SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 16, 1997
MAIN STREET AND MAIN INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
DELAWARE 33-27611-NY 11-2948370
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(State or other jurisdiction Commission File Number) (IRS Employer
of incorporation) Identification No.)
5050 North 40th Street, Suite 200, Phoenix, Arizona 85018
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 852-9000
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 16, 1997, Main Street and Main Incorporated (Registrant) through its
subsidiary, Main Street California II, sold the rights, title and interest in
five restaurants to CNL California (buyer) for $10,575,000 in cash. A subsidiary
of the Registrant entered into a Management Agreement and Master Incentive
Management Agreement with the buyer to manage the restaurants. This transaction
will result in a gain before taxes of approximately $1,800,000 in the first
quarter of 1997. $8,000,000 of the proceeds of the sale were used to reduce the
credit facility with the Registrant's primary lander with the balance to be used
for working capital purposes.
The Buyer is a Florida Limited Partnership affiliated with the CNL Group which
has previously entered into a joint venture and management agreement with a
subsidiary of the Registrant relative to the operation of three TGI Friday's
restaurants in Louisiana and one to be developed in El Paso, Texas.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
-----------------------------------------
Not Applicable
(b) Pro Forma Financial Information
-------------------------------
Pro Forma Balance Sheet for the period ended September 30,
1996.
Pro Forma Statement of Operations for the nine months ended
September 30, 1996.
Pro Forma Statement of Operations for the fiscal year ended
December 25, 1995.
Notes to Pro Forma Financial Statements.
(c) Exhibits
--------
10(a) Asset Conveyance Agreement among CNL California
Restaurants, LTD., Main St. California, Inc. and
Registrant.
10(b) Stock Purchase Agreement among CNL California
Restaurants, LTD., Main St. California, Inc. and
Registrant.
10(c) Form of Management Agreement between Main St.
California II, Inc. and Main St. California, Inc., a
wholly owned subsidiary of Registrant.
10(d) Master Incentive Agreements between Main St.
California II, Inc. and Main St. California, Inc., a
wholly owned subsidiary of Registrant.
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<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.
MAIN STREET AND MAIN INCORPORATED
Date:January 31, 1997 By:/s/ Mark C. Walker
---------------- -----------------------------------------------
Mark C. Walker
Chief Financial Officer, Secretary and Treasurer
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<PAGE>
MAIN STREET AND MAIN INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
----------------------------------
September 30, 1996 Adjustments Adjusted
------------------ ----------- --------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,695 $ 2,540 (a) $ 6,235
Accounts receivable, net 1,325 -- 1,325
Inventories 1,495 (177)(b) 1,318
Prepaid expenses 356 -- 356
----------- ----------- -----------
Total current assets 6,871 2,363 9,234
Property and equipment, net 45,691 (4,616)(b) 41,075
Other assets, net 5,806 -- 5,806
Franchise costs, net 22,229 (4,153)(c) 18,076
Notes receivable, net 1,250 --- 1,250
----------- ----------- -----------
$ 81,847 $ (6,406) $ 75,441
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Current portion of long-term debt $ 5,245 $ --- $ 5,245
Accounts payable 2,904 --- 2,904
Other accrued liabilities 8,508 --- 8,508
----------- ----------- -----------
Total current liabilities 16,657 --- 16,657
----------- ----------- -----------
Long-term debt, net of current portion 31,363 (8,000)(d) 23,363
----------- ----------- -----------
Other liabilities and deferred credits 2,662 1,594 (b)(e) 4,256
----------- ----------- -----------
Commitments and contingencies
Stockholders' Equity
Common stock, $.001 par value,
40,000,000 shares authorized;
8,451,825 shares issued and
outstanding 8 --- 8
Additional paid-in capital 41,205 --- 41,205
Accumulated deficit (10,048) --- (10,048)
----------- ----------- -----------
31,165 --- 31,165
----------- ----------- -----------
$ 81,847 $ (6,406) $ 75,441
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma consolidated balance sheet
F-1
<PAGE>
MAIN STREET AND MAIN INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Pro Forma
--------------------------------
As Reported Adjustments Adjusted
----------- ----------- --------
<S> <C> <C> <C>
Revenue $ 93,557 $ (12,299)(f) $ 81,258
----------- ----------- -----------
Restaurant Operating Expenses:
Cost of sales 26,744 (3,479)(f) 23,265
Payroll and benefits 29,192 (3,818)(f) 25,374
Depreciation and amortization 3,360 (399)(f) 2,961
Other operating expenses 27,523 (3,480)(f) 24,043
----------- ----------- -----------
Total restaurant operating expenses 86,819 (11,176) 75,643
----------- ----------- -----------
Income from restaurant operations 6,738 (1,123) 5,615
Depreciation and amortization 1,087 (106)(g) 981
General and administrative expenses 2,918 --- 2,918
Management fee income --- (390)(h) (390)
Restructuring charge 7,448 --- 7,448
----------- ----------- -----------
Operating loss (4,715) (627) (5,342)
Interest expense, net 2,381 (513)(i) 1,868
----------- ----------- -----------
Net loss before taxes (7,096) (114) (7,210)
Income tax expense --- --- ---
----------- ----------- -----------
Net loss $ (7,096) $ (114) $ (7,210)
=========== =========== ===========
Net Loss Per Share $ (0.89) $ (0.01) $ (0.90)
=========== =========== ===========
Weighted average shares outstanding 7,995 7,995 7,995
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
consolidated statement of operations.
F-2
<PAGE>
MAIN STREET AND MAIN INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended December 25, 1995
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Pro Forma
---------------------------------
As Reported Adjustments Adjusted
----------- ----------- --------
<S> <C> <C> <C>
Revenue $ 119,508 $ (16,024)(f) $ 103,484
----------- ----------- -----------
Restaurant Operating Expenses:
Cost of sales 34,005 (4,587)(f) 29,418
Payroll and benefits 36,769 (4,891)(f) 31,878
Depreciation and amortization 4,353 (522)(f) 3,831
Other operating expenses 35,250 (4,672)(f) 30,578
----------- ----------- -----------
Total restaurant operating expenses 110,377 (14,672) 95,705
----------- ----------- -----------
Income from restaurant operations 9,131 (1,352) 7,779
Depreciation and amortization 1,331 (140)(g) 1,191
General and administrative expenses 4,410 --- 4,410
1,087
Management fee income --- (459)(h) (459)
----------- ----------- -----------
Operating income (loss) 3,390 (753) 2,637
Interest expense, net 4,424 (684)(i) 3,740
----------- ----------- -----------
Net loss before taxes (1,034) (69) (1,103)
Income tax expense --- --- ---
----------- ----------- -----------
Net loss $ (1,034) $ (69) $ (1,103)
=========== ========== ===========
Net Loss Per Share $ (0.22) $ (0.02) $ (0.24)
=========== ========== ===========
Weighted average shares outstanding 4,621 4,621 4,621
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of this unaudited pro forma
consolidated statement of operations
F-3
<PAGE>
MAIN STREET AND MAIN INCORPORATED
Notes to Pro Forma Financial Statements
1. General
Main Street and Main Incorporated (the Company) is engaged in the business of
acquiring, developing and operating restaurants. The Company currently owns 38
T.G.I. Friday's restaurants and one Front Row Sports Grill, and operates eight
T.G.I. Friday's restaurants under management agreements.
On January 16, 1997, the Company sold five of its T.G.I. Friday's restaurants in
the San Francisco, California area and will continue to operate them under a
management agreement. The accompanying unaudited pro forma balance sheet
includes the Company's most recently filed balance sheet (as of September 30,
1996) and is presented as though the disposition had taken place as of September
30, 1996.
The accompanying unaudited pro forma statements of operations for the year ended
December 25, 1995 and the nine months ended September 30, 1996 include the
historical information of the Company and are presented as though the
disposition had taken place as of the beginning of these periods.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
management of the Company believes that the disclosures are adequate to make the
information presented not misleading. For a complete description of the
accounting policies, see the Company's Form 10-K filing for the year ended
December 25, 1995.
2. Pro Forma Adjustments
The historical balance sheet in the accompanying unaudited pro forma balance
sheet has been adjusted for the following items:
(a) Net cash received from the sale
(b) Inventory, property and equipment, and certain accrued
liability balances as of September 30, 1996 related to the
five restaurants sold
(c) Franchise licenses cost allocated to the five restaurants sold
(d) Payment of $8 million of long term debt
(e) Deferred gain of approximately $1.8 million
The historical operating results in the accompanying unaudited pro forma
statements of operation have been adjusted for the following items:
(f) Revenue and restaurant operating expenses related to the five
restaurants sold
(g) Amortization of franchise licenses costs allocated to the five
restaurants sold
(h) Management fee income to be derived from operating the five
restaurants sold pursuant to Management and Master Incentive
Agreements
(i) Interest savings from the reduction of long term debt
F-4
ASSET CONVEYANCE AGREEMENT
ASSET CONVEYANCE AGREEMENT made as of the ___ day of January, 1997, by
and among MAIN STREET CALIFORNIA, INC., an Arizona corporation ("Seller"), MAIN
STREET AND MAIN INCORPORATED, a Delaware corporation ("Shareholder") and CNL
CALIFORNIA RESTAURANTS, LTD., a Florida limited partnership ("Buyer").
Seller conducts the business of the ownership and operation of T. G. I.
Friday's Restaurants in the State of California, including the ownership and
operation ("Seller's SF Business") of five existing and open T.G.I. Friday's
restaurants located in California and more particularly identified hereinbelow
("Seller's Existing SF Restaurants"), each of which is covered by a franchise
agreement (the "Franchise Agreements") with T.G.I. Friday's, Inc. ("TGIF"), and
is in the process and developing a new T.G.I. Friday's restaurant in the
"Mosconi Center" in San Francisco, California (the "Seller's New Restaurant," or
together with the Seller's Existing SF Restaurants, the "Seller's SF
Restaurants"), under Seller's development agreement with TGIF and which upon
completion and opening will become subject to a Franchise Agreement. Each of the
Seller's SF Restaurants is operated (or is being developed to be operated)
pursuant to a specified system of standards, specifications and operating
procedures mandated by TGIF (the "T.G.I. Friday's System").
The parties hereto desire to effect the purchase by Buyer of all of the
assets of Seller related to the ownership and operation of Seller's SF
Restaurants. Such conveyance shall be structured as an intermediate conveyance
of the Existing Restaurants to"MAIN ST. CALIFORNIA II, INC.," an Arizona
corporation which is a newly formed wholly-owned subsidiary of Seller ("MSII"),
and a transfer of 100% of the stock of MSII to Buyer, followed by a further
conveyance of the Existing Restaurants to Buyer upon receipt of all necessary
approvals, with a deferred conveyance of the Seller's New Restaurant upon
completion, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
Section 1. Conveyance of Seller's SF Restaurants.
1.1 Assets and Properties to be Conveyed. Seller hereby agrees with and
in favor of Buyer, subject to all the terms and conditions of this Agreement, to
convey to MSII the following assets and properties of Seller (the "Conveyed
Assets"), free and clear of all liabilities, obligations, liens and
encumbrances, unless expressly assumed by MSII as set forth in this Agreement
and on Schedule 1.1:
(a) Leased Real Estate. All right, title and interest of Seller
in and to the leases described on Schedule 1.1(a) (the "Leases") and the land
and buildings associated with
<PAGE>
the Seller's SF Restaurants (the "Leased Properties") (Schedule 1.1(a)) and all
other schedules and exhibits referred to herein are attached hereto and hereby
made a part hereof.) The Leased Properties shall be conveyed free and clear of
any liabilities of Seller which encumber the Leased Properties.
(b) Improvements. All of the right, title and interest of
Seller in and to the use of the buildings and all other improvements, fixtures
and structures located on, affixed to and/or part of or appurtenant to the
Seller's SF Restaurants or the Leased Properties (collectively, the
"Improvements").
(c) Personal Property. All of the right, title and interest of
Seller in and to any and all personal property utilized in connection with the
businesses conducted in the Seller's SF Restaurants, including, but not limited
to the (i) mechanical systems, fixtures and equipment comprising a part of or
attached to or located in the Seller's SF Restaurants; (ii) pylons and other
signs, silverware, glassware, and other utensils and dishes, tables,
chandeliers, lamps, stained or leaded glass, marble tops, fans, televisions,
clocks, carpets, drapes, art work, memorabilia, paintings, posters, graphics and
other furnishings owned by Seller and comprising a part of or attached to or
located in the Seller's SF Restaurants including without limitation, any
furnishings located in business offices or party rooms; (iii) maintenance
equipment and tools owned by Seller and used in connection with the Seller's SF
Restaurants; (iv) stoves, ovens, refrigerators, walk-in cold storage boxes and
other kitchen equipment and other machinery, equipment, fixtures, keys, and; (v)
the inventory and supplies owned by Seller in such quality as is customarily
maintained on the Leased Properties by Seller and meeting minimum requirements
of TGIF under each Franchise Agreement, including food, beverages, spirits,
dishes, china, silver, glassware, paper goods, promotional items, uniforms,
linens and all other inventory and supplies (the "Inventory"), and which
personal property is presently located in, on or used in connection with the
Seller's SF Restaurants, or is hereafter acquired in the ordinary course of
business, and replacements of Inventory used in the ordinary course of business
(collectively, the "Personal Property"), including, but not limited to, the
Personal Property described on Schedule 1.1(c) attached hereto.
(d) Contracts. All rights and interests of Seller in, to and
under all agreements and contracts, to the extent that the same relate to
Seller's SF Business, including all management, maintenance, supply or service
contracts, or any other contracts, arrangements or agreements affecting the
Seller's SF Restaurants, the Leased Properties, the Improvements or the Personal
Property pursuant to which goods, services, supplies or any other items
whatsoever are furnished and/or are to be furnished in connection with the
Seller's SF Restaurants, or the repair, maintenance or operation thereof, and
all warranties, guarantees and bonds relating to the Seller's SF Restaurants,
Leased Properties, the Improvements or the Personal Property, together with all
other representations, contract rights, trade names, logos and transferable and
intangible property, miscellaneous rights, benefits or privileges of any kind or
character with respect to the Seller's SF Restaurants
2
<PAGE>
(collectively, the "Contracts"), including, but not limited to, those set forth
in Schedule 1.1(d); provided, however, that Buyer shall not be obligated to
assume or perform any obligation or liability of Seller pursuant to any contract
or agreement except as and to the extent specifically provided in accordance
with Section 2.1 below.
(e) Ancillary Assets. All of Seller's right, title and interest
in and to all permits, licenses (including liquor licenses), certificates of
occupancy, governmental approvals, site plans, surveys, plans and
specifications, marketing materials and floor plans in the possession of Seller
or Shareholder which relate to the Seller's SF Restaurants, the Leased
Properties, the Improvements or the Personal Property to the extent transferable
(the "Ancillary Assets").
(f) Computer Software and Hardware. All of Seller's right,
title and interest in and to all computer software and all hardware owned,
leased or licensed by or to Seller which is located at or exclusively used for
the Seller's SF Restaurants that is not otherwise prohibited from transfer by
contract between Seller and the owner thereof.
(g) Telephone Numbers. All of Seller's right, title and
interest in and to all telephone and facsimile numbers used by Seller for the
Restaurants.
(h) Documents. All of the right, title and interest of Seller
in and to all information and documentation in Seller's possession regarding the
Seller's SF Restaurants, including, but not limited to, surveys, tax assessment
records, engineering and building plans and specifications and reports (such as
environmental reports), as-built drawings, development plans, plats, site plans,
zoning materials, leases, guarantees, contracts, combinations to all locks on or
in the Seller's SF Restaurants and all books, records and files relating to the
ownership, management and/or operation (including those relating to financial
matters and employees) and correspondence pertaining to that portion of Seller's
SF Business relating to solely the operation of the Seller's SF Restaurants to
be transferred pursuant to this Agreement (other than Seller's corporate minute
books and stock record books) and records of the Seller's SF Restaurants
(collectively, the "Documents"). Buyer agrees to allow Seller and Shareholder
access to said records at all reasonable hours upon forty-eight hours prior
notice by Seller or Shareholder.
(i) Franchise Agreements. All of the right, title and interest
of Seller in and to the Franchise Agreements with TGIF relating to the Seller's
SF Restaurants as well as all representations, warranties and undertakings by,
from or for TGIF and its affiliates arising from or relating to the acquisition
of the Seller's Existing SF Restaurants from TGIF.
(j) Trademarks and Licenses. The right, title and interest of
Seller in and to the trademarks, service marks, trade names and copyrights to
the extent that the same are used in connection with the Seller's SF Restaurants
as now conducted and all licenses pursuant to which Seller may be entitled to
use any of the foregoing, provided that the Seller shall retain the right to use
the same as Manager of the Seller's SF Restaurants and
3
<PAGE>
in connection with its businesses conducted away from the Seller's SF
Restaurants.
1.2 Assets and Properties Not to Be Conveyed. Notwithstanding anything
to the contrary contained in this Agreement, there is excluded from the assets
and properties to be transferred pursuant to this Agreement and from the
computation of the Conveyance Amount in accordance with Section 3.2 below, the
following:
(a) Cash and Receivables. All cash, bank accounts, notes
receivable, loans receivable, certificates of deposit, credit card accounts
receivable from sales generated from Seller's SF Restaurants prior to the
Closing and allowances or credits due from vendors, suppliers or service
providers accrued prior to the Closing, other than the "cash banks" in the cash
registers and otherwise maintained as cash on hand in the Seller's SF
Restaurants as of the Closing Date, which shall be calculated and confirmed in
writing by Seller as of the Closing Date, and which shall be credited to Seller
as an addition to the Conveyance Amount hereunder.
(b) Deposits. The deposits and prepaid expenses of Seller
expressly set forth in Schedule 1.2(b) attached hereto.
(c) Name. The name "Main Street" and any variation thereof or
name similar thereto (provided however that Buyer shall have the right to use
the corporate name of "Main St. California II, Inc., solely as the corporate
name of MSII, until MSII has been dissolved as contemplated by the parties (and
shall not unreasonably withhold its consent to a name change for MSII if
requested by Seller).
(d) Corporate Assets. Any furniture, furnishings, office
equipment, corporate minute books, stock books and records, and such books,
records, documents and leases of Seller as are not in any manner used in or
related to the operation of the Seller's SF Restaurants.
(e) Development Agreement. All right, title and interest of
Seller (including all deposits paid thereunder) in and to the Development
Agreement with TGIF except and other than the right to establish and enter into
a Franchise Agreement for the Seller's New Restaurant.
(f) Seller's Other Restaurants. All right, title and interest
of Seller in and to all assets and properties to the extent that the same relate
to any restaurant now or in the future owned by Seller other than the Seller's
SF Restaurants.
Section 2. Liabilities of Seller.
2.1 Liabilities Not Assumed by MSII or Buyer. Except as expressly
provided herein, and other than any liability properly incurred by MSII as the
owner of the Seller's SF
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<PAGE>
Restaurants after Closing, Buyer shall not be deemed by anything contained
herein to have assumed, nor shall MSII be deemed to have assumed or to succeed
or be subject to, any liability or obligation of Seller, including but not
limited to:
(a) Any obligation or liability of Seller under the Development
Agreement with TGIF;
(b) Any obligation or liability of Seller under any of the
Leases or any Franchise Agreement prior to and up to the Closing Date, including
but not limited to, rents, royalties, marketing fees or trade payables;
(c) Any obligation or liability of Seller for any federal,
state or local corporate income taxes, property taxes, sales taxes, payroll,
withholding or social security taxes, or any other taxes of any kind or
description (provided that the foregoing shall not limit the liability of MSII
or Buyer for any such costs properly incurred by MSII or Buyer as the owner of
the Conveyed Assets following the Closing Date); or
(d) Any obligation or liability of Seller relating to employees
or independent contractors including, but not limited to, accrued salaries,
other compensation or benefits, severance payments, accrued vacations, pensions,
retirement plans, distributions or bonuses.
2.2 Liabilities Assumed by and Indemnities of MSII. MSII shall be
subject to and shall expressly assume all liabilities under the Leases and the
Franchise Agreements arising following the Closing Date, and shall indemnify,
defend and hold Seller and Shareholder, and their respective directors,
officers, shareholders and managerial personnel harmless for, from and against
any and all damage, loss, liability, claims, causes of action and expenses
(including reasonable attorneys' fees) suffered or incurred by Seller or
Shareholder in connection with MSII's failure to pay and discharge all
obligations and liabilities of MSII under the Leases, the Franchise Agreements,
any of the Contracts or other agreements relating to the Seller's SF Restaurant
which are assumed or incurred by MSII, and any failure by MSII or Buyer to pay
and discharge all obligations and liabilities of MSII or Buyer, and arising
after the Closing Date (all liabilities of MSII and indemnities of MSII
hereunder arising after the Closing Date shall become liabilities of Buyer at
such time as MSII is liquidated and its assets conveyed to Buyer as contemplated
by the parties).
2.3 Discharge of Obligations by Seller. Seller shall indemnify, defend
and hold Buyer and MSII harmless for, from and against any and all damage, loss,
liability, claims, causes of action and expenses (including reasonable
attorneys' fees) suffered or incurred by MSII or Buyer in connection with
Seller's failure to pay and discharge all obligations and liabilities of Seller
existing on the Closing Date or incurred by Seller thereafter (unless MSII or
Buyer has specifically assumed such obligation or liability) with respect to the
Seller's SF Restaurants. Seller shall make provisions which are reasonably
acceptable to Buyer to discharge any obligations relating to accrued vacations
or other accrued employee benefits
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<PAGE>
relating to the Seller's SF Restaurants as of the Closing Date. Without limiting
the foregoing, Seller shall discharge all obligations and liabilities relating
to the Conveyed Assets to the extent known not later than the Closing Date
(except taxes shall not be required to be paid until the same are due). To the
extent any such obligation or liability remains unpaid on the Closing Date, the
Buyer's payments to Seller in respect of the Conveyance Amount shall be reduced
by any amounts applied to discharge such obligation or liability or Buyer shall
be granted a credit with respect thereto.
2.4 Allocations. To the extent not otherwise provided for by any other
provision of this Agreement, Buyer and Seller shall allocate any obligations or
liabilities relating to Seller's SF Business (such as mortgage payments, lease
payments, franchise fees, royalties, telephone bills, Yellow Pages
advertisements, utility charges, credit card invoices, tax payments and refunds,
insurance premiums, costs of materials and supplies, labor costs and the like)
consistent with the belief by Buyer and Seller that the obligations and
liabilities arising from the operation of Seller's SF Business by Seller prior
to the Closing are borne by Seller and the obligations and liabilities arising
from the operation of the Restaurants by Buyer after the Closing are borne by
MSII and/or Buyer. Any fees, transfer taxes, intangible taxes or other such
taxes associated with the transfer of the Conveyed Assets shall be borne by
Buyer, up to the Buyer's Maximum Closing Cost Amount as provided below, with any
additional costs to be paid by Seller.
Section 3. Conveyance Amount.
3.1 Amount of Conveyance Amount. The allocated and agreed upon cost
basis (the "Conveyance Amount") for all of the assets and properties to be
transferred pursuant to Section 1.1 above shall be the sum of an amount equal to
Twelve Million One Hundred Seventy-Five Thousand and No/100 Dollars
($12,175,000), which shall be further allocated Ten Million Five Hundred and
Seventy-Five Thousand and No/100 Dollars ($10,575,000.00) to the Seller's
Existing SF Restaurants, and One Million Six Hundred Thousand and No/100 Dollars
($1,600,000.00) to the Seller's New Restaurant.
3.2 Payment of Conveyance Amount. Buyer shall pay to Seller the
Conveyance Amount with respect to the Seller's Existing SF Restaurants by
payment in full of the Purchase Price for all of the issued and outstanding
capital stock of MSII immediately upon the conveyance to MSII of the Conveyed
Assets on the Closing Date hereunder, pursuant to the terms and conditions of
that certain Stock Purchase Agreement dated of even date herewith by and between
Buyer, Seller and Shareholder (the "Stock Purchase Agreement"), which Stock
Purchase Price shall be subject to adjustment in respect of and based upon the
adjustments to the Conveyance Amount hereunder. The payment of the balance of
the Conveyance Amount as allocated to the Seller's New Restaurant, unless
structured as a new stock purchase/merger transaction with the mutual agreement
of Buyer and Seller, shall be accomplished on the Closing Date for the Seller's
New Restaurant by delivery to Seller of a cashier's or certified check or wire
transfer in an amount (the "Cash Component") equal to the unpaid balance of the
Conveyance Amount, after all adjustments thereto. The
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<PAGE>
Conveyance Amount shall be decreased by any amount required to discharge any
obligation or liability as provided in Section 2.2 hereof, which shall be paid
directly by the Closing Agent.
3.3 Allocation of Conveyance Amount. Buyer and Seller agree that the
total Conveyance Amount for the assets and properties purchased pursuant to this
Agreement shall be allocated to those assets and properties as set forth in
Schedule 3.3, and Buyer and Seller agree that the allocation set forth in
Schedule 3.3 has been made in accordance with the requirements of Section 1060
of the Internal Revenue Code of 1986, as amended, and any applicable Treasury
Regulations promulgated thereunder (the "Code"). Buyer and Seller, each at its
own expense, also agree to file appropriate forms with the Internal Revenue
Service setting forth the information required to be furnished to the Internal
Revenue Service by Section 1060 and the applicable Treasury Regulations
thereunder. In addition, at Buyer's option Seller and Shareholder will join with
the Buyer in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state and local tax law) (collectively a "Section
338 (h)(10) Election") with respect to the purchase and sale of the stock of the
Company under the Stock Purchase Agreement. Seller and Shareholder shall pay any
and all federal, state and local taxes attributable to the making of the Section
338(h)(10) Election and will indemnify the Buyer and the Company against any
claim, loss, cost or damage in connection therewith. Seller and Shareholder
shall also pay, and indemnify Buyer and the Company from and against any claim,
loss, cost or damage in connection with) any state or local tax attributable to
an election under any state or local law similar to the election available under
Section 338(g) of the Code (or which results from the making of an election
Section 338(g) of the Code) with respect to the purchase and sale of the stock
of the Company under the Stock Purchase Agreement.
Section 4. Seller's and Shareholder's Representations and Warranties.
To induce Buyer to enter into this Agreement and for the benefit of
Buyer, Seller and Shareholder jointly and severally represent and warrant and
agree as follows, with respect to the Seller's SF Restaurants:
4.1 Corporate Status and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, has the requisite corporate power and authority to own,
operate and lease its assets and properties and to carry on its business as now
being conducted and is duly qualified to do business in all jurisdictions in
which the nature of its business requires such qualification. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the fulfillment of the terms hereof have been validly authorized by
all necessary corporate action of Seller including, but not limited to,
shareholder approval, and this Agreement constitutes the valid, legal and
binding obligation of Seller enforceable in accordance with its terms.
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4.2 Financial Statements. The financial statements ("Financial
Statements") of Seller regarding the Seller's SF Restaurants (copies of which
constitute Exhibit B) were prepared in accordance with generally accepted
accounting principles (or in accordance with requirements established by TGIF)
applied on a consistent basis throughout the periods involved and with past
periods, and correctly, fairly and accurately present the financial position,
results of operations and changes in financial position of Seller regarding the
Seller's SF Restaurants as of the date and for the period indicated.
4.3 Books and Records. The books of account and other corporate records
of Seller with respect to the Seller's SF Restaurants are complete and accurate
in all material respects, have been maintained in accordance with customary
business practices and the matters contained therein are appropriately reflected
in the Financial Statements constituting Exhibit B.
4.4 Real Estate. Seller has delivered to Buyer a list setting forth as
of the date of this Agreement the location, basis of occupancy, square footage,
seating capacity, revenues and expenses for each of the last three calendar
years (or such shorter period reasonably available to Seller) and such other
information as Seller deems relevant with respect to each of the Seller's SF
Restaurants, and Seller has delivered to Buyer a true and accurate copy of each
deed, mortgage, lease and other document pursuant to which Seller owns, leases
or otherwise occupies each of the Seller's SF Restaurants (collectively "Real
Estate Documents"). With respect to the Seller's SF Restaurants, Seller does not
have any interest as owner, lessor, lessee or otherwise in any real estate
except as set forth in Schedule 4.4. Seller has not received notice from any
mortgagee or landlord of any Leased Property that Seller is in default of any
terms, conditions or provisions of any Lease. The Leases are in good standing
and no condition exists which, with the passage of time, giving of notice, or
both, would lead to a default under any of the Leases. There is no existing,
proposed or, to Seller's knowledge, contemplated plan to widen, modify or
realign any street or highway adjoining any Restaurant Property, or any
existing, proposed or contemplated eminent domain proceedings, or private
purchase in lieu thereof, relating to any Leased Property or any portion
thereof.
4.5 Subsidiaries and Joint Ventures. Seller's SF Business has not been
conducted through any subsidiary of Seller (other than MSII to the extent that
MSII is deemed to have conducted Seller's SF Business by virtue of acquisition
of the Conveyed Assets and other transactions contemplated hereby as of the
Closing Date) or any other affiliate of Shareholder.
4.6 Ownership of Assets and Properties. Seller has good and marketable
title to all of the Conveyed Assets. All of such assets and properties are owned
free and clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of every kind and
character, except as disclosed in Schedule 4.6 (or as disclosed in Title Reports
and/or Title Commitments approved in writing by Buyer), or except as
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disposed of by Seller in the ordinary course of its business since the date of
the Financial Statements, which disposition has been disclosed to the extent
required by this Agreement.
4.7 Condition of Assets and Properties. The buildings, equipment,
vehicles, fixtures, furniture, furnishings, office equipment and all other
tangible personal assets and properties of Seller (including the Leased
Properties, the Improvements and the Personal Property) presently used in, or
necessary to the operation of, Seller's SF Restaurants, do not require any
repairs other than normal maintenance and are in good operating condition and in
a state of reasonable maintenance and repair.
4.8 Taxes. Except as set forth in Schedule 4.8, Seller, to the best of
Seller's and Shareholder's knowledge, has filed all tax returns and reports
required to be filed with all appropriate federal, state, foreign and local
taxing authorities and has paid in full all taxes and assessments (including,
but not limited to, income withholding, excise, unemployment, Social Security,
occupation, transfer, franchise, property, sales and use taxes, lease taxes,
import duties or charges and all penalties and interest in respect thereof)
required to have been paid to date. To the best of Seller's and Shareholder's
knowledge, such tax returns and reports are correct in all material respects. To
the best of Seller's and Shareholder's knowledge, each such tax return
accurately reflects the proper income and allowable expenses and deductions of
Seller for the periods covered thereby, and the tax, if any, relating thereto,
and to the best of Seller's and Shareholder's knowledge, Seller is not in
default in the payment of any federal, foreign, state or local tax or
assessment.
4.9 Leases, Contracts, Agreements and Other Commitments. With respect to
the Seller's SF Restaurants, and except as listed in Schedule 4.9, Seller is not
a party to any written, oral or implied (a) contract for any person or firm to
render services of any kind which is not terminable at will without penalty; (b)
contract for the future purchase of materials, supplies or equipment in excess
of either $1,000 or its normal requirements (based upon sales experience last
year) for products or services which are now being sold or furnished by it; (c)
contract for the sale of any products or the furnishing of any services with
respect to which the aggregate amount, as to any person or entity, exceeds
$1,000 or, regardless of amount, which extends for a period of more than six
months; or (d) mortgage, lease, contract, agreement or other obligation not made
or created in the ordinary course of business or, if made in the ordinary course
of business, which involves obligations on its part in excess of $1,000 as to
any party or, regardless of amount, is not terminable by it on 30 days' or less
notice without penalty. All mortgages, leases, contracts, agreements and other
obligations with respect to the Seller's SF Restaurants (including the Leases,
the Contracts, the Documents, the Real Estate Documents and the Franchise
Agreements) to which Seller is a party or by which any of them are bound are
valid, binding and enforceable in accordance with their terms; and neither
Seller nor any other party is in default or in arrears nor has Seller nor any
other party committed any act or failed to perform any obligation which, with
the passage of time or the giving of notice or both, would constitute a default
under any mortgage, lease, contract, agreement or other obligation (including
the Leases, the Contracts,
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the Documents, the Real Estate Documents and the Franchise Agreements) to which
Seller is a party or by which any of them is bound, whether or not disclosure of
that mortgage, lease, contract, agreement or other obligation (including the
Leases, the Contracts, the Documents, the Real Estate Documents and the
Franchise Agreements) is required pursuant to the provisions of this Agreement.
4.10 Compliance with Law and Other Regulations. Except as set forth in
Schedule 4.10, Seller, to the best of Seller's and Shareholder's knowledge, is
in compliance with all requirements (including those relating to environmental
matters) of federal, state and local law, and all requirements of all
governmental bodies and agencies having jurisdiction over it, the conduct of its
business, the use of its assets and properties and all premises occupied by it.
With respect to the Seller's SF Restaurants, to the best of Seller's and
Shareholder's knowledge, as lessee, there is no environmental contamination,
toxic waste or other discharge, spill, construction component, structural
element or condition, other than cleaning solvents and other substances normally
used in the day-to-day operations of businesses such as the Restaurants,
adversely affecting any of the Leased Properties nor has Seller received any
official notice or citation that the Leased Properties in any way contravene any
federal, state or local law or regulation relating to environmental, health or
safety matters, including without limitation any requirements of the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
nor any OSHA requirements. Without limiting the foregoing, to the best of
Seller's and Shareholder's knowledge, Seller has properly filed all reports,
paid all monies and obtained all licenses, permits, certificates and
authorizations needed or required for the conduct of its business and the use of
its assets and properties and the premises occupied by it in connection
therewith and is in compliance in all respects with all conditions, restrictions
and provisions of all of the foregoing. Seller has not received any notice from
any federal, state or local authority or any insurance or inspection body that
any of its assets, properties, facilities, equipment or business procedures or
practices fails to comply with any applicable law, ordinance, regulation,
building or zoning law, or requirement of any public authority or body.
4.11 Labor, Employment Contracts, and Employee Benefit Programs. Without
limiting the generality of any provision of this Agreement, except as set forth
in Schedule 4.11, Seller is not a party to any collective bargaining agreement,
employment agreement or independent contractor agreement, and Seller has not
experienced any labor problems or is a party to any pending or threatened labor
dispute. Seller has complied with all applicable provisions of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA") and with all other
applicable federal, state and local laws relating to the employment of labor
including, but not limited to, the provisions thereof relative to wages, hours,
collective bargaining, working conditions and payment of taxes of any kind, and
Seller is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing or has any obligations for any
vacation, sick leave or other compensatory time except set forth in Schedule
4.11. All employees, independent contractors and agents of Seller in connection
with the Seller's SF Restaurants shall be
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retained and continue as employees of Seller in connection with its management
of the Seller's SF Restaurants after closing under the Management Agreements to
be entered into with MSII or otherwise, or shall be terminated.
4.12 Liabilities. To the best of Seller's and Shareholder's knowledge,
except as set forth in Schedule 4.12, Seller does not have any obligations or
liabilities with respect to or relating to the Seller's SF Restaurants, whether
related to tax or non-tax matters, known or unknown, matured or unmatured,
liquidated or unliquidated, fixed or contingent, or otherwise, except and to the
extent reflected or reserved on the Financial Statements or in this Agreement or
any schedule or exhibit hereto other than obligations or liabilities incurred in
the ordinary course of its business and disclosed to the extent required by this
Agreement. To the best of Seller's and Shareholder's knowledge, without limiting
the foregoing, Seller does not have any obligation or liability, contingent or
otherwise, with respect to warranties relating to products sold or services
rendered by it in connection with the Seller's SF Restaurants not adequately
covered by insurance except as set forth in Schedule 4.12.
4.13 Litigation. Except as set forth in Schedule 4.13, there are no
suits, actions, claims, arbitrations, administrative or other proceedings or
governmental investigations pending or, to the best of Seller's or Shareholder's
knowledge, threatened against or affecting Seller, its business or the assets
and properties being transferred hereunder in any court or before or by any
federal, state, local or other governmental department or agency, and neither
Seller nor its business or the assets and properties being transferred hereunder
are subject to or directly affected by any order, judgment, award, decree or
ruling of any court or governmental agency. Seller is not contemplating the
institution of any suit, action, claim, arbitration, administrative or other
proceeding or has any knowledge of any basis for any claims against it with
respect to the Seller's SF Restaurants.
4.14 Insurance. There is in effect at present, and there has been in
effect at all times since December 28, 1993, (a) public liability and workers'
compensation insurance covering Seller, its assets, properties and operations,
(b) fire and extended coverage insurance covering the assets and properties of
Seller, (c) general liability insurance, including product liability and liquor
liability insurance with respect to the assets, properties and operations of
Seller and the premises occupied by Seller and (d) automobile and other vehicle
insurance covering the value of such vehicles and liability claims arising out
of their use. A summary of this insurance, giving the amounts, expiration dates,
name of insurer and coverage is set forth in Schedule 4.14. Seller has not
received notice from or on behalf of any issuer of any such policy of its
intention to cancel or refuse to renew any policy issued by it or to increase
the cost of premiums thereunder.
4.15 Conflicting Interest. Except as set forth in Schedule 4.15, no
director, officer or shareholder of Seller (a) has any pecuniary interest in any
supplier or customer of Seller or in any other business with which Seller
conducts business or with which Seller is in competition or (b) is indebted to
Seller for borrowed money.
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4.16 Agreement Not in Breach of Other Instruments Affecting Seller. The
contracts, agreements and leases set forth in Schedule 4.16 shall require the
consent and authorization of third parties for the transfer, assignment and/or
termination of said instruments. For the purposes of this Agreement, the
requirement of approvals, consents or terminations of the contracts, agreements
and leases set forth on Schedule 4.16, shall be a condition precedent to
Closing. Except for those contracts, agreements and leases set forth on Schedule
4.16, the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof, will
not violate any provision of, or result in the breach of any term or provision
of, or result in the termination or modification of, or constitute a default
under, or conflict with, or cause the acceleration of any obligation under, or
permit any party to modify or terminate, the articles of incorporation or
by-laws of Seller, or any loan agreement, note, debenture, indenture, mortgage,
deed of trust, lease, contract, agreement or other obligation of any description
(including any Lease, Contract, Document, Real Estate Document or Franchise
Agreement) to which Seller is a party or by which Seller is bound, or any
judgment, decree, order or award of any court, governmental body or arbitrator
or any applicable law, rule or regulation.
4.17 Actions in the Ordinary Course of Business. Except as set forth in
Schedule 4.17, since the date of the Financial Statements, Seller has not with
respect to the Seller's SF Restaurants:
(a) taken any action outside of the ordinary and usual course
of business;
(b) borrowed any money or become contingently liable for any
obligation or liability of another;
(c) failed to pay all of its debts and obligations as they
became due;
(d) incurred any debt, liability or obligation of any nature to
any party except for obligations arising from the purchase of goods or the
rendition of services in the ordinary course of business, none of which in the
aggregate exceed by more than $5,000 the average outstanding balance thereof for
the previous six (6) months with respect to the same supplier or customer;
(e) failed to use its best efforts to preserve its business
organization intact, to keep available the services of its employees and
independent contractors, or to preserve its relationships with its customers,
suppliers and others with which it deals; or
(f) increased or committed to increase the salary, fee or
compensation of any officer, employee, independent contractor, agent, firm or
person performing services for it.
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4.18 No Material Adverse Change. Except as set forth in Schedule 4.18,
since the date of the Financial Statements, there has not been and there is not
threatened (a) any material adverse change in the financial condition, results
of operations or business of the Seller's SF Restaurants, (b) any material
physical loss or damage to any of assets or properties or to the premises
occupied by the Seller's SF Restaurants (whether or not such damage or loss is
covered by insurance), or (c) any other event or condition of any character
which has materially and adversely affected, or may be reasonably expected to
materially and adversely affect, the assets, properties, business, prospects or
affairs of the Seller's SF Restaurants.
4.19 No Prohibited Payments. Neither Seller nor, to the knowledge of
Seller and Shareholder, any officers, directors, employees, independent
contractors or agents acting on behalf of Seller has at any time (a) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any contributions to any candidate for political office
in accordance with any applicable statute, rule, regulation or ordinance
requiring such disclosure, (b) made any payment to any local, state, federal or
foreign governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or allowed by
applicable law, (c) made any payment outside the ordinary course of business to
any purchasing or selling agent or person charged with similar duties of any
entity to which Seller sells products or renders services or from which Seller
buys products or services for the purpose of influencing such agent or person to
buy products or services from or sell products or services to Seller or (d)
engaged in any transaction, maintained any bank account or used any corporate
funds except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of Seller.
4.20 Compliance with Requirements of TGIF. Seller has furnished to Buyer
a true and accurate copy of each Franchise Agreement relating to the Seller's SF
Restaurants to which it is a party with TGIF. Except as disclosed on Schedule
4.20, Seller has not received notice from TGIF that Seller is in default of the
terms, conditions or provisions of any such Franchise Agreement. Without
limiting any other provisions of this Agreement, each such Franchise Agreement
is valid, binding and enforceable in accordance with its terms, each such
Franchise Agreement is in good standing and no condition exists which (with the
passage of time, the giving of notice, or both) would lead to a default under
any such agreement, and Seller has performed all of its obligations under each
such Franchise Agreement in accordance with its terms and is operating each of
the Restaurants strictly in accordance with the T.G.I. Friday's System. with
respect to the Seller's SF Restaurants, except as set forth in Schedule 4.20,
Seller has no agreements or understandings (written or oral) with, or
obligations to, TGIF that will survive the Closing and be binding on MSII or
Buyer other than as set forth in the Franchise Agreements.
4.21 All Necessary Assets Transferred. At the Closing, Seller shall have
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transferred to MSII all assets necessary for MSII to operate the Seller's SF
Restaurants in substantially the same manner as operated by Seller immediately
prior to the Closing; provided, however, the items set forth on Schedule 4.21,
if any, shall not be included.
4.22 Hazardous Materials. To the best of Seller's knowledge, except as
set forth in Schedule 4.22, there has been no storage, treatment, generation,
discharge, transportation or disposal of industrial, medical, toxic or hazardous
substances or solid or hazardous waste at or adjacent to any of the Leased
Properties, in violation of any federal, state or local law, statute, rule or
regulation or the common law or any decree, order, arbitration award or
agreement with or any license or permit from any federal, state or local
governmental authority. Schedule 4.22 hereto sets forth a complete list of all
aboveground and underground storage tanks, vessels, and related equipment and
containers that are located on any of the Leased Properties and that are subject
to federal, state or local laws, statutes, rules or regulations, and Schedule
4.22 sets forth their present contents, what the contents have been at any time
in the past, and what program of remediation, if any, is contemplated with
respect thereto.
4.23 Statements and Other Documents Not Misleading. Neither this
Agreement, including all schedules and exhibits hereto, nor any other financial
statement, document or other instrument furnished or delivered by Seller to
Buyer in connection with the transactions contemplated hereby, contains any
untrue statement of material fact or omits to state a material fact required to
be stated in order to make such statement, document or other instrument not
misleading. In addition to the foregoing, neither Seller nor Shareholder have
failed to inform Buyer as to any material fact relating to the business, assets,
properties, prospects or affairs of Seller.
4.24 Ownership of Capital Stock of MSII. Seller owns all of the Capital
Stock of MSII. Seller has good, marketable and unencumbered title to such stock.
No transfer of record ownership of, or beneficial interest in, any of such stock
will be made between the date hereof and the Closing.
Section 5. Further Representations and Warranties of Shareholder.
To induce Buyer to enter into this Agreement and for the benefit of
Buyer, Shareholder further represents and warrants as follows:
5.1 Ownership of Capital Stock of Seller. Shareholder owns all of the
Capital Stock of Seller. Shareholder has good and marketable title to such
stock, and has received and provided to Buyer written consent to the
transactions contemplated hereby from any party holding a material encumbrance
on such stock. No transfer of record ownership of, or beneficial interest in,
any of such stock will be made between the date hereof and the Closing.
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5.2 Consent to Transaction. Shareholder, as the sole shareholder of
Seller, hereby consents to the transactions herein provided for, and Shareholder
agrees to vote all of his shares of stock of Seller in favor of approving any
and all other action necessary to be taken by Seller in order to comply fully
with this Agreement, at any and all meetings of Seller held for any such
purpose.
5.3 Power of Shareholder to Execute Agreement. Shareholder has full
power and authority to execute, deliver and perform this Agreement, and this
Agreement is the legal and binding obligation of Shareholder and is enforceable
against him in accordance with its terms.
5.4 Agreement Not in Breach of Other Instruments Affecting Shareholder.
Except as provided in Schedule 4.16 and as otherwise provided herein, the
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which Shareholder is a party or by
which Shareholder is bound, or any judgment, decree, order, or award of any
court, governmental body or arbitrator, or any applicable law, rule or
regulation.
Section 6. Buyer's Representations and Warranties.
To induce Seller and Shareholder to enter into this Agreement, Buyer
represents and warrants as follows:
6.1 Entity Status and Authority. Buyer is duly organized, validly
existing and in good standing under the laws of its state of organization. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been validly authorized by all appropriate
company action.
6.2 Agreement Not in Breach of Other Instruments. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby, and the fulfillment of the terms hereof, will not violate any provision
of the articles of incorporation or by-laws of Buyer nor will they result in the
breach of any term or provision of, or constitute a default under, or conflict
with, or cause the acceleration of any obligation under, any loan agreement,
note, debenture, indenture, mortgage, deed of trust, lease, contract, agreement
or other obligation of any description to which Buyer is a party or by which
either of them is bound, or any judgment, decree, order or award of any court,
governmental body or arbitrator, or any applicable law, rule or regulation.
Section 7. Continuation and Survival of Representations and Warranties.
Each of the representations and warranties contained in this Agreement
shall be true
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and correct on and as of the Closing Date and at all times between the execution
of this Agreement and the Closing Date with the same force and effect as if made
at each of such times, except to the extent, if any, that such representations
and warranties shall be affected by transactions contemplated by this Agreement.
All such representations and warranties shall survive the consummation of the
transactions contemplated by this Agreement for a period of two (2) years
(except those set forth in Section 4.8, Section 4.10 and Section 4.12, which
shall survive until the expiration of the applicable statute of limitations).
Section 8. Seller's and Shareholder's Covenants.
Seller and Shareholder agree with respect to the Seller's SF Restaurants
and the Seller's interests therein that, between the date hereof and the Closing
Date, inclusive:
8.1 Untruth of Representations and Warranties. Neither Seller nor
Shareholder shall take or suffer or permit any action which would render untrue
any of the representations or warranties of Seller or Shareholder herein
contained, nor shall Seller or Shareholder omit to take any action, the omission
of which would render untrue any such representation or warranty.
8.2 Conduct of Business. Seller shall conduct its business only in the
regular, ordinary and usual course and manner and will maintain all supplies and
Inventory at levels commensurate with those customarily maintained by Seller in
the ordinary course of business at each Purchased Restaurant during comparable
prior periods. Seller shall at all times operate the Seller's SF Restaurants in
compliance with the Franchise Agreements and the minimum standards established
thereby.
8.3 Preservation of Organization. Seller and Shareholder shall use their
best efforts (a) to preserve intact the present business organizations of
Seller, (b) to keep available the services of employees, independent contractors
and agents of Seller, (c) to maintain the present goodwill and favorable
relationships of Seller with landlords, suppliers, customers and all others
having business dealings or relationships with Seller (including TGIF), and (d)
to preserve and maintain in force all Franchise Agreements, licenses,
registrations, franchises, trademarks, copyrights, bonds and other similar
rights of Seller regarding or relating to the Seller's SF Restaurants.
8.4 Right of Inspection. Seller shall make available to Buyer and its
representatives for inspection subject to the nondisclosure agreement attached
hereto as Exhibit C, at all reasonable times all of the assets, properties,
facilities, records, agreements (including all documents of any description
evidencing any right or obligation of Seller) and the consolidated financial
statements of Seller and allow Buyer and its representatives the right to make
whatever copies of such materials they require, and Seller shall permit Buyer
and its independent accountants to audit or make such audit tests respecting the
accounts of Seller as Buyer or those accountants consider appropriate.
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8.5 Entry Into Obligations. Without the prior written consent of Buyer,
Seller shall not (a) enter into any lease, contract, agreement or other
obligation with any party, other than contracts for the sale of products or
services and contracts for the purchase of supplies or services in the ordinary
and usual course of business or, whether or not in the ordinary course of
business, which involve obligations in excess of $10,000 or which extend beyond
six months from the date of this Agreement, (b) amend, modify or terminate any
presently existing lease, contract, agreement or other obligation, (c) sell,
encumber or mortgage any assets or properties to be transferred under this
Agreement, (d) incur any obligation (contingent or otherwise) or purchase,
acquire, transfer or convey any material assets or properties or enter into any
transaction or make or enter into any contract or commitment except in the
ordinary course of business, (e) acquire or dispose of any stock or other equity
interest in any corporation, trust or other entity, (f) enter into any service
agreements, maintenance agreements, contracts or other arrangements relating to
the operation or maintenance of the Seller's SF Restaurants unless such
agreements are terminable by Buyer, without any cost or liability to Buyer, at
any time after the Closing effective immediately upon delivery of notice from
Buyer, or will otherwise terminate on or before the Closing, or (g) enter into
any amendment, modification, extension or any other change of any Lease or
Franchise Agreement.
8.6 Maintenance of Insurance. Seller shall maintain in force through the
Closing Date all of the insurance policies listed in Schedule 4.14 and make no
change in any insurance coverage without the prior written consent of Buyer.
8.7 Maintenance of Assets and Properties. Seller shall keep the premises
occupied by it and all of the equipment and other tangible assets and personal
property to be transferred hereunder in good operating condition and perform all
necessary repairs and maintenance. Seller shall not remove any Personal Property
from the Seller's SF Restaurants unless same are replaced with similar items of
at least equal quality prior to the Closing. Seller will not permit any
modifications or additions to or sell or permit to be sold or otherwise
transferred or disposed of any item or group of items constituting Personal
Property, except Inventory used and sold in the ordinary course of business.
Seller shall not, without the prior written consent of Buyer, convey any
interest in the Seller's SF Restaurants or subject the Seller's SF Restaurants,
or any portion thereof, to any additional liens, encumbrances or similar
matters.
8.8 Maintenance of Books and Records. Seller shall maintain or cause to
be maintained all of the usual business books, accounts and records in the
usual, regular and ordinary manner, and on a basis consistent with past
practices.
8.9 Satisfaction of Obligations and Liabilities. Seller shall (a) pay or
cause to be paid all of the obligations and liabilities arising out of its
business as they mature, except for those which are in good faith disputed, (b)
maintain in all material respects and perform its
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obligations under all agreements and contracts to which it is bound in
accordance with their terms and (c) comply in all material respects with all
requirements of applicable federal, state and local laws, regulations and rules.
Seller shall pay or cause to be paid in full all bills and invoices for labor,
goods, materials, services and utilities of any kind relating to the Seller's SF
Restaurants which were contracted for by Seller or which were delivered to or
performed on the Seller's SF Restaurants.
8.10 No Payments to Others. Seller shall not, in any way which could
materially or adversely affect the Seller's SF Restaurants prior to the
conveyances contemplated hereunder, (a) purchase, redeem or otherwise acquire
any shares of its capital stock, (b) transfer, distribute or pay, directly or
indirectly, any assets or properties comprising the Conveyed Assets as of the
date of this Agreement to any person except as otherwise permitted in this
Agreement, (c) issue any shares of capital stock (except upon the exercise of
outstanding stock options) or (d) grant any option, warrant or other right to
purchase or to convert any obligation into shares of capital stock.
8.11 Organizational Changes. Seller shall not, in any way which could
materially or adversely affect the Seller's SF Restaurants prior to the
conveyances contemplated hereunder, (a) amend its articles of incorporation or
by-laws, (b) make any changes in its capital stock by reclassification,
subdivision, reorganization or otherwise or (c) merge or consolidate with any
corporation, trust or other entity or change the character of its business.
8.12 Employees. Seller shall not increase the compensation of or
benefits for any employee, independent contractor or agent, hire any employee or
engage any independent contractor or agent other than in the ordinary course of
business and consistent with past periods. Seller will use reasonable efforts to
maintain substantially all of the current Purchased Restaurant employees in a
manner consistent with Seller's normal business practices.
8.13 Licenses and Permits. Seller and Shareholder shall assist and
cooperate with MSII and Buyer in obtaining all necessary permits and licenses
(and where possible will assign such permits and licenses to MSII and to Buyer)
(including liquor licenses) and consents necessary to continue operating the
Seller's SF Restaurants after the Closing as operated on the date of this
Agreement.
Section 9. Buyer's Conditions Precedent to Closing.
The obligations of Buyer hereunder and its obligations to consummate the
Closing provided for herein shall be subject to the following conditions
precedent, any one or more of which may be waived by Buyer:
9.1 Compliance With Agreements and Covenants. Seller and Shareholder,
respectively, shall have performed and complied with each of their agreements,
covenants
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and obligations to be performed on or prior to the Closing Date except those
calling for performance after the Closing Date.
9.2 Accuracy of Representations and Warranties. The representations and
warranties of Seller and Shareholder contained in this Agreement shall have been
true and correct at all times between the date of this Agreement and the Closing
Date, with the same force and effect as if made on and as of that date.
9.3 Corporate Approvals. All necessary corporate action on the part of
the directors and Shareholder of Seller approving this Agreement and the
transactions contemplated hereby shall have been taken.
9.4 No Material Adverse Change. There shall have been no material
adverse change in the business, assets, properties or financial condition of the
Seller's SF Restaurants.
9.5 Absence of Litigation or Proceedings. No litigation, governmental
action or other proceedings shall have been threatened or commenced against
Seller with respect to any matter or against any person with respect to the
consummation of the transactions provided for herein.
9.6 Approval by Counsel. All actions, proceedings, instruments and
documents required to perform this Agreement or incident thereto, and all other
legal matters (including assurances as to the due organization, existence, good
standing, corporate power and qualification to do business of Seller; the
authorization, power and authority of Seller and Shareholder to execute, deliver
and perform this Agreement; the absence of any violation by Seller of its
articles of incorporation, by-laws or contractual obligations or its violation
of any applicable laws, regulations or orders; and the absence of any litigation
involving Seller), shall have been approved by counsel for Buyer, which approval
shall not be unreasonably withheld.
9.7 Real Estate Matters. All Landlords shall have consented to the
assignment of the Leased Properties to MSII and to Buyer or, in the alternative,
Buyer shall have negotiated, for execution of the Closing, new leases for any of
the Leased Properties on terms and conditions satisfactory to Buyer. Buyer shall
have received from each of the landlords of the Leased Properties estoppel
certificates or other written assurance in form and substance reasonably
acceptable to Buyer, confirming that each Lease is in full force and effect,
that no default or breach exists thereunder, and such other facts pertaining to
each Lease as Buyer may reasonably request and, if necessary, non-disturbance
agreements in form and substance reasonably acceptable to Buyer, from any
lenders holding a lien on any of the Leased Properties as well as such other
Landlord matters as may by required by Buyer's lender.
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Buyer and Seller shall use their best efforts to obtain from each
landlord a release of Seller and/or Shareholder from further obligations under
the respective Leases.
9.8 Approval by TGIF. TGIF shall have approved the transactions
contemplated hereby including the transfer of the Franchise Agreements to MSII
and to Buyer in a manner reasonably satisfactory to Buyer. Without limiting the
foregoing, Buyer shall have obtained from TGIF, with Seller's cooperation,
satisfactory assurances that (a) the Seller's SF Restaurants are in compliance
in all material respects with the Franchise Agreements and that no condition
exists with respect to the Seller's SF Restaurants which, with the giving of
notice and/or passage of time, or both, would result in the occurrence of a
default under the Franchise Agreements and (b) all obligations and liabilities
pursuant to, and the consequences of any defaults under, the Development
Agreement are solely the responsibility of Seller. In addition, Seller and Buyer
shall use their best efforts to obtain from TGIF a release of any and all
obligations of Seller and/or Shareholder under such Franchise Agreements
including, but not limited to any such obligations arising from guarantees of
the Franchise Agreements by Seller, Shareholder and any entity wholly owned by
Shareholder.
9.9 Operation of Restaurants. MSII and then Buyer shall have been
issued, or shall be reasonably satisfied that MSII and then Buyer will be issued
immediately after Closing, all permits and licenses (including temporary or
permanent liquor licenses) or other approvals of governmental authorities
necessary to continue operating each Purchased Restaurant in the present manner
and all consents and approvals of all persons or entities which own or lease any
of the assets or properties to be transferred hereunder.
9.10 Acquisition Loan. MSII and Buyer shall have satisfied all
requirements to close, and shall have closed and received funding under the loan
commitment from CNL Financial Services, Inc. for an acquisition loan (herein the
"Acquisition Loan") not to exceed Eight Million Six Hundred Thousand and No/100
Dollars ($8,600,000.00) under the Commitment Letter therefor entered into by CNL
Growth Fund Advisors, Inc. dated December 13, 1996. Buyer agrees to use diligent
best efforts to satisfy all such requirements for and to close the Acquisition
Loan.
9.11 Environmental Reports. Buyer shall have received evidence
acceptable to it as to the Environmental Status of the parcels of real property
on which the Purchased Restaurants are located.
9.12 Inventory. Seller shall continue its standard inventory practices,
in the ordinary course of operating the Seller's SF Restaurants, until the
Closing. Seller shall provide an inventory report for each Purchased Restaurant
in the form and reflecting an inventory consistent with the standards of the TGI
Friday's system, and which demonstrates a total inventory amount for Seller's
Existing SF Restaurants of at least $_______________, and which will show a
total inventory amount for Seller's New Restaurant of at least
$_________________.
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9.13 Delivery of Documents. All other documents required to be delivered
by Seller or Shareholder at or prior to the Closing shall have been delivered or
shall be tendered at the Closing.
Section 10. Seller's Conditions Precedent to Closing.
The obligations of Seller to consummate the Closing provided for herein
shall be subject to the following conditions precedent, any one or more of which
may be waived by Seller:
10.1 Compliance with Agreements and Covenants. Buyer shall have
performed and complied with each of its agreements, covenants and obligations to
be performed hereunder on or prior to the Closing Date except those calling for
performance after the Closing Date.
10.2 Truth and Correctness of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement shall have
been true and correct at all times between the date of this Agreement and the
Closing Date, with the same force and effect as if made on and as of that date.
10.3 Approval by Counsel. All actions, proceedings, instruments and
documents required to perform this Agreement or incident hereto, and all other
legal matters, shall have been approved by counsel for Seller and Shareholder,
which approval shall not be unreasonably withheld.
10.4 Delivery of Documents. All other documents required to be delivered
by Buyer at or prior to the Closing shall have been delivered or shall be
tendered at the Closing.
10.5 Sanwa Release. Seller's existing lender, Sanwa Bank, shall have
consented to the proposed conveyance and stock transfer transaction and agreed
to release its lien on the Conveyed Assets.
Section 11. Closing.
This Agreement constitutes escrow instructions to Lawyers Title
Insurance Corporation and its California subsidiary ("Escrowholder"), and upon
receipt, Escrowholder shall establish an escrow account for this transaction
("Escrow"). Closing under this Agreement shall take place through the
Escrowholder at its most convenient office, or at such other place as may be
agreed upon by Seller and Buyer, and Closing shall take place in the manner and
in accordance with the provisions set forth in this Agreement. Closing shall
occur at such time as Seller and Buyer have confirmed in writing to Escrowholder
the fulfillment of the conditions precedent with respect to the Seller's
Existing SF Restaurants and the date of the last of such notices shall be the
closing date of the Escrow (the "Closing Date"). Seller and
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Buyer shall each have the right to terminate this Agreement if the conditions
precedent to its obligations with respect to the Seller's Existing SF
Restaurants as provided herein have not been satisfied by January 16, 1997. The
Closing Date for Seller's New Restaurant (the "Deferred Closing" and the
"Deferred Closing Date") shall be within thirty (30) days following the date
that the Seller's New Restaurant has been completed, certified for occupancy by
the applicable governmental authority and opened with the approval of TGIF under
a fully executed and effective Franchise Agreement. Buyer shall have the right
to terminate this Agreement with respect to the Seller's New Restaurant if the
conditions precedent to its obligations with respect to the Seller's New
Restaurant as provided herein have not been satisfied by July 1, 1997. Seller
and Buyer agree that the transfer of the Seller's Existing SF Restaurants shall
be accomplished as a conveyance of all of the Conveyed Assets with respect
thereto by Seller to MSII on the Closing Date, with the purchase by Buyer from
Seller of all of the outstanding Capital Stock of MSII under the Stock Purchase
Agreement also to be effective on the Closing Date. It is intended by the
parties, however, that the conveyance of the Seller's New Restaurant (unless
otherwise approved by the parties) will be accomplished on the Deferred Closing
Date as a direct sale and conveyance to MSII, or to Buyer if MSII has been
dissolved and its assets conveyed to Buyer. In any event, the parties intend and
agree that the entire Conveyance Amount, as adjusted hereunder and under the
Stock Purchase Agreement, is to be paid to Seller in the form of (i) the
Purchase Price under the Stock Purchase Agreement at the Closing Date for the
Seller's Existing SF Restaurants and (ii) the balance at the Deferred Closing
Date for the conveyance of the Seller's New Restaurant.
11.1 Deliveries by Seller. At the Closing, Seller shall deliver:
(a) Such assignments of leases, bills of sale, instruments of
assignment and other instruments and documents as may be necessary to convey to
MSII and/or to Buyer title to all the assets and properties to be transferred
hereunder.
(b) The certificate of Seller that all representations and
warranties of Seller contained in this Agreement have been true and correct at
all times between the date of this Agreement through the Closing Date.
(c) The certificate of Shareholder that all representations and
warranties of Shareholder contained in this Agreement have been true and correct
at all times between the date of this Agreement through the Closing Date.
(d) The certificate of Seller certifying to the resolutions
constituting all necessary corporate action by the board of directors and by the
shareholders of Seller to authorize or ratify the consummation of the
transactions provided for herein.
(e) The written consents to assignment of all parties whose
written consent is necessary to the continued effectiveness and validity, after
assignment as provided herein,
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of all contracts, agreements or leases to which Seller is a party.
(f) The materials regarding matters required by Section 9.6
above.
(g) As for the Seller's New Restaurant, evidence that all cost
of full completion have been paid in full, assignments of all construction
warranties and related matters, and evidence satisfactory to Buyer that the
Seller's New Restaurant has been fully completed and furnished and opened in
accordance with the approved plans and all TGIF requirements and standards.
All assignments, consents, certificates and other transfer documents delivered
by Seller shall be in a commercially reasonable form satisfactory to counsel for
Buyer.
11.2 Deliveries by Buyer. At the Closing, MSII and/or Buyer, as
appropriate, shall deliver:
(a) An assumption of liabilities necessary to assume the
obligations and liabilities being assumed hereunder, which shall include an
assumption by MSII (for the Seller's Existing SF Restaurants) and by Buyer (for
the Seller's New Restaurants) of all obligations arising and relating to the
period from and after the Closing Date, under the TGIF Franchise Agreements and
the Leases.
(b) A certified or cashier's check or bank wire transfer for
the Cash Component portion of the Conveyance Amount to be paid to the order of
Seller.
(c) The certificate of Buyer that all representations and
warranties of Buyer contained in this Agreement have been true and correct at
all times between the date of this Agreement through the Closing Date.
(d) The Certificate of Buyer certifying to the resolutions
constituting all necessary corporate action by the board of directors of Buyer
to authorize the consummation of the transactions provided for herein.
(e) The materials required by Section 10.4 above.
All certificates and other documents delivered by Buyer shall be in a
commercially reasonable form reasonably satisfactory to counsel for Seller.
11.3 Costs of Closing. Buyer shall be responsible for all costs of
closing, other than attorneys' fees and costs of Seller, up to a maximum amount
(including all costs relating to the Acquisition Loan and the Stock Purchase
Agreement and all costs reasonably incurred in connection with this transaction
regardless of whether or not the same might be listed as a required cost in or
under this Agreement) not to exceed Two Hundred Thousand and No/100 Dollars
($200,000.00) (herein "Buyer's Maximum Closing Cost Amount"). All costs which
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exceed the Buyer's Maximum Closing Cost Amount shall be borne by Seller as
credit against and a reduction of the Conveyance Amount.
Section 12. Risk of Loss, Destruction, Condemnation.
12.1 Risk of Loss. The risk of loss or damage to the Seller's SF
Restaurants, or any part thereof, by fire or other casualty until the date of
the Closing shall be on Seller. If, prior to the Closing, the Seller's SF
Restaurants, or any portion thereof, are damaged by fire, or any other cause of
whatsoever nature, Seller shall promptly give Buyer written notice of such
damage. If the cost for repairing such damage shall, in the reasonable judgment
of Buyer, exceed $50,000 for any Purchased Restaurant, Buyer shall have the
option, by written notice delivered to Seller within ten days of receipt by
Buyer of Seller's notice of damage to Buyer, either (a) to require Seller to
convey the Seller's SF Restaurants to Buyer in their damaged condition and to
assign to Buyer all of Seller's right, title and interest in and to any claims
Seller may have under the insurance policies covering the Seller's SF
Restaurants, or (b) to terminate this Agreement as to all or, at Buyer's option,
any affected Purchased Restaurant. Should Buyer elect to terminate this
Agreement, neither party hereto shall have any further duties or obligations
hereunder. If the cost for repairing such damage to any individual Purchased
Restaurant shall, in the reasonable judgment of Buyer, be less than $50,000,
then to the extent the repairs are not covered by insurance, Buyer may offset
the cost for repairs from the Cash Component.
12.2 Condemnation. If during the pendency of this Agreement and prior to
the Closing, condemnation proceedings are commenced or threatened with respect
to all or a material portion of any Purchased Restaurant or any land or interest
therein subject to this Agreement, Buyer may, at Buyer's election, terminate
this Agreement by written notice to Seller within ten days after Buyer receiving
notice of such event. In the event of such termination, neither party shall have
any further duties or obligations hereunder. If Buyer does not exercise such
right to terminate within the period prescribed, then, at the Closing, Seller
shall assign to Buyer all of Seller's interest in and to any condemnation
proceeds payable as a result thereof. If any such condemnation proceeds are
payable to Seller prior to the Closing, and Buyer does not elect to terminate
this Agreement, the amount of such proceeds paid to Seller shall be credited
toward Buyer's payment of the Conveyance Amount (such credit being first applied
to the Cash Component due at the Closing).
Section 13. Further Assurances.
Seller, Shareholder and Buyer shall execute and deliver all such other
instruments and take all such other action as any party may reasonably request
from time to time, before or after the Closing, in order to effectuate the
transactions provided for herein. The parties shall cooperate with each other
and with their respective counsel and accountants in connection with any steps
to be taken as a part of their respective obligations under this Agreement,
including the preparation of financial statements. Buyer shall make available to
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Seller and its representatives for inspection at all reasonable times the books
and records of Seller transferred pursuant hereto.
Section 14. Indemnification by Seller and Shareholder.
14.1 Indemnity Against Losses from Untruth of Representations or
Warranties or Breach of Agreements or Covenants. For a period of two (2) years
after the Closing Date, if it shall appear that any representation or warranty
of Seller or Shareholder contained or referred to in any Section of this
Agreement or in any certificate, schedule, exhibit or document delivered
pursuant hereto was incorrect or untrue, or that Seller or Shareholder breached
any covenant or agreement contained in this Agreement, Seller and Shareholder
jointly and severally shall pay Buyer, at Buyer's option, the amount of the
loss, expense or damage suffered or incurred by MSII or Buyer, which would not
have been suffered or incurred if the facts set forth in those representations
or warranties had been correct or those covenants and agreements had not been
breached. With respect to the representations and warranties contained in
Sections 4.8, 4.10, 4.12 and 4.21 which are made to the best of Seller's or
Shareholder's knowledge, if it is discovered by Seller, Shareholder or Buyer
that the substance of such representation and warranty is inaccurate, then
notwithstanding Seller's or Shareholder's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made or at the Closing
Date, Seller and Shareholder shall indemnify MSII and Buyer in accordance with
this Section 14.1 as if the applicable representation or warranty was breached.
14.2 Indemnity Against Suits and Claims. For a period of two (2) years
after the Closing Date, Seller and Shareholder hereby jointly and severally
indemnify and hold harmless MSII and Buyer from all liabilities, suits, claims,
demands, damages, fees, costs and expenses (including reasonable attorneys' and
accountants' fees) arising out of the incorrectness of any representation or
warranty or the breach of any agreement or covenant of Seller or Shareholder
under this Agreement. Upon written demand by Buyer, Seller and Shareholder shall
defend against any liabilities, suits, claims and demands which may arise from
the incorrectness of those representations or warranties or the breach of those
covenants and agreements. Seller and Shareholder shall retain counsel reasonably
satisfactory to Buyer and conduct any defense diligently and shall keep Buyer
advised of the status of such defense. If Seller is called upon to defend, Buyer
shall be entitled to participate, through counsel of its own choice, in any such
defense, at Buyer's expense. With respect to the representations and warranties
contained in Sections 4.8, 4.10, 4.12 and 4.21 which are made to the best of
Seller's or Shareholder's knowledge, if it is discovered by Seller, Shareholder
or Buyer that the substance of such representation and warranty is inaccurate,
then notwithstanding Seller's or Shareholder's lack of knowledge with respect to
the inaccuracy at the time the representation or warranty was made or at the
Closing Date, Seller and Shareholder shall indemnify MSII and Buyer in
accordance with this Section 14.2 as if the applicable representation or
warranty was breached.
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14.3 Indemnification By Seller and Shareholder Against Losses from
Failure to Comply with Bulk Transfer Law. Seller and Shareholder hereby jointly
and severally indemnify and hold harmless MSII and Buyer for, from and against
all liabilities, suits, actions, proceedings, claims, demands, losses, damages,
fees, costs, taxes, penalties and expenses (including, but not limited to,
reasonable attorneys' and accountants' fees) arising out of any failure (whether
by Seller, MSII or Buyer) to comply with any applicable bulk transfer law(s).
14.4 Indemnification By Seller and Shareholder for Pre-Closing Claims
and Landlord Consents. Seller and Shareholder hereby jointly and severally
indemnify and hold harmless MSII and Buyer for, from and against all
liabilities, suits, actions, proceedings, claims, demands, losses, damages,
fees, costs, taxes, penalties and expenses (including, but not limited to,
reasonable attorneys' and accountants' fees) arising out of (i) Seller's
ownership and operation of the Seller's SF Restaurants as and prior to the
Closing, and (ii) any assertion by any of the Landlords under the Leases, or
their mortgagees, that all necessary consents of such Landlords and mortgagees
to the assignments and collateral assignments of lease executed and delivered in
connection with the Closing have not been or are not obtained.
14.5 Advances by Buyer. Without limiting any of the foregoing provisions
of this Section 14, Buyer shall have the right to advance any sums necessary to
cure any breach of any representation, warranty, covenant or agreement of Seller
contained in this Agreement.
Section 15. Indemnification by Buyer.
15.1 Buyer's Indemnity Against Losses from Untruth of Representations or
Warranties or Breach of Agreements or Covenants. For a period of two (2) years
after the Closing Date, if it shall appear that any representation or warranty
of Buyer contained or referred to in any Section of this Agreement or in any
certificate, schedule, exhibit or document delivered pursuant hereto was
incorrect or untrue, or that Buyer breached any covenant or agreement contained
in this Agreement, Buyer shall pay Seller or Shareholder, at Seller's or
Shareholder's option, the amount of the loss, expense or damage suffered or
incurred by Seller or Shareholder which would not have been suffered or incurred
if the facts set forth in those representations or warranties had been correct
or those covenants and agreements had not been breached.
15.2 Indemnity Against Suits and Claims. For a period of two (2) years
after the Closing Date, Buyer hereby indemnifies and holds harmless Seller and
Shareholder from all liabilities, suits, claims, demands, damages, fees, costs
and expenses (including reasonable attorneys' and accountants' fees) arising out
of the incorrectness of any representation or warranty or the breach of any
agreement or covenant of Buyer under this Agreement. Upon written demand by
Seller or Shareholder, Buyer shall defend against any liabilities, suits, claims
and demands which may arise from the incorrectness of those representations or
warranties or the breach of those covenants and agreements. Buyer shall retain
counsel
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reasonably satisfactory to Seller and Shareholder and conduct any defense
diligently and shall keep Seller and Shareholder advised of the status of such
defense. If Buyer is called upon to defend, Seller and Shareholder shall be
entitled to participate through counsel of their own choice, in any such
defense, at Seller's or Shareholder's expense.
15.3 Indemnification By MSII and Buyer for Post-Closing Claims. Buyer
hereby (and Buyer shall cause MSII to) jointly and severally indemnify and hold
harmless Seller and Shareholder for, from and against all liabilities, suits,
actions, proceedings, claims, demands, losses, damages, fees, costs, taxes,
penalties and expenses (including, but not limited to, reasonable attorneys' and
accountants' fees) arising out of MSII's and Buyer's ownership and operation of
the Seller's SF Restaurants from and after the Closing, except to the extent of
any claim or liability asserted against Seller as, or as a result of Seller
acting as, Manager under the Management Agreement.
Section 16. Post Closing Obligations.
16.1 Accounting Reconciliation. Promptly following the Closing Date and
determination of all balances and proration amounts, the Seller shall provide a
current and complete beginning Balance Sheet, proration reconciliation and such
other reports and information as may be reasonably requested by Buyer, effective
as of the close of business on the Closing Date, in order to substantiate the
beginning financial statement balances required for the Seller's SF Restaurants
as acquired by MSII and Buyer and to verify and document all closing prorations
and other amounts relating to the Seller's SF Restaurants and the prorations and
adjustments provided for herein. All necessary prorations and adjustments shall
be made in order to insure that all operating and other costs of the Seller's SF
Restaurants incurred in connection with and properly allocable to the ownership
and operation of the Seller's SF Restaurants as of and prior to the Closing Date
shall be borne and paid be Seller, notwithstanding when such cost is actually
paid, and all revenues from the Seller's Restaurant to the Closing Date shall be
retained by or paid to Seller, and all costs and revenues accruing after the
Closing Date shall be borne or received, as applicable, by MSII or Buyer.
16.2 Extension of San Mateo Lease. Seller and Buyer have agreed that the
Lease for the Seller's Restaurant located at 3101 South El Camino Real, San
Mateo, California (the "San Mateo Lease") must be extended so that the term
thereunder, including all extension options, shall expire no sooner than January
31, 2012, and agree to cooperate in good faith and to use their best efforts to
obtain a proper written lease extension to at least that date from the San Mateo
Lease landlord without additional conditions (other than normal rent increases)
(herein the "Required Lease Extension"). All costs of obtaining the Required
Lease Extension shall be considered a cost of closing hereunder, and in the
event that the Required Lease Extension is not obtained by no later than
December 31, 1997, then Buyer, at Buyer's option, shall have the right to
require that Seller (a) substitute other collateral of comparable (and no
lesser) value and which is otherwise reasonably acceptable to Buyer and
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to CNL Financial, Inc., as the lender under the Acquisition Loan ("CNL
Financial"), and pay all costs of properly documenting and completing such
substitution resulting release of the San Mateo Restaurant (subject to such
adjustments as may reasonably be agreed to by Seller and Buyer relating to any
variations between the substituted restaurant and the San Mateo Restaurant), or
(b) repay to Buyer all of its invested capital in the San Mateo Restaurant and
the required principal payment, prepayment fee and all other costs of releasing
the San Mateo Restaurant from the Acquisition Loan in return for the
reconveyance of the San Mateo Restaurant to Seller or its designee.
16.3 Confidentiality. At all times after the Closing, each of Seller and
Shareholder shall maintain as confidential the discussions among them and Buyer,
and the terms and conditions of this Agreement, and the other agreements to be
executed in connection herewith, and except as required by law and by TGI
Friday's and the parties' accountants and lenders, shall not make any trade
press or other announcement or disclosure in relation to such discussions
whether before or after Closing without the prior written consent of Buyer.
16.4 Severability; Survival. Each and every provision set forth this
Section 16 is independent and severable from the others, and no provision shall
be rendered unenforceable by virtue of the fact that, for any reason, any other
or others of them may be unenforceable in whole or in part. The parties hereto
agree that if any provision of this Section 16 shall be declared by a court of
competent jurisdiction to be unenforceable for any reason whatsoever, the court
may appropriately limit or modify such provision, and such provision shall be
given effect to the maximum extent permitted by applicable law. Each provision
of this Section 16 shall survive the Closing.
Section 17. Termination.
17.1 Right to Terminate. Notwithstanding anything to the contrary
contained herein, this Agreement and the transactions contemplated hereby may be
terminated at any time prior to the Closing: (a) by Seller or Shareholder if the
conditions set forth in Section 10 are not satisfied, or waived in writing by
Seller and Shareholder; and (b) by Buyer if the conditions precedent set forth
in Section 9 are not satisfied, or waived in writing by Buyer.
17.2 Remedies. In the event a condition precedent hereunder is not met
due to one party's breach of any representation, covenant or warranty hereunder
(the "Breaching Party"), the other party (the "Injured Party") may: (i)
terminate this Agreement and may seek damages from the Breaching Party; (ii)
proceed to Closing and seek damages from the Breaching Party; or (iii) proceed
to Closing and waive the breach.
17.3 Right to Damages. If this Agreement is terminated, no party hereto
shall have any liability or obligation to the other; provided, however, that
each party shall remain liable for (a) any breach of any of the party's
representations, warranties and covenants contained in this Agreement, and (b)
any willful failure by the party to perform any of its or their
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obligations or agreements contained in this Agreement. If Seller and/or
Shareholder fails to perform pursuant to this Agreement then they shall be
jointly and severally liable for all of Buyer's out-of-pocket costs and expenses
which were incurred in connection with the negotiations, due diligence reviews,
and preparation of this Agreement, and all of the other documents related to
this transaction, and those costs and expenses which are incurred by Buyer in
pursuing such rights and remedies (including reasonable attorneys' fees).
Section 18. Brokers and Finders.
Each of the parties hereto represents and warrants to the others that it
has not employed or retained any broker or finder in connection with the
transactions contemplated by this Agreement nor has it had any dealings with any
person which, in either case, may entitle that person to a fee or commission
from any other party hereto. Each of the parties indemnifies and holds the
others harmless from and against any claim, demand or damages whatsoever by
virtue of any arrangement or commitment made by it with or to any person that
may entitle such person to any fee or commission from the other parties to this
Agreement.
Section 19. Shareholder's Guarantees.
Shareholder hereby guarantees to Buyer and becomes a surety for the
performance of and compliance with all of Seller's agreements, covenants and
obligations hereunder and the truth and correctness of all of Seller's
representations and warranties contained herein and under all of the instruments
of transfer and conveyance and other closing documents delivered by or on behalf
of Seller in connection with the Closing. Any claim or right of Buyer for the
failure to perform or comply with any of Seller's agreements, covenants or
obligations hereunder or for the untruth or incorrectness of any of its
representations or warranties contained herein may be directly enforced against
Shareholder and upon or pursuing any without any notice of any kind and without
first making any demand upon or pursuing any remedy against Seller. Without
notice to or consent of Shareholder, Buyer and Seller may modify or change the
terms of this Agreement or any obligation of Seller, and may grant any
extension, renewal or indulgence, release, compromise or settlement with respect
thereto and none of the foregoing shall in any way affect Shareholder's
liability hereunder. Shareholder shall execute or cause to be executed
management's representation letter of Buyer's independent accountants with
respect to Seller's financial statements so as to enable such accountants to
certify such financial statements with no material changes.
Section 20. Designation of Nominee.
Buyer shall have the right to designate another person or entity to be
the transferee of all of the assets and properties to be transferred by Seller
hereunder to a single assignee; provided, however, until the Closing Date such
assignment or transfer shall not release the Buyer from its obligations
hereunder (but as of and after the Closing Date Buyer will be so
29
<PAGE>
released to the extent another person or entity assumes all such obligations, as
to any obligation accruing or arising thereafter). Without limiting the
generality of the foregoing, the parties acknowledge that Buyer desires and
intends to convey and assign all of the Conveyed Assets from MSII to Buyer in a
liquidation of MSII as soon as all necessary consents and approvals are obtained
and agree (i) to cooperate in good faith to obtain all such consents and
approvals and to complete such conveyance to Buyer, and (ii) that upon such
conveyance Buyer shall succeed to all rights and interests of MSII with respect
to the Conveyed Assets, without additional cost or payment, and shall be subject
to all outstanding liabilities of MSII with respect thereto (including without
limitation any and all such liabilities of MSII hereunder).
Section 21. General Provisions.
21.1 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against receipt
or upon actual receipt of registered or certified mail, postage prepaid, return
receipt requested, addressed as set forth below:
(a) If to Seller or Shareholder:
Main Street California, Inc.
5050 N. 40th Street, Suite 200
Phoenix, Arizona 85018
Attention: Joe W. Panter
with a copy to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
Suite 1100
One East Camelback
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
(b) If to Buyer:
CNL California Restaurants, Ltd.
400 E. South Street, Suite 400
Orlando, Florida 32801
Attention: Brad Watt
with a copy to:
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<PAGE>
Lowndes, Drosdick, Doster, Kantor & Reed,
Professional Association
P.O. Box 2809
Orlando, Florida 32802-2809
Attn. Scott C. Thompson, Esq.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
21.2 Binding Nature of Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns, except that no party
may assign or transfer its or his rights or obligations under this Agreement
without the prior written consent of the other parties hereto. Notwithstanding
the foregoing, as provided above Seller and Buyer have agreed that Seller shall
have the right to convey all of the Conveyed Assets relating to the Seller's
Existing SF Restaurants to MSII as its wholly-owned subsidiary, in which event
such assets shall be conveyed subject in all respects to the terms of this
Agreement and effective as of the Closing Date all of the stock of MSII shall be
conveyed to Buyer, unencumbered in all respects. Upon receipt of all necessary
approvals, the Conveyed Assets may be conveyed to Buyer by MSII. In the event of
such assignment Seller and Shareholder, as well as MSII, shall continue to be
fully liable hereunder, and shall nonetheless be fully liable for all
obligations under the instruments of transfer and other documents delivered by
or on behalf of Seller and MSII hereunder in order to complete the conveyance of
the Conveyed Assets to Buyer.
21.3 Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.
21.4 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Florida.
21.5 Schedules and Exhibits. All Schedules and Exhibits referred to
herein or attached hereto are hereby incorporated by reference into, and made a
part of, this Agreement.
21.6 Indulgences, Not Waivers. Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate
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as a waiver thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise of the same or
of any other right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.
21.7 Costs and Expenses. Except to the extend of closing costs falling
within the Buyer's Maximum Closing Cost Amount, each party hereto shall bear its
or his own costs and expenses (including the fees and disbursements of counsel
and accountants) incurred in connection with the negotiation and preparation of
and the Closing under this Agreement, and all matters incident thereto.
21.8 Titles Not to Affect Interpretation. The titles of Sections
contained in this Agreement are for convenience only, and they neither form a
part of this Agreement nor are they to be used in the construction or
interpretation hereof.
21.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories. Any photographic, facsimile or photocopy of this Agreement, with
all signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as of it were an executed counterpart of this
Agreement.
21.10 Provisions Separable. The provisions of this Agreement are
independent and separable from each other, and no provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
other or others of them may be invalid or unenforceable in whole or in part.
21.11 Gender. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.
21.12 Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or holiday, then the final day shall be deemed to be the next
day which is not a Saturday, Sunday or holiday.
21.13 Subsidiaries. To the extent that Seller has subsidiaries at the
date of this Agreement and on the Closing Date, all representations, warranties,
covenants and agreements by Seller and Shareholder shall be deemed made to the
same extent and effect with respect to subsidiaries of Seller.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
<TABLE>
<CAPTION>
<S> <C>
SELLER: BUYER:
MAIN STREET CALIFORNIA, INC., an CNL CALIFORNIA RESTAURANTS,
Arizona corporation LTD., a Florida limited partnership
By: CNL Restaurants XVII, Inc., a
By: ________________________________ Florida corporation, General
Partner
Name: _____________________________
By: __________________________
As Its: _____________________ President
Name: _______________________
(CORPORATE SEAL) As Its: _______________ President
SHAREHOLDER:
MAIN STREET AND MAIN INCORPORATED, a Delaware
corporation
By: ________________________________
Name: _____________________________
As Its: _____________________ President
(CORPORATE SEAL)
</TABLE>
33
<PAGE>
Schedule 1.1(a)
Leased Real Estate
T.G.I. Friday's Restaurants
Addresses and Landlords
1. 10343 N. Wolfe Road
San Jose, Santa Clara County, California 95014
Landlord: Vallco L.L.C., a Delaware limited liability company
2. 685 Beach Street at Hyde
San Francisco, San Francisco County, California
Landlord: Oak Grove Investors, a California limited partnership
3. 2410 San Ramon Valley Boulevard, Suite 130
San Ramon, Contra Costa County, California 94583
Landlord: Kilpatrick Partners, LLC, a California limited
liability company
4. 3101 S. El Camino Real
San Mateo, San Mateo County, California 94403
Landlord: Bohannon Development Company, a California
corporation
5. 1250 Grundy Lane
San Mateo, San Bruno County, California 94066
Landlord: Silver Creek Valley, a California limited partnership
and North First Street
Properties, a California general partnership
6. 150 Fourth Street
San Francisco (Mosconi), San Francisco County, California 94103
Landlord: WCB II More Limited Partnership, a Delaware limited
partnership
STOCK PURCHASE AGREEMENT
Among
CNL CALIFORNIA RESTAURANTS, LTD.,
MAIN ST. CALIFORNIA, INC.
and
MAIN STREET AND MAIN INCORPORATED
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the ___ day of January, 1997 by and among (i) CNL CALIFORNIA
RESTAURANTS, LTD., a Florida limited partnership ("Buyer"), (ii) MAIN ST.
CALIFORNIA II, INC., an Arizona corporation (the "Company"), (iii) MAIN ST.
CALIFORNIA, INC., an Arizona corporation, ("Seller"); and (iv) MAIN STREET AND
MAIN INCORPORATED, a Delaware corporation ("Shareholder").
Recitals
--------
A. The Seller owns of record and beneficially all of the outstanding
capital stock of the Company.
B. Buyer desires to purchase all of the Company's capital stock, and
Seller desire to sell such stock, upon the terms and subject to the conditions
set forth herein.
Agreement
---------
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I - SALE AND PURCHASE OF SHARESARTICLE I - SALE AND PURCHASE OF SHARES
1.01 Sale and Purchase of Shares.
(a) On the terms and subject to the conditions of this
Agreement, at the Closing referred to in Section 2.01 hereof, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire
and accept delivery of, all of the issued and outstanding capital stock of the
Company, free and clear of any and all liens, mortgages, adverse claims,
charges, security interests, encumbrances or other restrictions or limitations
whatsoever other than any encumbrance arising under or in connection with the
loan from CNL Financial I, Inc. ("CNL Financial") obtained by Buyer and the
Company under the loan commitment from CNL Financial Services, Inc. for an
acquisition loan (herein the "Acquisition Loan") not to exceed Eight Million Six
Hundred Thousand and No/100 Dollars ($8,600,000.00) under the Commitment Letter
therefor entered into by CNL Growth Fund Advisors, Inc. dated December 13,
1996..
(b) To effect the transfers contemplated by Section 1.01(a),
at the Closing, Seller shall deliver or cause to be delivered to Buyer, against
payment therefor in accordance with Section 1.02 hereof, stock certificates
representing all the shares of the Company's capital stock being sold by Seller
hereunder, accompanied by stock powers duly executed in blank and otherwise in
form acceptable to Buyer for transfer on the books of the Company.
1.02 Payment for Shares. As payment in full for the Shares being sold
by Seller to Buyer hereunder, Buyer shall pay, in the manner set forth in this
Section 1.02, an aggregate of Ten Million Five Hundred Seventy-Five Thousand
Dollars ($10,575,000), subject to adjustment as provided herein (such aggregate
amount, as adjusted is herein referred to as the "Purchase Price"). The Purchase
Price shall be paid by Buyer at the Closing in immediately available funds.
1.03 Purchase Price Adjustment. The Purchase Price shall be adjusted by
the net amount (the "Purchase Price Adjustment") of all adjustments, credits,
deductions and prorations provided for as set forth in that certain Asset
Conveyance Agreement entered into of even date herewith by and between
<PAGE>
Buyer and Seller and Shareholder with respect to the "Seller's SF Restaurants"
to be contributed and/or conveyed to the Company thereunder (the "Asset
Agreement").
ARTICLE II - CLOSING
Closing. Subject to the conditions stated in Article VI of this
Agreement, the closing of the transactions contemplated hereby (the "Closing")
shall be held on January __, 1997, or, if the conditions set forth in Section
6.02 have not been satisfied or waived on such date, no later than the date on
which all such conditions shall have been satisfied or waived, through the
Escrow Holder in accordance with the Escrow Closing procedures of the Asset
Agreement. The date upon which the Closing occurs is hereinafter referred to as
the "Closing Date." The Closing shall be deemed completed as of the opening of
business on the Closing Date.
2.02 Deliveries by Seller. At or prior to the Closing, the Seller shall
deliver to Buyer:
(i) certificates representing all of the outstanding shares of
the Company's capital stock, duly endorsed in blank for transfer, or with
appropriate stock powers in blank attached;
(ii) the resignations of all the officers and directors of the
Company;
(iii) the stock book, stock ledger, minute books and corporate
seal of the Company;
(iv) a certificate executed by Seller to the effect that the
conditions set forth in Section 6.02(a) has been satisfied; and
(v) possession of all originals and copies of agreements,
instruments, documents, deeds, books, records, files, tax returns and other data
and information within the possession of the Company or any Affiliate of any
Company pertaining to the Company (collectively, the "Records"); provided,
however, that the Seller may retain (1) copies of any tax returns and copies of
Records relating thereto; (2) copies of any Records that the Seller is
reasonably likely to need for complying with requirements of law; and (3) copies
of any Records that in the reasonable opinion of the Seller will be required in
connection with the performance of its obligations under Article VIII hereof.
2.03 Deliveries by Buyer. At or prior to the Closing, Buyer shall
deliver to the Seller (i) the Purchase Price, required to be paid by Buyer at
Closing, all as provided in Section 1.02 hereof, (ii) the Management Agreements
to be entered into by the Company, as Owner, and Seller, as Manager, with
respect to the Seller's Existing SF Restaurants to be conveyed by Seller to the
Company pursuant to the Asset Agreement and (iii) the Master Incentive Agreement
to be entered into between the Seller and Buyer with respect to the Seller's SF
Restaurants.
2.04 Termination in Absence of Closing.
(a) Subject to the provisions of Section 2.04(b), if by the
close of business on January 31, 1997, the Closing has not occurred, then any
party hereto may thereafter terminate this Agreement by written notice to such
effect, to the other parties hereto, without liability of or to any party to
this Agreement or any shareholder, director, officer, employee or representative
of such party unless the reason for Closing having not occurred is (i) such
party's willful breach of the provisions of this Agreement, or (ii) if all of
the conditions to such party's obligations set forth in Article VI have been
satisfied or waived in writing by the date scheduled for the Closing pursuant to
Section 2.01, the failure of such party to perform its obligations under this
Article II on such date; provided, however, that the provisions of Sections
9.02, 9.03, 9.04, 9.07 and 9.08 shall survive any such termination; and provided
2
<PAGE>
further, however, that any termination pursuant to this Section 2.04 shall not
relieve any party hereto who was responsible for Closing having not occurred as
described in clauses (i) or (ii) above of any liability for (x) such party's
willful breach of the provisions of this Agreement, or (y) if all of the
conditions to such party's obligations set forth in Article VI have been
satisfied or waived in writing by the date scheduled for the Closing pursuant to
Section 2.01, the failure of such party to perform its obligations under this
Article II on such date.
(b) This Agreement and the transactions contemplated herein
may be terminated and abandoned at any time on or prior to the Closing Date by
the Buyer if:
(i) any representations or warranties made herein for
the benefit of Buyer, or any certificate, schedule or document furnished to
Buyer pursuant to this Agreement is untrue in any material respect; or
(ii) the Company or Seller shall have defaulted in
any material respect in the performance of any material obligation under this
Agreement.
(c) This Agreement and the transactions contemplated herein
may be terminated and abandoned at any time on or prior to the Closing Date by
the Seller if:
(i) any representations or warranties made herein for
the benefit of Seller, or any certificate, schedule or document furnished to
Seller pursuant to this Agreement is untrue in any material respect; or
(ii) the Buyer shall have defaulted in any material
respect in the performance of any material obligation under this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE COMPANYOF THE SELLER AND THE COMPANY
The Seller and the Company hereby jointly and severally represent and
warrant to Buyer that, except as specifically disclosed under and in accordance
with the terms of the Asset Agreement or elsewhere herein (a "Disclosure"):
3.01 Corporate Existence and Qualification; Corporate Documents.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona; the
Company has the corporate power to own, manage, lease, operate and hold its
Properties and to carry on its business as and where such Properties are
presently located and such business is presently conducted; and neither the
character of the Company's Properties nor the nature of the Company's business
requires the Company to be duly qualified to do business as a foreign
corporation in any jurisdiction outside those identified in Schedule 3.01(a)
attached hereto, and the Company is qualified as a foreign corporation and in
good standing in each listed jurisdiction.
(b) The stock and minute books of the Company that have been
made available to Buyer for review contain a complete and accurate record of the
sole stockholder of the Company and any actions of the stockholders and
directors (and any committees thereof) of the Company. The Company has
previously furnished to Buyer true and complete copies of the Company's charter
and bylaws as currently in effect, which charter documents and bylaws have been
certified by the appropriate
3
<PAGE>
governmental official and the secretary of the Company, respectively.
(c) The Company does not have any subsidiaries, participate in
any partnership or joint venture, or own any outstanding capital stock of any
other corporation.
3.02 Authority, Approval and Enforceability. This Agreement has been
duly executed and delivered by the Company and the Seller, and the Seller and
the Company have all requisite power and legal capacity to execute and deliver
this Agreement and all Collateral Agreements executed and delivered or to be
executed and delivered in connection with the transactions provided for hereby,
to consummate the transactions contemplated hereby and by the Collateral
Agreements, and to perform its or his respective obligations hereunder and under
the Collateral Agreements. This Agreement and each Collateral Agreement to which
Seller and/or the Company is a party constitutes, or upon execution and delivery
will constitute, the legal, valid and binding obligation of such party which is
enforceable in accordance with its terms.
3.03 Capitalization and Ownership. The Company's authorized capital
stock consists solely of ________________shares of common stock, par value
$_____ per share (the "Common Stock"), [______] shares of which are issued and
outstanding, all of which issued and outstanding shares of capital stock are
owned beneficially and of record by the Seller free and clear of any and all
liens, mortgages, adverse claims, charges, security interests, encumbrances or
other restrictions or limitations whatsoever other than any arising under or in
connection with the Acquisition Loan. All of the outstanding shares of the
Company are duly authorized, validly issued, fully paid and nonassessable and
were not issued in violation of (i) any preemptive or other rights of any Person
to acquire securities of the Company, or (ii) any applicable federal or state
securities laws, and the rules and regulations promulgated thereunder
(collectively "Securities Laws"). There are no outstanding subscriptions,
options, convertible securities, rights (preemptive or other), warrants, calls
or agreements relating to any shares of capital stock of the Company.
3.04 No Seller Defaults. The execution and delivery of this Agreement
and the Collateral Agreements by Seller and the performance by Seller of its
obligations hereunder and thereunder will not violate any provision of law or
any judgment, award or decree or any indenture, agreement or other instrument to
which Seller is a party, or by which Seller and the Company or any properties or
assets of Seller or the Company is bound or affected, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, security interest or encumbrance
of any nature whatsoever upon any of the properties or assets of Seller or the
Company.
3.05 No Company Default or Consents. Neither the execution and delivery
of this Agreement nor the carrying out of any of the transactions contemplated
hereby will:
(i) violate or conflict with any of the terms, conditions or
provisions of the charter or bylaws of the Company;
(ii) violate any Legal Requirements applicable to the
Company;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Contract or Permit
applicable to the Company;
(iv) result in the creation of any lien, charge or other
encumbrance on the shares
4
<PAGE>
of capital stock or any Properties of the Company; or
(v) require the Seller or the Company to obtain or make any
waiver, consent, action, approval or authorization of, or registration,
declaration, notice or filing with, any private non-governmental third party or
any Governmental Authority other than waivers and consents which have been
obtained in writing by Seller and copies provided to Buyer.
3.06 No Proceedings. No suit, action or other proceeding is pending or,
to the Knowledge of the Company, threatened before any Governmental Authority
seeking to restrain the Company or Seller or prohibit their entry into this
Agreement or prohibit the Closing, or seeking damages against the Company or its
Properties as a result of the consummation of this Agreement.
3.07 Employee Matters. The Company has never had any employees, nor has
it ever sponsored, maintained or contributed to:
(i) any "employee benefit plan", as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA") (including, but not limited to, employee benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA) ("Plan"); or
(ii) any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay policy or agreement, deferred
compensation agreement or arrangement, consulting agreement, employment contract
and each other employee benefit plan, agreement, arrangement, program, practice
or understanding which is not described in Section 3.07(a)(i) ("Benefit Program
or Agreement").
3.08 Financial Statements; Liabilities; Accounts Receivable.
(a) Seller shall prepare and deliver to Buyer a true, correct
and complete Balance Sheet for the Company, effective as of the Closing Date
prepared in accordance with generally accepted accounting principles ("GAAP")
and taking into consideration the ss.338 Election required under Section 8.03
below.
(b) Except as otherwise set forth in Schedule 3.08(b) attached
hereto, the Company does not have any liabilities or obligations (whether
accrued, absolute, contingent, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with GAAP), other than continuing liabilities of the Company
contemplated and permitted under the Asset Agreement (the "Permitted
Liabilities").
3.09 Absence of Certain Changes.
(a) Except as otherwise set forth in Schedule 3.09(a) attached
hereto, and except as contemplated under the Asset Agreement, since the
formation of the Company, there has not been:
(i) any change in circumstances that had or might
have an adverse effect on the business, operations, prospects, Properties,
securities, financial condition or working capital of the Company; or
(ii) any damage, destruction or loss (whether or
not covered by insurance) that had or might have an adverse effect on the
business, operations, prospects, Properties, securities or financial condition
of the Company.
5
<PAGE>
(b) Except as otherwise set forth in Schedule 3.09(b) attached
hereto, and except as contemplated under the Asset Agreement, since the
formation of the Company, the Company has not done any of the following:
(i) declared, set aside or paid any dividends, or
made any distributions or other payments in respect of its equity securities, or
repurchased, redeemed or otherwise acquired any such securities;
(ii) merged into or with or consolidated with, any
other corporation or acquired the business or assets of any person;
(iii) purchased any securities of any person;
(iv) amended its charter or bylaws;
(v) issued any capital stock or other securities,
or granted, or entered into any agreement to grant, any options, convertibility
rights, other rights, warrants, calls or agreements relating to its capital
stock other than the outstanding capital stock held by the Seller;
(vi) created, incurred, assumed, guaranteed or
otherwise become liable or obligated with respect to any indebtedness, or made
any loan or advance to, or any investment in, any person, except in each case in
the ordinary course of business;
(vii) made any change in any existing election, or
made any new election, with respect to any tax law in any jurisdiction which
election could have an effect on the tax treatment of the Company or the
Company's business operations;
(viii) entered into, amended or terminated any
material agreement;
(ix) sold, transferred, leased, mortgaged,
encumbered or otherwise disposed of, or agreed to sell, transfer, lease,
mortgage, encumber or otherwise dispose of, any Properties except (i) in the
ordinary course of business, or (ii) pursuant to any agreement specified in
Schedule 3.13;
(x) settled any claim or litigation, or filed any
motions, orders, briefs or settlement agreements in any proceeding before any
Governmental Authority or any arbitrator;
(xi) maintained its books of account other than in
the usual, regular and ordinary manner in accordance with generally accepted
accounting principles and on a basis consistent with prior periods or made any
change in any of its accounting methods or practices that would be required to
be disclosed under generally accepted accounting principles;
(xii) engaged in any one or more activities or
transactions outside the ordinary course of business; or
(xiii) committed to do any of the foregoing.
3.10 Compliance with Laws. To the knowledge of the Seller and of the
Company, the Company is and has been in compliance in all respects with any and
all Legal Requirements applicable to the Company, other than failures to so
comply that would not have an adverse effect on the business, operations,
prospects, Properties, securities or financial condition of the Company.
6
<PAGE>
3.11 Litigation; Default. There are no claims, actions, suits,
investigations or proceedings against the Company pending or, to the Knowledge
of the Company, threatened in any court or before or by any Governmental
Authority, or before any arbitrator, that might have an adverse effect (whether
covered by insurance or not) on the business, operations, prospects, Properties,
securities or financial condition of the Company and, to the Knowledge of the
Company, there is no basis for any such claim, action, suit, investigation or
proceeding. Except as set forth in the Disclosures, the Company is not in
default under, and no condition exists (whether covered by insurance or not)
that with or without notice or lapse of time or both would (i) constitute a
default by Seller or the Company under, or breach or violation of, any Legal
Requirement, Permit or Contract applicable to the Company, or (ii) accelerate or
permit the acceleration of the performance required under, or give any other
party the right to terminate, any Contract applicable to the Company, other than
defaults, breaches, violations or accelerations that would not have an adverse
effect on the business, operations, prospects, Properties, securities or
financial condition of the Company.
3.12 Ownership of Company Properties. Subject only to Seller's existing
lender, Sanwa Bank, having consented to the proposed conveyance and stock
transfer transaction and agreed to release its lien on the as such Properties in
connection with the Closing hereunder and under the Asset Agreement, the Company
has and will have as of the Closing Date legal and beneficial ownership of its
Properties, free and clear of any and all liens, mortgages, pledges, adverse
claims, encumbrances or other restrictions or limitations whatsoever other than
any such lien or encumbrances in favor of CNL Financial which may arise under or
in connection with the Acquisition Loan.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF BUYERNTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller that:
4.01 Corporate Existence and Qualification. Buyer is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Florida; has the legal power to own, manage, lease and hold its
properties and to carry on its business as and where such properties are
presently located and such business is presently conducted; and is duly
qualified to do business and is in good standing as a foreign corporation in
each of the jurisdictions where the character of its properties or the nature of
its business requires it to be so qualified.
4.02 Authority, Approval and Enforceability. This Agreement has been
duly executed and delivered by Buyer and Buyer has all requisite legal power and
legal capacity to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered by Buyer in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its obligations hereunder and under the Collateral Agreements. This
Agreement and each Collateral Agreement to which Buyer is a party constitutes,
or upon execution and delivery will constitute, the legal, valid and binding
obligation of Buyer which is enforceable in accordance with its terms.
4.03 No Default or Consents. Neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby by Buyer
will:
(i) violate or conflict with any of the terms, conditions or
provisions of Buyer's limited partnership agreement or certificate;
(ii) violate any Legal Requirements applicable to Buyer;
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(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any contract or Permit
applicable to Buyer;
(iv) result in the creation of any lien, charge or other
encumbrance on the shares of capital stock or any property of Buyer; or
(v) require Buyer to obtain or make any waiver, consent,
action, approval or authorization of, or registration, declaration, notice or
filing with, any private non-governmental third party or any Governmental
Authority.
4.04 No Proceedings. No suit, action or other proceeding is pending or,
to Buyer's knowledge, threatened before any Governmental Authority seeking to
restrain Buyer or prohibit its entry into this Agreement or prohibit the
Closing, or seeking Damages against Buyer or its properties as a result of the
consummation of this Agreement.
4.05 No Securities Transactions. Buyer has not entered into any type of
transaction relating to the stock of the Company to be acquired hereunder which
could result in a violation of any of the Securities Laws.
ARTICLE V - OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
5.01 Buyer's Access to Information and Properties. The Company shall
permit Buyer and its authorized employees, agents, accountants, legal counsel
and other representatives to have access to the books, records, employees,
counsel, accountants, engineers and other representatives of the Company at all
times reasonably requested by Buyer for the purpose of conducting an
investigation of the Company's financial condition, corporate status,
operations, prospects, business and Properties. The Company shall make available
to Buyer for examination and reproduction all documents and data of every kind
and character relating to the Company in possession or control of, or subject to
reasonable access by, the Company and/or the Seller, including, without
limitation, all files, records, data and information relating to the Properties
(whether stored in paper, magnetic or other storage media) and all agreements,
instruments, contracts, assignments, certificates, orders, and amendments
thereto. Also, the Company shall allow Buyer access to, and the right to
inspect, the Properties, except to the extent that such Properties are operated
by a third-party operator, in which case the Company shall use its best efforts
to cause the operator of such Properties to allow Buyer access to, and the right
to inspect, such Properties.
5.02 Company's Conduct of Business and Operations. The Company and the
Seller shall keep Buyer advised as to any material operations and proposed
material operations relating to the Company.
5.03 General Restrictions. Except as otherwise expressly permitted in
this Agreement and except as contemplated by the Asset Agreement, without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld, the Company shall not:
(i) declare, set aside or pay any dividends, or make any
distributions or other payments in respect of its equity securities, or
repurchase, redeem or otherwise acquire any such securities;
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(ii) merge into or with or consolidate with, any other
corporation or acquire the business or assets of any person;
(iii) purchase any securities of any person;
(iv) amend its charter or bylaws;
(v) issue any capital stock or other securities, or grant, or
enter into any agreement to grant, any options, convertibility rights, other
rights, warrants, calls or agreements relating to its securities;
(vi) create, incur, assume, guarantee or otherwise become
liable or obligated with respect to any indebtedness, or make any loan or
advance to, or any investment in, any person, except in each case in the
ordinary course of business;
(vii) make any change in any existing election, or make any
new election, with respect to any tax law in any jurisdiction which election
could have an effect on the tax treatment of the Company or the Company's
business operations;
(viii) enter into, amend or terminate any material agreement;
(ix) sell, transfer, lease, mortgage, encumber or otherwise
dispose of, or agree to sell, transfer, lease, mortgage, encumber or otherwise
dispose of, any Properties except (i) in the ordinary course of business, or
(ii) pursuant to any agreement specified in Schedule 3.13;
(x) maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods or make any change in
any of its accounting methods or practices;
(xi) adopt any Plan or Benefit Program or Agreement;
(xii) engage in any one or more activities or transactions
outside the ordinary course of business; or
(xiii) enter into any transaction or make any commitment
which could result in any of the representations, warranties or covenants of the
Company and/or Seller contained in this Agreement not being true and correct
after the occurrence of such transaction or event.
5.04 Notice Regarding Changes. The Company and Seller shall promptly
inform Buyer in writing of any change in facts and circumstances that could
render any of the representations and warranties made herein by the Company
and/or Seller inaccurate or misleading if such representations and warranties
had been made upon the occurrence of the fact or circumstance in question. The
Buyer shall promptly inform the Seller in writing of any change in facts and
circumstances that could render any of the representations and warranties made
herein by it inaccurate or misleading if such representations and warranties had
been made upon the occurrence of the fact or circumstance in question.
5.05 Ensure Conditions Met. The Seller, the Company and Buyer shall use
their best efforts to cause all conditions to Closing hereunder to be satisfied
on or before the Closing Date and shall specifically use their mutual best
efforts to cause to be assigned to Buyer any and all necessary Permits for the
conduct of the Company's business and shall cooperate with Buyer with regard to
obtaining all such Permits.
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Casualty Loss. If, between the date of this Agreement and the Closing,
any of the Properties of the Company shall be substantially destroyed or damaged
in whole or in part by fire, earthquake, flood, other casualty or any other
cause, then this Agreement shall be terminable, at Buyer's election.
ARTICLE VI - CONDITIONS TO SELLER'S AND BUYER'S OBLIGATIONS
6.01 Conditions to Obligations of the Seller. The obligations of Seller
to carry out the transactions contemplated by this Agreement are subject, at the
option of Seller, to the satisfaction, or waiver of the following conditions:
(a) All representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing as if such representations and warranties were made at and as of the
Closing, except for changes contemplated by the terms of this Agreement, and
Buyer shall have performed and satisfied in all material respects all covenants
and agreements required by this Agreement to be performed and satisfied by Buyer
at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of the Company
or the Seller shall be pending or threatened before any Governmental Authority
seeking to restrain the Company or prohibit the Closing or seeking Damages
against the Company as a result of the consummation of this Agreement.
(c) All necessary consents of third parties shall have been
received.
(d) The Company and Seller shall enter into the Management
Agreement and Master Incentive Agreement as contemplated under the Asset
Agreement immediately upon the transfer of shares of the Company hereunder as of
the Closing Date.
6.02 Conditions to Obligations of Buyer. The obligations of Buyer to
carry out the transactions contemplated by this Agreement are subject, at the
option of Buyer, to the satisfaction, or waiver by Buyer, of the following
conditions:
(a) All representations and warranties of the Company and
Seller contained in this Agreement shall be true and correct in all material
respects at and as of the Closing as if such representations and warranties were
made at and as of the Closing, except for changes contemplated by the terms of
this Agreement, and each of the Company and the Seller shall have performed and
satisfied in all material respects all agreements and covenants required by this
Agreement to be performed and satisfied by them at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of Buyer) shall
be pending or threatened before any court or governmental agency seeking to
restrain Buyer or prohibit the Closing or seeking Damages against Buyer or the
Company or its Properties as a result of the consummation of this Agreement.
(c) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given, and there shall not be any preferential purchase rights or consent
requirements with respect to the transactions contemplated by this Agreement
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that have not expired or been waived.
(d) Since the formation of the Company and up to and including
the Closing, except as contemplated by the Asset Agreement and hereby there
shall not have been:
(i) any change in the business, operations,
prospects or financial condition of the Company that had or might have a
material adverse effect on its business, operations, prospects, Properties,
securities or financial condition;
(ii) any damage, destruction or loss to the Company
(whether or not covered by insurance) that had or might have an adverse effect
on its business, operations, prospects, Properties, securities or financial
condition.
(e) The Buyer shall have received the opinion of O'Connor,
Cavanagh, Anderson, Killingsworth & Beshears, counsel to the Company, dated as
of the Closing Date, addressed to the CNL Financial and Buyer and in a form
approved in writing by Buyer.
(f) The Company and Seller shall have furnished Buyer with a
certified copy of all necessary corporate actions required to authorize and
effectuate the execution, delivery and performance of this Agreement.
(g) The Purchased Assets with respect to the Seller's Existing
Restaurants, both as defined in the Asset Agreement, shall have been conveyed to
the Company in accordance with the terms of the Asset Agreement.
(h) All proceedings to be taken by the Company and Seller in
connection with the transactions contemplated hereby and all documents incident
thereto shall be reasonably satisfactory in form and substance to Buyer and its
counsel, and Buyer and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as it or they may
reasonably request.
(i) Buyer shall have received written evidence, in form and
substance satisfactory to Buyer, of the consent to the transactions contemplated
by this Agreement of all governmental, quasi-governmental and private third
parties (including, without limitation, persons or other entities leasing real
or personal property to the Company) where the absence of any such consent would
result in a violation of law or a breach or default under any material agreement
to which the Company is a party.
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ARTICLE VII - POST-CLOSING OBLIGATIONS
7.01 Further Assurances. Following the Closing, Seller, the Company and
the Buyer shall execute and deliver such documents, and take such other action,
as shall be reasonably requested by any other party hereto to carry out the
transactions contemplated by this Agreement.
7.02 Post-Closing Indemnity by the Seller. For a period of one year
following the Closing, Seller shall indemnify and hold harmless Buyer and the
Company, and their respective directors, officers and constituent partners, from
and against any and all Damages arising out of, resulting from or in any way
related to (i) a breach of, or the failure to perform or satisfy, any of the
representations, warranties, covenants and agreements made by Seller in this
Agreement; or (ii) any claim that the Company's securities were issued or
acquired prior to the Closing in violation of any applicable Federal or state
securities laws.
ARTICLE VIII - TAX MATTERS
8.01 Representations and Obligations Regarding Taxes. The Company and
Seller jointly and severally represent and warrant to and agree with the Buyer
as follows:
(a) Except as set forth in Schedule 8.01(a), (i) all returns
and reports, including without limitation, information and withholding returns
and reports ("Tax Returns") of or relating to any foreign, federal, state or
local tax assessment or other governmental charge (all herein referred to
collectively as "Taxes" or singularly as a "Tax") that are required to be filed
on or before the Closing Date by or with respect to the income, business,
operations or property of the Company have been duly and timely filed, (ii) all
items of income, gain, loss, deduction and credit or other items required to be
included in such Tax Returns have been so included, (iii) all information
provided in such Tax Returns is true, correct and complete, (iv) all Taxes that
have become due with respect to the taxable years covered by such Tax Returns
have been timely paid in full, (v) no penalty, interest or other charge is or
will become due with respect to the late filing of any such Tax Return or late
payment of any such Tax, and (vi) all withholding Tax requirements imposed on
the Company for all taxable periods through the close of business on the Closing
Date have been satisfied in full in all respects.
(b) There is no claim against the Company with respect to any
Taxes and no assessment, deficiency or adjustment has been asserted or proposed
with respect to any Tax Return of or with respect to the Company, other than
those disclosed (and to which are attached true and complete copies of all audit
or similar reports) in Schedule 8.01(b).
(c) Except as set forth in Schedule 8.01(c), there is not in
force any extension of time with respect to the date on which any Tax Return of
or with respect to the Company is due to be or have been filed, or any waivers
or agreements by or with respect to the Company or either Seller of or for any
extension of time for the assessment or payment of any Tax.
(d) The total amounts set up as liabilities for Taxes in the
Financial Statements are sufficient to cover the payment of all Taxes, including
any penalties or interest thereon and whether or not assessed or disputed, which
are, or are hereafter found to be, or to have been, due with respect to the
conduct of the business of the Company for the taxable periods covered thereby.
(e) The Company and Seller shall grant to Buyer or its
designees access at all reasonable times to all of the their books and records
(including tax workpapers and returns and correspondence with tax authorities)
insofar as they relate to the operations of the Company, including the right to
take extracts therefrom and make copies thereof, to the extent such books and
records relate to taxable periods ending on or prior to or that include the
Closing Date. Buyer shall (i) grant to the
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Seller access at all reasonable times to all of the Company's books and records
(including tax workpapers and returns and correspondence with tax authorities),
including the right to take extracts therefrom and make copies thereof, to the
extent that such books and records relate to taxable periods ending on or prior
to or that include the Closing Date, and (ii) otherwise cooperate with the
Seller in connection with any audit of Taxes that relate to the business of the
Company prior to Closing.
8.02 Indemnification for Taxes.
(a) Seller hereby indemnifies Buyer, the Company and their
respective Affiliates (each herein sometimes referred to as an "Indemnified
Taxpayer") against, and agrees to protect, save and hold harmless each
Indemnified Taxpayer from, any and all claims, damages, deficiencies, losses
(including Taxes, interest and penalties) and all expenses, including attorneys'
and accountants' fees and disbursements (all herein referred to as "Losses")
resulting from:
(i) A claim by any taxing authority for (A) any
Taxes of the Company allocable to any period ending on or prior to the Closing
Date, and (B) any Taxes of the Seller or any corporation that is or was a member
of an affiliated group of corporations of which the Seller was or is a member;
(ii) A claim by any taxing authority for any Taxes
arising from or occasioned by the sale of the Company's capital stock pursuant
to this Agreement; or
(iii) Any misrepresentation or breach of any
representation, warranty or obligation set forth in this Article VIII.
(b) Subject to the resolution of any Tax contest pursuant to
Section 8.02(c), upon notice from Buyer to the Shareholder that an Indemnified
Taxpayer is entitled to an indemnification payment for a Loss pursuant to
Section 8.02(a), the Seller shall thereupon pay to the Indemnified Taxpayer an
amount that, net of any Taxes imposed on the Indemnified Taxpayer with respect
to such payment, will indemnify and hold the Indemnified Taxpayer harmless from
such Loss.
(c) (i) If a claim shall be made by any taxing authority
that, if successful, would result in the indemnification of an Indemnified
Taxpayer, the Indemnified Taxpayer shall promptly notify the Seller in writing
of such fact; provided, however, that any failure to give such notice will not
waive any rights of the Indemnified Taxpayer except to the extent the rights of
the indemnifying party are actually prejudiced.
(ii) The Indemnified Taxpayer shall take such action
in connection with contesting such claim as the Shareholder Representative shall
reasonably request in writing from time to time; provided that (A) within 30
days (or such earlier date that any payment of Taxes is due by the Indemnified
Taxpayer) after the notice described in (i) above has been delivered, the
Shareholder Representative requests that such claim be contested, (B) the Seller
shall have agreed to pay to the Indemnified Taxpayer on demand all costs and
expenses that the Indemnified Taxpayer may incur in connection with contesting
such claim, including, without limitation, reasonable attorneys' and
accountants' fees and disbursements, and (C) if the Indemnified Taxpayer is
requested to pay the Tax claimed and sue for a refund, the Seller shall have
advanced to the Indemnified Taxpayer, on an interest free basis, the amount of
such claim. In the case of any such claim referred to above, the Indemnified
Taxpayer shall not make payment of such claim for at least 30 days (or such
shorter period as may be
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required by applicable law) after the giving of the notice required by (i)
above, shall give to the Shareholder Representative any information reasonably
requested relating to such claim and otherwise shall cooperate with the
Shareholder Representative in good faith in order to contest effectively any
such claim.
(iii) Subject to the provisions of paragraph (ii)
above, the Indemnified Taxpayer shall prosecute such contest to a determination
in a court of initial jurisdiction, and if the Shareholder Representative shall
reasonably request, the Indemnified Taxpayer shall prosecute such contest to a
determination in an appellate court.
(iv) If, after actual receipt by the Indemnified
Taxpayer of an amount advanced by Seller pursuant to paragraph (ii)(C) above,
the extent of the liability of the Indemnified Taxpayer with respect to the
indemnified matter shall be established by the final judgment or decree of a
court or a final or binding settlement with an administrative agency having
jurisdiction thereof, the Indemnified Taxpayer shall promptly pay to Seller of
any refund received by or credited to the Indemnified Taxpayer with respect to
the indemnified matter (together with any interest paid or credited thereon by
the taxing authority and any recovery of legal fees from such taxing authority).
Notwithstanding the foregoing, the Indemnified Taxpayer shall not be required to
make any payment hereunder before such time as the Seller shall have made all
payments or indemnities then due with respect to Indemnified Taxpayer pursuant
to this Article VIII or Article VI.
(d) Anything to the contrary in this Agreement
notwithstanding, the indemnification obligations of the Seller under this
Article VIII shall survive the Closing and shall continue until the expiration
of the applicable statutes of limitations.
8.03 Section 338 Election. In addition, at Buyer's option Seller and
Shareholder will join with the Company and Buyer in making an election under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the
"Code"), and any applicable Regulations promulgated thereunder (and any
corresponding elections under state and local tax law) (collectively a "Section
338 (h)(10) Election") with respect to the purchase and sale of the stock of the
Company under the Stock Purchase Agreement. Seller and Shareholder shall pay any
and all federal, state and local taxes attributable to the making of the Section
338(h)(10) Election and will indemnify the Buyer and the Company against any
claim, loss, cost or damage in connection therewith. Seller and Shareholder
shall also pay, and indemnify Buyer and the Company from and against any claim,
loss, cost or damage in connection with) any state or local tax attributable to
an election under any state or local law similar to the election available under
Section 338(g) of the Code (or which results from the making of an election
Section 338(g) of the Code) with respect to the purchase and sale of the stock
of the Company under the Stock Purchase Agreement.
ARTICLE IX - MISCELLANEOUS
9.01 Shareholder Guarantee. Shareholder hereby guarantees to Buyer and
becomes a surety for the performance of and compliance with all of Seller's
agreements, covenants and obligations hereunder and the truth and correctness of
all of Seller's representations and warranties contained herein and under the
instruments of transfer and conveyance of the shares of the Company pursuant
hereto in connection with the Closing. Any claim or right of Buyer for the
failure to perform or comply with any of Seller's agreements, covenants or
obligations hereunder or for the untruth or incorrectness of any of its
representations or warranties contained herein may be directly enforced against
Shareholder and upon or
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pursuing any without any notice of any kind and without first making any demand
upon or pursuing any remedy against Seller. Without notice to or consent of
Shareholder, Seller and Buyer may modify or change the terms of this Agreement
or any obligation of Seller, and may grant any extension, renewal or indulgence,
release, compromise or settlement with respect thereto and none of the foregoing
shall in any way affect Shareholder's liability hereunder. Shareholder shall
execute or cause to be executed management's representation letter of Buyer's
independent accountants with respect to Seller's financial statements so as to
enable such accountants to certify such financial statements with no material
changes.
. Each of the parties to this Agreement shall bear his or its own legal
fees and costs incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions contemplated
hereby, and Buyer shall be responsible for all other costs consistent with and
subject to the limits set forth in the Asset Agreement. For purposes of the
foregoing and of the Asset Agreement, all costs incurred by the Company and
Buyer in connection with the liquidation of the Company and conveyance of its
assets to Buyer upon receipt of all necessary approvals, and the net incremental
income tax burden on the Company and Buyer resulting from any corporate level
income taxes until thirty (30) days following delivery to Buyer of all consents
and approvals necessary to allow such conveyance. In the event that necessary
approvals to such conveyance are denied, then Buyer and Seller shall cooperate
in good faith to restructure the ownership of the Company or its assets in order
to avoid double corporate taxation while satisfying Buyer's investment
restrictions.
9.03 Governing Law. The provisions of this agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Florida (excluding any conflict of law rule or
principle that would refer to the laws of another jurisdiction). Each party
hereto irrevocably submits to the jurisdiction of the Circuit Court of the State
of Florida, Orange County, in any action or proceeding arising out of or
relating to this Agreement or any of the Collateral Agreements, and each party
hereby irrevocably agrees that all claims in respect of any such action or
proceeding must be brought and/or defended in such court; provided, however,
that matters which are under the exclusive jurisdiction of the Federal courts
shall be brought in the Federal District Court for the Middle District of
Florida. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
9.04 Representations and Warranties. Each of the representations and
warranties of each of the parties to this Agreement shall be deemed to have been
made, and the certificates delivered pursuant to clause (ii) of Section 2.02 and
clause (ii) of Section 2.03 by a party are agreed to and shall be deemed to
constitute the making of such representations and warranties, again at and as of
the Closing Date by and on behalf of the party(ies) on behalf of whom such
certificates are delivered.
9.05 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules attached hereto, constitutes the entire
agreement between and among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver
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of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (regardless of whether similar), nor shall
any such waiver constitute a continuing waiver unless otherwise expressly
provided.
9.06 Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party, provided, however, that nothing herein shall prohibit the assignment of
all of Buyer's rights and obligations hereunder to any single Affiliate prior to
the Closing Date to the extent such assignee assumes all such obligations, or
prohibit the assignment of Buyer's rights (but not obligations) to any lender
providing financing in connection with the transactions contemplated hereby.
Nothing in this Agreement, express or implied, is intended to confer upon any
person or entity other than the parties hereto and their respective permitted
successors and assigns, any rights, benefits or obligations hereunder.
9.07 Remedies. The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights and remedies
a party may have by law, statute, or otherwise.
Schedules. The Schedules referred to herein are attached hereto and
incorporated herein by this reference. Disclosure of a specific item in any one
Schedule shall be deemed restricted only to the Section to which such disclosure
specifically relates except where (i) there is an explicit cross-reference to
another Schedule, and (ii) Buyer could reasonably be expected to ascertain the
scope of the modification to a representation intended by such cross-reference.
9.09 Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 References. Whenever required by the context, and is used in this
Agreement, the singular number shall include the plural and pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identification the person may require. References to
monetary amounts, specific named statutes and generally accepted accounting
principles are intended to be and shall be construed as references to United
States dollars, statutes of the United States of the stated name and United
States generally accepted accounting principles, respectively, unless the
context otherwise requires.
9.11 Survival. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing for a
period of one(1) year and shall be binding upon the party or parties obligated
thereby in accordance with the terms of this Agreement, subject to any
limitations expressly set forth in this Agreement.
9.12 Attorneys' Fees. In the event any suit or other legal proceeding
is brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
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reasonable attorneys' fees (and sales taxes thereon, if any), including
attorneys' fees for any appeal, and costs incurred in bringing such suit or
proceeding.
9.13 Risk of Loss. Prior to the Closing, the risk of loss of damage to,
or destruction of, any and all of the Company's assets, including without
limitation the Properties, shall remain with Seller and the Company, and the
legal doctrine known as the "Doctrine of Equitable Conversion" shall not be
applicable to this Agreement or to any of the transactions contemplated hereby.
ARTICLE X - DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article X or elsewhere in this Agreement.
10.01 Affiliate. The term "Affiliate" shall mean, with respect to any
person, any other person controlling, controlled by or under common control with
such person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person.
10.02 Collateral Agreements. The term "Collateral Agreements" shall
mean any or all other agreements, instruments or documents required or expressly
provided under this Agreement to be executed and delivered in connection with
the transactions contemplated by this Agreement.
10.03 Contracts. The term "Contracts", when described as being those of
or applicable to any person, shall mean any and all contracts, agreements,
franchises, leases, licenses, easements, mortgages, notes, liens, indebtedness
or other instruments or undertakings to which such person is a party or to which
or by which such person or the property of such person is subject or bound,
excluding any Permits.
10.04 Damages. The term "Damages" shall mean any and all damages,
liabilities, obligations, penalties, fines, judgments, claims, deficiencies,
losses, costs, expenses and assessments (including without limitation income and
other taxes, interest, penalties and attorneys' and accountants' fees and
disbursements).
10.05 Governmental Authorities. The term "Governmental Authorities"
shall mean any nation or country (including but not limited to the United
States) and any commonwealth, territory or possession thereof and any political
subdivision of any of the foregoing, including but not limited to courts,
departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
10.06 Knowledge of the Company. The term "Knowledge of the Company"
shall mean the actual knowledge of the Seller or any of the directors, officers
or managerial personnel of the Seller or the Company with respect to the matter
in question, and such knowledge as the Seller or any of the directors, officers
or managerial personnel of the Seller or the Company reasonably should have
obtained upon diligent investigation and inquiry into the matter in question.
10.07 Legal Requirements. The term "Legal Requirements", when described
as being
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applicable to any person, shall mean any and all laws (statutory, judicial or
otherwise), ordinances, regulations, judgments, orders, directives, injunctions,
writs, decrees or awards of, and any Contracts with, any Governmental Authority,
in each case as and to the extent applicable to such person or such person's
business, operations or properties.
10.08 Permits. The term "Permits" shall mean any and all permits,
orders or Contracts under any Legal Requirement or otherwise granted by any
Governmental Authority.
10.09 Properties. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible) to be
contributed and/or conveyed to the Company pursuant to the Asset Agreement.
10.10 Regulations. The term "Regulations" shall mean any and all
regulations promulgated by the Department of the Treasury pursuant to the Code.
10.11 Used. The term "Used" shall mean, with respect to the Properties,
Contracts or Permits of the Company, those owned, leased, licensed or otherwise
held by the Company which were acquired for use or held for use by the Company
in connection with the Company's business and operations, whether or not
reflected on the Company's books of account.
EXECUTED as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
SELLER: BUYER:
MAIN ST. CALIFORNIA, INC., an Arizona corporation CNL CALIFORNIA RESTAURANTS, LTD., a Florida limited
partnership
By: CNL Restaurants XVII, Inc., a
By: ______________________________________ Florida corporation, General
Partner
Name: ___________________________________
As its: ___________________________ President
By: _______________________________
(CORPORATE SEAL) Name: ____________________________
As its: ____________________ President
SHAREHOLDER:
(CORPORATE SEAL)
MAIN STREET AND MAIN INCORPORATED, a Delaware
corporation
<PAGE>
By: ______________________________________ COMPANY:
Name: ___________________________________ MAIN ST. CALIFORNIA II, INC., an Arizona corporation
As its: ___________________________ President
By: ______________________________________
(CORPORATE SEAL)
Name: ___________________________________
As its: ___________________________ President
(CORPORATE SEAL)
</TABLE>
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT ("Agreement") is entered into this ___ day of
January, 1997 (the "Commencement Date") by and between MAIN ST. CALIFORNIA II,
INC., an Arizona corporation whose address is 400 E. South Street, Suite 500,
Orlando, Florida 32801 ("Owner"), and MAIN ST. CALIFORNIA, INC., an Arizona
corporation whose address is 5050 North 40th Street, Suite 200, Phoenix, Arizona
85018 ("Manager").
RECITALS
1 This Agreement is made with reference to the "T.G.I. Friday's"
restaurant and bar (the "Restaurant") located at2410 San Ramon Valley Boulevard,
Suite 130, San Ramon, Contra Costa County, California (the "Premises");
2 Manager is experienced in the operation and management of "T.G.I.
Friday's" restaurants; and
3 Owner desires to employ Manager as its agent to operate the
Restaurant as a "T.G.I. Friday's" restaurant and bar.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, Owner and Manager agree as follows:
ARTICLE 1
APPOINTMENT OF MANAGER: KEY TERMS AND CONDITIONS
Section 1.1 Appointment of Manager. Owner hereby appoints and employs
Manager to act as Owner's exclusive agent for the supervision, direction and
control of the operation and management of the Restaurant as a "T.G.I. Friday's"
restaurant and bar, upon the terms and conditions hereinafter set forth.
Section 1.2 Key Terms. The following are certain of the key terms of
this Agreement, cross-referenced if applicable to the sections of this Agreement
in which they are more fully discussed:
1.2.1 Lease: Lease between Kilpatrick Partners, LLC, a
California limited liability company, as the current Landlord, and Owner as
Tenant evidenced by Assignment and Assumption of Lease dated on or about the
date hereof.
1.2.2 Term: Co-terminus with the shorter of the term of the
Lease or Franchise Agreement as provided in Article 2 below.
1.2.3 Management Fee: Manager shall be entitled to keep and
retain an annual fee based upon 3% of Gross Sales for managing the Restaurant
(the "Management Fee") which is payable by Owner pursuant to Article 4 below.
1.2.4 Gross Sales: The term "Gross Sales" as used herein shall
mean the entire amount of the actual sales price, whether for cash or other
consideration, of all sales of food, beverages, merchandise and services in, on,
or from the Premises, including receipts from mail or telephone orders received
or filled from the Premises and telephone and vending machine receipts; all
deposits not refunded to purchasers;
<PAGE>
orders taken, although such orders may be filled elsewhere; payments to Tenant
by any concessionaire, franchisee, or person otherwise in the Premises with
Tenant's approval; and promotional allowances to dissatisfied or inconvenienced
customers in an amount equal to Tenant's retail price for food and/or beverages
prepared and served by Tenant for which no compensation is received, but only to
the extent that said amount for promotional allowances exceeds one percent (1%)
of the Gross Sales as calculated without the inclusion of said amount.
Promotional allowances provided in exchange for goods or services shall be
includable in Gross Sales without benefit of the one percent (1%) discount.
1.2.5 Master Incentive Agreement: Master Incentive Agreement
for CNL California Restaurants Ltd. executed by Owner and Manager and dated of
even date herewith.
1.2.6 Franchise Agreement: The Amended and Restated Franchise
Agreement for the Premises dated on or about the date hereof between T.G.I.
Friday's, Inc. ("TGIF") and Owner.
ARTICLE 2
THE TERM
The "Term" of this Agreement shall commence on the Commencement Date.
The Term shall continue, unless sooner terminated pursuant to the terms hereof
or of the Master Incentive Agreement, until the earlier of the expiration or
termination of the Lease or of the Franchise Agreement. Owner and Manager shall
cooperate in good faith and use their best efforts to insure that the Lease
(including all extensions and any replacement thereof approved by Owner, Manager
and TGIF) and the Franchise Agreement are coterminous.
ARTICLE 3
DUTIES OF THE MANAGER
Section 3.1. Standard of Operations. Manager shall manage and operate
the Restaurant in a manner consistent with its management of its other "T.G.I.
Friday's" restaurants. Manager shall achieve "PACE" results, as established
within the "T.G.I. Friday's" franchise restaurant system, consistent with its
other "T.G.I. Friday's" restaurants and no less than PACE results achieved by
similar "T.G.I. Friday's" restaurants operated by TGIF, both after consideration
of regional disparities in operating costs. The Manager shall have sole
discretion to establish all policies for the Restaurant, including, without
limitation, menu items, prices, purchasing, design and decor, maintenance,
employment, standards of operation, quality of service, marketing and
promotional activities, and other matters affecting customer opinion of the
Restaurant and its operation. Throughout the Term of this Agreement Manager
shall periodically (but not more than once per quarter) review Restaurant
operations and performance with Owner at a mutually convenient time and place
(which meeting may be via telephonic communication), and shall reduce to writing
in the form of minutes or memoranda their decisions and agreements. A copy of
all such writings, whether in the form of minutes or memoranda, shall be
maintained by Manager and shall be available for inspection and photocopying by
the parties' directors, officers, agents and employees during normal business
hours. Further, Manager shall use its best efforts to maximize Restaurant sales
and cash flow and acknowledges that the amount of the Incentive Fee
distributions available to it under the Master Incentive Agreement is based upon
and determined by Manager's performance with respect to the standards attached
hereto.
Section 3.2. Services; Reports to Owner. The Manager shall provide all
such services for the operation of the Restaurant as determined by Manager to be
proper and necessary. The Manager shall keep
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Owner informed of all letters, accounts, writings and other information which
are material in scope which shall come to its attention concerning the
Restaurant. The Manager shall prepare an annual budget for the Restaurant within
thirty (30) days prior to the expiration of each fiscal year (an "Annual
Budget") and shall submit such Annual Budget to Owner for approval, in
reasonable detail, and including without limitation all planned capital and
other expenditures for the coming fiscal year.
Section 3.3. Personnel. Manager shall be responsible for hiring,
supervising, directing the work of, promoting, discharging and determining the
compensation and other benefits of all personnel working in the Restaurant,
including, without limitation, the in-store management staff and controller. All
personnel of the Restaurant shall be the employees of Manager, but Owner shall
be liable to reimburse Manager for the full amount of the wages, compensation or
other benefits, including, without limitation, severance and termination pay of
all such personnel (including both the permanent employees of the Restaurant and
temporary employees while they are working at the Restaurant). The employees of
the Restaurant shall be paid by Manager, but simultaneously with such payment
Manager shall be reimbursed out of the operating account of the Restaurant for
the full amount paid by Manager. The salaries, other compensation and benefits
of such personnel shall be consistent with those that apply at Manager's other
"T.G.I. Friday's" restaurants (with appropriate allowance for factors that may
affect the labor market serving the Restaurant). Manager may incur, at Owner's
expense, reasonable and customary employment agency fees and employee relocation
expenses for employees of the Restaurant. Manager, at Owner's expense, may incur
actual salaries, compensation, and benefits and relocation expenses for
management trainees of the Restaurant up to an amount not to exceed one percent
(1%) of Gross Sales with any excess of the one percent (1%) of Gross Sales
payable by Manager directly or as a deduction from Manager's Management Fee.
Manager shall employ and pay, from Manager's own account and without being
reimbursed, the wages and other compensation of any management personnel, such
as district or regional managers, who are not employed at the Restaurant on a
permanent basis but who are engaged in the performance of duties imposed on
Manager under this Agreement.
Section 3.4. Permits and Licenses. Manager, as Owner's agent, with
Owner's cooperation and at Owner's expense, shall be responsible for obtaining,
maintaining, and renewing in Owner's name (unless otherwise approved or required
by Owner) all licenses and permits that may be required for the operation of the
Restaurant, including liquor, bar, restaurant, and sign licenses and permits.
Manager shall provide Owner with a copy of any licenses and permits for the
Restaurant upon receipt of same by Manager. During the Term of this Agreement,
Manager shall renew all licenses and permits for the Restaurant on Owner's
behalf and at Owner's expense.
Section 3.5. Contracts. Manager, as agent of Owner, shall have
authority to enter into such service, supply, janitorial, security and other
contracts or agreements as are in Manager's reasonable professional judgment
necessary for the operation of the Restaurant as required by this Agreement. The
terms of such contracts and agreements shall be consistent with the terms of the
contracts and agreements for Manager's other similarly-situated restaurants.
Section 3.6. Maintenance. Manager, at Owner's expense, shall be
responsible for maintaining the Restaurant and the Premises in good condition
and repair consistent with the standards applicable to Manager's other
restaurants, including without limitation all necessary repairs and replacements
of the furniture, fixtures and equipment used in connection with the Restaurant.
Section 3.7. Alterations to the Restaurant. Except as approved in the
Annual Budget, Manager
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<PAGE>
shall not make alterations, additions or improvements in or to the Restaurant,
including without limitation (i) alterations, additions (other than replacements
and substitutions) or improvements to the Restaurant building and/or Premises
and (ii) additions to the fixed asset list of furniture, fixtures and equipment
used at the Restaurant ("FF&E") without Owner's prior written approval (which
approval shall not unreasonably be withheld so long as such alterations,
additions or improvements are consistent with what TGIF is doing in its
company-owned restaurants). If at any time during the Term of this Agreement,
however, repairs or alterations to the Restaurant are required by reason of any
laws, ordinances, rules or regulations now or hereafter in force, or by order of
any governmental authority, such repairs or changes shall be made by Manager on
Owner's behalf and at Owner's expense. The cost of such alterations, additions
or improvements to the Restaurant shall be capitalized or charged to current
expenses on the books of account of the Restaurant, using the same criteria that
apply to Manager's other restaurants; provided that routine maintenance and
repairs, as well as replacements and substitutions of FF&E, shall not be
considered capital expenditures but rather operating expenses of the Restaurant.
Manager will furnish Owner substantiating documentation for all such
expenditures.
Section 3.8. Professional Services. Manager may, at Owner's expense,
hire independent contractors to provide such legal, and other professional or
technical service as Manager reasonably deems advisable for the management,
operation and maintenance of the Restaurant; provided that any professional
services the cost of which is expected to exceed Five Thousand Dollars
($5,000.00) per occurrence shall be subject to prior approval of Owner unless
the cost of such services is to be paid by an insurance carrier under any policy
of insurance covering the Restaurant. During the Term of this Agreement the
professional and technical services of Manager's corporate staff shall be
provided to the Restaurant to the same extent that they are provided to
Manager's other restaurants. The Management Fee shall cover such services.
Section 3.9. Compliance With Laws. Manager shall make good faith and
reasonable efforts to comply with all applicable statutes, ordinances, rules and
regulations of federal, state and local governmental bodies having jurisdiction
over the Restaurant or its operation ("Governing Laws"). Notwithstanding
anything herein to the contrary, Manager may contest the application of any
Governing Laws to the Restaurant in the event Manager deems it prudent to do so.
The cost of any such contest shall be included in the operating expenses of the
Restaurant. Manager, at Owner's expense, may institute, defend and settle
litigation and claims affecting the Restaurant; provided that any settlement in
excess of Five Thousand Dollars ($5,000.00) shall be subject to Owner's
reasonable approval unless the cost of such settlement is to be paid by an
insurance carrier under any policy of insurance covering the Restaurant.
Section 3.10. Bank Accounts. Manager shall cause all receipts from the
Restaurant and other funds of Owner generated at or otherwise relating to the
Restaurant to be deposited in such bank account or accounts as it shall
designate, with notice to Owner, and which shall be property of the Owner
separate from and not commingled with the funds of Manager, and withdrawals may
be made upon the signature of the Manager or Owner.
ARTICLE 4
OWNER'S FINANCIAL OBLIGATIONS: PAYMENT OF MANAGEMENT FEE
Manager shall be entitled to keep and retain an annual Management Fee
which is payable by Owner to Manager for managing the Restaurant equal to 3% of
Gross Sales. Installments of the Management Fee shall be payable monthly in
arrears upon delivery to Owner of the Monthly Statement prepared in accordance
with Section 6.2 hereof and shall be equal to 3% of the Gross Sales from the
Restaurant for the previous
4
<PAGE>
month. The monthly Management Fee payments shall constitute installment payments
of the annual Management Fee, subject to reconciliation quarterly based on the
Quarterly Statements and annually based on the Annual Statement prepared in
accordance with Section 6.3 and Section 6.4 hereof. Any overpayment or
underpayment of the Management Fee (other than Management Fee deferrals under
Section 2 of the Master Incentive Agreement) shall be adjusted by payment or
refund, as appropriate, within thirty (30) days after Owner's receipt of the
Quarterly or Annual Statement, as the case may be. The obligation to pay any
accrued but unpaid Management Fee at termination shall survive the termination
of this Agreement [other than Management Fee deferrals under Section 2 of the
Master Incentive Agreement which shall only be payable, if at all, from
available Disposition Proceeds under Section 12(iv) of the Master Incentive
Agreement]. All costs and expenses of operating the Restaurant, including
without limitation the funding of operating deficits and working capital and
other obligations and liabilities hereunder ("Owner's Financial Obligations")
shall be the sole and exclusive responsibility and obligation of Owner (subject
to the terms and conditions of the Master Incentive Agreement), and shall be
treated as operating expenses of the Restaurant except where it is expressly and
specifically stated that such item shall be at Manager's expense. All operating
expenses of the Restaurant shall be paid from operating revenue. Such expenses
include, without limitation, the Management Fee, payroll, food and beverage
inventory, supplies, routine repair and maintenance, rent, contract services,
professional services, training, advertising, marketing, licenses, real estate
taxes, franchise taxes, gross receipts taxes, rent taxes or income taxes (other
than any income taxes payable by Manager on the Management Fee), insurance, bank
charges and processing fees charged by the local depository bank for the
Restaurant or by credit card companies for the processing of credit card sales
made at the Restaurant.
ARTICLE 5
WORKING CAPITAL AND CAPITAL EXPENDITURES
Section 5.1. Working Capital. Owner shall furnish to Manager, out of
available cash from operations of the Restaurant, sufficient working capital for
the ongoing operation of the Restaurant ("Working Capital"). The Working Capital
shall consist of the following: (i) the average value of the food and beverage
inventory of the Restaurant carried at cost, (ii) the cash balance in the
Restaurant's account at the Restaurant's local depository bank, (iii) the cash
on hand at the Restaurant, and (iv) an amount determined by Manager to be
adequate for the operation of the Restaurant based upon Manager's estimate of
the reasonably foreseeable income and expenses of the Restaurant. Owner shall
fund any deficit in the Working Capital within fifteen (15) days after Owner's
receipt of written notice from Manager of the need for additional Working
Capital.
Section 5.2. Capital Expenditures. No Restaurant expenditures that are
capitalized ("Capital Expenditures") shall be made or incurred without the prior
written approval of Owner pursuant to the Annual Budget or otherwise.
Notwithstanding the foregoing approval requirement, the Manager shall have the
right to expend up to Ten Thousand and No/100 Dollars ($10,000.00) per year for
Capital Expenditures which do not have the prior written approval of Owner in
the Annual Budget or otherwise, provided that such unapproved Capital
Expenditures (i) do not exceed Two Thousand and No/100 Dollars ($2,000.00) as to
any single item or category in any single year and (ii) are for repairs,
replacements, alterations, additions or improvements which are consistent with
what TGIF is doing in its company-owned restaurants.
ARTICLE 6
ACCOUNTING AND REPORTING
Section 6.1. Accounting Records and Standards. Manager shall maintain
books and records of account relating to Manager's operation and management of
the Restaurant. Such records shall include full
5
<PAGE>
records and accounting information relating to the Restaurant and shall be
maintained at Manager's principal office or at the principal office of the
accounting firm approved by Owner for the Restaurant. The cost of maintaining
such books and records and preparing the statements provided for below shall be
borne by Manager. The books and records for the Restaurant shall be kept
substantially in accordance with the systems utilized by Manager for its other
"T.G.I. Friday's" restaurant operations. Manager's records shall be sufficient
to permit an audit of Manager's Gross Sales and of all other financial
information relating to the Restaurant to be conducted in accordance with
generally accepted accounting principles ("GAAP") and auditing practices. Owner
and its designees (including but not limited to the Landlord under any Lease)
shall have the right, upon ten (10) days prior written notice to Manager, to
audit, examine and make copies of or extractions from said books and records at
Manager's corporate headquarters at any reasonable time during regular business
hours or by appointment.
Section 6.2. Monthly Statement. Within thirty (30) days after the end
of each month, Manager shall provide Owner with a profit and loss statement
showing the Restaurant's Gross Sales and operating results for the preceding
fiscal month and fiscal year to date ("Monthly Statement").
Section 6.3. Quarterly Statement. Within thirty (30) days after the end
of each quarter, Manager shall provide Owner with a profit and loss statement
showing the Restaurant's Gross Sales and operating results for the preceding
fiscal quarter and fiscal year to date ("Quarterly Statement"), prepared in
accordance with GAAP.
Section 6.4. Annual Statement. Within forty-five (45) days following
the end of each fiscal year, Manager shall provide Owner with comprehensive
financial statements for the Restaurant for the preceding fiscal year (the
"Annual Statement") prepared in accordance with GAAP. The Annual Statement shall
set forth the amount of the rents and other leasehold charges paid to the
Landlord under any Lease and the amount of the Management Fees retained by
Manager. The Annual Statement shall contain a reconciliation of all financial
activities of the Restaurant, including but not limited to a profit and loss
statement, a balance sheet and statement of cash flow, with supporting
schedules, and shall be certified as true and correct by Manager's Chief
Financial Officer.
Section 6.5. Annual Audits. All accounting for the Restaurant shall be
provided in accordance with generally accepted accounting principles
consistently applied. Owner and Manager shall mutually select a certified public
accounting firm to provide public accounting and tax reporting and filing
services with respect to the Restaurant. The financial information for the
Restaurant shall be audited or reviewed (at the option of Owner) annually by
such certified public accounting firm and the results of such audit (or review)
shall be forwarded directly to Owner by such firm within ninety (90) days after
the end of each fiscal year and shall be accompanied by an auditor management
letter. The expense of such audit shall be an Owner's normal operating expense
for the Restaurant.
Section 6.6. Tax Return Information. Within forty-five (45) days
following the end of each fiscal year, the Manager shall provide Owner with all
required state and federal tax returns of and/or for the Owner relating to the
Restaurant (including tax return information for all other Restaurants owned by
Owner and managed by Manager). These returns will be prepared at Owner's
expense, which shall be considered a normal operating expense for the
restaurant. The Manager shall keep all accounting records and shall report all
income for income tax purposes for the Restaurant on the accrual method of
accounting.
Section 6.7. Failure to Report. During any period in which any of the
Monthly, Quarterly or Annual Statements, or any Tax Return, to be provided by
Manager as set forth above has not been timely
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provided in accordance with the foregoing standards (a "Reporting Delinquency"),
the Manager shall not be entitled to retain, deduct or pay any Management Fee or
(installment thereof) which otherwise would be due and payable to Manager, until
any such delinquent report or return shall have been properly completed and
delivered. Because the damages which will be suffered by Owner as the result of
any such Reporting Delinquency would be difficult if not impossible to measure,
the Manager hereby agrees to pay liquidated damages to Owner equal to one (1)
day's Management Fee for each day of any Reporting Delinquency.
Section 6.8. Adjustments. Payments made to the Landlord on behalf of
Owner and payment of the Management Fee shall be subject to reconciliation on a
quarterly basis. Any adjustment required to make up an underpayment or to refund
an overpayment by Owner or Manager shall be made within thirty (30) days after
completion of the Quarterly Statement that shows the need for an adjustment.
Adjustments based on the Annual Statement shall be made during the first month
following completion of the Annual Statement. Adjustments made upon the
expiration or termination of this Agreement shall be made through payment or
refund, as required, within thirty (30) days after the end of the Term of this
Agreement.
Section 6.9. Right to Audit. At any time during the twenty-four (24)
month period following Owner's receipt of an Annual Statement, Owner shall have
the right, upon ten (10) days' prior written notice to Manager, to have an
accountant selected by Owner audit Manager's books and records at Manager's
corporate headquarters relating to the Restaurant for the period covered by such
Annual Report. If there is a discrepancy between such financial statements and
the findings of Owner's accountant, Manager's accountants and Owner's accountant
shall attempt to resolve such discrepancy, and their mutual decision shall be
binding upon Owner and Manager. If the accountants for the parties are unable to
resolve the discrepancy, the matter shall be referred to an independent
accounting firm acceptable to both Owner and Manager, and the decision of such
accounting firm shall be binding upon Owner and Manager. The cost of conducting
an independent audit of the Restaurant's financial statements shall be paid by
Owner as a normal operating expense of the Restaurant. If any audit shows any
material error(s) in the Annual Statement submitted by Manager, then Manager
shall pay the reasonable costs of such audit.
Section 6.10. Fiscal Year. The fiscal year of the Restaurant shall end
as of the Monday closest to December 31 of each year.
Section 6.11. Lease Year. For the purpose of calculating the amount of
Rent payable under the Lease, the term "Lease Year" shall have the meaning
ascribed to it in the Lease.
ARTICLE 7
INSURANCE AND INDEMNITY
Section 7.1. Required Insurance Coverage. The following forms of
insurance coverage shall be maintained for the Restaurant:
7.1.1 Property Insurance: Permanent property insurance
insuring against any and all risks of direct physical loss to the Restaurant and
its furniture, fixtures and equipment, with limits of not less than the full
replacement cost thereof.
7.1.2 Business Interruption: All-risk business interruption
insurance with a limit sufficient to reimburse Owner for loss of income
resulting from an inability to continue operations due to the Restaurant's
sustaining a loss from an insured peril.
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7.1.3 General Liability: Single limit commercial general
liability insurance, including product and liquor liability coverage, with
limits of not less than One Million Dollars ($1,000,000.00) per occurrence, with
excess liquor liability insurance of not less than Two Million Dollars
($2,000,000.00) per occurrence, with excess or umbrella liability coverage or
not less than Fifteen Million Dollar ($15,000,000.00), bodily injury and
property damage combined, including dram shop insurance in any area having a
Dram Shop Act or similar provisions of law. Such limits shall be subject to
increase if reasonably required by Owner, provided that any resulting increased
costs shall also be treated as an operating cost included under Owner's
Financial Obligations.
7.1.4 Employers' Liability: Workers' Compensation and
Employers' Liability insurance, as well as other insurance as may be required by
law, in such amounts as may be required by applicable statute or rule; provided
that the Employer's Liability insurance shall carry a limit of not less than
Five Hundred Thousand Dollars ($500,000.00). Owner shall be named as an
additional insured in all policies required hereunder, and all such policies
shall be primary to any policies which either of the parties hereto may carry on
its own. Such policies shall be written by insurance companies that are
authorized to do business where the Restaurant is located.
Section 7.2. Responsibility For Obtaining Coverage. Manager, at Owner's
expense, shall be responsible for providing all of the insurance coverage
required under this Article.
Section 7.3. Evidence of Coverage. Manager shall cause to be delivered
to Owner a certificate of insurance to evidence that the foregoing insurance
coverage requirements have been complied with. Such evidence shall include a
statement by the insurer that the policy or policies will not be canceled or
materially altered without at least thirty (30) days prior written notice to
both Owner and Manager.
Section 7.4. Indemnity by Manager. Manager agrees to indemnify, defend
and hold Owner free and harmless from any liability for injury or death to
persons or damage or destruction of property arising out of the operation of the
Restaurant by Manager (other than due to a default under the lease of the
premises, the Franchise Agreement or any other material contract by Owner) or
resulting from any act of Manager, its agents, officers, directors or employees.
Notwithstanding the foregoing, Manager shall not be obligated to indemnify and
hold Owner harmless or to reimburse Owner or to defend Owner from any liability
that results from the negligence, fraud or willful misconduct of Owner, its
employees, officers or directors. The Manager's obligations under this section
shall survive the expiration or any termination of this Agreement.
Section 7.5. Indemnity by Owner. Owner agrees to indemnify, defend and
hold Manager free and harmless from any liability for injury or death to persons
or damage or destruction of property arising out of the operation of the
Restaurant by Owner (other than due to a default under the lease of the
premises, the Franchise Agreement or any other material contract by Manager) or
resulting from any act of Owner its agents, officers, directors or employees.
Notwithstanding the foregoing, Owner shall not be obligated to indemnify and
hold Manager harmless or to reimburse Manager or to defend Manager from any
liability that results from the negligence, fraud or willful misconduct of
Manager, its employees, officers or directors. The Owner's obligations under
this section shall survive the expiration or any termination of this Agreement.
ARTICLE 8
DAMAGE AND DESTRUCTION
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If the Lease is terminated as a result of damage or destruction to the
Premises, this Agreement shall terminate effective as of the date of termination
of the Lease, unless (a) the Franchise Agreement can be kept in full force and
effect and will allow for reestablishment of the Restaurant at the Premises (if
released) or at another location and (b) Owner and Manager agree on and consent
to a new lease with an initial term approximating the remaining term of the
Franchise Agreement and approve the substantive terms of any related financing
necessary for reestablishment of the Restaurant.
ARTICLE 9
EMINENT DOMAIN
If the whole of the Premises or the Restaurant shall be taken in any
eminent domain, condemnation, compulsory acquisition or like proceeding by any
competent public authority, or if such a portion thereof is so taken that the
Lease is terminated in accordance with its terms, then in either of such events
the Term of this Agreement shall end as of the date of such taking (unless the
Franchise Agreement continues in effect at released premises as set forth
above).
ARTICLE 10
DEFAULT, TERMINATION AND REMEDIES
Section 10.1. Default, Notice and Cure. If either party hereto shall
default in the performance of any of its obligations under this Agreement, or if
any representation or warranty made by either party hereto shall be untrue or
shall be breached in any material way, and if within the applicable cure period
specified below the party fails to cure such default, then the party who
delivered the notice of such default shall have, in addition to its rights at
law or in equity (including special or consequential damages), the right to
terminate this Agreement. The cure period for monetary defaults shall be ten
(10) days. In the case of a nonmonetary default, the cure period shall be thirty
(30) days; provided that the cure period for a nonmonetary default shall be
extended as may be reasonably required to cure a default if (i) the default is
incapable of being cured within the normal cure period, and (ii) the party in
default makes diligent and good faith efforts to cure the default as soon as is
reasonably possible. All cure periods shall commence on the day next following
the day on which a written notice of default is received by the party alleged to
be in default under this Agreement.
Section 10.2. Bankruptcy. A party to this Agreement (the "Defaulting
Party") shall be in default under this Agreement if the Defaulting Party becomes
insolvent or makes a general assignment for the benefit of creditors, or if a
petition in bankruptcy is filed by the Defaulting Party or such a petition is
filed against and consented to by the Defaulting Party, or if the Defaulting
Party is adjudicated a bankrupt, or if a bill in equity or other proceeding for
the appointment of a receiver of the Defaulting Party or other custodian for the
Defaulting Party's business or assets is filed and consented to by the
Defaulting Party, or if receiver or other custodian (permanent or temporary) of
the Defaulting Party's assets of property, or any part thereof, is appointed by
any court of competent jurisdiction and not dismissed within sixty (60) days, or
if proceedings for a composition with creditors under any law should be
instituted by or against the Defaulting Party, or if a final, non-appealable
judgment remains unsatisfied or of record for sixty (60) days or longer (unless
a supersedeas bond is filed), or if execution is levied against the Defaulting
Party's restaurant business or property, or suit to foreclose any lien or
mortgage against the Premises or equipment is instituted against the Defaulting
Party and not dismissed within sixty (60) days after a final, non-appealable
judgment in excess of $50,000.00, or if the real estate or personal property
used in connection with the Restaurant shall be sold after levy thereupon by any
sheriff, marshal, constable or similar representative or government authority;
provided, however, that in the event of an involuntary action or proceeding
brought against, and not initiated
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by, the Defaulting Party, the Defaulting Party shall have a period of ninety
(90) days in which to cure its default by having the involuntary action or
proceeding dismissed.
Section 10.3. Cross-Default. An uncured default under this Agreement
shall constitute an event of default under all other Management Agreements
between Owner and Manager with respect to the Restaurants subject to the Master
Incentive Agreement, and any uncured default thereunder shall likewise
constitute an event of default hereunder which shall not be subject to or
eligible for any additional notice and opportunity to cure hereunder.
ARTICLE 11
SUCCESSORS AND ASSIGNS
Section 11.1. Assignment by Manager. Manager may not, without Owner's
prior written consent, which may be withheld in Owner's sole and absolute
discretion, assign its interest in this Agreement, provided however that Owner's
prior consent shall not be required for an assignment to any affiliate which is
wholly-owned by Main Street and Main Incorporated, a Delaware corporation
("Shareholder") or any of its wholly-owned subsidiaries, or for a collateral
assignment by Manager of its rights to receive payments hereunder.
Section 11.2. Assignment by Owner. Owner may, without Manager's
consent, assign its interest in this Agreement to (i) an Affiliate of Owner,
provided that Owner continues to be fully liable under this Agreement, or (ii) a
purchaser of Owner's entire interest in the Restaurant. Manager shall not
unreasonably withhold its consent to any other transfer by Owner of its interest
in this Agreement. The term "Affiliate" as used herein shall mean any parent,
subsidiary, or other entity that controls, is controlled by or is under common
control with the party whose interest is being transferred. For purposes of this
provision "control" shall mean the direct or indirect ownership of more than
fifty percent (50%) of the shares or partnership interests entitled to vote in
determining action by the Affiliate.
Section 11.3. Parties Bound. This Agreement shall be binding upon and
shall inure to the benefit of the successors-in-interest and assigns of the
parties hereto with the same effect as if mentioned in each instance where the
party hereto is named or referred to, except that no assignment, transfer,
pledge, mortgage, lease or sublease made by either Owner or Manager in violation
of this Agreement shall vest any rights in the assignee, transferee, mortgagee,
pledge, lessee, sublessee or occupant.
ARTICLE 12
NOTICES
Section 12.1. Notice Addresses. Written communications between Owner
and Manager shall be sent to their respective addresses shown on the first page
of this Agreement ("Notice Address"); provided that Owner or Manager may change
its Notice Address by giving written notice of such change to the other party at
least thirty (30) days in advance.
Section 12.2. Notices. Wherever this Agreement provides for notice,
such notice shall be in writing and shall be delivered to a party at its Notice
Address, by hand delivery, by United States mail, registered or certified, with
return receipt requested, by Federal Express or other national courier service,
or by telegram, facsimile or other similar methods of communication (provided
there is an independent verification of delivery). A hand-delivered notice or a
notice delivered by courier or electronic transmission
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shall be effective on the date of receipt by the party being served with the
notice. A mailed notice shall be effective on the earlier of (i) the date of
receipt or refusal of receipt, and (ii) five (5) days after the date of mailing.
ARTICLE 13
GENERAL PROVISIONS
Section 13.1. Relationship of the Parties. The provisions of this
Agreement relating to the determination and payment of management fees hereunder
are included solely for the purpose of providing a method whereby the said fees
can be measured and ascertained. Manager and Owner shall not be construed as
joint venturers or partners of each other and neither shall have the power to
bind or obligate the other except as set forth in this Agreement.
Section 13.2. Entire Agreement. This Agreement embodies the entire
agreement between Owner and Manager with respect to the subject matter hereof
other than the Master Incentive Agreement and supersedes all prior agreements
and understandings, whether written or oral. Owner and Manager have neither made
nor relied upon any promises, representations or warranties in connection with
this Agreement that are not expressly set forth in this Agreement.
Section 13.3. Modifications and Waiver. This Agreement may not be
modified except by a written agreement executed by Owner and Manager. No waiver
of any condition or covenant in this Agreement by either party shall be
effective unless made in writing, nor shall any waiver be deemed to imply or
constitute a future waiver of the same or any other condition or covenant of
this Agreement.
Section 13.4. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Florida.
Section 13.5. Construction. Whenever a word appears herein in its
singular form, such word shall include the plural; and the masculine gender
shall include the feminine and neuter genders. This Agreement shall be construed
without reference to the titles of Articles, Sections or Clauses, which are
inserted for convenient reference only. This Agreement shall be construed
without regard to any presumption or other rule permitting construction against
the party causing this Agreement to be drafted and shall not be construed more
strictly in favor of or against either of the parties hereto.
Section 13.6. Severability. If any term or provision of this Agreement
or the application thereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
Section 13.7. Consent or Approval. Unless otherwise specified herein,
whenever it is necessary under the terms of this Agreement for either party to
obtain the consent or approval of the other party, such consent or approval
shall not be unreasonably withheld, conditioned or delayed.
Section 13.8. Certificate of Performance. Owner and Manager shall,
within twenty (20) days after receipt of a written request from the other,
execute, acknowledge and deliver a statement in writing certifying whether this
Agreement is unmodified and in full force and effect (or if modified, whether
the same is in full force and effect as so modified), whether any conditions to
the full enforceability of this Agreement remain
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unsatisfied, and such other facts, including the nature of any claim of default
on the part of the other, as either party may reasonably request.
Section 13.9. Excuse for Nonperformance. If either party hereto shall
be delayed or prevented from the performance of any act required hereunder by
reason of acts of God, strikes, lockouts, labor troubles, plan approval delay,
inability to procure materials, restrictive governmental laws or regulations,
adverse weather, unusual delay in transportation, delay by the other party
hereto or other cause without fault and beyond the control of the party
obligated to perform (financial inability excepted), then upon notice to the
other party, the performance of such act shall be excused for the period of the
delay and the period for the performance of such act shall be extended for a
period equal to the period of such delay; provided, however, the party so
delayed or prevented from performing shall exercise good faith efforts to remedy
any such cause of delay or cause preventing performance.
Section 13.10. Disputes. If a dispute shall arise as to any amount or
sum of money to be paid by one party to the other or any work to be performed by
either of them under the provisions hereof, a party shall have the right to make
payment or perform such work "under protest," without waiver or prejudice to its
right to recover from the other party. If it shall later be determined (by
agreement of the parties, arbitration or litigation) that one party has paid or
performed an obligation that should have been paid or performed by the other
party, the party who paid or performed "under protest" shall be entitled to
recover the amount paid or the cost incurred, plus interest thereon at the
Interest Rate specified in Section 13.12 hereof, from the date on which such
payment was made until the date on which reimbursement is received.
Section 13.11. Attorney's Fees. If Owner or Manager brings action at
law or equity against the other in order to enforce the provisions of this
Agreement or as a result of an alleged default under this Agreement, the
prevailing party in such action shall be entitled to recover reasonable
attorney's fees from the other.
Section 13.12. Interest. All monetary obligations under this Agreement
shall bear interest from the date on which they become due and payable until the
date on which payment is received by the party entitled to payment. Except where
a different rate of interest is expressly provided for elsewhere in this
Agreement, such interest shall be paid at an annual rate (the "Interest Rate")
equal to the lesser of (i) the prime interest rate as published in the "Money
Rates" section of the Wall Street Journal (adjusted on the first business day of
each month) plus two percent (2%), or (ii) the highest interest rate permitted
by law, compounded daily on the basis of a 360-day year.
Section 13.13. Date of Agreement. All references to the "date of this
Agreement," the "date hereof," and the like shall be deemed to be the
Commencement Date set forth on the first page of this Agreement.
Section 13.14. Shareholder's Guarantee. The undersigned Shareholder
hereby guarantees to Owner and becomes a surety for the performance of and
compliance with all of Manager's agreements, covenants and obligations
hereunder. Any claim or right of Owner for the failure to perform or comply with
any of Manager's agreements, covenants or obligations hereunder may be directly
enforced against Shareholder and upon or pursuing any without any notice of any
kind and without first making any demand upon or pursuing any remedy against
Manager. Without notice to or consent of Shareholder, Owner and Manager may
modify or change the terms of this Agreement or any obligation of Manager, and
may grant any extension, renewal or indulgence, release, compromise or
settlement with respect thereto and none of the foregoing shall in any way
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affect Shareholder's liability hereunder.
IN WITNESS WHEREOF, Owner and Manager do hereby execute this Management
Agreement on the dates shown opposite their respective signatures.
OWNER: MANAGER:
MAIN ST. CALIFORNIA II, INC., an Arizona MAIN ST. CALIFORNIA, INC., an
corporation Arizona corporation
By: __________________________________ By: _______________________________
Robert A. Bourne, President
Name: _____________________________
(CORPORATE SEAL)
Title: __________________ President
(CORPORATE SEAL)
SHAREHOLDER:
MAIN STREET AND MAIN
INCORPORATED, a Delaware
corporation
By: _______________________________
Name: _____________________________
As Its: _________________ President
(CORPORATE SEAL)
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MASTER INCENTIVE AGREEMENT
CNL CALIFORNIA RESTAURANTS, LTD.
THIS MASTER INCENTIVE AGREEMENT is entered into this ___ day of
January, 1997 by and between MAIN ST. CALIFORNIA II, INC., an Arizona
corporation whose address is 400 East South Street, Suite 500, Orlando, Florida
32801 ("CNL") and MAIN ST. CALIFORNIA, INC., an Arizona corporation, whose
address is 5050 North 40th Street, Suite 200, Phoenix, Arizona 85018 ("Main
St.").
W I T N E S S E T H:
WHEREAS, CNL is the owner of five (5) T.G.I. Friday's restaurants which
it have been conveyed to it by Main St. on or about the date hereof pursuant to
a certain Asset Conveyance Agreement dated on or about the date hereof
("Restaurants") which are located as set forth in Exhibit "A" attached hereto;
and
WHEREAS, in connection with the acquisition of the Restaurants by CNL,
CNL as Owner and Main St. as Manager have entered into a separate Management
Agreement dated of even date herewith for each of the Restaurants (herein each a
"Management Agreement," or together the "Management Agreements"); and
WHEREAS, in addition to the terms of the Management Agreements, the
parties have agreed that Main St. shall have certain other rights and
obligations with respect to the Restaurants as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in further consideration of the
mutual promises and obligations contained herein, the parties hereto agree as
follows:
1. Key Terms. The following are certain of the key terms of this
Agreement, cross-referenced if applicable to the sections of this Agreement in
which they are more fully discussed:
a. Main St. Management Fees: The total aggregate management
fees due to Main St. under the Management Agreements.
b. CNL Investment: CNL's and CNL California's aggregate
capital investment in the Restaurants (not including the principal sum of the
Acquisition Loan or any other funds borrowed from third parties), less all
returns of capital (defined as a return of capital investment in the Restaurants
to CNL and/or CNL California for distribution to CNL California and/or its
partners as a release of capital from the Restaurants resulting from
refinancing, sale of a capital asset or some other capital event relating to the
Restaurants and not a return on capital or a return generated from operations).
c. CNL Return: A cumulative equity return equal to 14% per
annum on the total CNL Investment, which is in addition to and separate from all
other returns and amounts which are to be paid to or retained by CNL with
respect to the Restaurants.
d. Restaurant Revenues: The entire amount of the actual sales
price and all other revenues, whether for cash or other consideration, of all
sales of food, beverages, merchandise and services in, on, or from the
Restaurants, including receipts from mail or telephone orders and telephone and
vending machine receipts; all deposits not refunded to purchasers; orders taken,
although such orders may be filled elsewhere; payments received from any
concessionaire, franchisee, or other person with respect to the
<PAGE>
Restaurants., but not including any capital proceeds from any Disposition or
other capital event.
e. Restaurant Costs: All operating and other expenses of the
Restaurants of whatever nature, including without limitation all costs CNL is
obligated to pay or in fact does pay as the Owner under the Management
Agreements as well as all debt service and other current amounts due and payable
on the Acquisition Loan, all Capital Expenditures to the extent that the same
are not funded from the Capital Expenditure Reserve or under a Loan Call as
provided below, and all lease payments, taxes and other occupancy costs.
f. Acquisition Loan: The secured fixed rate loan made by CNL
Financial I, Inc. ("Lender") to CNL and to CNL California Restaurants, Ltd.
("CNL California"), a Florida limited partnership which is the sole stockholder
of CNL, in the initial principal amount of $7,400,000.00 and as evidenced and
secured by the primary loan documents described in Exhibit "A" attached hereto.
g. Capital Expenditures: Necessary expenditures, other than
ordinary maintenance and repair costs (which are included in Restaurant Costs),
for repair, renovations, restoration and replacement of capital assets of the
Restaurants, as approved by CNL and Main St., which approval shall not
unreasonably be withheld so long as such expenditure is reasonable and necessary
for the Restaurants to be maintained and operated consistent with other
comparable T.G.I. Friday' s restaurants operated by Main St. and in the T.G. I.
Friday's system generally (herein a "Capital Improvement").
h. Uncured Default: A default which has remained uncured after
thirty (30) days prior written notice thereof to the defaulting party, provided
however that the time for curing any non-monetary default shall be extended so
long as (i) the defaulting party has commenced cure within such thirty-day
period and is diligently and continuously prosecutes such cure in good faith to
completion and (ii) such non-monetary default is subject to being cured by
diligent good faith efforts of the defaulting party.
i. Franchise Agreements: The Amended and Restated Franchise
Agreements for the Restaurants entered into with T. G. I. Friday's, Inc.
("TGIF"), and any and all modifications, extensions and/or replacements thereof.
2. Deferral of Management Fees. In the event that in any period there
is not sufficient Restaurant Revenue after payment of all Restaurant Costs for
(a) CNL to retain the Required CNL Return on its total CNL Investment, and (b)
CNL to pay to Main St. the Main St. Management Fees, then the Required CNL
Return and the Main St. Management Fees shall only be paid prorata, in
proportion to the respective dollar amounts of each sum payable to each party
prior to any deferral hereunder, from available cash. Any unpaid Required CNL
Return (a "CNL Return Deferral") and any deferred amount of the Main St.
Management Fees (herein a "Main St. Fee Deferral") shall be deferred and
accumulated and shall be paid from future Net Cash Flow Available for
Distribution under the relative priorities set forth in Section 3.b.iii of this
Agreement. Assuming for the sake of example that only a single Restaurant were
involved with an annual Required CNL Return Amount of $88,000 (i.e., a CNL
Investment of just over $628,500) and annual Gross Sales under the Management
Agreement of $2,500,000 (i.e., an annual 3% Main St. Management Fee of $75,000),
if only $100,000 were available for distribution then CNL would retain
$53,987.73 [$88,000/($88,000+$75,000)x$100,000] and CNL would pay Main St.
$46,012.27 [$75,000/($88,000+$75,000)x$100,000], with the balance of each amount
being deferred.
3. Incentive Management Fee.
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a. Manager's Incentive Fee. Subject to such adjustments as may
be required pursuant to the terms of this Agreement, CNL shall pay to Main St.
Incentive Management Fees ("Incentive Fees") with respect to Net Cash Flow
Available for Distribution for the Restaurants as more fully set forth below.
b. Net Cash Flow Available for Distribution.
i. Definition. CNL's net cash flow from the
Restaurants which is available for distribution for any fiscal year (herein "Net
Cash Flow Available for Distribution") shall be an amount equal to its net
income or net loss for such fiscal year (the terms "net income" and "net loss"
shall mean the net income and loss of CNL with respect to the Restaurants as
determined in accordance with generally accepted accounting principles
consistently applied by the certified public accountant servicing the CNL
account for the Restaurants), adjusted as follows:
(1) Such net income shall be increased or
net loss shall be decreased by the sum of: (i) depreciation, amortization and
other non-cash expenses deducted in computing such net income or net loss; (ii)
loss recognized by CNL from the sale or exchange of Restaurant assets to the
extent such loss is taken into account in computing such net income or net loss;
and (iii) any amounts released from the Working Capital Reserve or Capital
Expenditure Reserve (as defined in Paragraph 3.b.ii below) established for the
Restaurants.
(2) Such net income shall be decreased or
net loss shall be increased by the sum of: (i) nondeductible cash payments made
by CNL for the Restaurants during such year (such as principal amortization, or
Capital Expenditures which are not funded from the Capital Expenditure Reserve
and which have not already been deducted in arriving at net income), other than
distributions to CNL, payments of Incentive Fees hereunder and payments made
with the proceeds of borrowings for or sales of Restaurant assets; (ii) gain
recognized by CNL from the sale or exchange of any Restaurant assets to the
extent such gain is taken into account in computation of such net income or net
loss; and (iii) any additions to the Working Capital Reserve or Capital
Expenditure Reserve with respect to such fiscal quarter.
ii. Reserves. Working capital reserves shall be
established and maintained for the Restaurants (the "Working Capital Reserve")
in such amounts as may be deemed necessary and as are approved by the parties.
Similarly, capital expenditure reserves shall be established and maintained for
the Restaurants (the "Capital Expenditure Reserve") in an amount equal to Ten
Thousand and No/100 Dollars ($10,000.00) per Restaurant per annum (with such
amounts to be subject to adjustment if deemed necessary and if approved by the
parties). Such Working Capital and Capital Expenditure Reserves, however, shall
only be established, maintained and replenished from any available net cash flow
after payment of the other Restaurant Costs (including the Main St. Management
Fees) and deduction of the Required CNL Return for each period, and shall be
available and used for normal working capital needs or payment of Capital
Expenditures as defined above, as applicable, and as required and/or approved
under the Management Agreements or as otherwise approved by the parties.
iii. Payments of Incentive Fees from Net Cash Flow
Available for Distribution. CNL shall pay to Main St. an Incentive Fee equal to
the remaining amount, if any, of Net Cash Flow Available for Distribution from
the Restaurants, which shall be payable quarterly after deduction of the
following sums:
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(1) first, monthly, amounts necessary to
repay prorata, based upon the outstanding Unmatched
Loan balances, the unpaid balance of any Unmatched
Loans, as defined below, including interest thereon;
(2) second, monthly, amounts deducted to pay
prorata based upon the outstanding unpaid balances,
unpaid amounts of any CNL Return Deferral and Main
St. Fee Deferral (as defined in and determined under
Section 2 hereof);
(3) third, monthly, the Required CNL Return
on the CNL Investment (as defined under Sections 1.c
and 1.b above) shall be retained by CNL;
(4) next, quarterly, amounts necessary to
pay prorata, based upon the outstanding Matched Loan
balances, unpaid amounts of accrued interest on any
Matching Loans;
(5) next, quarterly, to CNL an amount
(herein the "CNL Matching Amount") equal to FIFTY
PERCENT (50%) (as adjusted as provided in this
Agreement) (the "CNL Percentage") of the remaining
Net Cash Flow Available for Distribution for the
period after deduction of the foregoing [the "Main
St. Incentive Percentage" shall be equal to One
Hundred Percent (100%) minus the CNL Percentage].
This CNL Matching Amount is separate from and in
addition to any portion of the Required CNL Return
which must be received prior to any payments of
Incentive Fees hereunder.
Notwithstanding the foregoing, in the event that Main St., as the Manager under
the Management Agreements, does not achieve "PACE" results (as defined in
Section 3.1 of the Management Agreements) for each Restaurant during any period,
then unless such failure is clearly documented by Main St. to have resulted from
causes which are not within Main St.'s control as the Manager under the
Management Agreements, Main St. shall relinquish its right to receive all or
such portion of its Incentive Fee as necessary so that CNL shall be able to
retain as the CNL Matching Amount for such period, an amount equal to the CNL
Matching Amount that would have been available for such period if the "PACE"
level of results had been achieved for each Restaurant. In addition, the
foregoing calculations shall be reconciled annually under the financial
statements for the Restaurants and Main St. shall repay to CNL within forty-five
(45) days following the end of the fiscal year any "excess" Incentive Fees
received by Main St. which are in excess of the Incentive Fees which would have
been paid to Main St. had the Incentive Fees been calculated on an annual basis
at the end of the fiscal year rather than on a quarterly basis.
4. Term. The term of this Agreement shall continue until the earlier to
occur of: (i) the date which is coterminous with the last termination date of
any of the Restaurant leases, including all exercised extension options; (ii)
the date which is coterminous with the last termination date of the Franchise
Agreements, as the same may be extended with the written approval of T.G.I.
Friday's, Inc., CNL and Main St.; or (iii) the date which is coterminous with
the last termination date of the Management Agreements; or (iv) termination as
otherwise provided for in this Agreement. Unless otherwise specifically set
forth herein, the terms of this Agreement shall not apply to any Restaurant
which is not being managed by Main St. under a Management Agreement with CNL.
5. Revenue Shortfall Loans. CNL shall have the right to request that
Main St. make or cause to
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be made matching Manager Loans (herein a "Manager Loan") to CNL, and Main St.
shall have the right to request that CNL obtain funding of a matching CNL
affiliate loan (herein a "CNL Loan") for the Restaurants on the following terms
and conditions:
i. Operating Deficit. If at any time or from time to
time after the opening of the Restaurants, the Restaurant Costs and all other
expenses of owning and operating the Restaurants, including, without limitation,
debt service on all indebtedness (including lease payments on all leases), and
Capital Expenditures to the extent that the same exceed amounts available in the
Capital Expenditure Reserve, shall exceed the Restaurant Revenues (herein a
"Revenue Shortfall"), then CNL and Main St. shall each be responsible for its
proportionate share of such excess, based upon their respective Percentages (as
defined under Section 3.b.iii.(5) above), and CNL shall obtain and Main St.
shall make or cause to be made, within thirty (30) days after notice of the
amount of the Revenue Shortfall, unsecured non-recourse CNL Loans and Manager
Loans, respectively (herein "Matching Loans"), to CNL in pro rata shares
(proportionately to their respective Percentages) totaling the Revenue
Shortfall.
ii. Loan Call Procedure. At any time when additional
funds are required to meet a Revenue Shortfall, either CNL or Main St. may
deliver written notice of such call to the other setting forth the amount and
the purpose for which the loan call is required and designating each party's
obligation for such loan call. All loan funds from the parties shall be due on
or before the thirtieth (30th) day following the date of receipt of the notice
of the call. All such loans shall be made in cash or immediately available
funds. Matching Loans shall be interest-only loans bearing interest at a rate
per annum equal to the 15-Year US Treasury Rate as published in the Wall Street
Journal or other reliable financial market reference plus Seven Percent (7%),
which interest shall only be payable out of Net Cash Flow Available from
Distribution, and principal thereunder shall be payable solely out of available
Disposition Proceeds as provided in Section 13 below. Main St. shall not have
the right to call for a Matching Loan at any time when the Main St. Incentive
Percentage has been reduced to Twenty Percent (20%) or less.
iii. Failure to Respond to Matching Loan Call.
(1) Unmatched Loans. If either CNL or Main
St. shall fail to obtain or make a Matching Loan when due hereunder, then the
non-defaulting party shall have the right to convert its contribution/loan to an
"Unmatched Loan," and to make the loan funding due from the defaulting party
(the "Unmatched Amount") as an "Unmatched Loan," which Unmatched Loans shall
bear interest at a rate per annum equal to the 15-Year US Treasury Rate as
published in the Wall Street Journal or other reliable financial market
reference plus Seven Percent (7%), and shall be payable from first available
cash flow from the Restaurants as provided in Section 3.b.iii.(1) of this
Agreement.
(2) Dilution of Percentages. If Main St.
shall fail to make any Matching Loan when requested due to a loan call hereunder
when due, the CNL Percentage shall be increased by the ratio, expressed as a
percentage, of (a) the total Unmatched Loan amount advanced by CNL with respect
thereto (inclusive of both the CNL Unmatched Loan and the Unmatched Loan of CNL
relating to the Unmatched Amount of Main St.), to (b) the total sum of the
cumulative CNL Investment plus all Matching and Unmatched Loans of both parties
prior to the Unmatched Loans relating to such loan call (with a resulting
decrease in the Main St. Incentive Percentage as of such date). Similarly, in
the event that Main St. shall have caused a Manager Loan to be made to CNL, then
if CNL shall fail to make any Matching Loan when requested due to a loan call
hereunder when due, the CNL Percentage shall be decreased by the ratio,
expressed as a percentage, of (a) the total Unmatched Loan amount advanced by or
on behalf of Main St.
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with respect thereto (inclusive of both the Main St. Unmatched Loan and the
Unmatched Loan of Main St. relating to the Unmatched Amount of CNL), to (b) the
total sum of the cumulative CNL Investment plus all Matching and Unmatched Loans
of both parties prior to the Unmatched Loans relating to such loan call (with a
resulting increase in the Main St. Incentive Percentage as of such date).
(3) Termination. CNL shall also have the
option of terminating this Agreement and all right, title and interest of Main
St. hereunder, in which event the Management Agreements shall also be
terminated, if Main St. shall fail (or elect not) to fund as a Matched Loan
(resulting in a simultaneous repayment of a CNL Unmatched Loan and conversion of
an equal amount still owed to or which has been contributed by or on behalf of
CNL to a Matched Loan) its Percentage of any Unmatched Loan in excess of FIFTY
THOUSAND AND NO/100 DOLLARS ($50,000.00) within ninety (90) days following
written notice of such election to terminate from CNL. Similarly, Main St. shall
also have the option of terminating this Agreement (and any obligations or right
hereunder), in which event the Management Agreements shall also be terminated,
if CNL shall fail (or elect not) to fund as a Matched Loan (resulting in a
simultaneous repayment of a Main St. Unmatched Loan and conversion of an equal
amount still owed to Main St. to a Matched Loan) its Percentage of any Unmatched
Loan in excess of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) within ninety
(90) days following written notice of such election to terminate from Main St.
In the event of such termination by either party, notwithstanding any other
provision hereof to the contrary, any Unmatched or Matching Loans shall continue
to be payable in the amounts and with the respective priorities set forth in
Section 3.b.iii and Section 13 hereof.
Neither party shall have any recourse liability to make any Loan hereunder and
the parties' remedies in the event that the other party shall fail or shall
elect not to make any Loan when requested shall be limited to the options set
forth above. CNL, at CNL's option, shall have the right to obtain or cause to be
provided CNL Loan funds in the form of an additional capital contribution which
shall have a preferred return in lieu of interest but which shall be payable in
all respects as though such capital contribution and preferred return were
treated like principal and interest on a CNL Loan.
6. Assignability.
a. Assignment by Main St. Main St. may not, without CNL's
prior written consent, which may be withheld in CNL's sole and absolute
discretion, assign its interest in this Agreement, provided however that CNL's
prior consent shall not be required for an assignment to any affiliate which is
wholly-owned by Main Street and Main Incorporated or any of its wholly-owned
subsidiaries, or for a collateral assignment by Main St. of its rights to
receive payments hereunder and/or under the Management Agreements.
b. Assignment by CNL. CNL may, without Main St.'s consent,
assign its interest in this Agreement to (i) an Affiliate of CNL in connection
with an assignment of the Management Agreements, provided that CNL continues to
be fully liable under this Agreement, or (ii) a purchaser of CNL's entire
interest in the Restaurants. Main St. shall not unreasonably withhold its
consent to any other transfer by CNL of its interest in this Agreement. The term
"Affiliate" as used herein shall mean any parent, subsidiary, or other entity
that controls, is controlled by or is under common control with the party whose
interest is being transferred. For purposes of this provision "control" shall
mean the direct or indirect ownership of more than fifty percent (50%) of the
shares or partnership interests entitled to vote in determining action by the
Affiliate. Without limiting the generality of the foregoing, the parties have
agreed that the Restaurants and all interests therein and relating thereto are
to be conveyed to CNL California in a liquidation of CNL,
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and hereby consent to and agree to fully cooperate with and to execute all
documents reasonably necessary in order to complete such conveyance. Until such
conveyance has been completed, CNL and CNL California shall be considered
together in computing the amounts payable to the parties hereunder.
7. Right of First Refusal. In the event that a third party shall make a
bona fide written offer to CNL to purchase any or all of the Restaurants (an
"Offer"), CNL shall not accept or otherwise sell any or all of the Restaurants
pursuant to the Offer without first giving Main St. a right of first refusal to
purchase such Restaurant interests as provided in this paragraph. Upon the
receipt by CNL of the Offer, CNL, if it wishes to accept the Offer, shall first
give written notice of the Offer to Main St. and with said notice CNL shall
enclose a copy of the Offer received by it. Main St. shall have twenty (20)
business days after the receipt of said notice to elect to purchase the interest
on the same terms and conditions as set forth in the Offer. If Main St. does not
elect within said twenty (20) business days to purchase the Restaurant interests
subject to the Offer, then CNL may sell its Restaurant interests described in
and pursuant to the Offer, in which event the Management Agreements and this
Agreement shall be terminated with respect to such Restaurants as of the date of
conveyance under the Offer (subject, however, to Main St.'s right to receive
Disposition Proceeds resulting from such sale under Section 13 below).
Notwithstanding the foregoing, even if Main St. elects not to accept any Offer
hereunder, during the first three (3) years of the term hereof the respective
Management Agreement and the rights of Main St. to participate in Net Cash Flow
Available for Distribution hereunder shall not be terminated as a result of any
sale to a third party under an Offer which is not accepted by Main St. If CNL
later intends to sell any or all of its Restaurant interests to someone other
than the original third party offeror or on terms or conditions different than
those set forth in the original notice and Offer (including a change in the
closing date), such change shall be considered a new Offer pursuant to which the
right of first refusal as set forth herein shall again apply. In the event that
Main St. does elect within said twenty (20) business days to exercise the right
of first refusal granted herein, then Main St. shall be subject to the terms of
the Offer, and the closing of such purchase and sale shall occur at the same
time as provided in the Offer (but not sooner than sixty (60) days after receipt
by CNL of Main St.'s timely written notice of its exercise of its first refusal
rights hereunder). In the event that Main St. is unable after good faith
diligent efforts to close under an Offer which it has accepted within the time
originally provided, such closing date shall be extended by CNL for up to sixty
(60) additional days upon written request by Main St., provided that Main St.
right of first refusal hereunder shall no longer apply to any Offer property if
Main St. ultimately fails to close under any such accepted Offer within the time
allowed. Unless expressly consented to in writing by the other party, no
transfer of a Restaurant interest shall in any way alter or diminish the other
parties' obligations hereunder with respect to any obligation under this
Agreement which accrued or arose prior to the date of sale. The foregoing right
of first refusal shall not apply and CNL shall have the right to sell a
Restaurant and terminate the Management Agreement with respect thereto if (i) an
Uncured Default exists with respect to Main St. under this Agreement; (ii) Main
St. is no longer managing such Restaurant pursuant to a Management Agreement or
any replacement thereof; or (iii) the Main St. Incentive Percentage is reduced
to less than twenty percent (20%).
8. Other Businesses of Venturers. Main St. and its affiliates shall not
own, operate or invest in, directly or indirectly, an interest in any other
T.G.I. Friday's restaurant or similar casual dining restaurant which serves
similar menu items within a five (5) mile radius of the Restaurant without the
prior consent of CNL. The five (5) mile radius can be reduced to not less than
three (3) miles subject to CNL's approval of an "impact study" provided by a
mutually-acceptable trade-area analyst at Main St.'s expense which demonstrates
that an additional T.G.I. Friday's restaurant and bar within the 3- to 5-mile
radius will not materially and adversely impact the revenues or profitability of
the potentially-affected Restaurant. Any lesser separation of the existing
Restaurants subject to this Agreement (including the Mosconi Center
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<PAGE>
Restaurant) shall not constitute a violation of the foregoing, nor shall the
foregoing be construed to create any condition or limitation on TGIF.
9. Addition of Restaurant(s). CNL has contracted to acquire a sixth
(6th) T.G.I. Friday's Restaurant located at 150 Fourth Street, San Francisco,
California (the "Mosconi Center Restaurant") from Main St. upon completion, to
be financed by Lender under an additional Acquisition Loan in the initial
principal amount of $1,200,000 (which shall become part of the "Acquisition
Loan" hereunder) and upon such acquisition CNL and Main St. shall enter into a
Management Agreement with respect thereto upon terms consistent in all respects
with the existing Management Agreements, at which time the Mosconi Center
Restaurant shall be added as an additional Restaurant hereunder.
10. Option to Purchase. CNL hereby grants to Main St. an option,
exercisable at any time after the seventh (7th) year of the term of this
Agreement, to purchase all of the Restaurants then subject hereto for a purchase
price equal to the sum of (a) the outstanding balance of all third-party loans
incurred by CNL with respect to the Restaurants, including all prepayment fees
if such loans can not be assumed by Main St. (the "Third Party Loans"), and (b)
the greater of (i) 120% of the sum of the CNL Investment in the Restaurants plus
the total balance due on all CNL Loans (the "Total CNL Investment"), or (ii) the
Total CNL Investment plus the CNL Percentage of the excess of the total fair
market value of the Restaurants, determined by an valuation company selected by
CNL and acceptable to Main St., over the Total CNL Investment in the Restaurants
plus the amount of all Third Party Loans. All expenses of closing shall be paid
by Main St. and this option may not be exercised at any time when an Uncured
Default on the part of Main St. exists under any term or condition of this
Agreement or the Management Agreements. The right to share in Disposition
Proceeds under Section 13 below shall not apply to any proceeds relating to Main
St.'s exercise of this option to purchase.
11. CNL's Development and Financing Options. Main St. hereby grants to
CNL and its affiliates (a) an option and first right of refusal to participate
in any additional T.G.I. Friday's restaurants developed by Main St. or any other
affiliate within the "San Francisco Region" development territory established
under the existing California Development Agreement with T.G.I. Friday's, Inc.,
on comparable terms to those established hereunder; and (b) a first right of
refusal to provide any other financing (such as mortgage or sale-leaseback
financing) which is to be obtained for any such additional T.G.I. Friday's
restaurants to be acquired or developed by Main St. and/or any other affiliate
within the "San Francisco Region" development territory under the existing
California Development Agreement with T.G.I. Friday's, Inc., on comparable terms
available to Main St. and CNL with other potential financing parties (which
shall at least be comparable to the terms and conditions as may be contained in
any offer received by Main St. or its affiliate for such development or
financing if Main St. intends to accept such offer).
12. TGIF Franchise Agreements. All terms and conditions of this
Agreement are subject in all respects to any and all approval conditions and
rights, rights of first refusal and similar rights and limitations, if any, in
favor of TGIF or otherwise arising under the Franchise Agreements, and in the
event of any conflict between the rights of TGIF or the obligations of the
franchisee under the Franchise Agreements and the terms of this Agreement, the
Franchise Agreements shall prevail.
13. Disposition Proceeds. In the event of the sale of any Restaurant
(herein a "Disposition Restaurant") while this Agreement is still in effect or
applies with respect thereto, including dispositions subject to the Right of
First Refusal under Section 7, and dispositions at the termination hereof, but
not a disposition to Main St. or its designee under the purchase option set
forth in Section 10 (herein a
8
<PAGE>
"Disposition"), then Main St. shall be entitled to receive a portion of the
disposition proceeds received by CNL with respect thereto (herein a "Disposition
Payment"), out of any available net proceeds in the amount and after all
deductions as set forth below. As soon as practicable after any Disposition, a
full accounting of the assets and liabilities of CNL with respect thereto shall
be taken, and a statement of the assets and liabilities of CNL relating thereto
shall be prepared by the independent public accountants then providing financial
accounting for the Restaurants. A copy of such statement, which shall include a
calculation of the proceeds from such Disposition, shall be furnished to Main
St. promptly following such Disposition. All proceeds from any such Disposition
shall be applied in the following order:
i. First, the expenses of the Disposition and the
Acquisition Loan payoff, all accounts payable and similar normal operating
obligations for the Disposal Restaurant and other approved third party debts of
CNL (other than Matching or Unmatched Loans) with respect to the Restaurants
shall be paid. Any reserves shall be established or continued which CNL deems
reasonably necessary for any contingent or unforseen liabilities or obligations
arising out of or in connection with the Disposition. Such reserves shall be
held by CNL for the purpose of disbursement in payment of any of the
aforementioned contingencies, and at the expiration of such period as CNL shall
deem advisable in its reasonable discretion, CNL shall distribute the balance
thereafter remaining in the manner provided in the following subparagraphs; ii.
Next, any unpaid balance of principal and interest due on any Unmatched Loans
with respect to the Disposition Restaurant shall be paid in full or on a pro
rata basis if the amount available is insufficient to repay all such loans;
iii. Next, CNL shall retain an amount equal to its
CNL Investment for the Disposition Restaurant (to the extent not previously
returned);
iv. Next, any unpaid deferred, accumulated Main St.
Management Fees or Required CNL Return as defined under Section 2, shall be paid
and/or retained as applicable, pro rata if the amount available is insufficient
to repay all of such sums;
v. Next, any unpaid balance of principal and interest
due on any Matched Loans shall be paid in full or on a pro rata basis if the
amount available is insufficient to repay all such loans; and
vi. Next, to CNL and Main St. in proportion to their
respective Percentages (this distribution item shall not apply in the event and
to the extent that this Agreement and the Management Agreement previously has
been terminated for any Disposition Restaurant prior to the date of its
Disposition).
14. Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for in this Agreement shall be
given in writing either (i) by personal or facsimile delivery with a copy of
such notice mailed by registered or certified mail, return receipt requested,
postage prepaid, (ii) by registered or certified mail, return receipt requested
with proper postage prepaid, or (iii) delivery by Federal Express, UPS or any
other overnight carrier . In each case, notices shall be addressed to the
parties at the address set forth below opposite their names:
Name Address
- ---- -------
CNL California Restaurants, Ltd. 400 East South Street, Suite 500
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Orlando, Florida 32801
Attn: Robert A. Bourne
cc: Scott C. Thompson, Esquire Post Office Box 2809
Orlando, Florida 32802
Main Street and Main Incorporated 5050 North 40th Street, Suite 200
Phoenix, Arizona 85018
Attn: Jim Wopnford
cc: Robert Nagle, Esquire O'Connor Cavanagh
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012-1656
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties hereto in the manner provided in this
Section. In the case of mailed notices as provided above, the effective date of
the notice shall be the third (3rd) consecutive calendar day following the date
of the postage mark. Failure to accept a notice or designate a new address by a
party will not frustrate any delivery of notice as set out in the Agreement.
15. Remedies. The remedies of the parties under this Agreement are
cumulative and shall not exclude any other remedies to which any party may be
lawfully entitled.
16. Waiver. The failure of any party to insist upon strict performance
of a covenant hereunder or any obligation hereunder shall not be a waiver of
such party's right to demand compliance therewith in the future.
17. Headings. The headings contained in this Agreement are for
convenience only and shall in no way enlarge or limit the scope or meaning of
the various and several paragraphs hereof.
18. Binding Effect; Amendment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
executors, administrators, heirs, legal representatives, successors and
permitted assigns. Amendments to this Agreement shall become effective only if
in writing and signed by each of the parties to be bound.
19. Survival of Representations. All statements contained in any
certificate or other instrument delivered by or on behalf of the parties
pursuant hereto or in connection with the transactions contemplated herein,
shall be deemed representations and warranties by the respective party. All
representations, warranties and agreements made by the parties shall survive the
execution of this Agreement.
20. Recording. By execution hereof, each party agrees that this
Agreement shall not be recorded in the Public Records of any jurisdiction
without the express written approval of all of the other parties.
21. Construction. This Agreement is being delivered and is intended to
be performed in the State of Florida, and shall be construed and enforced in
accordance with the laws of that state. If it becomes necessary for any party to
this Agreement to institute litigation to enforce or construe any of its terms,
then the prevailing party in such action shall be entitled to an award of
reasonable attorneys' fees. Any aggrieved
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<PAGE>
party may proceed to enforce its rights in the appropriate action at law or in
equity. Venue for all suits arising out of this Agreement shall lie exclusively
in the state and federal courts of Orange County, Florida (unless and except to
the extent that any such controversy is subject to the exclusive jurisdiction of
courts in the State of California under applicable California law). By execution
or adoption of this Agreement, each party hereby submits himself to the in
personam jurisdiction of all courts of Orange County, Florida.
22. Scope of Manager's Authority. Except as expressly provided for in
this Agreement or in the Management Agreements, neither CNL nor Main St. shall
have any authority to act for, hold himself or itself out as the agent of, or
assume any obligation or responsibility on behalf of, the other party.
23. Title to Restaurant Property. All the Restaurant property, whether
real or personal, tangible or intangible, is solely owned by CNL and Main St.
does not claim any right, title or interest therein, aside from the payment
rights hereunder and payment and other rights under the Management Agreements.
No joint venture or similar fiduciary relationship or ownership interest
intended, nor shall one be deemed to arise under, this Agreement and/or the
Management Agreements.
24. Relationship of the Parties. The provisions of this Agreement
relating to the determination and payment of incentive management fees and other
sums hereunder are included solely for the purpose of providing a method whereby
the said fees can be measured and ascertained. Main St. and CNL shall not be
construed as joint venturers or partners of each other and neither shall have
the power to bind or obligate the other except as set forth in this Agreement.
25. Miscellaneous. The neuter pronoun references utilized in this
Agreement shall be deemed to include the feminine and the masculine genders when
the context shall so require. Further, the plural shall include the singular and
the singular shall include the plural.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MAIN ST. CALIFORNIA II, INC., an Arizona
corporation
By: ___________________________________
Robert A. Bourne, President
MAIN ST. CALIFORNIA, INC., an Arizona
corporation
By: ___________________________________
Name: _________________________________
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<PAGE>
As its: _________________________ President
JOINDER
-------
Main Street and Main Incorporated hereby joins in the execution of this
Agreement to evidence its agreement to the non-competion and other terms
expressly applicable to it as an affiliate of Main St. California, Inc.
thereunder.
MAIN STREET & MAIN INCORPORATED,
a Delaware corporation
By: ___________________________________
Name: _________________________________
As its: _________________________ President
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<PAGE>
Exhibit "A"
Existing T.G.I. Friday's Restaurants
Addresses and Landlords
1. 10343 N. Wolfe Road
San Jose, Santa Clara County, California 95014
Landlord: Vallco L.L.C., a Delaware limited liability company
2. 685 Beach Street at Hyde
San Francisco, San Francisco County, California
Landlord: Oak Grove Investors, a California limited partnership
3. 2410 San Ramon Valley Boulevard, Suite 130
San Ramon, Contra Costa County, California 94583
Landlord: Kilpatrick Partners, LLC, a California limited liability
company
4. 3101 S. El Camino Real
San Mateo, San Mateo County, California 94403
Landlord: Bohannon Development Company, a California corporation
5. 1250 Grundy Lane
San Mateo, San Bruno County, California 94066
Landlord: Silver Creek Valley, a California limited partnership and
North First Street Properties, a California general
partnership
<PAGE>
"Joint Venture" items into/conform to Management Agreement instead
of Incentive Agreement
26. Control and Management.
a. Manager. The day-to-day operations of the Joint Venture's
business shall be the responsibility of Main St., pursuant to the terms of the
Management Agreement attached hereto as Exhibit "A". In the event that, for any
reason, the Management Agreement is terminated or expires CNL shall have the
right to appoint a new manager on terms acceptable to CNL. In the event of a
termination of this Agreement and CNL appoints a new manager, then CNL shall be
responsible for the obligations of manager.
b. Services; Reports to Other Venturers. Main St. shall cause
the Manager to keep all Venturers informed of all letters, accounts, writings
and other information which are material in scope which shall come to its
attention concerning the business of the Joint Venture. Main St. shall cause the
Manager to prepare a business plan annually within sixty (60) days prior to the
expiration of each fiscal year and shall submit such plan to all Venturers for
approval.
c. Accounting Records; Fiscal Year. Main St. shall cause the
Manager to keep or cause to be kept full records of each transaction of the
Joint Venture and shall maintain such records at its principal office or at the
principal office of the Joint Venture's accounting firm. The Manager shall
provide each Venturer with the reports and schedules set forth in the Management
Agreement within the time periods specified in such Exhibit. Each Venturer, or
its duly authorized representative, shall have the right during regular and
normal business hours or by appointment to audit, examine and make copies of or
extractions from the Joint Venture's records, and the Venture shall bear all
expenses incurred in any such examination. Main St. shall cause the Manager to
furnish or cause to be furnished to each Venturer monthly financial statements
within thirty (30) days following each calendar month. In addition, Main St.
shall cause the Manager to furnish or cause to be furnished to each Venturer
such tax information as shall be necessary for the preparation by the Venturers
of their respective federal and state income tax returns. Such tax information
shall be furnished within thirty (30) days after the end of each fiscal year of
the Joint Venture. The fiscal year of the Joint Venture shall be a calendar
year. The Joint Venture shall keep its accounting records and shall report its
income for income tax purposes on the accrual method of accounting. The
accounting for Joint Venture purposes shall be in accordance with generally
accepted accounting principles consistently applied. The Venturers shall
mutually select the Joint Venture's certified public accounting firm. The Joint
Venture's books shall be audited annually by such certified public accounting
firm and the results of such audit shall be forwarded directly to each Venturer
by such firm within forty-five (45) days after the end of each fiscal year and
shall be accompanied by an auditor management letter. The expense of such audit
shall be a Joint Venture expense.
d. Bank Accounts. Main St. shall cause the Manager to cause
the funds of the Joint Venture to be deposited in such bank account or accounts
as it shall designate and withdrawals may be made upon the signature of the
Manager.
27. Consent to Operations. The procedure for the operation of the Joint
Venture shall be as follows:
a. Day-to-Day Affairs. The day-to-day affairs of the Joint
Venture shall be handled by the Manager as hereinabove stated.
b. Unanimous Approval. The following actions may not be taken
without the vote and
<PAGE>
unanimous approval of all the Venturers: (i) any amendment of this Agreement;
(ii) admission of a new venturer to the Joint Venture; (iii) obtaining financing
for any land or interest in land, any building, or any equipment; (iv)
confession of any judgment or compromise of any claim against the Joint Venture;
(v) entering into or modifying any contract, transaction or relationship between
the Joint Venture and any Venturer, Affiliate of any Venturer or any entity in a
control relationship with any Venturer; (vi) any sale (except as otherwise
provided in this Agreement) or lease of the Restaurant or Joint Venture
properties or assets other than sales or trade-ins of equipment in the ordinary
course of business; (vii) any borrowing not otherwise specifically authorized in
this Agreement; (viii) entering into any contract with a duration in excess of
one year or (to the extent such contract is not in the ordinary course of
business) calling for payment(s) in excess of $10,000; (ix) amending or
modifying any agreement or contract which requires unanimous approval; and (x)
any other decision or action which by any provision of this Agreement is
required to be approved by all of the Venturers, or which is out of the normal
course of the Joint Venture business. For purposes of this Agreement the
following persons are designated as empowered to consent on behalf of CNL: James
M. Seneff, Jr. or Robert A. Bourne; and on behalf of Main St.: Jim Wopnford
c. Venturers' Meetings. The Venturers shall cause their
respective duly appointed directors, officers, agents and/or employees to meet
(which meeting may be via telephonic communication) from time to time but not
less often than quarterly to discuss and plan the various aspects of the Joint
Venture, and shall reduce to writing in the form of minutes or memoranda their
decisions and agreements. A copy of all such writings, whether in the form of
minutes or memoranda, shall be maintained at the Joint Venture's principal place
of business and shall be available for inspection and photocopying by the
Venturers' directors, officers, agents and employees during normal business
hours.
<PAGE>
Probably not needed
28. Conversion of Delinquent Venturer's Interest. In the event a
Venturer Defaults (as defined at subparagraph 6(D)(4)(a) above) hereunder,
including a Default under 6(D)(1) above, then, at the option of the other
Venturer, this Agreement shall be converted to a limited partnership and such
defaulting Venturer's entire interest in the Joint Venture shall be converted
into the interest of a limited partner of the Joint Venture, effective as of the
Default date. As a result of such conversion, the defaulting Venturer shall
cease to be a general partner of the Joint Venture as of the Default date and
shall become solely a limited partner of the Joint Venture, without any rights
to participate in the management of the Joint Venture, but with the same
percentage interest in the partnership; however, its right to receive
distributions from the partnership, in liquidation or otherwise shall be
assigned to the other Venturer until such default has been cured; and provided,
further, that such defaulting Venturer shall continue to have the obligation
provided in 6(D)(1) and shall be subject to (whether its interest is a general
partnership or limited partnership interest) the provisions of this Article. If
the default is subsequently cured, such defaulting Venturer's interest shall
revert to a general partner Joint Venture interest. In the event of such
conversion to a limited partnership, the defaulting Venturer shall promptly,
upon demand of the other Venturer, execute and deliver to the Joint Venture a
certificate of limited partnership and such other documents or instruments which
counsel for the Joint Venture may reasonably require to effectuate the
conversion of the Delinquent Venturer's interest to that of a limited partner.
The Delinquent Venturer does hereby constitute and appoint the other Venturer as
its true and lawful attorney-in-fact to execute and deliver to the Joint
Venture, for and on its behalf, all documents that may be necessary or
appropriate, in the opinion of counsel, for the Joint Venture to effect such
conversion and, if necessary, to effectuate the admission to the Joint Venture
of the Delinquent Venturer's successor in interest as a limited partner and the
agreement of such successor to be bound by all of the terms and conditions of
this Agreement.
29. New Venturers. Except as provided in Paragraph 12 below, new
venturers may be admitted into the Joint Venture only upon the unanimous
agreement of the Venturers and only after they execute and acknowledge such
instruments as are necessary or desirable, as determined by counsel to the Joint
Venture, to effect such admission and to confirm their agreement to be bound by
all the covenants, terms and conditions of this Agreement, as the same now
exists or may hereafter be amended. Each new venturer's interest in the Joint
Venture shall be determined by all other Venturers at the time of admission.
30. Indemnification. Each Venturer shall, to the fullest extent
permitted by law, indemnify, hold harmless and defend all other partners against
its pro rata share of any liability, loss or damage, including, without
limitation, attorneys' fees and costs, incurred or sustained by reason of any
act or omission in the conduct of the business of the Joint Venture or resulting
from any claims, demands, liability and/or actions which shall or may arise by
virtue of anything done or omitted to be done by such Venturer outside the scope
of, or in breach of, the terms of this Agreement; provided that such Venturer be
given prompt notice of such claim, demand, liability or action and shall be
given reasonable opportunity to participate in the defenses thereof, and further
provided that failure to give such notice shall not affect such Venturer's
obligations under this Paragraph 15, except to the extent of any actual
prejudice to the Venturer resulting therefrom. The indemnification provided
herein shall not extend where such Venturer has been adjudicated guilty of
fraud, bad faith or gross negligence by a court of competent jurisdiction.
a. Right to Cause Sale.
<PAGE>
i. At any time after the first to occur of provided
that such party (the "Offering Party") shall have first offered to sell the
Restaurants to the other Venturer (the "Non-Offering Party") in accordance with
this Section subject to the approval of TGI Friday's Inc., if necessary. For
purposes of this Agreement, the term "Default" shall mean (i) a Venturer's
withdrawal from the Joint Venture in violation of the terms hereof, (ii) a
breach by or failure of performance by a Venturer (or an Affiliate of such
Venturer) as to any material covenant or agreement of such Venturer (or
Venturer's Affiliate) in this Joint Venture Agreement or any agreement relating
to the Restaurants if such breach or failure is not cured or corrected within
thirty (30) days after receipt of written notice from the other Venturer
specifying the nature of such breach, or if such cure cannot be effected within
such thirty (30) day period, but can be cured within a reasonable time, if such
Venturer fails to commence the cure of such breach within such thirty (30) day
period or, having so commenced, fails to prosecute such cure diligently to
completion.
ii. In order to initiate its right to cause the sale
of the Restaurants in accordance with the preceding paragraph, the Offering
Party shall deliver to the Non-Offering Party notification (the "First Offer
Notification") describing a proposed offer to sell the Restaurants for a price
specified in such First Offer Notification (the "First Offer Sale Price").
iii. The First Offer Notification shall (i) advise
the Non-Offering Party and the Owner that the Offering Party desires to cause
the Joint Venture to sell the Restaurants, (ii) state the proposed First Offer
Sale Price, (iii) set forth the other material terms of the proposed offer,
which must include a cash earnest money deposit (the "First Offer Deposit"), and
(iv) give the Non-Offering Party the option to purchase the Restaurants at the
First Offer Sale Price and upon the other First Offer Sale Terms.
iv. Within thirty (30) days after the giving of the
First Offer Notification, the Non-Offering Party shall give notice to the
Offering Party to the effect that:
(1) it has elected to purchase the
Restaurants, in which event such notice shall be sent to the Offering Party
together with the First Offer Deposit; or
(2) it does not wish to purchase the
Restaurants, in which event, the Offering Party shall have the right to cause
the sale of the Restaurants without the consent of the Non-Offering Party to any
person (including the Offering Party) upon terms and conditions not less
favorable to the Joint Venture than the First Offer Sale Price and the other
First Offer Sale Terms.
v. If the Non-Offering Party does not give notice to
the Offering Party in response to the First Offer Notification within such
30-day period, it shall be deemed to have given the answer set forth in clause
(ii) above. If the Non-Offering Party gives or is deemed to have given the
answer set forth in clause (ii) above and the Joint Venture has not contracted
to sell the Restaurants within one hundred eighty (180) days after the date as
of which the Non-Offering Party gives or is deemed to have given such answer,
this Section shall be applicable again as if no offer previously had been made
in accordance herewith to the Non-Offering Party.
vi. The closing of any sale of the Restaurants to the
Non-Offering Party pursuant to this Section shall take place not later than
ninety (90) days after the Non-Offering Party provides the written notice of
acceptance to the Offering Party. At such closing, the Joint Venture shall
execute and deliver such instruments as shall be appropriate to transfer the
Restaurants to the Non-Offering Party, subject
<PAGE>
to any then existing mortgage(s) or other lien(s) if the same are to survive the
closing, the Non-Offering Party shall simultaneously pay to the Joint Venture
the cash portion of the First Offer Sale Price (less the amount of the First
Offer Deposit already paid), the Joint Venture and the Non-Offering Party shall
perform the Other First Offer Sale Terms to be performed by them, and the Joint
Venture shall thereupon distribute the cash portion of the First Offer Sale
Price (including the amount of the First Offer Deposit then held in escrow) in
the manner provided in this Joint Venture Agreement and the Joint Venture shall
thereafter make distributions in the manner provided in this Agreement.
vii. In the event that the Non-Offering Party
defaults in any obligation it has to purchase the Restaurants pursuant to this
Section, then the Offering Party shall be paid the First Offer Deposit as
liquidated damages and may cause the Joint Venture to sell (without reimposing
the notice provisions set forth above) the Restaurants to any person (including
the Offering Party or an Affiliate of the Offering Party) at a price and on
terms not materially less favorable than those offered to the Non-Offering
Party.
<PAGE>
STATE OF FLORIDA
COUNTY OF ORANGE
The foregoing instrument was acknowledged before me this ________ day
of October, 1996 by ROBERT A. BOURNE, as President on behalf of CNL RESTAURANTS
XV, INC., a Florida corporation as General Partner of CNL LOUISIANA RESTAURANTS,
LTD., a Florida limited partnership as General Partner of CNL/MAIN LOUISIANA
RESTAURANT VENTURE, a Florida general partnership. He is personally known to me
and did not take an oath.
Name:
SEAL: Notary Public, State of Florida
Commission #
My commission expires:
STATE OF ARIZONA
COUNTY OF MARICOPA
The foregoing instrument was acknowledged before me this ______ day of
October, 1996 by , as on behalf of MAIN ST. LOUISIANA RESTAURANTS, INC., an
Arizona corporation as General Partner of CNL/MAIN LOUISIANA RESTAURANT VENTURE.
He is personally known to me or has produced _________________________ as
identification and did(did not) take an oath.
Name:
SEAL: Notary Public, State of
Commission #
My commission expires:
STATE OF ARIZONA
COUNTY OF MARICOPA
The foregoing instrument was acknowledged before me this ______ day of
October, 1996 by ____________________________, as _______________ on behalf of
MAIN STREET AND MAIN INCORPORATED, a Delaware corporation. He is personally
known to me or has produced _________________________ as identification and
did(did not) take an oath.
<PAGE>
Name:
SEAL: Notary Public, State of
Commission #
My commission expires:
