SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended December 24, 1995
------------------------
Commission File Number 0-14650
RUDY'S RESTAURANT GROUP, INC.
Nevada 88-0210808
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11900 Biscayne Blvd., Suite 806, Miami, FL 33181
------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(305) 895-7200
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 9, 1996
------------------------- -------------------------------
Common Stock, par value 3,765,000
$.01 per share<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets - December 24, 1995
and October 1, 1995 3
Consolidated Statements of Operations -
Twelve weeks ended December 24, 1995 and
December 25, 1994 4
Consolidated Statements of Cash Flows -
Twelve weeks ended December 24, 1995 and
December 25, 1994 5
Notes to Consolidated Financial Statements 6
Item 2.Management's Discussion and Analysis of
Results of Operations 8
PART II. OTHER INFORMATION
Item 5: Other Information
Acquisition of Businesses 10
Item 6: Exhibits
(a) Combined Financial Statements, including auditor's
report thereon of Asian Restaurants, Inc., Kyoto Restaurants,
Inc., Kyoto West, Inc. and Kyoto North, Inc. 14
(b) 10.22 Asset Purchase and Sale Agreement by and
between Asian Restaurants International, Inc., Kyoto West,
Inc., Kyoto North, Inc., Kyoto Restaurants, Inc. and Asian
Restaurants, Inc. ("Seller") and Maxwell's International, Inc.
("Buyer") dated December 27, 1995 31
<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
12/24/95 10/1/95
ASSETS ------------ ------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 1,633,614 $ 1,476,652
Accounts receivable (Note 3) 34,507 5,915
Inventories 170,799 162,685
Prepaid expenses 69,443 107,924
------------ ------------
Total current assets 1,908,363 1,753,176
------------ ------------
Property and Equipment, net 2,070,561 2,094,841
Goodwill, net of accumulated
amortization of $314,283
at December 24, 1995 and
$309,441 at October 1, 1995 524,816 529,658
Other assets 225,029 204,783
------------ ------------
$ 4,728,769 $ 4,582,458
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to related parties $ 106,247 $ 105,076
Accounts payable and accrued expenses 714,183 840,364
------------ ------------
Total liabilities 820,430 945,440
------------ ------------
Commitments, contingencies and subsequent
event (Note 2)
Stockholders' Equity:
Preferred stock, $.01 par value.
Authorized 10,000,000 shares,
none issued.
Common stock, $.01 par value.
Authorized 30,000,000 shares;
issued and outstanding 3,765,000 shares 37,650 35,200
Paid-in capital 17,852,403 17,823,603
Accumulated (deficit) (13,981,714) (14,221,785)
------------ ------------
Net stockholders' equity 3,908,339 3,637,018
------------ ------------
$ 4,728,769 $ 4,582,458
============ ============
See accompanying notes to consolidated financial statements.<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Twelve Weeks Ended
12/24/95 12/25/94
----------- -----------
Total Revenues $ 2,517,943 $ 2,450,531
Cost and expenses variable with revenues 1,315,416 1,324,467
Restaurant operating expenses 748,221 751,692
Depreciation and amortization 60,573 73,387
----------- -----------
Total restaurant expenses 2,124,210 2,149,546
Earnings from restaurant operations 393,733 300,985
General and administrative expenses 131,291 122,933
Interest expense 1,171 1,674
Other expense
Loss on retirement of assets 4,800 ---
----------- -----------
Income before income taxes 256,471 176,378
Income taxes 16,400 26,500
----------- -----------
Net Income $ 240,071 $ 149,878
=========== ===========
Net Income per equivalent share
Primary $ .06 $ .04
=========== ===========
Fully Diluted $ .06 $ .04
=========== ===========
Weighted average number of common and
common equivalent shares outstanding
Primary 3,747,003 3,697,554
=========== ===========
Fully Diluted 3,752,934 3,697,554
=========== ===========
See accompanying notes to financial statements.<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Twelve Weeks Ended
12/24/95 12/25/94
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 240,071 $ 149,878
Non-cash items:
Depreciation and amortization 68,112 80,689
Loss on retirement of assets 4,800 ---
Changes in assets and liabilities:
Increase in indebtedness to
related parties 1,171 1,171
(Increase) in accounts receivable (28,592) (292)
(Increase) in inventories (8,114) (31,220)
Decrease in prepaid expenses 38,480 63,009
(Decrease)/Increase in accounts
payable and accrued expenses (126,181) 42,764
----------- -----------
Total adjustments (50,324) 156,121
----------- -----------
Net cash provided by operating
activities 189,747 305,999
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (42,375) (9,199)
Purchase of other assets (21,660) ---
----------- -----------
Net cash (used in) investing activities (64,035) (9,199)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 31,250 ---
----------- -----------
Net cash provided by financing activities 31,250 ---
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 156,962 296,800
Cash and Cash Equivalents, October 1,
1995 and October 2, 1994, respectively 1,476,652 341,477
----------- -----------
Cash and Cash Equivalents, December 24,
1995 and December 25, 1994, respectively $1,633,614 $ 638,277
=========== ===========
See accompanying notes to financial statements.<PAGE>
RUDY'S RESTAURANT GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Financial Statement Presentation
The unaudited financial statements presented herein have been
prepared in accordance with the instructions to Form 10-QSB and do
not include all of the information and note disclosures required by
generally accepted accounting principles. These statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Form 10-KSB for the year ended October 1,
1995.
The accompanying financial statements have not been examined by
independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management, such financial
statements include all adjustments, consisting of only normal
recurring accruals, necessary to summarize fairly the financial
position of Rudy's Restaurant Group, Inc. and Subsidiaries (the
"Company") as of December 24, 1995 and the results of operations for
the twelve weeks ended December 24, 1995 and December 25, 1994. The
results of operations for the period ended December 24, 1995 are not
necessarily indicative of the results to be expected for the full
year.
BUSINESS. Rudy's Restaurant Group, Inc. (the "Company"), is a Nevada
corporation which, through its wholly-owned subsidiaries, The
Samurai, Inc. ("The Samurai") and Maxwell's International Inc.
("Maxwell's") owns and operates Japanese-style steak and seafood
restaurants. The Company also owns 100% of the stock of Rudy's
Sirloin Steakburgers, Inc. ("Rudy's"), a non-operating subsidiary.
GOODWILL. The Company evaluates the propriety of goodwill, the
excess of the purchase value of net tangible assets of acquired
business over recorded value, and the related amortization policy
periodically by review of many factors including current operating
trends, the value of intangibles held by the Company such as
trademarks and leasehold interests, and the current national economy,
particularly as it relates to the Company's business plan and
operations. The Company's policy is to amortize goodwill using the
straight-line method over forty (40) years. Under the current policy
goodwill will be fully amortized in the year 2021.
INCOME PER SHARE. Income per share is calculated using the weighted
average number of shares of common stock outstanding and common stock
equivalents if dilutive.
NOTE 2: SUBSEQUENT EVENT - BUSINESS ACQUISITION
On December 26, 1995 the Company, through its Maxwell's subsidiary,
signed an Asset Purchase and Sale Agreement (the "Agreement") to
acquire substantially all of the assets and business operations of<PAGE>
four Japanese steak and seafood restaurants owned by Asian
Restaurants International, Inc. for a total of $2,400,000. The
Agreement calls for an initial payment of approximately $600,000
cash, the issuance of notes totalling $1,400,000, payable over four
years at 7%, and the signing of a non-compete and consulting
agreement requiring payment of $400,000 over five years.
The Company completed the acquisition of three of the four
restaurants in February 1996. The Company expects the balance of this
acquisition, which will be treated as a purchase, will be completed
in the second quarter of the Company's 1996 fiscal year. The
acquisition of the assets and business operations is subject to
various conditions, including, but not limited to, inspections of the
properties and the books and records.
See the Company's Form 10-KSB and Item 5 of this Form 10-QSB for
proforma financial information on this acquisition.
NOTE 3: CAPITAL TRANSACTIONS
Pursuant to the terms of options issued in 1992 by the Company's
Employee Stock Option Plan (the "Plan"), the following options to
purchase shares of the Company's common stock were exercised by
officers of the Company in December 1995:
# OF SHARES OPTION
OPTIONEE POSITION RECEIVED PRICE
-------- ---------- ----------- --------
Douglas M. Rudolph President, 200,000 $.10-.15
CEO, Director,
Chairman of the
Board
Marie G. Peterson Vice President, 40,000 $.10-.15
Chief Operating
Officer, Chief
Financial Officer
The terms of the Plan provided that the option price may be advanced
to employees desiring such advances. Advances made to purchase stock
granted under these options and included in the accompanying
consolidated balance sheet as of December 24, 1995 as accounts
receivable, totalled $30,500. Advances made for this purpose are due
to be repaid within one year.
The options exercised represented all the then outstanding options of
the Company; there are no outstanding options at February 9, 1996.<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Results of
Operations
RESULTS OF OPERATIONS - First Quarter 1996 Compared to First Quarter
1995
BUSINESS OVERVIEW. The Company's revenues increased 2.7% and
earnings improved 3.4% to 9.5% in the first quarter fiscal 1996 as
compared to 6.1% in the first quarter fiscal 1995. As more fully
discussed below, this improvement was primarily the result of the
introduction of new menu pricing late in fiscal 1995 and a reduction
in the availability of certain special pricing coupon offers.
REVENUES. Revenues increased $67,000, 2.7% in the first quarter
fiscal 1996 as compared to 1995. The increase in revenues includes a
5.4% increase in average check, a 3.2% decrease in customer traffic
and a .5% increase in other income. The increase in average check is
the result of numerous factors including the effect of menu price
changes made late in 1995 and changes in customer eating habits to
higher priced menu items; the decline in covers is the result of
changes in availability of special pricing offers at each restaurant.
Because of the limited number and diverse geographic location of its
restaurants, it is not economically beneficial for the Company to use
extensive mass-media advertising available to larger restaurant
companies. In addition to being highly competitive, the restaurant
industry is affected by changes in the public's eating habits and
local and national economic conditions. Therefore, management
believes the increase in revenues in 1996 does not necessarily
represent a trend.
COSTS AND EXPENSES APPLICABLE TO REVENUES.
Percent of Revenues
COSTS AND EXPENSES: 1996 QTR 1995 QTR Change
--------------------------- -------- -------- ------
Food, beverage and supplies 27.3% 29.4% (2.1%)
Labor and related costs 24.9% 24.6% .3%
-------- -------- ------
52.2% 54.0% (1.8%)
======== ======== ======
The cost of seafood, meat and chicken are the primary components of
the Company's food costs. These costs, together with substantially
all other food costs, vary with market conditions, supply and demand.
Food, beverage and supplies costs decreased 2.1% to 27.3% of revenues
in the first quarter 1996 as compared to 29.4% in 1995 primarily as a
result of comparatively stable market prices for seafood, meat and
chicken. Inasmuch as market prices did not change significantly the
improvement in these costs is the expected result of the new menu
pricing discussed above.<PAGE>
Although labor costs were expected to decline as a result of the
decline in customer traffic and the menu price increases, labor costs
increased .3% to 24.9% of revenues in the first quarter 1996 as
compared to 24.6% in 1995. This increase is due to increases in
direct labor wage rates necessary to meet prevailing wage scales and
retain qualified personnel.
COSTS AND EXPENSES OF RESTAURANT OPERATIONS: GENERAL. General
operations include restaurant management and supervision, occupancy
costs, repairs and maintenance, utilities, advertising and property
and liability insurance. These expenses did not change significantly
in the first quarter 1996 as compared to the first quarter 1995.
CORPORATE OVERHEAD. General and administrative expenses increased
$8,000 in the first quarter 1996 as compared to the first quarter
1995. This increase is primarily the result of performance bonuses
granted certain administrative staff in December 1995.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operating activities is $190,000 in the first
quarter fiscal 1996 as compared to $306,000 in the first quarter
fiscal 1995. At December 24, 1995 the Company's current assets exceed
its current liabilities by approximately $1,088,000 due to the
accumulation of significant cash balances. As more fully discussed in
Item 5 to this report, the Company intends on applying a significant
portion of currently available cash to the acquisition of certain
businesses in fiscal 1996.
CAPITAL EXPENDITURES. Capital expenditures to be funded from cash
flow, excluding capital expenditures related to businesses to be
acquired, are expected to total approximately $300,000 in fiscal
1996, of which $42,400 was paid in the first quarter 1996.
Anticipated capital expenditures include certain expenditures for
improvements required by the Americans with Disabilities Act, the
"ADA". These improvement will be funded through current cash flow and
accumulated cash balances.
OTHER. The Company presently pays a significant portion of its
employees in excess of the Federal minimum wage. In addition, a large
number of the Company's employees are tipped employees whose wages
are subject to the Federal tip credit. Therefore, although increased
state and federal minimum wage rates have some impact on the
Company's results of operations, such impact has not historically
been significant.
Labor shortages and the related impact on wage rates could have a
significant impact on the Company's results of operations. Too,
because the restaurant industry is labor intensive, the Company is
subject to various claims and/or litigation related to personnel
matters such as claims of sexual harassment and discrimination.
Although the Company currently provides health insurance benefits to
its employees, management believes the introduction of a national<PAGE>
health care program which would require employers to pay a
significant portion of employee health care costs would have a
significant impact on the Company's results of operations.
Excluding the newly reopened Miami restaurant facility, the Company's
restaurant facilities were built prior to the enactment of Federal
regulations regarding equal opportunity for individuals with
disabilities, the ADA. The ADA includes certain requirements to alter
public facilities, including restaurants, as necessary to make
facilities accessible to and useable by individuals with
disabilities. Although Federal regulations consider the cost of
alterations and the overall financial resources of the Company in
determining the nature and timing of compliance, the cost of such
alterations could have a significant impact on the Company's cash
flow. The Company is currently in the process of identifying and
implementing those alterations which are economically feasible and
intends to make required alterations as possible.
Part II. OTHER INFORMATION
Item 5. Other Information
ACQUISITION OF BUSINESSES. On December 26, 1995 the
Company's Maxwell's subsidiary signed an Asset Purchase and Sale
Agreement (the "Agreement") to acquire substantially all of the
assets and business operations of four Japanese steak and seafood
restaurants owned by Asian Restaurants International, Inc. for a
total of $2,400,000. The Agreement calls for an initial payment of
approximately $600,000 cash, the issuance of notes totalling
$1,400,000, payable over four years, and the signing of a non-compete
and consulting agreement requiring payment of $400,000 over five
years. This summary is qualified in its entirety by reference to the
Asset Purchase and Sale Agreement found in Exhibit 10.22 to this
report.
The Company completed the acquisition of three of the four
restaurants in February 1996. The Company expects the balance of this
acquisition, which will be treated as a purchase, will be completed
in the second quarter of the Company's 1996 fiscal year.
The following unaudited proforma condensed balance sheet gives effect
to this acquisition as if it had occurred at October 1, 1995, the
beginning of fiscal year 1995.
Proforma Condensed
-------------------------------------------
Proforma
Assets As Reported Adjustments Proforma
------ ----------- ------------ -----------
Cash $ 1,477,000 $ (600,000) $ 877,000
Net property and
equipment 2,095,000 1,675,000 3,770,000
All other assets 1,010,000 725,000 1,735,000
----------- ------------ -----------
$ 4,582,000 $ 1,800,000 $ 6,382,000
=========== ============ ===========<PAGE>
Liabilities and
Stockholders Equity
------------------------
Notes payable, current $ --- $ 314,000 $ 314,000
All other liabilities 945,000 400,000 1,345,000
Notes payable,
long-term --- 1,086,000 1,086,000
Stockholders equity 3,637,000 --- 3,637,000
----------- ------------ -----------
$ 4,582,000 $ 1,800,000 $ 6,382,000
=========== ============ ===========
The following unaudited proforma consolidated results of operations
give effect to the proposed acquisition as though it had occurred
October 3, 1993, the beginning of fiscal 1994.
October October
Fiscal Years Ended 1, 1995 2, 1994
------------ ------------
Revenues $ 17,319,000 $ 15,989,000
============ ============
Net Income $ 1,612,000 $ 1,129,000
============ ============
Net income per share:
Primary $ .43 $ .30
============ ============
Fully diluted $ .43 $ .30
============ ============
Permitted proforma adjustments include only the effects of events
directly attributable to a transaction that are factually supportable
and expected to have a continuing impact. Proforma adjustments
reflecting anticipated "efficiencies" in operations resulting from a
transaction are, under most circumstances, not permitted. For
purposes of presenting the above unaudited consolidated results of
operations certain proforma adjustments were made including
adjustments to depreciation, interest expense and general and
administrative expense to reflect the effect of the acquisition and
the Company's basis in the assets to be acquired.
The unaudited proforma information is presented to provide the reader
with information about the continuing impact of this proposed
acquisition by showing how it might have affected historical
financial statements. Further, the proforma information assumes a
full year of operations whereas the business acquisition occurred or
is expected to occur in the second quarter fiscal 1996. Thus, the
above information is not necessarily indicative of results of
operations that would have occurred had the acquisition been made on
October 3, 1993 or of future results of operations of the Company.<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.22 Asset Purchase and Sale Agreement by and between
Asian Restaurants International, Inc., Kyoto West, Inc., Kyoto North,
Inc., Kyoto Restaurants, Inc. and Asian Restaurants, Inc. ("Seller")
and Maxwell's International, Inc. ("Buyer") dated December 27, 1995.
(b) Report on Form 8-K
Information required to be reported on Form 8-K is
reported herein in lieu of filing Form 8-K, as follows:
Page
Form 8-K Item 2, Acquisition or Disposition of Assets
is included herein as Item 5 - Other
Information 11
Form 8-K Item 6. Financial Statements of Businesses
Acquired
(a) Financial Statements of the businesses acquired,
prepared and provided by Asian Restaurants International, Inc.:
Combined Financial Statements, including auditor's report thereon of
Asian Restaurants, Inc., Kyoto Restaurants, Inc., Kyoto West, Inc.
and Kyoto North, Inc.
Page
Report of Tonneson & Company, Certified Public Accountants 16
Combined Balance Sheets, October 31, 1995 and 1994 17
Combined Statements of Income, years ended October 31,
1995 and 1994 19
Combined Statements of Changes in Stockholder's Equity,
years ended October 31, 1995 and 1994 20
Combined Statements of Cash Flows, years ended October 31,
1995 and 1994 21
Notes to Combined Financial Statements 23
(b) See Item 5 - Other Information for proforma unaudited
condensed consolidated financial statements. <PAGE>
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.
RUDY'S RESTAURANT GROUP, INC.
(Registrant)
Dated: February 12, 1996 /s/ Douglas M. Rudolph
------------------------------
Douglas M. Rudolph, President
Dated: February 12, 1996 /s/ Marie G. Peterson
------------------------------
Marie G. Peterson, Treasurer,
Chief Financial and Operating
Officer and Principal
Accounting Officer
<PAGE>
EXHIBIT TO FORM 10-QSB AS OF DECEMBER 24, 1995 AS REQUIRED BY
INSTRUCTIONS FOR FORM 8-K INCORPORATED HEREIN IN LIEU OF FORM 8-K,
ITEM 7, FINANCIAL STATEMENTS OF ACQUIRED BUSINESSES
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
(WHOLLY-OWNED SUBSIDIARIES OF ASIAN RESTAURANTS
INTERNATIONAL, INC.)
COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
COMBINED FINANCIAL STATEMENTS
COMBINED BALANCE SHEETS 2
OCTOBER 31, 1995 AND 1994
COMBINED STATEMENTS OF INCOME 3
YEARS ENDED OCTOBER 31, 1995 AND 1994
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY 4
YEARS ENDED OCTOBER 31, 1995 AND 1994
COMBINED STATEMENTS OF CASH FLOWS 5
YEARS ENDED OCTOBER 31, 1995 AND 1994
NOTES TO COMBINED FINANCIAL STATEMENTS 6
YEARS ENDED OCTOBER 31, 1995 AND 1994<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Asian Restaurants, Inc., Kyoto Restaurants, Inc.
Kyoto West, Inc. and Kyoto North, Inc.
Framingham, Massachusetts
We have audited the accompanying combined balance sheets of Asian
Restaurants, Inc., Kyoto Restaurants, Inc., Kyoto West, Inc. and
Kyoto North, Inc. (wholly-owned subsidiaries of Asian Restaurants
International, Inc.) as of October 31, 1995 and 1994, and the related
combined statements of income, changes in stockholder's equity, and
cash flows for the years then ended. These financial statements are
the responsibility of the Companies' management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial
position of Asian Restaurants, Inc., Kyoto Restaurants, Inc., Kyoto
West, Inc. and Kyoto North, Inc. as of October 31, 1995 and 1994, and
the combined results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles.
Tonneson & Company C.P.A.'s P.C.
January 24, 1996<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
COMBINED BALANCE SHEETS
OCTOBER 31, 1995 AND 1994
ASSETS
1995 1994
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 101,924 $ 107,845
Accounts receivable, trade 64,722 64,290
Inventories 60,842 53,291
Prepaid expenses and other current assets
(Note 2) 113,660 105,984
---------- ----------
Total current assets 341,148 331,410
---------- ----------
PROPERTY AND EQUIPMENT, AT COST: (Notes 3 and 4)
Leasehold improvements 2,765,564 2,533,298
Furniture and equipment 1,529,594 1,450,435
Motor vehicles 21,813 21,813
---------- ----------
4,316,971 4,005,546
Less accumulated depreciation 3,250,193 3,026,402
---------- ----------
1,066,778 979,144
Capitalized operating supplies 38,975 34,250
---------- ----------
Property and equipment, net 1,105,753 1,013,394
---------- ----------
OTHER ASSETS:
Deferred income tax (Note 6) 110,600 75,487
Liquor licenses 177,500 177,500
Deposits 15,700 14,700
Deferred charges, net of accumulated amortization
of $29,566 in 1995 and $26,585 in 1994 10,434 13,415
---------- ----------
Total other assets 314,234 281,102
---------- ----------
TOTAL ASSETS $1,761,135 $1,625,906
========== ==========
See Notes to Combined Financial Statements.<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY
1995 1994
----------- -----------
CURRENT LIABILITIES:
Current portion of long-term debt (Note 3) $ 2,357 $ 2,210
Obligations under capital leases (Note 4) 1,070 1,300
Accounts payable, trade 34,589 28,091
Accrued expenses and other current liabilities
(Notes 5 and 7) 253,353 237,132
----------- -----------
Total current liabilities 291,369 268,733
LONG-TERM DEBT, NET OF CURRENT PORTION (Note 3) 3,391 5,748
OBLIGATIONS UNDER CAPITAL LEASES (Note 4) 2,191 3,261
COMMITMENTS AND CONTINGENT LIABILITIES
(Note 7) --- ---
----------- -----------
TOTAL LIABILITIES 296,951 277,742
----------- -----------
STOCKHOLDER'S EQUITY:
Common stock (Note 8) 139,000 139,000
Additional paid-in capital 28,000 28,000
Retained earnings (Note 9) 1,316,184 1,200,164
----------- -----------
1,483,184 1,367,164
Less treasury stock, at cost (19,000) (19,000)
----------- -----------
TOTAL STOCKHOLDER'S EQUITY 1,464,184 1,348,164
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,761,135 $1,625,906
=========== ===========
- 2 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
COMBINED STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 1995 AND 1994
1995 1994
---------- ----------
REVENUES:
Net sales $6,219,737 $6,244,303
Other income 8,190 27,520
---------- ----------
Total revenues 6,227,927 6,271,823
---------- ----------
COSTS AND EXPENSES:
Cost of sales 1,600,624 1,574,122
Salaries, wages and related expenses 1,883,916 1,864,002
Rent and related expenses 874,729 875,115
Depreciation and amortization 224,603 214,510
Other operating costs and expenses 505,699 499,401
Administrative and general expenses 183,747 181,041
Management and franchise fees (Note 11) 381,711 381,961
Advertising 293,240 311,940
Interest 1,019 1,975
---------- ----------
Total costs and expenses 5,949,288 5,904,067
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 278,639 367,756
PROVISION FOR INCOME TAXES (Note 6) 101,860 134,354
---------- ----------
NET INCOME $ 176,779 $ 233,402
========== ==========
See Notes to Combined Financial Statements.
- 3 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED OCTOBER 31, 1995 AND 1994
Additional
Common Retained Paid-In Treasury
Stock Earnings Capital Stock
-------- ---------- ------- -------
BALANCE AT NOVEMBER 1, 1993 $139,000 $1,292,942 $28,000 $19,000
Dividends (Note 9) (326,180)
Net income for the year 233,402
-------- ----------- ------- --------
BALANCE AT OCTOBER 31, 1994 139,000 1,200,164 28,000 19,000
Dividends (Note 9) (60,759)
Net income for the year 176,779
-------- ----------- ------- --------
BALANCE AT OCTOBER 31, 1995 $139,000 $1,316,184 $28,000 $19,000
======== =========== ======= =======
See Notes to Combined Financial Statements.
- 4 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1995 AND 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 176,779 $ 233,402
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 221,622 211,529
Amortization 2,981 2,981
Deferred income taxes (35,113) (32,264)
Changes in certain assets and liabilities:
Accounts receivable, trade (432) 2,093
Inventories (7,551) (2,605)
Prepaid expenses and other assets (8,676) (1,700)
Capitalized operating supplies (4,725) (9,394)
Accounts payable, trade 6,498 (3,843)
Accrued expenses and other current
liabilities 16,221 29,565
---------- ----------
Net cash provided by operating
activities 367,604 429,764
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (309,256) (52,996)
---------- ----------
Net cash used in investing activities (309,256) (52,996)
---------- ----------
See Notes to Combined Financial Statements.<PAGE>
1995 1994
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt ( 2,210) ( 12,863)
Payments on obligations under capital leases ( 1,300) ( 1,305)
Dividends ( 60,759) (326,180)
---------- ----------
Net cash used in financing activities ( 64,269) (340,348)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ( 5,921) 36,420
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 107,845 71,425
---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 101,924 $ 107,845
========== ==========
Supplemental disclosures of cash flow information:
Cash paid for interest and income taxes during the years ended October
31, 1995 and 1994 consist of the following:
1995 1994
---------- ----------
Interest $ 1,019 $ 1,975
Income taxes 34,949 25,742
- 5 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 1 - Summary of Significant Accounting Policies
---------------------------------------------------
ORGANIZATION AND OPERATIONS - Asian Restaurants, Inc., Kyoto
Restaurants, Inc., Kyoto West, Inc. and Kyoto North, Inc. are
wholly-owned subsidiaries of Asian Restaurants International, Inc.
Each corporation operates a restaurant business with locations in
Massachusetts and Michigan.
PRINCIPLES OF COMBINATION - The combined financial statements
include the accounts of Asian Restaurants, Inc., Kyoto Restaurants,
Inc., Kyoto West, Inc. and Kyoto North, Inc. All significant
intercompany accounts and transactions are eliminated in the
combined financial statements.
CASH AND CASH EQUIVALENTS - Cash equivalents consist of money
market funds, treasury bills and commercial paper with original
maturities of 90 days or less.
INVENTORIES - Inventories are stated at the lower of cost or
market. Cost is determined principally on the first-in, first-out
(FIFO) method and market is generally based on net realizable
values.
PROPERTY AND EQUIPMENT - Depreciation is computed using straight-
line and accelerated methods calculated to amortize the cost of the
assets over their estimated useful lives. Leasehold improvements
are amortized over the lesser of the related lease or the estimated
useful lives of the assets.
The useful lives of property and equipment for purposes of
computing depreciation are:
Furniture and Equipment 5 - 7 years
Motor Vehicles 3 years
Leasehold Improvements Length of leases ranging
from 20 to 25 years
Leasehold Improvements-Related Party 10 - 20 years
Capitalized operating supplies consisting of linen, china, glass,
chopsticks and similar items have been classified as a component of
property and equipment and are charged to operations based on
actual usage.
- 6 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------
CAPITAL LEASE OBLIGATIONS - Certain long-term lease transactions
relating to the financing of property and equipment are accounted
for as installment purchases of property and equipment. The
capital lease obligations reflect as a liability the present value
of future rental payments and a corresponding amount is capitalized
as the costs of the assets and amortized using the straight-line
method over the estimated economic lives of the assets.
Amortization of assets under capital leases is included in
depreciation expense in the accompanying financial statements.
LIQUOR LICENSES - Liquor licenses are stated at cost and are not
amortized since they are considered to have continuing value over
an indefinite period.
DEFERRED CHARGES - The cost of renewing a lease agreement, in the
amount of $40,000, for Asian Restaurants, Inc.'s restaurant
facility is being amortized on the straight-line method over the
lease term, one hundred sixty-one months, from December 1, 1985.
ADVERSTISING - The Companies expense advertising costs as incurred.
INCOME TAXES - Income taxes are accounted for in accordance with
the provisions of Statement of Financial Accounting Standards No.
109. The provision for deferred income tax expense or benefit
represents the net change during the year in the Companies'
deferred income tax assets.
Deferred income tax assets represent the amount of taxes
recoverable in future years (based on current tax laws) resulting
from future net taxable deductions arising from temporary
differences in the reporting of certain types of income and expense
items for financial statement and for income tax purposes.
Note 2 - Prepaid Expenses and Other Current Assets
--------------------------------------------------
Prepaid expenses and other current assets at October 31, 1995 and
1994 consist of the following:
1995 1994
--------- ---------
Prepaid expenses
Rent $ 48,417 $ 48,417
Property taxes 44,628 44,413
Other current assets 20,615 13,154
--------- ---------
Total $ 113,660 $ 105,984
========= =========
- 7 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 3 - Long-Term Debt
----------------------- 1995 1994
-------- --------
6.5% installment note payable,
collateralized by a motor vehicle, with
principal and interest payable in monthly
installments of $222 through February, 1998 $ 5,748 $ 7,958
Less current portion 2,357 2,210
------- -------
Net long-term portion $ 3,391 $ 5,748
======= =======
Maturities of long-term debt for each of the years succeeding
October 31, 1995 are as follows:
Years ending October 31, Amount
------------------------ --------
1996 $ 2,357
1997 2,515
1998 876
--------
$ 5,748
========
Note 4 - Capital Lease Obligations
----------------------------------
A summary of machinery and equipment leased under capital leases at
October 31, 1995 and 1994 is as follows:
1995 1994
------- -------
Cost $ 6,230 $ 6,230
Accumulated depreciation 3,115 1,869
------- -------
Net book value $ 3,115 $ 4,361
======= =======
- 8 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 4 - Capital Lease Obligations (Continued)
----------------------------------------------
The following is a schedule by years of future minimum lease
payments under capital leases together with the present value of
the net minimum lease payments as of October 31, 1995:
Years ending October 31, Amount
------------------------ --------
1996 $ 1,500
1997 1,500
1998 1,000
--------
Total minimum lease payments 4,000
Less amount representing interest 739
--------
Present value of minimum lease payments 3,261
Less current portion 1,070
--------
Net long-term portion $ 2,191
========
Note 5 - Accrued Expenses and Other Current Liabilities
-------------------------------------------------------
Accrued expenses and other current liabilities at October 31, 1995
and 1994 consist of the following:
1995 1994
--------- ---------
Accrued expenses
Salaries, wages and related expenses $ 96,811 $ 90,694
Rent and related expenses 70,811 43,429
Other current liabilities 85,731 103,009
--------- ---------
$ 253,353 $ 237,132
========= =========
Note 6 - Income Taxes
---------------------
As of November 1, 1993 the Companies adopted the provisions of
Statement of Financial Accounting Standards No. 109 (FAS 109).
Asian Restaurants International, Inc. and its wholly-owned
subsidiaries file a consolidated federal income tax return with
Lanover Enterprises, Inc. and most subsidiaries file separate state
income tax returns. The subsidiaries are charged or credited with
their portion of tax or tax benefit based on the relationship of
their income or loss to consolidated income or loss.
- 9 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 6 - Income Taxes (Continued)
---------------------------------
The provisions (benefit) for income taxes for the years ended
October 31, 1995 and 1994 is comprised of the following:
1995 1994
Current: --------- ---------
Federal $ 98,461 $124,015
State 38,512 42,603
--------- ---------
136,973 166,618
--------- ---------
Deferred:
Federal ( 36,247) ( 29,697)
State 1,134 ( 2,567)
--------- ---------
( 35,113) ( 32,264)
--------- ---------
Total provision $101,860 $134,354
========= =========
A significant portion of the current state tax provisions result
from the State of Michigan which does not allow deductions for
salaries, wages, employee benefits and certain other expenses.
The long-term deferred income tax asset at October 31, 1995 and
1994 principally results from temporary differences in the
recognition of depreciation expense on property and equipment. The
Companies primarily use the straight-line method over the estimated
useful lives (or the lease periods if shorter for leasehold
improvements) of property and equipment for financial statement
purposes, while accelerated methods (straight-line for leasehold
improvements) based on tax regulations are used for income tax
purposes.
Note 7 - Commitments and Contingent Liabilities
-----------------------------------------------
LEASE COMMITMENTS - The Companies lease restaurants under long-term
non-cancellable real estate lease agreements expiring at various
dates through 2005. The agreements generally provide for fixed
minimum rental payments and additional rentals based on specific
sales levels. In addition, the agreements require the payment of
utilities, real estate taxes, insurance and repairs. Certain
leases contain renewal options ranging from 5 to 10 years with
various rent escalation clauses. Total rent expense, excluding
certain operating expenses payable by the Companies, for the years
ended October 31, 1995 and 1994 was approximately $670,000 and
$700,000, respectively.
- 10 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 7 - Commitments and Contingent Liabilities (Continued)
-----------------------------------------------------------
Kyoto North, Inc. and Kyoto West, Inc. lease property from the
president of Asian Restaurants International, Inc.
Kyoto, North, Inc.'s lease agreement, as amended, requires a
minimum annual payment of $120,000 commencing April 1, 1989.
Subsequent payments will be increased annually at a rate of three
percent commencing April 1, 1990 through April 1, 1999. In
addition, Kyoto North, Inc. will be required to pay rent in the
amount, if any, that eight percent of gross sales exceeds the base
rent.
Kyoto West, Inc.'s lease agreement, as amended, requires minimum
annual payments of $183,750 through July, 2005. In addition to the
minimum rent, Kyoto West, Inc. shall pay additional rent equal to
eight percent of gross sales in excess of specific sales levels.
The following is a schedule by years of approximate future minimum
rental payments required under the long-term non-cancellable
operating leases, excluding certain operating expenses payable by
the Companies:
Years ending October 31, Amount
------------------------ -----------
1996 $ 670,000
1997 660,000
1998 660,000
1999 450,000
2000 270,000
Later years 885,000
-----------
$ 3,595,000
===========
The Companies have ongoing negotiations with the landlord at Asian
Restaurants, Inc. to renegotiate that lease agreement. An accrual
of $61,400 and $29,716 as of October 31, 1995 and 1994,
respectively, has been reflected in the accompanying combined
balance sheets for estimated rents due in arrears subject to these
negotiations.
LITIGATION - Certain other claims, suits and complaints arising in
the ordinary course of business have been filed or are pending
against the Companies. In the opinion of management, all such
matters are adequately covered by insurance, or if not so covered,
are without merit or are of such kind, or involve such amounts, as
would not have a significant effect on the combined financial
position or combined results of operations of the Companies if
disposed of unfavorably.
- 11 -<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 8 - Common Stock
---------------------
The Companies' common stock is as follows:
1995 1994
--------- ---------
Asian Restaurants, Inc.
-----------------------
Common stock, no par value
Authorized 500 shares
Issued and outstanding 100 shares $ 108,000 $ 108,000
Kyoto Restaurants, Inc.
-----------------------
Common stock, $1.00 par value
Authorized 1,000 shares
Issued and outstanding 1,000 shares 1,000 1,000
Kyoto North, Inc.
-----------------
Common stock, $10.00 par value
Authorized 10,000 shares
Issued and outstanding 3,000 shares 30,000 30,000
Kyoto West, Inc.
----------------
Common stock, $1.00 par value
Authorized 50,000 shares
Issued and outstanding 100 shares - -
--------- ---------
$ 139,000 $ 139,000
========= =========
Note 9 - Dividends
------------------
The Companies have reported advances to their parent company as
dividends although a formal dividend has not been declared as of
yet. Advances to the parent company amounted to $326,180 and
$60,759 for the years ended October 31, 1995 and 1994,
respectively.
Note 10 - Retirement Plans
--------------------------
The Companies have trusteed, contributory, defined-contribution
plans which cover substantially all of their regular employees,
including officers. The Companies are required to contribute a
matching amount equal to a certain percentage of the employees'
contribution. Contributions to the plans for the years ended
October 31, 1995 and 1994 amounted to approximately $11,300 and
$5,800, net of credits, respectively.
-12-<PAGE>
ASIAN RESTAURANTS, INC.
KYOTO RESTAURANTS, INC.
KYOTO WEST, INC.
AND
KYOTO NORTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1995 AND 1994
Note 10 - Retirement Plans (continued)
--------------------------------------
While the Companies expect to continue the plans indefinitely, they
have reserved the right to modify, amend or terminate the plans.
In the event of termination, the entire amount contributed under
the plans must be applied to the payment of benefits to the
participants or their beneficiaries.
Note 11 - Related Party Transactions
------------------------------------
Asian Restaurants International, Inc. provides management and
franchise services to the Companies. Management fees charged to
the Companies amounted to $201,600 for each of the years ended
October 31, 1995 and 1994. Franchise fees charged to the Companies
amounted to approximately $180,000 for each of the years ended
October 31, 1995 and 1994.
The Company leases certain property from its president. (Reference
is made to Note 7.)
Note 12 - Subsequent Event
--------------------------
During January, 1996, Asian Restaurants International, Inc. agreed,
in principal, to sell substantially all of its subsidiaries'
assets, excluding cash and accounts receivable, for $1,900,000.
- 13 -<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS, CONSOLIDATED STATEMENTS
OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-END> DEC-24-1995
<CASH> 1633614
<SECURITIES> 0
<RECEIVABLES> 34507
<ALLOWANCES> 0
<INVENTORY> 170799
<CURRENT-ASSETS> 1908363
<PP&E> 5178545
<DEPRECIATION> 3107984
<TOTAL-ASSETS> 4728769
<CURRENT-LIABILITIES> 820430
<BONDS> 0
0
0
<COMMON> 37650
<OTHER-SE> 3870689
<TOTAL-LIABILITY-AND-EQUITY> 4728769
<SALES> 2517943
<TOTAL-REVENUES> 2517943
<CGS> 1315416
<TOTAL-COSTS> 2255501
<OTHER-EXPENSES> 4800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1171
<INCOME-PRETAX> 256471
<INCOME-TAX> 16400
<INCOME-CONTINUING> 240071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 240071
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
EXHIBIT 10.22
ASSET PURCHASE AND SALE
AGREEMENT
-------------------------
--------
THIS AGREEMENT dated below is made and
entered into by and between ASIAN RESTAURANTS
INTERNATIONAL, INC., a corporation organized
under the laws of the State of Massachusetts,
Kyoto West, Inc., a Michigan corporation,
Kyoto North, Inc, a Michigan corporation,
Kyoto Restaurants, Inc., a Michigan
corporation and Asian Restaurants, Inc., a
Massachusetts corporation (hereinafter
jointly and severally referred to as
"SELLER") and MAXWELL'S INTERNATIONAL, INC.,
a Delaware corporation or its assigns
(hereinafter referred to as "BUYER").
R E C I T A L S :
SELLER is the owner and operator of a
restaurant chain doing business as "Kyoto
Japanese Restaurants" with locations at:
A. 64 Eliot Street, Boston, Massachusetts
(the "Boston Location");
B. 18601 Hubbard Drive, Dearborn, Michigan
(the "Dearborn Location");
C. 1985 W. Big Beaver Road, Troy, Michigan
(the "Troy Location"); and
D. 21150 Haggerty Boulevard, Farmington
Hills, Michigan (the "Farmington Hills
Location").
The restaurant business of SELLER at the
Boston Location, Dearborn Location, Troy
Location, and Farmington Hills Location are
hereinafter referred to as the "BUSINESS" or
the BUSINESSES. The Boston Location, the
Dearborn Location, the Troy Location, and the
Farmington Hills Location are hereinafter
referred to as the "SUBJECT PROPERTIES."
BUYER desires to purchase, and SELLER desires
to sell substantially all of the assets
comprising the BUSINESS as a going concern,
including personal property and certain
contract rights, upon the terms and subject
to the conditions set forth herein.<PAGE>
NOW, THEREFORE, in consideration of the
mutual benefits accruing to the respective
parties under the provisions of this
Agreement, the parties hereby agree as
follows:
1.I. PURCHASE AND SALE OF ASSETS.
----------------------------
1.01 Subject to the terms and conditions
herein and in reliance upon the warranties,
representations and obligations specifically
set forth herein, SELLER agrees to sell and
transfer to BUYER, and BUYER agrees that it
will purchase from SELLER, all of SELLER's
assets and properties pertaining to the
BUSINESS operated at the SUBJECT PROPERTIES,
except as otherwise specifically provided for
in Paragraph 1.02. The assets to be conveyed
("ASSETS") to BUYER by SELLER at closing
("CLOSING") (as set forth in Paragraph 4
below) include, but are not limited to, the
following:
1.01.1 All inventory, materials, supplies,
deposits (subject to the provisions of
Section 6.02 below), prepaid assets,
utensils, plates, dinnerware, glasses,
knives, cooking utensils, advertising matter,
photographs, mailing lists, sales materials,
menus, catalogues, plans, market surveys,
brochures, artwork, and stationery in
existence on the CLOSING.
1.01.2 All furniture, furnishings,
equipment, fixtures, business records,
information on SELLER's software,
transferrable software and software licenses,
customer lists, leasehold improvements,
leasehold interest, contract rights and other
personal property located at the SUBJECT
PROPERTIES and/or utilized in the operations
of the BUSINESS including, but not limited
to, those assets identified on the attached
Schedule 1.01.2.
1.01.3 The name "Kyoto Japanese
Restaurants," and all of SELLER's rights to
the use of the name "Kyoto" and derivations
thereof.
1.01.4 All telephone/telecommunication
numbers and post office boxes of SELLER as
used by SELLER as of the date of this
Agreement for the BUSINESS at the SUBJECT
PROPERTIES.<PAGE>
1.01.5 All transferable licenses and
permits.
1.01.6 All goodwill, promotional materials
and other such data.
1.01.7 All trademarks, servicemarks, logos,
recipes, operating systems and goodwill.
1.01.8 All rights under the real property
leases for the SUBJECT PROPERTIES which shall
be assigned by SELLER to BUYER and assumed by
the BUYER at the CLOSING as provided for
herein.
1.02 The parties acknowledge and agree that
SELLER is not selling, and BUYER is not
purchasing, the following assets:
1.02.1 Cash in Banks or Financial
institutions.
1.02.2 Accounts receivable or loans
receivable.
1.02.3 The tangible personal property, lease
and other assets of the SELLER's management
office located at Point West Place, 111 Speen
Street, Suite 405, Framingham, Massachusetts,
and the telephone/telecommunication numbers
and Post Office boxes used by SELLER for such
location.
1.03 ACCOUNTS RECEIVABLE. As provided for
in Section 1.02 above, accounts receivable of
the SELLER are not being sold pursuant to
this transaction. Following the CLOSING, the
BUYER agrees to collect the accounts
receivable of SELLER arising prior to CLOSING
for the benefit of SELLER; however, nothing
shall obligate the BUYER to incur any expense
or obligation in collecting such accounts
receivable of the SELLER. Upon receipt of
accounts receivable of the SELLER following
the CLOSING, the BUYER shall remit checks
therefore directly to the SELLER upon a
weekly basis. In the event any checks are
received by the BUYER which include payment
of accounts receivable attributable to food
or services provided by the SELLER and the
BUYER, the BUYER shall be obligated to pay
the portion attributable to the SELLER upon
receiving cleared funds therefore. BUYER
agrees to allow SELLER to review the customer
records of the BUSINESS following the CLOSING<PAGE>
from time to time during regular business
hours to monitor collection of SELLER's
accounts receivable.
2. PURCHASE PRICE.
2.01 BASIC PRICE. The parties to this
Agreement have agreed that the basic purchase
price will be a total of ONE MILLION NINE
HUNDRED THOUSAND AND NO/100 DOLLARS
($1,900,000.00), and the purchase price has
been allocated among the ASSETS being
transferred as set forth on Schedule 2.01.
2.02 INVENTORY. The basic purchase price
for the assets set forth in Paragraph 2.01
above shall be increased by the value of all
items of food and beverage inventory in good
saleable condition transferred to BUYER at
the CLOSING. Any defective or spoiled
inventory shall be excluded. For purposes of
this paragraph, inventory shall be valued at
its cost to SELLER. Immediately prior to the
CLOSING, representatives of SELLER and BUYER
shall jointly count and value the inventories
of SELLER at the SUBJECT PROPERTIES to be
transferred to BUYER at the CLOSING. Such
inventory shall be valued at cost on a first-
in, first-out basis. Any business conducted
during or subsequent to the time such
physical inventory is taken shall be for the
benefit of BUYER. Any increase to the
purchase price by an adjustment pursuant to
the provisions of this paragraph shall
increase the cash payable by BUYER pursuant
to the provisions of Section 3.04 below.
3. PAYMENT OF PURCHASE PRICE. The
purchase price provided for in Section 2
shall be payable as follows:
3.01 Simultaneously with the execution of
this Agreement, BUYER shall pay TEN THOUSAND
AND NO/100 DOLLARS ($10,000.00) as a deposit,
which amount shall be deposited in the trust
account of the law firm of GREENSPOON,
MARDER, HIRSCHFELD & RAFKIN, P.A. ("Escrow
Agent"). The deposit shall be distributed to
SELLER to satisfy the purchase price at the
CLOSING as provided for in Paragraph 3.04,
unless otherwise provided for herein.
3.02 Within three (3) days after the
completion of the thirty (30) day inspection
period referred to in Section 14 below<PAGE>
(providing BUYER has not terminated the
Agreement as provided for therein), BUYER
shall pay the additional sum of FORTY
THOUSAND AND NO/100 DOLLARS ($40,000.00) to
the trust account of the Escrow Agent. Such
deposit shall be distributed to SELLER at
CLOSING as provided in Paragraph 3.04, unless
otherwise provided for herein. At the
request of BUYER, Escrow Agent shall place
the deposit in an interest-bearing trust
account. Interest earned on the deposit
shall be paid to SELLER at the CLOSING,
unless otherwise provided for herein, and
such interest shall serve as a credit towards
the purchase price becoming payable at
CLOSING.
3.03 At the CLOSING for the assets of the
BUSINESS in Michigan, the sum of ONE MILLION
TWO HUNDRED FIFTY-THREE THOUSAND TWO HUNDRED
TWENTY ONE AND 05/100 DOLLARS ($1,253,221.05)
shall be paid by BUYER's execution of a
Promissory Note. Such Promissory Note shall
bear interest at seven percent (7%) per annum
and shall be amortized in equal monthly
installments of principal and interest of
$30,009.94 over a period of forty-eight (48)
months. Accrued interest only shall be paid
on the first day of the month following such
CLOSING, and thereafter on the first day of
each and every month installments in the
amount of THIRTY THOUSAND NINE AND 94/100
DOLLARS ($30,009.94) shall become payable for
the term of such Note.
At the CLOSING for the assets of the BUSINESS
located in Massachusetts, the sum of ONE
HUNDRED FORTY-SIX THOUSAND SEVEN HUNDRED
SEVENTY-EIGHT AND 95\100 DOLLARS
($146,778.95) shall be paid by BUYER's
execution of a Promissory Note. Such
Promissory Note shall bear interest at seven
percent (7%) per annum and shall be amortized
in equal monthly installments of principal
and interest of THREE THOUSAND FIVE HUNDRED
FOURTEEN AND 80/100 DOLLARS ($3,514.80) over
a period of forty-eight (48) months. Accrued
interest only shall be paid on the first day
of the month following such CLOSING, and
thereafter on the first day of each and every
month installments in the amount of $3,514.80
shall become payable for the term of such
Note.<PAGE>
The Notes shall provide that there shall be
no prepayment penalty and shall provide for a
fifteen (15)-day grace period. The form of
the Promissory Notes to be executed at the
CLOSING is attached hereto as Exhibit "A".
The Promissory Notes to be executed by
BUYER to SELLER at the CLOSING shall be
secured by Security Agreements and Chattel
Mortgages granting a first lien to SELLER on
all of the assets of the BUSINESS being sold.
The form of the Security Agreements and
Chattel Mortgages to be executed at the
CLOSING is attached hereto as Exhibit "B".
The BUYER shall execute such UCC-1 Financing
Statements as are appropriate to allow SELLER
to perfect SELLER's security interest in the
ASSETS. Such Promissory Notes shall be
guaranteed by RUDY'S RESTAURANT GROUP, INC.
3.04 At the CLOSING for the assets of the
BUSINESS in Michigan, the deposits referred
to in Paragraphs 3.01 and 3.02 and the
balance of the purchase price for the assets
of the BUSINESS in Michigan (after
application of credit for the face amount of
the Promissory Note to be executed at such
CLOSING), plus or minus any net adjustments
and prorations due SELLER pursuant to Section
6 and Paragraph 2.02 with respect to the
BUSINESS in Michigan, shall be paid to SELLER
by wire transfer.
At the CLOSING for the assets of the BUSINESS
in Massachusetts, the balance of the purchase
price for the assets of the BUSINESS in
Massachusetts (after application of credit
for the face amount of the Promissory Note to
be executed at such CLOSING), plus or minus
any net adjustments and prorations due SELLER
pursuant to Section 6 and Paragraph 2.02 with
respect to the BUSINESS in Massachusetts
shall be paid to SELLER by wire transfer.
4. CLOSING.
4.01 The parties agree that a CLOSING for
the ASSETS of the BUSINESS in Massachusetts
shall occur on or about March 15, 1996,
unless all parties agree to extend the date
of CLOSING for such BUSINESS.
The parties agree that a CLOSING for the
ASSETS of the BUSINESSES in Michigan shall
occur on January ___, 1996, unless all<PAGE>
parties agree to extend the date of such
CLOSING for such BUSINESSES.
4.02 The CLOSINGS for this transaction shall
be conducted by the parties and their legal
counsel through the mail utilizing express
delivery services.
4.03 Reference to the term "CLOSING" shall
refer to either the CLOSING held for the
transfer of the BUSINESSES located in
Michigan or the CLOSING for the transfer of
the BUSINESS located in Massachusetts. In
construing this Agreement with reference to
the term CLOSING, the parties shall apply
reference to a CLOSING with respect to the
transaction to transfer the ASSETS of the
BUSINESS in Massachusetts or the ASSETS of
the BUSINESSES in Michigan, as shall be
reasonably necessary for the particular
transaction under consideration.
4.04 At the time of CLOSING for the
BUSINESSES located in Michigan, the transfer
of the beverage licenses for such transaction
shall be deferred until such time as BUYER
receives necessary approvals for the transfer
of the Michigan beverage licenses of SELLER
to BUYER. Accordingly, notwithstanding any
language to the contrary contained herein, at
the CLOSING for the transfer of the Michigan
BUSINESSES, the purchase price allocable to
the beverage licenses of SELLER shall be
retained in escrow with SELLER's counsel
pursuant to the terms of a Management
Agreement to be entered into between the
SELLER and BUYER at such CLOSING. A copy of
the Management Agreement to be entered into
at the CLOSING is attached as Exhibit "K".
5. LIABILITIES.
5.01 ASSUMPTION OF LIABILITIES. BUYER shall
assume the following liabilities of the
BUSINESSES being transferred at such CLOSING:
5.01.1 BUYER shall assume all future
obligations arising for telephone service and
telephone directory advertising from and
after the date of CLOSING. A true and
complete listing of all telephone numbers and
the terms of directory advertising contracts<PAGE>
for each of the SUBJECT PROPERTIES is set
forth on Schedule 5.01.1.
5.01.2 BUYER shall assume all future
obligations arising under the terms of the
equipment leases (hereinafter referred to as
"EQUIPMENT LEASES") identified on the
attached Schedule 5.01.2 from and after the
date of CLOSING.
5.01.3 BUYER shall assume all future
obligations arising under the terms of the
Real Property Lease for the Boston Location
which lease is identified on the attached
Schedule 5.01.3 from and after the date of
CLOSING.
5.01.4 BUYER shall assume all future
obligations arising under the terms of the
Real Property Lease for the Dearborn Location
which lease is identified on the attached
Schedule 5.01.4 from and after the date of
CLOSING.
5.01.5 As provided for in Section 7.01 and
7.02 below, BUYER shall assume all future
obligations arising under the terms of the
Real Property Leases for the Troy location
and the Farmington location, which leases are
identified on the attached schedule 5.01.5.
5.01.6 BUYER shall assume all of SELLER's
liability for honoring gift certificates to
supply food and beverages to customers of
SELLER from and after the date of CLOSING;
provided, however, BUYER shall be entitled to
a credit for gift certificates honored which
were issued by SELLER (at face amount). Such
credit shall be applied by BUYER mailing to
SELLER the gift certificates honored along
with the balance of payment of the
installment falling due on the Promissory
Notes executed by BUYER to SELLER at CLOSING.
5.01.7 BUYER shall assume all of the service
contracts identified on the attached Schedule
5.01.7 (the "SERVICE CONTRACTS") from and
after the date of CLOSING.
5.02 NO ASSUMPTION OF LIABILITIES. Except
as expressly provided for in Paragraph 5.01
above, BUYER shall not be obligated and will
not assume or become liable for any
obligations or liabilities of the SELLER with
respect to the BUSINESS. All of SELLER's<PAGE>
accounts payable, liens, liabilities of any
type and other encumbrances of SELLER which
are existing on or which arose at or prior to
CLOSING, shall be paid from the proceeds of
the sale contemplated herein. The parties
specifically acknowledge that BUYER is not
assuming and will not be obligated to
discharge or be liable for any debts,
liabilities, claims or obligations of SELLER
including, without limitation, any:
5.02.1 Liabilities or obligations of the
SELLER to any creditors, customers or
employees;
5.02.2 Liabilities or obligations of SELLER
with respect to any transactions occurring
after the CLOSING;
5.02.3 Any and all other liabilities,
accounts payable or obligations of SELLER,
whether direct, indirect, contingent or
otherwise.
Except as set forth in Paragraph 5.01, the
parties intend that BUYER shall acquire
ownership of the ASSETS being purchased
herein free and clear of all claims, liens
and encumbrances. SELLER warrants that it
will hold BUYER harmless from any and all
claims, liabilities and encumbrances incurred
by SELLER not expressly assumed under the
provisions of Section 5.01 and will fully
indemnify BUYER for any such liabilities,
loss or other damages suffered by BUYER,
including all costs and expenses in defending
same, including reasonable attorneys' fees,
court costs and costs of appeal in connection
with such liabilities or obligations of
SELLER.
5.03 BULK SALE PROVISIONS. The parties
specifically acknowledge that BUYER is not
assuming and will not discharge or be liable
for any debts, liabilities, taxes or other
obligations of SELLER whatsoever except as
expressly provided for herein. In reliance
upon the representations and warranties of
SELLER and Barclay Henderson, BUYER hereby
waives compliance with any requirements of
the bulk transfer provisions of the Uniform
Commercial Code of the State of Michigan or
of the State of Massachusetts. However,
nothing in this section shall estop or
prevent any party from asserting as a bar or<PAGE>
defense to any action or proceeding brought
under such laws that the bulk transfer
provisions are not applicable to the sale
contemplated under this Agreement.
6. PRORATIONS AND UTILITIES ETC. The
following adjustments shall be made at each
CLOSING provided for hereunder with respect
to each of the BUSINESSES being transferred
at such CLOSING:
6.01 UTILITIES. SELLER and BUYER shall
arrange to notify all utility companies to
take final readings as of the date of such
CLOSING, and BUYER shall have the obligation
to advise such utilities to provide future
services in BUYER's name.
6.02 DEPOSITS AND PREPAYMENTS. SELLER shall
be entitled to receive an amount equal to all
deposits and prepayments relating to the
BUSINESS transferred to BUYER at the CLOSING
which are held by depositees and third
parties for the benefit of BUYER following
the CLOSING. Notwithstanding the foregoing,
the deposit paid under the Real Property
Lease for the Boston Location shall be
handled in the manner as provided for in
Section 7.03. A listing of all deposits and
prepayments which may be applicable to the
CLOSINGS provided for hereunder is set forth
on Schedule 6.02.
6.03 PRORATIONS. All rent and property
taxes which are imposed upon the ASSETS shall
be prorated at the CLOSING. The parties
shall prorate all other proratable items.
6.04 CUSTOMER DEPOSITS. BUYER shall be
entitled to receive an amount equal to all
customer deposits and prepayments relating to
the BUSINESS for parties, banquets and other
events which are to be provided by the BUYER
following the CLOSING.
6.05 ACCRUED EMPLOYEE BENEFITS. BUYER shall
be entitled to receive credit against amounts
falling due under the Promissory Note for the
sums BUYER pays with respect to all earned
and unpaid EMPLOYEE compensation and benefits
existing at the time of CLOSING for employees
who will be retained by BUYER following the
CLOSING, including but not limited to such
items as incentive bonus, payable vacation
days, payable sick days, etc. In order to<PAGE>
obtain such credit, BUYER shall inform SELLER
in writing listing each EMPLOYEE's name and
benefits paid by it under the provisions of
this Section on a monthly basis.
6.06 CASH BANKS. SELLER shall be entitled
to receive an amount equal to all cash in
registers transferred to BUYER at the
beginning of business on the date of CLOSING,
which amounts shall not exceed SELLER's
normal working cash balances at the beginning
of each business day.
7. REAL PROPERTY LEASES. SELLER
represents it has provided BUYER with true
and complete copies of it's real estate
property leases for the Boston location, the
Dearborn location, the Troy location and the
Farmington Hills location.
7.01 TROY REAL PROPERTY LEASE. At the
CLOSING for the BUSINESSES located in
Michigan, BUYER and BARCLAY HENDERSON (as the
landlord of the Troy Location) shall enter
into a new lease for the Troy Location on the
following terms and conditions:
7.01.1 The initial lease term shall be for a
period of twenty (20) years;
7.01.2 The lease shall grant two additional
five (5) year options;
7.01.3 Rent shall be the greater of:
(i) ONE HUNDRED FORTY
THOUSAND AND NO/100 DOLLARS ($140,000.00)
annual base rent or,
(ii) eight
percent (8%) of Annual Sales up to TWO
MILLION FOUR HUNDRED THOUSAND AND NO/100
DOLLARS ($2,400,000.00) and six percent (6%)
of Annual Sales above TWO MILLION FOUR
HUNDRED THOUSAND AND NO/100 DOLLARS
($2,400,000.00);
For purposes of this Agreement the terms
"Annual Sales" shall mean the gross sales of
BUYER at the particular location under the
location for lease being considered,
excluding, to the extent included in gross
sales, gratuities paid for it's employees,
sales taxes collected, returns, discounts,
chargebacks, allowances, employee meals,<PAGE>
discounts on and complementary meals and
beverages, and sales of capital assets.
BUYER shall also pay to the landlord of the
Troy Location additional rent in the amount
of $50,000.00 upon the execution of such
lease by all parties.
7.01.4 BUYER shall be responsible for all
real estate taxes, normal maintenance and
insurance coverage for the Troy Location.
The landlord shall be responsible for all
repairs and maintenance of facilities and
equipment exterior to the leased premises,
including but not limited to structural
repairs, the HVAC system and roof repairs
however, BUYER shall be responsible to repair
and maintain the HVAC system on the roof
directly above the leased premises). BUYER
shall be responsible for repairs and
maintenance of all improvements made to the
interior of the leased premises;
7.01.5 BUYER shall have a right of first
refusal to purchase the real estate and
improvements subject to the lease on any
transfer of same according to the same price
and terms as received by a third-party bona
fide offer for a period of thirty (30) days
after receipt of such notice from the
landlord (such right of first refusal shall
not apply to transfers to or among family
members of the landlord);
7.01.6 RUDY'S RESTAURANT GROUP, INC. will
guaranty payment of rent under the lease for
the Troy Location; and
7.01.7 A default in payment of rent under
the Lease by Buyer which is not cured within
a fifteen (15) day grace period shall
constitute a default under the Promissory
Notes executed by BUYER to the SELLER at the
CLOSING.
7.01.8 Provisions shall be included to share
common area maintenance for the lobby,
landscaping, parking and other common area
expenses.
Except as provided for above, the Troy lease
to be entered into shall utilize a form
acceptable to BUYER. A copy of the Troy
Lease to be entered into at the time of
CLOSING is attached hereto as Exhibit "D". <PAGE>
7.02 FARMINGTON HILLS REAL PROPERTY LEASE.
At the CLOSING for the BUSINESSES located in
Michigan, BUYER and BARCLAY HENDERSON (as the
landlord of the Farmington Hills Location)
shall enter into a new lease for the
Farmington Hills Location on the following
terms and conditions:
7.02.1 The initial lease term shall be for a
period of twenty (20) years;
7.02.2 The lease shall grant two additional
five (5) year options;
7.02.3 Rent shall be the greater of:
(i) ONE HUNDRED FORTY
THOUSAND AND NO/100 DOLLARS ($140,000.00) per
annum base rent, or
(ii) six percent (6%)
of Annual Sales;
BUYER shall also pay to the landlord of
the Farmington Hills Location additional rent
in the amount of $50,000.00 upon the
execution of such lease by all parties.
7.02.4 BUYER shall be responsible for all
real estate taxes, maintenance and insurance
coverage for the Farmington Hills Location.
Tenant shall be responsible for all repairs
and maintenance of the interior and exterior
of the lease premises, including its parking
lot and landscaping;
7.02.5 The BUYER shall have a right of first
refusal to purchase the real estate and
improvements subject to the lease on any
transfer of same according to the same price
and terms as received by a third-party bona
fide offer for a period of thirty (30) days
after receipt of such notice from the
landlord (such right of first refusal shall
not apply to transfers to or among family
members of the landlord); and
7.02.6 RUDY'S RESTAURANT GROUP, INC. will
guaranty payment of rent under the lease for
the Farmington Hills Location.
7.02.7 A default in payment of rent under
the Lease by Buyer which is not cured within
a fifteen (15) day grace period shall
constitute a default under the Promissory<PAGE>
Notes executed by Buyer to the Seller at the
closing.
Except as provided for above, the Farmington
lease to be entered into shall utilize a form
acceptable to BUYER. A copy of the
Farmington Hills Lease to be entered into at
the time of CLOSING is attached hereto as
Exhibit "E".
7.03 BOSTON LEASE. The parties acknowledge
that the real property lease for the Boston
Location terminates on April 29, 1999. The
parties further acknowledge that the purchase
price for this transaction with respect to
the Boston Location was based upon an
assumption that BUYER will be able to obtain
a new lease acceptable to BUYER for the
Boston Location with an initial term such
that the remaining term of the existing
lease, and the initial term of the new lease
is twenty (20) years, plus two renewal option
terms under the new lease of five (5) years
each.
Prior to the termination of the lease for the
Boston location, if so requested by BUYER,
SELLER will cooperate to assist BUYER in
renegotiating a new lease or lease renewal of
the existing lease containing the initial
term and option terms desired.
In the event an acceptable lease to BUYER, in
BUYER's sole discretion, is not executed by
the BUYER prior to the expiration of the
current lease for the Boston Location, SELLER
agrees that BUYER shall receive a credit of
$199,200.00 against the outstanding principal
balance then existing under the Promissory
Note executed by BUYER to SELLER at the
CLOSING hereunder. In such case, the new
outstanding principal balance of the
Promissory Note existing after such credit
shall be re-amortized over the remaining term
of the Note in equal monthly installments of
principal and interest.
In the event the BUYER does not obtain a new
lease acceptable to it as provided for herein
prior to the expiration of the current lease
for the Boston location, BUYER shall transfer
all of the assets (including the liquor
license) utilized by BUYER in the operations
of the Boston Location to SELLER on the last
business day of the current lease term. Such
assets shall be transferred to SELLER in the<PAGE>
same condition as received from SELLER,
subject to reasonable and normal wear and
tear. If such transfer occurs, BUYER shall
be entitled to receive reimbursement for its
cost of food and beverage inventory
transferred to SELLER, and the parties shall
make the same prorations in connection with
such transfer as are provided for in this
Agreement. A copy of the Assignment and
Assumption Agreement to be entered into by
the parties at the time of CLOSING with
respect to the Boston Lease is attached
hereto as Exhibit "F".
The parties acknowledge the deposit paid to
the landlord under the Boston Lease is
approximately $20,700.00. At the CLOSING
hereunder for the BUSINESS located in
Massachusetts, BUYER shall execute to SELLER
a Promissory Note for the amount of such
deposit, which shall bear interest at the
same rate as such deposit accrues interest
under the Lease. Such Note shall be secured
by the Security Agreements and Chattel
Mortgages set forth in Section 3.03, be
subject to the Confession of Judgment
Agreements set forth in Section 3.03, and
payment thereof shall be guaranteed by RUDY'S
RESTAURANT GROUP, INC. In the event BUYER
executes a new Lease for the Boston Lease as
provided for herein, such Note shall become
due and payable in full on the date of
signing such new lease. In the event BUYER
does not obtain a new lease acceptable to it
as provided for herein prior to the
expiration of the current lease for the
Boston Location, such Note shall be deemed
discharged in full and SELLER shall be
entitled to receive from BUYER the documents
of transfer contemplated herein for such
event.
7.04 DEARBORN LEASE. The parties
acknowledge that the real property lease for
the Dearborn Location terminates on September
20, 2001. The parties further acknowledge
that the purchase price for this transaction
with respect to the Dearborn Location was
based upon an assumption that BUYER will be
able to obtain a new lease acceptable to
BUYER for the Dearborn location with an
initial term such that the remaining term of
the existing Lease, and the initial term of
the new lease is 20 years, plus two renewal
option terms under the new lease of five (5)
years each.<PAGE>
Prior to the termination of the lease for the
Dearborn location, if so requested by BUYER,
SELLER will cooperate to assist BUYER in
renegotiating a new lease or lease renewal of
the existing lease containing the initial
term and option terms desired.
In the event an acceptable lease to BUYER,
(in BUYER's sole discretion), is not executed
by the BUYER prior to the expiration of the
current lease for the Dearborn Location, the
SELLER agrees that BUYER shall receive a
credit of $264,000.00 against the outstanding
principal balance then existing under the
Promissory Note executed by BUYER to SELLER
at the CLOSING for the BUSINESSES located in
Michigan. In such case, the new outstanding
principal balance of such Promissory Note
existing after such credit shall be re-
amortized over the remaining term of the Note
in equal monthly installments of principal
and interest.
In the event the BUYER does not obtain a new
lease acceptable to it as provided for herein
prior to the expiration of the current lease
for the Dearborn location, BUYER shall
transfer all of the assets (including the
liquor license) utilized by BUYER in the
operations of the Dearborn Location to SELLER
on the last business day of the current lease
term. Such assets shall be transferred to
SELLER in the same condition as received from
SELLER, subject to reasonable and normal wear
and tear. If such transfer occurs, BUYER
shall be entitled to receive reimbursement
for its cost of food and beverage inventory
transferred to SELLER, and the parties shall
make the same prorations in connection with
such transfer as are provided for in this
Agreement. A copy of the Assignment and
Assumption Agreement to be entered into by
the parties at the time of CLOSING with
respect to the Dearborn Lease is attached
hereto as Exhibit "G".
8. REPRESENTATIONS AND WARRANTIES OF
SELLER. SELLER represents, warrants,
covenants and agrees with BUYER that the
following, statements, conditions and facts
are true and correct as of the date of this
Agreement and shall continue to be true and
correct as of the date of CLOSING:
8.01 TITLE TO ASSETS AND STATUS. SELLER are
corporations duly organized and existing in<PAGE>
good standing under the laws of the States
indicated herein and have the corporate power
to own its assets and carry on its business
as now conducted. SELLER has no subsidiaries
or entity or other ownership interest in any
other corporation, firm, association or
business enterprise which has any interest in
the BUSINESS. On or prior to the CLOSING,
SELLER shall deliver to BUYER a Certificate
of Good Standing of each SELLER, certified by
the appropriate state office. SELLER is the
owner of and has good and marketable title to
all of the assets utilized in the operations
of the BUSINESS, free and clear of any liens,
encumbrances or claims whatsoever, except as
expressly noted in Section 5.01.
8.02 COMPLIANCE WITH AGREEMENTS AND
INSTRUMENTS. The execution and delivery of
this Agreement by SELLER and the consummation
of the transactions contemplated hereby do
not conflict with or violate its Articles or
Bylaws, or any contract or agreement to which
SELLER is a party, or by which it may be
bound, except as herein provided where
various consents may be required, and is not
contrary to any order of any court to which
SELLER is subject.
8.03 FINANCIAL STATEMENTS AND SALES
REPRESENTATIONS. The balance sheets, income
statements, tax statements and all other
financial information of SELLER with respect
to the BUSINESS previously supplied and which
may be supplied to BUYER by SELLER (as listed
on Schedule 8.03) are true and complete in
all material aspects and fairly and properly
present the financial condition of the
BUSINESS at such dates, as well as the
results of operations for the periods therein
specified.
8.04 EQUIPMENT AND FIXTURES. The fixed
assets and equipment of the BUSINESS are
suitable and operational for the uses for
which they were originally intended. The
equipment and machinery of the BUSINESS being
transferred to BUYER are in good working
order and shall be so at the CLOSING.
Immediately prior to the CLOSING, SELLER
shall provide BUYER with access to the
equipment of the BUSINESS to allow BUYER to
inspect their working condition. Any defects
found in mechanical working condition which
are discovered prior to the CLOSING which
cause such equipment not to be in good<PAGE>
working order shall be repaired by the
SELLER, at SELLER's cost.
8.05 COMPLIANCE WITH LAW. To the best of
SELLER's knowledge, neither SELLER nor the
SUBJECT PROPERTIES are in violation of any
federal, state or city laws, rules,
regulations or ordinances, including, but not
limited to those connected with, fire codes,
parking, signage, Americans With Disabilities
Act, employment practices, wages and hours,
discrimination, employment of illegal aliens,
occupational health and safety, environmental
or the physical condition of the SUBJECT
PROPERTIES. SELLER is not aware of, nor has
it received any written or oral notification
from any third party of any present or past
failure which remain outstanding to so
comply, or of any present or future events,
conditions, circumstances, activities,
practices, incidents, actions or plans which
may materially interfere with or prevent
continued compliance with any laws, rules or
regulations or of which may give rise to any
common law or statutory liabilities or
otherwise form the basis of any claim,
action, suit, proceeding, hearing or
investigation. In the event SELLER or BUYER
become aware of any violation or
noncompliance with any federal, state or city
laws, rules or regulations effecting the
BUSINESSES which existed prior to the CLOSING
for a BUSINESS, then upon BUYER's request,
SELLER shall cure such noncompliance, at
SELLER's cost.
8.06 LITIGATION. To the best of SELLER's
knowledge, there are no judgments, decrees,
liens, actions or proceedings pending or
threatened by or against SELLER in any court
or by any governmental agency.
8.07 BILL OF SALE. The bill of sale and
instruments of assignment to be delivered at
the CLOSING will transfer all of the ASSETS,
free of all encumbrances and liabilities, and
will contain the usual warranties and
affidavit of title (except as provided for in
Section 5.01 above).
8.08 CONDUCT OF BUSINESS. The BUSINESS will
be conducted up to the date of the CLOSING in
accordance with all laws, rules, regulations
and ordinances of all city, county, state and
federal governments. SELLER, up to the date
of the CLOSING, will operate and maintain the<PAGE>
BUSINESS in the same manner as operated by
SELLER prior to the execution of this
Agreement, will not violate the terms of its
contracts connected with the BUSINESS, and
will not remove or transfer any of its
assets, except sales of inventory in the
ordinary course of business. Inventory and
supplies sold shall be restocked in a normal
manner prior to the CLOSING. SELLER shall
maintain ample and appropriate insurance
coverage on its assets, operations and those
properties requiring insurance coverage under
agreements with third-parties through the
date of CLOSING.
8.09 LICENSES. SELLER possesses any and all
licenses and permits of any public authority
of any level of government that are necessary
for the lawful conduct of activities as of
the date hereof. To the best of SELLER's
knowledge, there are no ordinances or
regulations of any governmental body that
materially and adversely relate to, limit or
affect the conduct of the activities of
SELLER, except as disclosed herein. All of
such licenses are current and in good
standing. Within ten (10) days from the
execution of this Agreement, SELLER shall
furnish BUYER with copies of all of its
licenses or permits, including but not
limited to occupational licenses and any and
all other licenses or permits as are
necessary for the operation of the BUSINESS.
There are no pending violation or issues
concerning any of the licenses utilized by
SELLER in the BUSINESS. SELLER has not had
any beverage license violations which it has
experienced within the last twelve (12) month
period which would interfere in the transfer
of such licenses to BUYER. A list of all
licenses and permits possessed by SELLER with
respect to the BUSINESS, specified by
location and license number, are set forth on
Schedule 8.09.
8.10 NO DEFAULT. SELLER is not in default
in any respect under any of the contracts,
agreements, leases, documents or other
commitments to which it is a party or is
otherwise bound which agreements are to be
assigned to BUYER at a CLOSING hereunder.
8.11 DISCLOSURE. No representation or
warranty by SELLER in this Agreement or in
any writing attached hereto contains or will
contain any untrue statement of material<PAGE>
fact, or omits to state any material fact (of
which SELLER has knowledge or should have had
knowledge or notice of required to make the
statements herein or therein contained not
misleading).
8.12 MATERIAL FACTS. SELLER has no
knowledge of any materially adverse matter or
thing relative to the condition, financial or
otherwise, of the BUSINESS or the SUBJECT
PROPERTIES not disclosed in this Agreement or
the Schedules attached hereto.
8.13 CUSTOMERS. SELLER does not have any
information, nor is it aware of any facts
indicating that any of SELLER's customers
intend to cease doing business with the
BUSINESS, either as a result of the
transaction contemplated herein or for any
other reason which in the aggregate would
have a material impact on the BUSINESS.
8.14 EMPLOYEES. To the best of SELLER's
knowledge, the consummation of the
transaction contemplated herein will not
result in the resignation of any employee or
agent of the BUSINESS. SELLER possesses no
written employment agreements with any of its
employees of the BUSINESS. Seller is not a
party to any collective bargaining or union
agreement with respect to its employees. All
employees of the BUSINESS may be terminated
at will without cost or liability to the
BUSINESS (except for terminated employees'
rights to file for statutory unemployment
compensation).
8.15 INCORRECT STATEMENTS. SELLER agrees
that if prior to CLOSING it shall discover
that any representations, covenants and
warranties of SELLER contained in this
Agreement are incorrect, misleading or
erroneous, it shall promptly notify BUYER in
writing of such incorrect, misleading or
erroneous statement, and if same is
materially adverse to BUYER, in BUYER's
reasonable judgment, BUYER shall have the
right to terminate this Agreement and receive
back all deposit monies paid by BUYER.
8.16 ACCESS BY PUBLIC. SELLER has not
received notice of and has no knowledge of
ongoing or contemplated road construction,
eminent domain proceedings or other
interference contemplated which would<PAGE>
adversely effect access to or enjoyment of
any of the SUBJECT PROPERTIES.
8.17 CORPORATE ACTIONS. The Board of
Directors and Stockholders of SELLER have
approved this Agreement and the performance
thereof, and have authorized the execution
and delivery hereof. On or prior to the
CLOSING, SELLER shall provide BUYER with
copies of the resolutions by its Stockholders
and Directors, authorizing this Agreement and
the transactions contemplated herein.
8.18 INVENTORY. All of the inventory of the
BUSINESS to be transferred to the BUYER at
the CLOSING will consist of items which are
sellable in the ordinary course of business.
Prior to the closing, SELLER shall remove any
defective and/or spoiled inventory items from
the SUBJECT PROPERTIES.
8.19 ADVERSE PUBLICITY. SELLER has not
experienced any adverse publicity concerning
its operations with the general public in the
last twelve (12) month period which had or
might have a material adverse effect on any
of the BUSINESSES other than as set forth on
Schedule 8.19.
8.20 INSURANCE EXPERIENCE. Seller has not
experienced any adverse matters which would
adversely affect its experience rating under
insurance policies for future coverage by
BUYER.
8.21 OWNERSHIP. Lanover Enterprises, Inc.
is the parent corporation of Asian
Restaurants International, Inc. Asian
Restaurants International, Inc. is a parent
corporation of Kyoto West, Inc., Kyoto North,
Inc., Kyoto Restaurants, Inc. and Asian
Restaurants, Inc.
9. REPRESENTATIONS AND WARRANTIES OF
BUYER. BUYER represents, warrants, covenants
and agrees with SELLER that the following
statements, conditions and facts are true and
correct as of the date of this Agreement, and
shall continue to be true and correct as of
the date of CLOSING:
9.01 BUYER has the full power in accordance
with law to execute and perform this
Agreement and other documents required to be
executed and delivered by BUYER hereunder,
and the execution hereof and the performance<PAGE>
herein shall not create a default or
violation in any other agreement entered into
by BUYER.
9.02 The Board of Directors of BUYER has
approved this Agreement and the performance
thereof, and has authorized the execution and
delivery hereof. On or prior to the CLOSING,
BUYER shall provide SELLER with copies of the
Resolution of its Board of Directors
authorizing this Agreement and the
transactions contemplated herein.
10. CONDITIONS.
10.01 CONDITIONS TO BUYER'S OBLIGATION TO
CLOSE. The obligations of BUYER under this
Agreement for each CLOSING are contingent
upon the existence or satisfaction of various
conditions, as hereinafter set forth. If all
of the conditions do not exist or have not
been satisfied by the date of each CLOSING
(or as otherwise set forth with respect to
any specific condition), BUYER will have the
right to either: (i) terminate this
Agreement by written notice to SELLER, in
which event all monies paid by BUYER shall be
returned to BUYER and thereafter the parties
shall be relieved of all further obligations
and liabilities hereunder; (ii) grant an
additional period of time to SELLER in which
to satisfy such conditions; or (iii) BUYER
may waive any condition and proceed to close
the transaction. The parties shall cooperate
with each other with respect to the
satisfaction of all conditions; shall not
prevent or hinder the satisfaction of any
conditions; and the party responsible for the
satisfaction of any condition shall proceed
with due diligence and use such party's best
efforts to satisfy such condition. The
conditions upon which this Agreement is
contingent are as follows:
10.01.1 CONSENT TO ASSIGNMENT OF BUSINESS
LEASES. The landlords under the Real
Property Leases for the Dearborn Location and
the Boston Location shall have consented in
writing to the assignment of such leases to
BUYER upon the same terms and conditions as
SELLERS current leases for such locations,
and shall provide an estoppel certificate
attesting to the good standing of such
leases, the current monthly rental amount,
and any deposits paid thereunder.
Notwithstanding the foregoing, the landlord<PAGE>
under the Real Property Lease for the Boston
Location shall agree to consent to allow
BUYER to provide annual financial statements
for the lease year defined therein to be
certified by BUYER's Chief Financial Officer
instead of certified by independent certified
public accountants for the lease year.
10.01.2 CONSENT TO ASSIGNMENT OF EQUIPMENT
LEASES. The lessors of the Equipment Leases
set forth on Schedule 5.01.2 shall have
consented to the assignment of the EQUIPMENT
LEASES to BUYER on the same terms and
conditions as SELLER's EQUIPMENT LEASES.
10.01.3 LICENSES. With respect to the
CLOSING for the BUSINESS located in
Massachusetts, BUYER shall have been able to
obtain all food and beverage licenses, and
such other governmental permits as shall be
necessary to enable BUYER to operate the
BUSINESS serving food and alcoholic beverages
to the general public as is conducted by
SELLER. With respect to the CLOSING for the
BUSINESSES located in Michigan, BUYER shall
have been able to obtain all food, licenses,
and such other governmental permits as shall
be necessary to enable BUYER to operate such
BUSINESSES serving food to the general public
as is conducted by SELLER.
10.01.4 OBLIGATIONS OF SELLER. All of the
obligations of SELLER and the documents
required to be obtained and/or furnished by
SELLER shall have been performed, obtained
and furnished within the time period required
pursuant to the terms of this Agreement, and
time is of the essence with respect to such
obligations.
10.01.5 COMPLIANCE WITH AGREEMENT. All of
the terms and conditions of this Agreement to
be complied with and performed by SELLER on
or before the closing date, including the
delivery to BUYER of all schedules, documents
and instruments required to be delivered,
shall have been complied with and performed.
10.01.6 REPRESENTATIONS AND WARRANTIES. All
representations and warranties of SELLER
shall be deemed to have been made again on
the closing date and shall then be true and
correct. There shall have been no materially
adverse change in the financial condition or
the operations of SELLER.<PAGE>
10.01.7 COVENANT NOT TO COMPETE. SELLER and
BARCLAY HENDERSON, shall have entered into an
Agreement Not to Compete as provided for in
Section 11 below.
10.01.8 LEASES FOR TROY LOCATION AND
FARMINGTON LOCATION. BARCLAY HENDERSON shall
have entered into leases for the Troy
Location and Farmington Location as provided
for in Sections 7.01 and 7.02 above.
10.01.9 MANAGEMENT AGREEMENT. With respect
to the CLOSING for the BUSINESSES located in
Michigan, the parties shall have entered into
a Management Agreement for the operation of
SELLER's beverage licenses until all
appropriate governmental approvals for the
transfer of such licenses from SELLER to
BUYER are obtained.
10.02 CONDITIONS TO SELLER'S OBLIGATION TO
CLOSE. The obligations of SELLER under this
Agreement for each CLOSING are contingent
upon the existence or satisfaction of various
conditions, as hereinafter set forth. If all
of the conditions do not exist or have not
been satisfied by the date of CLOSING (or as
otherwise set forth with respect to any
specific condition), SELLER will have the
right to either: (i) terminate this
Agreement by written notice to BUYER, in
which event all monies paid by BUYER shall be
returned to BUYER and thereafter the parties
shall be relieved of all further obligations
and liabilities hereunder; (ii) grant an
additional period of time to BUYER in which
to satisfy such conditions; or (iii) SELLER
may waive any condition and proceed to close
the transaction. The parties shall cooperate
with each other with respect to the
satisfaction of all conditions; shall not
prevent or hinder the satisfaction of any
conditions; and the party responsible for the
satisfaction of any condition shall proceed
with due diligence and use such party's best
efforts to satisfy such condition. The
conditions upon which this Agreement is
contingent are as follows:
10.02.1 REAL PROPERTY LEASES. BUYER shall
have entered into lease assignments and the
leases as provided for in Section 7 above.
10.02.2 AGREEMENT NOT TO COMPETE. BUYER
shall have entered into an Agreement Not to<PAGE>
Compete with SELLER and BARCLAY HENDERSON as
provided for in section 11 below.
10.02.3 OBLIGATIONS OF BUYER. All of the
obligations of BUYER and the documents
required to be obtained and/or furnished by
BUYER shall have been performed, obtained and
furnished within the time period required
pursuant to the terms of this Agreement, and
time is of the essence with respect to such
obligations.
10.02.4 COMPLIANCE WITH AGREEMENT. All of
the terms and conditions of this Agreement to
be complied with and performed by any party
on or before the closing date, including the
delivery to SELLER or BUYER of all schedules,
documents and instruments required to be
delivered, shall have been complied with and
performed.
10.02.5 REPRESENTATIONS AND WARRANTIES. All
representations and warranties of BUYER shall
be deemed to have been made again on the
closing date and shall then be true and
correct.
11. AGREEMENT NOT TO COMPETE. At the
CLOSING for the BUSINESSES located in
Michigan, SELLER and BARCLAY HENDERSON shall
agree in writing that they will not
individually or collectively as a member of a
partnership, sole proprietorship, corporation
or other entity or as a consultant, manager,
advisor, lender, guarantor or in any other
capacity, either directly or indirectly,
engage in the same or similar business as is
presently engaged in by SELLER for a term of
five (5) years within a one hundred (100)
mile radius of any present or future
restaurant location established by BUYER or
THE SAMURAI, INC. or its subsidiaries. For
purposes of the Agreement, the "same or
similar business" shall mean any Asian or
Japanese themed restaurant.
Such Agreement Not to Compete shall provide
that SELLER and BARCLAY HENDERSON shall
provide reasonable consultation services with
regard to prior operations and policies of
the BUSINESS to the BUYER for a period of
sixty (60) months, and they shall each agree
to hold in confidence all trade secrets and
confidential information relating to the
operation of the BUSINESS.<PAGE>
Such Agreement Not to Compete shall provide
for compensation of FOUR HUNDRED THOUSAND AND
NO/100 DOLLARS ($400,000.00) to BARCLAY
HENDERSON payable in equal monthly
installments over a period of sixty (60)
months. Payment of such consideration shall
be guaranteed by RUDY'S RESTAURANT GROUP,
INC. A copy of the Agreement Not To Compete
to be entered into at the time of CLOSING is
attached hereto as Exhibit "H".
12. DOCUMENTS TO BE DELIVERED BY SELLER.
12.01 At the CLOSING, SELLER shall deliver
the following documents to BUYER for the
ASSETS being transferred:
12.01.1 A bill of sale, dated as of the
CLOSING, covering all of the personal and
tangible property to be transferred,
transferring all right, title and interest in
such personal and tangible property to BUYER,
and containing the usual warranties and
affidavit of title. A copy of the form Bill
of Sale to be executed at the time of each
CLOSING is attached hereto as Exhibit "I".
12.01.2 Assignments, dated as of the
CLOSING, of SELLER's occupational, beverage,
and other operating Licenses.
12.01.3 Assignments of the EQUIPMENT LEASES.
12.01.4 Assignments of the SERVICE
CONTRACTS.
12.01.5 Assignments for all trade names and
service marks, and any applications with
respect thereto.
12.01.6 Minutes of the Board of Directors of
SELLER and the SHAREHOLDERS of SELLER
authorizing the consummation of this
transaction.
12.01.7 The Agreement Not to Compete of
Seller and BARCLAY HENDERSON as provided for
in Section 11 above.
12.01.8 New leases for the Troy Location and
the Farmington Hills Location as provided for
in Sections 7.01 and 7.02 above, together
with terminations of the existing Leases for
such location.<PAGE>
12.01.9 Assignment of Leases for the Boston
Location and the Dearborn Location together
with the Landlord's written consent for such
assignments and estoppel letters indicating
the status of such leases.
12.01.10 A No-Lien Affidavit of the Seller
indicating the absence of liens or
encumbrances against the ASSETS AND SUBJECT
PROPERTIES and a statement that no work has
been performed at the SUBJECT PROPERTIES
which would entitle anyone to file a lien for
services or work performed as a result of
transactions occurring prior to the CLOSING.
The form of the No Lien Affidavit to be
executed at the time of CLOSING is attached
hereto as Exhibit "J".
12.01.11 Assignments for the Name "Kyoto
Japanese Restaurants," and all
telephone/telecommunication numbers, post
office boxes and addresses used by SELLER in
the BUSINESS.
12.01.12 The Management Agreement for the
beverage licenses of the BUSINESSES located
in Michigan, a copy of which is attached
hereto as Exhibit "K".
12.01.13 All other documents and instruments
expressly or impliedly required by the terms
of this Agreement.
Simultaneously with the delivery of such
documents provided for above, SELLER will
take all such steps as may be requisite to
put BUYER in actual possession, operation and
control of the properties, ASSETS and
BUSINESS to be transferred hereunder.
Subsequent to the date of CLOSING, and at the
request of BUYER, SELLER will execute and
deliver to BUYER such other instruments of
conveyance and transfer and take such other
action as BUYER may reasonably require to
more effectively convey, transfer to, invest
in BUYER, and to put the BUYER in possession
of, any of the properties or assets to be
conveyed, transferred and delivered to BUYER
hereunder.
12.02 At the CLOSING, BUYER shall deliver
the following documents to SELLER:
12.02.1 Minutes of the Board of Directors of
BUYER authorizing the transactions hereunder.<PAGE>
12.02.2 The Promissory Note of BUYER is
provided for in Section 3.03 guaranteed by
RUDY'S RESTAURANT GROUP, INC.
12.02.3 The Security Agreement and Chattel
Mortgage as provided for in Section 3.03.
12.02.4 UCC-1 Financing Statements to perfect
SELLER'S interest in the Security Agreement
and Chattel Mortgage.
12.02.5 The cash sum required to be paid
pursuant to Section 3.04
12.02.6 Assumption of obligations arising
under the real property leases for the Boston
Location and the Dearborn Location.
12.02.7 The guaranty by RUDY'S RESTAURANT
GROUP, INC. for the payment of rent falling
due under the real property leases for the
Troy Location and the Farmington Hills
Location.
12.03 All documents to be provided by the
parties to the other at the time of CLOSING
shall be subject to the reasonable approval
of all legal counsel of the parties.
13. CASUALTY. SELLER assumes all risk of
destruction, loss or damage due to fire or
other casualty up to the date of CLOSING. If
the destruction, loss or damage is such that
the BUSINESS of SELLER being transferred is
interrupted or curtailed then BUYER shall
have the right, at its option, to terminate
this Agreement. If BUYER elects to terminate
this Agreement, BUYER shall receive a return
of the deposit paid hereunder and the rights
of BUYER and SELLER under this Agreement
shall thereupon terminate. If the
destruction, loss or damage is such that the
BUSINESS of SELLER is neither interrupted nor
curtailed or in the event BUYER does not
elect to terminate this Agreement following a
casualty, the purchase price shall be
adjusted at the CLOSING to reflect the costs
to repair or replace assets affected by such
destruction, loss or damage.
14. INSPECTION OF SUBJECT PROPERTIES AND
SELLER'S BOOKS AND RECORDS. From and after
the date of the execution of this Agreement
by all parties, SELLER shall arrange for and
provide BUYER and BUYER's advisors free and
full access to the SUBJECT PROPERTIES,<PAGE>
properties, books and records of SELLER and
allow copies to be made in order that BUYER
may have full opportunity to make whatever
investigation it shall desire of the affairs
of SELLER, provided that the investigation
shall not unreasonably interfere with the
operations of SELLER. In the event BUYER is
not satisfied with its investigations, for
whatever reasons, then BUYER may terminate
this Agreement and receive back the entire
deposit paid upon sending written notice to
the parties, and each party shall thereafter
have no liability with respect to the other
hereunder. Such decision to terminate this
Agreement on behalf of BUYER shall be made
and sent to SELLER on or before thirty (30)
days after the date this Agreement is
executed by all parties. The parties
acknowledge the BUYER shall be permitted to
obtain audited statements for the BUSINESSES
of SELLER being transferred herein for the
years 1993, 1994 and 1995. Accordingly, for
a period of 120 days following the CLOSING of
each BUSINESS, BUYER shall be entitled to
access to the records of SELLER pertaining to
the BUSINESSES transferred, as such access
existed prior to the CLOSING.
15. INDEMNIFICATION.
15.01 SELLER shall, and hereby agrees to,
indemnify and hold BUYER harmless at all
times from and after the closing date against
and in respect to any damages, as hereinafter
defined. Damages, as used herein, shall
include any claims, actions, demands, losses,
costs, expenses, liabilities (joint or
several), penalties and damages, including
counsel fees incurred in investigating or in
attempting to avoid the same or oppose the
imposition thereof, resulting to BUYER from:
15.01.1 Any materially inaccurate
representation made by SELLER as specified in
this Agreement;
15.01.2 Breach of any of the material
warranties made by SELLER as specified in
this Agreement;
15.01.3 Breach or default in the performance
by SELLER of any of the material covenants or
agreements to be performed by them as
specified in this Agreement; and<PAGE>
15.01.4 Any debts, claims, liabilities or
obligations of SELLER, whether accrued,
absolute, contingent or otherwise, due or to
become due against the BUSINESS being
transferred pursuant hereto, resulting from
SELLER's actions taken prior to their
transfer to BUYER.
BARCLAY HENDERSON hereby agrees to indemnify
and hold BUYER harmless at all times from and
after the CLOSING date against and in respect
of any damages arising under Section 15.01.4.
BUYER shall give notice to SELLER and BARCLAY
HENDERSON of the assertion of any claim, the
arising of any matter, or the happening of
any event to which this covenant of
indemnification is applicable. SELLER and
BARCLAY HENDERSON shall have, at their
election, the right to satisfy, compromise or
defend any such matter through counsel of
their own choosing and notice of such action
shall be provided to BUYER within ten (10)
days after having received notice of the
claim from BUYER. Such notice and
opportunity to satisfy, compromise or defend
shall be a condition precedent to any
liability of SELLER and BARCLAY HENDERSON
under this indemnification provision. As
long as SELLER and/or BARCLAY HENDERSON take
such actions as shall be necessary to hold
BUYER harmless from such claim, matter or
event, and the defense or contest thereof
does not interfere with the operations of
BUYER's BUSINESS, then SELLER and BARCLAY
HENDERSON shall be considered in compliance
with the provisions of this section. In the
event SELLER and BARCLAY HENDERSON do not
undertake to satisfy, compromise, defend or
remedy such asserted liability or default,
and hold BUYER harmless from any damages with
respect thereto, then BUYER shall have the
right, in addition to any actions permitted
by law, to set off from the next payment or
payments falling due under the Promissory
Notes and/or Agreement Not to Compete
executed pursuant hereto an amount equal to
the costs and expenses paid by BUYER as a
result of such breach. Any amount so
withheld shall be finally adjusted between
BUYER and SELLER upon final resolution in the
matter giving rise to the setoff. In the
event there is a dispute between BUYER and
SELLER with respect to the amount of any
setoff under the provisions of this Section
15.01, such dispute shall be settled by<PAGE>
binding arbitration between the parties under
the rules as the American Arbitration
Association to be held in Dade County,
Florida.
15.02 Following the CLOSING for each of the
applicable BUSINESSES, BUYER shall hold
SELLER harmless from any and all claims and
liabilities relating to obligations assumed
by BUYER and from all obligations and
liabilities incurred by BUYER with respect to
the BUSINESSES transferred to BUYER which are
asserted against SELLER and BUYER will
indemnify SELLER from any payments, loss or
other damages suffered, including costs and
expenses in defending same, inclusive of
reasonable attorney's fees, court costs and
costs of appeal in connection with such
liabilities and obligations of BUYER.
16. BROKER/FINDER. BUYER and SELLER
represent that neither has incurred any
obligation to pay any commission, finder's
fee or similar charge in connection with the
transactions provided for in this Agreement.
Each of the parties will indemnify and hold
the other harmless from and against any loss,
liability or damage, including expenses
arising out of any claim for any other
commission, fee or charge by reason of
services alleged to have been rendered to, or
at the insistence of, such party.
17. EXPENSES. Each party hereto will pay
the expenses incurred by it in connection
with the preparation of and entering into
this Agreement, including counsel fees and
expenses of their representatives, whether or
not the transactions contemplated by this
Agreement are consummated. At the CLOSING,
BUYER shall satisfy the cost of recording
UCC-1 Financing Statements at the county and
state levels. Notwithstanding the foregoing,
each of the parties agrees to equally share
the costs of legal and professional fees and
expenses of transferring the beverage
licenses of the BUSINESSES being sold. In
this connection, the parties acknowledge that
if the law firm of CHANDLER, BUJOLD &
CHANDLER is retained for legal services in
connection with the beverage license
transfers of SELLER to BUYER in the State of
Michigan, the parties also acknowledge such
law firm will serve as general Michigan
counsel for SELLER and BARCLAY HENDERSON.
The parties waive any such conflict with<PAGE>
respect to such firm's joint representation
of the parties with respect to the beverage
license transfers in Michigan, and such
representation for the beverage license
transfers shall not preclude such firm from
representation of SELLER and BARCLAY
HENDERSON following the CLOSING in any manner
with respect to this Agreement or any of the
documents executed in connection herewith.
18. NO SOLICITATION. The SELLER and
BARCLAY HENDERSON agree not to solicit,
encourage or entertain any inquiries or
proposals with respect to, or furnish any
information relating to or participate in any
negotiations or discussions concerning an
acquisition or purchase of any portion of the
ASSETS or capital stock of the SELLER other
than as contemplated by this Agreement. The
SELLER and BARCLAY HENDERSON will notify
BUYER immediately if (a) any inquiries or
proposals are received by them; (b)
information is requested from them; or (c)
negotiations or discussions are sought to be
initiated by any third party. SELLER agrees
to cause its employees and agents to comply
with the provisions of this Agreement.
19. SURVIVAL OF REPRESENTATIONS. All
representations, warranties, indemnifications
and agreements of the parties contained in
this Agreement shall not be discharged or
dissolved upon, but shall survive, the
CLOSING, and shall be unaffected by any
investigation made by any party at any time.
20. NOTICES. All notices given under any
of the provisions of this Agreement shall be
deemed to have been duly given if mailed by
registered or certified mail, return receipt
requested, as follows:
20.01 If to SELLER:
c/o MR. BARCLAY HENDERSON
ASIAN RESTAURANTS
INTERNATIONAL, INC.
Point West Place
111 Speen Street, Suite 405
Framingham, Massachusetts
01701-4618
Copy to: JOHN J. MADDEN, ESQ.
HEMENWAY & BARNES<PAGE>
60 State Street
Boston, Massachusetts 02109
20.02 If to BUYER:
c/o RUDY'S RESTAURANT GROUP, INC.
Attention: Douglas M. Rudolph,
President
11900 Biscayne Boulevard,
Suite 806
Miami, Florida 33181
Copy to: GREGORY J. BLODIG, ESQ.
GREENSPOON, MARDER,
HIRSCHFELD & RAFKIN, P.A.
100 West Cypress Creek Road,
Suite 700
Fort Lauderdale, Florida
33309
or to such other addresses the parties have
been notified of in writing.
21. DEFAULT.
21.01 BUYER'S DEFAULT. In the event of any
breach by BUYER, (except for failure to close
as permitted herein) the parties acknowledge
it would be impossible to ascertain the
amount of damages suffered by SELLER and,
therefore, the parties agree that in the
event there is such a breach, SELLER may
elect:
(i) to have the deposit paid to and accepted
by SELLER as liquidated damages and as
SELLER's sole and exclusive remedy, and each
of the parties shall thereafter be released
of any further liability or responsibility
hereunder; or
(ii) if and only if the BUYER arbitrarily
refuses to close this transaction, and such
refusal is not based upon a material adverse
change in the financial or operational
condition of BUYER, to pursue specific
performance under this Agreement against
BUYER.
21.02 BY SELLER. The parties agree that in
the event SELLER shall default or not satisfy
the conditions of CLOSING under the SELLER's
control under the terms of this Agreement,
then, at BUYER's option, BUYER shall have the
right to:<PAGE>
(i) pursue all legal remedies available to
BUYER, for the right of specific performance
of this Agreement; or
(ii) elect to receive a return of BUYER's
deposit plus FIFTY THOUSAND AND NO/100
DOLLARS ($50,000.00) from SELLER as
liquidated damages and each of the parties
shall thereafter be released of any further
liability or responsibility hereunder.
22. ENTIRE AGREEMENT. This Agreement,
together with its exhibits attached hereto
and to be attached hereto, constitutes the
entire agreement between the parties. None
of the terms, conditions or provisions
contained in this Agreement may be changed,
modified or deleted, except by an instrument
executed by the parties.
23. PASSING OF TITLE. Legal title,
equitable title and risk of loss with respect
to the property and rights to be transferred
hereunder shall pass to BUYER on the CLOSING,
and risk of loss and opportunity for profit
with respect to the operation of the business
of SELLER shall pass to BUYER as of the
CLOSING.
24. BINDING EFFECT. This Agreement shall
be binding upon and shall inure to the
benefit of the respective parties and their
successors, assigns, heirs and personal
representatives. This Agreement may be
assigned by BUYER to any subsidiary of RUDY'S
RESTAURANT GROUP, INC. or any subsidiary of
THE SAMURAI, INC. Except as permitted, this
Agreement may not be assigned by any party
without the written consent of the other.
25. BUSINESS DAY. Whenever an event is
to take place or action is to be taken within
a certain number of days pursuant to this
agreement, and a day that such event is to
occur or action is to be taken is a non-
business day, the event shall occur or action
shall be taken on the next business day. For
purposes of this section, the term "business
day" shall mean any day other than a
Saturday, Sunday or a day which is a
statutory holiday under the laws of the State
of Florida.
26. DATE OF AGREEMENT. The date of this
Agreement shall be the date this Agreement is
executed by the party last executing same.<PAGE>
27. GOVERNING LAW. This Agreement shall
be governed by and construed in accordance
with the laws of the State of Florida. The
parties agree that any legal proceedings
brought by either party in connection with or
arising out of this Agreement shall be
brought in Dade County, Florida.
Notwithstanding the foregoing, the Confession
of Judgment Agreements provided for in
Section 3.03 shall be governed and construed
in accordance with the laws of the State of
Massachusetts, and may be entered or enforced
in the State of Massachusetts; and the real
property leases being assigned or granted to
BUYER shall be governed by and construed in
accordance with the laws where the subject
property thereof is located.
28. ATTORNEYS' FEES. In the event either
party shall be forced to enforce this
Agreement, whether or not through litigation,
the prevailing party shall be entitled to
receive reasonable attorneys' fees and all
costs incurred in connection with such
enforcement, including fees and costs of
appeal.
29. FURTHER COOPERATION. From and after
the date of this Agreement, each of the
parties hereto agrees to execute whatever
additional documentation or instruments as
are necessary to carry out the intent and
purposes of this Agreement.
30. WAIVER. No indulgences expended by
any party hereto or any other party shall be
construed as a waiver of any breach on the
part of such other party, nor shall any
waiver of one breach be construed as a waiver
of any rights or remedies with respect to any
subsequent breach.
31. PUBLICITY. SELLER agrees not to
issue any announcements or press releases
with respect to this transaction without
first having obtained the prior written
consent of BUYER. It is acknowledged that
BUYER is an affiliate of a public company and
accordingly BUYER and/or its affiliates shall
be permitted to issue such announcements and
press releases related to this transaction as
it shall deem necessary or desirable;
provided SELLER has been given at least three
(3) business days notice for comments on such
proposed announcement or press release.<PAGE>
32. GENDER. Wherever the context shall
require, all words herein in any gender shall
be deemed to include either the masculine,
feminine or neuter gender. All singular
words shall include the plural, and all
plural shall include the singular.
33. LIQUIDATION. SELLER and Barclay
Henderson each agree that until the
Promissory Notes of BUYER are satisfied in
full, Lanover Enterprises, Inc. and Asian
Restaurants International, Inc. will not be
liquidated.
34. ESCROW PROVISIONS. The Escrow Agent
shall hold the amounts deposited by the BUYER
(including interest earned thereon) and shall
deliver such amounts to the SELLER at the
CLOSING of this transaction, unless otherwise
provided for in this Agreement. The Escrow
Agent shall not be responsible for the
genuineness of any certificate, notice,
signature or other document and may rely
conclusively upon and shall be protected in
acting upon any notice, affidavit, request,
consent or other instrument for
communications believed by it in good faith
to be properly made. The Escrow Agent shall
not be responsible or liable for any act or
omission on its part in the performance of
its duty as Escrow Agent under this Agreement
except if such act or omission constitutes
bad faith, gross negligence or fraud. In the
event the BUYER shall terminate this
Agreement as permitted herein, or the
conditions precedent to a CLOSING of this
transaction shall not have been satisfied,
the Escrow Agent shall return to the BUYER
all amounts deposited with the Escrow Agent
(including any interest earned thereon)
should BUYER so request. In the event of any
dispute between the parties hereto, the
Escrow Agent shall be entitled to deposit the
amounts held in escrow with any competent
court serving Dade County, Florida, and upon
such deposit, shall be relieved of all
obligations and liabilities hereunder. The
Escrow Agent shall be entitled to be
reimbursed for reasonable attorneys' fees and
court costs incurred in connection with the
filing of any interpleader action pursuant to
the provisions of this Agreement.
35. COUNTERPARTS. This Agreement may be
executed in counterparts.<PAGE>
IN WITNESS WHEREOF, BUYER has duly
executed this Agreement on the 27 day of
December, 1995.
BUYER:
MAXWELL'S INTERNATIONAL,
INC.,
a Delaware corporation
By: /s/ Marie G. Peterson
__________________________
Marie G. Peterson,
as Vice President
IN WITNESS WHEREOF, SELLER has duly executed
this Agreement on the 26 day of December,
1995.
SELLER:
ASIAN RESTAURANTS
INTERNATIONAL, INC., a
corporation organized under the laws of the
State of Massachusetts
By: /s/ Barclay Henderson
_____________________________
Barclay Henderson, its
President
KYOTO WEST, INC., a Michigan
corporation
By: /s/ Barclay Henderson
____________________________
Barclay Henderson, its
President
KYOTO NORTH, INC., a Michigan
corporation
By: /s/ Barclay Henderson
_____________________________
Barclay Henderson, its
President
KYOTO RESTAURANTS, INC., a
Michigan corporation
By: /s/ Barclay Henderson
__________________________
Barclay Henderson, its
President<PAGE>
ASIAN RESTAURANTS, INC., a
Massachusetts corporation
By:/s/ Barclay Henderson
_________________________
Barclay Henderson, its
President
<PAGE>
JOINDER
-------
The undersigned hereby executes this
Agreement to acknowledge his duties and
responsibilities contained herein, and agrees
to be bound by the terms and conditions
contained herein where appropriate.
/s/ Barclay Henderson
_________________________
BARCLAY HENDERSON
DEPOSIT RECEIPT
---------------
The undersigned acknowledges as of this
______ day of December, 1995, as Escrow
Agent, receipt of the sum of TEN THOUSAND AND
NO/100 DOLLARS ($10,000.00) (subject to
clearance), representing the deposit to be
held by the undersigned as provided for in
the foregoing Asset Purchase and Sale
Agreement pursuant to the terms of the
agreement.
By:____________________________________
Escrow Agent<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 1.01.2
---------------
List of Tangible Personal Property by each
Location *
Schedule 2.01
-------------
Allocation of Purchase Price
Schedule 5.01.1
---------------
List of Telephone Numbers and Directory
Advertising Contracts *
Schedule 5.01.2
---------------
List of Equipment Leases at Each Location *
Schedule 5.01.3
---------------
Description of Real Property Lease for Boston
Location *
Schedule 5.01.4
---------------
Description of Real Property Lease for
Dearborn Location *
Schedule 5.01.5
---------------
Description of Real Property Leases for Troy
Location and Farmington Location*
Schedule 5.01.7
---------------
List of Service Contracts for Each Location *
Schedule 8.03
-------------
List of Financial Statements and Information
Provided by Seller *
Schedule 8.09
-------------
List of Licenses and Permits *
Schedule 8.19
-------------
Adverse Publicity *<PAGE>
* The parties shall jointly prepare and
mutually agree upon the List of Schedules,
which shall be completed and attached to the
Agreement within two weeks from the date of
the Agreement.<PAGE>
LIST OF EXHIBITS
----------------
A - Promissory Note.
B - Security Agreement and Chattel
Mortgage.
C - (Intentionally Deleted.)
D - New Troy Location Lease. *
E - New Farmington Hills Lease. *
F - Assignment and Assumption Agreement for
Boston Lease. *
G - Assignment and Assumption Agreement for
Dearborn Lease. *
H - Agreement Not To Compete.
I - Bill of Sale. *
J - No Lien Affidavit. *
K - Management Agreement *
* The parties shall jointly prepare and
mutually agree upon the List of Exhibits,
which shall be completed and attached to the
Agreement within two weeks from the date of
the Agreement.<PAGE>
