment or the Leased
Real Property, as the case may be.
2.7 Insurance.
Such Seller carries adequate insurance (both in form and
amount), subject to deductibles, with respect to the
Business and real and personal property of the Restaurants
operated by such Seller. Such insurance is in effect and
will remain in effect through the Closing Date.
2.8 Taxes.
Such Seller or its consolidated parent has filed all
requisite federal, state and local tax returns and has paid
all taxes required thereby, to the extent they have become
due and payable, other than (i) those presently payable
without penalty or interest, and (ii) any that are being
contested in good faith by appropriate proceedings. The
Sellers will indemnify the Buyer for any damages suffered
by the Buyer as a result of the Sellers' failure to pay any
such taxes to the extent such taxes related to the
ownership or operation of the Restaurants prior to the
applicable Closing Date.
2.9 Brokerage and Finder's Fees.
None of the Sellers, any of their respective Affiliates or
any of their respective stockholders, directors, officers,
partners or employees, on behalf of any Seller, has
retained or dealt with any broker or finder, or has
incurred or will incur any liability for brokerage fees,
commissions or finder's or similar fees in connection with
the transactions contemplated by this Agreement or the
other documents contemplated hereby.
2.10 Absence of Certain Changes.
Each of the unaudited profit and loss summaries (the
"Profit and Loss Summaries") that relate to the Restaurants
for the periods ended November 24, 1999 previously
delivered to the Buyer are true and correct in all material
respects. Since November 24, 1999, none of the Restaurants
have suffered any material adverse change in its financial
condition or results of operations other than changes in
the ordinary course of business that, individually or in
the aggregate, have not had a material adverse effect on
such Restaurants. Such Seller agrees to inform the Buyer
of any material adverse changes to the financial condition
or results of operations of the Restaurants prior to the
Closing.
2.11 Environmental Matters.
To the best of the Sellers' knowledge, without independent
investigation and except as otherwise reflected in Sellers'
files regarding the Restaurants which have been provided to
Buyer:
(a) The Restaurants contain no asbestos in friable form;
(b) No underground petroleum or chemical storage tanks or
underground storage facilities are located under the
Restaurants;
(c) No contaminant, industrial waste, pollutant(1), toxic
or hazardous waste, or any similar substance of any kind or
character has been stored, processed, or disposed of in or
around the Restaurants by the Sellers in conducting their
business, or discharged at any time by the Sellers directly
or indirectly into the environment in violation of any law
or governmental regulation applicable to the Sellers, or
into any sanitary sewer connection or treatment system
except in conformity with requirements of all applicable
laws, regulations and valid permits nor has any such act or
occurrence taken place under the ownership of a prior owner
which has not been cured, except in such instances which
would not have a material adverse effect on the operations
and financial condition of the Restaurants taken as a
whole; and'
(d) With respect to the Restaurants, the Sellers have not
at any time been the subject of any governmental
investigation or proceeding pertaining to the use, storage,
processing, transportation or disposition of toxic or
hazardous waste or any other subject or material that has
been determined to be hazardous to human health under
applicable law or government regulation, nor have they been
the subject of any governmental investigation or proceeding
pertaining to violation of any waste water or sewage
disposal statutes or regulations applicable to the business
and operations of the Sellers.
(1) The term "pollutant" means any substance subject to control
under the Federal Water Pollution Act, 33 U.S.C. Section 1251, et
seq., or the Clean Air Act, 42 U.S.C. Section 7401, et seq., or
regulations promulgated thereunder. The term "toxic or hazardous
waste" means any chemical, substance, or material that is
classified by the Environmental Protection Agency as a hazardous
substance under the Comprehensive Environmental Response,
Compensation' and Liability Act of 1980, 42 U.S.C. Section 9601,
et seq., or regulations promulgated thereunder, or under the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901, et seq., or regulations promulgated thereunder, or which is
a petroleum product, or which is classified by any applicable
state or local regulation or statute as a hazardous waste.
3. Representations of the Buyer.
The Buyer represents to the Sellers that as of the date of this
Agreement:
3.1 Organization, Standing, Power and Authority.
The Buyer is a duly organized corporation and in good
standing under the laws of the jurisdiction in which it is
incorporated and in which it is doing business, and has
full power and authority to execute, deliver and perform
its obligations under this Agreement and each other
agreement or document executed or to be executed by it in
connection herewith, and to consummate the transactions
contemplated hereby and thereby. The Buyer and each of its
Affiliates that sign this Agreement and/or the Franchise
Agreement meet all of the standards for, and requirements
of, franchisees of PHI, including without limitation the
standards set forth in the Manual (as defined in the
Franchise Agreement) and the requirements set forth on
Schedule 3.1 hereto. This Agreement has been, and each
other agreement or document to be executed by the Buyer in
connection herewith will be, duly executed and delivered by
the Buyer and constitutes, or will constitute, a legal,
valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and
fair dealing.
3.2 No Conflict or Breach.
The execution, delivery and performance of this Agreement
and any other agreements or documents contemplated hereby
and the consummation by the Buyer of the transactions
contemplated hereby or thereby do not and will not:
(a) conflict with or constitute a violation of the
articles of incorporation or by-laws or other
organizational documents, as applicable, of the Buyer or
any of its Affiliates that sign this Agreement and/or the
Franchise Agreement;
(b) conflict with or constitute a violation of (with or
without the giving of notice or the lapse of time or both)
any provision of any law, judgment, order, decree, rule or
regulation of any legislative body, court, governmental or
regulatory authority or arbitrator which is applicable to
or relates to the Buyer or any of its Affiliates that sign
this Agreement and/or the Franchise Agreement; or
(c) with or without the giving of notice or the lapse of
time or both, violate or conflict with, constitute a
default under, result in a breach, acceleration or
termination of any provision of, or require notice to or
the consent of any third party under, any contract,
agreement, commitment, indenture, mortgage, deed of trust,
lease, licensing agreement, note or other instrument or
obligation to which either of the Buyer (or any of its
Affiliates that sign this Agreement and/or the Franchise
Agreement) are a party or by which the Buyer (or any such
Affiliate) is bound, which could, individually or in the
aggregate, reasonably be expected to have a material
adverse effect upon the Buyer (or any such Affiliate) or
the ability of the Buyer (or any such Affiliate) to perform
its obligations under this Agreement or any other agreement
or document contemplated hereby.
3.3 Consents.
No consent, approval, or authorization of, or designation,
declaration or filing with, or notice to, any legislative
body, court, governmental or regulatory authority or
arbitrator under any provision of any law, judgment, order,
decree, rule or regulation is required on the part of the
Buyer (or any of its Affiliates that sign this Agreement
and/or the Franchise Agreement) in connection with the
execution, delivery and performance of this Agreement or
any other agreement or document contemplated hereby or with
the consummation of the transactions contemplated hereby
and thereby, except for the filings with the FTC and the
DOJ referred to in Section 4.3.
3.4 Brokerage and Finder's Fees.
Neither the Buyer nor any of its Affiliates or any of its
respective stockholders, directors, officers, partners or
employees, on behalf of the Buyer, has retained or dealt
with any broker or finder, or has incurred or will incur
any liability for brokerage fees, commissions or finder's
or similar fees in connection with the transactions
contemplated by this Agreement or the other documents
contemplated hereby.
3.5 Obligations Under Other Franchise Agreements.
Neither the Buyer nor any Affiliate of it is in default of
any material provision under any existing franchise
agreement with PHI or with Tricon Global Restaurants, Inc.
or any division or subsidiary thereof, nor does there exist
any condition or conditions that, with the giving of
notice, the passage of time, or both, would ripen into a
default thereunder.
4. Covenants.
4.1 Operation Until Closing.
From and after May 4, 2000, the Sellers have operated and
will operate the Restaurants in the ordinary course of
business. Each Seller will maintain all of the Assets with
respect to the Restaurants operated by such Seller in
substantially the same condition (ordinary wear and tear
excepted) as they were in on May 4, 2000, except for (i)
Personal Property disposed of in the ordinary course of
business consistent with the past operations of such
Restaurant; provided, however, any such Personal Property
must be replaced by similar assets of equal or greater
value in like or better condition than those assets
transferred or removed or (ii) Personal Property
transferred among Restaurants that are subject to this
Agreement. Seller will only make capital improvements to
the Restaurants that have been authorized as evidenced by a
fully approved and executed CAPEX dated prior to the date
of this Agreement. The damage or destruction of any
Restaurant operated by any Seller before the Closing will
not affect the Buyer's obligation to close the transactions
contemplated by this Agreement. Subject to the
requirements of any applicable Real Property Lease, such
Seller shall proceed to repair the damage or, if such
repair is not reasonably practicable in the opinion of such
Seller prior to the Closing Date, then such Seller shall
credit to the Buyer at the Closing an amount equal to the
sum of the reasonable cost (as agreed by the Buyer and the
Sellers) of repairing or restoring the damaged or destroyed
restaurant to substantially the same condition as
immediately before the damage or destruction.
4.2 Access to Restaurants and Employees.
The Buyer (and/or its consultants, attorneys, lenders or
advisers) may not inspect any Restaurant or contact any
Pizza Hut employees working in such Restaurant or market
until (i) Sellers have made Employee Announcements to the
employees of the Restaurants, and (ii) the Buyer (and when
applicable in Seller and PHI's sole discretion, the Buyer's
consultants, attorneys, lenders or other advisors) has
executed the Access and Confidentiality Agreement in the
form attached hereto as Exhibit "F". Once these conditions
have been met, if the Buyer chooses to inspect the
Restaurants (under the conditions set forth herein and in
the Access and Confidentiality Agreement), the Buyer must
schedule such inspections with PHI, the Buyer must be
accompanied by an agent or employee of PHI and the Buyer
must conduct the inspections in a manner that minimizes
disruption to the Restaurant's operations. Any such
inspections are for the Buyer's information only; the
Restaurants are being sold "AS IS, WHERE IS." Buyer does
not have the right to perform environmental audits of the
Leased Real Property. Buyer acknowledges and agrees that a
violation of this Section 4.2 shall constitute a default
under this Agreement by Buyer and Sellers shall have, in
addition to any other rights or remedies hereunder, at law
or in equity, the right to terminate this Agreement and
retain the Exclusivity Fee as provided in Section 1.6.
4.3 Hart-Scott-Rodino Act.
The Buyer and the Sellers shall, in cooperation with each
other, file (or cause to be filed) with each of the DOJ and
the FTC any reports or notifications that may be required
to be filed by them under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") in connection with
the transactions contemplated by this Agreement. If the
Sellers, based upon the advice of counsel, determine that
any filings with the DOJ and the FTC are necessary, the
Buyer and any necessary Affiliates of the Buyer agree to
make any such filings in connection with the transactions
contemplated by this Agreement upon request from PHI. The
Buyer and the Sellers shall promptly comply with all
requests for further documents and information made by the
DOJ or the FTC, shall use their best efforts to obtain
early termination of all waiting periods under the HSR Act,
and shall furnish to the others all such information in its
possession as may be necessary for the completion of the
reports or notifications to be filed by the others. All
fees due from any party to the FTC or the DOJ under the HSR
Act in connection with the filing of any of those reports
or notifications shall be borne by the Buyer.
4.4 Franchise Agreement.
Subject to the terms and conditions of this Agreement, PHI
will grant to the Buyer the franchise rights and
obligations contained in the Pizza Hut Location Franchise
Agreement in the form attached hereto as Exhibit "E" (the
"Franchise Agreement"). A copy of the form of the
Franchise Agreement has been provided to the Buyer with
PHI's Uniform Franchise Offering Circular.
4.5 Sales and Distribution Agreement.
The Buyer acknowledges that the Restaurants are subject to
a Sales and Distribution Agreement (the "S&D Agreement")
with AmeriServe Food Distribution, Inc. ("AmeriSource").
Pursuant to the S&D Agreement, the Buyer agrees, prior to
or at Closing, to enter into a Sales and Distribution
Agreement in the form of Exhibit "G" (which is
substantially on the same terms as the S&D Agreement),
pursuant to which AmeriServe will continue to be the
exclusive distributor of Exclusive Restaurant Products (as
defined in the S&D Agreement) for the Restaurants listed on
Schedule 1.1 for a term equal to the remainder of the
original term of the S&D Agreement. In the alternative,
Buyer will deliver to Sellers a letter from AmeriServe
waiving Buyer's execution of the S & D Agreement and
acknowledging PHI's compliance with the terms of the S & D
Agreement. The Buyer acknowledges that the Buyer's terms
of credit with AmeriServe are subject to AmeriServe's
credit approval process and AmeriServe may require certain
guarantees from the Buyer and/or its Affiliates. PHI shall
not guarantee in any way the payments or other obligations
of the Buyer to AmeriServe.
4.6 Pepsi-Cola Beverage Supply and Marketing Agreement
The Buyer understands that the Restaurants are subject to a
Pepsi-Cola Beverage Supply and Marketing Agreement (the
"Pepsi Agreement") between PHI and its Affiliates and the
Pepsi-Cola Company ("Pepsi"), the term of which expires
December 31, 2011. Pursuant to the Pepsi Agreement, the
Buyer understands that Buyer is required to and agrees to
enter into a Franchisee version of the Pepsi-Cola Beverage
Supply and Marketing Agreement ("Franchisee Agreement") in
the form of Exhibit "K", pursuant to which Buyer will agree
that Pepsi beverage products shall be, subject to certain
exceptions provided for in the Franchisee Agreement, the
exclusive fountain and bottle and can products sold,
dispensed, or otherwise made available or in any way
advertised, displayed or promoted in the Restaurants listed
on Schedule 1.1 for a term equal to the remainder of the
original term of the Pepsi Agreement.
The Buyer acknowledges that once the Buyer enters into the
Franchisee Agreement with Pepsi with respect to the
Restaurants listed on Schedule 1.1, neither PHI nor its
Affiliates will have any further obligations under the
Pepsi Agreement with respect to the Restaurants listed on
Schedule 1.1 and PHI shall not guarantee in any way any
payments or other obligations between Buyer and Pepsi.
5. Sellers' Employees.
PHI's policy on refranchising (a copy of which is attached as
Schedule 5) does not obligate the Sellers to offer transfer
opportunities to any of its restaurant-level employees, i.e.,
all employees at the level of "Restaurant General Manager" or
below, who will be affected by sale of the Restaurants. Sellers
will seek to provide opportunities for employees to remain with
Sellers but such employment is not guaranteed and will depend on
Sellers' assessment of its business needs as well as the
employee's performance. Unless otherwise agreed before Closing,
with respect to any of Sellers' restaurant-level employees,
Sellers will terminate the employment of those employees at the
close of business on the Closing Date. Sellers will directly
pay all terminated employees, including any of the employees
hired by the Buyer (the "Hired Employees") for earned and unused
vacation, in accordance with Sellers' normal policies (which do
not call for Sellers to pay for accrued but unearned
vacation).The terminated employees may become employees of the
Buyer as of the day following the Closing Date and PHI hereby
waives any violation of Section 13.2 of the Franchise Agreement
with respect to the Hired Employees. All claims of the
employees arising out of their employment with Sellers before
the Closing Date will be the sole liability of Sellers, and
Sellers will indemnify the Buyer from all claims of that nature.
As between Sellers and the Buyer, the Buyer assumes all claims
of the Hired Employees relating to employment by the Buyer
arising after the Closing Date, and the Buyer will indemnify
Sellers from all such claims by them. For the purpose of
determining benefits for Hired Employees, the Buyer agrees to
honor the Hired Employees' length of service and anniversary
dates with the Sellers. The Sellers will furnish the Buyer a
list of the Hired Employees that defines their length of service
and anniversary dates. The Buyer understands that the active
participation of the Hired Employees in all benefit plans
maintained by the Sellers will end on the Closing Date. Sellers
will continue any employee benefit payment obligations for Hired
Employees who are on leave of absence or disabled on the Closing
Date in accordance with the Sellers' or PHI's policies. No
compensation increases shall be granted by Sellers to the Hired
Employees unless expressly approved by Buyer. Buyer will not
deny any increases which are reasonable and justifiable.
If any of the Sellers' employees are transferred to other
operations of the Sellers ("Transferred Employees"), in
accordance with PHI's policy on refranchising, the Sellers will
(upon request by the Buyer) use their reasonable best efforts to
provide to the Buyer the services of some or all of the
Transferred Employees (as chosen by the Buyer) for up to 90 days
after the Closing. The Buyer will reimburse the Sellers for all
payroll and benefit costs associated with any such loaned
Transferred Employees.
6. Conditions to Closing.
(a) The obligations of the Sellers, on the one hand, and
the Buyer, on the other hand, to consummate the
transactions contemplated by this Agreement are subject to
the fulfillment, at or prior to the Closing, of each of the
following conditions:
(i) there shall not be in effect any preliminary or
permanent injunction or other order issued by any
federal or state court of competent jurisdiction in
the United States or by any United States federal or
state governmental or regulatory body nor any statute,
rule, regulation or executive order promulgated or
enacted by any United States federal or state
governmental authority which restrains, enjoins or
otherwise prohibits the consummation of the
transactions contemplated by this Agreement or any
other agreement or document contemplated hereby; and
(ii)any filings required to be made under the HSR Act
shall have been made, and all applicable waiting
periods thereunder with respect to the transactions
contemplated by this Agreement shall have expired or
been terminated.
(b) Each Seller's obligations to consummate the
transactions contemplated by this Agreement are subject to
the fulfillment, at or prior to the Closing, of each of the
following conditions (any of which may be waived in writing
by such Seller):
(i) each of the representations of the Buyer under
this Agreement and each of the other agreements and
documents contemplated hereby shall be true and
correct in all material respects at and as of the time
of the Closing with the same effect as though such
representations had been made again at and as of that
time, except to the extent that any such
representations expressly relate to an earlier date in
which case any such representations shall be true and
correct in all material respects at and as of such
earlier date;
(ii)the Buyer shall have performed and complied with
each obligation, covenant and condition required by
this Agreement and the other documents contemplated
hereby to be performed or complied with by it prior to
or at the Closing, with such exceptions as could not
reasonably be expected to result in a material adverse
effect on the ability of the Buyer to perform its
obligations under this Agreement or any other
agreement or document contemplated hereby provided,
however, that nothing in this subparagraph shall
affect Sellers' rights under Section 4.2 in the event
of a default thereunder;
(iii)the Capital Expenditures Committees of Tricon
Global Restaurants, Inc., and PHI will have approved
the transactions contemplated by this Agreement;
(iv)the Sellers will have received a copy of a
resolution or unanimous written consent evidencing the
action by the Buyer's Board of Directors or the
Buyer's general partner or such other similar
authorizing body approving the purchase of the Assets
under this Agreement certified by an authorized
officer, partner or member; and
(v) the Buyer will deliver to Sellers a statement,
signed by the Buyer's Chief Financial Officer,
certifying that at least 20% of the Purchase Price
paid to Sellers and PHI at Closing will be represented
by "at risk capital" as defined by applicable
accounting rules.
(vi)the Sellers shall have received evidence
satisfactory in all respects to them that the Buyer
shall have hired an operator to manage the Restaurants
to be purchased by the Buyer, which operator has
substantial experience in the operation of Pizza Hut
restaurants and has been approved by PHI, in its sole
discretion; and
(vii)the Buyer shall deliver to Sellers and PHI, and
the Sellers and PHI shall have received from the Buyer
and its Affiliates, as the Sellers and PHI deem
necessary, in their sole discretion, all Uniform
Franchise Offering Circular receipts, including those
relating to any Addenda or Amendments.
(c) The Buyer's obligation to consummate the transactions
contemplated by this Agreement are subject to the
fulfillment, at or prior to the Closing, of each of the
following conditions (any of which may be waived in writing
by the Buyer):
(i) each of the representations of each Seller under
this Agreement and each of the other agreements and
documents contemplated hereby shall be true and
correct in all material respects at and as of the time
of the Closing with the same effect as though such
representations had been made again at and as of that
time, except to the extent that any such
representations expressly relate to an earlier date in
which case any such representations shall be true and
correct in all material respects at and as of such
earlier date;
(ii) each Seller shall have performed and complied
with each obligation, covenant and condition required
by this Agreement and the other documents contemplated
hereby to be performed or complied with by it prior to
or at the Closing, with such exceptions as could not
reasonably be expected to result in a material adverse
effect on the ability of the Sellers to perform their
obligations under this Agreement or any other
agreement or document contemplated hereby; and
(iii) the Buyer will have received a copy of a
resolution of Sellers' Board of Directors approving
the sale of the Assets certified by an authorized
officer of the applicable Seller.
7. Closing.
Unless otherwise agreed, the consummation of the transactions
contemplated by this Agreement will occur at the "Closing", at
10:00 a.m. (local time) on June 7, 2000, at the offices of PHI
in Dallas, Texas, or such other location as may be designated by
the Sellers in their sole discretion. (As used herein, the date
the Closing actually occurs is referred to in this Agreement as
the "Closing Date"). At the Closing, the Sellers shall deliver
to the Buyer such bills of sale, instruments of assignment,
transfer and conveyance and the other documents contemplated by
this Agreement. Against such delivery, the Buyer shall pay to
the Sellers the balance of the Purchase Price and all other
amounts required to be paid at the Closing in accordance with
Section 1.6 above and shall deliver the other documents
contemplated by this Agreement. All actions taken at the
Closing shall be deemed to have been taken simultaneously at the
time the last of any such actions is taken or completed. Upon
the completion of the Closing, title to the Assets and the
assumption of the Assumed Liabilities will be deemed to be
effective as of 11:59 p.m. on the Closing Date. The Sellers
will cooperate with the Buyer to see that the transfer of the
Assets proceeds smoothly.
7.1 Post-Closing Adjustments.
From time to time after the Closing Date, the Buyer or the
Sellers may prepare and submit to the other party one or
more post-closing statements concerning any obligations
that become due under this Agreement that were not paid at
Closing, or for which the actual costs varied from any
estimate. The net amount owed will be paid within 30 days
after receipt of the post-closing statement. Any amount
not paid within 30 days after receipt of a post-closing
statement will bear interest at the rate of 18% per annum,
or the maximum legal rate. Without limiting the generality
of this provision, the following is a non-exclusive list of
some of the types of items that may be reimbursed through
use of post-closing statements: rent; equipment lease
payments; utilities; inventories and change funds; sales
taxes and any applicable interest and penalties; real or
personal property taxes; and advertising and other prepaid
expenses.
7.2 Post-Closing Indemnification.
The Buyer will indemnify the Sellers, their affiliates,
subsidiaries, employees, officers, directors, and agents,
on an after-tax basis, against any loss, cost, damage, or
other expense (including attorney's fees) (collectively,
"Losses") that arise from operation of the Restaurants or
related properties after Closing. The Sellers (jointly and
severally) will indemnify the Buyer, its affiliates,
subsidiaries, employees, officers, directors, and agents,
on an after-tax basis, against any Losses that arise from
operation of the Restaurants or related properties on or
before the Closing.
7.3 Critical Deficiencies.
Notwithstanding that the Assets are being sold to Buyer "AS
IS, WHERE IS", with all faults, and subject to the
limitations set forth herein, Sellers agree to indemnify
the Buyer for the actual costs incurred by Buyer to cure
any Critical Deficiency. For purposes of this section, a
"Critical Deficiency" is a deficiency in the kitchen (or
other area of the Restaurant that is not accessible to the
general public) that a local health department determines
is of such a magnitude that the Buyer would not be
permitted to open the subject Restaurant for business while
such deficiency exists. Sellers' obligation to provide the
Buyer such indemnity is conditioned upon the Buyer
notifying the Sellers of the Critical Deficiencies within
seven (7) days after Closing and providing Sellers with
copies of all relevant inspection reports citing the
Critical Deficiencies within thirty (30) days after
Closing.
The maximum amount of the indemnity for which Sellers will
be liable hereunder will not exceed the lesser of $10,000
per Critical Deficiency or, in the aggregate for all
Restaurants listed on Schedule 1.1, $3,000 per Restaurant.
Sellers will have no obligation to indemnify the Buyer for
lost profits or other consequential damages resulting from
any business interruption while the Critical Deficiencies
are cured. Buyer specifically acknowledges that this
provision supersedes entirely all prior oral or written
discussions, agreements or understandings regarding the
Sellers' responsibility for the costs to repair Critical
Deficiencies or other faults related to the Assets.
Sellers agree to reimburse Buyer within forty-five (45)
days after receiving a reimbursement request from Buyer.
Sellers further agree that each Restaurant will have
adequate equipment, smallwares, inventories, change funds
and supplies to function as a Pizza Hut Restaurant.
7.4 Additional Documents.
For the period of two years following the Closing, each of
the parties covenants to cooperate and provide such
additional documents or instruments as the other party may
reasonably request for the purpose of carrying out this
Agreement. Each of the parties will use reasonable
efforts, none of which shall require the payment of any
consideration, to have their present officers, directors,
and employees cooperate after the Closing in furnishing
information, evidence, testimony and other assistance
concerning matters, including but not limited to litigation
and employment matters, that occurred prior to or after the
Closing.
7.5 The Buyer's Acknowledgment.
The Buyer acknowledges that:
(a) Except as set forth in Section 7.6(b), below, the
Sellers (and their agents and employees) have made no
statements or warranties to the Buyer as an inducement for
the Buyer's decision to purchase, except as contained in
this Agreement or in the PHI Franchise Offering Circular
for Prospective Franchisees, and the Buyer's decision to
purchase was made independently by it with the aid of
professional counselors, including legal, accounting, and
financial advisors.
(b) The Sellers have made available to the Buyer, before
the Buyer's execution of this Agreement, the Profit and
Loss Summaries. The Buyer's decision to purchase the
Assets for the consideration set forth in this Agreement
was made independently, based on inspection of the Profit
and Loss Summaries by the Buyer or its agents or
representatives (and on other information available to the
Buyer), without reliance on the book ledgers or on any oral
statements of any kind or character by the Sellers or their
representatives.
7.6 Information Statement.
The Buyer and the Sellers will timely file any information
statement required by regulations issued pursuant to
Section 1060(b) of the Internal Revenue Code of 1986, as
amended.
7.7 Closing Costs, Transfer Fees and Expenses.
The Buyer will pay and indemnify the Sellers from any and
all closing costs including, but not limited to, costs for
all environmental reports sought by the Buyer or required
by Buyer's lender, title search fees, title insurance
premiums, recording costs and survey costs, sales, use,
excise, transfer, documentary, recording, property and
other taxes and fees (except the Sellers' income taxes) and
other costs for which Sellers are to be reimbursed
hereunder that arise out of the transactions contemplated
by this Agreement that either of the Sellers or the Buyer
may be required to pay, which shall become due and payable
prior to, on or after the Closing Date. As provided in
Section 1.6, at Closing the Buyer will pay Sellers an
estimate of these charges that are due to Sellers. Any
differences between the estimated charges paid and the
actual charges incurred will be resolved pursuant to
Section 7.1.
8. Miscellaneous.
8.1 Notices.
Any notice or other communication under this Agreement
shall be in writing (including, without limitation, by
telecopy or like transmission) and shall be considered
given (a) when delivered personally (including, without
limitation, by overnight courier), (b) when telecopied
(with confirmation of transmission having been received),
or (c) three days after being mailed by registered mail
(postage prepaid, return receipt requested), in each case
to the respective parties at the addresses set forth below
(or at such other address as a party may specify by notice
to the other):
if to the Sellers, to them c/o:
Pizza Hut, Inc.
14841 Dallas Parkway
Dallas, Texas 75240
Attention: John J. Murphy, Esq.
Telecopy No.: (972) 338-6852
if to the Buyer, to:
NPC International, Inc.
NPC Management, Inc.
14400 College Blvd., Suite 201
Lenexa, KS 66215
Attn: James K. Schwartz
Troy Cook
Telecopy No.: 913-327-5849
Telephone No.: 913-327-5555
with a copy to:
Craig Evans
Stinson, Mag & Fizzell
1201 Walnut, Suite 2800
Kansas City, MO 64106
Telephone No.: 816-842-8600
8.2 Survival.
The provisions set forth in subsections 1.4(b), 4.5, 8.4,
8.8 and 8.14 of this Agreement shall expressly and
permanently survive the termination or abandonment of this
Agreement. All covenants and agreements contained in this
Agreement shall expressly and permanently survive the
Closing Date and shall remain in full force and effect,
except for the representations set forth in Sections 2 and
3, which representations shall expressly survive the
Closing Date for a period of six months following the
Closing Date.
8.3 Termination of Agreement.
This Agreement will terminate and be of no further force
and effect if the transfer has not been consummated by the
close of business on June 7, 2000.
8.4 Modification and Waiver.
No modification or waiver of any of the provisions of this
Agreement, and no consent by any of the parties to any
departure from the provisions of this Agreement by the
other party, will be effective unless the modification or
waiver is in writing and signed by the party or parties to
be bound. Each modification or waiver will be effective
only for the period, on the conditions, and for the
specific instances and purposes specified in the writing.
No notice to or demand on any of the parties in any case
will entitle it, them, or any of them to any other or
further notice or demand in similar or other circumstances.
8.5 Assignment: Binding Effect.
This Agreement is intended to inure to the benefit of, and
is binding upon, the parties and all of their respective
successors and permitted assigns. This Agreement is not,
however, assignable or transferable, in whole or in part,
by any of the parties except upon the express prior written
consent of all of the other parties, and nothing contained
in this Agreement is intended to confer upon any person,
other than the parties and their respective heirs,
successors, and permitted assigns, any rights, remedies, or
obligations under, or by reason of, this Agreement. Any
request by the Buyer for the Sellers' consent to the
assignment of this Agreement will be subject to the
conditions on assignment contained in the Franchise
Agreement. PHI and its respective successors and assigns
are intended third-party beneficiaries of this Agreement.
Notwithstanding the foregoing, however, PHI may assign all
of its rights and obligations hereunder to Tricon Global
Restaurants, Inc. ("Tricon") or to any subsidiary of Tricon
that is the franchisor of the "Pizza Hut" concept and, upon
such assignment, PHI will have no further liability
hereunder.
8.6 Severability.
If any provision or provisions of this Agreement or of any
of the documents or instruments delivered pursuant hereto,
or any portion of any provision hereof or thereof, is
invalid or unenforceable pursuant to a final determination
of any court of competent jurisdiction or a result of
future legislative action, that determination or action
will be construed (whenever possible) so as not to affect
the validity or enforceability hereof or thereof and will
not affect the validity or effect of any other portion
hereof or thereof which shall remain in full force and
effect.
8.7 Entire Agreement.
This Agreement (including the Exhibits and the Schedules,
which are incorporated into this Agreement by reference)
contains the entire understanding of the parties with
respect to the transactions contemplated by this Agreement
and may be amended, modified, supplemented, or altered only
by a writing duly executed by all of the parties. Any
prior agreements or understandings relating to the same
subject matter, whether oral or written, are entirely
superseded by this Agreement (other than the
confidentiality letter between the parties dated January
21, 1999).
8.8 Confidential Information.
This Agreement, the terms of the transactions contemplated
by this Agreement, and any other information heretofore or
hereafter disclosed or obtained in connection with this
Agreement concerning the business, operations, affairs, or
financial condition of any party hereto (collectively, the
"confidential information"), will be kept confidential,
except as otherwise required by law or legal process and
except to the extent (i) the confidential information is or
has been disclosed to any lender, to Tricon Global
Restaurants, Inc. or any of its Affiliates, or to the
respective attorneys, accountants, and financial advisors
of any party hereto and its Affiliates, (ii) the
confidential information is or hereafter becomes lawfully
obtainable from other sources, or (iii) this duty of
confidentiality is waived in writing by the party to whom
the confidential information relates. These obligations of
confidentiality will permanently survive termination or
abandonment of this Agreement.
8.9 GOVERNING LAW.
THIS AGREEMENT, AND ALL INSTRUMENTS DELIVERED IN CONNECTION
WITH THIS AGREEMENT, UNLESS OTHERWISE EXPRESSLY PROVIDED IN
THOSE OTHER INSTRUMENTS, SHALL IN ALL RESPECTS BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
8.10 Bulk Sales Waiver.
The Sellers and the Buyer each waive compliance by the
other with any bulk sales or similar laws that may be
applicable to the transactions contemplated by this
Agreement.
8.11 Expenses.
Except as otherwise expressly provided in this Agreement,
each of the parties will bear its own expenses incident to
this Agreement and the transactions contemplated by this
Agreement, including without limitation all fees and
disbursements of counsel and accountants retained by the
party, whether or not the transactions contemplated by this
Agreement are consummated.
8.12 Headings; Interpretation.
(a) The headings of the various articles, sections and
subsections of this Agreement have been inserted for the
purpose of convenience of reference only, are not a part of
this Agreement and shall not be deemed in any manner to
modify, explain, enlarge or restrict any of the provisions
of this Agreement.
(b) When reference is made in this Agreement to an
Article, Section, subsection, Schedule or Exhibit, such
reference shall be to an Article, Section, subsection,
Schedule or Exhibit of this Agreement unless otherwise
indicated. Whenever the words "included", "includes" or
"including" (or any other tense or variation of the word
"include") are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". As used
in this Agreement, the auxiliary verbs "will" and "shall"
are mandatory, and the auxiliary verb "may" is permissive
(and, by extension, is prohibitive when used negatively, as
a denial of permission). All accounting terms used but not
defined in this Agreement shall have the meanings
determined by generally accepted accounting principles.
The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular
provision of this Agreement. The definitions contained in
this Agreement are applicable to the singular as well as
the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term, and
references to a person include any individual, corporation,
partnership or other entity and its permitted heirs,
successors and assigns. Any agreement, instrument or
statute defined or referred to herein or in any agreement
or instrument that is referred to herein means such
agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case
of agreements or instruments) by waiver or consent and (in
the case of statutes) by succession of comparable successor
statutes.
(c) Whenever any statement or representation is made to
the knowledge of the Sellers (or either of them), whether
such statement or representation is contained in this
Agreement or in any other agreement or document
contemplated hereby, the "knowledge" referred to shall be
limited to the actual knowledge (without independent
investigation) of the employees and officers of the Sellers
and/or their Affiliates who are involved in the negotiation
and documentation of the transactions contemplated by this
Agreement.
(d) When reference is made in this Agreement to the
"relevant" Seller, such reference shall be to the Seller
who is selling or assigning, the portion of the Business,
Restaurants or real or personal property being referred to
in the context of such reference. Similarly, if reference
is made in this Agreement to the "relevant" Franchise
Agreement, such reference shall be to the Franchise
Agreement to which the Buyer being referred to in the
context of such reference is a party.
(e) For purposes of this Agreement, the term "Affiliate"
shall mean, with respect to any person or entity, any other
person or entity that directly or indirectly controls, is
controlled by, or is under common control with, such first
person or entity; provided that, with respect to the Buyer,
the term Affiliate shall also include all members of the
Buyer's Control Group.
8.13 Time is of the Essence.
Time is of the essence in the performance of this
Agreement. Facsimile signatures, including signatures
relating to the execution of this Agreement, shall be
deemed legally binding.
8.14 Announcements.
(a) None of the Buyer, its Affiliates or any of its
respective subsidiaries, employees, officers, directors,
agents or representatives may, without the prior written
consent of the Sellers (which consent shall not be
unreasonably withheld after the Closing Date but may be
arbitrarily withheld prior thereto), make any announcement
to the public concerning the transactions contemplated by
this Agreement.
(b) None of the Sellers, their Affiliates or any of their
respective subsidiaries, employees, officers, directors,
agents or representatives may, without the prior written
consent of the Buyer (which consent shall not be
unreasonably withheld after the Closing Date but may be
arbitrarily withheld prior thereto), make any announcement
to the public concerning the transactions contemplated by
this Agreement, except as required by law.
(c) This subsection 8.14 shall expressly and permanently
survive the termination or abandonment of this Agreement.
8.15 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original and all of which together shall constitute one and
the same instrument.
8.16 No Specific Enforcement.
Each of the parties to this Agreement acknowledges that the
Restaurants, the Assets, the Owned Real Property and the
Leased Real Property are not of a special, unique or
extraordinary character, and that any breach of this
Agreement or any of the agreements or documents
contemplated hereby by any party hereto could be
compensated for by damages. Accordingly, if any party
hereto breaches its obligations under this Agreement or any
of the agreements or documents contemplated hereby, the
other party hereto shall not be entitled to enforcement of
this Agreement or such other agreement or document by a
decree of specific performance requiring that the breaching
party fulfill its obligations hereunder or thereunder.
8.17 Submission to Jurisdiction.
For purposes of any legal action or proceeding relating to
this Agreement or any other agreements or documentation
contemplated by the Acquisition, including recognition or
enforcement of any judgment, the Buyer and each Seller
hereby irrevocably and unconditionally submit themselves
and their property to the non-exclusive general
jurisdiction of the state and federal courts of the county
in which PHI then has its principal place of business, and
any applicable appellate courts. The Buyer and each Seller
waive any objection to venue or the inconvenience of such
courts. The Buyer and each Seller waive, to the extent not
prohibited by law, any right they may have to claim any
special, exemplary or consequential damages in such action
or proceeding.
8.18 Arms Length Contract.
This Agreement has been negotiated "at arms length" by the
parties hereto, each represented by counsel of its choice
and each having an equal opportunity to participate in the
drafting of the provisions hereof. Accordingly, in
construing the provisions of this Agreement no party shall
be presumed or deemed to be the "drafter" or "preparer" of
the same.
8.19 No Future Acquisition.
The Buyer expressly acknowledges and agrees that it has no
rights to acquire any additional restaurants or properties,
other than those expressly provided in this Agreement, from
PHI or any of its Affiliates. Any future rights to acquire
restaurants or properties would only arise pursuant to a
separate written agreement between PHI or any of its
Affiliates and Buyer.
IN WITNESS WHEREOF, the parties have hereunto set their hands
and seals on the date and year first above written.
PIZZA HUT OF AMERICA, INC.
By: /s/ John J. Murphy
John J. Murphy
President
EL KrAm, INC.
By: /s/ John J. Murphy
John J. Murphy
President
RED RAIDER PIZZA COMPANY
By: /s/ John J. Murphy
John J. Murphy
President
UPPER MIDWEST PIZZA HUT, INC.
By: /s/ John J. Murphy
John J. Murphy
President
PIZZA HUT, INC.
By: /s/ John J. Murphy
John J. Murphy
Vice President - Law
NPC INTERNATIONAL, INC.
By: /s/ Troy D. Cook
Troy D. Cook, Vice President
NPC MANAGEMENT, INC.
By: /s/ Troy D. Cook
Troy D. Cook, Vice President
TABLE OF CONTENTS
1. TRANSFER OF BUSINESS AND PROPERTY 1
1.1 TANGIBLE PERSONAL PROPERTY 1
1.2 EXCLUDED PROPERTY 2
1.3 REAL PROPERTY 4
1.4 LICENSES 5
1.5 RESTAURANT INVENTORIES AND CHANGE FUNDS 6
1.6 PURCHASE PRICE AND OTHER PAYMENTS 6
1.7 CLOSING DOCUMENTS 7
1.8 NON-ASSUMPTION 8
1.9 TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL REPORTS 8
1.10POS AND COMPUTER SYSTEMS 8
2. REPRESENTATIONS OF SELLERS 9
2.1 CORPORATE POWER AND AUTHORITY 9
2.2 NO CONFLICT OR BREACH 9
2.3 CONSENTS 10
2.4 TITLE TO OWNED PROPERTY 10
2.5 ADEQUACY OF PERSONAL PROPERTY 11
2.6 LEASES 11
2.7 INSURANCE 11
2.8 TAXES 11
2.9 BROKERAGE AND FINDER'S FEES 12
2.10ABSENCE OF CERTAIN CHANGES 12
2.11ENVIRONMENTAL MATTERS 12
3. REPRESENTATIONS OF THE BUYER 13
3.1 ORGANIZATION, STANDING, POWER AND AUTHORITY 13
3.2 NO CONFLICT OR BREACH 14
3.3 CONSENTS 14
3.4 BROKERAGE AND FINDER'S FEES BROKERAGE AND
FINDER'S FEES 14
3.5 OBLIGATIONS UNDER OTHER FRANCHISE AGREEMENTS 15
4. COVENANTS 15
4.1 OPERATION UNTIL CLOSING 15
4.2 ACCESS TO RESTAURANTS AND EMPLOYEES 15
4.3 HART-SCOTT-RODINO ACT 16
4.4 FRANCHISE AGREEMENT 16
4.5 SALES AND DISTRIBUTION AGREEMENT 17
5. SELLERS' EMPLOYEES 17
6. CONDITIONS TO CLOSING 18
7. CLOSING 20
7.1 POST-CLOSING ADJUSTMENTS 21
7.2 POST-CLOSING INDEMNIFICATION 21
7.3 CRITICAL DEFICIENCIES 21
7.4 ADDITIONAL DOCUMENTS 22
7.5 THE BUYER'S ACKNOWLEDGMENT 22
7.6 INFORMATION STATEMENT 23
7.7 CLOSING COSTS, TRANSFER FEES AND EXPENSES 23
8. MISCELLANEOUS 23
8.1 NOTICES 23
8.2 SURVIVAL 24
8.3 TERMINATION OF AGREEMENT 25
8.4 MODIFICATION AND WAIVER 25
8.5 ASSIGNMENT: BINDING EFFECT 25
8.6 SEVERABILITY 26
8.7 ENTIRE AGREEMENT 26
8.8 CONFIDENTIAL INFORMATION 26
8.9 GOVERNING LAW 26
8.10BULK SALES WAIVER 27
8.11EXPENSES 27
8.12HEADINGS; INTERPRETATION 27
8.13TIME IS OF THE ESSENCE 28
8.14ANNOUNCEMENTS 28
8.15COUNTERPARTS 29
8.16NO SPECIFIC ENFORCEMENT 29
8.17SUBMISSION TO JURISDICTION 29
8.18ARMS LENGTH CONTRACT 29
8.19NO FUTURE ACQUISITION RIGHTS 29
INDEX TO EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit "A" Form of Assignment and Assumption Agreement
(Real Property Leases) and Blanket Guaranty
Exhibit "B" Inventory Form
Exhibit "C" Form of Bill of Sale
Exhibit "D" Form of Assignment and Assumption Agreement
(Equipment Leases
and Contracts)
Exhibit "E" Form of Franchise Agreement
Exhibit "F" Form of Access and Confidentiality Agreement
Exhibit "G" Form of Sales and Distribution Agreement
Exhibit "H" Form of Land and Building Lease - 10 year
Exhibit "H-1" Form of land and Building Lease - 5 year
Exhibit "I" Form of Lessor Agreement
Exhibit "J" Form of Pre-Close Statement
Exhibit "K" Form of Pepsi-Cola Beverage Supply and Marketing
Agreement
SCHEDULES
Schedule 1.1 List of Restaurants
Schedule 1.2 Leased Equipment
Schedule 1.3(a) Owned Real Property
Schedule 1.3(b) Leased Real Property
Schedule 2.5 Required Equipment
Schedule 3.1 Franchisee Requirements
Schedule 5 Policy on Refranchising
